Mercia Asset Management Plc · LSE:MERC
Mercia Asset Management — FY2020 Earnings Presentation
30 slides from Mercia Asset Management's earnings presentation, Jul 14, 2020
Slide 1: Mercia Asset Management PLC 2020 Preliminary Results Presentation
Mercia Asset Management PLC 2020 Preliminary Results Presentation
Slide 2: Executive Directors
A track record of value creation Dr Mark Payton Martin Glanfield Julian Viggars Chief Executive Chief Financial Chief Investment Executive Directors Officer Officer Officer Over 20 years’ experience Over 20 years’ CFO/FD Over 20 years’ venture in technology experience of listed and capital experienc
Slide 3: Highlights
Maiden trading profit (“net revenues”) driven by AuM growth, achieved 12 months ahead of target Assets under Management (AuM) grown by 58% to c.£800m (2019: c.£507m) Highlights Average recurring fund management related fees % maintained at c.2% Maiden trading profit (“net revenues”): £0.1m (2019: £1
Slide 4: Response to COVID-19
Response to COVID-19 • Wellbeing of our team remains the key priority • Remote working with productivity maintained Our Company • No use of Government furlough scheme • Executives voluntarily reduced bonus awards by 50% • No RPI salary increase across the Group for FY21 • Prompt review, support and
Slide 5: Why the regions?
Target market and market trends Total equity Our regional coverage • We seek businesses investment typically requiring • Our offices across UK • University <£20m investment Why the regions? partners with exit expectations • NEVF regions of £20m - £200m • MEIF regions • NPIF regions • Target market c
Slide 6: FY22 targets
Strong progress against strategic priorities FY20 – FY22 First choice for investees, investors & employees FY22 targets 1. Become the most active investor in our target market 2. Achieve operating profitability before balance sheet fair value movements, realised cash gains and all non-cash charges/c
Slide 7: Key regional investor
Strong regional deal origination Across all asset classes in FY20 Key regional investor • 3,323 investment enquiries • c.£75m invested in existing and new portfolio companies: - into 133 companies - of which 54 are new - 387 portfolio companies Private Balance Venture Debt Total equity sheet Total p
Slide 8: Scalable operation
Fee income growth driven by scaling funds under management (FuM) Scalable operation * Includes 3 months’ contribution from Northern VCT fund management contracts 8
Slide 9: Managed funds
Key acquisition combined with organic growth • FuM increased from c.£381m to c.£658m mainly driven by acquisition of the Northern VCT contracts Managed funds • Organic growth of £101.6m from: - £38.2m new FuM raised by Northern VCTs - £53.4m additional regional funds awarded by BBB - £10.0m addition
Slide 10: AuM growth since IPO
AuM growth (FuM + balance sheet NAV) since IPO Managed fund investment returns to clients Scalable operation AuM: assets under management (FuM plus balance sheet NAV) 10 FuM: third-party funds under management Hard NAV: direct investment holding value plus cash on hand
Slide 11: Growth in AuM and dry powder by asset class
Scalable operation Growth in AuM and dry powder by asset class AuM by asset class FY19 - FY20 £’m 900 800 700 600 500 400 300 200 100 0 Balance sheet Balance sheet Venture FY19 Venture FY20 Private equity Private equity Debt FY19 Debt FY20 Total AuM Total AuM FY19 FY20 FY19 FY20 FY19 FY20 Drawn/inve
Slide 12: Track record
Investment performance • Direct investments: - Since IPO (December 2014): o £94.7m invested gross, average c.£14.8m p.a. o Four exits – total returned to March 2020 £14.5m Track record - Post year end, sale of The Native Antigen Company 93% above September 2019 holding value will return c.£5.2m - Wi
Slide 13: Direct investments
13 Direct investments
Slide 14: Direct investments highlights
Highlights • Effort concentrated on larger investments, top 10 represent c.77% of portfolio value Direct investments • FY20 focus on strengthening boards, management teams and building co-investment syndications • 15 of 20 (75%) companies funded through FY21 and beyond • £15.7m net invested into 18
Slide 15: Top holdings, by value (1-5)
