TIDMMERC
RNS Number : 8308U
Mercia Asset Management PLC
28 November 2023
RNS 28 November 2023
Mercia Asset Management PLC
("Mercia" or the "Group" or the "Company")
Interim results for the six months ended 30 September 2023
Continuing profitable progress and a strong balance sheet,
underpins a 6% increase in the interim dividend and a share buyback
of up to GBP5.0million
Mercia Asset Management PLC (AIM: MERC), the proactive
regionally focused, profitable specialist asset manager with
c.GBP1.5billion of assets under management ("AuM"), is pleased to
announce its interim results for the six months ended 30 September
2023.
Mark Payton, Chief Executive Officer of Mercia, commented:
"Mercia has never been financially stronger. The first six
months of FY24 have witnessed record revenues derived predominantly
from Mercia's profitable and cash generative third-party fund
management operations. Mercia is now firmly established as a
leading provider of private capital across venture, debt and
private equity in the UK within the GBP0.5million to GBP20million
range, with further attractive growth prospects across all of these
discrete strategic asset classes.
"The Group's recent successful exit from its largest direct
investment, nDreams, has materially increased Mercia's debt-free
liquidity position to c.GBP60million today. We are therefore
pleased to announce a share buyback of up to GBP5.0million."
Highlights
-- Group AuM of GBP1,461.8million (H1 2023: GBP979.4million; FY
2023: GBP1,437.3million); an increase of 1.7% with no
redemptions
-- Revenue up c.23% to GBP15.0million (H1 2023: GBP12.2million)
-- EBITDA up c.33% to GBP2.8million (H1 2023: GBP2.1million)
-- Adjusted operating profit up c.54% to GBP5.5million (H1 2023: GBP3.6million)
-- Direct investment portfolio fair value of GBP142.5million (FY 2023: GBP136.6million)
-- Profit before taxation of GBP1.4million (H1 2023: GBP7.4million)
-- Interim dividend up c.6% to 0.35 pence per share (H1 2023: 0.33 pence per share)
-- Strong balance sheet with cash, cash equivalents and
short-term liquidity investments of GBP36.5million as at 30
September 2023 (H1 2023: GBP56.1million; FY 2023: GBP37.8million),
increased post period end to c.GBP60million following the sale of
nDreams
-- Net assets per share of 45.3 pence (H1 2023: 46.8 pence; FY 2023: 45.4 pence)
Financial results
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
--- ------------------------------------------- -------------- -------------- ------------
Statutory results
Revenue GBP15.0m GBP12.2m GBP25.9m
Fair value movement in direct investments GBP(1.6)m GBP5.6m GBP1.2m
Profit before taxation GBP1.4m GBP7.4m GBP2.4m
Basic earnings per share 0.30p 1.59p 0.64p
Interim dividend per share (1) 0.35p 0.33p 0.33p
Cash, cash equivalents and short-term GBP36.5m GBP56.1m GBP37.8m
liquidity investments
Net assets GBP202.4m GBP206.0m GBP202.9m
Alternative performance measures
AuM (2) GBP1,461.8m GBP979.4m GBP1,437.3m
EBITDA (3) GBP2.8m GBP2.1m GBP5.2m
Adjusted operating profit (4) GBP5.5m GBP3.6m GBP7.6m
Net assets per share 45.3p 46.8p 45.4p
----------------------------------------------- -------------- -------------- ------------
1 The interim dividend will be paid on 10 January 2024 to
shareholders on the register at the close of business on 8 December
2023.
2 AuM is defined as the value of funds under management from
which the Group earns fund management revenues, plus the Group's
consolidated net assets.
3 EBITDA is defined as operating profit/(loss) before
exceptional item, depreciation, realised gains/(losses) on the sale
of direct investments, fair value movement in direct investments,
share-based payments charge, amortisation of intangible assets and
movement in fair value of deferred consideration.
4 Adjusted operating profit is defined as EBITDA plus net finance income.
Managed fund movements
-- Third-party funds under management ( " FuM " ) of
c.GBP1,260million (H1 2023: c.GBP773million; FY 2023:
c.GBP1,234million), with no redemptions
o Venture FuM of c.GBP660million (H1 2023: c.GBP611million; FY
2023: c.GBP630million)
-- GBP18.0million successfully raised by the three Northern
Venture Capital Trusts ("VCTs") in April 2023, in addition to
GBP1.4million of shareholder dividend reinvestment inflows
-- GBP15.0million additional allocation under the Northern
Powerhouse Investment Fund Equity, with a further GBP5.1million
allocated to the North East Venture Capital fund mandate
-- One Enterprise Investment Scheme fund ("EIS") raised a total
of GBP5.7million
-- Final dividends totalling GBP9.2million paid out by the three
Northern VCTs
o Debt FuM of c.GBP552million (H1 2023: c.GBP116million; FY 2023
c.GBP556million)
o Private equity FuM of c.GBP48million (H1 2023: c.GBP46million;
FY 2023: c.GBP48million)
Direct investment portfolio movements
-- Direct investment portfolio fair value of GBP142.5million (H1 2023: GBP131.5million; FY 2023: GBP136.6million), up c.4% from 31 March 2023
-- GBP7.5million net invested into eight portfolio companies (H1
2023: GBP6.4million net invested into six portfolio companies)
-- GBP1.6million net fair value decrease in the portfolio during
the six-month period (H1 2023: GBP5.6million increase)
Post period end developments
-- Profitable realisation of the Group's equity holding in
nDreams Limited ("nDreams") in November 2023 for a total
consideration of GBP30.2million; comprising GBP26.4million in cash
and GBP3.8million re-invested into Aonic
-- In the period from 1 April 2020 to 30 September 2023,
including the impact of the nDreams realisation, Mercia has
generated sale related cash receipts from its direct investment
portfolio of c.GBP87million
-- Commencement of a share buyback of up to GBP5.0million,
reflecting strong cash position of the Group and confidence in the
business
-- Netacea Group Limited completed a GBP4.4million funding
round, achieved across two tranches in July and October 2023,
supporting its UK and international growth plans as a leading
provider of defensive AI software
-- GBP5.0million additional allocation from British Business
Bank ("BBB") under the Midlands Engine Investment Proof-of-Concept
Fund
-- The Northern VCTs have received applications totalling
GBP28.3million as of 24 November 2023, as part of their current
fundraise of up to GBP60.0million
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 which is
part of UK law by virtue of the European Union (Withdrawal) Act
2018. Upon publication of this announcement, this inside
information is now considered to be in the public domain.
-Ends-
For further information, please contact:
Mercia Asset Management PLC
Mark Payton, Chief Executive Officer
Martin Glanfield, Chief Financial Officer +44 (0)330 223
www.mercia.co.uk 1430
Canaccord Genuity Limited (NOMAD and Joint +44 (0)20 7523
Broker) 8000
Simon Bridges, Emma Gabriel
+44 (0)20 7496
Singer Capital Markets (Joint Broker) 3000
Harry Gooden, James Moat
+44 (0)20 3727
FTI Consulting 1051
Tom Blackwell, Jenny Boyd
mercia@fticonsulting.com
Analyst briefing
An analyst webcast will be given by Dr Mark Payton, Chief
Executive Officer, Martin Glanfield, Chief Financial Officer, and
Julian Viggars, Chief Investment Officer, at 9.30am today, 28
November 2023. Analysts wishing to register are asked to contact
mercia@fticonsulting.com . An audio webcast of this briefing will
subsequently be available later in the day via Mercia's
website.
Investor presentation
In addition, as part of its continuing commitment to appropriate
and open communication with all shareholders and its wider
stakeholder community, Mercia will provide a live management
presentation and Q&A via the Investor Meet Company ("IMC")
platform at 3.00pm today. Registration details can be accessed
via:
https://www.investormeetcompany.com/mercia-asset-management-plc/register-investor
About Mercia Asset Management PLC
Mercia is a proactive, specialist asset manager focused on
supporting regional SMEs to achieve their growth aspirations.
Mercia provides capital across its four asset classes of venture,
private equity, debt and proprietary capital: the Group's 'Complete
Connected Capital'. The Group initially nurtures businesses via its
third-party funds under management, then over time Mercia can
provide further funding to the most promising companies, by
deploying direct investment follow-on capital from its own balance
sheet.
The Group has a strong UK footprint through its regional
offices, university partnerships and extensive personal networks,
providing it with access to high-quality deal flow.
Mercia Asset Management PLC is quoted on AIM with the EPIC
"MERC".
Chief Executive Officer's Review
Introduction
Mercia's competitive advantage comprises its people, geographic
footprint, long-term investment performance, supportive
stakeholders and broad capital deployment capabilities in the
private markets, which continue to experience a healthy level of
capital availability, in contrast to the public markets. Challenges
in the private markets do exist however and relate to the cyclical
nature of venture investing, based on sector and business stage.
