REG - Mercia Asset Mgt PLC - Interim Results
26/11/2024 07:00
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RNS Number : 5865N Mercia Asset Management PLC 26 November 2024
RNS 26 November 2024
Mercia Asset Management PLC
("Mercia" or the "Group" or the "Company")
Interim results for the six months ended 30 September 2024
34% growth in EBITDA underpins a 6% increase in the interim dividend
Mercia Asset Management PLC (AIM: MERC), the regionally focused, specialist
alternative asset manager with over £1.8billion of assets under management
("AuM"), is pleased to announce its interim results for the six months ended
30 September 2024.
Mark Payton, Chief Executive Officer of Mercia, commented:
"Mercia has delivered another strong first half performance with our higher
funds under management driving revenue and EBITDA growth. I am pleased to say
that none of the tax changes announced in the Government's Autumn Budget, will
curtail Mercia's growth ambitions."
Unaudited Unaudited Audited
30 September 30 September 31 March
2024 2023 2024
Statutory results
Revenue £17.9m £15.0m £30.4m
Realised fair value gain on sale of a direct investment - - £4.5m
Unrealised fair value movement in direct investments £0.2m £(1.6)m £(17.3)m
Profit/(loss) before taxation £2.4m £1.4m £(8.2)m
Basic earnings/(loss) per share 0.41p 0.30p (1.71)p
Interim(1)/final dividend per share 0.37p 0.35p 0.90p
Cash and cash equivalents £46.2m £36.5m £46.9m
Net assets £187.4m £202.4m £189.2m
Alternative performance measures
AuM (2) £1,836.9m £1,461.8m £1,818.8m
EBITDA (3) £3.7m £2.8m £5.5m
Adjusted operating profit (4) £4.8m £5.5m £9.7m
Net assets per share 43.4p 45.3p 43.4p
1 The interim dividend will be paid on 8 January 2025 to shareholders on
the register at the close of business on 6 December 2024.
2 AuM is defined as the value of funds under management from which the
Group earns revenues, plus the Group's consolidated net assets.
3 EBITDA is defined as operating profit/(loss), depreciation, realised
fair value gains/(losses) on the sale of direct investments, unrealised fair
value movement in direct investments, share-based payments charge,
amortisation of intangible assets and movement in fair value of deferred
consideration.
4 Adjusted operating profit is defined as EBITDA plus net finance
income.
Managed fund movements
· Third-party funds under management ("FuM") increased by c.31%
compared to the corresponding period end to c.£1,650million (H1 2024:
c.£1,260million; FY 2024: c.£1,630million), with no redemptions
o Venture FuM of c.£952million (H1 2024: c.£660million; FY 2024:
c.£913million)
§ £29.2million successfully raised by the three Northern Venture Capital
Trusts ("VCTs") in April 2024, in addition to £1.2million of shareholder
dividend reinvestment inflows
§ Final dividends totalling £9.1million paid out by the three Northern VCTs
in addition to shares repurchased and cancelled totalling £6.8million
§ £10.0million additional equity allocation under the Northern Powerhouse
Investment Fund I
§ Two Enterprise Investment Scheme ("EIS") funds closed raising a total of
£16.3million
o Debt FuM of c.£672million (H1 2024 c.£552million; FY 2024:
c.£687million)
§ Frontier Development Capital's National Tooling Loan Fund moved into its
realisation phase
o Private equity FuM of c.£26million (H1 2024: c.£48million; FY 2024:
c.£30million)
§ A refinancing at Imail realised £6.4million back to fund investors
Direct investment portfolio movements
· Direct investment portfolio fair value of £120.9million (H1 2024:
£142.5million; FY 2024: £116.9million)
· £3.9million net invested into four portfolio companies (H1 2024:
£7.5million net invested into eight portfolio companies)
· £0.2million net fair value increase in the portfolio during the six
month period (H1 2024: £1.6million decrease)
Post-period end developments
· Northern VCTs to launch a £36.0million fundraise in January 2025,
with shares allotted in the 2024/25 tax year
· Mercia's most recent EIS fundraise closed in November 2024, raising a
total of c.£4million
· Cash proceeds totalling £0.6million received from the realisation of
the Group's direct investment in Artesian Solutions, 11% higher than its
carrying value as at 30 September 2024
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018. Upon publication of this
announcement, this inside information is now considered to be in the public
domain.
For further information, please contact:
Mercia Asset Management PLC +44 (0)330 223 1430
Mark Payton, Chief Executive Officer
Martin Glanfield, Chief Financial Officer
www.mercia.co.uk (http://www.mercia.co.uk/)
Canaccord Genuity Limited (NOMAD and Joint Broker) +44 (0)20 7523 8000
Simon Bridges, Emma Gabriel
Singer Capital Markets (Joint Broker) +44 (0)20 7496 3000
Charles Leigh-Pemberton
FTI Consulting +44 (0)20 3727 1051
Tom Blackwell, Jenny Boyd
mercia@fticonsulting.com (mailto:mercia@fticonsulting.com)
Investor presentation
Mercia will also provide a live management presentation and Q&A via the
Investor Meet Company platform at 3.00pm today. Registration details for the
online investor presentation can be accessed via:
https://www.investormeetcompany.com/mercia-asset-management-plc/register
(https://www.investormeetcompany.com/mercia-asset-management-plc/register)
About Mercia Asset Management PLC
Mercia is a specialist alternative asset manager focused on supporting
regional SMEs to achieve their growth aspirations. Mercia provides capital
across its four asset classes of venture, debt, private equity and proprietary
capital: the Group's 'Complete Connected Capital'.
The Group has a strong UK footprint through its 11 regional offices,
university partnerships and extensive personal networks, providing it with
access to high-quality deal flow.
Mercia Asset Management PLC is quoted on AIM with the EPIC "MERC".
Chief Executive Officer's review
Our 10-year journey - significant scale profitably built
The original Mercia Fund Management business was founded in Birmingham in 2010
following the Global Financial Crisis, with a core belief that we could make a
material difference through deploying capital to the best investment
opportunities, irrespective of where they were located in the UK.
Mercia Asset Management PLC was admitted to trading on AIM in December 2014
(as Mercia Technologies PLC), making this our tenth anniversary as a quoted
company. With a focus on growing our original hybrid model of making both
direct investments (using our own capital) and managing third-party funds
under management ("FuM"), our vision was to become the first choice for
investees, investors and employees. We are pleased to mark this 10-year
milestone with the strong results we are reporting today.
Our journey to date can be summarised as:
Timeline Third-party FuM Total direct investment value Average investment size Six month deployment rate Six month revenue EBITDA FTE
At IPO c.£23m c.£9m c.£0.2m c.£2m c.£0.4m £0 7
H1 FY25 c.£1.6bn c.£121m c.£1.5m c.£100m c.£18m £3.7m 138
Over this 10-year journey, we have invested over £1billion into c.800
businesses and projects, returning over £700million back to our managed fund
investors to date. Over the same period, in respect of our direct investment
activity, we have invested c.£168million into 44 businesses returning over
£100million thus far. We have faced and overcome many external challenges
during this 10-year period including Brexit, COVID, global conflicts, energy
crisis, inflation, elevated interest rates and sector-wide redemption calls. I
am proud of what Mercia has accomplished, because we have proven that our
business model is resilient and has been able to prosper, despite a frequently
turbulent economic/market backdrop. Being a diversified, specialist
alternative asset manager, focused on regional private markets capital
deployment, is serving us and our investors well.
