Mercia Asset Management PLC

("Mercia" or the "Group" or the "Company")

Preliminary results for the year ended 31 March 2026

Continued EBITDA growth and EBITDA margin expansion support a 5% increase in the proposed final dividend

Mercia Asset Management PLC (AIM: MERC), the proactive, regionally focused private capital asset manager with c.£2.2billion of assets under management ("AuM") today, is pleased to announce its preliminary results for the year ended 31 March 2026.

Mark Payton, Chief Executive Officer of Mercia, commented:

"We are pleased to announce a positive set of full year trading results. We are continuing to successfully deliver against our strategy to drive increases in AUM, EBITDA and margin. We have attracted new and expanded mandates, including increases to existing funds, effective from early April 2026, alongside our successful VCT and EIS fundraises, growing Mercia's AuM to c.£2.2billion today. The unrealised fair value movement in the direct investment portfolio largely reflects external comparable valuation multiples, which have been impacted by current market sentiment."

1    The proposed final dividend is subject to shareholder approval at the Company's Annual General Meeting on 24 September 2026 and if approved, will be paid on 30 October 2026 to shareholders on the register at the close of business on 2 October 2026.

2    AuM is defined as the value of funds under management from which the Group earns revenues, plus the Group's consolidated net assets.

3    EBITDA is defined as operating (loss)/profit excluding performance fees net of attributable costs, depreciation, realised fair value (loss)/gain on the sale of direct investments, unrealised fair value movement in direct investments, share-based payments charge, amortisation of intangible assets and movement in fair value of deferred consideration.

4    EBITDA margin is defined as EBITDA divided by revenue (excluding performance fees).

Managed fund movements

·    Third-party funds under management ("FuM") organically increased by c.1.3% in the year to c.£1,823million (2025: c.£1,800million), with no redemptions

o  Venture FuM of c.£988million (2025: c.£928million)

§  A record £80.0million Northern VCT fundraise in the 2025/26 tax year - the largest retail fundraise in the Group's history

§  Final dividends totalling £21.5million paid out by the three Northern VCTs in addition to shares repurchased and cancelled totalling £17.9million

§  Three Enterprise Investment Scheme ("EIS") funds closed raising a total of £12.7million

§  £5.0million additional equity allocation under the Northern Powerhouse Investment Fund I

§  Award of a new £35.0million fund in the North East of England, the North East Accelerate Fund

o  Development capital FuM of c.£435million (2025: c.£472million)

§ FDC Debt fund, now in its realisation phase, returned c.£18million to investors in the year

o  Property finance FuM of c.£400million (2025: c.£400million)

§ c.£61million was deployed in the year

Direct investment portfolio movements

·      Direct investment portfolio fair value of £124.8million (2025: £126.0million)

·      £11.6million net invested into nine portfolio companies (2025: £9.7million net invested into seven portfolio companies)

·    £12.8million net fair value decrease in the portfolio during the year (2025: £0.3million net fair value increase in the portfolio), largely reflects market sentiment arising from geopolitical instability and the rapid development of AI, which in turn have reduced market confidence and risk appetite, impacting market valuation comparables

Post year end developments

·    Managed funds

o  Mercia secured c.£151million of additional allocations, effective from early April 2026, into its regional venture and lending funds, and a new allocation of c.£33million for deployment against the government's eight industrial sectors ("IS-8") as part of the UK's growth agenda

o  The Northern VCTs allotted shares totalling £40.8million in April 2026, concluding their fundraise which became fully subscribed in March 2026

o  Mercia's most recent Knowledge-intensive EIS fundraise closed in April 2026, raising a total of £5.4million

·    Direct investment portfolio

o  Direct investment portfolio company Warwick Acoustics announced a major commercial milestone, supplying components for Range Rover's new "SV Electrostatic Sound" system, initially on its new Range Rover SV Ultra model

o  Warwick Acoustics successfully completed a £6.4million funding round, with additional funding of up to £1.1million anticipated, comprising existing and new investors

o  The Group announced the continuance of its share buyback policy, which will return up to a further £3.0million to shareholders during the current financial year

o  Mercia realised its direct investment portfolio holding in Fortis Frontier PLC, with £0.6million of cash proceeds returned

o  Additional £0.2million received from other realisations

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of domestic law in the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 and as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain.

