REG - Mercia Asset Mgt PLC - Preliminary Results
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RNS Number : 0874P Mercia Asset Management PLC 01 July 2025
RNS 1 July 2025
Mercia Asset Management PLC
("Mercia" or the "Group" or the "Company")
Preliminary results for the year ended 31 March 2025
37% growth in EBITDA supports a 5% increase in the proposed final dividend and
commencement of an annual share buyback policy of up to £3.0million
Mercia Asset Management PLC (AIM: MERC), the regionally focused, private
capital asset manager with £2.0billion of assets under management ("AuM"), is
pleased to announce its preliminary results for the year ended 31 March 2025.
Mark Payton, Chief Executive Officer of Mercia, commented:
"We are pleased to announce an excellent set of full year results. Our
increasing scale is driving profitable growth and an increasing EBITDA margin.
Our ambition now is to go much further and faster."
31 March 31 March
2025 2024
Statutory results
Revenue £35.2m £30.4m
Realised fair value (loss)/gain on sale of direct investments £(0.3)m £4.5m
Unrealised fair value movement in direct investments £0.3m £(17.3)m
Profit/(loss) before taxation £5.4m £(8.2)m
Basic earnings/(loss) per share 0.80p (1.71)p
Interim dividend paid per share 0.37p 0.35p
Proposed final dividend per share (1) 0.58p 0.55p
Cash and cash equivalents £40.1m £46.9m
Net assets £187.9m £189.2m
Alternative performance measures
AuM (2) £1,987.8m £1,818.8m
EBITDA (3) £7.6m £5.5m
EBITDA margin (4) 22.1% 18.2%
Adjusted operating profit (5) £10.2m £9.7m
Net assets per share 43.6p 43.4p
1 The proposed final dividend is subject to shareholder approval at the
Company's Annual General Meeting on 25 September 2025 and if approved, will be
paid on 31 October 2025 to shareholders on the register at the close of
business on 3 October 2025.
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) excluding performance
fees net of attributable costs, depreciation, realised fair value (loss)/gain
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 EBITDA margin is defined as EBITDA divided by revenue (excluding
performance fees).
5 Adjusted operating profit is defined as EBITDA plus net finance income
(excluding performance fees net of attributable costs).
Managed fund movements
· Third-party funds under management ("FuM") organically increased by
c.10% in the year to c.£1,800million (2024: c.£1,630million), with no
redemptions
o Venture FuM of c.£928million (2024: c.£913million)
§ £29.2million of shares allotted by the three Northern Venture Capital
Trusts ("VCTs") in April 2024, in addition to £2.4million of shareholder
dividend reinvestment inflows
§ Four Enterprise Investment Scheme ("EIS") funds closed raising a total of
£23.0million
§ £10.0million additional equity allocation under the Northern Powerhouse
Investment Fund I
§ Award of a new £35.0million fund in the North East of England
o Debt FuM of c.£850million (2024: c.£687million)
§ Additional £90.0million allocated to the West Midlands Combined Authority
Commercial and Residential Investment Funds, managed by Frontier Development
Capital ("FDC")
§ First close of the £81.5million Mercia Evolution Fund launched by FDC
o Private equity FuM of c.£22million (2024: c.£30million)
§ £10.5million distributed back to fund investors following two fund
realisations
Direct investment portfolio movements
· Direct investment portfolio fair value of £126.0million (2024:
£116.9million)
· £9.7million net invested into eight portfolio companies (2024:
£19.6million net invested into 11 portfolio companies)
· £0.3million net fair value increase in the portfolio during the year
(2024: £17.3million net fair value decrease in the portfolio)
Post year end developments
· The Northern VCTs allotted shares totalling c.£36million on 4 April
2025, concluding their fundraise which became fully subscribed in March 2025
· Mercia's most recent Knowledge-intensive EIS fundraise closed on 4
April 2025, raising a total of c.£8million
· Significant funding rounds completed for Warwick Acoustics and Axis
Spine Technologies, reflecting continued commercial progress and the potential
for their respective technologies
· An initial £0.4million was received in June 2025 from the ongoing
liquidation of Impression Technologies
This announcement contains inside information for the purposes of article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of domestic law in
the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 and
as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement, this
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, Andrew Potts, Harry Gooden
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 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 private capital 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, extensive
local adviser and personal networks, and university partnerships, providing it
with access to high-quality deal flow.
Mercia Asset Management PLC is quoted on AIM with the EPIC "MERC".
Non-executive Chair's statement
On behalf of our Board, I am pleased to share our 2025 preliminary results
with shareholders and our many other valued stakeholders. This marks our 10th
anniversary as an AIM quoted company. It has been a challenging decade for the
UK but despite this, Mercia has grown significantly since those early days,
making meaningful strides in becoming the respected, profitable and cash
generative business which it is today.
Performance against strategy
We were delighted that shareholders overwhelmingly supported our
reclassification as a trading company on AIM at last September's Annual
General Meeting ("AGM"). With this came the launch of our new fund management
growth strategy. The year to 31 March 2025 ("FY25") is the first year of our
new three-year strategy, Mercia '27, our ambitious plan to double the size and
financial performance of the Group. This strategy also envisages us realising
c.70% by value of the direct investment portfolio, thereby generating cash for
other corporate purposes. As these FY25 financial results demonstrate, we have
made a good start.
In spite of the ongoing challenges in the asset management sector, during the
financial and tax year combined, the Group achieved excellent organic fund
inflows across our equity investing and lending asset classes exceeding
£0.3billion. This takes our total assets under management to over £2billion,
doubling AuM over the last two years or so, with c.60% of the growth being
organic net inflows.
In December 2022, we welcomed Frontier Development Capital Limited into our
Group. I am pleased to report that the business continues to perform well. The
deferred consideration, which was contingent upon the achievement of a number
of financial targets has now been paid in full. This has been the case with
each of the three acquisitions since our 2014 IPO, and speaks to the quality
of the businesses and staff who have joined us with each of those
transactions.
Capital allocation policy
In my Chair statement last year, we announced a fundamental change in our
capital allocation policy. Via both organic and inorganic initiatives, we
resolved to focus on accelerating growth in our fund management operations. As
we divest the direct investment portfolio and continue our strategic shift to
become a 'pure play' regionally focused private capital asset manager, we
believe this will accelerate the creation of shareholder value and higher
shareholder returns.
We adopted our progressive dividend policy in December 2020, when the Group
declared its maiden interim dividend of 0.10 pence per share. Since then,
Mercia's annual dividend has become firmly established with growth in each
successive year's interim and final dividend. In January, the Group paid an
interim dividend of 0.37 pence per share. We are now recommending a final
dividend of 0.58 pence per share, representing a total dividend of 0.95 pence
per share for the full year (2024: 0.90 pence per share), a c.6% increase on
the prior year.
We anticipate that this rate of dividend growth will continue at similar
levels. Given the Group's increasing financial performance and its continuing
excellent cash position, the Board has decided to go one step further in
respect of returns to shareholders. Following the Group's well received first
share buyback which concluded in May last year, together with our ongoing
dialogue with shareholders, we have decided to initiate an annual buyback
policy. The initial value of shares to be bought back will be up to
£3.0million and this amount will be kept under review. Shares re-purchased
under this new policy will be cancelled. When combined with our annual
dividend, this new policy will see c.£7.0million returned to shareholders
annually.
