Mercia Asset Management PLC (AIM:MERC) CEO Dr Mark Payton talked with Proactive about the company's impressive full-year 2024 results amidst market volatility, high inflation, and geopolitical uncertainty. Despite these challenges, Mercia reported record organic growth. Payton attributed this success to a dedicated team and strategic focus on diversified asset management, including venture capital, private equity, and debt.
Proactive: I'm joined today by Dr Mark Payton. He's the CEO of Mercia Asset Management. Mark, very good to speak with you this morning. You are out with your full year 2024 results in a year that you characterized as being filled with market volatility, high inflation and interest rates, geopolitical, geopolitical uncertainty, and also that short-lived recession. And yet you have reported record organic growth. Mark, how did you achieve that?
Mark Payton: Yeah. Good. Good morning. Yeah, I think every business owner will look back on the last two, three, five years and think, what else could come our way? And, in short, and flippantly, we achieved that by a very strong and dedicated team. And in an environment where we are flourishing and by flourishing as an asset manager, it's about funds in flight, in an environment where many asset managers are reporting net funds outflows.
And the reason why we secured funds inflows across institutional retail and British Business Bank is, is frankly, track record and performance. So how we've achieved that it's not it's a classic thing. The overnight success that's taken ten years to build is we've been on the market for ten years. We're now delivering exits, we're delivering track record and we're delivering capital out across the regions. Over 90% of what we've invested is outside of London. You know, we're firmly a domestic investor. We're firmly here to continue to grow that.
Proactive: Mark you highlight your diversified and differentiated approach. Could you briefly explain that?
Mark Payton: Yeah. So I mean most of our capital is in what we would call sort of the strategic assets of venture private equity and debt. And we set those up on the sub-brands of Mercia Ventures, of Mercia Debt, and Mercia Private Equity. Following the acquisition, relatively recently of Frontier Development Capital, we've also moved into sort of what we call intermediary, real assets.
So we're starting to move into real assets, be it social housing, infrastructure plays, brownfield regeneration, etc. so that broad church spread across different asset classes gives us that differentiated approach, not just in terms of investment activity, but also in terms of asset classes under management.
And I think that's really important when you're going through cyclical variations. Venture, for instance, at the moment is a challenging environment for all that venture is a part of our business rather than the entirety of our business. And I do think that a differentiated approach gives you the ability to scale different parts of the business, but also to look at, on a distribution basis, different pools of capital.
Proactive: Mark can you take us through some of the financial highlights of the year, because you reported a growth in revenue, growth in EBITDA, adjusted operating profits also up, and you've also raised your proposed final dividend?
Mark Payton: Yeah, absolutely. I mean, and I mean, these are a very strong set of results for us. Our best results so far as we continue, momentum and growth, but also what we term the natural evolution of the business. And just to sort of put that in context before I go into the results a little bit more, but you can see what's driving the results in that respect is when we listed back in 2014 on AIM we had approximately 23 million in third-party funds under management exclusively actually in enterprise Investment scheme EIS. And our net assets were 81 million. And you roll forward now to these results. Net assets are at 189 million so it has grown.
And coupled with our balance sheet, we had, what really isn't highlighted from what you've just said is we had an excellent realisation nDreams Limited sold to a business called Aonic AB for 30 million and over 26 of that was cashback onto us. And we've got a small equity stake now in Aonic AB, a business in itself, turning over €100 million and making something like 25 million EBITDA in itself.
So we had a small equity stake in a growing business. But that underlying third-party funds is what's driving the business forward. That's what's driving the revenue growth at 17.6%. And the commensurate EBITDA growth, again, up 6.7% to 5.5 million. Then it's the cash-generative nature of the business. That means that we can continue on this, progressive dividend policy.
And again, the dividends were up circa 4% during this period compared to last year. So very strong in that regard. And liquidity as well, I think is something that should come out in these results where, you know, we've got 46.9 million cash on hand. And just to remind everybody, we have a hybrid model which comprises of, balance sheet direct investments and which is a, you know, it's approximately 116 and 117 million of the net asset value, but also our third-party funds.
And within the balance sheet over the next three years, we estimate a need of about 25 million. So there's a 25. So if you've got 47 million, give or take cash on hand on the balance sheet, you have adequate capital to support that portfolio for the foreseeable future. And then look at our third-party funds. There is 666 million of unrestricted cash across those funds.
And another way of looking at this, is if you step back and say, all this turmoil hasn't finished and we've still got turmoil ahead of us. If Mercia raised no new funds and we carried on investing at the same rate in new businesses and existing portfolios, we have a three-year runway of cash here. Now, of course, we will raise new funds. And actually I expect a period of stability now that we're all facing, thank goodness. So I think we're in a very strong position, as these results say, as we face our next three-year strategic plan.
Proactive: And you continue to win new mandates during the period. So three new, British Business Bank mandates. Can you comment on that Mark?
Mark Payton: Yeah. And see back to the sort of distribution, the position of Mercia We focus, as I said, on institutional, which is predominantly sort of local pension government scheme capital pension funds. We've got British Business Bank, as you just rightly pointed out, and retail. And if I just flow through those and pick up on the BBB all three have been important to us and will be important to us going forwards.
Retail through EIS and VCT, we've had record fundraises across the group there and that's happened in this period. Institutional that's been coming into the real asset position that I mentioned at the moment. And we have ongoing fundraising in there. And then British Business Bank, we were successful in a competitive process in securing 360 million pounds, within the Midlands and the north of England in venture and in debt. So all three pools of capital have provided inflows to Mercia, giving us a record circa 600 million of funds inflow for this reporting period.
Proactive: Mark, you mentioned those three-year targets. And amongst those you aim to raise, your assets under management to 3 billion pounds and also double your EBITDA. So assets under management were 1.82 billion at the end of the period. How are you going to drive us up to 3 billion?
Mark Payton: Yeah, it will be. If you look back at our history, we've been growing at over 100% every three years. So that's it. This natural evolution language just speaks to the trajectory of growth that we have benefited from the historical periods. And if you then look back at every circa three years, we're acquiring a business. That business often delivers the same amount of organic funds growth as we acquired in the first place. That's really important to us, and we're seeing that with FDC at the moment. And so the move from circa 1.8 to 3 will be a combination of acquisitions as well as organic growth. It's a stretch target. These are never easy targets. But we have sight on how we can move in that direction.
Proactive: We're already a quarter way through the new financial year. Mark. How's it looking so far?
Mark Payton: Yeah, it's looking good. It's looking very good. So in terms of, business performance, you know, I look at business performance in terms of. And if, we have this sort of vision of being first choice for investors, investors, employees. So that's how I judge things. Investors, in a market of, limited liquidity, origination has never been as strong as it is at the moment across all our asset classes. So incoming approaches for investment, both in terms of quantity and quality are growing.
And that's a big positive. Investors we continue to raise capital across those three pools of distribution. So again that's looking very favorable going forward. And employees we have an excellent team here at Mercia. we have grown the team to meet the new capital, 140 of us now across 11 offices across the UK. And we are well set with systems and capability to meet that growth, aspiration.