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Mercia released interim results for its FY26 on 2 Dec 25. My Equity Development research note covering the results is out. You can read the full note here.
Some highlights:
H1-26 (to 30 Sep 25) saw EBITDA jump 14% y-o-y to £4.2m and EBITDA margin up from 20.8% to 24.6%.
AUM was marginally up at £2.0bn. Capital raises and new mandates added +£52m, offset by distributions of -£56m: mostly dividends to VCT shareholders and returns of capital by funds in their realisation phase. Valuation moves added +£16m. There were no redemptions. Post period-end, £38m was raised by Northern VCTs and the North East Accelerate Fund launched with £35m of FUM.
The capital raising pipeline is very strong at £880m. Source-of-funds diversification is on track with £550m of the pipeline from institutional investors, £200m from the public sector, and £130m from retail investors. Mercia looks on track to meet our short- and medium-term forecasts, which are unchanged, and we expect AUM to ratchet up towards Mercia’s target of £3.0bn over the next few years.
Mercia’s net cash of £34m equates to 9p per share (27% of market cap).
We value its fee-earning fund management business at 18p per share (10x EBITDA).
The NAV of its direct investments’ portfolio is £131m or 31p per share (>100% of market cap).
That’s a sum-of-the-parts value of 58p per share, almost double the share price. Clearly, the portfolio is being deeply discounted by investors, yet Mercia has a proven track record of exiting at a premium to NAV. Its strategy is to sell c. 70% of the portfolio over the next few years, so it won’t take long to see if the market is being grossly over-conservative.
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Disclosure: At the time of writing, Paul Bryant was a shareholder in Mercia Asset Management and covered it as an analyst on behalf of Equity Development Limited. Read Equity Development’s research on Mercia here. And please read this link for the terms and conditions of reading Equity Development’s research.