As the balance sheet direct investment portfolio unwinds into cash, the Board
will also consider the balance between periodic additional returns to
shareholders and corporate growth opportunities for the Group, our objective
always being to drive faster and greater shareholder returns.
Governance and Board evolution
Our commitment to the principles of the Quoted Companies Alliance Corporate
Governance Code remains resolute, albeit these principles simply codify the
existing integrity and transparency which are the fundamental cornerstones of
the way in which we will always do business.
Succession planning is an essential element of good governance and this year
is no exception. In April, Julian Viggars voluntarily relinquished his
Executive Director role to enable him to concentrate all of his time on the
Group's equity portfolios' investment performance. Julian's invaluable
investment experience will be of continuing benefit to our equity fund
investors and equity investment teams. In the coming months our Board will
further evolve, with the retirement of both Dr Jonathan Pell and Caroline
Plumb OBE from their Non-executive roles; Jonathan having served over seven
years as our Audit and Risk Committee Chair and Caroline six years.
Julian, Jonathan and Caroline have all made a significant contribution to our
strategic development and successes over the years. Both personally and on
behalf of the Board, I would like to thank them all very much indeed for their
dedicated service to the Group. Our Nominations Committee has commenced the
search for both Jonathan's and Caroline's successors and we will make
appropriate Stock Exchange announcements in due course.
At the senior operating level, we were very pleased to appoint Dean Heaney to
the newly created role of Head of Institutional Distribution, underlining our
commitment to significant future organic growth in our third-party funds under
management, particularly with institutional investors.
Maintaining good stakeholder relationships remains critical to our future
success, as does continuing to meet the investment objectives agreed with our
many and varied asset class fund investors. We thank all of our investor
stakeholders (and in particular the three independent Northern VCT boards, the
British Business Bank, local government pension schemes and regional combined
authorities), for their continuing trust in us.
Proactive engagement with all of our stakeholder groups remains particularly
important to our Board. I am always pleased to meet and engage directly with
shareholders, as I have done on a number of occasions during the past twelve
months. As a national business with a diverse shareholder base, we have
historically held our AGMs at different regional venues. Having held our
previous two AGMs in London, this September for the first time, we will be
holding our AGM in central Birmingham. It will be held at the offices of
Frontier Development Capital Limited, 11th Floor, 45 Church Street,
Birmingham, B3 2RT on 25 September 2025 at 10:00 am.
Responsible investing and culture
For Mercia, responsible investing with a clear purpose, a positive company
culture and strong teamwork have always gone hand-in-hand. As set out in more
detail in Mark's review, we always seek to make a commercial return for our
investors, but we also aim to do so in a manner that treats all of our
stakeholders with respect.
Looking forward
During our first decade as a quoted company, Mercia has met and successfully
overcome many unexpected external challenges including Brexit, the COVID
pandemic, high inflation and elevated interest rates. Today, the macro
challenges currently come from further afield, but we do not anticipate any
permanent impact on our portfolios of young venture backed businesses, nor on
our portfolios of profitable SMEs and property developers, to whom our debt
funds have made loans.
With guidance from our trusted advisers, our successful pivot to focus on
growing our profitable fund management operations in private capital is
leading to the benefits of scale now being experienced. In turn this is
driving increased profitability, without compromising our ability to source
good investment and lending opportunities; all whilst continuing to meet our
funds investors' capital deployment and commercial return objectives.
Given the macro-economic and sector specific upheavals of the past decade, we
have always managed Mercia whilst cautiously scanning the horizon, hence
always maintaining a strong liquidity base. Whilst we will not endanger
Mercia's long-term prosperity by deviating from this fundamental principle,
our increasing financial strength now allows us to be bolder with our growth
ambitions and shareholder returns.
Growth on the scale which Mercia is now consistently achieving requires
extremely hard work and a daily commitment from all of our staff. They
invariably work together as one team across our 11 offices. Our current
financial results and the momentum this creates are as a direct result of the
tireless endeavours of everyone involved. Again, both personally and on behalf
of our Board, I would like to thank each and every one of our employees for
their relentless efforts. I would also like to recognise and thank all of our
external stakeholders and supporters, many of whom bring us exciting
investment and lending opportunities, manage our investee companies and
generally help us maintain our momentum.
Finally, an enormous thank you to you; our longstanding, loyal and supportive
shareholders. We are all doing everything that we can to build a successful
and increasingly valuable business for you.
It remains a privilege to be Chair of Mercia Asset Management PLC and I look
forward to reporting to you on further progress in the years to come.
Ian R Metcalfe OBE
Non-executive Chair
Chief Executive Officer's Review
Introduction
In a year marked by continued global market volatility, inflation stubbornly
above the 2% target and elevated interest rates, Mercia Asset Management PLC
has demonstrated continued resilience and strategic progress. Our diversified
investment approach across private capital asset classes and commitment to
impactful capital deployment has enabled us to navigate these challenges
effectively, resulting in continuing growth and value creation for our many
stakeholders.
It is pleasing to note that since Mercia's beginning as a quoted company on
AIM, we have invested over £1.2billion across the UK into over 800 businesses
and projects. In this financial year alone we have invested c.£284million
into 165 businesses, making Mercia a leading domestic private capital asset
manager, with a focus on Place-Based Impact Investing ("PBII").
Our journey over the past ten years can be summarised as follows:
Timeline Third-party FuM Total direct investment value Average investment size Annual deployment rate Annual revenue EBITDA Average
headcount
At IPO - December 2014 £23m £9m c.£0.2m c.£2m £0.8m £0m 7
31 March 2025 £1.8bn £126m c.£2m c.£284m £34.4m £7.6m 143
Place-Based Impact Investing: the right choice for investors and society
PBII is emerging as a powerful strategy for generating both financial returns
and meaningful social impact in the UK, enhanced by the government's growing
narrative on the need for a growth agenda focused on small and medium-sized
businesses, plus real asset investment. These government imperatives play to
Mercia's regional strengths. We strongly believe that by directing capital
across the UK through our physical regional presence, across our 11 offices
from Bristol in the South West to Newcastle in the North East, PBII fosters
economic resilience, job creation and long-term prosperity, whilst unlocking
strong commercial opportunities and investment returns.
Market opportunity
In the 2024 calendar year, c.£12billion of venture capital was invested
across the UK. During Mercia's financial year to 31 March 2025 we invested
c.£284million, with approximately 50% of Mercia's third-party FuM being in
venture capital. Today however, Mercia is not just about venture capital
investing. We are also a leading regional player in the SME lending sector,
with a desire to enter the 'real assets' investment space too. Over the next
two years we are seeking to aggressively grow market share in each of our
chosen markets and asset classes.
One of Mercia's initial targets in the real assets space will be social and
affordable regional UK housing, which is currently growing at c.30% per annum,
with over £3.8billion being deployed annually.
By focusing on regional venture, SME lending and local property development
lending, which all play to Mercia's regional strengths and existing networks,
there is a tremendous opportunity to rapidly expand our FuM in these niche
sectors of the UK economy.
