Mercia Asset Management

Investment summary

FY21 was the year Mercia’s business model as a specialist asset manager matured. Mercia has built a structurally profitable, cash-generative business, with high levels (90%+) of contracted revenue and the potential for super-returns from its mature direct portfolio. In FY21, management largely achieved its FY22 strategic goals a year early (c £1bn AUM, evergreen balance sheet, sustainably profitable), with NAV per share climbing 24% to 40p and AUM rising 18% to £940m at year end. Management’s new three-year plan aims for 20% average annual growth in AUM and average PBT of £20m between FY22–24. Mercia still trades at a discount to NAV, even before considering the embedded value of the third-party fund management business (c 6.9p/share at 4% of AUM).