mercia-globe-highres

Scaling, sustainable and evergreen by FY22

Mercia Asset Management 20 July 2020 Update

Mercia Asset Management

Scaling, sustainable and evergreen by FY22

FY20 results

Investment companies

20 July 2020

Price

19.25p

Market cap

£85m

Net cash (£m) at 31 March 2020

30.2

Shares in issue

440.1m

Free float

69.1%

Code

MERC

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.0

4.1

(45.5)

Rel (local)

(0.2)

(4.4)

(35.5)

52-week high/low

38.5p

13.8p

Business description

Mercia Asset Management is a regionally focused specialist asset manager. Its stated intent is to become the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m.

Next event

AGM

September 2020

Half year results

December 2020

Analysts

Richard Williamson

+44 (0)20 3077 5700

Rob Murphy

+44 (0)20 3077 5700

Mercia Asset Management is a research client of Edison Investment Research Limited

Mercia’s FY20 results reflect continued progress, delivering on management’s three-year strategy. AUM climbed 58% to £0.8bn, while FUM rose 73% to £658m. Following the acquisition of the NVM VCT fund management business, the company is operationally profitable on a monthly basis, with annual revenues exceeding operating costs for the first time in FY20. Net assets rose 12% to £141.5m, with the direct investment portfolio stalled at £87.5m reflecting the impact of COVID-19 fair value adjustments and a £15.7m net investment. The group remains well-placed for a downturn with £30m of unrestricted balance sheet cash and £320m of group cash. Post period end the group exited The Native Antigen Company, with £5.2m in cash (8.4x return, 65% IRR) expected. Despite the group’s progress, Mercia’s shares continue to trade at a material discount to NAV (0.60x), even before considering the embedded value of the third-party fund management business (> 4.5p at 3% of AUM).

Period end

Net cash* (£m)

Direct
investments (£m)

FUM
(£m)

NAV
(£m)

NAV per share (p)

P/NAV
(x)

03/17

59.6

52.0

336.5

121.4

40.4

0.48

03/18

49.4

66.1

400.0

123.5

40.7

0.47

03/19

29.8

87.7

381.0

126.1

41.6

0.46

03/20

30.2

87.5

658.0

141.5

32.1

0.60

Note: *Includes liquid securities but not funds held on behalf of EIS investors.

Positive net revenues following 73% rise in FUM

Mercia achieved its first positive net revenues in FY20, delivering revenues of £12.75m (FY19: £10.68m) against admin expenses of £12.66m (FY19: £12.12m), to deliver net revenues of £0.1m (FY19: loss of £1.4m). Mercia reported FY20 net assets of £141.5m (FY19: £126.1m), despite the direct investment portfolio falling marginally to £87.5m (FY19: £87.7m); the impact on valuations from COVID-19 more than offset the net £15.7m invested in 18 portfolio companies. Accordingly, hard NAV (portfolio fair value + net cash) was broadly flat, up 0.2% to £117.7m (£117.4m). FUM rose by 73% to £658m (FY19: £381m).

AUM scales to £0.8bn with help from NVM and BBB

The acquisition of the NVM VCT fund management business (NVM) in December 2019, together with £38.2m of new capital raised by NVM in April, supplemented by a further £54.3m from the BBB and £10m of EIS capital, means that FUM rose to c £658m and AUM to c £800m. The NVM acquisition was transformative in that the additional revenue (from fund management-related fees of c 2%) means that Mercia is now profitable on an ongoing operational basis, starting to deliver on management’s three-year strategic plan to put Mercia on a sustainable footing.

Valuation: 0.60x NAV + £20m for MFM

Mercia’s shares continue to trade at a discount to NAV (0.60x), even before considering the embedded value of Mercia Fund Managers (MFM), which we estimate could be worth an additional 4.5p per share or more on top of NAV. Catalysts for a re-rating include further scaling of the business, commercialisation of the direct investment portfolio and/or successful exits.

