Mercia Asset Management Plc · LSE:MERC
Mercia Asset Management — H1 2022 Earnings Presentation
33 slides from Mercia Asset Management's earnings presentation, Dec 7, 2021
Slide 1: Mercia Asset Management PLC 2022 Interim Results
Mercia Asset Management PLC 2022 Interim Results • venture • private equity • debt • proprietary capital
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: A track record of value creation
A track record of value creation Dr M a r k Payton M a r t i n Glanfield Julian Viggars Chief Executive Officer Chief Financial Officer Chief Investment Officer Over 20 years’ experience in Over 20 years’ CFO experience of Over 20 years’ venture capital technology commercialisation and listed and PE
Slide 4: Highlights
Continued growth and value generation Assets under management (AuM) Financial c.£948m (H1 2021: c.£872m) • ↑ 21% revenue* growth to c.£10m • ↑ 125% adjusted operating profit* growth to £2.4m Third-party funds under management (FuM) • ↑ 35% growth in profit after tax to £11.2m c.£762m • Strong balanc
Slide 5: Mercia Asset Management
Sustainable, growing and financially strong Mercia Asset Management Find value Add value Realise value 1,110 enquiries, 74 Centralised resource, 9 profitable exits in deals completed, 38 9 syndicated deals, 18 H1 2022 are new NEDs placed, 137 jobs created portfolio companies by regional venture Addr
Slide 6: Complete Connected Capital
Investment model Flexible financing solutions across the capital structure to help companies develop and grow Venture Capital Private Equity Debt Scale-up Complete Connected Capital • Our third-party funds seed future direct investments and underpin our progressive dividend policy • With our proprie
Slide 7: Our market
Our market Total venture Our regional investment coverage • Our offices across UK • University partners • NEVF regions • MEIF regions • NPIF regions • Active secondary, 70% IPO and trade sale market for Mercia investees Distribution of high- growth businesses 25% Source: The ScaleUp Institute & Beau
Slide 8: Three-year objectives
Pillars of Mercia’s 20:20 vision Grow AuM on average by 20% per annum over the next 3 years • Organic: c.50% of AuM to date through organic growth • M&A: two successful acquisitions over 7 years has doubled AuM Three-year objectives • Balance sheet portfolio grown at c.14% IRR since IPO £60m PBT ove
Slide 9: Financial review
66 Financial review
Slide 10: Financial information
Summarised results • Revenue* increased 20.7% to £10.1m (H1 2021: £8.4m) • Adjusted operating profit* increased 125.0% £2.4m (H1 2021: £1.1m) Financial information • Net performance fees £1.6m (H1 2021: £nil) • Profit after tax increased 35.2% £11.2m (H1 2021: £8.2m) • Net assets £186.4m (H1 2021: £
Slide 11: AuM movements
AuM movements AuM AuM Asset class 1 April 2021 Net fund flows Distributions Performance 30 Sept 2021 £’m £’m £’m £’m £’m Venture 600 11 (36) 26 601 Private equity 54 - - (1) 53 Debt 110 - (2) - 108 Total FuM 764 11 (38) 25 762 Proprietary capital 176 - (1) 11 186 Total AuM 940 11 (39) 36 948 • One E
Slide 12: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income For the six months ended 30 September 2021 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2021 2020 2021 £’000 £’000 £’000 Revenue 12,696 8,362 23,410 Administrative expenses (9,082) (7,429) (
Slide 13: Consolidated statement of financial position
Consolidated statement of financial position As at 30 September 2021 Unaudited Unaudited Audited As at As at As at 30 September 30 September 31 March 2021 2020 2021 £’000 £’000 £’000 Goodwill and intangible assets 33,371 35,538 34,388 • Direct portfolio: Property, plant and equipment and right-of us
Slide 14: Consolidated cash flow statement
Consolidated cash flow statement For the six months ended 30 September 2021 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 September 30 September 31 March 2021 2020 2021 £’000 £’000 £’000 Net cash generated from operating activities 2,625 2,164 5,611 • Strong operating c
Slide 15: Investment review
Investment review Third-party fund management 15
Slide 16: 65 investment professionals
Experienced investment teams with a strong track record National Regional Private Proprietary Debt VCT/EIS venture equity capital 65 investment professionals MD – asset classes: Investment team size: 18 21 5 16 5 c.£5m of CBILS deployed RLS accredited Highlights: August 2021 16
Slide 17: Proactive regional deal origination
Proactive regional deal origination Origination across asset classes enhanced by digital platform established pre-pandemic £55.1m invested in 74 companies, of which 38 are new Key regional investor National Regional Private Proprietary VCT/EIS venture equity Debt capital Investment Early stage, Earl
