Mercia Asset Management Plc · LSE:MERC
Mercia Asset Management — FY2021 Earnings Presentation
32 slides from Mercia Asset Management's earnings presentation, Jul 6, 2021
Slide 1: Mercia Asset Management PLC 2021 Preliminary Results
Mercia Asset Management PLC 2021 Preliminary 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 Mark Payton Martin 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-backed
Slide 4: Highlights
Three-year goals substantially achieved ahead of time Assets under Management (AuM) Strategic highlights c.£940m, +c.18% - Three-year objectives substantially achieved: AuM of c.£1bn; sustainably profitable; evergreen balance sheet Adjusted operating - Highly resilient; no use of furlough or CBILS p
Slide 5: Mercia Asset Management
Mercia Asset Management Find value Add value Extract value 2,826 enquiries, 173 Centralised resource, 145 10 profitable exits deals completed, 76 syndicated deals, 29 NXDs in FY21 are new portfolio placed, 467 jobs created by companies regional venture Addressable market Market penetration - SMEs (m
Slide 6: Complete Connected Capital
Investment model Proactive, regionally focused, specialist asset manager • Third-party funds deliver future direct investments, attractive Complete Connected Capital returns for investors and underpin our progressive dividend policy • Balance sheet selectively invests in certain of its own managed f
Slide 7: Our journey: growth in AuM and profitability
Our journey: growth in AuM and profitability FY21, dividend initiation £19.2m* turnover, £34.0m operating profit December £0.9bn AuM: 2019 Acquired • c.£764m FuM (portfolio of 426 companies) Northern VCT contracts • c.£96m portfolio valuation at March 2021 (23 direct investments) • c.£314m unrestric
Slide 8: Mercia share register: 69% free float (2020: 69%)
Mercia share register: 69% free float (2020: 69%) • Board, management and employees (c.17%) • Invesco (c.14%) • Retail (c.10%) • Ruffer (c.7%) • Librae Holdings (c.6%) • Ninety One (Investec Asset Management) (c.4%) • Chelverton Asset Management (c.3%) • The Hargreaves No.11 settlement (c.3%) • NFU
Slide 9: Mercia 20:20 vision: bold new three-year strategic goals
Mercia 20:20 vision A purpose-led business We provide growth capital and tailored investment solutions to regional businesses to create long-term shareholder value Bold new three-year Our vision is to be the first choice for our employees, investors and investees strategic goals 20% £20m Achieve ave
Slide 10: Financial review
10 mercia ‘assel management
Slide 11: Financial information: Summarised results
Summarised results • Revenue* increased 50.5% to £19.2m (2020: £12.7m) • Adjusted operating profit* £3.3m (2020: £0.5m) Financial information • Net performance fees £3.8m (2020: £nil) • Profit after tax £34.5m (2020: £17.5m loss) • Net assets £176.0m (2020: £141.5m) • Net assets per share 40.0 pence
Slide 12: AuM movements
AuM movements AuM AuM 1 April 2020 Distributions Net fund flows Performance 31 March 2021 Asset class £’m £’m £’m £’m £’m Venture 476 (16) 13 127 600 Private equity 60 (6) - - 54 Debt 122 (5) (7) - 110 Proprietary 142 - - 34 176 capital Total 800 (27) 6 161 940 • Performance driven by VCT and direct
Slide 13: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income For the year ended 31 March 2021 Year ended Year ended 31 March 31 March 2021 2020 £’000 £’000 Revenue 23,410 12,747 Administrative expenses (16,554) (12,661) Realised gain on sale of direct investments 20,251 – Fair value movements in direct investment
Slide 14: Consolidated balance sheet
Consolidated balance sheet As at 31 March 2021 As at As at 31 March 31 March 2021 2020 £’000 £’000 Goodwill and intangible assets 34,388 36,705 Property, plant and equipment and right-of use assets 563 723 Investments 96,220 87,471 Total non-current assets 131,171 124,899 Trade and other receivables
Slide 15: Consolidated cash flow statement
Consolidated cash flow statement For the year ended 31 March 2021 Year ended Year ended 31 March 31 March 2021 2020 £’000 £’000 Net cash generated from operating activities 5,611 298 Sale of direct investments 36,987 – Purchase of direct investments (15,647) (17,449) Investee company loan repayments
Slide 16: Investment review: Third-party fund management
Investment review Third-party fund management 16
Slide 17: Proactive regional deal origination
Proactive regional deal origination • Origination across asset classes enhanced by digital platform established pre-pandemic - £94.4m invested in 173 companies, of which 76 are new Key regional investor Private Proprietary Venture Debt Total equity capital Total portfolio size: 245 8 150 23 426 No.
