Mercia Asset Management Plc · LSE:MERC
Mercia Asset Management — FY2022 Earnings Presentation
34 slides from Mercia Asset Management's earnings presentation, Jul 5, 2022
Slide 1: Mercia Asset Management PLC Preliminary Results
Mercia Asset Management PLC 31 March 2022 Preliminary 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 comme
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 across the Group – c.£297m 2 3 funds and balance sheet 4 5 7 • Long dated managed funds, no redemptions 6 8 • Well funded portfolios, with low capital needs • Strong commercial progress by the
Slide 5: FY22 – Key results for the Group
FY22 – Key results for the Group OPERATING 31 March 2022: c.£959m c.£124m c.£155m c.£297m Group AuM Capital deployed Cash realised Total liquidity 31 March 2021: c.£940m c.£94m c.£103m c.£314m FINANCIALS £20.6m £61.3m £27.4m 45.6p 0.5p 31 March 2022: Profit before Proposed final dividend Group reven
Slide 6: The model - a debt-free group delivering
The model - a debt-free group delivering Balance sheet returns - Complimentary - Strong focus and asset classes discipline - Recurring Profitable - Invests in emerging predictable fee Proprietary funds’ portfolio income managed companies, fund activity capital selectively into - Growing managed fund
Slide 7: Growing UK specialist asset manager
Growing UK specialist asset manager At IPO (2014) 31 March 2022 c.£201m Proprietary capital c.£48m Venture c.£118m Debt Private Equity c.£592m c.£13m c.£23m AuM c.£36m c.£959m Unrestricted Group cash* - £61.3m Debt - - PBT - £27.4m People 7 120 * Including short-term liquidity investments Offices 1
Slide 8: 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 (regional pension funds) Drivers for growth Growing addressable opportunity Top-four manager in EIS: £1.6bn (2021) Retail capital (EIS / VCT) both
Slide 9: Strong M&A track record
Strong M&A track record What we look for: i. Value driver analysis ii. Strong cultural fit iii. Earnings enhancing iv. Domestic market expansion via new FuM v. Similar fee structures vi. Strong fit with investment model and internal capabilities / systems 2016 2019 Acquired entire group (£11m): Acqu
Slide 10: 'Mercia 20:20' Vision; one year in
‘Mercia 20:20’ Vision; one year in FY22 – FY24 Our three-year strategic goals PBT AuM FY22: £27.4m £959m FY23: - - £20m 20% FY24: - - Three-year cumulative c.£60m c.£1.5bn Achieve average target: Grow AuM by an pre-tax profits of average of 20% per £20million per annum over the same annum over the n
Slide 11: Financial review
mercia ‘asset management
Slide 12: FY22 – Key results for the Group
FY22 – Key results for the Group HEADLINE FINANCIALS £20.6m £8.4m £27.4m £61.3m 45.6p 31 March 2022: Adjusted operating Profit before Unrestricted Group revenue* NAV/share profit taxation cash** 31 March 2021: £19.2m* £3.3m £34.0m £54.7m** 40.0p * Excluding performance fees ** Including short-term l
Slide 13: Revenue as percentage of AuM
Resilience of total revenue with AuM growth Revenue as percentage of AuM AuM (£’m) *Excludes performance, fund raising or other fees 13
Slide 14: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income For the year ended 31 March 2022 Year ended Year ended 31 March 31 March 2022 2021 £’000 £’000 Revenue 23,183 23,410 Administrative expenses (17,857) (16,554) Realised gain on sale of direct investment 9,878 20,251 • Realised gain on the sale of Faradio
Slide 15: Consolidated statement of financial position
Consolidated statement of financial position As at 31 March 2022 As at As at 31 March 31 March 2022 2021 £’000 £’000 Goodwill and intangible assets 32,355 34,388 • Direct portfolio: Property, plant and equipment and right-of use assets 530 563 • Net capital deployed £18.4m Investments 119,558 96,220
Slide 16: Consolidated statement of cash flows
Consolidated statement of cash flows For the year ended 31 March 2022 Year ended Year ended 31 March 31 March 2022 2021 £’000 £’000 Net cash generated from operating activities 9,150 5,611 • Strong operating cash inflow Sale of direct investments 16,309 36,987 Purchase of direct investments (19,884)
Slide 17: Mercia share register: 69% free float
Mercia share register: 69% free float (2021: 69%) • Board, management and employees (c.17%) • Invesco (c.14%) • Retail (c.10%) • Ruffer (c.7%) • Chelverton Asset Management (c.4%) • BMO Global Asset Management (c.4%) • The Hargreaves No.11 Settlement (c.3%) • NFU Mutual (c.3%) • BlackRock (c.3%) • L
Slide 18: Investment review
Investment review 18
Slide 19: FY22 - AuM movements
