Mercia Asset Management Plc · LSE:MERC
Mercia Asset Management — H1 2023 Earnings Presentation
31 slides from Mercia Asset Management's earnings presentation, Dec 6, 2022
Slide 1: Interim Results
Mercia Asset Management PLC 30 September 2022 Interim Results
Slide 2: 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 3: An entrepreneurial leadership team with a track record of value realisation
An entrepreneurial leadership team with a track record of value realisation Dr Mark Payton Martin Glanfield Julian Viggars Chief Executive Officer Chief Financial Officer Chief Investment Officer Over 20 years’ experience in tech Over 20 years’ CFO experience of Over 20 years’ venture capital commer
Slide 4: Strong model delivering capital growth and yield
Strong model delivering capital growth and yield • On track to deliver Mercia ‘20:20’ 1 • Strong liquidity – c.£296m across managed 2 3 funds and the balance sheet 4 5 9 7 • Long-dated managed funds with no redemptions 6 8 • Well-funded portfolios with low capital needs • Resilient Group with sustai
Slide 5: The model - a debt-free group delivering Balance Sheet returns
The model - a debt-free group delivering Balance Sheet returns - Complementary - Strong focus and asset classes discipline - Recurring Profitable - Invests in emerging predictable fee managed Proprietary funds’ portfolio income fund activity capital companies, selectively into - Growing profitabilit
Slide 6: Strong M&A track record
Strong M&A track record What we look for: i. Value driver analysis – minimum 20 v. Domestic market expansion via new FuM, both national and regional ii. Strong cultural fit vi. Strong fit with internal capabilities / systems iii. ‘More of the same’ or adjacent asset classes vii. Organic growth prosp
Slide 7: Strong M&A track record
Strong M&A track record What we look for: i. Value driver analysis – minimum 20 v. Domestic market expansion via new FuM, both national and regional ii. Strong cultural fit vi. Strong fit with internal capabilities / systems iii. ‘More of the same’ or adjacent asset classes vii. Organic growth prosp
Slide 8: Frontier Development Capital ("FDC")
Frontier Development Capital (“FDC”) i. Alternative national fund manager providing loans to SMEs and property developers to fund regional growth ii. Established in 2016 - headquartered in Birmingham with 24 employees iii. The transaction: • £9.5m total cash consideration; £5.5m initial; £4.0m defer
Slide 9: Proforma AuM post-acquisition
Proforma AuM post-acquisition Private Balance FDC Venture Debt TOTAL Equity Sheet Debt £0.2m - £5m £2m - £5m £0.2m - £1m £1m - £10m £2m - £10m Total FuM Total FuM Total FuM NAV Total FuM Total AuM £611m £46m £116m £206m £415m £1,394m 9
Slide 10: Tailwinds for growth
Tailwinds for growth Scalable distribution: i. Retail investors (via EIS and VCT) ii. Public sector (via British Business Bank) iii. Institutional capital (via regional pension funds) Drivers for growth Growing addressable opportunity Top-four manager in EIS: £1.6bn (2021) Retail capital (EIS / VCT)
Slide 11: Mercia '20:20' strategy; the midpoint
Mercia ‘20:20’ strategy; the midpoint FY22 – FY24 Our three-year strategic goals PBT AuM FY 2022: £27.4m £959m H1 2023: £7.4m £979m £20m 20% H1 2023*: - c.£1.4bn FY 2024: - - Achieve average Grow AuM by an Three-year pre-tax profits of average of 20% per cumulative £60.0m c.£1.6bn £20million per ann
Slide 12: Making an impact
Responsible investor, responsible employer Making an impact • Mercia is proof that Responsible Investment works • Dedicated team (which includes Mercia’s CEO) representing all parts of the Group • First Knowledge-intensive Impact EIS Fund closed, with a second fund raise now launched • Now 144 emplo
Slide 13: Financial review
13 mercia ‘asset management
Slide 14: H1 2023 - Key results for the Group
H1 2023 - Key results for the Group HEADLINE FINANCIALS £12.2m £3.6m £7.4m £56.1m 46.8p 30 September 2022: Group revenue Adjusted operating Profit before Unrestricted NAV/share profit taxation cash 30 September 2021: £10.1m* £2.4m £11.0m £52.1m 42.4p 31 March 2022: £20.6m* £8.4m £27.4m £61.3m 45.6p
Slide 15: H1 2023 - AuM movements
H1 2023 - AuM movements Post AuM AuM period 1 April Investor 30 Sept. end 2022 inflows Performance Distributions 2022 inflows Asset class £’m £’m £’m £’m £’m £’m Venture 592 54 (21) (14) 611 12 Private Equity 48 - (2) - 46 - Debt 118 - - (2) 116 - Debt (FDC) - - - - - 415 Total FuM 758 54 (23) (16)
