Mercia Asset Management Plc · LSE:MERC
Mercia Asset Management — H1 2020 Earnings Presentation
32 slides from Mercia Asset Management's earnings presentation, Dec 3, 2019
Slide 1: Mercia Asset Management Interim results presentation
Mercia Asset Management Interim results presentation 3 December 2019
Slide 2: Presentation team
A track record of value creation Dr Mark Payton Martin Glanfield Julian Viggars Chief Executive Chief Financial Chief Investment Presentation team Officer Officer Officer Over 15 years’ experience Over 20 years’ CFO/FD Over 20 years of venture in technology experience of listed and capital experienc
Slide 3: Highlights
Highlights Reaching scale, platform to leverage AuM: post acquisition, assets 1 under management (AuM) grow by c.50% from c.£500m to c.£760m Earnings enhancing acquisition: moves the Group to profitable trading 2 in FY 2021 Summary Strengthened liquidity: c.£250m across asset classes to invest over
Slide 4: Strategic priorities FY20 – FY22
Strategic priorities FY20 – FY22 First choice for investees, investors & employees FY 2022 target • Target market is annual c.£1bn invested in regional SMEs seeking modest capital in areas of Mercia’s technical and operational expertise • Become the most active investor in our target market • Target
Slide 5: Why does Mercia focus on the UK regions?
Why does Mercia focus on the UK regions? Total equity Our regional coverage investment • Our offices across UK • University Our marketplace partners • NEVF regions • MEIF regions • NPIF regions 46% Distribution of high- growth firms 22% 5 Source: British Business Bank & ScaleUp Institute
Slide 6: Hybrid investment model
Hybrid investment model Our business model Our regional focus: highly experienced investment teams with a local presence Mercia platform: supporting our portfolio as they grow High-quality recurring revenues: c.2%, typically 10-year funds, c.68% annual contracted 6 Complete connected capital: strong
Slide 7: NVM VCT Contract Acquisition and Financial Review
NVM VCT Contract Acquisition and Financial Review 7
Slide 8: Delivering scale and profitability
Delivering scale and profitability Proposed transaction: • Acquisition of three VCT management contracts from NVM for a maximum Transaction overview consideration of £25m • Initial £16.6m (£12.4m cash; £4.2m Mercia shares) with three year £8.4m deferred contingent consideration (£6.3m cash; £2.1m sh
Slide 9: NVM VCT: a transformational acquisition
NVM VCT: a transformational acquisition Achieves trading profitability (Net Income before realisations, FVM, share-based payments Transaction rationale & amortisation) in first year post completion. Immediately earnings enhancing: • Total VCT related revenue of £7.2m, with £6.3m recurring revenue (o
Slide 10: Integration planning and execution
Integration planning and execution • Integration Plan • Back Office Team ‐ Mutually-agreed detailed pre and ‐ 21-month Transition Services post completion integration plan Agreement in place ‐ 158 workstreams ‐ IT access to ensure Integration ‐ Completed within first 100 days communication continuit
Slide 11: Condensed consolidated statement of comprehensive income
Interim results Condensed consolidated statement of comprehensive income for the six months ended 30 September 2019 11
Slide 12: Condensed consolidated balance sheet
Interim results Condensed consolidated balance sheet as at 30 September 2019 12
Slide 13: Assets under Management
Ne Assets under Management = é Oe YL
Slide 14: The acquisition
NVM Private Equity LLP (“NVM”) VCT contracts • Three NVM VCT management contracts with c.£270m in AuM1 • 60 portfolio companies; 17 are listed, 27 are private venture, 16 are The acquisition private equity • Strong fundraising track record • High barrier to entry into VCT market for new entrants 14
Slide 15: Proforma AuM post acquisition