FY20 results review

Transitioning to a new paradigm: Positive net revenues

Mercia reported a material 73% rise in funds under management (FUM) to £658m (FY19: £381m), with the acquisition of the NVM VCT fund management business delivering a c £250m uplift, supplemented by a further £38.2m of new capital raised by NVM for its own funds in March 2020, as well as a further allocation of £54.3m from the British Business Bank (BBB), split between Mercia’s PE and Debt funds. The group also raised £10m of additional EIS funds. The additional scale that these funds deliver, together with the boost to fee revenue, is a major step on the way to Mercia achieving management’s strategic goal of an evergreen funding model.

Group revenues increased by 19.4% to £12.7m (FY19: £10.7m), reflecting an approximately three-month contribution from NVM. Revenues comprised £8.9m from fund management fees, £1.3m from initial management fees and £2.4m from portfolio director fees.

Importantly, operating costs only rose 4.5% to £12.7m (FY19: £12.1m), with staff costs also increasing 4.5% to £8.8m (FY19: £8.4m), despite a 9% increase in headcount (from 85 to 93 over the course of the year). With revenue growth outstripping growth in staff costs, Mercia has been able to declare its first positive annual net revenues, transitioning from annual net expenses of £1.44m in FY19 to net revenues of £0.09m, a year ahead of plan.

With NVM making a full-year contribution in FY21, we fully expect the transition to be sustainable, with revenues covering expenses before realised gains and fair value movements, reversing the historical operational NAV erosion. If average fees are maintained at c 2% of assets under management (AUM) and at current fund levels, this would suggest FY21 revenues of £15m+, making allowance for a c £2m reduction in fees due to recent COVID-19-related falls in fund values.

Mercia announced net assets of £141.5m (FY19: £126.1m) or 32.1p per share (FY19: 41.6p), a fall of 23% over the year, largely as a result of the £30m equity placing (at 25p per share) in December 2019 to fund the acquisition of the NVM VCT fund management business. Direct investments of £17.5m gross (£15.7m net) were made into 18 portfolio companies (FY19: £19.4m, 17 companies) during the year, including one new direct investment, One Touch Apps (trading as Clear Review). The company ended the year with £30.2m of unrestricted cash and short-term liquidity investments (FY19: £29.8m) as well as total liquidity of £320m across all asset classes.

Mercia’s full FY20 results presentation can be reviewed in Exhibit 1.

Exhibit 1: Mercia FY20 results presentation

Source: Mercia Asset Management

Portfolio review: Affected by COVID-19

The value of Mercia’s direct investment portfolio at year-end at £87.5m was relatively unchanged versus FY19 (£87.7m), despite gross portfolio investment of £17.5m (FY19: £17.7m). On a net basis, investment of £15.7m was more than offset by a COVID-19-related decrease in fair value of £15.8m (FY18: £3.9m increase), representing an 18% fall in portfolio fair value. As has been seen by other investment companies, although valuations of private investments tend to lag the public markets, they ultimately follow similar trends. In this downturn, investors favour profitable businesses (or those at least close to break-even), with strong recurring revenues, particularly those in sectors seen to benefit from lockdown, such as software, digital entertainment, medtech, digital healthcare, diagnostics and biotech.

In line with previous reporting periods, Mercia’s top 20 direct investments represented 98.7% of total portfolio value as at 31 March 2020, with the top 10 representing over 77% of total portfolio value. Mercia weights its efforts accordingly.

Exhibit 2: Direct investment portfolio

£000s

Sector

Net value
1/4/19

Net cash invested FY20

Fair value change
FY20

Net value
31/3/20

Fair value change
FY20

Mercia’s holding at
31/3/20

£000

£000

£000

£000

%

%

nDreams

Digital/digital entertainment

15,120

1,000

-

16,120

-

36.4

Oxford Genetics (OXGENE)

Life sciences/biosciences

10,161

-

1,582

11,743

15.6

30.2

Intechnica

Software and the internet

6,677

500

-

7,177

-

27.5

Medherant

Life sciences/biosciences

5,205

1,500

-

6,705

-

30.1

Voxpopme

Software and the internet

3,026

2,000

1,004

6,030

33.2

17.1

Ton UK (Intelligent Positioning)