Financial performance: Mercia '27
We are now one year into our three-year strategic plan ("Mercia '27"), and
even in the context of the ongoing macro-economic and market challenges, it is
pleasing to report on the progress that we are making against our three-year
strategic objectives, which are:
1. Grow AuM to ≥£3billion with a sustainable ≥5% net inflows per
annum;
2. Grow EBITDA to ≥£10million and EBITDA margin to ≥26%;
3. Simplify the business model by divesting c.70% by value of the
balance sheet direct investment portfolio.
Grow assets under management
As at 31 March 2025, Mercia's assets under management ("AuM") had grown to
£2.0billion (2024: £1.8billion), of which c.£1.8billion is in third-party
FuM (2024: £1.6billion). The remaining £0.2billion is Mercia's consolidated
balance sheet which comprises the direct investment portfolio
(c.£126million), cash (c.£40million), and intangible assets and working
capital (totalling c.£22million).
During the year to 31 March 2025, the c.10% organic growth in FuM came from
existing fund mandate increases, new fund management contracts awarded and
successful VCT and EIS fund raises. The overall movements are summarised as
follows:
1 April Inflows Transition to realisation phase Performance Distributions 31 March Other inflows*
2024 2025
Asset class £'m £'m £'m £'m £'m £'m £'m
Venture 913 65 (15) 11 (46) 928 79
Debt 687 172 (7) 14 (16) 850 -
Private equity 30 - - 3 (11) 22 -
Total FuM 1,630 237 (22) 28 (73) 1,800 79
Proprietary capital 189 - - 5 (6) 188 -
Total AuM 1,819 237 (22) 33 (79) 1,988 79
* Inflows achieved/awarded during the year, but 'on fee' post year end.
Liquidity Liquidity
31 March 31 March
2025 2024
Asset class £'m £'m
Venture 347 404
Debt 253 262
Private equity - -
Total FuM 600 666
Proprietary capital 40 47
Total AuM 640 713
During the year we invested c.£274million (2024: c.£227million) across the
funds which we manage, into 162 businesses, including 87 new companies.
FuM
31 March Companies Amount Company
2025 in portfolio invested exits
Asset class £'m No. £'m No.
Regional venture 439 90 56 13
VCT 379 56 44 8
EIS 110 82 21 5
Debt 850 295 152 n/a
Private equity 22 4 1 2
Totals 1,800 527 274 28
Mercia achieved another strong financial and tax year of organic increase in
FuM, with total fund inflows exceeding £0.3billion. After last year's organic
growth was powered by significant contributions from five new British Business
Bank backed mandates, this year our growth has been driven by our SME and
property lending teams at FDC, with c.£172million of new or extended
mandates. Equity mandate increases, new fund management contracts awarded and
successful VCT and EIS fundraises confirmed during the year totalled
c.£144million. New FuM additions are only possible with the track records of
deployment, performance and financial stewardship that Mercia demonstrates,
driven by the long-term dedication of our equity, lending and operating teams.
As can be seen in the table above, notwithstanding our increasing annual
capital deployment totals, these new inflows have replenished our financial
dry powder and we maintain healthy liquidity across both our equity and
lending mandates.
There were c.£101million in total AuM reductions as a result of the change of
fund treatment from funds committed to portfolio valuations, fund investor
distributions and shareholder dividends.
Overall, Mercia's fundraising successes have resulted in c.15% net fund
inflows across the financial and tax year end.
Grow EBITDA and EBITDA margin
For FY25 we are pleased with Mercia's EBITDA growth, up from £5.5million last
year to £7.6million this year, an increase of c.37%. Our EBITDA margin has
also improved, from 18.2% to 22.1%, as we are now increasingly benefiting from
systems efficiencies and the economies of scale.
Our long-term focus is on growing EBITDA and EBITDA margin via material
expansion of our FuM. Product diversification in our niche regional private
markets brings a degree of revenue insulation, whilst targeting top quartile
investment performance may also result in periodic performance fees for Mercia
and performance-related bonuses for our valued team members, as has occurred
during this financial year via a performance fee from the Northern VCTs. We
will continue to carefully manage the growth of our cost base, but not at the
expense of either investor or investee client service and investment
performance.
In respect of future potential non-organic growth, we continuously evaluate
potential acquisition opportunities that may fit with both our culture and our
Mercia '27 growth objectives and historically, approximately 50% of our FuM
growth has come from carefully planned and integrated acquisitions. The return
on invested capital for each of the three acquisitions completed since our
December 2014 IPO have comfortably exceeded our weighted average cost of
capital.
Direct investment portfolio
Approximately 6% of Mercia's AuM is made up of the balance sheet direct
investment portfolio. Over the next two years we expect this to reduce to less
than 2% as we seek to divest for cash up to 70% by value of the portfolio. At
the start of Mercia '27 we confirmed that we would not be adding further new
investments to the balance sheet portfolio and of the 20 direct investments
then held, did not anticipate any exits in FY25. We have modelled up to
c.£10million of exit returns in the new financial year, with the remainder of
our 70% target in the following financial year. At the beginning of the
three-year period to 31 March 2027, we anticipated only c.£25million in total
being deployed by our balance sheet into the decreasing and maturing direct
investment portfolio. We remain comfortable with this expectation.
The table below lists Mercia's 20 direct investments by fair value as at 31
March 2025, including the net cash invested, fair value movements and the
fully diluted equity percentage held. It is pleasing to report that in the
first year of our strategic plan, we have only invested £9.7million into the
direct investment portfolio and have benefited from a modest return on the
sale of our second smallest holding in Artesian Solutions for £0.6million
(against a holding value of £0.5million) and post year end, a relatively
small amount (£0.4million) from the ongoing liquidation of the fully
provisioned Impression Technologies. Overall, Mercia's direct investment
portfolio continues to make good technical and commercial progress, despite a
continuing challenging market backdrop for venture investing, reflecting the
strong fundamentals of the portfolio.
Whilst now not adding any new direct investments, we will ensure that we
retain sufficient liquidity to continue supporting our existing portfolio
companies on their journey to exit over the next few years.
Year of Net Net cash Investment realisation Realised gain/(loss) Fair value Net
first investment invested year to year to movement investment Percentage
31 March
31 March
direct investment value as at year to
year to value as at held as at
1 April
31 March 2025 2025
2024
31 March 31 March 31 March
2025 £'000 £'000
£'000
2025 2025 2025
£'000
£'000 £'000 %
Netacea Group Ltd 2022 14,661 2,000 - - - 16,661 32.4
Voxpopme Ltd 2018 15,849 - - - 25 15,874 20.2
Warwick Acoustics Ltd 2014 11,934 - - - - 11,934 35.8
VirtTrade Ltd * 2015 10,223 1,300 - - 24 11,547 61.4
Medherant Ltd 2016 10,934 587 - - - 11,521 36.9
Eyoto Group Ltd 2017 7,142 2,500 - - - 9,642 24.7
Invincibles Studio Ltd 2015 8,567 750 - - - 9,317 35.5
Locate Bio Ltd 2018 7,837 - - - - 7,837 19.4
Ton UK Ltd ** 2015 6,609 - - - - 6,609 40.4
Aonic Founder SCS 2023 3,784 - - - 1,916 5,700 0.0
Axis Spine Technologies Ltd 2022 3,000 1,000 - - - 4,000 11.5
Tozaro Ltd 2020 2,734 - - - - 2,734 11.2
Pimberly Ltd 2021 2,612 - - - 116 2,728 4.9
Nova Pangaea (Holdings) Ltd 2022 2,250 - - - - 2,250 0.0
Forensic Analytics Ltd 2021 2,264 - - - (514) 1,750 6.7
sureCore Ltd 2016 2,416 250 - - (1,268) 1,398 22.0
MyHealthChecked PLC 2016 782 - - - 170 952 13.1
Uniphy Ltd 2022 727 - - - - 727 3.9
Artesian Solutions Ltd *** 2023 539 - (601) 62 - - 0.0
Sherlock Biosciences Inc 2023 340 - - (340) - - 0.0
Other direct investments n/a 1,657 1,317 - - (195) 2,779 n/a
Total 116,861 9,704 (601) (278) 274 125,960 n/a
* Trading as Avid Games.
