Mercia Asset Management PLC (AIM:MERC) shares jumped 6% after it proposed a new investment approach and an increased final dividend after generating record fund inflows last year.
The regionally focused alternative asset manager's intention is to focus on its profitable and fast-growing fund under management (FuM), proposing a resolution at the annual shareholder meeting to reclassify Mercia as a trading company focused on the business of asset management rather than an investing company under the AIM rules.
When it floated on London’s junior market the company had net assets of £81 million and third-party FuM of around £23 million, while in the past year to March, total assets under management (AuM) rose 27% to £1.82 billion, while third-party FuM swelled 32% to £1.6 billion, dwarfing net assets of £189.2 million.
Mercia said it intends “no longer to make new direct investments from our balance sheet. We will continue to support our existing direct investments, but anticipate that their number will reduce as these investments are realised".
If the resolution is approved at the AGM, Mercia's new twin strategic objectives will be to increase AuM to more than £3 billion while doubling EBITDA during the next three years to 31 March 2027.
Record fund inflows
Mercia proposed a 0.55p final dividend, up from 0.53p last year, having upped its interim payout to 0.35p from 0.33p at the half-year stage and also a £5 million buyback after exiting from its investment in nDreams in November.
Mercia achieved record fund inflows of £562 million in the year to end-March, against a background of another year of subdued inflows for the wider asset management sector.
Venture FuM ended the year at £913 million, up 45%, with Debt FuM rising 24% to £687 million, both boosted by with securing new regional mandates from the British Business Bank. Private equity FuM shrank to circa £30 million from around £48 million.
The direct investment portfolio fair value ended the year at £116.9 million, down from £136.6 million, after the profitable sale of nDreams for £90.3 million, with Mercia having held a 33.2% direct stake, resulting in a total consideration of £30.2 million.
Chief executive Mark Payton said: "The year to 31 March 2024 was characterised by market volatility, high inflation and high interest rates driving up the costs of doing business, alongside geopolitical uncertainty and a thankfully short-lived recession.
"It is therefore pleasing to have come through these universal headwinds with record organic growth in our assets under management, driven by Mercia's diversified and differentiated approach to making a positive impact for our investors and investees."
He said the aim of driving the £3 billion of AuM and doubling EBITDA were part of Mercia continuing its "natural evolution", where it will be focused on "building value for shareholders and our other key stakeholders as a growing and sustainable, specialist alternative asset manager".