The domestic UK venture market, which accounts for c.59% of
Mercia's assets under management, historically saw annual domestic
growth of c.10% in respect of capital deployment. In 2021 and 2022
this ballooned by over 100%, mainly driven by large, late-stage
venture investments (outside of Mercia's investment focus). An
October 2023 report by HSBC Innovation Banking and Dealroom
highlighted a stabilisation to 2020 levels, with a significant
reduction in later stage deals and larger investment rounds. In
addition, syndicated funding rounds are now more challenging and
taking longer for some sectors, but for the best investment
opportunities with increasing commercial traction, funding remains
available. We anticipate these trends will continue for the
remainder of this financial year and potentially into the next.
Mercia's business model of supporting businesses with relatively
modest capital needs (typically GBP0.5m to GBP20m) in part protects
us from a major Venture correction, as we can often mitigate
syndication risk, via our substantial available pools of managed
fund capital. Nonetheless, we are now taking a more cautionary
approach to direct investing. Reflecting this caution, we have
paused adding new companies to our direct investment portfolio,
although we will continue to support the existing portfolio. In
parallel, we will concentrate on accelerating the growth of our
managed funds' operation, both organically and via very selective
acquisitions, by utilising some of the proceeds from direct asset
realisations, such as the post period end profitable exit from
nDreams.
Strong AuM growth prospects with continued tail winds
At the heart of Mercia's investment approach is diversification
by regions, sectors, stages of businesses and investor types
(retail, public sector and institutional). With an active portfolio
of 539 companies split 255 in venture, 277 in debt and seven in
private equity, Mercia is one of the UK's most active
investors.
During the period under review, Mercia has also solidified its
reputation as a trusted impact investor and partner delivering
connected capital and support across the UK via our wide network of
regional offices. This enables Mercia to continue to scale our
managed funds operation and deal flow opportunities. As we look
ahead, we see potential growth opportunities across all three pools
of the private funds capital that we manage: retail (via EIS and
the VCTs), institutional regional pension funds that typically
invest via their impact allocations and public sector
(predominantly via the British Business Bank).
Overview of H1 FY24
The first half of FY24 underscores the profitable sustainability
of Mercia's growing third-party managed funds operation. We also
benefit from the fact that many of our funds are structured on a
long-term basis, giving us confidence in the 'stickiness' of our
FuM and their associated revenues - no redemptions were experienced
in the period, as none of our managed funds are 'open-ended'.
Mercia has delivered robust trading results across the Group for
the first six months of the current financial year. We achieved
EBITDA of GBP2.8million (H1 2023: GBP2.1million) from revenues of
GBP15.0million (H1 2023: GBP12.2million), equating to an EBITDA
margin of 18.4% (H1 2023: 17.1%). Last year's acquisition, Frontier
Development Capital Limited, is continuing to perform well and is
fully integrated within Mercia. Our continued growth in cash
generative profitable trading supports our declaration of an
interim dividend of 0.35 pence per share, an increase of c.6% on
the prior year's interim dividend of 0.33 pence per share and the
commencement of a share buyback.
During the period, the Group invested c.GBP111million of capital
from both the balance sheet and its managed funds into 83
companies, 40 of which were new to Mercia. It is pleasing to report
that c.GBP52million in investment realisations was also achieved
from 19 exits.
Progress towards 'Mercia 20:20'
In April 2021, Mercia set out its three-year 20:20 vision aiming
to grow, on average, AuM by 20% per annum from c.GBP959million to
c.GBP1.6billion, and to achieve average Profit Before Taxation
("PBT") of GBP20million per annum.
AuM growth
We have continued to make progress against the average growth
target of 20% per annum as we look to reach GBP1.6billion of AuM by
31 March 2024. As at 30 September 2023, Mercia has c.GBP1.5billion
of AuM (of which c.GBP1.3billion is via third-party managed funds)
which have grown over the six-month period by 1.7%, via retail net
inflows totalling GBP25.0million and public sector net inflows of
GBP20.1million . We remain focused on achieving the GBP1.6billion
AuM target by year end. More details on the net inflows and the
spread of Mercia's AuM can be read in Julian Viggars' CIO
review.
PBT growth
This target comprises two main drivers; adjusted operating
profit, which is largely driven by Mercia's profitable third-party
fund management operation, and fair value movements and/or
profitable realisations stemming from the direct investment
portfolio. In respect of the latter, given the current economic and
technology sector climate, we have decided to make provisions
against two of our direct investment portfolio assets; Impression
Technologies Limited and Eyoto Group Limited. The rest of the
direct investment portfolio continues to show positive momentum,
supported post period end by the profitable exit from nDreams,
which was sold for an enterprise value 17.5% higher that its
carrying value as at 31 March 2023. The overall direct investment
portfolio fair value movement for the period is a reduction of
GBP1.6million.
In the period from 1 April 2020 to 30 September 2023, including
the impact of the nDreams realisation, Mercia has generated sale
related cash receipts from its direct investment portfolio of
c.GBP87million. Full commentary on the direct investment portfolio
and the broader Group's investment performance can also be found in
the Julian Viggars' CIO review.
With six months of Mercia's current three-year strategic plan
still to run, the cumulative PBT stands at GBP31.2million. Given
the prevailing investment climate, particularly for technology
investing, it is unlikely that the cumulative three-year target of
GBP60million will be achieved.
Fund raising in H2
Mercia is currently engaged in fundraising initiatives across
all three of its discrete pools of private capital. We anticipate
reporting on further organic growth in our FuM by this financial
year end.
Commitment to impactful investing
Our impact investment philosophy is deeply rooted in sustainable
financial growth and responsible investment. We are signatories to
the United Nations supported Principles for Responsible Investing.
In the first half of the year, we launched several initiatives that
highlight our commitment to creating a more balanced
entrepreneurial ecosystem. Our 'Rise & Thrive' programme
demonstrates Mercia's dedication to diversity, equity and
inclusion. Through a series of workshops funded by Mercia, we
support women entrepreneurs, aiming to create a more level playing
field in investment. Additionally, we offer up to four half days
per year for each Mercia employee to contribute to charitable
causes, reflecting our community-oriented ethos. Since April,
Mercia team members have attended five external events across the
UK as volunteers, and separately have raised c.GBP45,000 as part of
external fundraising teams for a range of good causes, including
our Mercia-nominated charity, Cancer Research UK.
Our team and shared values
Mercia benefits from wide ranging equity investing and lending
capabilities, unified by our shared ethos and values. In the first
half of the year, we welcomed four new team members to Mercia,
resulting in our current full time equivalent headcount being 140
employees. 40% of our Group are women - testament to our commitment
to the Investment in Women Code. Within our investment team, women
represent 33%, compared to the industry average of 25%, as reported
in the latest BVCA statistics. We also remain committed to
investing in diverse senior talent and systems to strengthen
Mercia's operational capabilities and to sustain the Group's
long-term growth. This commitment is evident with the addition of
Jocelyne Bath to the Executive team as Chief Operating Officer, who
in turn will focus on productivity and efficiency as we continue to
scale Mercia.
Outlook
There currently exists strong growth potential in Mercia's
managed funds' operation across all three pools of private capital.
With our focus on scaling the profitable delivery of our fund
management operations, we anticipate continued momentum through the
remainder of the current financial year and beyond.
Consistent with recent years, we continue to build a sustainable
growing business whilst maintaining a strong cash position at all
times. As at 30 September 2023, Mercia had Group-wide unrestricted
cash of c.GBP383million, including GBP36.5million of Group cash and
short-term liquidity investments. Following the recent profitable
sale of nDreams, Mercia's cash position has increased to
c.GBP60million. Alongside our progressive dividend policy, it has
always been one of our ambitions to be in a position to return
capital to shareholders, if we felt that we had sufficient cash
from direct investment exits to do so. The successful nDreams exit
is that trigger point and we are therefore pleased to announce an
up to GBP5.0million share buyback, full details of which are given
in our share buyback announcement this morning.
Given the heightened emphasis by fund investors and the UK
Government on regional businesses and impact investment, we are
confident that Mercia is well placed for continued growth for the
foreseeable future.
With a fully aligned team located from Bristol to Newcastle,
Mercia prides itself on being an enduring partner to entrepreneurs
and trusted to deliver for all our stakeholders - time and time
again. I remain sincerely grateful to all at Mercia for their
continued efforts in making a positive difference and to our
supportive fund investors and shareholders, without whom Mercia
would not exist.
Dr Mark Payton
Chief Executive Officer
Chief Investment Officer's review
Investment activity
During the six months to 30 September 2023, we invested
c.GBP111million into 83 businesses across our funds and balance
sheet, including 40 new companies. We also achieved c.GBP52million
in investment realisations from 19 exits, as referenced below.
Overall, AuM increased 1.7% to c.GBP1.5billion, with no
redemptions. At the end of the period, we had c.GBP383million of
liquidity to support our future investment activities.
Investment realisations
In the six-month period to 30 September 2023, our investors
benefitted from 19 full and partial equity funds exits (H1 2023:
14). These realised c.GBP52million at a combined return of 1.5x.