For further information, please contact:

Investor presentation

Mercia will provide a live management presentation and Q&A via the Investor Meet Company platform at 3.00 pm today. Registration details for the online investor presentation can be accessed via:

https://www.investormeetcompany.com/mercia-asset-management-plc/register

About Mercia Asset Management PLC

Mercia is a private capital asset manager focused on supporting regional SMEs to achieve their growth aspirations. Mercia provides capital across its four asset classes of venture, development capital, property finance and proprietary capital: the Group's 'Complete Connected Capital'.

The Group has a strong UK footprint through its 11 regional offices, extensive local adviser and personal networks, and university partnerships, providing it with access to high-quality deal flow.

Mercia Asset Management PLC is quoted on AIM with the EPIC "MERC".

Non-executive Chair's statement

The year to 31 March 2026 ("FY26") has once again required Mercia to execute against a backdrop of considerable external complexity. I am pleased to report that it has done so to good effect. Record EBITDA and further material organic growth in third-party funds under management ("FuM") in the immediate post year end period, including the largest retail fundraise in the Group's history, indicate that Mercia is operating with significant momentum.

FY26 was the second year of the Group's three-year 'Mercia '27' strategic plan. The journey from our IPO in December 2014 to the regionally focused, multi-asset private capital manager we are today has not been linear. Brexit, a global pandemic, a sharp inflation and interest-rate cycle, and most recently a succession of significant events beyond our shores, have each required the Group to adapt and be nimble. FY26 added further chapters to that list: continued disruption to global trade from shifting US tariff policy, the ongoing Ukraine/Russia war and the conflict across the Middle East, with the resultant impact on fuel prices and inflation. Against that combination, I consider the FY26 result a testament to both the increasing maturity of the Group, our growing platform and the relentless hard work and discipline of the team.

Strategic progress

Mercia '27, as shareholders will recall, sets three clear objectives: to grow assets under management ("AuM") to in excess of £3.0billion; to double EBITDA to c.£10million; and to divest up to 70% by value of the direct investment portfolio, all by 31 March 2027.

In the period under review, which includes mandate award successes in the financial year, but 'on fee' from early April 2026, Mercia experienced further material organic growth in third-party funds under management, with AuM growing to c.£2.2billion. These successes included the record £80.0million Northern Venture Capital Trust ("VCT") fundraise, additional allocations from the British Business Bank ("BBB") and the new North East Accelerate Fund. Record EBITDA of £8.1million, with an EBITDA margin at 23.7%, demonstrates the operational leverage that comes with scale. Across the Group, c.£230million of capital was deployed into 156 businesses and, with c.86% of that invested outside London - a tangible illustration of the regional access to deal flow that continues to set Mercia apart from its peers.

On the third of the Mercia '27 objectives, whilst the underlying technical and commercial progress of the direct investment portfolio has been largely unaffected by external events, comparable market valuations and acquiror behaviour have both been influenced, with the result that expected exit timelines have lengthened. We remain committed to a full portfolio exit within the stated three-to-five-year window but now expect the majority of realisations to fall between FY28 and FY29. This is a frustrating but realistic re-calibration to reflect current market conditions. The Board is however also considering other alternative options for the divestiture of the direct investment portfolio.

FY26 also saw meaningful change in the regulatory backdrop, most notably in last year's Autumn Budget. Qualifying company size thresholds, together with the annual and lifetime investment limits, were doubled in both the Enterprise Investment Scheme ("EIS") and VCT schemes, broadening the universe of investable businesses. For VCTs specifically, income tax relief for retail investors has decreased from 30% to 20% in the 2026/27 tax year. We expect these changes to benefit the larger, better-performing VCTs. As the manager of the three Northern VCTs - collectively the sixth largest VCT operation in the UK and one of the top performers for NAV return over the last three years - the Northern VCTs and Mercia are well placed to thrive in this new environment.