Slide 18: Regional investment activity
Regional investment activity 18
Slide 19: H1 2022 managed funds' performance
H1 2022 managed funds’ performance Venture VCT Mercia 5.9x 1.7x 2nd most active venture capital funds in the UK 6.0x (excluding London) June 2021 2.7x 1.1x 4th most active UK 10.9x venture capital firm - The Deal 2020 1.8x 0.4x 19
Slide 20: H1 2022 asset class performance
H1 2022 asset class performance T VPI * Venture PE Institutional Funds Legacy 137% 133% Current 102% 101% Retail EIS Funds Legacy 140% n/a Current 97% n/a * TVPI % Distributions + total value + cash/paid in VCTs NAV** Total return Northern Venture Trust 74.1 256.6 Northern 2 VCT 69.2 199.6 Northern
Slide 21: Northern VCTs acquisition update
Northern VCTs acquisition update • Second successful acquisition since Mercia’s 2014 IPO • Delivering on value drivers Strategy in action • Successful integration of investment team and support functions • 8 investments from cross referrals • 13 exits to 30 September 2021 • £38.2m raised in new capi
Slide 22: Balance sheet performance
Proprietary capital • 25 direct investments (including two new added post period end) Balance sheet performance • £8.7m in fair value movements across direct investments • IRR c.14% • Areas of focus: • Enabling technologies within Life Sciences, Software, Digital Entertainment and Deep Tech • Seed n
Slide 23: Continuing to build a balanced portfolio
Continuing to build a balanced portfolio • Clear balance sheet strategy: • Focus on enabling technologies within key sectors to reflect Balance sheet strategy regional strengths • Optimal portfolio size of 30 • Typical holding period of 3-7 years • Typically holding 10-30% equity stakes • Acquire sm
Slide 24: Portfolio overview
Portfolio overview Well diversified Life Sciences Software 21% 26% Deep Tech Digital Entertainment 27% 26% 24
Slide 25: Direct investment holdings
Direct investment holdings as at 30 September 2021 Investment Net cash Fair value Investment Percentage value invested movement value held Year of As at Six months to Six months to As at As at first 1 April 30 September 30 September 30 September 30 September direct 2021 2021 2021 2021 2021 investmen
Slide 26: Direct investments: top holdings 1-5
Top 10 holdings, by value (1-5) Investment value £ 17.7m £12.9m £12.8m £9.0m £8.8m % direct holding (excludes FuM) 35.4% 15.0% 27.5% 33.1% 17.6% Direct investments Initial year of investment 2014 2017 2017 2016 2018 Description Sodium-ion E-commerce/ VR developer battery tech web security Patch deli
Slide 27: Direct investments: top holdings 6-10
Top 10 holdings, by value (6-10) Investment value £8.6m £4.9m £4.9m £4.7m £4.6m % direct holding 67.3% 29.9% 18.1% 35.8% 39.0% Direct investments (excludes FuM) Initial year of investment 2015 2015 2018 2014 2015 Description Mobile soccer Aluminum Business Orthobiologics Flat speaker management pres
Slide 28: Responsible employer, responsible investor
Responsible employer, responsible investor • Dedicated ESG team representing all parts of the Group, led by Jill Williams, reporting to CEO • Our approach is based on the UN Principles of Responsible Investing • We have 3 key areas of focus: • Sustainable economic growth; • Reducing inequalities wit
Slide 29: Summary
Purpose-led, proven business model, strategy for growth and shareholder returns VCT operation fully integrated and delivering Growing fee income - 88% contracted and recurring Summary Scale: c.£948m AuM with strong growth prospects Well capitalised with substantial dry powder in both funds and balan
Slide 30: Appendices
Appendices 30
Slide 31: NEDs - strong corporate governance
NEDs - strong corporate governance combined with deep business and asset management experience Ian Metcalfe Diane Seymour-Williams Ray Chamberlain Chair SID Dr Jonathan Pell Caroline Plumb OBE 31
Slide 32: Mercia share register: 69% free float
Mercia share register: 69% free float (31 March 2021: 69%) • Board, management and employees (c.17%) • Invesco (c.14%) • Retail (c.10%) • Ruffer (c.7%) • Librae Holdings (c.6%) • Chelverton Asset Management (c.4%) • BMO (c.4%) • BlackRock (c.3%) • The Hargreaves No.11 settlement (c.3%) • NFU Mutual
Slide 33: Valuation methodology
Valuation methodology • Followed IPEVCV Guidelines • Calibration of valuation approaches • Some use of DCF due to valuation guidelines • COVID-19 discounts beginning to unwind • But still adopt a ‘hand-on-heart’ final review • BDO undertook interim review Direct investment valuations £2.3m £2.0m Lis
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