The standout exit was Evotix, which generated a 4.6x return for our
VCT investors. The figures also include the exit from ParkCloud
Holdings from within our private equity portfolio generating a 1.6x
return, which is pleasing for a business that was particularly
impacted for its airport parking services during COVID-19.
Post period end, we achieved the profitable realisation of the
Group's direct equity holding in nDreams. In the period from 1
April 2020 to 30 September 2023, including the impact of the
nDreams realisation, Mercia has generated sale related cash
receipts from its direct investment portfolio of
c.GBP87million.
Proprietary capital
As at 30 September 2023, our direct investment portfolio was
fair valued at GBP142.5million (H1 2023: GBP131.5million; FY 2023:
GBP136.6million) with 22 active companies (H1 2023: 22; FY 2023:
21).
Including converted loan interest, we invested GBP7.5million net
into the direct investment portfolio in the first six months of the
current financial year (H1 2023: GBP6.4million). Our investment
efforts were focused on supporting our existing portfolio with
further investment into Voxpopme, Netacea, VirtTrade (trading as
Avid Games), Impression Technologies, Ton UK (trading as
Intelligent Positioning) and Eyoto.
The table below lists Mercia's top 20 direct investments by fair
value as at 30 September 2023, including the net cash invested,
fair value movement and the fully diluted equity percentage
held.
Net Net cash Fair value Net
investment invested movement investment Percentage
value as six months six months value as held as
at to to at at
Year of 1 April 30 September 30 September 30 September 30 September
first 2023 2023 2023 2023 2023
direct investment GBP'000 GBP'000 GBP'000 GBP'000 %
-------------------- ------------------- ------------ -------------- ------------- -------------- --------------
nDreams Ltd 2014 25,761 - 4,450 30,211 33.2
Voxpopme Ltd 2018 11,015 861 3,973 15,849 20.4
Netacea Group Ltd 2022 11,693 1,500 - 13,193 24.1
VirtTrade Ltd * 2015 10,082 1,530 - 11,612 62.6
Medherant Ltd 2016 10,934 - - 10,934 38.4
Warwick Acoustics
Ltd 2014 9,695 - - 9,695 40.3
Invincibles Studio
Ltd 2015 8,697 - (116) 8,581 35.5
Impression
Technologies
Ltd 2015 15,260 1,198 (8,909) 7,549 65.1
Ton UK Ltd ** 2015 5,382 746 455 6,583 40.4
Locate Bio Ltd 2018 4,858 - - 4,858 18.1
Eyoto Group Ltd 2017 5,487 1,527 (2,322) 4,692 24.7
Axis Spine
Technologies
Ltd 2022 3,000 - - 3,000 9.4
sureCore Ltd 2016 2,417 - - 2,417 22.0
Nova Pangaea
(Holdings)
Ltd 2022 2,250 - - 2,250 -
Forensic Analytics
Ltd 2021 1,750 - 344 2,094 7.4
Akamis Bio Ltd 2015 1,780 - - 1,780 1.3
Pimberly Ltd 2021 1,375 - 332 1,707 5.7
MIP Discovery Ltd 2020 1,449 - - 1,449 10.2
MyHealthChecked PLC 2016 969 - (153) 816 13.1
Uniphy Ltd 2022 550 40 137 727 4.5
Other direct
investments n/a 2,146 121 190 2,457 n/a
-------------------- ------------------- ------------ -------------- ------------- -------------- --------------
Total 136,550 7,523 (1,619) 142,454 n/a
-------------------- ------------------- ------------ -------------- ------------- -------------- --------------
* Trading as Avid Games
** Trading as Intelligent Positioning
The period under review saw positive fair value movements of
GBP10.2million across eight assets offset by downward movements of
GBP11.8million on four assets, giving a net fair value decrease of
GBP1.6million. Significant upward movements in nDreams and
Voxpopme, alongside smaller uplifts in software businesses
Pimberley, Forensic Analytics and Intelligent Positioning, were
balanced principally by reduced enterprise values at Impression
Technologies and Eyoto.
nDreams was sold post period end to Aonic AB, the diversified
video gaming investment group, which had been a co-investor. The
17.5% uplift in fair value of GBP4.4million at 30 September 2023
reflects the value of Mercia's direct investment at exit in
November 2023. Mercia held a 33.2% fully diluted direct stake in
nDreams, resulting in total consideration of GBP30.2million, split
GBP26.4million in cash proceeds and GBP3.8million re-invested into
Aonic itself. This exit results in a 2.7x return on invested
capital and an 18.4% IRR.
The structure of Voxpopme's April 2023 funding round favourably
improved our holding position and, alongside solid trading,
resulted in a GBP4.0million uplift.
Impression Technologies has been running a dual sale/fundraising
process; the preferred buyer, whose offer was at a level that
supported the 31 March 2023 carrying value, has recently asked for
a lengthy extension to the sale process, which has been rejected.
We have therefore impaired the value to reflect increased
uncertainty for now.
Eyoto had been in consultation with the US Food and Drug
Administration ("FDA") around approval for its slit lamp product,
with customer orders awaiting approval; unfortunately, additional
trials are now required delaying the US launch by a year. In the
near term, the company intends to refocus its efforts on Europe
where it already has approval. We have therefore recognised this
setback in an impairment to its carrying value.
Our top 10 direct investment holdings represent c.84% of the
total value of our portfolio at 30 September 2023. There has been
steady progress across a number of our larger investments by fair
value, as summarised in the sectorial review below.
Digital Entertainment ; c.36% by value of the portfolio at 30
September 2023
VirtTrade: 62.6% fully diluted direct investment stake with a
further 2.6% fully diluted stake held by Mercia's managed
funds.
VirtTrade's mobile game ' CUE Cards' (Cards, the Universe and
Everything) launched in December 2019 and is a card collecting and
battling game. It now has over 250,000 regular monthly active users
from territories across the globe and is managing a steady growth
profile.
Invincibles Studio: 35.5% fully diluted direct investment stake
with a further 13.2% fully diluted stake held by Mercia's managed
funds.
The team at Invincibles Studio continue to make good progress.
The latest iteration of its Soccer Manager 2024 game, launched in
late September, shows record user numbers, engagement time per user
and revenues. Its two new games 'Ultimate Soccer League' and
'Worlds XI' will be launched during 2024, after significant
upgrades to the visual engine that controls player movement
graphics. It has renewed its licence deal with Arsenal Football
Club manager Mikel Arteta as the face of the game and added the
social media rights to Manchester City, alongside existing FIFPro
licences.
Software; c.28% by value of the portfolio at 30 September
2023
Voxpopme: 20.4 % fully diluted direct investment stake with a
further 13.5% fully diluted stake held by Mercia's managed
funds.
Voxpopme is a software business based jointly in Birmingham, UK
and Colorado, USA that provides video analytics software to firms
in the market research, customer experience and the recruitment and
HR markets. In the early part of 2023, the company experienced some
levels of customer churn, however this has since reversed, and the
company has grown to c.$9million annual recurring revenue.
Netacea: 24.1% fully diluted direct investment stake with a
further 26.5% fully diluted stake held by Mercia's managed
funds.
Manchester-based Netacea sells enterprise server-side bot
management solutions that protect websites, mobile apps and APIs
from automated threats, using an intelligent detection engine. The
agentless technology focuses on understanding the traffic's intent
rather than just distinguishing between human and malicious bots.
The business has raised further growth capital and also
strengthened its leadership.
Deep Technology ("Deep Tech"); c.16% by value of the portfolio
at 30 September 2023
Warwick Acoustics: 40.3% fully diluted direct investment stake
with a further 1.3% fully diluted stake held by Mercia's managed
funds.
Midlands-based Warwick Acoustics creates highly innovative audio
products for both the automotive and the high-end personal and
studio headphone market. Commercial traction has been impressive,
with a first original equipment manufacturer ("OEM") nomination
signed and ongoing projects with other global automotive OEMs.
Impression Technologies ("ITL"): 65.1% fully diluted direct
investment stake with a further 0.9% fully diluted stake held by
Mercia's managed funds.
Since 2016, ITL has been advancing its exclusive aluminium
lightweight technology, HFQ(TM), supported by its own pressing
facility in Coventry. In collaboration with FEV Group GmbH, a
leading automotive technology group, ITL has developed an
innovative exoskeleton battery box design. This minimises the need
for internal support structures in the battery box, thereby
enlarging the available space for battery cells. Achievable solely
through HFQ technology, this concept was unveiled at the HFQ
Partner Network Conference in September 2023 and later showcased at
the Euro Body Car Conference in October. Additionally, ITL has
recently ventured into the aerospace sector with its first
licensing agreement. The company is now shifting its focus towards
a lower-burn manufacturing strategy.
Life Sciences; c.20% by value of the portfolio at 30 September
2023
Medherant: 38.4% fully diluted direct investment stake with a
further 15.3% fully diluted stake held by Mercia's managed
funds.