Today, operating under the trading names of Mercia Ventures, Mercia Debt,
Frontier Development Capital and Mercia Private Equity, we are seen as a
respected and pro-active partner to those seeking investment, having also been
recognised on a national and regional basis including 'Top Investor in
Women-Powered Businesses' (JP Morgan and Beauhurst, 2024 Annual Report),
Insiders' 'Funder of the Year for the Midlands, Yorkshire, North West, and
North East', and from Sifted, who recently noted Mercia to be the 'Most Active
Investor' in Q3 across Europe.
Making a positive impact through our investment activities
Mercia is committed to investing responsibly and striving for sustainable,
financial growth. We continue to be signatories of, and report against, the
United Nations Principles for Responsible Investing. We aim to make a positive
impact through the environmental and social contributions that our investees
can make, aligning the UN Sustainable Development Goals with our own guiding
principles, being: sustainable economic growth, improving diversity, reducing
inequalities, boosting health and wellbeing for all.
In the first half of this financial year, we strengthened this commitment by
appointing a dedicated ESG Manager to drive forward our sustainability agenda.
Mercia continues to offset 100% of our corporate carbon emissions through
Carbon Neutral Britain. We have also made commitments to the Investing in
Women Code and the Women in Finance Charter to reinforce our beliefs, that a
diverse and inclusive environment is most conducive to the success of our
business and our portfolio companies, and we continue to improve the way in
which we monitor this.
As a leading domestic and impactful investor across the UK, we seek
opportunities that align our vision with our core values of Trusted, Growth,
Responsible, Responsive and Connected, to demonstrate best-in-class ESG
stewardship.
'Mercia 27': Accelerating FuM growth and doubling EBITDA
In July 2024, we set out our three year strategy to divest c.70% of our direct
investment portfolio by value over the next three years, via orderly sale
processes, primarily to fund the accelerated scaling of our third-party FuM to
c.£3billion, whilst also doubling EBITDA. This we anticipate, will be
accomplished by growing our existing strategic assets and in parallel, moving
into the management of real assets. During the period, we received new fund
inflows totalling c.£57million and post-period end a further c.£4million. In
addition to the ongoing funds being raised via the Enterprise Investment
Scheme ("EIS") and the three Northern Venture Capital Trusts ("VCTs") that we
manage, we also have a number of other fund opportunities under consideration.
We are diversified by asset class, investor type and fund structure , as shown
below:
Private Venture Private Debt Private Equity Intermediary Real Asset Finance Balance Sheet (incl. direct investments) Total
AuM: £952m £362m £26m £310m £187m £1.8bn
Asset type: Equity as sole or syndicated provider in businesses typically seeking Direct lending, secondaries, leveraged loans. Growth equity looking at business re-engineering to drive performance. Midlands-focused on real estate regeneration. Investing up to £20m as sole Nationally-focused on supporting existing direct assets to sale, and investing
<£30m.
investor. in Mercia's managed FuM as an LP.
Often sole provider, investing up to £7.5m.
Mercia will typically invest up to £10m, but can invest >£20m.
National and regional impact: Real economy and job creation. Real economy and job creation. Real economy and job creation. Infrastructure investment for growth and job creation. Historically invested alongside Mercia's third-party FuM in 'emerging stars'.
Creating resilience. Creating resilience. Creating resilience. Expansion and sustainability.
New business creation and expansion. Business support and expansion. Business expansion. Brownfield remediation and regeneration.
Housing, including social/affordable.
Unrestricted cash: £420m £108m - £89m £46m £663m
Building for growth
We believe that our future success will be delivered from two key areas of our
Group: 'Deal Origination' and 'Sales and Distribution'. Over the remainder of
'Mercia 27', these will remain our key areas of focus, as we look to broaden
our managed funds into real assets, in parallel with continued growth in our
strategic assets under management.
With our growth over the past 10 years, we benefit from the investment
discipline exercised by our diverse investment teams across our 11 offices,
originating and supporting many of the best opportunities across the UK.
Whilst we expect to welcome a limited number of new colleagues for the
remainder of this financial year, our focus now is on operational efficiencies
and updated systems, as we seek to leverage our historic success with future
opportunities, to deliver on our twin 'Mercia 27' goals.
Outlook
Mercia has delivered another strong first half performance with our higher
funds under management driving revenue and EBITDA growth. I am pleased to say
that none of the tax changes announced in the Government's Autumn Budget, will
curtail Mercia's growth ambitions. Mercia's platform is now benefiting from
its increasing scale across our investment strategies and investor client
base. Our positive equity investing and SME lending track records and
reputation, together with our human and financial capital, are combining to
create a powerful and growing ecosystem within the UK regions, that positions
us for long-term success, enabling us to proactively navigate through market
cycles.
Mercia, with its investment discipline, debt-free cash position and
sustainable, long-term private capital deployment business model, has a stable
AuM position and a clear strategy through which to continue its growth
trajectory. As institutional funds look to impactful, domestic and regional
allocations, I remain confident that Mercia is well placed to benefit from
this capital transition.
Since our IPO 10 years ago, Mercia's networks, liquidity and regional presence
have grown significantly, positioning us for another decade of growth with the
current opportunities that exist across the UK. My sincerest gratitude goes to
our investees, our investors, our team here at Mercia and of course to our
loyal shareholders, for your continued support.
Dr Mark Payton
Chief Executive Officer
Chief Investment Officer's review
Investment activity
During the six months to 30 September 2024, we invested c.£133million into
86 businesses across our funds and balance sheet, including 46 new fund
portfolio companies. Compared to the corresponding period, AuM has increased
c.26% to c.£1.8billion with no redemptions and the Group had
c.£663million of liquidity at the end of the period to support our future
investment activities.
Assets under management
A total of c.£47million of new capital was raised by our Enterprise
Investment Schemes ("EIS") and Northern Venture Capital Trusts ("VCT"),
alongside an additional £10.0million equity allocation to the Northern
Powerhouse Investment Fund I from the British Business Bank ("BBB"), during
the period.
Valuations across managed funds have remained largely flat, whilst
c.£35million of distributions were made to fund investors, including
dividends paid to VCT shareholders and the balance of the share buyback.