Software and the internet

5,473

400

(1,519)

4,354

(27.8)

28.2

Impression Technologies

EMME

5,381

2,000

(3,087)

4,294

(57.4)

25.9

Faradion

EMME

3,525

500

-

4,025

-

15.6

Warwick Acoustics

EMME

7,904

1,065

(5,313)

3,656

(67.2)

52.9

The Native Antigen Company*

Life sciences/biosciences

2,863

-

630

3,493

22.0

29.4

Soccer Manager

Digital/digital entertainment

2,099

300

135

2,534

6.4

34.8

Edge Case Games

Digital/digital entertainment

2,300

-

-

2,300

-

21.2

Locate Bio

Life sciences/biosciences

500

1,750

-

2,250

-

17.4

VirtTrade (Avid Games)

Digital/digital entertainment

3,938

550

(2,288)

2,200

(58.1)

25.8

PsiOxus Therapeutics

Life Sciences/biosciences

2,377

160

(344)

2,193

(14.5)

1.4

sureCore

EMME

1,834

333

-

2,167

-

22.0

W2 Global Data Solutions

Software and the internet

2,000

-

-

2,000

-

15.2

Eyoto Group

Life sciences/biosciences

1,755

875

(878)

1,752

(50.0)

15.7

One Touch Apps t/a Clear Review

Software and the internet

-

500

-

500

-

3.9

Concepta

Life sciences/biosciences

1,133

750

(1,408)

475

(124.3)

22.4

Other direct investments

4,388

1,473

(4,358)

1,503

 

Totals

87,659

15,656

(15,844)

87,471

Source: Mercia. Note: EMME is electronics, materials, manufacturing and engineering. Excludes post year-end investments. *The sale of The Native Antigen Company was announced at the start of July 2020 for up to £18m in cash, a c 50% uplift on fair value.

Within the direct investment portfolio, Warwick Acoustics, Impression Technologies (both serving the automotive sector), Crowd Reactive (events management) and LM Technologies (Chinese supply chain) suffered notable falls in valuation. Together, these four businesses represented 79% of the £15.8m downward adjustment in fair value. Fair value uplifts included: OXGENE (£1.6m); The Native Antigen Company (£0.6m); Voxpopme (£1.0m) and Soccer Manager (£0.1m).

Post year-end developments include:

In early April, two of Mercia’s direct portfolio companies, The Native Antigen Company and Oxford Genetics (OXGENE), announced the formation of a new strategic partnership to scale up COVID-19 antigen production. This was followed in early May by the announcement of a £3m funding round into OXGENE, with Mercia investing a further £1m alongside Canaccord Genuity Wealth Management. OXGENE’s technology accelerates the design, discovery and manufacture of new biologics.

3 April 2020 – The three Northern VCTs managed by Mercia following the acquisition of the NVM VCT fund management contracts in December 2019, announced that they had raised new capital of £38.2m.

21 April 2020 – The British Business Bank (BBB) announced a further £54.3m investment in the Northern Powerhouse Investment Fund (NPIF) managed by Mercia, with £23.7m allocated to the NPIF equity fund and £30.6m to the NPIF debt fund. Later in May, the BBB accredited Mercia to deliver its NPIF debt mandate under the new Coronavirus Business Interruption Loan Scheme (CBILS). In total, BBB has allocated £186.3m to Mercia managed funds.

14 May 2020 – Medherant, a transdermal drug delivery company, announced a partnership agreement with Cycle Pharmaceuticals to develop new products using Medherant's proprietary TEPI Patch technology. Under the agreement, Medherant will receive upfront payments for each candidate drug targeted as well as royalty payments on future product sales.

25 June 2020 – nDreams released its latest VR title, Phantom: Covert Ops. Its initial Metacritic score was over 80 (very positive), with management reporting 28,000 units sold in the first fortnight after its release on Oculus Rift and Oculus Quest headsets, generating over £0.6m of revenues.

1 July 2020 – MIP Diagnostics completed a £5.1m funding round to scale production of its polymer antibodies, with Mercia committing £0.5m alongside the Business Growth Fund, Downing Ventures, Calculus Capital and MIP management.