Top 10 holdings, by value (1-5) Investment value £16.1m £11.7m £7.2m £6.7m £6.0m Direct investments % direct holding (excludes FuM) 36.4% 30.2% 27.5% 30.1% 17.1% Initial investment date 2014 2016 2017 2017 2018 Description Biotech Machine VR developer Patch delivery Video analytics gene therapy lear
Slide 16: Top holdings, by value (6-10)
Top 10 holdings, by value (6-10) Investment £3.5m value £4.4m £4.3m £4.0m £3.7m Direct investments Cash exit £5.2m % direct holding (excludes FuM) 28.2% 25.9% 15.6% 52.9% 29.4% Initial investment date 2015 2015 2018 2014 2014 Description Aluminium Sodium-ion Flat speaker Antigen SEO platform pressin
Slide 17: Founders, funds, shareholders
Operational leverage Backing founders, managed funds’ first Founders, funds, shareholders - All direct investments derive from FuM - Balance sheet holding period 3-7 years from initial investment VoxPopMe (Midlands-based) - Sourced from regional network - Mercia’s EIS, VCT and balance sheet Native A
Slide 18: Financial review
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Slide 19: Summarised results
Summarised results • AuM increased 58% to c.£800m (2019: c.£507m) Financial information • Revenue increased 19.4% to £12.7m (2019: £10.7m) • Trading profit (“net revenues”) £0.1m (2019: £1.4m trading loss) • Net fair value decrease £15.8m (2019: £3.9m increase) – COVID-19 • Pre-exceptional operating
Slide 20: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income for the year ended 31 March 2020 20
Slide 21: Consolidated balance sheet
Consolidated balance sheet as at 31 March 2020 Consolidated balance sheet As at As at 31 March 31 March 2020 2019 £’000 £’000 Assets Non-current assets Goodwill 16,642 10,328 Intangible assets 20,063 584 Property, plant and equipment 125 153 Right-of-use assets 598 - Investments 87,471 87,659 Total
Slide 22: Summary
Focused asset manager with robust business model ✓ Continued fee income growth with c.87% contracted recurring (fund and monitoring fees) ✓ Broad range of close ended and evergreen client FuM Summary ✓ Scale: continued growth towards target of £1bn AuM ✓ Well capitalised with substantial dry powder
Slide 23: Appendices
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Slide 24: Environmental, social & corporate governance
Where employees do their best work • In the regions, from the regions, to the regions Environmental, social & corporate governance • c.100 employees in 8 regional offices, with 19 regional university partnerships • c.41% of staff, c.26% of the investment team and 25% of Mercia board NEDs are women •
Slide 25: Mercia: share register – 69% free float
Mercia: share register – 69% free float (2019: 23%) • Board, management and employees (c.17%) • Invesco (c.14%) • Retail (c.12%) • Librae Holdings (c.6%) • Ruffer (c.6%) • Ninety One (Investec Asset Management) (c.4%) • Chelverton Asset Management (c.3%) • The Hargreaves No.11 settlement (c.3%) • NF
Slide 26: Direct investment holdings
Direct investment holdings as at 31 March 2020 Investment Net cash Fair value Investment Percentage value invested movement value held As at Year to Year to As at As at 1 April 31 March 31 March 31 March 31 March 2019 2020 2020 2020 2020 £’000 £’000 £’000 £’000 % nDreams Ltd 15,120 1,000 - 16,120 36
Slide 27: Valuation methodology
Valuation methodology • Followed new IPEVCV Guidelines • Calibration of valuation approaches • Some use of DCF due to new valuation guidelines • COVID-19 discounts applied where appropriate • But, still adopt a ‘hand on heart’ final review Direct investment valuation £0.5m Listed investments 1% £15.
Slide 28: Non-executive Directors
Strong corporate governance combined with deep, patient investment experience Non-executive Directors Ian Metcalfe Ray Dr Jonathan Caroline New NED Chair Chamberlain Pell Plumb OBE with strong asset management background 28
Slide 29: Important notice
Important notice • This document contains statements about Mercia Asset Management PLC that are or may be forward-looking statements. Forward-looking statements include statements relating to (i) future revenues, expenses, earnings, financial condition and future prospects; and (ii) business and man
Slide 30: Contact
0330 223 1430 @Mercia_PLC info@mercia.co.uk Mercia Asset Management PLC mercia.co.uk
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