Midlands-based Medherant is a University of Warwick spinout
commercialising a platform of proprietary patch adhesive technology
for medical applications. The company's leading external
collaboration has successfully cleared the initial two evaluation
stages, leading to expanded research and pre-clinical development
work. This product represents a potential multi-billion market
opportunity. Medherant's other in-house development program is also
advancing, with trials underway aiming for a potential product
launch in 2024. The management team has been bolstered by the
appointment of a new Medical Director and a Non-executive
Director.
Locate Bio: 18.1% fully diluted direct investment stake with a
further 24.6% fully diluted stake held by Mercia's managed
funds.
Nottingham-based Locate Bio is developing a range of
OrthoBiologics. Its products are designed to aid orthopaedic
surgeons to accelerate the natural repair of bone and cartilage.
The company reports continued good progress, having completed all
animal trials with positive results for its lead bone graft
solution. Additionally, Locate Bio has engaged with the FDA and
finalised the protocol for a pilot clinical study for which ethics'
approval has been submitted in Australia. Currently, the company is
concentrating on completing all necessary tests for FDA submission
and is in the process of recruiting Clinical Investigators for a 40
patient trial in Australia, with three already in the contracting
stage.
Assets under management
AuM increased by 1.7% to c.GBP1.5billion, with c.GBP45million of
new capital raised by our Enterprise Investment Schemes ("EIS") and
Northern Venture Capital Trusts ("VCT") alongside top-ups to
existing regional funds during the six-month period. Valuations
across the business have remained largely flat, whilst
c.GBP15million of distributions have been returned to fund
investors and dividends paid to VCT shareholders.
Post
period
1 April Investor 30 September end
2023 inflows Performance Distributions 2023 inflows
Asset class GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
--------------------- -------- --------- ------------ -------------- ------------- ---------
Venture 630 45 (3) (12) 660 10
Debt 556 - (1) (3) 552 -
Private equity 48 - - - 48 -
Total FuM 1,234 45 (4) (15) 1,260 10
Proprietary capital 203 - 1 (2) 202 -
--------------------- -------- --------- ------------ -------------- ------------- ---------
Total AuM 1,437 45 (3) (17) 1,462 10
--------------------- -------- --------- ------------ -------------- ------------- ---------
Third-party managed funds
As at 30 September 2023, we were managing c.GBP1.3billion of
third-party funds (H1 2023: c.GBP773million; FY 2023:
c.GBP1.2billion). Across those funds we had c.GBP346million of
liquidity (H1 2023: c.GBP240million; FY 2023: c.GBP341million),
which enables us to fully support our portfolio companies and
transact new deals in the future.
In April 2023, we added a further c.GBP25million of organic FuM
following successful EIS and Northern VCT fundraises, and we have
received a further GBP15.0million allocation from the British
Business Bank in relation to our Northern Powerhouse Investment
Fund, as well as an additional GBP5.1million allocation under our
North East Venture Capital fund mandate.
During the six-month period ended 30 September 2023, we invested
c.GBP103million across the multiple funds which we manage as
follows:
FuM
30 September Companies Amount Company
2023 in portfolio invested exits
Asset class GBP'm No. GBP'm No.
------------------ -------------- --------------- ----------- ----------
EIS 97 84 17.2 4
VCT 336 58 15.0 4
Regional venture 227 88 16.6 10
Debt 552 277 54.0 23
Private equity 48 7 0.4 1
Totals 1,260 514 103.2 42
------------------ -------------- --------------- ----------- ----------
Managed funds' portfolios
Venture
The 18 full and partial exits returned GBP44.7million in the six
months to 30 September 2023, at a combined return of 1.4x. The
standout exit was Evotix, which we sold in June to SAI360 Inc,
generating proceeds of GBP35.6million, equating to a return of 4.6x
for our VCT investors.
Debt
Mercia's northern Debt funds' team saw an increase in activity
during the period, supporting 30 businesses, lending a total of
GBP11.8million. We continue to support small and medium-sized
enterprises by deploying the Government-backed Recovery Loan Scheme
via the Northern Powerhouse Investment Fund. Mercia SME Loans has
also benefitted from an increase in the volume of transactions
(management buy outs, acquisitions) taking place.
Frontier Development Capital continues to perform well , lending
GBP42.2million to 8 businesses.
Private equity ("PE")
The value of our PE funds increased marginally during the six
months to 30 September 2023, with strong trading seen across two
assets, iMail and UK Landscapes, plus the exit from ParkCloud
Holdings. We expect to see further realisations during 2024.
Summary
Our progress continues with c.GBP111million invested in the
first half, matched favourably with c.GBP52million of realisations
across our equity portfolios. The post period end realisation of
nDreams is a fantastic result for us, transacted at a 17.5% uplift
to the 31 March 2023 carrying value, returning GBP26.4million of
cash to the Group's balance sheet whilst enabling us to continue to
have an interest in the ongoing success of the company and the
augmented reality ("AR")/Virtual Reality ("VR") market, with
GBP3.8million of the total proceeds reinvested into an equity
holding in Aonic itself, which we believe has excellent prospects
with its strong position in VR and AR. We look forward to nDreams
continuing its exciting journey within a larger gaming group and
wish CEO Patrick O'Luanaigh and his team continuing success.
We are clearly disappointed with the downward fair value
movements that we felt were necessary at Impression Technologies
and Eyoto, and these do negatively impact the achievement of our
'Mercia 20:20' profit before tax target. However, seen in the
context of a very challenging external environment since the start
of 2022, our portfolio is holding up well. Overall, our direct
asset portfolio is in good health and we have ample liquidity to
support it.
The following table summarises our proprietary capital
performance since 1 April 2020, including the post period end sale
of nDreams. With total sale related cash receipts of
GBP86.8million, from companies such as OXGENE(TM), Faradion,
Intechnica and nDreams, c.50% greater than the total net cash
invested and with cumulative unrealised fair value gains also
comfortably ahead of realised and unrealised fair value losses
across our portfolio, I believe we continue to demonstrate the
significant progress made and the potential value contained
therein.
Proprietary capital
performance
1 April 2020 to 30
Sept 2023 * GBP'm
--------------------------- -----------
Sale related cash receipts 86.8
Net cash invested ** (57.6)
Realised gains 36.4
Realised losses (5.3)
Unrealised fair value
gains *** 42.6
Unrealised fair value
losses *** (23.3)
--------------------------- -----------
* Including the post period end impact of the nDreams realisation.
** Excluding convertible loan interest reinvested into an equity holding.
*** Excluding the impact of the Intechnica and Netacea demerger
in FY23.
It appears that as a global society we are rolling from one
crisis to the next, with the events in Israel and Palestine just
recently being the latest. This political and economic uncertainty
is unnerving and we are seeing the effects, as both individuals and
corporates are tending to make more prudent investment decisions
involving less risk. We have asked our investees to stay focused on
their own strategies, with the benefit of sufficient cash reserves
and support, and focus on what they can control, running their
businesses in the most efficient manner. This is what we are doing
at Mercia. As always, I would like to thank all our dedicated staff
for their efforts during the past six months.
Julian Viggars
Chief Investment Officer
Chief Financial Officer's review
Overall financial performance
From a fund management profitability perspective, during the six
months to 30 September 2023, Mercia was able to maintain its prior
year momentum and absorb the inflationary challenges affecting the
UK economy in general, and more specifically the financial services
sector.
This is the first reporting period fully incorporating the
results of FDC since its acquisition on 5 December 2022. The
company is fully integrated into the Group and continuing to
perform well.
Interim dividend
The Board adopted Mercia's progressive dividend policy in
December 2020, and since then has announced interim dividends of
0.10 pence per share in December 2020, 0.30 pence per share in
December 2021 and 0.33 pence per share in December 2022.
Given the Group's twin sources of profitability and cash inflow,
being regionally focused proactive specialist asset management,
plus direct investment with periodic cash realisations, the Group's
dividend policy does not need to be anchored to one or other source
of liquidity, hence the Board's intention to grow total dividends
year on year.
The continuing positive overall trajectory of the Group has
enabled Mercia's Board to declare an interim dividend of 0.35 pence
per share (H1 2023: 0.33 pence per share). T he interim dividend
will be paid on 10 January 2024 to shareholders on the register at
close of business on 8 December 2023, with the total dividend
payable being GBP1,563,000 (H1 2023: GBP1,452,500).
Share buyback
Although relatively recent share buybacks in the specialist
asset management sector have done little to positively affect share
price performance and a resultant reduction in discounts to net
asset value, Mercia has always said that if it enjoyed a
significant cash realisation it would consider how best to
distribute a proportion of those proceeds to shareholders. Given
that as at the date of this announcement, following the post period
end realisation of its direct investment in nDreams Limited, the
Group now has significant cash balances totalling c.GBP60million
and no debt, Mercia is pleased to announce up to a GBP5.0million
share buyback.