9 July 2020 – Mercia announced the sale of The Native Antigen Company (NAC) for up to £18m in cash, with management expecting to realise £5.2m (1.2p per share) for the group’s 29.4% direct investment. NAC was held at £3.3m on the balance sheet as at 31 March 2020, with the sale representing a fair value gain of up to £1.9m – an 8.4x return on Mercia’s initial December 2014 direct investment and an IRR of 65%. The exit delivers another significant milestone in management’s strategy to achieve an evergreen funding model.

COVID-19: Strangely, an opportunity for Mercia

Exhibit 3: UK – Change in turnover due to COVID-19 outbreak (% of firms in each sector)

Source: Bank of England, Covid-19 and monetary policy, 28 May 2020

As summarised in a speech by the Bank of England (Covid-19 and monetary policy, 28 May 2020), the sectors that have proven most resilient to the COVID-19 pandemic to date have been the ICT and healthcare sectors. With a portfolio focused on life sciences, software and the internet and digital entertainment, as well as electronics, materials, manufacturing and engineering, we fully expect Mercia’s direct portfolio to remain resilient, although as we have noted above, there are already clear winners and losers.

As outlined in its recent update (COVID-19 Business Impact), Beauhurst highlights that the UK’s scaleup companies are vulnerable to COVID-19, with almost a quarter (22%) at severe or critical risk of disruption to their operations and a further 43% at moderate risk. The regions furthest from London, notably the South West and Scotland, have the highest proportion of critically affected businesses of all UK regions (Exhibit 4), whilst London has the highest proportion of positively impacted businesses (Exhibit 5), with a weighting towards technology businesses in the capital. Beahurst also concludes that seed stage companies are the least likely to be negatively affected by coronavirus, whilst later stage businesses most at risk.

Sectors that rely on customer footfall such as leisure and entertainment and retail are the most significantly affected, whilst technology-driven sectors that enable remote working, such as VoIP, EdTech, eHealth and Digital security, have the highest numbers of positively impacted businesses.

Exhibit 4: Percentage of companies critically affected by COVID-19 by region

Exhibit 5: Percentage of companies for which COVID-19 has had a positive impact by region

Source: Beauhurst, COVID-19 Business Impact

Source: Beauhurst, COVID-19 Business Impact

Exhibit 4: Percentage of companies critically affected by COVID-19 by region

Source: Beauhurst, COVID-19 Business Impact

Exhibit 5: Percentage of companies for which COVID-19 has had a positive impact by region

Source: Beauhurst, COVID-19 Business Impact

From Mercia’s perspective, the group operates in many attractive sectors (that potentially benefit from lockdown) and is well-funded, with £30m of unrestricted balance sheet cash and c £320m of uninvested cash across the group. Its position is further strengthened by the fact that 15 of its top 20 investments are funded through FY21 and beyond. This means that Mercia has the resources, patiently but selectively, to support its direct investments, while the broader fund management business can focus on identifying quality investments that require additional capital at attractive valuations.

With Mercia committed to its regional investment strategy and looking to grow its market share from c 18% today to over 20%, as one of its key strategic targets, a more difficult trading environment presents a real opportunity for a patient and well-resourced investor to consolidate its market position, while other funds retrench to London.

Group overview

Mercia Asset Management: Specialist asset manager

Mercia is a specialist asset manager with a stated intent to become the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m. To achieve this, management expects to take a market share of 20%+ of its targeted regional markets (in England, the North, Northeast, Northwest, Midlands and Scotland), with market share calculated based on data from Beauhurst, the British Business Bank and the British Venture Capital Association. Latest research from Beauhurst has shown Mercia to be the fourth most active investor nationally and the second most active in the North of England (by number of deals).

Exhibit 6: Mercia’s regional commitment

Source: Mercia Asset Management

Historically, Mercia has been closely associated with IP commercialisation. However, this categorisation no longer reflects the growth of the business, the diversity of its deal sourcing or the breadth of its investment portfolio, both debt and equity. Through its 19 university partnerships, IP commercialisation will remain an important element of Mercia’s overall investment proposition, but today represents one of five principal sources of deal flow (the others being direct sourcing from Mercia’s own network, client referrals, advisor referrals and cross-referrals).