** Trading as Intelligent Positioning.
*** Trading as FullCircl.
Post year end, we have led significant new rounds of £6.2million into Warwick
Acoustics, and £6.6million into Axis Spine Technologies, investing
£1.0million and £2.0million directly from our balance sheet cash reserves.
We have also undertaken a detailed planning exercise across all of our direct
investments to assess shareholder alignment and set expectations around the
timing of realisations over the next two years. This has included the use and
retention of corporate finance advisers, exit readiness reviews and detailed
value creation exercises.
Capital allocation policy
As at 31 March 2025, Mercia held c.£40million cash on hand and had no debt.
As part of our forward planning approach to capital allocation, we naturally
prioritise maintaining our going concern status, regulatory capital
requirements, corporate taxes and support for our direct investment portfolio.
Beyond that, our allocation policy is straightforward: increasing shareholder
returns and, given our positive returns on invested capital, continued
periodic M&A. Maintaining the right balance between taking risk and
exercising caution with our shareholders' capital has always been part of
Mercia's DNA and will continue to be so, whilst we drive for accelerated
growth.
I am pleased to say that the Board is recommending a final dividend of 0.58
pence per share, taking the full year dividend to 0.95 pence per share, an
annual increase of c.6%.
Furthermore, given the profitable and cash generative progress being made (and
having already completed one successful share buyback), our Board has now
decided to further increase our annual returns to shareholders, via an annual
£3.0million share buyback policy. Shares bought back from now on will be
cancelled and the quantum of the annual buyback will be kept under review, as
our free cash flow increases over time.
In conclusion
As a UK-focused private capital asset manager quoted on AIM, we remain
committed to delivering strong, sustainable returns for all our investors,
through supporting the growth of our now over 500 investees. In due course, we
will also begin investing in real assets through our expanding FuM, as we
believe this asset class will also drive long-term shareholder value creation.
Despite the continuing market challenges, our disciplined Group-wide
investment approach, including our commitment to responsible investing,
positions us well for future success. Looking ahead, we will continue to scale
our platforms of deal origination and sales and distribution (the latter now
led by Dean Heaney), to drive further growth and with it, incremental
shareholder value and returns.
Our strategic progress and these financial results are a testament to the
dedication of our whole team and the continuing trust of our fund investors.
We remain steadfast in our mission to be the leading regionally focused
private capital asset manager in the UK, providing impactful capital and
support to businesses across the regions, with a key part of our future growth
funded through the divestment of our direct investment portfolio, balancing
increasing shareholder returns with accelerated FuM growth via M&A.
Looking back over our 10-year journey to date, we have come a long way from
that c.£23million of FuM at IPO, but our ambition now is to go much further
and faster, whilst always maintaining our established financial disciplines.
Dr Mark Payton
Chief Executive Officer
Chief Financial Officer's review
Overall financial performance
Mercia achieved significant growth in profitability during the year to 31
March 2025, with record EBITDA of £7,608,000, up c.37% on the prior year
(2024: £5,537,000).
The continued scaling of our private capital fund management operations
following record fund inflows towards the end of the previous financial year
is resulting in economies of scale, which has contributed to the increase in
the Group's EBITDA margin of 22.1% (2024: 18.2%). This progress was made
whilst maintaining our investment commitments and support to both our
investors and investees.
Proposed final dividend
The Board continues to adopt a progressive dividend policy and therefore, with
the continuing cash generative growth of the Group, recommends a proposed
final dividend of 0.58 pence per share (2024: 0.55 pence per share). If
approved by shareholders at the Annual General Meeting in September 2025, the
total dividend for the year will be 0.95 pence per share (2024: 0.90 pence per
share), a year-on-year increase of c.6% (2024: increase of c.5%).
If approved by shareholders, the final dividend will be paid on 31 October
2025, to shareholders on the register at the close of business on 3 October
2025.
Share buyback programme
In November 2023, the Group launched its first share buyback programme, buying
back 15,706,088 Ordinary shares into treasury at an average of 31.8 pence per
share, for a total cost of £5.0million. Given Mercia's strong financial
position and future prospects the Board has now decided to initiate an annual
share buyback programme at a cost of up to £3.0million. The shares bought
back under this new policy will be cancelled. As part of its periodic capital
allocation policy review, the Board will keep the quantum of this annual
buyback policy under review.
Alternative performance measures ("APM")
The Directors believe that the reporting of both EBITDA and adjusted operating
profit assists 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) excluding performance fees net of
costs, depreciation, realised fair value (losses)/gains on the sale of direct
investments, unrealised fair value movement in direct investments, share-based
payments charge, amortisation of intangible assets and movement in the 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.
Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Revenue (1) 34,416 30,434
Administrative expenses (1) (26,808) (24,897)
EBITDA (1) 7,608 5,537
Net finance income 2,570 4,160
Adjusted operating profit (1) 10,178 9,697
Performance fees 785 -
Variable compensation attributable to performance fees (628) -
Adjusted operating profit(1) including performance fees net of costs 10,335 9,697
Depreciation (598) (489)
Net finance income (2,570) (4,160)
Realised fair value (loss)/gain on sale of direct investments (278) 4,450
Unrealised fair value movement in direct investments 274 (17,338)
Share-based payments charge (938) (1,002)
Amortisation of intangible assets (2,989) (2,989)
Movement in fair value of deferred consideration (454) (540)
Operating profit/(loss) 2,782 (12,371)
Net finance income 2,570 4,160
Profit/(loss) before taxation 5,352 (8,211)
Taxation (1,897) 626
Profit/(loss) and total comprehensive income/(expense) 3,455 (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:
Year ended 31 March 2025
IFRS as reported £'000 Performance fees Depreciation £'000 APM basis(1)
£'000 £'000
Revenue 35,201 (785) - 34,416
Administrative expenses (28,034) 628 598 (26,808)
Depreciation - - (598) (598)
Year ended 31 March 2024
IFRS as reported Performance fees Depreciation £'000 APM basis(1)£'000
£'000 £'000
Revenue 30,434 - - 30,434
Administrative expenses (25,386) - 489 (24,897)
Depreciation - - (489) (489)
Revenue (1)
Revenue increased 13.1% to £34,416,000 (2024: £30,434,000) and comprised
fund management-related fees, initial management fees from investment rounds,
arrangement fees from loans, investment director monitoring fees, sundry
business services income and VCT share offer fees. 97.9% of these revenues
were derived from the Group's fund management activities (2024: 96.6%).
