Mercia Asset Management Plc · LSE:MERC
Mercia Asset Management — FY2023 Earnings Presentation
27 slides from Mercia Asset Management's earnings presentation, Jul 4, 2023
Slide 1: Preliminary Results
4 July 2023 Preliminary Results 1
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 ma
Slide 3: An entrepreneurial leadership team with a track record of value creation
Dr Mark Payton Chief Executive Officer Co-founder of Mercia, with a PhD in Life Sciences and over 20 years’ experience in tech, commercialisation and investing. An entrepreneurial leadership team with a track record of value creation. Martin Glanfield Chief Financial Officer KPMG trained chartered a
Slide 4: FY23 Annual Results and our focus for FY24
FY23 Annual Results and our focus for FY24 Dr Mark Payton 4
Slide 5: Highlights
Highlights Operating Financials £1.4bn c.£71m £25.9m £37.8m Group AuM Cash realised Group revenue Unrestricted cash (FY22: c.£959m) (FY22: c.£155m) (FY22: £23.2m) (FY22: £61.3m) c.£165m c.£378m £7.6m 45.4p Capital deployed Total liquidity Adjusted operating profit NAV/share (FY22: c.£124m) (FY22: c.
Slide 6: The model - a debt-free group consistently delivering
The model - a debt-free group consistently delivering Balance sheet returns Profitable managed Proprietary - Highly scalable fund capital - Strong focus and discipline - Adjacent asset class activities opportunities - Invests in emerging funds’ portfolio - Recurring predictable companies, selectivel
Slide 7: The market opportunity
The market opportunity Fund management Current national UK domestic impact market segment market opportunity market share Retail tax efficient SME equity investing £19.5bn (c.£3bn EIS, c.2.5% £5.3bn VCT, £11.2bn BPR) Typically, 1-50 employees, investments of £1m to £10m Public sector (e.g. British B
Slide 8: Mercia 20:20
Mercia 20:20 AuM PBT Progressive Dividend Two years into a 0.80p / share FY22: £959m £27.4m three-year strategy (c.2% yield*) 0.86p / share FY23: £1.4bn £2.4m (c.3% yield*) FY24: - - - Progress: £1.4bn £29.8m - Three-year cumulative c.£1.6bn c.£60m - target: * Against year-end share price 8
Slide 9: FY23 Annual Results
FY23 Annual Results Martin Glanfield 9
Slide 10: FY23 AuM growth: Continued momentum
FY23 AuM growth: Continued momentum 1,600 1,400 • Acquisition of Frontier Development Capital: 1,200 − c.£415m FuM inflow • Funds raised across asset classes: AuM (£million) 1,000 − Retail: c.£74m (EIS and VCT) − British Business Bank: c.£30m 800 − Institutional: c.£30m (FDC) 600 • Post-year end inf
Slide 11: Long-dated, diversified AuM
Long-dated, diversified AuM • Regional specialist in SME capital • Enables strong margins, with • Long-dated funds comprising provision across the UK, delivered blended fee rate of c.2% evergreen or 10-year LP through a physical presence in structures – all closed end key regional cities 203 445 48
Slide 12: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income For the year ended 31 March 2023 Year ended Year ended 31 March ‘23 31 March ‘22 £’000 £’000 Revenue 25,881 23,183 • Revenue increase c.12% Administrative expenses (21,001) (17,857) Realised (loss)/gains on sale of direct investments (849) 9,878 Fair va
Slide 13: Consolidated statement of financial position
Consolidated statement of financial position As at 31 March 2023 As at As at 31 March ‘23 31 March ‘22 £’000 £’000 Goodwill and intangible assets 39,051 32,355 Property, plant and equipment, and right-of use assets 964 530 Investments 136,550 119,558 • Direct portfolio: Total non-current assets 176,
Slide 14: Consolidated statement of cash flows
Consolidated statement of cash flows For the year ended 31 March 2023 Year ended Year ended 31 March ‘23 31 March ‘22 £’000 £’000 Net cash generated from operating activities 1,200 9,150 • Cash generative, profitable fund management operations Sale of direct investments 3,744 16,309 Purchase of dire