1 April Inflows Transition to realisation phase Performance Distributions 30 September Post-period
2024 2024 end inflows
Asset class £'m £'m £'m £'m £'m £'m £'m
Venture 913 57 - 1 (19) 952 4
Debt 687 - (11) 2 (6) 672 -
Private equity 30 - - 2 (6) 26 -
Total FuM 1,630 57 (11) 5 (31) 1,650 4
Proprietary capital 189 - - 2 (4) 187 -
Total AuM 1,819 57 (11) 7 (35) 1,837 4
Liquidity Liquidity
30 September 31 March
2024 2024
Asset class £'m £'m
Venture 420 404
Debt 197 262
Private equity - -
Total FuM 617 666
Proprietary capital 46 47
Total AuM 663 713
Investment realisations
In the six month period to 30 September 2024, our equity funds investors
benefitted from 10 full and partial equity realisations (H1 2024: 19). These
totalled c.£26million at a combined return of c.2x, and included a
£14.8million, 4.5x return on VCT asset Gentronix and a refinancing at PE
asset Imail realising £6.4million. A further £17.5million has been realised
since the period end, including £7.5million from the sale of Smartgate
Solutions Ltd (trading as Radar Healthcare), out of our Northern Powerhouse
Investment Fund I for an enterprise value of £53.0million, returning a
multiple of 4.1x. A direct investment asset, Artesian Solutions, was sold in
November 2024 realising £0.6million.
Third-party managed funds
As at 30 September 2024, we were managing c.£1.6billion of third-party funds
across multiple mandates (H1 2024: £1.3billion; FY 2024: £1.6billion).
During the period we invested c.£129million across our venture and debt
asset classes.
Across those funds we have c.£617million of liquidity (H1 2024:
c.£346million; FY 2024: c.£666million), enabling us to both invest in new
transactions and fully support our existing portfolio companies.
FuM
30 September Companies Amount Company
2024 in portfolio invested exits
Asset class £'m No. £'m No.
Regional venture 469 90 23 3
EIS 106 83 12 2
VCT 377 58 18 4
Debt 673 295 76 32
Private equity 25 5 - 1
Totals 1,650 531 129 42
Managed funds' portfolios
Following the c.£360million of new regional BBB fund mandates won earlier in
this calendar year, we have made an encouraging start, deploying c.£20million
across 24 new businesses during the first half of this financial year from
these new funds.
Regional Venture
New deals from within the BBB funds include a Harrogate based manufacturer of
healthy 'free-from' chilled and frozen ready meals led by female CEO Kirsty
Henshaw and WareHow, a Worksop based warehouse operator which promotes a one
stop ecommerce fulfilment solution for fashion retailers. Our Northern VCTs
have also been active, investing in consumer focused ski breaks business Heidi
and Deep Tech carbon capture technology developer, Promethean.
Debt
In March 2024, Mercia Business Loans was awarded the mandate by BBB to manage
the new c.£54million NPIF II Debt Fund, with a number of launch events
subsequently taking place across the region during the period. Lending
activity is in line with expectations and Mercia's Northern Debt Team
supported 25 businesses, lending a total of £9.5million.
During the period, Frontier Development Capital ("FDC") deployed a significant
£66.4million from its diversified portfolio of funds. Its property team led
the way with £54.2million in funding, whilst the growth capital team
contributed £10.5million, demonstrating resilient market demand. Against a
backdrop of tightening mainstream lending criteria, FDC's alternative debt
offerings have emerged as increasingly attractive financing solutions,
particularly in the underserved commercial property development sector. Whilst
portfolio companies have faced broader economic pressures, liquidity remains
strong with no current provision requirements. Market conditions proved
notably favourable for new property lending, with opportunistic developers
seeking funding for strategically acquired sites, whilst the new BBB-backed
c.£45million Midlands Engine Investment Fund II's successful February launch,
has generated consistent interest across the West Midlands' SME landscape.
Heightened lending activity to support transactions was also driven by
anticipated CGT changes, cementing FDC's position as a crucial player in
meeting diverse market financing needs. FDC continues to be an excellent
addition to Mercia, as we approach the second anniversary of its acquisition.
Private Equity
Our PE team oversaw a £6.4million refinancing of Imail alongside continued
growth at Shoppertainment, Total Resources and UK Landscapes.
Proprietary capital
As at 30 September 2024, our direct investment portfolio was fair valued
at £120.9million (H1 2024: £142.5million; FY 2024: £116.9million) with
21 companies in the portfolio (H1 2024: 22; FY 2024: 22). The top 10 direct
investment holdings represent c.£101million or c.83% of the total value of
our portfolio as at 30 September 2024.
We invested £3.9million during the first six months (H1
2024: £7.5million), with our investment efforts focused on supporting
VirtTrade (trading as Avid Games), Invincibles Studio, Eyoto and our limited
partner contributions, which were primarily into the new managed BBB funds.
The table below lists Mercia's top 20 direct investments by fair value as at
30 September 2024, including cash invested, fair value movements and the fully
diluted equity percentage held. It is pleasing to report our first direct
investment realisation following the evolution of our strategy, with disposal
proceeds of £0.6million received after the period end in respect of Artesian
Solutions Ltd.
Year of Net Net cash Fair value Net
first investment invested movement investment Percentage
direct investment value as at six months to six months to value as at held as at
1 April
30 September
2024
30 September 30 September 30 September
2024
£'000
2024 2024 2024
£'000
£'000 £'000 %
Voxpopme Ltd 2018 15,849 - 25 15,874 20.2
Netacea Group Ltd 2022 14,661 - - 14,661 34.2
Warwick Acoustics Ltd 2014 11,934 - - 11,934 35.8
VirtTrade Ltd * 2015 10,223 900 93 11,216 61.4
Medherant Ltd 2016 10,934 - - 10,934 33.3
Invincibles Studio Ltd 2015 8,567 750 - 9,317 35.5
Eyoto Group Ltd 2017 7,142 1,500 - 8,642 24.7
Locate Bio Ltd 2018 7,837 - - 7,837 19.6
Ton UK Ltd ** 2015 6,609 - - 6,609 40.4
Aonic Founder SCS 2023 3,784 - - 3,784 0.0
Axis Spine Technologies Ltd 2022 3,000 - - 3,000 11.5
Tozaro Ltd 2020 2,734 - - 2,734 11.2
Pimberly Ltd 2021 2,612 - - 2,612 4.9
sureCore Ltd 2016 2,416 - - 2,416 22.0
Forensic Analytics Ltd 2021 2,264 - - 2,264 7.4
Nova Pangaea (Holdings) Ltd 2022 2,250 - - 2,250 0.0
MyHealthChecked PLC 2016 782 - 68 850 13.1
Uniphy Ltd 2022 727 - - 727 3.9
Artesian Solutions Ltd *** 2023 539 - - 539 0.8
Sherlock Biosciences Inc 2023 340 - (12) 328 0.3
Other direct investments n/a 1,657 736 11 2,404 n/a
Total 116,861 3,886 185 120,932 n/a
* Trading as Avid Games
** Trading as Intelligent Positioning
*** Trading as FullCircl
Continued investment discipline across capital allocation and planning for
further realisations
This first half of the financial year was relatively quiet for our direct
asset portfolio. This is to be expected, given that many of our businesses
raised substantial syndicated rounds in FY24 or are nearing cash flow
breakeven. The direct asset portfolio remains healthy overall and we have
ample liquidity to support it.