Shareholder returns

The Group adopted its progressive dividend policy in December 2020, when we announced a maiden interim dividend of 0.10 pence per share. Since then, we have steadily grown both the interim and the final dividend each year.

In January 2026, the Group paid an interim dividend of 0.39 pence per share. The Board is now recommending a final dividend of 0.61 pence per share, giving a total for the year of 1.0 pence per share (2025: 0.95 pence per share), an increase of c.5% on the prior year.

Alongside the dividend, the annual £3.0million share buyback programme announced on 1 July 2025 continued throughout the financial year. During FY26, the Group repurchased 9,840,205 Ordinary shares for cancellation at an average price of 30.1 pence per share. Combined with the dividend, this equates to c.£7.2million being returned to shareholders on an annual basis. The Board keeps the quantum of both the annual dividend and share buyback under review and, as the direct investment portfolio is converted into cash, will balance further periodic returns to shareholders against acquisition and organic growth opportunities, all with a view to driving incremental shareholder value.

Governance and the Board

The Board's commitment to the principles of the Quoted Companies Alliance ("QCA") Corporate Governance Code remains central to how we operate. As I have observed in previous statements, the 10 principles simply reflect the culture of integrity and transparency which have always guided the way in which the Group does business. This year we have established a Responsible Investment Working Group, and this, together with our continued alignment with the UN Principles for Responsible Investment, reflects a governance framework continuing to mature in step with the increasing scale and ambition of the Group.

The Company is committed to a well-functioning board with a breadth of skills and independence. During the year, the Company was pleased to welcome two new independent Non-executive Directors to the Board, with the appointment of Janine Nicholls to the Board on 20 October 2025, subsequently taking on the role of Audit and Risk Committee Chair, and Penny Freer who joined the Board on 15 December 2025 as a Non-executive Director.

As anticipated in last year's statement, Dr. Jonathan Pell and Caroline Plumb OBE resigned from the Board during FY26, having respectively served as Chair of the Audit and Risk Committee and as a Non-executive Director. On behalf of the Board, I would like to record our thanks to Jonathan and Caroline for their significant contribution over many years, and to welcome Janine and Penny.

The Nominations Committee continues to consider succession planning and independence for the broader Board and in particular with regard to the tenure of its Directors.

Investor engagement

Continuing to meet the investment objectives that we have agreed with our fund investors remains critical to everything we do. On behalf of the Board, I would like to thank each of those investors for their ongoing trust, in particular the three independent Northern VCT boards, the British Business Bank ("BBB"), local government pension schemes, regional Combined Authorities and our retail VCT and EIS investors.

Proactive engagement with all of our stakeholders remains particularly important to our Board. During FY26, I was pleased to engage directly with shareholders on several occasions, and would always be pleased to hear directly from other stakeholders. We held last year's AGM in Birmingham, but as a national business and in response to shareholder feedback, we will hold this year's AGM in London, at 10.00 am on 24 September 2026.

Responsible investing and culture

Responsible investing, a clear sense of purpose and a strong, collaborative culture have always been central to everything we do. We aim to generate commercial returns for our investors whilst treating every stakeholder - investees, colleagues, intermediaries and the communities in which we operate - with respect. During FY26, we continued to embed sustainability across the investment lifecycle, launching the Mercia Sustainability Hub and re-affirmed our long-term commitment to reach net zero by 2050. We also continued to invest in the people who make the Mercia platform work, through leadership development, structured succession planning, our Rise & Thrive programme (for underrepresented founders), and the ongoing contribution of Mercia Spirit to volunteering and community initiatives.