Alternative performance measures ("APM")
The Directors believe that the reporting of both EBITDA and
adjusted operating profit assist in providing insightful measures
of operating performance for businesses such as Mercia, and are
important APMs of interest to both current and potential
shareholders.
EBITDA is defined as operating profit/(loss) before exceptional
item, depreciation, realised gains/(losses) on the sale of direct
investments, fair value movement in direct investments, share-based
payments charge, amortisation of intangible assets and movement in
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.
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
------------------------------------------------- ------------- ------------- ---------
Revenue 15,040 12,181 25,881
Administrative expenses (12,266) (10,102) (20,692)
------------------------------------------------- ------------- ------------- ---------
EBITDA 2,774 2, 079 5,189
Net finance income 2,690 1,480 2,397
------------------------------------------------- ------------- ------------- ---------
Adjusted operating profit 5,464 3,559 7,586
Depreciation (236) (120) (309)
Net finance income (2,690) (1,480) (2,397)
Realised loss on sale of direct investment - - (849)
Fair value movement in direct investments (1,619) 5,595 1,201
Share-based payments charge (509) (592) (1,049)
Amortisation of intangible assets (1,495) (1,017) (2,337)
Movement in fair value of deferred consideration (218) - (1,462)
------------------------------------------------- ------------- ------------- ---------
Operating (loss)/profit before exceptional
item (1,303) 5,945 384
Exceptional item - - (372)
------------------------------------------------- ------------- ------------- ---------
Operating (loss)/profit (1,303) 5,945 12
Net finance income 2,690 1,480 2,397
------------------------------------------------- ------------- ------------- ---------
Profit before taxation 1,387 7,425 2,409
Taxation (38) (422) 427
------------------------------------------------- ------------- ------------- ---------
Profit and total comprehensive income for
the period 1,349 7,003 2,836
------------------------------------------------- ------------- ------------- ---------
A reconciliation of these interim results prepared in accordance
with International Financial Reporting Standards ("IFRS") to those
presented on an APM basis are as follows:
Six months ended 30 September
2023
--------------------------------------------
IFRS as reported Depreciation APM basis(1)
GBP'000 GBP'000 GBP'000
------------------------ ---------------- ------------ ------------
Administrative expenses (12,502) 236 (12,266)
Depreciation - (236) (236)
------------------------ ---------------- ------------ ------------
Six months ended 30 September 2022
--------------------------------------------
IFRS as reported Depreciation APM basis(1)
GBP'000 GBP'000 GBP'000
------------------------ ---------------- ------------ ------------
Administrative expenses (10,222) 120 (10,102)
Depreciation - (120) (120)
------------------------ ---------------- ------------ ------------
Year ended 31 March 2023
--------------------------------------------
IFRS as reported Depreciation APM basis(1)
GBP'000 GBP'000 GBP'000
------------------------ ---------------- ------------ ------------
Administrative expenses (21,001) 309 (20,692)
Depreciation - (309) (309)
------------------------ ---------------- ------------ ------------
Revenue
Revenue increased 23.5% to GBP15,040,000 (H1 2023:
GBP12,181,000) and comprised fund management related fees, initial
management fees from investment rounds, investment director
monitoring fees, sundry business services income and VCT share
offer fees.
Administrative expenses (1)
Administrative expenses, excluding depreciation and share-based
payments charge, increased 21.4% to GBP12,266,000 (H1 2023:
GBP10,102,000) and comprised predominantly staff-related, office,
marketing, professional adviser and s hare offer costs incurred as
part of VCT share offers.
Mercia anticipates that the financial benefits of operational
leverage will continue to be realised as its funds under management
increase, by both its future organic and inorganic initiatives.
EBITDA
EBITDA increased 33.4% to GBP2,774,000 (H1 2023: GBP2,079,000),
equating to an EBITDA margin of 18.4% (H1 2023: 17.1%),
demonstrating the Group's increasing economies of scale, including
a positive contribution from FDC, despite the inflationary backdrop
during the reporting period.
Net finance income
Total gross finance income of GBP2,720,000 (H1 2023:
GBP1,488,000) arose from a material increase in interest receivable
on cash deposits (as shown in note 8) following continued Bank of
England base rate rises during the period, together with the
crystallisation of convertible loan interest within the direct
portfolio. Finance costs of GBP30,000 (H1 2023: GBP8,000) comprised
interest payable on office leases and the Group's staff electric
car scheme.
Fair value movement in direct investments
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
----------------------------------------------- ------------- ------------- ---------
Investment movements excluding cash invested
and realisations:
Unrealised gains on the revaluation of direct
investments* 10,171 7,578 11,324
Unrealised losses on the revaluation of direct
investments* (11,790) (1,983) (10,123)
----------------------------------------------- ------------- ------------- ---------
Net fair value movement in direct investments (1,619) 5,595 1,201
----------------------------------------------- ------------- ------------- ---------
* Excluding the impact of the demerger of Netacea Limited from
Intechnica Holdings Limited in the six months ended 30 September
2022 and year ended 31 March 2023.
The net fair value movement in direct investments resulted in a
GBP1,619,000 decrease (H1 2023: GBP5,595,000 increase) and as at 30
September 2023, the fair value of the Group's direct investment
portfolio was GBP142,454,000 (H1 2023: GBP131,545,000; FY 2023:
GBP136,550,000).
Unrealised fair value gains arose in eight (H1 2023: four*) of
the Group's direct investments. The largest fair value gain was in
respect of nDreams Limited, which accounted for GBP4,450,000 of the
total (H1 2023: GBP4,003,000 fair value gain in respect of
VirtTrade Limited).
There were four (H1 2023: three*) fair value decreases, the
largest being GBP8,909,000 which arose in respect of Impression
Technologies Limited (H1 2023: GBP883,000 fair value decrease in
Edge Case Games Limited).
Share-based payments charge
The GBP509,000 non-cash charge (H1 2023: GBP592,000) arises from
the total number of issued and vested share options held by all
employees throughout the Group, ranging from 28 January 2020 to 30
September 2023.
Amortisation of intangible assets
The amortisation charge for the period of GBP1,495,000 (H1 2023:
GBP1,017,000) 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 is subject to a number
of targets being met. Movement in the fair value of this contingent
deferred consideration during the six-month period to 30 September
2023 has resulted in a charge to the income statement of
GBP218,000.
Taxation
The components of the Group's tax charge are shown in note 9.
The overall tax charge for the period comprises a corporation tax
charge on taxable profits, offset by the continued unwinding of the
deferred tax liability in respect of the intangible assets arising
on the acquisition of FDC and the VCT fund management business.
Profit and total comprehensive income for the period
The adjusted operating profit, less the net fair value decrease
for the period and other non-cash charges, lead to a consolidated
total comprehensive income of GBP1,349,000 (H1 2023: GBP7,003,000).
This has resulted in basic earnings per Ordinary share of 0.30
pence (H1 2023: 1.59 pence).
Summarised statement of financial position and cash flows
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ------------- ------------- ---------
Goodwill and intangible assets 37,556 31,338 39,051
Direct investment portfolio 142,454 131,545 136,550
Other non-current assets, trade and other receivables 3,497 1,626 4,751
Cash and short-term liquidity investments 36,482 56,112 37,834
------------------------------------------------------ ------------- ------------- ---------
Total assets 219,989 220,621 218,186
Trade, other payables and lease liabilities (10,165) (8,092) (7,720)
Deferred consideration (3,223) (2,869) (3,005)
Deferred taxation (4,168) (3,676) (4,540)
------------------------------------------------------ ------------- ------------- ---------
Total liabilities (17,556) (14,637) (15,265)
------------------------------------------------------ ------------- ------------- ---------
Net assets 202,433 205,984 202,921
------------------------------------------------------ ------------- ------------- ---------
Net assets per share (pence) ** 45.3p 46.8p 45.4p
------------------------------------------------------ ------------- ------------- ---------
** 446,679,523 Ordinary shares were in issue as at 30 September
2023 and used as the denominator for calculating net assets per
share as at 30 September 2023. 446,581,202 and 440,109,707 Ordinary
shares were in issue as at 31 March 2023 and 30 September 2022, and
therefore used as the denominator for calculating the respective
net assets per share.
The reduction in net assets per share of 0.1 pence from 31 March
2023 to 30 September 2023 arises from recognition of the FY23 final
dividend of 0.53 pence per share, approved at the Group's AGM on 21
September 2023, partially offset by the profit and total
comprehensive income, less the share-based payment charge, for the
six-month period.
Intangible assets
The Group's intangible assets consist of goodwill and the
intangible assets recognised on the acquisition of FDC and the VCT
fund management business.
Direct investment portfolio
During the period, Mercia's direct investment portfolio grew
from GBP136,550,000 as at 1 April 2023 (H1 2023: GBP119,558,000 as
at 1 April 2022) to GBP142,454,000 as at 30 September 2023 (H1
2023: GBP131,545,000 as at 30 September 2022), a c.4% increase (H1
2023: c.10% increase).