Administrative expenses (1)
Administrative expenses, excluding depreciation, increased 7.7% to
£26,808,000 (2024: £24,897,000) and comprised predominantly staff-related,
office, marketing, professional adviser and VCT share offer-related costs.
EBITDA
EBITDA increased 37.4% to £7,608,000 (2024: £5,537,000), equating to an
EBITDA margin of 22.1% (2024: 18.2%). This margin improvement demonstrates the
Group's ability to derive economies of scale as it grows its funds under
management.
Net finance income
Total gross finance income of £2,626,000 (2024: £4,216,000) arose largely
from interest receivable on the Group's cash deposits, together with the
crystallisation of convertible loan interest within the direct investment
portfolio. Finance costs of £56,000 (2024: £56,000) comprised interest
payable on office leases and the Group's staff electric car scheme.
Performance fees
During the second half of the year, a performance fee totalling £785,000
(2024: £nil) became payable by Northern Venture Trust PLC, Northern 2 VCT PLC
and Northern 3 VCT PLC based upon the growth in their respective net asset
value per share for the year to 31 March 2025. Directly related VCT investment
team bonuses (including employer's National Insurance) totalling £628,000
have been accrued at the year end (2024: £nil).
Fair value movement in direct investments
Year ended Year ended
31 March 2025 31 March 2024
£'000 £'000
Investment movements excluding cash invested and realisations:
Unrealised gains on the revaluation of direct investments 2,378 7,877
Unrealised losses on the revaluation of direct investments (2,104) (25,215)
Net unrealised fair value movements 274 (17,338)
The net unrealised fair value movement in direct investments resulted in a
£274,000 increase (2024: £17,338,000 decrease) and as at 31 March 2025, the
fair value of the Group's direct investment portfolio was £125,960,000 (2024:
£116,861,000).
Unrealised fair value gains arose in five (2024: 10) of the Group's direct
investments. The largest unrealised fair value gain was in respect of Aonic
Founder SCS, which accounted for £1,916,000 of the total (2024: £3,973,000
unrealised fair value gain in respect of Voxpopme Limited).
There were three (2024: eight) unrealised fair value decreases, the largest
being £1,268,000 which arose in respect of sureCore Limited (2024:
£18,558,000 unrealised fair value decrease in Impression Technologies
Limited).
Share-based payments charge
The £938,000 non-cash charge (2024: £1,002,000) arises from the total number
of issued and vested share options held by employees throughout the Group,
ranging from 28 January 2020 to 31 March 2025.
Amortisation of intangible assets
The amortisation charge for the year of £2,989,000 (2024: £2,989,000)
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 in December 2022 included an element of contingent
deferred consideration which was subject to a number of financial targets
being met. The deferred consideration was paid in full during the year.
Movement in the fair value of this contingent deferred consideration during
the year to 31 March 2025 has resulted in a charge to the consolidated
statement of comprehensive income of £454,000 (2024: £540,000).
Taxation
The overall tax charge for the year 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/(loss) and total comprehensive income/(expense) for the year
The overall financial performance of the Group has led to a consolidated total
comprehensive income of £3,455,000 (2024: expense of £7,585,000). This has
resulted in basic earnings per Ordinary share of 0.80 pence (2024: basic loss
per Ordinary share of 1.71 pence).
Summarised statement of financial position
As at As at
31 March 2025 31 March 2024
£'000 £'000
Goodwill and intangible assets 33,307 36,296
Direct investment portfolio 125,960 116,861
Other non-current assets, trade and other receivables 4,129 4,810
Cash and cash equivalents 40,093 46,940
Total assets 203,489 204,907
Trade, other payables and lease liabilities (12,538) (9,595)
Deferred consideration - (2,279)
Deferred taxation (3,044) (3,792)
Total liabilities (15,582) (15,666)
Net assets 187,907 189,241
Net assets per share (pence) ** 43.6p 43.4p
** 431,336,370 Ordinary shares, excluding those held in treasury, were in
issue as at 31 March 2025 and therefore used as the denominator for
calculating net assets per share. 436,319,815 Ordinary shares, excluding those
held in treasury, has been used as the denominator for calculating 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 acquisitions of FDC and the VCT fund management business.
Direct investment portfolio
During the year, Mercia's direct investment portfolio increased from
£116,861,000 as at 1 April 2024 (2024: £136,550,000 as at 1 April 2023) to
£125,960,000 as at 31 March 2025 (2024: £116,861,000 as at 31 March 2024), a
c.8% increase (2024: c.14% decrease).
The Group invested £9,704,000 net (2024: £19,626,000 net) into eight
existing direct investments (2024: 11 existing direct investments).
Cash and cash equivalents
At the year end, Mercia had cash and cash equivalents totalling £40,093,000
(2024: £46,940,000).
The Group continues to have limited working capital needs due to the nature of
its business and during the year, cash generated from operating activities
totalled £9,409,000 (2024: £7,872,000), exceeding the Group's EBITDA.
As at 31 March 2025, 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.4%.
The summarised movements in the Group's cash and cash equivalents during the
year are shown below.
Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Opening cash and cash equivalents 46,940 37,555
Cash generated from operating activities 9,409 7,872
Corporation tax paid (690) (788)
Net cash (used in)/generated from direct investment activities (8,516) 9,360
Deferred consideration paid in respect of acquisitions (2,733) (1,500)
Cash inflow generated from other investing activities 1,935 1,991
Purchase of Ordinary shares into treasury (1,836) (3,194)
Net cash used in financing activities (4,416) (4,356)
Closing cash and cash equivalents 40,093 46,940
Outlook
These results exhibit the operational leverage and scalable profitability of
the Group, following the significant organic growth in private capital funds
at the start of 2024.
Mercia will continue to execute its strategy of growing its funds under
management to drive financial performance, thereby enabling the continuation
of its progressive dividend policy. Furthermore, as a component of the Group's
capital allocation policy, the new share buyback programme will annually
return capital back to shareholders whilst reducing the number of outstanding
shares in issue.
Mercia remains debt free with strong liquidity and has entered the new
financial year with good momentum towards its Mercia '27 objectives.
Martin Glanfield
Chief Financial Officer
Summary Financial Information
Consolidated statement of comprehensive income
For the year ended 31 March 2025
Note Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Revenue 5 35,201 30,434
Administrative expenses 7 (28,034) (25,386)
Realised fair value (loss)/gain on sale of direct investments 6 (278) 4,450
Unrealised fair value movements in direct investments 6 274 (17,338)
Share-based payments charge (938) (1,002)
Amortisation of intangible assets 13 (2,989) (2,989)
Movement in fair value of deferred consideration (454) (540)
Operating profit/(loss) 2,782 (12,371)
Finance income 8 2,626 4,216
Finance expense (56) (56)
Profit/(loss) before taxation 5,352 (8,211)
Taxation 9 (1,897) 626
Profit/(loss) and total comprehensive income/(expense) 3,455 (7,585)
Basic earnings/(loss) per Ordinary share (pence) 10 0.80 (1.71)
Diluted earnings/(loss) per Ordinary share (pence) 10 0.80 (1.71)
All results derive from continuing operations.