During the six month period, we have concentrated on value-creating activities
across the portfolio. New c-suite executives have been recruited or identified
for eight of our direct investee companies, to support realisations within the
next two to three years. Additionally, we have worked diligently to introduce
appropriate advisers early, helping to identify key growth areas that
potential acquirers will find attractive.
Global events over the past few years, coupled with the resulting uncertainty
has particularly impacted sentiment towards technology growth businesses,
reaching a low point in December 2022. Data from 2023 and 2024 indicates that
technology company multiples, especially in Software/SaaS, have started to
tick upwards again. We are seeing entry multiples for SaaS businesses holding
up, though the overall market remains tight for attracting new external
investment, particularly in the Life Science and Deep Tech sectors.
Our Software/SaaS businesses have made significant strides in reducing the
customer churn rates seen across the industry in recent years, with particular
progress evident at Voxpopme and Intelligent Positioning, whilst Pimberly and
Forensic Analytics continue to grow their revenues. In Life Sciences, Locate
Bio and Medherant remain focused on advancing their clinical trials and
development programmes. Although sentiment across the digital entertainment
sectors is currently subdued with some studios contracting, both VirtTrade and
Invincibles Studio have maintained stable revenues. They have both been
investing in new games that are set to launch in the coming months, to support
their future revenue growth.
Warwick Acoustics is progressing towards the delivery of its first automotive
contract for production vehicles scheduled to launch in 2025. The company is
also advancing multiple proof-of-concept projects with other automotive OEMs,
and continues to grow sales of its multiple award winning, high-quality
headphones.
Through our efforts in 2024, including syndicated funding rounds at Warwick
Acoustics, Locate Bio, and Tozaro (formerly MIP Discovery), together with the
progression of other investees towards breakeven, such as Voxpopme and
Intelligent Positioning, our portfolio has required relatively low levels of
financial support. During the second half of this financial year we will see
further capital deployment across a number of direct investee companies,
including Netacea Group and Eyoto. However, total investment for this
financial year as a whole will be materially lower than last year, as the
portfolio continues to mature.
Summary
With c.£617million of managed fund capital available for deployment, we
continue to support the most promising regional businesses across diverse
sectors and founders, whilst aiming to deliver robust investor returns in an
impactful way.
Our equity portfolios are well diversified across sectors, largely
unleveraged, and maintain significant liquidity, with a number of investments
structured to provide downside protection. Our lending teams are also on the
front foot with capital to deploy and good levels of deal flow.
Whilst inflation and interest rates are trending in a favourable direction and
political uncertainty in the UK has lessened, there remains a generally lower
risk tolerance in both the business and funding communities, particularly at
the SME level. Whilst SMEs, including our portfolio companies, still face a
challenging environment, they are resilient and continue to make solid
progress.
As always, I would like to thank all our dedicated staff for their efforts
during the past six months.
Julian Viggars
Chief Investment Officer
Chief Financial Officer's review
Overall financial performance
With record fund inflows of c.£562million during the year to 31 March 2024,
revenues, EBITDA and EBITDA margin all increased during the six months to 30
September 2024 compared with the corresponding prior period, as the Group
continues to profitably scale its business model.
Interim dividend
The continued growth and operational cash generation of the Group has enabled
Mercia's Board to declare a c.6% increase in the interim dividend to 0.37
pence per share (H1 2024: 0.35 pence per share). This interim dividend will
be paid on 8 January 2025 to shareholders on the register at close of business
on 6 December 2024, with the total dividend payable being £1,596,000 (H1
2024: £1,563,000).
Share buyback
The £5.0million share buyback programme announced in November 2023, concluded
during the period on 29 May 2024, with a total of 15,706,088 shares bought
back into treasury at an average price of 31.8 pence per share.
Alternative performance measures ("APM")
The Directors believe that the reporting of both EBITDA and adjusted operating
profit assist in providing insightful measures of operating performance for
businesses such as Mercia and are APMs of interest to both current and
potential shareholders.
EBITDA is defined as operating profit/(loss) before depreciation, realised
fair value gain on the sale of direct investments, unrealised fair value
movements in direct investments, share-based payments charge, amortisation of
intangible assets and movement in fair value of deferred consideration.
Adjusted operating profit is defined as EBITDA plus net finance income.
Results reported on an APM basis are denoted by ¹ throughout this review.
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Revenue 17,908 15,040 30,434
Administrative expenses(1) (14,192) (12,266) (24,897)
EBITDA(1) 3,716 2,774 5,537
Net finance income 1,102 2,690 4,160
Adjusted operating profit(1) 4,818 5,464 9,697
Depreciation (302) (236) (489)
Net finance income (1,102) (2,690) (4,160)
Realised fair value gain on sale of a direct investment - - 4,450
Unrealised fair value movement in direct investments 185 (1,619) (17,338)
Share-based payments charge (478) (509) (1,002)
Amortisation of intangible assets (1,495) (1,495) (2,989)
Movement in fair value of deferred consideration (295) (218) (540)
Operating profit/(loss) 1,331 (1,303) (12,371)
Net finance income 1,102 2,690 4,160
Profit/(loss) before taxation 2,433 1,387 (8,211)
Taxation (657) (38) 626
Profit/(loss) and total comprehensive income/(expense) 1,776 1,349 (7,585)
A reconciliation of these results prepared in accordance with International
Financial Reporting Standards ("IFRS") to those presented on an APM basis are
as follows:
Six months ended 30 September 2024
IFRS as reported Depreciation APM basis(1)
£'000 £'000 £'000
Administrative expenses (14,494) 302 (14,192)
Depreciation - (302) (302)
Six months ended 30 September 2023
IFRS as reported Depreciation APM basis(1)
£'000 £'000 £'000
Administrative expenses (12,502) 236 (12,266)
Depreciation - (236) (236)
Year ended 31 March 2024
IFRS as reported Depreciation APM basis(1)
£'000 £'000 £'000
Administrative expenses (25,386) 489 (24,897)
Depreciation - (489) (489)
Revenue
Revenue increased 19.1% to £17,908,000 (H1 2024: £15,040,000) and comprised
fund management related fees, initial management fees from equity investment
rounds, arrangement fees from loans, investment director monitoring fees,
sundry business services income and VCT share offer related fees.
Administrative expenses(1)
Administrative expenses, excluding depreciation, increased 15.7% to
£14,192,000 (H1 2024: £12,266,000) and comprised predominantly
staff-related, office, marketing, professional adviser and VCT share offer
related costs.
EBITDA
EBITDA increased 34.0% to £3,716,000 (H1 2024: £2,774,000), equating to an
EBITDA margin of 20.8% (H1 2024: 18.4%).
Net finance income
Total gross finance income of £1,128,000 (H1 2024: £2,720,000) arose wholly
from interest receivable on cash deposits (as shown in note 8 of the summary
financial information). Finance costs of £26,000 (H1 2024: £30,000)
comprised interest payable on office leases and the Group's staff electric car
scheme.