Outlook

As the Group enters the final year of Mercia '27, the external environment remains uncertain. Despite this, the structural drivers of demand for UK regional private capital are strengthening: succession-driven M&A within owner-managed SMEs; the continued need for scale-up capital for high-growth businesses; supportive Government policy such as the Mansion House Accord and the UK growth agenda; and a notable rise in institutional and local government pension scheme appetite for place-based, domestically-focused investment. Each of these drivers plays to Mercia's model.

Our focus on building a profitable, predominantly recurring revenue fund management operation continues to deliver. Scale is now translating into increasing margin; investment performance across the asset classes is being sustained; and the fundraising pipeline is healthy. We continue to manage the balance sheet prudently, and the Group's financial strength gives us more options - to invest in our platform, to pursue carefully chosen inorganic growth and in due course, to return further capital to shareholders.

None of this year's progress would have been possible without the energy and commitment of everyone at Mercia. Across our 11 regional offices, our colleagues consistently work as a single team, and the pace and quality of what has been delivered throughout FY26 is a direct reflection of this wholehearted commitment. Both personally, and on behalf of the Board, I would like to thank all of our colleagues for their continued dedication.

Finally, to you, our shareholders - thank you for your continued support as we undertake the next stage of Mercia's development and continue to simplify the Group's business model. I look forward to updating you on further progress through FY27.

Ian R. Metcalfe OBE, DL
Non-executive Chair

Chief Executive Officer's Review

As investors increasingly demand both purpose and performance, Mercia is positioned at that intersection. Our strategy is built on a clear conviction: that the most compelling long-term returns are generated by backing high-quality businesses and projects in those parts of the UK that remain underserved by mainstream capital. This place-based approach is not only aligned with structural market inefficiencies but also provides access to investment opportunities with strong growth potential. As we begin FY27, we do so with confidence in the strength of our model, the depth of our pipeline, and the enduring resilience of the UK private markets landscape, despite the many external market challenges seemingly engulfing our economy.

In FY26, Mercia backed 156 businesses, deploying c.£230million across venture capital, development capital, property finance and the direct investment portfolio: c.£111million, c.£46million, c.£61million and c.£12million respectively - this deployment reflects both the depth of our national deal flow networks and the discipline with which we allocate our investors' capital. The UK continues to generate high-quality entrepreneurial businesses where access to capital remains unevenly matched to the quality of the opportunities available across the country. Our regional footprint, multi-sector expertise and multi-asset capability provide a competitive advantage in identifying and securing those opportunities.

During the year, the Group deployed c.86% of capital into businesses outside London.

Mercia's asset management operation is well placed for continued organic expansion, as demonstrated by strong retail growth in our Venture Capital Trust ("VCT") and Enterprise Investment Scheme ("EIS") operations (collectively raising £90.5million in the 2025/26 tax year) and by securing additional allocations into our regional venture and lending funds beyond our initial expectations in both quantum and timing (c.£151million), with a further c.£22million available in FY27 and a new allocation of c.£33million for deployment against the government's eight industrial sectors ("IS-8") as part of the UK's growth agenda.

These results represent the second year of our three-year strategic plan, Mercia '27, focused on simplifying the business model to unlock value for our shareholders, while remaining laser focused on being the first choice for our stakeholders. Our continuing strategic execution and operational discipline should be seen against a series of significant events affecting all of our stakeholders - shareholders, fund investors, portfolio management teams and colleagues alike. These include: two challenging Autumn Budgets, ongoing US-led disruptions to global trade via shifting tariff policy, the continued Ukraine/Russia war; and the US/Israel/Iran conflict across the Middle East. In addition, the accelerating development and adoption of artificial intelligence ("AI") is disrupting certain sectors and as a result, weighing on valuation multiples where disruption is expected to be at its greatest. We remain focused on the controllables and on maximising the successes, but we cannot ignore the geopolitical fragility of the current environment, which will inevitably impact on certain aspects of Mercia '27.

Our three-year targets are: to grow assets under management ("AuM") to in excess of £3.0billion; to double EBITDA to c.£10million; and to divest up to 70% by value of the direct investment portfolio, by 31 March 2027.

