Mercia Asset Regulatory News (MERC)

Mercia Technologies PLC

("Mercia" or "the Group")

Software & the Internet Portfolio Update

Mercia Technologies PLC (AIM: MERC), the national investment group focused on the funding and scaling of innovative technology businesses with high growth potential from the UK regions, is pleased to provide an update on recent commercial progress across its Software & the Internet portfolio.

Mercia currently has five direct investments within its Software & the Internet portfolio. Having successfully exited Science Warehouse in early 2018, the Group made new direct investments into two companies during the year, Voxpopme and W2 Global Data Solutions, both having been previously supported by Mercia's managed funds. Together, the current Software & the Internet portfolio represents approximately 21% by value of the Group's total direct investment portfolio. All of these companies have shown strong revenue growth during 2018 and several are developing significant revenue streams from international markets to complement their domestic revenues.

The sector investment team works closely with the Group's managed funds team to identify and cultivate new balance sheet direct investment candidates. They continue to see multiple opportunities for potential future direct investments from the earlier-stage funds portfolio. Mercia plays a proactive role with these early-stage companies to help shape and support their development plans and currently has 10 companies from the sector that it believes have the potential to become new direct investments within the next 12-24 months. These include Clear Review, a company that provides a continuous performance management solution in the talent management space and Smartgate Solutions, whose Radar Healthcare solution supports improvements in quality and compliance for organisations in the healthcare sector.

Intechnica (holding value as at 30 September 2018 £4.7million, 27.9% direct equity stake) is a well-established specialist in website performance and security, delivering consulting services and solutions to blue chip organisations across the UK and internationally, with key clients including ASOS, Channel 4 and Avis. Powered by machine learning, the company's cybersecurity division Netacea protects websites and mobile apps from malicious bots, providing frictionless access for genuine users while preventing non-human traffic.

The company has made several senior appointments during 2018 to further strengthen the management team including Nick Baglin as General Manager of Netacea, whose previous experience includes being VP of Sales, EMEA of Cyber Ark Software. Having already secured significant financial backing via a syndicated investment round, Intechnica's revenue is anticipated to grow rapidly from its current circa £6million level.

Intelligent Positioning (holding value at 30 September 2018 £4.2million, 28.8% direct equity stake). The company's Pi Datametrics platforms, APIs and reports offer a digital intelligence solution that helps organisations track, manage and optimise their organic equity by combining and correlating search engine ranking data with multiple additional data sources, to provide insight into the factors that impact business performance. Key clients include Tesco, Vodafone, Dyson, Travel Supermarket, Aviva, The Telegraph, Leo Vegas and Mitsubishi Motors.

Within the last year, the platform has been extended to offer rapid insights, brand and equity performance indicators as well as daily product pricing analysis for retailers. The breadth of data collected by Intelligent Positioning allows it to derive deep insights into industry verticals such as retail, automotive and finance, as well as supply M&A, branding and commerce teams with strategic market indicators. The company has achieved 35.0% revenue growth in 2018, with product revenues increasing by 47.0%, aided by strong expansion in the US, the Nordic Region and South East Asia. It has also developed a partnership with Brandwatch to combine organic search performance data with data on social media performance.

Voxpopme (holding value at 30 September 2018 £3.0million, 21.8% direct equity stake) was a new direct investment in 2018. It offers clients, including Verizon, Microsoft, Airbnb and Unilever, a video-based solution to their market research requirements, augmenting or replacing traditional surveys with video feedback capture and analytics capabilities that give richer insights into feedback. Its new product, VideoCX, targets the rapidly-growing Customer Experience market that is expected to show CAGR of circa 23% to reach $32.5billion by 2025[1]. Voxpopme has shown strong revenue growth since Mercia's investment, with an increasing proportion of its revenues being captured as recurring subscription revenue, which has grown by more than 130% in 2018 and now represents in excess of 50% of all new business overall. Revenue growth is currently circa 90% year-on-year.

W2 Global Data Solutions ("W2") is Mercia's most recent new balance sheet investment, with £2.0million invested in October 2018 for a 17.4% direct equity stake. W2's software-as-a-service tools provide real-time identity verification services to help organisations prevent fraud and money laundering, a market estimated to grow from $14.4billion in 2016 to $33.2billion in 2021.

With clients including gohenry, GVC Holdings and Wirecard, W2 has delivered consistently high double-digit revenue growth over the last three years and Mercia's recent investment will help the company expand its service offering into additional vertical markets and geographic regions.

Crowd Reactive (holding value at 30 September 2018 £1.6million, direct equity stake 26.2%) has continued to develop its position as one of the leading providers of experiential technology solutions, with clients including major international brands such as Adidas, Coca Cola and Google. Crowd Reactive is extending its business to support permanent installations that include augmented and mixed-reality experiences in major attractions and event venues worldwide.

During 2018, to support this market expansion the company acquired Excelerated Applications, the developer of a sophisticated radio-frequency identification event engagement platform. Utilising this technology, the company is pioneering digital engagement solutions and is developing immersive digital experiences for high-profile attraction venues in the UK, with further opportunities being explored in the US and other international markets. The business grew its revenues by 42.0% in 2018.

Alistair Forbes, Head of Software & the Internet at Mercia Technologies PLC, said:

"The early stage software business ecosystem remains very active across the UK and through our managed funds activities we see a large number of innovative applications that have their origins from both our partner universities and via our local investment teams' networks across the regions. Our physical presence across the UK regions gives us excellent visibility into these opportunities and we remain one of the most active software investors in the UK.

The addition of two new investments into our balance sheet portfolio in 2018 and the developing pipeline of future potential direct investments in our managed funds give us confidence that we will be able to create significant shareholder value and realise profitable cash exits from both portfolios in the near to medium term. These direct investments are showing strong revenue growth and our focus remains on supporting them in the delivery of their business growth ambitions."

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About Mercia Technologies PLC

Mercia is a national investment group focused on the funding and scaling of innovative technology businesses with high growth potential from the UK regions. The Group benefits from 19 university partnerships and offices across the Midlands, the North of England and Scotland providing it with access to high quality, regional deal flow. Mercia Technologies PLC is quoted on AIM with the epic "MERC".

Mercia's 'Complete Capital Solution' initially nurtures businesses via its third-party funds (now with circa £400million under management) and then over time Mercia can provide further funding to the most promising companies, by deploying direct investment follow-on capital from its own balance sheet. Since its IPO in December 2014, Mercia has invested over £74million across its direct investment portfolio.