Technology-focused business incubator Mercia Technologies (LON:MERC) has seen a sharp increase in the value of its investment portfolio.
The company, which listed on Aim about this time last year, has invested £20mln since it became a public company and during the six months to the end of September saw the fair value of its investment portfolio rise by £4.6mln to £29.2mln.
"During the period, Mercia Technologies invested £4.4million into 11 new and existing direct portfolio companies. In addition, Mercia's fund management business invested £1.8million into 14 companies and circa £6.0million was raised in new third party funds to support its early stage deal flow,” said company chief executive Mark Payton.
Around £6mln was raised by its Mercia Fund Management division in third party Enterprise Investment Scheme (EIS) and Seed EIS deals to invest in developing the early stage pipeline.
Speaking to Proactive Investors, Payton stressed the importance of funding for these early stage companies, which are often starved of investment, especially if they are based outside of London.
“Capital tends not to travel more than two hours beyond London,” Payton opined.
Though the company's focus is on investing in companies from the provinces, Payton said it was prepared to invest anywhere, but suggested that the best deals are likely to be found away from the capital city.
The reporting period certainly saw the company extend its presence north of the border, opening an office in Edinburgh and signing two university partnerships in Scotland: one with the University of Strathclyde and the other with Abertay University.
The latter, in particular, is a leader in digital development with close ties to Internet giant Google.
As well as funding companies, Mercia provides hands-on management advice, using experienced and successful executives to develop fledgling companies in what is usually a long gestation period – it can be anywhere from two to eight years before a portfolio company becomes what Mercia calls an “emerging star”, which is essentially a company that is on the cusp of becoming ready for prime time in the commercial arena.
Generally, Payton told Proactive, the exit strategy is usually for a trade sale and the group normally has a good idea of who the likely buyers would be for a particular company when it adds the firm to its portfolio.
"A lot of work goes on behind the scenes," Payton revealed.
For a portfolio company of this kind, the profit & loss statement is not especially relevant, but for the record the company made a loss of £748,000 on revenue of £654,000.