Unrealised fair value movement in direct investments
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Investment movements excluding cash invested and realisations:
Unrealised gains on the revaluation of direct investments 424 10,171 7,877
Unrealised losses on the revaluation of direct investments (239) (11,790) (25,215)
Net unrealised fair value movement 185 (1,619) (17,338)
The net unrealised fair value movement in direct investments resulted in a
£185,000 increase (H1 2024: £1,619,000 decrease) and as at 30 September
2024, the fair value of the Group's direct investment portfolio was
£120,932,000 (H1 2024: £142,454,000).
Unrealised fair value gains arose in three (H1 2024: eight) of the Group's
direct investments. The largest unrealised fair value gain was in respect of
VirtTrade Limited, which accounted for £93,000 of the total (H1 2024:
£4,450,000 unrealised fair value gain in respect of nDreams Limited).
There were two (H1 2024: four) unrealised fair value losses, the largest being
£65,000 which arose in respect of Impression Technologies Limited ("ITL") (H1
2024: £8,909,000 unrealised fair value loss in ITL).
Share-based payments charge
The £478,000 non-cash charge (H1 2024: £509,000) arises from the total
number of both issued and vested share options held by employees throughout
the Group, ranging from 28 January 2020 to 30 September 2024.
Amortisation of intangible assets
The amortisation charge for the period of £1,495,000 (H1 2024: £1,495,000)
represents amortisation of the acquired intangible assets of FDC and the VCT
fund management business.
Movement in fair value of deferred consideration
The purchase price of FDC, acquired in December 2022, included an element of
contingent deferred consideration which is subject to a number of targets
being met. An increase in the fair value of this contingent deferred
consideration during the six month period to 30 September 2024 has occurred,
due to the increased probability of its achievement and this has resulted in a
charge to the income statement of £295,000 (H1 2024: £218,000).
Taxation
The components of the Group's tax charge are shown in note 9 of the summary
financial information. The overall tax charge for the period comprises a
corporation tax charge on taxable profits, partially offset by the continued
unwinding of the deferred tax liability in respect of the intangible assets
which arose on the acquisition of FDC and the VCT fund management business.
Profit and total comprehensive income for the period
The adjusted operating profit plus the net unrealised fair value increase for
the period, together with other non-cash charges, have led to a consolidated
total comprehensive income of £1,776,000 (H1 2024: £1,349,000). This has
resulted in basic earnings per Ordinary share of 0.41 pence (H1 2024: 0.30
pence).
Summarised statement of financial position
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Goodwill and intangible assets 34,801 37,556 36,296
Direct investment portfolio 120,932 142,454 116,861
Other non-current assets, trade and other receivables 4,285 3,497 4,810
Cash and cash equivalents 46,214 36,482 46,940
Total assets 206,232 219,989 204,907
Trade, other payables and lease liabilities (12,883) (10,165) (9,595)
Deferred consideration (2,575) (3,223) (2,279)
Deferred taxation (3,419) (4,168) (3,792)
Total liabilities (18,877) (17,556) (15,666)
Net assets 187,355 202,433 189,241
Net assets per share (pence) * 43.4p 45.3p 43.4p
* 431,292,375 Ordinary shares, excluding those held in treasury, has been
used as the denominator for calculating net assets per share as at 30
September 2024. 446,679,523 Ordinary shares has been used as the denominator
for calculating the comparative net assets per share as at 30 September 2023.
436,319,815 Ordinary shares, excluding those held in treasury, has been used
as the denominator for calculating the comparative net assets per share as at
31 March 2024.
Intangible assets
The Group's intangible assets consist of goodwill and the intangible assets
recognised on the acquisition of FDC and the VCT fund management business.
Direct investment portfolio
During the period, Mercia's direct investment portfolio increased from
£116,861,000 as at 31 March 2024 (H1 2024: £136,550,000 as at 31 March 2023)
to £120,932,000 as at 30 September 2024 (H1 2024: £142,454,000 as at 30
September 2023), a 3.5% increase (H1 2024: 4.3% increase).
The Group invested £3,886,000 (H1 2024: £7,523,000 net; FY 2024:
£19,626,000 net) into four existing direct investments (H1 2024: seven
existing and one new direct investment; FY 2024: 11 existing direct
investments), with the top 10 direct investments representing c.83% of the
total direct investment portfolio value (H1 2024: c.84%; FY 2024: c.83%).
Cash and cash equivalents
At the period end, Mercia had cash and cash equivalents totalling
£46.2million (H1 2024: £36.5million; FY 2024: £46.9million).
The Group continues to have limited working capital needs due to the nature of
its business and during the period net cash generated from operating
activities totalled £4.2million (H1 2024: £3.5million; FY 2024:
£7.1million).
As at 30 September 2024, the Group's cash and cash equivalents were spread
across four leading United Kingdom banks and a BlackRock Sterling money market
fund, earning an average overall yield of c.5%.
The summarised movements in the Group's cash and cash equivalents during the
period are shown below.
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Opening cash and cash equivalents 46,940 37,555 37,555
Net cash generated from operating activities 4,157 3,533 7,084
Net cash (used in)/generated from direct investment activities (3,886) (5,312) 9,360
Deferred consideration paid in respect of the acquisition of FDC - - (1,500)
Cash inflow from other investing activities 1,030 646 1,991
Purchase of own shares into treasury (1,834) - (3,194)
Net cash used in financing activities (193) (224) (4,356)
Closing cash and cash equivalents 46,214 36,198 46,940
Outlook
The Group's first-half performance continues to demonstrate Mercia's robust
fundamentals with growth in revenues, EBITDA and EBITDA margin. This continued
growth, alongside the cash generative nature of Mercia's fund management
activities, supports a c.6% increase in the interim dividend to 0.37 pence per
share.
With significant liquidity and a debt-free balance sheet, Mercia is well
positioned for continuing profitable progress during the second half of this
financial year.
Martin Glanfield
Chief Financial Officer
Summary Financial Information
Consolidated statement of comprehensive income
For the six months ended 30 September 2024
Note Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Revenue 5 17,908 15,040 30,434
Administrative expenses 7 (14,494) (12,502) (25,386)
Realised fair value gain on sale of a direct investment 6 - - 4,450
Unrealised fair value movement in direct investments 6 185 (1,619) (17,338)
Share-based payments charge (478) (509) (1,002)
Amortisation of intangible assets (1,495) (1,495) (2,989)
Movement in fair value of deferred consideration (295) (218) (540)
Operating profit/(loss) 1,331 (1,303) (12,371)
Finance income 8 1,128 2,720 4,216
Finance expense (26) (30) (56)
Profit/(loss) before taxation 2,433 1,387 (8,211)
Taxation 9 (657) (38) 626
Profit/(loss) and total comprehensive income/(expense) 1,776 1,349 (7,585)
Basic earnings/(loss) per Ordinary share (pence) 10 0.41 0.30 (1.71)
Diluted earnings/(loss) per Ordinary share (pence) 10 0.40 0.30 (1.71)
All results derive from continuing operations.
