Strong growth. A rarity in today's asset management sector.
In H1 of FY25, Mercia Asset Management's revenue grew 19% year-on-year with EBITDA up 34%. It is one of very few London-listed peers with positive net flows.
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My Equity Development research note was published last week covering Mercia Asset Management. It is certainly making solid progress with its Mercia 27 strategy which targets £3bn AUM (currently £1.8bn) and c.£10m EBITDA by FY27. AUM was up 26% y-o-y, and Mercia is one of very few London-listed asset managers with positive net flows over recent periods.
Video Summary
Executive Summary
H1 revenue was up 19% y-o-y to £17.9m and EBITDA +34% to £3.7m, a margin of 20.8%, up from 18.4% in H1-24. This is likely to ratchet up over the longer term as the business scales.
PBT increased 75% to £2.4m (the % jump boosted by a negative FV move in direct investments in H1-24, and basic EPS increased 37% to 0.41p (a higher tax charge in H1-25 reduced the % increase).
The balance sheet is strong with net cash of £46m (35% of market cap), and no debt. There were no significant FV moves or exits in the direct portfolio (NAV £121m, 91% of market cap), with £3.9m of follow-on investments made. We remind readers that Mercia intends to sell down its direct portfolio to focus on 3rd party fund management. The interim dividend increased 6% to 0.37p.
We reiterate that on fundamental value, Merc. shares look mispriced. Our valuation is sum-of-the-parts based as shown below.
And we see no reason to discount the direct portfolio NAV given Mercia’s record of exits at a premium to holding NAV.
Full research note available here.
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Disclosure: At the time of writing, Paul Bryant was a shareholder of Mercia Asset Management and covered Mercia 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.