Slide 15: Mercia share register: 69% free float
Mercia share register: 69% free float (2022: 69%) • Board, management and employees (c.17%) • Invesco (c.14%) • Retail (c.10%) • Ruffer (c.7%) • BlackRock (c.5%) • Chelverton Asset Management (c.4%) Others of note: • Columbia Threadneedle Investments (c.4%) • Hargreave Hale • Fidelity (c.4%) • Liont
Slide 16: Group investment performance
Group investment performance Julian Viggars 16
Slide 17: Assets under Management
Assets under Management FuM Unrestricted Early-stage venture cash Mercia £305m: £0.5m - £5m Ventures National / scale up venture Mercia Ventures £630m £160m £325m: £3m – £10m Mercia Private Equity £48m £14m PE £48m: £2m - £5m Mercia Debt £556m £166m Regional debt £93m: £0.2m - £1m National debt £463
Slide 18: FY23 - Key investment figures for the Group
FY23 - Key investment figures for the Group Group investment 2,639 c.£165m 176 85 Investment requests Capital deployed Business invested New to portfolio (FY22: 2,604) (FY22: c.£124m) (FY22: 148) (FY22: 95) Mercia 1,943 c.£109m 81 19 Ventures Investment requests Capital deployed Business invested Ne
Slide 19: Direct investment portfolio - as at 31 March 2023
Direct investment portfolio - as at 31 March 2023 Investment Net cash invested Realised gains/(loss) Fair value movement Equity percentage Net investment value realisations Net investment value Year of first direct year to 31 March year to 31 March year to 31 March held as at 31 March as at 1 April
Slide 20: Valuation methodology
Valuation methodology • Follow IPEVCV Guidelines • Over half of the portfolio value based on the price of recent investment round, subsequently calibrated • Enterprise value based on most recent trading and market multiples 969 3,147 • Some use of DCF for calibration • Minimal exposure to volatile p
Slide 21: Top holdings, by value (1-5)
Top 10 holdings, by value (1-5) Investment value £25.8m £15.3m £11.7m £11.0m £10.9m % direct holding (excludes FuM) 33.2% 65.1% 24.1% 16.6% 38.4% Initial year of investment 2014 2015 2022 2018 2016 Description Aluminium VR developer Cyber security Video analytics Patch delivery pressing Board repres
Slide 22: Top holdings, by value (6-10)
Top 10 holdings, by value (6-10) Investment value £10.1m £9.7m £8.7m £5.5m £5.4m % direct holding (excludes FuM) 40.6% 40.3% 35.5% 24.7% 29.9% Initial year of investment 2015 2014 2015 2017 2015 Description Mobile soccer Mobile digital Flat speaker Optical Business management trading cards tech solu
Slide 23: Direct portfolio value creation
Direct portfolio value creation Since IPO in 2014, balance sheet portfolio performance: c.13% IRR 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
Slide 24: The investment case for FY24
The investment case for FY24 24
Slide 25: A leading UK impact investor
Portfolio size Mercia Ventures: 258 A leading UK Mercia Private Equity: 08 impact investor Mercia Debt: 301 Seeing deals others do not through our physical presence in key cities Total: 567 University spinouts supported: 74 Group capital invested FY21 c.£94m FY22 c.£124m (↑ c.32%) FY23 c.£165m (↑ c.
Slide 26: Our focus for FY24
Our focus for FY24 • Organic expansion of retail FuM • Organic expansion of public sector FuM • Organic expansion of institutional FuM • Continue progressive dividend • Drive direct investment performance and cash realisations • Using own cash resources, continue to evaluate capability and asset gro
Slide 27: Why invest in Mercia?
Why invest in Mercia? • 100% of FuM in closed-end funds • Blended c.2% fee margin Long-term • Well placed for domestic organic FuM expansion revenue visibility, • Diversified direct investment portfolio: c.40% share sustainable price discount to NAV profitability and • Strong liquidity: − c.£38m, de
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