Consolidated statement of financial position
As at 30 September 2024
Note Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 21,126 20,892 21,126
Intangible assets 13,675 16,664 15,170
Property, plant and equipment 183 137 128
Right-of-use assets 871 790 711
Investments 12 120,932 142,454 116,861
Total non-current assets 156,787 180,937 153,996
Current assets
Trade and other receivables 3,231 2,570 3,971
Short-term liquidity investments 13 - 284 -
Cash and cash equivalents 13 46,214 36,198 46,940
Total current assets 49,445 39,052 50,911
Total assets 206,232 219,989 204,907
Current liabilities
Trade and other payables (12,035) (9,296) (8,893)
Lease liabilities (403) (420) (376)
Deferred consideration 14 (2,575) (1,316) (2,279)
Total current liabilities (15,013) (11,032) (11,548)
Non-current liabilities
Lease liabilities (445) (449) (326)
Deferred consideration 14 - (1,907) -
Deferred taxation 15 (3,419) (4,168) (3,792)
Total non-current liabilities (3,864) (6,524) (4,118)
Total liabilities (18,877) (17,556) (15,666)
Net assets 187,355 202,433 189,241
Equity
Issued share capital 16 4 4 4
Share premium 17 83,775 83,775 83,775
Treasury reserve 18 (4,925) - (3,188)
Other distributable reserve 19 56,966 60,899 59,338
Retained earnings 45,532 52,690 43,756
Share-based payments reserve 6,003 5,065 5,556
Total equity 187,355 202,433 189,241
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
The condensed consolidated interim financial statements of Mercia Asset
Management PLC were approved by the Board of Directors on 25 November 2024 and
authorised for issue. They were signed on its behalf by:
Dr Mark Payton
Martin Glanfield
Chief Executive Officer
Chief
Financial Officer
Consolidated statement of cash flows
For the six months ended 30 September 2024
Note Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Cash flows from operating activities:
Operating profit/(loss) 1,331 (1,303) (12,371)
Adjustments to reconcile operating (loss)/profit to net cash generated from
operating activities:
Depreciation of property, plant and equipment 50 50 104
Depreciation of right-of-use assets 252 186 385
Realised fair value gain on sale of a direct investment 6 - - (4,450)
Unrealised fair value movement in direct investments 6 (185) 1,619 17,338
Share-based payments charge 478 509 1,002
Amortisation of intangible assets 1,495 1,495 2,989
Movement in fair value of deferred consideration 295 218 540
Working capital adjustments:
Decrease in trade and other receivables 740 621 800
(Decrease)/increase in trade and other payables (461) 138 1,535
Cash generated from operating activities 3,995 3,533 7,872
Corporation tax receipt/(payment) 162 - (788)
Net cash generated from operating activities 4,157 3,533 7,084
Cash flows from direct investment activities:
Sale of direct investments 12 - 269 26,696
Purchase of direct investments 12 (3,886) (7,523) (19,926)
Investee company loan repayments 12 - - 300
Investee company loan interest and redemption premium received 8 - 1,942 2,290
Net cash (used in)/generated from direct investment activities (3,886) (5,312) 9,360
Cash flows from other investing activities:
Interest received from cash and cash equivalents 1,135 711 1,813
Purchase of property, plant and equipment (105) (65) (110)
Deferred consideration paid in respect of acquisitions 14 - - (1,500)
Decrease in short-term liquidity investments - - 288
Net cash generated from other investing activities 1,030 646 491
Net cash (used in)/generated from total investing activities (2,856) (4,666) 9,851
Cash flows from financing activities:
Dividends paid 11 - - (3,928)
Purchase of own shares into treasury (1,834) - (3,194)
Proceeds received from the exercise of employee share options 66 - 26
Interest paid (26) (30) (56)
Payment of lease liabilities (233) (194) (398)
Net cash used in financing activities (2,027) (224) (7,550)
Net (decrease)/increase in cash and cash equivalents (726) (1,357) 9,385
Cash and cash equivalents at the beginning of the period 46,940 37,555 37,555
Cash and cash equivalents at the end of the period 13 46,214 36,198 46,940
Consolidated statement of changes in equity
For the six months ended 30 September 2024
Issued Other Share-based
share Share Treasury distributable Retained payments
capital premium Reserve reserve earnings reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2023 (audited) 4 83,744 - 63,266 51,341 4,566 202,921
Profit and total comprehensive income for the period - - - - 1,349 - 1,349
Final dividend - - - (2,367) - - (2,367)
Exercise of share options - 31 - - - (10) 21
Share-based payments charge - - - - - 509 509
As at 30 September 2023 (unaudited) 4 83,775 - 60,899 52,690 5,065 202,433
Purchase of Ordinary shares into treasury - - (3,194) - - - (3,194)
Loss and total comprehensive expense for the period - - - - (8,934) - (8,934)
Exercise of share options - - 6 - - (2) 4
Interim dividend - - - (1,561) - - (1,561)
Share-based payments charge - - - - - 493 493
As at 31 March 2024 (audited) 4 83,775 (3,188) 59,338 43,756 5,556 189,241
Purchase of Ordinary shares into treasury - - (1,834) - - - (1,834)
Profit and total comprehensive income for the period - - - - 1,776 - 1,776
Final dividend - - - (2,372) - - (2,372)
Exercise of share options - - 97 - - (31) 66
Share-based payments charge - - - - - 478 478
As at 30 September 2024 (unaudited) 4 83,775 (4,925) 56,966 45,532 6,003 187,355
1. General information
Mercia Asset Management PLC (the "Group", "Mercia") is a public limited
company, incorporated and domiciled in England, United Kingdom, and registered
in England and Wales with registered number 09223445. Its Ordinary shares are
admitted to trading on the AIM market of the London Stock Exchange. The
registered office address is Mercia Asset Management PLC, Forward House, 17
High Street, Henley-in-Arden, Warwickshire B95 5AA.
2. Basis of preparation
The financial information presented in these condensed consolidated interim
financial statements constitutes the condensed consolidated financial
statements of Mercia Asset Management PLC and its subsidiaries for the six
months ended 30 September 2024. These condensed consolidated interim financial
statements should be read in conjunction with the Group's Annual Report and
consolidated financial statements for the year ended 31 March 2024, which have
been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, International
Financial Reporting Standards ("IFRS") and the applicable legal requirements
of the Companies Act 2006.
These condensed consolidated interim financial statements and the comparative
financial information presented in these condensed consolidated interim
financial statements for the period ended 30 September 2024 do not constitute
full statutory accounts within the meaning of Section 434 of the Companies Act
2006. The Group's Annual Report and consolidated financial statements for the
year ended 31 March 2024 were approved by the Board on 1 July 2024 and have
been delivered to the Registrar of Companies. The Group's independent
auditor's report on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement under section
498 of the Companies Act 2006.
These condensed consolidated interim financial statements have been prepared
in accordance with International Accounting Standard ("IAS") 34 Interim
Financial Reporting, as adopted for use in the UK.
No new or revised standards or interpretations that have become effective
during the period ended 30 September 2024 have had a material effect on the
financial statements of the Group.
