Mercia confident it can provide certainty and cash in uncertain times

Regional investor Mercia continues to be confident about its future growth, hoping it can provide certainty in uncertain economic times.

One-quarter of its £1.44bn of assets under management are unrestricted, while its evergreen funds would not be impacted by weaker investor sentiment, or redemptions, should the UK fall into recession.

“We have a lot of cash to invest this year and the coming years from our existing funds,” chief executive Mark Payton told TheBusinessDesk.com.

“There is certainty and clarity from Mercia in an environment that lacks that certainty and clarity.”

Mercia itself has 80% of its revenues secured through contracted revenues, with the remainder generated when it deploys capital.

CFO Martin Glanfield said: “We’ll still be investing whether it’s recession or not, and we’ll still have our fund management contracts.

“From a top line perspective, it’s a rock solid model.”

Mercia, which is headquartered in Warwickshire and has 140 people across the regions, increased its assets under management by around half in the year to March 2023.

This was predominantly through the £5.5m acquisition of Birmingham-based SME lender Frontier Development Capital, which added £415m of funds under management as well as debt capability in the Midlands.

Mercia invested in 85 new companies during the year and its £165m deployed is spread across 176 businesses.

Payton added: “In an environment of uncertainty and lacking clarity, these are nice, solid again, results year-on-year that we have produced.

“We’re optimistic looking forward. It’s very much a focus on organic growth and we expect growth across our three pools of capital – retail, institutional, British Business Bank

“The amount of money we’ve been putting to work over the last three years has grown 30% year on year to a record amount this year, which is £165m, and we expect that 30% growth to continue into the financial year.”

Mercia has maintained its progressive dividend policy, nudging up the final dividend by 6% to 0.53p per share.

Since the year-end, its three Northern VCTs have raised £18.0m, and its North East Venture Capital fund has had a further £5.0m allocated.

“We are actively engaged in new fundraising and expanding existing asset classes, so we do expect organic increase in third party funds under management,” added Payton.

“Our direct investments continue to mature, they’re a robust and diversified portfolio and we would expect positive developments from those over the next 12 months as well.”