Consolidated statement of financial position
As at 31 March 2025
Note As at As at
31 March 31 March
2025 2024
£'000 £'000
Assets
Non-current assets
Goodwill 12 21,126 21,126
Intangible assets 13 12,181 15,170
Property, plant and equipment 153 128
Right-of-use assets 727 711
Investments 14 125,960 116,861
Total non-current assets 160,147 153,996
Current assets
Trade and other receivables 3,249 3,971
Cash and cash equivalents 15 40,093 46,940
Total current assets 43,342 50,911
Total assets 203,489 204,907
Current liabilities
Trade and other payables (11,780) (8,893)
Lease liabilities (425) (376)
Deferred consideration 16 - (2,279)
Total current liabilities (12,205) (11,548)
Non-current liabilities
Lease liabilities (333) (326)
Deferred taxation 17 (3,044) (3,792)
Total non-current liabilities (3,377) (4,118)
Total liabilities (15,582) (15,666)
Net assets 187,907 189,241
Equity
Issued share capital 18 4 4
Share premium 19 83,775 83,775
Treasury reserve 20 (4,911) (3,188)
Other distributable reserve 21 55,370 59,338
Retained earnings 47,211 43,756
Share-based payments reserve 6,458 5,556
Total equity 187,907 189,241
Consolidated statement of cash flows
For the year ended 31 March 2025
Note Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Cash flows from operating activities:
Operating profit/(loss) 2,782 (12,371)
Adjustments to reconcile operating profit/(loss) to net cash generated from
operating activities:
Depreciation of property, plant and equipment 103 104
Depreciation of right-of-use assets 495 385
Realised fair value loss/(gain) on sale of direct investments 6 278 (4,450)
Unrealised fair value movements in direct investments 6 (274) 17,338
Share-based payments charge 938 1,002
Amortisation of intangible assets 13 2,989 2,989
Movement in fair value of deferred consideration 16 454 540
Working capital adjustments:
(Increase)/decrease in trade and other receivables (26) 800
Increase in trade and other payables 1,670 1,535
Cash generated from operating activities 9,409 7,872
Corporation tax paid (690) (788)
Net cash generated from operating activities 8,719 7,084
Cash flows from direct investment activities:
Proceeds from sale of direct investments 14 601 26,696
Purchase of direct investments 14 (9,704) (19,926)
Investee company loan repayment 14 - 300
Investee company loan interest received 8 587 2,290
Net cash (used in)/generated from direct investment activities (8,516) 9,360
Cash flows from other investing activities:
Interest received from cash and cash equivalents 2,063 1,813
Purchase of property, plant and equipment (128) (110)
Deferred consideration paid in respect of acquisitions 16 (2,733) (1,500)
Decrease in short-term liquidity investments - 288
Net cash (used in)/generated from other investing activities (798) 491
Net cash (used in)/generated from total investing activities (9,314) 9,851
Cash flows from financing activities:
Dividends paid 11 (3,968) (3,928)
Purchase of Ordinary shares into treasury (1,836) (3,194)
Proceeds received from the exercise of employee share options 73 26
Interest paid (56) (56)
Payment of lease liabilities (465) (398)
Net cash used in financing activities (6,252) (7,550)
Net (decrease)/increase in cash and cash equivalents (6,847) 9,385
Cash and cash equivalents at the beginning of the year 46,940 37,555
Cash and cash equivalents at the end of the year 15 40,093 46,940
Consolidated statement of changes in equity
For the year ended 31 March 2025
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 4 83,744 - 63,266 51,341 4,566 202,921
Purchase of Ordinary shares into treasury - - (3,194) - - - (3,194)
Loss and total comprehensive expense for the year - - - - (7,585) - (7,585)
Dividends paid - - - (3,928) - - (3,928)
Exercise of share options - 31 6 - - (12) 25
Share-based payments charge - - - - - 1,002 1,002
As at 31 March 2024 4 83,775 (3,188) 59,338 43,756 5,556 189,241
Purchase of Ordinary shares into treasury - - (1,836) - - - (1,836)
Profit and total comprehensive income for the year - - - - 3,455 - 3,455
Dividends paid - - - (3,968) - - (3,968)
Exercise of share options - - 113 - - (36) 77
Share-based payments charge - - - - - 938 938
As at 31 March 2025 4 83,775 (4,911) 55,370 47,211 6,458 187,907
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 summary financial information included in this announcement has been
extracted from the audited financial statements of the Group for the year
ended 31 March 2025, which have been approved by the Board of Directors. The
summary financial information does not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006 (the "Act"). The auditor's
report on the financial statements for the year ended 31 March 2025 was
unqualified and did not contain any statement under section 498 of the Act.
The Group's Annual Report and financial statements will be delivered to the
Registrar of Companies in due course.
The financial statements have been prepared on a historical cost basis, as
modified by the revaluation of certain financial assets and financial
liabilities in accordance with International Financial Reporting Standard
("IFRS") 9 Financial Instruments. The accounting policies presented in this
summary financial information are consistent with those set out in the audited
financial statements.
3. Going concern
Based on the Group's balance sheet, including its liquidity position at the
year 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 consolidated financial statements.
4. Significant accounting policies
Basis of consolidation
Subsidiary undertakings are consolidated from the date of their acquisition,
being the date on which the Group obtains control, and continue to be
consolidated until the date that such control ceases. The financial statements
of entities held within the Group's direct investment portfolio are not
included within the consolidated financial statements as the Group accounts
for these in accordance with the IFRS 10 Investment Entity exemption.
The Group accounts for business combinations using the acquisition method from
the date that control is transferred to the Group. Both the identifiable net
assets and the consideration transferred in the acquisition are measured at
fair value and transaction costs are expensed as incurred. Goodwill arising on
acquisitions is tested annually for impairment. Deferred consideration payable
to vendors is measured at fair value at acquisition and re-assessed annually,
with particular reference to the conditions upon which the consideration is
contingent.
New standards, interpretations and amendments effective in the current
financial year
No new standards, interpretations and amendments effective in the year have
had a material effect on the Group's financial statements.
Critical accounting judgements and key sources of estimation uncertainty
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 year in which the
estimate is revised if the revision affects only that year, or in the year of
the revision and future years if the revision affects both current and future
years.
The Directors have made the following judgements and estimates, which have had
the most significant effect on the carrying amounts of the assets and
liabilities in this summary financial information.
Fair value measurements and valuation processes
The judgements required to determine the appropriate valuation methodology of
unquoted equity investments mean there is risk of a material adjustment to the
carrying amounts of assets and liabilities. These judgements include a
decision on whether or not to impair or uplift investment valuations.
The fair value of unlisted securities is established using the International
Private Equity and Venture Capital Valuation Guidelines ("IPEVCVG") as updated
in December 2022.