Against these targets, performance in FY26 has been broadly resilient. However, the original divestiture target of up to 70% of the portfolio by 31 March 2027 will now be difficult to deliver within that timeframe. While geopolitical instability and the rapid development of AI have had limited direct impact on portfolio development and trading per se, it has affected market confidence and risk appetite, which in turn has impacted valuation comparables and, as a consequence, exit timelines have lengthened. As set out in Mercia '27, launched on 1 April 2024, we expect to divest the full portfolio over a three-to-five-year period. For the reasons outlined above, we now anticipate that the majority of realisations will take place between FY28 and FY29. The Board will however also consider other alternative options for the divestiture of the direct investment portfolio.

As we progress towards a single focus on growing third-party funds under management ("FuM"), during the year we prioritised investment in our three scalable platforms of deal origination, sales and distribution and investment performance, supported by operational efficiency, combining automation and the selective use of AI.

Financial highlights

With c.83% of our fund management fees contracted and recurring, our focus remains on building a scalable business with predictable, recurring fund management income streams complemented by carefully timed realisations, as we look to achieve top quartile performance against all of the capital pools we manage.

With our continued strong trading performance, we are able to maintain our commitment to both our progressive dividend policy which, if approved by shareholders, will have grown by 5% this year, and our annual share buyback programme of £3.0million.

Movements in assets under management

Against a challenging backdrop for many asset managers, and with significant inflows immediately post year end, AuM at the time of this report has grown to £2.2billion (2025: £2.0billion), of which £2.05billion is in third-party FuM (2025: £1.80billion). The remaining £0.17billion is Mercia's consolidated balance sheet and comprises the direct investment portfolio (c.£125million), cash (c.£26million) and intangible assets and working capital (c.£23million).

Overall, the c.14% organic growth in third-party FuM came predominantly from the pre year end notifications of existing fund mandate increases, successful VCT and EIS fundraises and securing additional capital from the British Business Bank ("BBB"). The movements during the year and immediately post year end are summarised below:

*    inflows achieved/awarded during the year, but 'on fee' post year end

The Autumn Budget in November 2025 contained a number of significant announcements in respect of VCT and EIS rules, which have taken effect in the 2026/27 tax year. For both schemes, the qualifying company size threshold (gross assets) has doubled, enabling Mercia and others to invest in larger later-stage opportunities. The annual and lifetime investment limits have also doubled to £20.0million and £40.0million respectively for knowledge intensive businesses. For VCTs specifically, income tax relief for retail investors has reduced from 30% to 20%. These impending changes prompted the Northern VCT boards to expand their 2025/26 fundraise to £80.0million - a record raise - up from the original £50.0million target. I am pleased to say this higher raise was fully subscribed - a reflection of the Northern VCTs and Mercia's investment track record, and the strength of our sales and distribution platform. Today, the three Northern VCTs managed by Mercia are collectively the sixth largest in operation and one of the top performing on a NAV return basis over the last three years. As a result they are well positioned to benefit from these rule changes over time.

EBITDA performance

Mercia's EBITDA performance reflects both scale benefits and careful resource management.

Our long-term focus is on growing EBITDA and increasing the EBITDA margin via continued expansion of our third-party FuM. Product diversification in our niche regional private markets brings a degree of revenue insulation, while targeting top-quartile investment performance may also generate periodic performance fees for Mercia and performance-related rewards for our valued equity investment and lending teams. We will continue to manage the growth of our cost base carefully, without compromising deployment and investment performance.

In respect of future potential inorganic growth, we continue to evaluate acquisition opportunities that fit both our culture and our Mercia '27 strategy.

Strong cash position

Mercia is a strongly cash-generative fund management operation with £26.4million cash on hand at year end and consistent operating cash inflows available to support both Mercia's progressive dividend policy and the £3.0million annual share buyback programme. Since initiating dividend payments in FY21 and the share buyback programme in FY24, Mercia has returned £26.8million. For FY26, Mercia will, if the final proposed dividend is approved by shareholders, return £7.2million to shareholders.

