Mercia Asset Management - FY21 a breakthrough year, with more to come

FY21 was the year Mercia’s business model as a specialist asset manager matured. The group largely achieved its FY22 strategic goals a year ahead of target (assets under management, AUM, of c £1bn, evergreen balance sheet and sustainable profitability), with NAV per share climbing 24% y-o-y to 40p and AUM rising 18% y-o-y to £940m at year end. Given this progress, a new plan has been set, Mercia 20:20, aiming for average annual growth in AUM of 20% and average PBT of £20m between FY22 and FY24. Mercia is now profitable (FY21 EPS of 7.83p, a 4.8x P/E), with an FY21 dividend yield of 1.1%. Despite evident progress, Mercia’s shares continue to trade at a discount to NAV (0.94x), even before considering the embedded value of the third-party fund management business (c 6.9p/share at 4% of AUM).