Funds overview

Mercia invests in both growing its pipeline and its existing portfolio companies through four pools of capital under management:

Balance sheet (£87.5m portfolio fair value, £30.2m unrestricted cash)

Venture (including NVM) (FUM £475.6m)

Private equity (£59.8m)

Debt (£121.8m).

In aggregate, the company manages AUM of c £800m, of which third-party funds under management account for over 80%, approximately £658m.

Venture, including the NVM VCT fund management business, EIS and IP commercialisation, represents the majority (FY20: 72% of FUM) of the group’s FUM, but private equity (9%) and debt (19%) together represent a substantial proportion of overall funds. Including the direct investment portfolio and balance sheet cash (hard NAV), the proportion of Venture funds falls to 61%, as set out in Exhibit 7 below.

Exhibit 7: Balance of Mercia’s business (FUM + Hard NAV)

Source: Mercia Asset Management, Edison Investment Research

Strategic goals

In the regions, from the regions, to the regions

Management has stated its intent to become the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m. To achieve this, management expects to take a market share of 20%+ of its targeted regional markets (in England, the North, Northeast, Northwest, Midlands, and Scotland). Management estimates that the group currently has a market share of c 18% of these markets.

Sustainability (positive net revenues)

The acquisition of the NVM VCT fund management business has been transformative in that the additional revenue from ongoing management-related fees means that Mercia no longer burns cash on an operational basis. This delivers the first part of management’s three-year strategic plan, to put Mercia on a sustainable footing, and also starts to deliver the scale that management believes will allow it to operate an evergreen model by FY22.

Assets under management > £1bn

The acquisition of the NVM VCT fund management contracts in December 2019, together with the new capital they raised of £38.2m prior to the 2020 tax year end, increased Mercia's total AUM to c £740m. Together with the BBB allocating a further £54.3m to funds managed by Mercia and an additional £10m of EIS funds, this means that AUM has now risen to c £800m. The AUM target delivers the scale that management believes is necessary to deliver a fully sustainable, evergreen business model.

An evergreen balance sheet by FY22

An evergreen model is where annual portfolio realisations are greater than net investment, with management fees covering other operational costs. Despite the downturn in valuations from the COVID-19 pandemic, management believes that the current cash headroom (£30.2m as at 31 March 2020), together with organic growth and anticipated portfolio realisations, should be sufficient to achieve the goal of an evergreen balance sheet by FY22 without the need for further recourse to the markets.

Fund equity investments target 15% IRR

To remain an attractive proposition for future institutional fund allocations and to be able to scale its business, Mercia needs to continue to deliver market-beating returns. Although not immediately relevant to public market investors, the company is targeting a 15% equity IRR benchmark at its underlying equity funds. Although the current downturn has affected valuations in the short term, management is confident that it will achieve this benchmark in the medium to long term.

Exhibit 8: Mercia’s three-year strategic goals (by FY22)

Source: Mercia

Valuation: Mercia looks undervalued at 0.60x NAV

In line with Mercia’s intent to become the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m, we have broadened Mercia’s valuation peer group to include a broader range of direct private equity and venture capital investors, as well as IP commercialisation companies.

Following the share placing at 25p in December 2019, Mercia has traded at a widened discount to its NAV, due in part to the NAV/share erosion that entailed. Currently, Mercia trades at a 40% discount to the FY20 NAV, below the mean and median of the peer group and, in our view, this is unwarranted given the strength of the business and its underlying operating model.