Although not required by statute or regulation, the financial information
contained in these condensed consolidated interim financial statements, which
were approved by the Board on 25 November 2024 and authorised for issue, have
been reviewed by the Group's independent auditor.
3. Going concern
Based on the Group's balance sheet, including its liquidity position at the
period end and its forecast future operating and investment activities, the
Directors have a reasonable expectation that the Group has adequate financial
resources to manage business risks in the current economic environment and
continue in operational existence, for a period of at least 12 months from the
date of this announcement. Accordingly, the Directors continue to adopt the
going concern basis in preparing these condensed consolidated interim
financial statements.
4. Material accounting policies
In the application of the Group's accounting policies, the Directors are
required to make judgements, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual
results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future
periods, if the revision affects both current and future periods.
The principal accounting policies applied in the presentation of the condensed
consolidated interim financial statements of Mercia Asset Management PLC (the
"Group", "Mercia" or the "Company"), including the critical accounting
judgements made by the Directors and the key sources of estimation, are
consistent with those followed in the preparation of the Group's Annual Report
and consolidated financial statements for the year ended 31 March 2024 and
have been consistently applied throughout the period ended 30 September 2024.
5. Segmental reporting
The Group's revenue and profits are derived from its principal activity within
the United Kingdom.
IFRS 8 Operating Segments defines operating segments as those activities of an
entity about which separate financial information is available and which are
evaluated by the Chief Operating Decision Maker to assess performance and
determine the allocation of resources. The Chief Operating Decision Maker has
been identified as the Board of Directors. The Directors are of the opinion
that under IFRS 8 Operating Segments the Group has only one operating segment,
being specialist alternative asset management, because the results of the
Group are monitored on a Group-wide basis. The Board of Directors assesses the
performance of the operating segment using financial information which is
measured and presented in a consistent manner.
An analysis of the Group's revenue is as follows:
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Fund management fees 12,362 9,958 19,214
Initial management fees 2,524 2,369 5,465
Portfolio directors' fees 2,092 1,926 3,933
Other revenue 130 158 341
VCTs share offer fees 800 629 1,481
17,908 15,040 30,434
6. Realised fair value gain and unrealised fair value movement in direct
investments
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Realised fair value gain on sale of a direct investment (note 12) - - 4,450
Net unrealised fair value movements in direct investments (note 12) 185 (1,619) (17,338)
185 (1,619) (12,888)
7. Operating profit/(loss)
Operating profit/(loss) is stated after charging:
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Staff costs 9,747 8,578 17,530
Other administrative expenses (including VCT share offer costs) 4,747 3,924 7,856
Total administrative expenses 14,494 12,502 25,386
8. Finance income
Finance income is derived from:
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Cash deposits 1,128 773 1,917
Short-term liquidity investments - 5 9
Investee company loans (interest and redemption premium) - 1,942 2,290
Total interest income 1,128 2,720 4,216
9. Taxation
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
£'000 £'000 2024
£'000
Current tax
UK corporation tax (1,030) (410) (122)
Deferred tax
Origination and reversal of temporary timing differences 373 372 748
Total tax (charge)/credit (657) (38) 626
The UK standard rate of corporation tax is 25% (H1 2024: 25%). The deferred
tax credit of £373,000 (H1 2024: £372,000) represents the unwinding of the
deferred tax liabilities which arose in respect of the intangible assets
recognised on the acquisition of Frontier Development Capital Limited and the
VCT fund management business.
10. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss)
for the financial period by the weighted average number of Ordinary shares in
issue during the period. Diluted earnings/(loss) per share is calculated by
dividing the profit/(loss) for the financial period by the weighted average
number of Ordinary shares outstanding and, when dilutive, adjusted for the
effect of all potentially dilutive shares, including share options, on an
as-if-converted basis. The potential dilutive shares are included in diluted
earnings/(loss) per share calculations on a weighted average basis for the
period. The profit/(loss) and weighted average number of shares used in the
calculations are set out below:
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
2024
Profit/(loss) for the financial period (£'000) 1,776 1,349 (7,585)
Basic weighted average number of Ordinary shares ('000) 431,850 446,582 444,716
Basic earnings/(loss) per Ordinary share (pence) 0.41 0.30 (1.71)
Diluted weighted average number of Ordinary shares ('000) 445,310 454,800 444,716
Diluted earnings/(loss) per Ordinary share (pence) 0.40 0.30 (1.71)
The calculation of basic and diluted earnings per share is based on the
following weighted average number of Ordinary shares:
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 September 30 September ended
2024 2023 31 March
'000 '000 2024
'000
Weighted average number of shares
Basic 431,850 446,582 444,716
Dilutive impact of employee share options 13,460 8,218 -
Diluted weighted average number of Ordinary shares 445,310 454,800 444,716
The dilutive impact of employee share options for the year ended 31 March 2024
has been excluded from the weighted average number of diluted Ordinary shares,
as including them is anti-dilutive to diluted earnings per share.
11. Dividends
An interim dividend for the year ending 31 March 2025 of 0.37 pence per share,
totalling £1,596,000, has been declared after the reporting period end and as
such, has not been included as a liability in these condensed consolidated
financial statements, in accordance with IAS 10.
Details of the dividends declared and paid in the comparative periods are set
out in the Group's consolidated financial statements for the year ended 31
March 2024.
12. Investments
The net change in the value of investments for the period is an increase of
£4,071,000 (H1 2024: increase of £5,904,000). The table below reconciles the
opening to closing value of investments for both the current and comparative
periods.
Level 1 Level 3 Total financial assets
financial financial
assets assets
£'000 £'000 £'000
As at 1 April 2023 (audited) 969 135,581 136,550
Investments made during the period - 7,523 7,523
Unrealised fair value gains on investments - 10,171 10,171
Unrealised fair value losses on investments (153) (11,637) (11,790)
As at 30 September 2023 (unaudited) 816 141,638 142,454
Investments made during the period - 12,403 12,403
Investee company loan repayment - (300) (300)
Disposal - (30,211) (30,211)
Investment received as consideration - 3,784 3,784
Realised gain on sale of direct investment - 4,450 4,450
Unrealised fair value gains on investments - (2,294) (2,294)
Unrealised fair value losses on investments (34) (13,391) (13,425)
As at 31 March 2024 (audited) 782 116,079 116,861
Investments made during the period - 3,886 3,886
Unrealised fair value gains on investments 68 356 424
Unrealised fair value losses on investments - (239) (239)
As at 30 September 2024 (unaudited) 850 120,082 120,932
Investments held as part of the Group's direct investment portfolio are
carried at fair value in accordance with IFRS 10 Investment Entity exemption.
The measurement basis for determining the fair value of investments held at
each period end is as follows:
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Listed investment 850 816 782
Initial fair value 6,900 3,140 6,912
Price of recent investment round 64,100 55,401 79,847
Enterprise value 49,082 83,097 29,320
120,932 142,454 116,861
13. Cash, cash equivalents and short-term liquidity investments
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Total cash and cash equivalents 46,214 36,198 46,940
Total short-term liquidity investments - 284 -
14. Deferred consideration
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Payable within one year 2,575 1,316 2,279
Payable within two to five years - 1,907 -
2,575 3,223 2,279
Details of the deferred consideration which arose on the acquisition of
Frontier Development Capital Limited in December 2022 are set out in the
Group's consolidated financial statements for the year ended 31 March 2024.