Group-wide investment and divestment activity

FY26 was a more challenging year for investment deployment across all asset classes, with deal cycles lengthening in a more cautious market:

* A number of co-investments were made across asset classes, and therefore this total is the number of unique companies backed in the year.

In venture capital, we saw deal sizes increase alongside heightened competition at Series A, while capital availability at seed stage continued to contract. There is a general caution around software-centric opportunities at present, as the market absorbs the impact of AI adoption. There has also been a cooling of interest in life sciences as investors prioritise capital-efficient, often AI-enabled models, with faster routes to revenue growth. We have however entered FY27 with a good pipeline across the Group's activities.

Residential property finance has experienced challenges this year as geopolitical fragility pushed construction costs higher against a backdrop of increasing government regulation and planning delays. Despite this, demand remains strong from the commercial property sector. There have once again been no provisions within our property funds, and the portfolios continue to perform well.

Accentuated by changes in Inheritance Tax, Capital Gains Tax and Business Asset Disposal Relief introduced over the last two years, we are seeing succession challenges for founders seeking development capital to realise value and maintain legacy. Despite the increasing pressures from global challenges and domestic employment cost increases, long-term growth ambitions within our portfolios remain broadly intact. This environment has also attracted some senior lenders, including the high street banks, back into the SME space.

Direct investment portfolio

We invested c.£12million net in FY26 (materially below the c.£20million annual run rate prior to Mercia '27). Even with the revised expectation on exit timing, we are confident that the portfolio, including LP commitments, will require less than £15million from Mercia's own cash resources over the next two to three years, excluding inflows expected from portfolio realisations during that period.

The table below lists Mercia's top 10 direct investments by fair value as at 31 March 2026, including the net cash invested, fair value movements and the fully diluted equity percentage held.

* Trading as Avid Games

Overall, Mercia's direct investment portfolio continues to make good technical and commercial progress, despite a continuing challenging market backdrop for venture investing and realisations, driven predominantly by geopolitical instability.

The £12.8million net fair value decrease in the portfolio during the year (2025: £0.3million net fair value increase in the portfolio), largely reflects market sentiment arising from geopolitical instability and the rapid development of AI, which in turn have reduced market confidence and risk appetite, impacting market valuation comparables.

Strategic priorities

Our focus throughout FY26 was on executing against our core priorities, building scalable platforms in deal origination, sales and distribution and fund investment performance. We also applied more dedicated resources to the direct investment portfolio and engaged in several conversations with the owners of other private asset managers, regarding their possible acquisition.

Seeing the best

We continue to invest in systems, technology, data infrastructure and talent, deploying the latest in automated agentic technology from third parties. This ensures proactive outreach and tracking of investment prospects, as we seek to see the majority of deals done in our target markets. We supplement this with regional and national outreach events, including our underrepresented entrepreneur-targeted Rise & Thrive programme.

Scaling specialist private market funds

During the year, we delivered a strong fundraising performance, securing c.£189million in new BBB fund allocations and raising c.£168million across our VCT, EIS and other institutional and public sector channels. We strengthened our distribution capability, broadened our market reach and improved the foundations for future growth. In FY27, our focus is on disciplined execution and deepening our reputation as a responsible and commercial steward of third-party capital, particularly within the UK regions.

Active portfolio management and realisations

We maintained an active approach to portfolio oversight, working closely with management teams to accelerate value creation alongside our centralised platform of venture support services. Selected equity realisations and loan capital repayments resulted in distributions of c.£88million to our fund investors, with notable exits such as MICOM Technologies, Idox, FourteenIP and, in a rare occurrence in the current subdued public markets, the IPO of The Beauty Tech Group. This demonstrates the quality and maturity of our Group's investment portfolios.