FY22 - AuM movements AuM AuM Post year- 1 April Private investor Public sector 31 March end 2021 inflows inflows Performance Distributions 2022 inflows Asset class £’m £’m £’m £’m £’m £’m £’m Venture 600 22 20 30 (80) 592 45 Private equity 54 - - (2) (4) 48 - Debt 110 - 11 - (3) 118 - Total FuM 764
Slide 20: FY22 - Key investment figures for the Group
FY22 - Key investment figures for the Group INVESTMENT 31 March 2022: 2,604 c.£124m 148 95 Investment requests Capital deployed Businesses invested New to portfolio 31 March 2021: 2,818 c.£94m 173 76 PERFORMANCE c.£155m 3.1x 13 3 17 31 March 2022: Investment Investment Trade sales IPOs Other full or
Slide 21: £155m of realisations for FY22
£155m of realisations for FY22 Equity realisations Cost multiple (equity realisations / cost) £2m 1.3x £19m 4.4x 3.0x £134m Venture (managed funds) Private Equity (managed funds) Proprietary capital 21
Slide 22: Faradion – 2011 to 2022 realisation
Faradion – 2011 to 2022 realisation Ashwin Kumaraswamy Investment Director Founded by Dr Jerry Barker and Dr Chris Wright, with seed First direct investment from Sold to Reliance New Energy investment from Mercia Mercia was made in 2017 Solar in January 2022 2011 2017 2022 Mercia’s managed funds 201
Slide 23: Direct investment portfolio
Direct investment portfolio as at 31 March 2022 Investment Net cash Investment Realised Fair value Investment Percentage value invested realisations gains movement value held Year of As at Year to Year to Year to Year to As at As at first 1 April 31 March 31 March 31 March 31 March 31 March 31 March
Slide 24: More to come from proprietary investments
More to come from proprietary investments 40.0% 15.7% 24.1% 40.6% 24
Slide 25: Shadow portfolio, ones to watch
Shadow portfolio, ones to watch Processes that enable the conversion of woody and agricultural plant residues Implant systems that achieve into high-value sustainable and maintain superior spinal biocarbons, biopolymers, alignment for improved biochemicals and advanced clinical outcomes. biofuels. A
Slide 26: 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, led by Jill Williams • First Knowledge-intensive Impact EIS Fund launched (with more to come) • 120 empl
Slide 27: Summary and outlook
Summary and outlook ✓ Strong liquidity across the Group ✓ Maintenance of fee margin on scaling managed funds ✓ Long dated managed funds not subject to redemptions ✓ Well funded, diversified direct investment portfolio with modest capital needs ✓ Limited exposure to public markets ✓ One year in, on t
Slide 28: Appendices
28 66 ere = _ Appendices mercia ‘asset management
Slide 29: Proactive regional deal origination
Proactive regional deal origination National Regional Private Proprietary Debt EIS/VCT Venture Equity capital Investment Early stage, Early stage, Profitable, up Profitable, Series A, up criteria: series A, up up to £2m to £5m up to £1m to £10m to £5m Total portfolio 131 119 10 171 23 size: Investme
Slide 30: Top 10 holdings, by value (1-5)
Top 10 holdings, by value (1-5) Investment value £25.8m £14.4m £10.5m £10.4m £9.0m % direct holding (excludes FuM) 33.2% 24.1% 17.6% 67.3% 33.1% Initial year of investment 2014 2017 2018 2015 2016 Description E-commerce/ Aluminum VR developer Video analytics Patch delivery web security pressing Boar
Slide 31: Top 10 holdings, by value (6-10)
Top 10 holdings, by value (6-10) Investment value £6.3m £6.1m £5.4m £4.9m £4.6m % direct holding (excludes FuM) 40.0% 29.9% 40.6% 18.1% 39.0% Initial year of investment 2014 2015 2015 2018 2015 Description Mobile soccer Flat speaker Business Mobile digital Orthobiologics management tech intelligence
Slide 32: Valuation methodology
Valuation methodology • Follow IPEVCV Guidelines Direct investment portfolio by valuation • Over half of the portfolio value methodology based on the price of last £1.6m investment round £5.6m • Calibration of valuation £12.3m Listed Investments 1% approaches Price of last investment round 52% • Som
Slide 33: Investment focus
Investment focus Direct investment portfolio by sector • Direct investments balanced across key sectors 20% • Current focus areas include digital Software & the Internet health, business efficiency, energy 31% transition and enabling technology Digital & Digital Entertainment Electronics, Materials,
Slide 34: NEDs - strong corporate governance combined with deep asset management experience
NEDs - strong corporate governance combined with deep asset management experience Ian Metcalfe Diane Seymour-Williams Ray Chamberlain Chair SID Dr Jonathan Pell Caroline Plumb OBE 34
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