Investments are measured at fair value at each measurement date. Fair value is
the price that would be received to sell an asset in an orderly transaction
between market participants at the measurement date. A fair value measurement
assumes that a hypothetical transaction to sell an asset takes place in the
principal market or, in its absence, the most advantageous market for the
asset. For quoted investments, available market prices will be the exclusive
basis for the measurement of fair value for identical instruments. For
unquoted investments, the measurement of fair value requires the valuer to
assume the underlying business or instrument is realised or sold at the
measurement date, appropriately allocated to the various interests, regardless
of whether the underlying business is prepared for sale or whether its
shareholders intend to sell in the near future.
In estimating fair value for an investment, the valuer should apply a
methodology that is appropriate in light of the nature, facts and
circumstances of the investment in the context of the total investment
portfolio and should use reasonable current market data and inputs, combined
with reasonable market participant assumptions.
The price of recent investment can be used to estimate the enterprise value,
before allocating to the various interests. The Group believes that this is
still the most relevant technique to measure fair value for early-stage
investments. However, it has also taken into consideration time elapsed,
performance since the investment round and external market events to help
inform its judgements.
0-6 months post last funding round
The Group will apply the price of a recent investment for up to six months
post the last funding round, subject to there being no material change to the
investee company's prospects (which would include the prospects of drawing
down the next tranche or raising the next round of funding).
7-18 months post last funding round
Beyond the six months point, the Group seeks assurance that the investee
company is progressing against the development milestones which were set out
in the initial assessment. Failing to hit milestones will not necessarily
impact the valuation - this may simply be an indicator that incremental value
will take longer to deliver, but the performance against milestones is
assessed as an indicator of a potential change in value. The Group will be
cautious about increasing the valuation of an early-stage investee company
unless it is based on a new market price or maintainable revenues and/or
earnings.
19+ months post last funding round
From this point onwards, the Group looks for additional support for the 'price
of recent investment' by calibrating back to that using a discounted cash flow
("DCF") methodology. However, unless the investee company has become
established with maintainable revenues and/or earnings and can be valued on an
earnings basis, given the inherent risk in early-stage investing and the lack
of reliability of using estimates yet to be delivered a number of years into
the future, the Group is unlikely to increase the fair value, even if a DCF
calculation suggests a higher value. Nevertheless, the DCF calculation helps
support the proposed fair value at the valuation point.
The recent macroeconomic uncertainty has created uncertainty in the fair value
of the direct investment portfolio. The Directors believe that they have
reflected this uncertainty in a balanced way through the assumptions used in
the valuation of each investee company. The Directors have assessed the
estimates made in relation to each individual valuation and do not believe
that a reasonable possible change in estimate would result in a material
change in the value of each investment.
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 the Group has only one operating segment, being private
capital 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:
Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Fund management fees 23,861 19,214
Initial management fees 5,294 5,465
Portfolio directors' fees 4,162 3,933
Other revenue 299 341
VCT share offer fees 800 1,481
VCT performance fees 785 -
35,201 30,434
6. Fair value movements in direct investments
Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Realised fair value (loss)/gain on the sale of direct investments (note 14) (278) 4,450
Unrealised fair value movements in direct investments (note 14) 274 (17,338)
(4) (12,888)
7. Operating profit/(loss)
Operating profit/(loss) is stated after charging:
Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Staff costs 20,343 17,530
Other administrative expenses 7,691 7,856
Total administrative expenses 28,034 25,386
8. Finance income
Finance income is derived from:
Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Cash deposits 2,039 1,917
Short-term liquidity investments - 9
Investee company loan interest 587 2,290
Total interest income 2,626 4,216
9. Taxation
Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Current tax
UK corporation tax (2,645) (122)
Deferred tax
Origination and reversal of temporary timing differences 748 748
Total tax (charge)/credit (1,897) 626
The UK standard rate of corporation tax is 25% (2024: 25%). The deferred tax
credit of £748,000 (2024: £748,000) represents the unwinding of the deferred
tax liabilities recognised in respect of the intangible assets arising on the
acquisition of the VCT fund management business and Frontier Development
Capital Limited.
A reconciliation from the reported profit/(loss) to the total tax
(charge)/credit is shown below:
Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Profit/(loss) before taxation 5,352 (8,211)
Taxation at the standard rate of corporation tax in the UK of 25% (2024: 25%) (1,338) 2,053
Effects of:
Income not subject to tax - 1,113
Expenses not deductible for tax purposes (388) (2,131)
Share of partnership profits - (1,134)
Other timing differences not recognised (171) 725
Total tax (charge)/credit (1,897) 626
The Group's deferred tax liability has been calculated at a rate of 25% as at
31 March 2025 (2024: 25%).
A total deferred tax liability of £3,044,000 (2024: £3,792,000) as at 31
March 2025 relates to the intangible assets recognised on the acquisition of
FDC in December 2022 and on the acquisition of the VCT fund management
business in 2019.
A potential deferred tax asset of £3,167,000 (2024: £3,392,000) for
cumulative unrelieved management expenses and other tax losses has not been
recognised in these consolidated financial statements as their future use is
uncertain.
10. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss)
for the financial year by the weighted average number of Ordinary shares in
issue during the year. Diluted earnings/(loss) per share is calculated by
dividing the profit/(loss) for the financial year 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
year. The profit/(loss) and weighted average number of shares used in the
calculations are set out below:
Year ended Year ended
31 March 31 March
2025 2024
Profit/(loss) for the financial year (£'000) 3,455 (7,585)
Basic weighted average number of Ordinary shares ('000) 431,586 444,716
Basic earnings/(loss) per Ordinary share (pence) 0.80 (1.71)
Diluted weighted average number of Ordinary shares ('000) 434,201 444,716
Diluted earnings/(loss) per Ordinary share (pence) 0.80 (1.71)
The calculation of basic and diluted earnings per share is based on the
following weighted average number of Ordinary shares:
Year ended Year ended
31 March 31 March
2025 2024
'000 '000
Weighted average number of shares
Basic 431,586 444,716
Dilutive impact of employee share options 2,615 -
Diluted weighted average number of Ordinary shares 434,201 444,716
11. Dividends
Year ended 31 March 2025 Year ended 31 March 2024
Pence per share £'000 Pence per share £'000
Dividends declared/proposed in respect of the year
Interim dividend declared in relation to year ended 31 March 2024 - - 0.35 1,561
Final dividend declared in relation to year ended 31 March 2024 - - 0.55 2,371
Interim dividend declared in relation to year ended 31 March 2025 0.37 1,597 - -
Final dividend proposed in relation to year ended 31 March 2025 0.58 2,502 - -
0.95 4,099 0.90 3,932
Year ended 31 March 2025 Year ended 31 March 2024
Pence per share £'000 Pence per share £'000
Dividends paid during the year
Final dividend paid in relation to year ended 31 March 2023 - - 0.53 2,367
Interim dividend paid in relation to year ended 31 March 2024 - - 0.35 1,561
Final dividend paid in relation to year ended 31 March 2024 0.55 2,371 - -
Interim dividend paid in relation to year ended 31 March 2025 0.37 1,597 - -
0.92 3,968 0.88 3,928
The proposed final dividend for the year ended 31 March 2025 is subject to
shareholder approval at the AGM on 25 September 2025, and as such has not been
included as a liability in these summary financial statements in accordance
with IAS 10.
