Regional investor delivers record results
Regional investor Mercia Asset Management has recorded record results after accelerating its progress last year.
The asset manager has completed two of the three pillars of its three-year plan with a year to spare and has set out its next three-year plan.
It has achieved operating profitability, generating £3.3m in the year to March, compared with £0.5m in the previous year.
It also has an “evergreen”s balance sheet, with the group’s direct investment activities fully funded by periodic cash realisations from the existing portfolio. The sale of Oxford Genetics crystallised a gain of £18m and delivered a 5x return on its original direct investment.
The third pillar, to expand the group’s assets under management to at least £1.0bn, is “within touching distance”, and stood at £940m at the year end.
The new three-year plan is designed to “deliver substantial total shareholder returns” by growing assets under management by an average of 20% per year and to deliver average annual pre-tax profits of £20.0m over the next three years.
Mercia chief executive Mark Payton said: “What we know is that we have an ability to grow assets under management and we will focus resources to do that. What we also know is we are good at finding value and adding value and extracting value.
“With our focus on that, and if everything else remains static, then we’ll achieve our three-year plan. But our expectation is that there’s going to be a global economic recovery and we’re sitting in a good place to benefit from that.”
Mercia has performed strongly during the pandemic both with its existing portfolio, which is focused on life sciences, software and gaming, and in making new investments.
“Because of the liquidity that we have and the cash on hand, we were able to invest in these businesses and not rescue them, but actually build several,” said Payton.
“Over this period we’ve invested in over 70 new companies. The strength and depth in the portfolio has grown over this period as well which is why weare so optimistic going forward – assets under management have grown, obviously cash generation across the group has grown, but so has the portfolio.”
Some companies in the portfolio have had challenges but Mercia remains confident that they will bounce back.
He added: “Diversification [of the portfolio] is important both in terms of sector and stage of development. During Covid, although life sciences and software sectors picked up well, areas such as automotive and electronics took a beating and actually took a step backwards.
“What these results aren’t are us writing down assets and then writing the same ones up again. Those ones are still provisioned and written down, but those ones are where we also put money and people into and we’re now seeing those come through.”
More to follow.
