Mercia AM debuts interim dividend as AUM and profits surge

How did managers fare in H1 2020?

How did managers fare in H1 2020?

Companies and economies around the world continued to feel the effects of the coronavirus-enforced lockdowns during the first half of 2020. Investment Week reports on how they have done since then.

Mercia Asset Management 

Mercia Asset Management has announced its maiden interim dividend at a value of 0.1p per share and the commencement of a progressive dividend policy, with the firm quadrupling post-tax profits and growing AUM by 78% compared to the same time last year.

In its interim results for the six months ended 30 September, published today (1 December), Mercia revealed its AUM had risen to £872m, up from £490m and £800m on 30 September 2019 and 31 December 2019 respectively.

The full-year AUM increase was largely as a result of the acquisition of a VCT fund management business in December 2019, while AuM grew organically by 9% in the six months to 30 September.

Net outflows of £8m were wiped out by positive market performance worth £80m during the period, the bulk of which came from the firm’s VCT offering.

Around 83% of Mercia’s AUM is third-party funds under management, up from 74% at the same time last year, with unrestricted cash on hand of £230m, down from £290m at the end of last year.

Remaining AUM is on the firm’s consolidated balance sheet, which has an unrestricted cash balance of £25m, down from £30m at the end of last year.

Profit after tax for the period was £8.2m, up from £2.1m at the same time last year, with the firm generating £4.8m in returned cash to the balance sheet from the exit of The Native Antigen Company and a further £1m from the sale of Clear Review.

The achievement of a “sustainable adjusted operating profit, driven by the fees generated in our fund management business”, according to Mercia, means the firm has achieved one of its three strategic growth goals, enabling the firm to institute its new dividend policy.

Merica is now halfway through its three-year strategic plan, which targets three goals: achieve operating profitability before fair value movements, realised gains and all non-cash charges; grow AUM to at least £1bn; and the achievement of an “evergreen” balance sheet enabling direct investment activities to be fully funded by periodic cash realisations from the existing direct investment portfolio.

The firm said it was “confident of achieving the remaining two goals over the next 18 months”.

Commenting on the “record results”, CEO of Mercia Mark Payton said: “We have successfully built scale in our third-party fund management business and the fees this is generating are enabling us to deliver a sustainable adjusted operating profit, in turn underpinning our maiden interim dividend and the adoption of a progressive dividend policy.

“I am also pleased with the positive steps we are making towards ‘evergreening’ our balance sheet. We delivered a profitable cash realisation during the period and another post period end. Furthermore, our direct investment portfolio is well financed and we have considerable remaining liquidity.

“In addition, it is encouraging that we have reported a strong net fair value increase, reversing some of the Covid-19 impact we reported in our full-year 2020 results.

“We are increasingly optimistic about the potential of the companies within our direct investment portfolio, many of which are in sectors such as life sciences, software and digital entertainment which are experiencing strong tailwinds.”

Aviva Investors

Aviva Investors was boosted by strong new business wins in the UK and North America during the first nine months of 2020, as third-party net fund inflows soared to £1.2bn.

The figure was a large increase from the £500m of inflows in the same period during 2019, despite a challenging market backdrop.

CEO Amanda Blanc on Thursday (26 November) said the insurer would implement a new “sustainable and resilient dividend policy”, as it looked to focus on its core markets of the UK, Ireland and Canada after the recent sale of Aviva Italy and Aviva Singapore for £2bn.

Aviva said it would pay a 7p interim dividend per share for 2020 and expects a final dividend of 14p to take it to 21p per share for the financial year, up from 15.5p in 2019.

The firm said this level of dividend would be “sustainable and resilient in times of stress” and noted it was covered by the capital and cash generated from its core markets.

It added the divided was expected to grow in future by low to mid single digits over time.

Le Blanc said: “Our trading performance is robust and our financial position is strong with a capital surplus of £11.8bn. The first nine months have demonstrated Aviva’s ability to grow in core markets where we have attractive, long-term growth prospects.

“The response of our people to the Covid crisis has been nothing less than phenomenal and I would like to thank them for all they have done for our customers this year. We continue to work at pace to deliver our strategy, support our customers, and unlock value for Aviva shareholders.”

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