Slide 18: Regional investment activity
Regional investment activity 18
Slide 19: FY21 profitable managed fund exits across the Group
FY21 profitable managed fund exits across the Group Venture Northern VCTs 12x 2x 1.3x 1x 8x 2x 8x 2x 2x 13-20x 19
Slide 20: FY21 fund asset class performance
FY21 fund asset class performance TVPI * Venture PE Institutional Funds Legacy 138% 142% Current 98% 87% Retail EIS Funds Legacy 123% N/A Current 102% N/A *TVPI % Distributions + total value + cash/ paid in Retail VCTs NAV** Total return Northern Venture Trust 71.8 254.3 Northern 2 VCT 65.8 196.2 No
Slide 21: Proprietary capital
Proprietary capital • 23 direct investments (2 new) • 4 exits in the year • £37.0m of cash generated • £20.3m realised gains • IRR c.15% • Areas of focus: • Life Sciences, Software, Digital, Deep Tech • Corporate activity 21
Slide 22: Continuing to build a balanced portfolio
Investment focus Continuing to build a balanced portfolio • Continued support of our existing portfolio • New direct deals from our third-party funds • 17 companies in shadow portfolio • Selective co-investment with our funds • Discretionary LP investor • Providing secondary capital in venture deals
Slide 23: Three profitable realisations in FY21
Three profitable realisations in FY21 Key regional investor Advanced Business Buyer LGC Software WuXi AppTec Mercia holding 29.4% 4.0% 32.1% Mercia’s consideration £5.2m £1.0m £30.7m Realised gain £1.8m £0.5m £18.0m 8.4x return; 65% 5x return; Direct investment return IRR 2x return; 72% IRR 51% IRR
Slide 24: Direct investment holdings
Direct investment holdings as at 31 March 2021 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 25: Direct investments: Top holdings, by value (1-5)
Top 10 holdings, by value (1-5) Investment value £17.7m £10.0m £8.8m £8.6m £8.1m % direct holding (excludes FuM) 35.4% 27.5% 17.6% 67.3% 29.0% Direct investments Initial year of investment 2014 2017 2018 2015 2016 Description E-commerce/ Aluminum VR developer Video analytics Patch delivery web secur
Slide 26: Direct investments: Top holdings, by value (6-10)
Top 10 holdings, by value (6-10) Investment value £5.7m £4.9m £4.5m £4.3m £3.6m % direct holding (excludes FuM) 15.6% 29.9% 14.6% 35.8% 39.0% Direct investments Initial year of investment 2017 2015 2016 2014 2015 Description Mobile soccer Sodium-ion Business At-home Flat speaker management battery t
Slide 27: Responsible employer, responsible investor
Responsible employer, responsible investor • Dedicated ESG team representing all parts of the Group, led by Jill Williams, Environmental, social & corporate reporting to CEO • Our approach is based on the UN Principles of Responsible Investing • We have three key areas of focus: governance • Sustain
Slide 28: Summary
Purpose-led, proven business model Strategy for growth and shareholder returns Original strategic targets substantially achieved one year ahead of plan Growing fee income with 85% contracted and recurring (fund management and monitoring fees) Summary Scale: c.£940m AuM and growing Well capital
Slide 29: Appendices
29 a on 66 \ppendices
Slide 30: Valuation methodology
Valuation methodology • Followed IPEVCV Guidelines • Calibration of valuation approaches • Some use of DCF due to valuation guidelines • COVID-19 discounts still applied where appropriate • But, still adopt a ‘hand-on-heart’ final review • New auditor BDO happy with valuations and methodologies Dire
Slide 31: Investment focus: Portfolio by sector
Investment focus Portfolio by sector 28% 28% • Direct investments balanced across key sectors • Current focus areas include digital health, business efficiency, energy transition and 23% 21% enabling technology Software & the Internet Life Sciences & Biosciences Deep Tech Digital & Digital Entertain
Slide 32: 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 32
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