In today’s FY25 year-end trading summary for the period 1 Apr 24 – 31 Mar 25, Mercia has announced it expects EBITDA to be ‘materially ahead’ of expectations. This seems to be driven by a ‘continuing focus on efficiencies.’ It also reported a jump in net inflows in Q4 (£250m). This is hugely impressive given such an uncertain market and economic environment.
It closed the year with cash and equivalents of c. £40m, well ahead of our forecast of £34m. Following the recent share price fall, that £40m of cash translates to around 31% of Mercia’s market cap. We.Provided there are no major falls in the NAV of on-balance-sheet investments, today’s update suggests that our previous sum-of-the-parts valuation of 52p per share (double the current share price) may prove conservative.
The £250m of inflows in Q4 (existing fund mandate increases, new fund management contracts, and successful VCT and EIS fund raises), coupled with the £57m in H1 shows that Mercia has developed a proposition which is highly attractive to investors in its range of vehicles.
We upgrade FY25 forecasts on the back of higher-than-expected net flows and additional efficiencies, and assume no major market moves in FUM, or large valuation moves to on-balance investments. Our fundamental valuation of 52p / share is unchanged for now.