Proforma AuM post acquisition as at 30 September 2019 Venture NVM VCTs Private equity Debt Balance sheet Total portfolio Total portfolio Total portfolio Total portfolio Total portfolio 194 60 17 120 23 Total FuM Total FuM Total FuM Total FuM NAV £210m £270m £60m £91m £128m Total invested Total ventu
Slide 16: Direct investment holdings
VALUATION BASIS BY HOLDING VALUE Direct investment holdings Held at cost Price of last round 1% 59% as at 30 September 2019 Enterprise valuation 33% Bid price, listed 1% Impaired / below cost 6% Investment Net cash Fair value Investment Percentage value invested movement value held As at Six months
Slide 17: Direct investment portfolio
Direct investment portfolio Holding proportions 17 As at 30 September 2019
Slide 18: Balance sheet direct investments
Balance sheet direct investments Diversified balance sheet portfolio Portfolio value by stage of Portfolio value by sector development Profitable Early stage 28% 24% 7% 31% 62% 24% 24% Revenue growth 18
Slide 19: Strong commercial progress with direct investments
Strong commercial progress with direct investments • 2018: c.£3m revenue Sodium ion battery technology • c.700% 3-year growth • 2018: c.£2m revenue • 2018: c.£5m revenue • c.1,000% 3-year growth • c.1,000% 3-year growth 19
Slide 20: Further potential deal flow from managed funds
Further potential deal flow from managed funds 50+ businesses looking for c.£125m in next 18 months Electronics, Materials, Life Sciences & Biosciences Proprietary deal flow Manufacturing & Engineering Digital & Digital Entertainment Software & the Internet 20
Slide 21: Investing in Talent; the best place to do your best work
Investing in Talent; the best place to do your best work 21
Slide 22: Where employees do their best work
Where employees do their best work • In the regions, from the regions, to the regions Environmental, social & corporate governance • c.100 employees post transaction in 8 regional offices, with 19 regional university partnerships • c.41% of staff, c.38% of the investment team ♂ ♀ ♂ ♀ are female All
Slide 23: Conclusion: Differentiated, scalable specialist asset manager
Differentiated, scalable specialist asset manager ✓ Acquisition expands potential balance sheet deal flow and moves Group to profitability Conclusion ✓ Complementary acquisition moves Mercia significantly closer to £1bn AuM target ✓ Placing fully funds existing direct investments and pipeline, everg
Slide 24: Q&A
Oe Y) Q&A of Ny " rN VN YY i
Slide 25: Appendices
Oe Y) A ppendices of Ny " rN VN YY i
Slide 26: Share register
Share register c.23% Board, management and employees c.19% Invesco Perpetual Share register c.11% BlackRock, formerly WIM c.10% Retail c.5% NFU Mutual Others to note: c.4% Baillie Gifford • Miton • Schroders c.3% Canaccord (formerly Hargreave Hale) • Quilter Cheviot • Investec c.2% West Yorkshire Pe
Slide 27: The Non-executive Directors
Strong corporate governance combined with deep, patient investment experience The Non-executive Directors Ian Metcalfe Ray Caroline Dr Jonathan New NED Chair Chamberlain Plumb OBE Pell with strong asset management background 27
Slide 28: The Senior Management Team (post acquisition)
The Senior Management Team (post acquisition) Confidential Ceri Rosie Will Julian Peter Michelle Alison John Group Financial Compliance North/Yorks Midlands COO People & Talent Head of FD, funds Controller Marketing & Comms. Charlie Paul Sarah Wayne Angela Ian Head of VCT Head of Head of Head of PE
Slide 29: Managed fund support
Managed fund support Finance Compliance Fund: admin., investor relations & reporting Confidential Ceri Group Financial John Controller Rosie Finance Director Compliance Director 29
Slide 30: NVM's VCTs' investment portfolio summary
NVM’s VCTs’ investment portfolio summary 30
Slide 31: 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 32: Mercia Asset Management PLC contact details
0330 223 1430 @Mercia_PLC info@mercia.co.uk Mercia Asset Management PLC mercia.co.uk
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