Fund management strong, exit environment subdued

FUM momentum accelerating, FY26 FUM was broadly flat at £1.82bn but increased by c.13% shortly after year end as £230m came on fee, supporting management fee growth and underpinning FY27 revenue expectations.

Operational leverage emerging, EBITDA rose 6% to £8.1m despite slightly lower revenue as operating costs fell 3%, with our FY27 EBITDA forecast increasing to £8.0m.

Exit timing pushed back, weaker venture market conditions mean direct portfolio realisations are now more likely in FY28/29 rather than FY27, although portfolio disposal options could accelerate cash generation.

Valuation disconnect remains significant, Mercia retains a strong balance sheet, increased its dividend by 6%, and our 54p sum of the parts valuation sits 88% above the current share price.