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Mercia Asset Mgt PLC - COVID-19 Business Update

RNS Number : 6045H
Mercia Asset Management PLC
25 March 2020
 

RNS

 

 

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

For immediate release

25 March 2020

 

 

Mercia Asset Management PLC

("Mercia", the "Group" or the "Company")

COVID-19 Business Update

 

Mercia Asset Management PLC (AIM: MERC), the proactive, regionally focused specialist asset manager, provides the following business update in light of COVID-19.

 

·     Business continuity plan implemented with previously tested remote working capabilities functioning well

·     Assessing and supporting c.400 portfolio companies in own and third-party managed funds

·     Strong balance sheet with £30.4million unrestricted cash as at 20 March 2020

·     No bank or other indebtedness and c.£190million of available fund capital from long-term investors to selectively support portfolio companies and provide financial stability

·     Short-term impact to asset management revenues and portfolio valuations as a result of the drop in asset values across all markets and overall economic conditions

 

COVID-19 priorities and actions

In response to the challenges posed by COVID-19, the Group's focus is on three priorities: the safety of our employees, the continued support for our portfolio companies and maintaining long-term value creation potential for our shareholders and investors in our managed funds.

Mercia's employees are our strength

Our first priority is the wellbeing and safety of our employees and their families. Well in advance of government guidance Mercia had developed full virtual systems (including end-to-end investment and fund transfer processes) to operate in a remote environment and we had already closed all eight offices for a day to trial this virtual operating in real time. We have no staff overseas and all of our employees are now working remotely. We have established regular, coordinated investment and support team video check-ins as we anticipate an extended period of remote working to ensure that our employees' welfare, and that of their families, is catered for. We are passionate about our #OneMercia community which now, more than ever, is critical to Mercia's continued and efficient operations.

 

Commitment to regional SMEs

In addition to promoting employee safety, our remote working capabilities allow us to provide ongoing support to our portfolio companies at this critical time. The Group has c.400 companies within its venture, private equity, debt and balance sheet investment portfolios and we are deploying our operational specialists and platform of services to assess their needs. We have a talented, committed and experienced investment and support team across all of Mercia's asset classes and they are actively engaging with our portfolio companies.

Our commitment to regional SMEs is long term, and we will deploy all of our resources to support them through this period. This will in turn ensure that we protect long-term value for our shareholders and managed fund investors alike. Mercia's funds under management are typically long-term and closed-end in nature, including some with supportive investors such as British Business Bank and regional pension funds.

Strong balance sheet to meet funding needs

The Company has a strong balance sheet with £30.4million of unrestricted cash as at 20 March 2020 and no bank borrowings or other debt obligations. In addition, Mercia has c.£190million of available investment capital in its managed funds. Together, this provides sufficient liquidity to selectively support our portfolios and provide financial stability to the Group as a whole. Mercia's focus has always been on sectors where investee companies have relatively low investment needs to achieve cash flow breakeven and, at this time of limited liquidity, Mercia's significant cash resources across both its funds and balance sheet is a key asset.

Likely short-term financial impact on the Group

With almost all asset classes worldwide falling in value it is inevitable that valuations for Mercia's managed funds will be impacted. Where contracted revenues are directly linked to those asset values, they will be consequently affected. Today the three Northern Venture Capital Trusts, whose portfolios are now managed by Mercia, announced reduced net asset values of c.22% on average. Similarly, it is inevitable that the fair value of Mercia's direct investment portfolio will be impacted.

Outlook

The Group will continue to invest carefully to preserve the significant potential future value in all portfolios and has the necessary capital to do so. Whilst it is not possible to provide more explicit guidance at this time we do now expect revenues over the next financial year to be lower than originally anticipated. The Group remains very well placed financially, however, and has a degree of flexibility in its cost base, to partially mitigate lower anticipated revenues.

As a result of these key strengths, Mercia's medium-term future prospects remain unchanged.

Mark Payton, Chief Executive Officer of Mercia, commented:

"Mercia was established with the knowledge that capital supply and market performance is cyclical in nature. Over more than a decade we have built a proactive, supportive ecosystem where we have invested in businesses with relatively modest capital needs and sensible entry valuations. I have the privilege of working with an exceptionally talented and experienced team who themselves have successfully invested through such cycles. I am confident that we will come out of this cycle in good health. We are well prepared with strong liquidity (c.£220million of uninvested cash across our asset classes) and long-term, supportive fund investors. Mercia has only invested on a domestic and largely regional basis, and we are here to support our portfolio companies as we chart our way together through these difficult times."

 

For further information, please contact:

Mercia Asset Management PLC

+44 (0)330 223 1430

Mark Payton, Chief Executive Officer

 

Martin Glanfield, Chief Financial Officer

 

www.mercia.co.uk

 

 

 

Canaccord Genuity Limited (NOMAD and Joint Broker)

+44 (0)20 7523 8000

Simon Bridges, Richard Andrews

 

 

 

N+1 Singer (Joint Broker)

 

Harry Gooden, James Moat

+44 (0)20 7496 3000

 

 

Buchanan Communications

+44 (0)20 7466 5000

Giles Stewart, Chris Lane, Vicky Hayns

 

www.buchanan.uk.com

 

 

About Mercia Asset Management PLC:

Mercia is a proactive, specialist asset manager focused on supporting regional SMEs to achieve their growth aspirations. Mercia provides capital across its four asset classes of balance sheet, venture, private equity and debt capital; the Group's 'Complete Capital Solution'. The Group initially nurtures businesses via its third-party funds under management, then over time Mercia can provide further funding to the most promising companies, by deploying direct investment follow-on capital from its own balance sheet.

The Group has a strong UK regional footprint through its eight offices, 19 university partnerships and extensive personal networks, providing it with access to high-quality deal flow. Mercia has over £700million of assets under management and, since its IPO in December 2014, has invested over £90million across its direct investment portfolio.

Mercia Asset Management PLC is quoted on AIM with the epic "MERC".

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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Price: 20

Market: AIM
Market Cap: £88.02 m
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