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(Corrects name of direct portfolio company.)
(Alliance News) - Mercia Asset Management PLC on Tuesday said it acquired the entire share capital of Birmingham-based regional lender Frontier Development Capital Ltd, while it also announced its profit was down and declared an increased interim dividend.
The Warwickshire, England-based asset manager said it acquired FDC for a total consideration of up to GBP9.5 million plus net cash.
This involves an initial GBP5.5 million satisfied in cash from Mercia Asset Management's liquid resources plus an amount equal to FDC's net cash position on November 30, which is estimated to be GBP1.5 million. A further deferred consideration of up to GBP4.0 million in cash will be paid, depending on future FDC revenue performance and net new third-party fundraising targets for the two years ending November 2024.
Mercia Asset Management said the acquisition adds around GBP415 million to its funds under management and its profitable assets under management to a total of around GBP1.4 billion. This means its three-year GBP1.6 billion target by March 2024 is within reach and with 18 months still to run.
It currently expects the remaining GBP200 million of targeted assets under management growth by organic means. While there are no active negotiations for further acquisitions, Mercia Asset Management said it did not rule it out between now and March 2024.
It also invested a total GBP5.3 million in two new direct portfolio companies Axis Spine Technologies Ltd and Nova Pangaea Technologies Ltd in October.
Meanwhile, Mercia Asset Management also announced its pretax profit in the six months fell by 33% to GBP7.4 million from GBP11.0 million a year prior, while revenue fell by 4% to GBP12.2 million from GBP12.7 million.
Fair value movements in direct investments underpinned declining profit, falling by 36% to GBP5.6 million from GBP8.7 million.
Net asset value per share on September 30 was up 10% to 46.80 pence from 42.40p a year earlier.
Shares in Mercia Asset Management were up 1.6% to 31.23p each in London on Tuesday morning.
It declared an interim dividend of 0.33p, up 10% from 0.30p a year earlier.
Mercia Asset Management said its debt-free balance sheet and high liquidity was good for investment, as reflected in its recent post-half-year acquisitions. Cash and short-term liquidity investments were at GBP56.1 million on September 30, up 7.7% from GBP52.1 million a year earlier.
"In these challenging times, both nationally and globally, the resilience of Mercia's hybrid investment model is evident as we continue to drive growth in assets under management, net asset value per share and our progressive dividend," said Chief Executive Officer Mark Payton.
Payton continued: "These results also showcase our track record of delivery, with Mercia having returned circa GBP280 million back to our fund investors since April 2020. With our strong cash position, exceptional team and proven ability to generate attractive returns across asset classes, we continue to look forward with confidence as we progress towards our Mercia '20:20' targets."
Mercia Asset Management's '20:20' targets relate to the three-year strategic plan outline above regarding assets under management. It also includes targets of GBP60 million in cumulative pretax profits by March 2024.
By Greg Rosenvinge, Alliance News reporter
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