Tech investor accelerates growth on back of regional strength
Technology investor Mercia Technologies is accelerating its progress as it benefits from the strength of the regions and its own regional strength.
The AIM-listed company, which is headquartered in Henley-in-Arden, saw half-year profits increase 35% to £1.9m while the value of its direct investments grew by 20%, to £77.8m.
It is continuing to take advantage of the imbalance between where venture capital is deployed and where high growth firms are located to find the right opportunities.
In 2017, 68% of venture capital was deployed in London, but only 79% of Great Britain’s high-growth firms are located outside of the capital city.
Mercia’s chief executive Mark Payton said: “The regions have historically punched below their weight. What we are seeing is the quality of businesses that we have backed have been very strong and the deal flow we are seeing from our funds under management is far stronger.
“It’s quite an exciting time for us and the regions.”
Contrasting the location of where venture capital is deployed and where high growth firms are based (Source: Mercia Technologies)
He highlighted its recent investment in Arc Vehicle, a Coventry-based manufacturer developing an electric motorcycle. It used funds from Mercia Fund Managers’ EIS funds and from the Midlands Engine Investment Fund pot it manages, alongside support from Jaguar Land Rover’s venture capital fund InMotion Ventures and private investors.
“We were the only player looking at that,” said Payton. “We have come a long way in a short time – we are now seeing 60%-100% of everything in the regions.”
Mercia typically uses its managed funds to identify businesses that are ready for further scale-up funding, and it then looks to bring those businesses across to its balance sheet.
Nearly 99% of its £77.8m portfolio is in its top 20 investments, led by nDreams, Oxford Genetics and Warwick Acoustics.
Payton added: “Since the start of this financial year, Mercia has received circa 1,800 business plans and made on average 10 managed fund investments per month across the Midlands, the North of England and Scotland.
“Mercia is increasingly seen as the go-to regional investor and in its relatively short time on AIM is now recognised as one of the most active venture investors in the UK.”
Canaccord analyst Paul Morland, who has maintained a “buy” rating for Mercia, said: “During the first half to September Mercia has made ‘solid progress’ against all four of its strategic metrics.
“It has sourced ‘compelling deal flow’; seen evidence of commercial progress and increased fair values in its direct investments; is looking for direct investment cash realisations; and minimised NAV erosion through net expense reduction.”