15. Deferred taxation
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Deferred tax liability 3,419 4,168 3,792
Under IAS 12 Income Taxes, provision is made for the deferred tax liability
associated with the recognition of intangible assets arising as part of the
acquisitions of Frontier Development Capital Limited and the VCT fund
management contracts.
As at 30 September 2024, the deferred tax liability has been calculated using
the tax rate of 25%.
16. Issued share capital
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 September 2024 30 September 2023 31 March 2024
Number £'000 Number £'000 Number £'000
Allotted and fully paid
As at the beginning of the period 446,679,523 4 446,581,202 4 446,581,202 4
Issue of share capital during the period - - 98,321 - 98,321 -
As at the end of the period 446,679,523 4 446,679,523 4 446,679,523 4
During the period, 5,326,380 Ordinary shares were repurchased into a treasury
reserve, see note 18. The outstanding Ordinary shares as at 30 September 2024,
being 431,292,375, are entitled to one vote each and have equal rights as to
dividends. The Ordinary shares are not redeemable.
17. Share premium
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
As at the beginning of the period 83,775 83,744 83,744
Premium arising on the issue of Ordinary shares - 31 31
As at the end of the period 83,775 83,775 83,775
18. Treasury reserve
Unaudited Unaudited Audited
30 September 2024 30 September 2023 31 March 2024
Number £'000 Number £'000 Number £'000
As at the beginning of the period 10,359,708 3,188 - - - -
Purchase of own shares into treasury 5,326,380 1,834 - - 10,379,708 3,194
Satisfaction of employee share options (298,940) (97) - - (20,000) (6)
As at the end of the period 15,387,148 4,925 - - 10,359,708 3,188
19. Other distributable reserve
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
As at the beginning of the period 59,338 63,266 63,266
Dividends (2,372) (2,367) (3,928)
As at the end of the period 56,966 60,899 59,338
20. Fair value measurements
The fair values of the Group's financial assets and liabilities are considered
a reasonable approximation to the carrying values shown in the consolidated
statement of financial position. Subsequent to their initial recognition at
fair value, measurements of movements in fair values of financial instruments
are grouped into Levels 1 to 3, based on the degree to which the fair value is
observable. The fair value hierarchy used is outlined in more detail in note 2
to these consolidated financial statements.
The following table gives information about how the fair values of these
financial assets and financial liabilities are determined and presents the
Group's assets measured at fair value as at 30 September 2024. There have been
no movements in financial assets or financial liabilities between levels
during the current or comparative periods. The table in note 12 sets out the
movement in the Level 1 and 3 financial assets from the start to the end of
the period.
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Assets:
Financial assets at fair value through profit or loss - direct investment
portfolio
Level 1 850 816 782
Level 2 - - -
Level 3 120,082 141,638 116,079
120,932 142,454 116,861
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Liabilities:
Financial liabilities at fair value through profit or loss - deferred
consideration
Level 1 - - -
Level 2 - - -
Level 3 2,575 3,223 2,279
2,575 3,223 2,279
The Directors consider that the carrying amounts of financial assets and
financial liabilities recorded at amortised cost in the financial statements
approximate to their fair values.
Financial instruments in Level 1
The Group had one direct investment quoted on the AIM market of the London
Stock Exchange, MyHealthChecked PLC, which is valued using the closing bid
price as at 30 September 2024.
Financial instruments in Level 3
If one or more of the significant inputs required to fair value an instrument
is not based on observable market data, the instrument is included in Level 3.
Apart from the one investment classified in Level 1, all other investments
held in the Group's direct investment portfolio have been classified in Level
3 of the fair value hierarchy and the individual valuations for each of the
companies have been arrived at using appropriate valuation techniques.
The Group has adopted the International Private Equity and Venture Capital
Valuation Guidelines for determining its valuation techniques, which specify
that the price of a recent investment represents one of a number of inputs
used to arrive at fair value and uses a single classification for all Level 3
investments. Note 2 of the Group's consolidated financial statements for the
year ended 31 March 2024 provides further information on the Group's valuation
methodology, including a detailed explanation of the valuation techniques used
for Level 3 financial instruments.
A reconciliation of the movement in Level 1 and 3 financial assets is
disclosed in note 12.
INDEPENDENT REVIEW REPORT TO MERCIA ASSET MANAGEMENT PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2024 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the London Stock Exchange AIM Rules for Companies.
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2024 which comprises the consolidated statement of comprehensive
income, consolidated statement of financial position, consolidated cash flow
statement, consolidated statement of changes in equity and notes to the
condensed interim financial statements.
Basis for conclusion
We conducted our review in accordance with Revised International Standard on
Review Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410
(Revised)"). A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with UK adopted International Accounting Standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410 (Revised), however future events or conditions may cause the
Group to cease to continue as a going concern.
Responsibilities of directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the London Stock Exchange AIM Rules for Companies which
require that the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual accounts
having regard to the accounting standards applicable to such annual accounts.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the rules of the London
Stock Exchange AIM Rules for Companies and for no other purpose. No person is
entitled to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior written
consent. Save as above, we do not accept responsibility for this report to any
other person or for any other purpose and we hereby expressly disclaim any and
all such liability.
BDO LLP
Chartered Accountants
London, UK
Date: 25 November 2024
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Directors, secretary and advisers
Directors
Ian Roland Metcalfe OBE
(Non-executive Chair)
Dr Mark Andrew Payton
(Chief Executive Officer)
Martin James
Glanfield (Chief
Financial Officer)
Julian George
Viggars
(Chief Investment Officer)
Diane Seymour-Williams
(Senior Independent Director)
Dr Jonathan David
Pell
(Non-executive Director)
Caroline Bayantai Plumb OBE
(Non-executive Director)
Company secretary Company registration number
Sarah-Louise Anne Williams 09223445
Company website Company registrar
www.mercia.co.uk Equiniti Ltd
Highdown House
Registered office Yeoman Way
Forward House Worthing
17 High Street West Sussex BN99 3HH
Henley-in-Arden
Warwickshire B95 5AA Solicitors
Gowling WLG (UK) LLP
Independent auditor 4 More London Riverside
BDO LLP London SE1 2AU
55 Baker Street
Marylebone Nominated adviser and joint broker
London W1U 7EU Canaccord Genuity Ltd
88 Wood Street
Principal bankers London EC2V 7QR
Barclays Bank PLC
One Snowhill Joint broker
Snow Hill Queensway Singer Capital Markets Advisory LLP
Birmingham B4 6GN 1 Bartholomew Lane
London EC2N 2AX
Lloyds Bank plc
125 Colmore Row Investor relations adviser
Birmingham B3 3SD FTI Consulting Ltd
200 Aldersgate
London EC2A 4HD
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