Exhibit 9: Peer comparison

 

Price
(p)

Market cap (£m)

Latest NAV (£m)

Cash/ (debt) (£m)

NAV multiple
(x)

NAV per share (p)

Mercia Asset Management

19.25

85

141

30

0.60

32.1

Specialist asset managers

 

 

 

 

 

 

Gresham House

630.0

193.8

90

19

1.90

324.3

Intermediate Capital Group

1,365.0

3,964.6

1,311

(999)

3.10

463.0

Direct technology investors

Augmentum FinTech

107.0

125.0

131

29

0.95

112.2

Draper Esprit

500.0

594.6

672

89

0.88

565.1

HgCapital

243.0

992.5

963

100

1.03

236.0

IP Group

65.1

695.6

1,172

71

0.59

110.6

Oakley Capital

215.0

417.7

686

160

0.61

345.0

Mean

 

 

 

0.81

 

Median

 

 

 

0.88

 

Source: Refinitiv data, Edison Investment Research. Note: Priced as at 17 July 2020.

Funds business: Additional £20m (at 3% of FUM) on top of NAV

The additional revenue bought via the acquisition of NVM (£6.3m of annual recurring revenue) means the group is now profitable before fair value adjustments, realisation gains, amortisation and share-based payment charges. The removal of the monthly cash burn is a significant step towards Mercia developing a fully sustainable model, with management targeting an evergreen funding model by FY22. This progress helps to underline that the NAV-based valuation does not properly reflect the embedded value of Mercia Fund Managers.

From research covering 50 listed US and European asset management firms (The Valuation of Asset Management Firms, 2019), Marco Bigelli and Fabio Manuzzi calculated average EBIT margins of 28% for the companies reviewed and earnings margins of 17%. Average yearly fees were equal to 1.0% of AUM, with an average firm value of 3.0% of AUM. They found that higher valuations were significantly positively correlated with higher earnings margins and higher fees as a percentage of AUM.

Management confirmed on the FY20 results call that the group continues to sustain average fund management-related fees of c 2% of AUM, implying fees >2% of FUM. Using the above analysis as a benchmark, we propose to reflect the value of Mercia’s embedded fee-earning funds business at 3% of FUM (although a higher percentage would be justified by Mercia’s fee margins) on top of the NAV-based valuation of its direct investment business. With FUM of £658m, this implies a valuation for the funds business of £20m, or 4.5p per share, on top of the FY20 NAV of 32.1p per share.

Exhibit 10: Financial summary

£'000

2015

2016

2017

2018

2019

2020

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

508

1,755

6,660

10,197

10,675

12,747

Cost of Sales

(10)

(79)

(92)

0

0

0

Gross Profit

498

1,676

6,568

10,197

10,675

12,747

Operating costs

(1,495)

(4,011)

(9,051)

(10,633)

(12,115)

(12,661)

Fair value changes

3,934

896

4,268

2,823

3,916

(15,844)

Realised gains

0

0

839

871

0

0

Normalised operating profit

 

 

2,937

(1,439)

2,624

3,258

2,476

(15,758)

Amortisation of acquired intangibles

0

(17)

(301)

(301)

(301)

(852)

Exceptionals

(1,018)

(372)

(1,125)

(1,125)

0

(695)

Share-based payments

(44)

(230)

(395)

(497)

(171)

(528)

Reported operating profit

1,875

(2,058)

803

1,335

2,004

(17,833)

Net Interest

93

361

186

274

562

220

Joint ventures & associates (post tax)

0

0

0

0

0

0

Profit Before Tax (norm)

 

 

3,030

(1,078)

2,810

3,532

3,038

(15,538)

Profit Before Tax (reported)

 

 

1,968

(1,697)

989

1,609

2,566

(17,613)

Reported tax

0

0

54

54

54

159

Profit After Tax (norm)

3,030

(1,078)

2,810

3,532

3,038

(15,538)

Profit After Tax (reported)

1,968

(1,697)

1,043

1,663

2,620

(17,454)

Minority interests

0

0

0

0

0

0

Discontinued operations

0

0

0

0

0

0

Net income (normalised)

3,030

(1,078)

2,810

3,532

3,038

(15,538)

Net income (reported)

1,968

(1,697)

1,043

1,663

2,620

(17,454)

Basic average number of shares outstanding (m)

212

212

224

302

303

341

EPS – basic normalised (p)

 

 

1.43

(0.51)