The Group invested GBP7,523,000 net (H1 2023: GBP6,403,000 net)
into seven existing and one new direct investment (H1 2023: five
existing and one new direct investment), with the top 20 direct
investments representing 98.3% of the total direct investment
portfolio value (H1 2023: 97.4%; FY 2023: 98.4%).
Cash, cash equivalents and short-term liquidity investments
At the period end, Mercia had cash, cash equivalents and
short-term liquidity totalling GBP36,482,000 (H1 2023:
GBP56,112,000; FY 2023: GBP37,834,000). This is comprised of cash
and cash equivalents of GBP36,198,000 (H1 2023: GBP50,864,000; FY
2023: GBP37,555,000) and short-term liquidity investments of
GBP284,000 (H1 2023: GBP5,248,000; FY 2023: GBP279,000).
The Group continues to have limited working capital needs due to
the nature of its business and during the six-month period
generated operating cash inflow of GBP3.5million (H1 2023:
GBP0.5million inflow).
As at 30 September 2023, the Group's cash, cash equivalents and
short-term liquidity investments were spread across four leading
United Kingdom banks and a BlackRock Sterling money market fund,
earning an average overall yield by period end of c.5%.
The summarised movements in the Group's cash and cash
equivalents during the period are shown below.
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------------- ------------- ---------
Opening cash and cash equivalents 37,555 56,049 56,049
Cash generated from operating activities 3,533 544 3,019
Corporation tax paid - (705) (1,819)
Net cash used in direct investment activities (5, 312) (5,021) (14,930)
Acquisition of Frontier Development Capital
Limited - - (6,951)
Cash acquired with Frontier Development Capital
Limited - - 2,882
Purchase of VCT fund management business (deferred
consideration) - - (2,100)
Cash inflow from other investing activities 646 84 5,327
Net cash used in financing activities (224) (87) (3,922)
--------------------------------------------------- ------------- ------------- ---------
Closing cash and cash equivalents 36,198 50,864 37,555
--------------------------------------------------- ------------- ------------- ---------
Outlook
Whilst the impairment of Mercia's direct investment in
Impression Technologies, following its recently aborted sale, is
frustrating, the successful exit from nDreams above carrying value,
aptly demonstrates the ups and downs of venture investing. Overall
however, since the advent of COVID-19 in March 2020, Mercia has
realised cash proceeds from direct investment disposals of
GBP86.8million, compared to realised losses totalling
GBP5.3million.
The profitability of the Group's fund management operations,
together with opportunities for future growth, underpin the Group's
progressive dividend policy, whilst the recent significant cash
realisation of its direct investment in nDreams has swelled the
Group's cash balances to c.GBP60million post period end. This
balance, representing c.30% of the Group's current net asset value,
and c.49% of its current market capitalisation, now enables the
Group to offer shareholders a managed reduction in their
shareholding should they so wish, via a share buyback of up to
GBP5.0million.
The remainder of the Group's cash will be primarily directed
towards further growth opportunities in its fund management
operations, whilst continuing to support its existing direct
investment portfolio through to further cash exits.
Overall, Mercia has never been financially stronger and for this
we remain grateful to our excellent staff for their continuing
efforts and our many supportive stakeholders. Mercia looks forward
to the remainder of the current financial year from a debt-free
position of considerable financial strength, coupled with
continuing growth prospects for its profitable fund management
operations.
Martin Glanfield
Chief Financial Officer
Summary Financial Information
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2023
Audited
Unaudited Unaudited Year
Six months ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
Note GBP'000 GBP'000 GBP'000
Revenue 5 15,040 12,181 25,881
----------------------------------------------------- ---- ----------------- ----------------- ---------
Administrative expenses 7 (12,502) (10,222) (21,001)
Realised loss on sale of direct investment - - (849)
Fair value movement in direct investments 12 (1,619) 5,595 1,201
Share-based payments charge (509) (592) (1,049)
Amortisation of intangible assets (1,495) (1,017) (2,337)
Movement in fair value of deferred consideration (218) - (1,462)
----------------------------------------------------- ---- ----------------- ----------------- ---------
Operating (loss)/profit before exceptional item (1,303) 5,945 384
Exceptional item - - (372)
----------------------------------------------------- ---- ----------------- ----------------- ---------
Operating (loss)/profit (1,303) 5,945 12
Finance income 8 2,720 1,488 2,428
Finance expense (30) (8) (31)
----------------------------------------------------- ---- ----------------- ----------------- ---------
Profit before taxation 1,387 7,425 2,409
Taxation 9 (38) (422) 427
----------------------------------------------------- ---- ----------------- ----------------- ---------
Profit and total comprehensive income for the period 1,349 7,003 2,836
----------------------------------------------------- ---- ----------------- ----------------- ---------
Basic earnings per Ordinary share (pence) 10 0.30 1.59 0.64
Diluted earnings per Ordinary share (pence) 10 0.30 1.57 0.63
----------------------------------------------------- ---- ----------------- ----------------- ---------
All results derive from continuing operations.
Condensed consolidated statement of financial position
As at 30 September 2023
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2023 2022 2023
Note GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 20,892 16,642 20,892
Intangible assets 16,664 14,696 18,159
Property, plant and equipment 137 101 122
Right-of-use assets 790 367 842
Investments 12 142,454 131,545 136,550
--------------------------------- ---- ------------- ------------- ---------
Total non-current assets 180,937 163,351 176,565
Current assets
Trade and other receivables 2,570 1,158 3,787
Short-term liquidity investments 13 284 5,248 279
Cash and cash equivalents 13 36,198 50,864 37,555
--------------------------------- ---- ------------- ------------- ---------
Total current assets 39,052 57,270 41,621
--------------------------------- ---- ------------- ------------- ---------
Total assets 219,989 220,621 218,186
--------------------------------- ---- ------------- ------------- ---------
Current liabilities
Trade and other payables (9,296) (7,683) (6,813)
Lease liabilities (420) (168) (333)
Deferred consideration 14 (1,316) (2,869) (1,227)
--------------------------------- ---- ------------- ------------- ---------
Total current liabilities (11,032) (10,720) (8,373)
Non-current liabilities
Lease liabilities (449) (241) (574)
Deferred consideration 14 (1,907) - (1,778)
Deferred taxation 15 (4,168) (3,676) (4,540)
--------------------------------- ---- ------------- ------------- ---------
Total non-current liabilities (6,524) (3,917) (6,892)
--------------------------------- ---- ------------- ------------- ---------
Total liabilities (17,556) (14,637) (15,265)
--------------------------------- ---- ------------- ------------- ---------
Net assets 202,433 205,984 202,921
--------------------------------- ---- ------------- ------------- ---------
Equity
Issued share capital 16 4 4 4
Share premium 17 83,775 81,644 83,744
Other distributable reserve 18 60,899 64,719 63,266
Retained earnings 52,690 55,508 51,341
Share-based payments reserve 5,065 4,109 4,566
--------------------------------- ---- ------------- ------------- ---------
Total equity 202,433 205,984 202,921
--------------------------------- ---- ------------- ------------- ---------
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
The condensed consolidated interim financial statements of
Mercia Asset Management PLC were approved by the Board of Directors
on 27 November 2023 and authorised for issue. They were signed on
its behalf by:
Dr Mark Payton Martin Glanfield
Chief Executive Officer Chief Financial Officer
Condensed consolidated statement of cash flows
For the six months ended 30 September 2023
Audited
Unaudited Unaudited Year
Six months ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
Note GBP'000 GBP'000 GBP'000
Cash flows from operating activities:
Operating (loss)/profit (1,303) 5,945 12
Adjustments to reconcile operating (loss)/profit to cash
generated from operating activities:
Depreciation of property, plant and equipment 50 32 68
Depreciation of right-of-use assets 186 88 239
Loss on sale of direct investment - - 849
Fair value movement in direct investments 12 1,619 (5,595) (1,201)
Share-based payments charge 509 592 1,049
Amortisation of intangible assets 1,495 1,017 2,337
Movement in fair value of contingent consideration 218 - 1,462
Working capital adjustments:
Decrease/(increase) in trade and other receivables 621 (84) (1,087)
Increase/(decrease) in trade and other payables 138 (1,451) (709)
--------------------------------------------------------------- ---- ----------------- ----------------- ---------
Cash generated from operating activities 3,533 544 3,019
Corporation tax paid - (705) (1,819)
--------------------------------------------------------------- ---- ----------------- ----------------- ---------
Net cash generated from/(used in) operating activities 3,533 (161) 1,200
Cash flows from direct investment activities:
Sale of direct investments 269 11 3,744
Purchase of direct investments 12 (7,523) (6,403) (20,778)
Investee company loan repayment 12 - - 125
Investee company loan redemption premium and interest received 8 1,942 1,371 1,979
Net cash used in from direct investment activities (5,312) (5,021) (14,930)
Cash flows from other investing activities:
Interest received from cash deposits 711 104 404
Purchase of property, plant and equipment (65) (20) (77)
Acquisition of a subsidiary undertaking - - (6,951)
Cash acquired with purchase of a subsidiary undertaking - - 2,882
Purchase of VCT fund management business - - (2,100)
Decrease in short-term liquidity investments - - 5,000
--------------------------------------------------------------- ---- ----------------- ----------------- ---------
Net cash generated from/(used in) other investing activities 646 84 (842)
--------------------------------------------------------------- ---- ----------------- ----------------- ---------
Net cash used in total investing activities (4,666) (4,937) (15,772)
Cash flows from financing activities:
Dividends paid - - (3,653)
Interest paid (30) (8) (31)
Payment of lease liabilities (194) (79) (238)
Net cash used in financing activities (224) (87) (3,922)
