Technology investor makes strong progress in profitable year

Mercia Technologies, the technology investor focused on the UK regions, has welcomed a “positive year” in which it recorded a £1.1m profit and increased the value of its portfolio companies.

It believes it has built “a compelling and sustainable model”, which sees it invest third party funds into businesses and then takes the best of those – which it calls its “emerging stars” – and invests directly in their growth.

Revenue grew substantially in the year to March 2017, from £1.76m to £6.66m, which is mostly because of the acquisition of fund manager Enterprise Ventures in March 2016. One major success has been securing new fund mandates totalling £108.5m, from the Northern Powerhouse Investment Fund.

Mercia’s revenues are mostly generated from fund management fees, initial management fees from new investments and investment director monitoring fees.

It monitors its success through growth in net asset value (NAV) per share, which this year rose 8% to 40.4p. It achieved this through its two strategic objectives – accelerating the growth in value of its direct investment holdings, and minimising NAV erosion by offsetting operating costs with fee income and realised gains.

Mark Payton, chief executive of Mercia, said: “Mercia is focused on delivering growth in net assets, by executing against each of our shareholder value creation objectives, including the group’s first cash realisations.

He added: “These results demonstrate that Mercia is starting to deliver on both of these important facets of our investment model.”

Mercia, which is based in Henley-in-Arden, recorded a pre-tax profit of £1.1m, compared with a £1.7m loss a year earlier.

The value of its 24 investments had a net gain of £4.27m, with seven increases and six impairments. The largest individual gain was from nDreams, which rose £4.76m, with the biggest writedown being the £2.74m impairment in the value of Science Warehouse.

It also sold two of its direct investments, Allinea Software and Abzena, which realised £840,000, and portfolio company Concepta floated in July 2016.

Payton remains confident despite market sentiment “not being supportive of this sector in general”.

He said: “We look forward to the years ahead with a well-funded balance sheet and a materially increased level of third party managed funds.

“Our confidence in delivering shareholder value is supported by Mercia’s hybrid investment model combined with a strong regional presence, excellent investment team and established deal flow networks.”

Mercia floated in December 2014 and rose to trade above 70p in 2015. However it closed on Friday at 34p, close to its all-time low, which gives the company a market value just below £100m.