Venture fund manager Mercia insists it is set to grow its funds and deliver strong returns to shareholders despite a perfect storm of tax changes and a “challenging environment”.
In the last six months to 30 September 2024, Mercia invested c.£133million into 86 businesses across all the funds and the balance sheet, including 46 new fund portfolio companies.
The business made pre-tax profits of £2.4m (HY 2023: £1.4m) in the half year, on revenues of £17.9m (HY 2023: £15m).
Compared to the corresponding period, Assets under Management have increased c.26% to c.£1.8billion with no redemptions and the Group had c.£663million of liquidity at the end of the period to support our future investment activities.
Merica has also raised c.£47million of new capital across its Enterprise Investment Schemes (EIS) and Northern Venture Capital Trusts (VCT), alongside an additional £10.0million equity allocation to the Northern Powerhouse Investment Fund I from the British Business Bank, during the period.
Ten years since the business floated on the Stock Exchange Mark Payton, Chief Executive Officer of Mercia, commented: “Mercia has delivered another strong first half performance with our higher funds under management driving revenue and EBITDA growth. I am pleased to say that none of the tax changes announced in the Government’s Autumn Budget, will curtail Mercia’s growth ambitions.”
The original Mercia Fund Management business was founded in Birmingham in 2010 following the Global Financial Crisis, “with a core belief that we could make a material difference through deploying capital to the best investment opportunities, irrespective of where they were located in the UK,” Payton says.
Julian Viggars, Chief Investment Officer said: “With a focus on growing our original hybrid model of making both direct investments (using our own capital) and managing third-party funds under management, our vision was to become the first choice for investees, investors and employees. We are pleased to mark this 10-year milestone with the strong results we are reporting today.
“With c.£617million of managed fund capital available for deployment, we continue to support the most promising regional businesses across diverse sectors and founders, whilst aiming to deliver robust investor returns in an impactful way.
“Our equity portfolios are well diversified across sectors, largely unleveraged, and maintain significant liquidity, with a number of investments structured to provide downside protection. Our lending teams are also on the front foot with capital to deploy and good levels of deal flow.”
He said that whilst inflation and interest rates are trending in a favourable direction and political uncertainty in the UK has lessened, there remains “a generally lower risk tolerance in both the business and funding communities, particularly at the SME level.”
He added: “Whilst SMEs, including our portfolio companies, still face a challenging environment, they are resilient and continue to make solid progress.”