12. Goodwill
Goodwill arising on the businesses acquired to date is set out in the table
below.
Enterprise Ventures Group VCT fund management business Frontier Development Capital Total
Mercia Fund Management
£'000 £'000 £'000 £'000 £'000
Cost
As at 1 April 2023, 31 March 2024 and 31 March 2025 2,455 7,873 6,314 4,484 21,126
Goodwill for each business acquired has been assessed for impairment as at 31
March 2025. Recoverable amounts for each cash generating unit ("CGU") are
based on the higher of value in use and fair value, less costs of disposal
("FVLCD").
The value in use calculations are based on future expected cash flows
generated by each CGU, as derived from the approved budget for the year ending
31 March 2026. Key assumptions are post-tax discount rates of 12.0% and 15.0%
(pre-tax discount rates of 17.8% and 20.6% respectively) and the growth rates
used in forecasting future operating results. Where the fund management
contracts are 'evergreen', a value into perpetuity has been used based on a
zero growth rate beyond a five-year forecast period.
The review concluded that the value in use of each CGU exceeds its carrying
value. The Directors do not consider that a reasonably possible change in a
key assumption would reduce the recoverable amount of the CGUs to below their
carrying value.
13. Intangible assets
The net book value of intangible assets represents contractual arrangements in
respect of the acquisition of the VCT fund management business in 2019 and the
acquisition of FDC in December 2022, where it is probable that the future
economic benefits that are attributable to those assets will flow to the Group
and the fair value of the assets can be measured reliably.
£'000
Cost
As at 1 April 2023, 31 March 2024 and 31 March 2025 26,618
Accumulated amortisation
As at 1 April 2023 8,459
Charge for the year 2,989
As at 31 March 2024 11,448
Charge for the year 2,989
As at 31 March 2025 14,437
Net book value
As at 1 April 2023 18,159
As at 31 March 2024 15,170
As at 31 March 2025 12,181
14. Investments
The net change in the value of investments for the year is an increase of
£9,099,000 (2024: decrease of £19,689,000). The table below reconciles the
opening to closing value of investments for both the current and prior years.
Level 1 Level 3 Total financial assets
financial financial
assets assets
£'000 £'000 £'000
As at 1 April 2023 969 135,581 136,550
Investments made during the year - 19,926 19,926
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 - 7,877 7,877
Unrealised fair value losses on investments (187) (25,028) (25,215)
As at 31 March 2024 782 116,079 116,861
Investments made during the year - 9,704 9,704
Disposal - (601) (601)
Realised loss on sale of direct investments - (278) (278)
Unrealised fair value gains on investments 170 2,208 2,378
Unrealised fair value losses on investments - (2,104) (2,104)
As at 31 March 2025 952 125,008 125,960
In November 2024, the Group sold its investment in Artesian Solutions Limited,
generating a realised gain of £62,000. Total cash proceeds of £601,000 were
received upon completion.
In December 2024, the Group sold its minority investment in Sherlock
Biosciences Inc., generating a £340,000 realised loss. No cash proceeds were
received on completion.
Investments held as part of the Group's direct investment portfolio are
carried at fair value in accordance with the IFRS 10.
The measurement basis for determining the fair value of investments held as at
31 March is as follows:
As at As at
31 March 2025 31 March 2024
£'000 £'000
Listed investment 952 782
Price of recent investment round 65,670 79,847
Enterprise value - multiple 57,088 29,320
Cost - price of initial investment 2,250 6,912
125,960 116,861
15. Cash and cash equivalents
As at As at
31 March 31 March 2024
2025 £'000
£'000
Total cash and cash equivalents 40,093 46,940
16. Deferred consideration
As at As at
31 March 31 March 2024
2025 £'000
£'000
Deferred consideration - payable within one year - 2,279
In the year ended 31 March 2025, the second and third deferred consideration
conditions were met, resulting in payments totalling £2,500,000 to the
vendors of FDC. A further free cash amount of £233,000 was also paid to the
vendors during the year. Movement in the fair value of the FDC deferred
consideration during the year resulted in a charge to the consolidated
statement of comprehensive income of £454,000.
17. Deferred taxation
As at As at
31 March 31 March 2024
2025 £'000
£'000
Deferred tax liability 3,044 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 the VCT fund management contracts and FDC.
As at 31 March 2025, the deferred tax liability has been calculated using a
25% tax rate.
18. Issued share capital
31 March 2025 31 March 2024
Number £'000 Number £'000
Allotted and fully paid
As at the beginning of the year 446,679,523 4 446,581,202 4
Issue of share capital during the year - - 98,321 -
As at the end of the year 446,679,523 4 446,679,523 4
During the year, 5,326,380 Ordinary shares were repurchased into a treasury
reserve (note 20). The outstanding Ordinary shares as at 31 March 2025, being
431,336,370, are entitled to one vote each and have equal rights as to
dividends. The Ordinary shares are not redeemable.
19. Share premium
As at As at
31 March 31 March 2024
2025 £'000
£'000
As at the beginning of the year 83,775 83,744
Premium arising on the issue of Ordinary shares - 31
As at the end of the year 83,775 83,775
20. Treasury reserve
31 March 2025 31 March 2024
Number £'000 Number £'000
Allotted and fully paid
As at the beginning of the year 10,359,708 3,188 - -
Purchase of Ordinary shares into treasury 5,326,380 1,836 10,379,708 3,194
Satisfaction of employee share options exercise (342,935) (113) (20,000) (6)
As at the end of the year 15,343,153 4,911 10,359,708 3,188
21. Other distributable reserve
As at As at
31 March 31 March 2024
2025 £'000
£'000
As at the beginning of the year 59,338 63,266
Dividends paid (note 11) (3,968) (3,928)
As at the end of the year 55,370 59,338
22. 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.
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 31 March 2025. There have been no
movements in financial assets or financial liabilities between levels during
the current or prior years. The table in note 14 sets out the movement in the
Level 1 and 3 financial assets from the start to the end of the year.
As at As at
31 March 31 March 2024
2025 £'000
£'000
Assets:
Financial assets at fair value through profit or loss - direct investment
portfolio
Level 1 952 782
Level 2 - -
Level 3 125,008 116,079
125,960 116,861
As at As at
31 March 31 March 2024
2025 £'000
£'000
Liabilities:
Financial liabilities at fair value through profit or loss - deferred
consideration
Level 1 - -
Level 2 - -
Level 3 - 2,279
- 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 listed on the AIM market of the London
Stock Exchange, MyHealthChecked PLC, which is valued using the closing bid
price as at 31 March 2025.
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 IPEVCVG 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 4 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 from 1
April to 31 March is disclosed in note 14.
23. Availability of Annual Report
The Annual Report of Mercia Asset Management PLC will be made available to all
shareholders on 25 July 2025. An electronic copy will be available on Mercia
Asset Management PLC's website at www.mercia.co.uk (http://www.mercia.co.uk) .
24. Annual General Meeting
The Annual General Meeting of Mercia Asset Management PLC will be held at the
offices of Frontier Development Capital Limited, 11th Floor, 45 Church Street,
Birmingham, B3 2RT on 25 September 2025 at 10:00 am.
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)
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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