Annual Report and Accounts 2024 Mercia Asset Management PLC
Strategic report
As a Board, we unanimously believe that our proposed new
strategic direction is the right one for all of our stakeholders, be
they our many longstanding fund investors, our Venture Capital
Trusts (“VCTs”), our employees and, critically, our shareholders.
If the resolution is approved by our shareholders in September
2024, Mercia’s new twin strategic objectives will be to increase
AuM to in excess of £3.0billion whilst doubling EBITDA during
the next three years to 31 March 2027.
Shareholder returns – dividends and share buyback
As part of our strategy to create value for shareholders, we have
a strong desire to make cash returns to shareholders, funded from
both our trading activities and direct investment realisations. We
adopted our progressive dividend policy in December 2020, when
the Group declared its maiden interim dividend of 0.10 pence
per share. Since then, Mercia’s continued progress has merited
measured increases in both the interim and final dividends. Last
December, the Group paid an interim dividend of 0.35 pence per
share and is now recommending a final dividend of 0.55 pence
per share, representing a total dividend of 0.90 pence per share
for the full year (2023: 0.86 pence per share), a c.5% increase on
the prior year. Given the overall strength of Mercia’s business
model and its excellent cash position, the Board’s objective
remains to maintain this progressive policy.
Following the successful exit from nDreams Limited (“nDreams”)
in November 2023, we announced a £5.0million share buyback.
This buyback concluded in May 2024 and resulted in 15.7million
shares being bought back into Treasury, at an average purchase
price of 31.8 pence per share.
Taken together (and assuming that the proposed final dividend
is approved by shareholders at this year’s AGM), Mercia will have
returned c.£18million in cash to shareholders since March 2020.
‘Mercia 20:20’
Mercia’s year to 31 March 2024 demonstrated the variability of
venture investing, from the very successful and profitable sale
of the Group’s direct investment in nDreams for £30.2million
(of which £26.4million was received in cash), to the difficult
decision in May 2024 to cease further material investment into
Impression Technologies Limited.
Across the three-year period, our many business activities have
contributed to Mercia comfortably exceeding its three-year
‘Mercia 20:20’ growth in AuM target, whilst missing its three-year
profit before tax target. It is these experiences, together with
feedback from our shareholders, which have helped shape our
thinking in terms of Mercia’s proposed future direction.
Governance
Our commitment to the governance principles of the Quoted
Companies Alliance (“QCA”) Corporate Governance Code
remains resolute and we have recently adopted the new
QCA Code. Governance codes aside, our Directors have
always regarded integrity and transparency as fundamental
cornerstones to the way in which we do business. Succession
planning is also an essential element of good governance and
this is kept under review by our Nominations Committee.
At this year’s AGM, having reached 78 years of age, our co-
founder, first Chair and, together with family trusts, Mercia’s
largest overall shareholder group, Ray Chamberlain has decided
to retire from our Board. Ray has been a serial and successful
entrepreneur over many decades. In 2010, it was Ray who
backed Mark Payton’s fund management MBO and whose family
trusts provided the follow-on capital thereafter to the most
promising fund investees. This was the genesis of what became
Mercia’s ‘funds-first’ hybrid investment model.
Ray’s measured and thoughtful Board contributions over the
last 10 years, together with his unwavering long-term support,
have provided the time and stability from which all businesses
benefit. I would also like to thank him personally for his
wise counsel during my time as Chair. We will all miss Ray’s
enthusiasm for venture investing and his support for young,
regionally based technology-led businesses, such as Warwick
Acoustics Limited. We are confident that Ray will remain
a strong supporter of our Group, including our proposed new
strategic direction.
With a Board currently comprising five Non-executive Directors
and three Executive Directors, we do not feel that it is necessary
to add an additional Non-executive Director once Ray steps
down at our AGM in September 2024. Our Nominations
Committee will of course keep our Board’s composition and
balance of skills and experience under review.
At the operating level, we appointed Jocelyne Bath during
the year as our new Chief Operating Officer, and more
recently appointed our first full-time heads of Environmental,
Social and Governance (“ESG”) and Information Systems/
Information Technology (“IS/IT”), both reporting to Jocelyne.
We remain as committed as ever to all three principles of ESG,
including continuing to measure and offset our relatively small
environmental impact, and promoting further diversity, equity
and inclusion throughout Mercia, our investment committees
and investee portfolio companies. Based upon our investment
experience, diverse teams make good teams. The appointment
of a dedicated IS/IT manager is an investment in our internal
capabilities, so as to increase our efficiency as we continue to scale.
Maintaining good stakeholder relationships also remains
critical to our future success, as does continuing to meet the
investment objectives agreed with our many asset class fund
investors. During the year we have also continued to focus on
our relationship with each of the three Northern VCT boards.
Proactive engagement with all of our stakeholder groups
remains particularly important to our Board and I am always
pleased to meet and engage with shareholders. In recent
months, Diane Seymour-Williams, our Senior Independent
Director and Remuneration Committee Chair, has also been
in contact with our leading shareholders in connection with
the one-year extension of the Executive Director’s Long-Term
Incentive Plan. We will, as last year, hold our forthcoming
AGM in London – this year at Rothschild & Co’s offices.
I and my fellow Board members look forward to engaging
with our stakeholders during the current financial year.