1.26

1.17

1.00

(4.55)

EPS – diluted normalised (p)

 

 

1.43

(0.51)

1.21

1.13

1.00

(4.55)

EPS – basic reported (p)

 

 

0.93

(0.80)

0.47

0.55

0.86

(5.11)

Dividend (p)

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

(29.7)

245.5

279.5

53.1

4.7

19.4

Gross Margin (%)

98.0

95.5

98.6

100.0

100.0

100.0

Normalised Operating Margin

578.1

-82.0

39.4

32.0

23.2

-123.6

BALANCE SHEET

Fixed Assets

 

 

27,121

50,103

63,693

77,428

98,724

124,899

Intangible Assets

2,455

11,815

11,514

11,213

10,912

36,705

Tangible Assets

49

145

151

145

153

125

Right of use assets

0

0

0

0

0

598

Investments & other

24,617

38,143

52,028

66,070

87,659

87,471

Current Assets

 

 

54,349

31,730

64,576

53,965

31,180

31,951

Stocks

0

0

0

0

0

0

Debtors

716

798

747

1,057

782

1,298

Cash & cash equivalents

23,633

20,932

28,829

42,908

25,210

24,438

Short term liquidity investments

30,000

10,000

35,000

10,000

5,188

6,215

Current Liabilities

 

 

(631)

(1,521)

(6,698)

(7,760)

(3,730)

(6,659)

Creditors

(631)

(1,521)

(6,698)

(7,760)

(3,730)

(4,805)

Tax and social security

0

0

0

0

0

0

Lease liabilities

0

0

0

0

0

(118)

Short term borrowings

0

0

0

0

0

0

Other (incl deferred consideration)

0

0

0

0

0

(1,736)

Long Term Liabilities

 

 

0

(271)

(217)

(163)

(109)

(8,731)

Long term borrowings

0

0

0

0

0

0

Lease liabilities

0

0

0

0

0

(473)

Other long term liabilities

0

(271)

(217)

(163)

(109)

(8,258)

Net Assets

 

 

80,839

80,041

121,354

123,470

126,065

141,460

Minority interests

0

0

0

0

0

0

Shareholders' equity

 

 

80,839

80,041

121,354

123,470

126,065

141,460

CASH FLOW

Op Cash Flow before WC and tax

2,943

(1,406)

2,700

3,339

2,560

(15,685)

Working capital

(20)

650

5,250

(87)

(3,724)

533

Exceptional & other

(4,952)

(1,268)

(5,107)

(3,694)

(3,916)

15,149

Depreciation of right-of-use assets

0

0

0

0

0

139

Tax

0

0

0

0

0

0

Net operating cash flow

 

 

(2,029)

(2,024)

2,843

(442)

(5,080)

136

Capex

(27)

(113)

(82)

(75)

(92)

(45)

Acquisitions/disposals

(11,563)

(20,939)

(8,779)

(10,664)

(17,673)

(28,056)

Net interest

22

397

165

260

531

245

Equity financing

67,230

(22)

38,750

0

(196)

30,000

Dividends

0

0

0

0

0

0

Other

(30,000)

20,000

(25,000)

25,000

4,812

(3,052)

Net Cash Flow

23,633

(2,701)

7,897

14,079

(17,698)

(772)

Opening net debt/(cash)

 

 

(39)

(23,633)

(20,932)

(28,829)

(42,908)

(25,210)

FX

0

0

0

0

0

0

Other non-cash movements

(39)

0

0

0

0

0

Closing net debt/(cash)

 

 

(23,633)

(20,932)

(28,829)

(42,908)

(25,210)

(24,438)

Closing net debt/ (cash) inc short-term liquidity investments (not EIS)

(53,633)

(30,932)

(59,601)

(49,435)

(29,769)

(30,186)

Source: Mercia Asset Management accounts

General disclaimer and copyright

This report has been commissioned by Mercia Asset Management and prepared and issued by Edison, in consideration of a fee payable by Mercia Asset Management. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Mercia Asset Management and prepared and issued by Edison, in consideration of a fee payable by Mercia Asset Management. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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