--------------------------------------------------------------- ---- ----------------- ----------------- ---------
Net decrease in cash and cash equivalents (1,357) (5,185) (18,494)
Cash and cash equivalents at the beginning of the period 37,555 56,049 56,049
--------------------------------------------------------------- ---- ----------------- ----------------- ---------
Cash and cash equivalents at the end of the period 13 36,198 50,864 37,555
--------------------------------------------------------------- ---- ----------------- ----------------- ---------
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2023
Issued Other Share-based
share Share distributable Retained payments
capital premium reserve earnings reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2022 (audited) 4 81,644 66,919 48,505 3,517 200,589
Profit and total comprehensive income for the
period - - - 7,003 - 7,003
Final dividend - - (2,200) - - (2,200)
Share-based payments charge - - - - 592 592
------------------------------------------------ -------- -------- -------------- --------- ----------- --------
As at 30 September 2022 (unaudited) 4 81,644 64,719 55,508 4,109 205,984
Issue of share capital - 2,100 - - - 2,100
Loss and total comprehensive expense for the
period - - - (4,167) - (4, 167)
Interim dividend - - (1,453) - - (1,453)
Share-based payments charge - - - - 457 457
------------------------------------------------ -------- -------- -------------- --------- ----------- --------
As at 31 March 2023 (audited) 4 83,744 63,266 51,341 4,566 202,921
Issue of share capital - 31 - - - 31
Profit and total comprehensive income for the
period - - - 1,349 - 1,349
Final dividend - - (2,367) - - (2,367)
Exercise of share options - - - - (10) (10)
Share-based payments charge - - - - 509 509
As at 30 September 2023 (unaudited) 4 83,775 60,899 52,690 5,065 202,433
------------------------------------------------ -------- -------- -------------- --------- ----------- --------
1. General information
Mercia Asset Management PLC 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 Alternative
Investment Market ("AIM") of the London Stock Exchange. The
registered office address is Mercia Asset Management PLC, Forward
House, 17 High Street, Henley-in-Arden B95 5AA.
2. Basis of preparation
The financial information presented in these condensed
consolidated interim financial statements constitutes the condensed
consolidated financial statements of Mercia Asset Management PLC
and its subsidiaries for the six months ended 30 September 2023.
These condensed consolidated interim financial statements should be
read in conjunction with the Group's Annual Report and consolidated
financial statements for the year ended 31 March 2023, which have
been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006,
International Financial Reporting Standards ("IFRS") and the
applicable legal requirements of the Companies Act 2006.
These condensed consolidated interim financial statements and
the comparative financial information presented in these condensed
consolidated interim financial statements for the period ended 30
September 2023 do not constitute full statutory accounts within the
meaning of Section 434 of the Companies Act 2006. The Group's
Annual Report and consolidated financial statements for the year
ended 31 March 2023 were approved by the Board on 3 July 2023 and
have been delivered to the Registrar of Companies. The Group's
independent auditor's report on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006.
These condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standard
("IAS") 34 'Interim Financial Reporting', as adopted for use in the
UK.
No new or revised standards or interpretations that have become
effective during the period ended 30 September 2023 have had a
material effect on the financial statements of the Group.
Although not required by statute or regulation, the financial
information contained in these condensed consolidated interim
financial statements, which were approved by the Board on 27
November 2023 and authorised for issue, have been reviewed by the
Group's independent auditor.
3. Going concern
Based on the overall strength of the Group's financial position,
including not only its strong liquidity at the period end, which
has been significantly enhanced post period end by the exit cash
proceeds received from nDreams, together with its forecast future
operating and investment activities and, having considered the
ongoing UK macroeconomic backdrop and geopolitical instability on
the Group's operations and portfolio, the Directors have a
reasonable expectation that the Group is well placed to manage
business risks in the current economic environment and has adequate
financial resources to continue in operational existence for the
foreseeable future. Accordingly, the Directors continue to adopt
the going concern basis in preparing these condensed consolidated
interim financial statements.
4. Significant accounting policies
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 period in which the
estimate is revised if the revision affects only that period, or in
the period of the revision and future periods, if the revision
affects both current and future periods.
The principal accounting policies applied in the presentation of
the condensed consolidated interim financial statements of Mercia
Asset Management PLC (the "Group", "Mercia" or the "Company"),
including the critical accounting judgements made by the Directors
and the key sources of estimation, are consistent with those
followed in the preparation of the Group's Annual Report and
consolidated financial statements for the year ended 31 March 2023
and have been consistently applied throughout the period ended 30
September 2023.
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 Operating Segments the Group has only one
operating segment, being proactive specialist asset management,
because the results of the Group are monitored on a Groupwide
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:
Audited
Unaudited Unaudited Year
Six months ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Fund management fees 9,958 8,469 17,593
Initial management fees 2,369 890 3,680
Portfolio directors' fees 1,926 1,351 2,934
Other revenue 158 140 343
VCTs share offer fees 629 1,331 1,331
15,040 12,181 25,881
-------------------------- ----------------- ----------------- ---------
6. Fair value movement in direct investments
Audited
Unaudited Unaudited Year
Six months ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Net fair value movement in direct investments (note 12) (1,619) 5,595 1,201
-------------------------------------------------------- ----------------- ----------------- ---------
7. Operating (loss)/profit
Operating (loss)/profit is stated after charging:
Audited
Unaudited Unaudited Year
Six months ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Staff costs 8,578 6,743 14,366
Other administrative expenses 3,924 3,479 6,635
------------------------------ ----------------- ----------------- ---------
Total administrative expenses 12,502 10,222 21,001
------------------------------ ----------------- ----------------- ---------
8. Finance income
Finance income is derived from:
Audited
Unaudited Unaudited Year
Six months ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ----------------- ----------------- ---------
Cash deposits 773 104 404
Short-term liquidity investments 5 13 45
Investee company loans (interest and redemption premium) 1,942 1,371 1,979
--------------------------------------------------------- ----------------- ----------------- ---------
Total finance income 2,720 1,488 2,428
--------------------------------------------------------- ----------------- ----------------- ---------
9. Taxation
Audited
Unaudited Unaudited Year
Six months ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ----------------- ----------------- ---------
Current tax
UK Corporation tax (410) (674) (157)
Deferred tax
Origination and reversal of temporary timing differences 372 252 584
Total tax (charge)/credit (38) (422) 427
--------------------------------------------------------- ----------------- ----------------- ---------
The current UK standard rate of corporation tax is 25% (H1 2023:
19%). The deferred tax credit of GBP372,000 (H1 2023: GBP252,000)
represents the unwinding of the deferred tax liability recognised
in respect of the intangible assets arising on the acquisition of
Frontier Development Capital Limited and the VCT fund management
business.
10. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the financial period by the weighted average number of Ordinary
shares in issue during the period. Diluted earnings per share is
calculated by dividing the profit for the financial period 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 per
share calculations on a weighted average basis for the period. The
profit and weighted average number of shares used in the
calculations are set out below:
Audited
Unaudited Unaudited Year
Six months ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
---------------------------------------------------------- ----------------- ----------------- ---------
Profit for the financial period (GBP'000) 1,349 7,003 2,836
---------------------------------------------------------- ----------------- ----------------- ---------
Basic weighted average number of Ordinary shares ('000) 446,582 440,110 441,156
Basic earnings per Ordinary share (pence) 0.30 1.59 0.64
---------------------------------------------------------- ----------------- ----------------- ---------
Diluted weighted average number of Ordinary shares ('000) 454,800 447,216 449,348
Diluted earnings per Ordinary share (pence) 0.30 1.57 0.63
---------------------------------------------------------- ----------------- ----------------- ---------
The calculation of basic and diluted earnings per share is based
on the following weighted average number of Ordinary shares:
Audited
Unaudited Unaudited Year
Six months ended Six months ended ended
30 September 30 September 31 March
2023 2022 2023
--------------------------------------------------- ----------------- ----------------- ---------
Weighted average number of shares
Basic 446,582 440,110 441,156
Dilutive impact of Ordinary shares issued 8,218 7,106 8,192
--------------------------------------------------- ----------------- ----------------- ---------
Diluted weighted average number of Ordinary shares 454,800 447,216 449,348
--------------------------------------------------- ----------------- ----------------- ---------
11. Dividends
An interim dividend for the year ending 31 March 2024 of 0.35
pence per share, totalling GBP1,563,000, has been declared after
the reporting period end and as such has not been included as a
liability in these condensed consolidated financial statements, in
accordance with IAS 10.