Slide 16: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income For the six months ended 30 September 2022 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2022 2021 2022 £’000 £’000 £’000 Revenue 12,181 12,696 23,183 Administrative expenses (10,222) (9,082)
Slide 17: Consolidated statement of financial position
Consolidated statement of financial position As at 30 September 2022 Unaudited Unaudited Audited As at As at As at 30 September 30 September 31 March 2022 2021 2022 £’000 £’000 £’000 Goodwill and intangible assets 31,338 33,371 32,355 • Direct portfolio: Property, plant, equipment and right-of use a
Slide 18: Consolidated cash flow statement
Consolidated cash flow statement For the six months ended 30 September 2022 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2022 2021 2022 £’000 £’000 £’000 Cash generated from operating activities 544 2,625 9,150 Corporation tax paid (705)
Slide 19: Investment review
19 66 Inve EGE? asset management
Slide 20: H1 2023 - Key investment figures for the Group
H1 2023 - Key investment figures for the Group INVESTMENT 30 September 2022: 1,165 c.£56m 80 35 Investment requests Capital deployed Businesses invested New to portfolio 30 September 2021: 1,110 c.£55m 74 38 31 March 2022: 2,604 c.£124m 148 95 PERFORMANCE 30 September 2022: c.£25m 1.6x 14 Investment
Slide 21: New to the direct portfolio
New to the direct portfolio £3.0m invested £2.3m invested in October 2022 in October 2022 £0.3m invested in H1 2023 …and at the right time, more to come 21
Slide 22: Direct investment portfolio
Direct investment portfolio H1 2023 progress Investment Investment Fair value Investment Percentage value Net cash invested realisations movement value held Year of As at Six months to Six months to Six months to As at As at first 1 April 30 September 30 September 30 September 30 September 30 Septem
Slide 23: Direct portfolio value creation
Direct portfolio value creation Financial year/investee Carrying value Realised value Premium £’000 £’000 (%) 2017 Abzena plc 150 170 13.3 Allinea Software Limited 1,900 2,700 42.1 2018 Science Warehouse Limited 9,900 10,500 6.1 2021 The Native Antigen Company Limited 3,500 5,200 48.6 Clear Review L
Slide 24: Summary and outlook
Summary and outlook Earnings enhancing acquisition expands national debt footprint Acquisition moves Mercia closer to achieving Mercia ‘20:20’ at the midpoint Long-dated managed funds not subject to redemptions Well funded, diversified direct investment portfolio with modest capital needs St
Slide 25: Appendices
Appendices 25
Slide 26: Top holdings, by value (1-5)
Top 10 holdings, by value (1-5) Investment value £25.8m £14.0m £12.2m £10.5m £9.8m % direct holding (excludes FuM) 33.2% 65.1% 24.1% 17.6% 40.6% Initial year of investment 2014 2015 2022 2018 2015 Description Aluminum Bot Mobile digital VR developer Video analytics pressing management trading cards
Slide 27: Top holdings, by value (6-10)
Top 10 holdings, by value (6-10) Investment value £9.7m £9.0m £6.0m £5.4m £4.9m % direct holding (excludes FuM) 40.3% 33.1% 39.0% 29.9% 18.1% Initial year of investment 2014 2016 2015 2015 2018 Description Mobile soccer Flat speaker Business Patch delivery management Orthobiologics tech intelligence
Slide 28: Shadow portfolio, ones to watch
Shadow portfolio, ones to watch Loopr offers a no-code Slingshot’s platform will auto- SaaS platform to adopt generate 3D models of cities and pre-built and end-to-end surrounding areas, allowing AI solutions within days planners to test different ways to and with no up-front cost. boost the capacit
Slide 29: Valuation methodology
Valuation methodology • Followed IPEVCV Guidelines • Calibration of valuation approaches • Some use of DCF due to valuation guidelines • Some COVID-19 discounts still to unwind • But still adopt a ‘hand-on-heart’ final review • BDO undertook interim valuations review – not all companies do Direct in
Slide 30: Mercia share register: 69% free float
Mercia share register: 69% free float (FY 2022: 69%) • Board, management and employees (c.17%) • Invesco (c.14%) • Retail (c.10%) • Ruffer (c.7%) • Chelverton Asset Management (c.5%) • BlackRock (c.4%) • Columbia Threadneedle Investments (c.4%) • Fidelity (c.4%) • The Hargreaves No.11 Settlement (c.
Slide 31: Asset class summary
Asset class summary Frontier Private Balance Venture Debt Dev. Capital TOTAL Equity Sheet Debt £0.2m - £5m £2m - £5m £0.2m - £1m £1m - £10m £2m - £10m Total portfolio Total portfolio Total portfolio Total portfolio Total portfolio Total portfolio 236 9 179 25 100 549 Total FuM Total FuM Total FuM NA
Mercia Asset Management — H1 2023 Earnings Presentation on 6ix