Mercia Asset Management Reports Record EBITDA and 5% Dividend Hike Amid Strong AuM Growth

Mercia Asset Management results: record EBITDA, higher dividend, but a statutory loss clouds the picture

Mercia Asset Management has delivered one of those results that looks good in some places and uncomfortable in others. The upbeat bit is clear enough: record EBITDA, improving margins, more money under management and a 5% increase in the proposed final dividend.

The snag is the headline statutory numbers. Mercia swung from a £5.4 million profit before tax to a £7.7 million loss before tax, mainly because the value of its direct investment portfolio was marked down by £12.8 million. So this is not a bad trading update, but it is definitely not a clean one either.

Key Mercia Asset Management FY26 numbers investors should focus on

Metric	FY26	FY25
Revenue	£34.1 million	£35.2 million
EBITDA	£8.1 million	£7.6 million
EBITDA margin	23.7%	22.1%
Operating profit/(loss)	£(8.9) million	£2.8 million
(Loss)/profit before tax	£(7.7) million	£5.4 million
Basic EPS	(2.00)p	0.80p
AuM at year end	£1,997 million	£1,988 million
AuM today	c.£2.2 billion	Not disclosed
Cash	£26.4 million	£40.1 million
Proposed final dividend	0.61p	0.58p

Why Mercia’s record EBITDA matters more than the statutory loss

EBITDA – earnings before interest, tax, depreciation and amortisation – is a way of showing the underlying trading engine before some accounting and investment valuation noise. On that measure, Mercia had a strong year. EBITDA rose 6.5% to £8.1 million and the EBITDA margin improved to 23.7%.

That margin improvement matters. It tells you the core fund management business is scaling properly, with costs growing more slowly than income. Administrative expenses excluding depreciation actually fell 2.9% to £26.0 million, which is exactly what you want to see from an asset manager chasing operational leverage.

In plain English, Mercia’s fee-based business is becoming more efficient. That is the most encouraging part of this update.

Assets under management growth shows Mercia’s fundraising machine is still working

At the year end, assets under management, or AuM, were £1,997 million, up slightly from £1,988 million. That does not sound thrilling at first glance, but the more important number is the post year end jump to c.£2.2 billion today.

That increase was helped by c.£151 million of additional allocations into regional venture and lending funds, plus a new c.£33 million allocation tied to the government’s eight industrial sectors. These were effective from early April 2026, so they do not fully show up in the 31 March year-end figure.

Mercia also had a very strong retail fundraising year. The Northern VCTs raised a record £80.0 million in the 2025/26 tax year, while three EIS funds raised £12.7 million, with a further Knowledge-intensive EIS fund closing in April 2026 with £5.4 million.

That is important because fundraising is the lifeblood of an asset manager. More capital under management generally means more recurring fees, and Mercia says c.83% of its fund management fees are contracted and recurring. That gives the business a solid base.

What went wrong: direct investment portfolio markdowns hit Mercia’s profits hard

Here is the sore point. Mercia’s direct investment portfolio fell in fair value by £12.8 million during the year, leaving it valued at £124.8 million at 31 March 2026, down from £126.0 million.

The company says this largely reflects weaker market valuation comparables caused by geopolitical instability and the rapid development of AI, which has hit confidence and risk appetite. That is plausible, and it is also a reminder that valuing unquoted growth companies can get messy fast when markets cool.

The biggest individual markdown mentioned was Netacea Group, down £6.243 million. Voxpopme also saw a £3.292 million fair value reduction, while VirtTrade was down £1.977 million.

My view is that investors should not ignore this. These are non-cash valuation movements, yes, but they still matter because they affect net assets, reported earnings and the eventual value Mercia might realise when it exits these investments.

Mercia’s direct portfolio exit delays are the main strategic disappointment

This is probably the most important negative in the whole announcement. Under the Mercia ’27 strategy, the company had aimed to divest up to 70% by value of the direct investment portfolio by 31 March 2027.

Management is now saying that target will be difficult to hit on time. Instead, the majority of realisations are now expected between FY28 and FY29.

That is a meaningful slip. It does not break the investment case, but it does delay the simplification story and the release of cash that could potentially be returned to shareholders or reinvested elsewhere. The board says it is considering alternative options for divesting the portfolio, but details are not disclosed.

Dividend increase and share buybacks show confidence, but cash has fallen

The board has proposed a final dividend of 0.61p per share, up from 0.58p. That brings the total dividend for the year to 1.00p, up from 0.95p, a 5% increase.

Mercia also bought back 9,840,205 shares during the year at an average price of 30.1p, costing £3.0 million. Combined with dividends, that meant around £7.2 million a year being returned to shareholders.

That is supportive, and it suggests management is confident in the cash generation of the fund management arm. Still, cash and cash equivalents fell from £40.1 million to £26.4 million, mainly due to direct portfolio investment, dividends and buybacks. That is still a decent cash balance, but it is lower and worth keeping an eye on.

Mercia’s property finance and regional investing model still look resilient

One quietly positive feature here is diversification. Mercia is not relying on one narrow corner of private markets. It operates across venture, development capital, property finance and its own balance sheet portfolio.

Property finance funds held steady at c.£400 million and deployed c.£61 million in the year, with no provisions again. Mercia also backed 156 businesses and deployed c.£230 million across the group, with c.86% invested outside London. That regional focus remains a genuine point of difference.

Is this Mercia Asset Management RNS positive for retail investors?

On balance, I would call this moderately positive, but with a real asterisk attached.

• The positives: record EBITDA, improving margins, strong fundraising, AuM growth to c.£2.2 billion post year end, a higher dividend, and continued buybacks.
• The negatives: a £12.8 million portfolio markdown, a statutory loss, lower cash, and delayed exits from the direct investment portfolio.

If you own Mercia for its fee-based asset management business, this update is encouraging. The core machine is working better, and scale is starting to show through in profits and margins.

If you own it hoping for a quick crystallisation of value from the direct investment portfolio, this RNS is less cheerful. That part of the story has moved further out.

Mercia Asset Management outlook: what to watch next

The next phase is fairly clear. Investors should watch whether the post year end mandate wins translate into rising fee income, whether EBITDA keeps moving towards the c.£10 million Mercia ’27 target, and whether management can make real progress on portfolio exits.

There is also a wider point here. Mercia looks increasingly like a steadier, recurring-revenue asset manager with a lumpy and occasionally awkward investment portfolio attached. If the company can keep growing third-party funds under management while gradually reducing that balance sheet exposure, the investment case gets easier for the market to understand.

For now, this was a good trading year wrapped inside a messy accounting result. That is not ideal, but it is a lot better than a weak business dressed up by flattering numbers.