Details of the dividends declared and paid in the comparative
periods are set out in the Group's consolidated financial
statements for the year ended 31 March 2023.
12. Investments
The net change in the value of direct investments for the
six-month period is an increase of GBP5,904,000 (H1 2023:
GBP11,987,000). The table below reconciles the opening to closing
fair value of investments.
Level 1 Level 3 Total
financial financial financial
assets assets assets
GBP'000 GBP'000 GBP'000
--------------------------------------------- ---------- ---------- ----------
As at 1 April 2022 (audited) 1,632 117,926 119,558
Investments made during the period - 6,403 6,403
Disposal - (11) (11)
Unrealised fair value gains on investments* 102 7,476 7,578
Unrealised fair value losses on investments* - (1,983) (1,983)
--------------------------------------------- ---------- ---------- ----------
As at 30 September 2022 (unaudited) 1,734 129,811 131,545
Investments made during the period - 14,333 14,333
Acquired investments - 42 42
Investee company loan repayment - (125) (125)
Disposal - (4,851) (4,851)
Unrealised fair value gains on investments - 3,746 3,746
Unrealised fair value losses on investments (765) (7,375) (8,140)
--------------------------------------------- ---------- ---------- ----------
As at 31 March 2023 (audited) 969 135,581 136,550
Investments made during the period - 7,523 7,523
Unrealised fair value gains on investments - 10,171 10,171
Unrealised fair value losses on investments (153) (11,637) (11,790)
--------------------------------------------- ---------- ---------- ----------
As at 30 September 2023 (unaudited) 816 141,638 142,454
--------------------------------------------- ---------- ---------- ----------
* Excluding the demerger of Netacea Limited from Intechnica
Holdings Limited in the period.
The measurement basis for determining the fair value of
investments held is as follows:
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Quoted investment 816 1,734 969
Price of last investment round 55,401 69,284 79,522
Enterprise value 83,097 53,106 52,912
Cost 3,140 300 3,147
Impaired value (1) - 7,121 -
142,454 131,545 136,550
------------------------------- ------------- ------------- ---------
(1) Valued using methodologies consistent with the Group's
accounting policy.
13. Cash, cash equivalents and short-term liquidity
investments
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 36,198 50,864 37,555
--------------------------------- ------------- ------------- ---------
Short-term liquidity investments 284 5,248 279
--------------------------------- ------------- ------------- ---------
14. Deferred consideration
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
--------------------------------- ------------- ------------- ---------
Payable within one year 1,316 2,869 1,227
Payable within two to five years 1,907 - 1,778
--------------------------------- ------------- ------------- ---------
3,223 2,869 3,005
--------------------------------- ------------- ------------- ---------
Details of the deferred consideration which arose on the
acquisition of Frontier Development Capital Limited in December
2022 are set out in the Group's consolidated financial statements
for the year ended 31 March 2023.
15. Deferred taxation
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2023 2023 2023
GBP'000 GBP'000 GBP'000
----------------------- ------------- ------------- ---------
Deferred tax liability 4,168 3,676 4,540
----------------------- ------------- ------------- ---------
Under IAS 12 Income Taxes, provision is made for the deferred
tax liability associated with the recognition of the intangible
asset arising on the acquisition of Frontier Development Capital
Limited and the VCT fund management business. As at 30 September
2023 the deferred tax liability has been calculated using the tax
rate of 25%.
16. Issued share capital
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 September 30 September 31 March 2023
2023 2022
-------------------- -------------------- --------------------
Number GBP'000 Number GBP'000 Number GBP'000
---------------------------------- ----------- ------- ----------- ------- ----------- -------
Allotted and fully paid
As at the beginning of the period 446,581,202 4 440,109,707 4 440,109,707 4
Issue of share capital during the
period 98,321 - - - 6,471,495 -
---------------------------------- ----------- ------- ----------- ------- ----------- -------
As at the end of the period 446,679,523 4 440,109,707 4 446,581,202 4
---------------------------------- ----------- ------- ----------- ------- ----------- -------
On 29 September 2023, 98,321 new Ordinary shares were issued in
respect of the exercise of share options held by certain employees.
These new shares were admitted to trading on the AIM market of the
London Stock Exchange on 5 October 2023.
Each Ordinary share is entitled to one vote and has equal rights
as to dividends. The Ordinary shares are not redeemable.
17. Share premium
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ------------- -----------
As at the beginning of the period 83,744 81,644 81,644
Premium arising on the issue of Ordinary
shares 31 - 2,100
----------------------------------------- ------------- ------------- -----------
As at the end of the period 83,775 81,644 83,744
----------------------------------------- ------------- ------------- -----------
On 29 September 2023, a premium on the issue of Ordinary shares
arose from 98,321 new Ordinary shares of GBP0.00001 each, issued at
a price of 21.50 pence per share, following the exercise of share
options held by certain employees.
18. Other distributable reserve
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
---------------------------------- ----------------- ----------------- -----------
As at the beginning of the period 63,266 66,919 66,919
Dividends (note 11) (2,367) (2,200) (3,653)
---------------------------------- ----------------- ----------------- -----------
As at the end of the period 60,899 64,719 63,266
---------------------------------- ----------------- ----------------- -----------
19. 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 following table gives information about how the fair values
of these financial assets and financial liabilities are determined
and presents the Group's assets that are measured at fair value.
There have been no movements in financial assets or financial
liabilities between levels during the current or prior periods. The
table in note 12 sets out the movement in the Level 1 and 3
financial assets during the period.
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Assets:
Financial assets at fair value through profit or loss - direct investment
portfolio
Level 1 816 1,734 969
Level 2 - - -
Level 3 141,638 129,811 135,581
----------------------------------------------------------------------------- ------------- ------------- ---------
142,454 131,545 136,550
----------------------------------------------------------------------------- ------------- ------------- ---------
Unaudited Unaudited Audited
As at As at As at
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------------ --- ------------- ------------- ---------
Liabilities:
Financial liabilities at fair value through profit or loss - deferred
consideration
Level 1 - - -
Level 2 - - -
Level 3 3,223 2,869 3,005
-------------------------------------------------------------------------- ------------- ------------- ---------
3,223 2,869 3,005
--- ------------- ------------- ---------
The Directors consider that the carrying amounts of financial
assets and financial liabilities recorded at amortised cost in the
consolidated financial statements approximate to their fair
values.
Financial instruments in Level 1
The Group had one direct investment quoted on AIM,
MyHealthChecked PLC, which is fair valued using the closing bid
price as at 30 September 2023, 30 September 2022 and 31 March 2023
respectively.
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 has been arrived at using appropriate valuation
techniques.
The Group has adopted the International Private Equity and
Venture Capital Valuation Guidelines 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 2 of the Group's consolidated financial statements for the
year ended 31 March 2023 provides further information on the
Group's valuation methodology, including a detailed explanation of
the valuation techniques used for Level 3 financial
instruments.
20. Post balance sheet event
On 17 November 2023, the Group sold its investment in nDreams
Limited to Aonic AB for a total consideration of GBP30.2million,
split between GBP26.4million in cash and GBP3.8million re-invested
into Aonic.
INDEPENT REVIEW REPORT TO MERCIA ASSET MANAGEMENT PLC
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the London Stock Exchange AIM Rules for Companies.
We have been engaged by the Group to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 September 2023 which comprises the condensed
consolidated statement of comprehensive income, condensed
consolidated statement of financial position, condensed
consolidated cash flow statement, condensed consolidated statement
of changes in equity and notes to the interim financial
statements.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the London Stock Exchange AIM
Rules for Companies which require that the half-yearly report be
presented and prepared in a form consistent with that which will be
adopted in the Company's annual accounts having regard to the
accounting standards applicable to such annual accounts.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Group a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions relating to going concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange AIM Rules for Companies and for
no other purpose. No person is entitled to rely on this report
unless such a person is a person entitled to rely upon this report
by virtue of and for the purpose of our terms of engagement or has
been expressly authorised to do so by our prior written consent.
Save as above, we do not accept responsibility for this report to
any other person or for any other purpose and we hereby expressly
disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
Date: 27 November 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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)
Julian George Viggars (Chief Investment Officer)
Diane Seymour-Williams (Senior Independent Director)
Raymond Kenneth Chamberlain (Non-executive 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
Aspect House
Registered office Spencer Road
Forward House Lancing
17 High Street West Sussex BN99 6DA
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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END
IR FDLLLXFLZFBE
(END) Dow Jones Newswires
November 28, 2023 02:00 ET (07:00 GMT)
Mercia Asset Management (LSE:MERC)
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