Outlook

We have entered FY27 with pragmatic confidence in our path forward and the environment we are navigating, as we anticipate:

·    continued growth in third-party FuM, as fundraising pipelines convert;

·    further progress towards increasing recurring revenues and operating leverage;

·    highly selective M&A;

·    a measured pace of realisations for the balance sheet direct investments, dependent on market conditions strengthening into FY28 although we are also exploring options to accelerate the distribution of the portfolio; and

·    ongoing disciplined resource management alongside selective investment in talent and technology.

While macro-economic volatility persists, private markets continue to offer compelling long-term opportunities. Against this backdrop, Mercia is well positioned, supported by diversified pools of capital to invest, a strong balance sheet and experienced team. This combination enables us to navigate uncertainty with confidence, while remaining alert to opportunities and risks as they arise.

Our objective remains clear and consistent: to deliver sustainable, long-term value for our shareholders, fund investors, portfolio companies and the wider UK economy.

I would like to thank our shareholders, colleagues, fund investors, portfolio management teams and partners for their continued trust, commitment and collaboration.

Dr. Mark Payton
Chief Executive Officer

Chief Financial Officer's review

Overall financial performance

Mercia delivered continued growth in trading profitability during the year to 31 March 2026, achieving record EBITDA of £8,102,000, up 6.5% on the prior year (2025: £7,608,000).

The ongoing scaling of our private capital fund management operations is delivering economies of scale, which has resulted in the improvement in the Group's EBITDA margin to 23.7% (2025: 22.1%). This progress has been made while maintaining our investment commitments and support to both our fund investors and investees.

Proposed final dividend

The Board continues to adopt its progressive dividend policy and therefore, with the cash generative nature of the Group's fund management operations, recommends a proposed final dividend of 0.61 pence per share (2025: 0.58 pence per share). If approved by shareholders at the Annual General Meeting on 24 September 2026, the total dividend for the year will be 1.00 pence per share (2025: 0.95 pence per share), a year-on-year increase of c.5% (2025: increase of c.6%).

If approved by shareholders, the final dividend will be paid on 30 October 2026 to shareholders on the register at the close of business on 2 October 2026.

Share buyback programme

During the year to 31 March 2026, the Group commenced its annual £3.0million share buyback programme, purchasing 9,840,205 Ordinary shares for cancellation at an average of 30.1 pence per share, for a total cost of £3.0million. As part of its periodic capital allocation policy assessment, the Board will keep the quantum of this annual buyback policy under review.

Alternative performance measures ("APM")

The Directors believe that the reporting of both EBITDA and EBITDA margin assists in providing insightful measures of operating performance for businesses such as Mercia, and are APMs of interest to both current and potential shareholders.

EBITDA is defined as operating (loss)/profit excluding performance fees net of attributable costs, depreciation, realised fair value gain/(loss) on the sale of direct investments, unrealised fair value movement in direct investments, share-based payments charge, amortisation of intangible assets and movement in fair value of deferred consideration.

EBITDA margin is EBITDA divided by revenue (excluding performance fees).

Results reported on an APM basis are denoted by ¹ throughout this review.

A reconciliation of these results prepared in accordance with International Financial Reporting Standards ("IFRS") to those presented on an APM basis are as follows:

Revenue¹

Revenue decreased 0.8% to £34,136,000 (2025: £34,416,000) and comprised fund management-related fees, initial management fees from investment rounds, arrangement fees from loans, investment director monitoring fees, sundry business services income and VCT share offer fees. 97.7% of these revenues were derived from the Group's fund management activities (2025: 97.9%). The marginal year-on-year reduction in APM revenue primarily reflects lower capital deployment-related transaction fees.

Administrative expenses¹

Administrative expenses, excluding depreciation, decreased 2.9% to £26,034,000 (2025: £26,808,000) and comprised predominantly staff-related, office, marketing, professional adviser and VCT share offer-related costs. This reduction reflects the Group's continued cost discipline and the realisation of operational efficiencies as Mercia scales.

EBITDA¹

EBITDA increased 6.5% to £8,102,000 (2025: £7,608,000), equating to an EBITDA margin of 23.7% (2025: 22.1%). This margin improvement was derived from operational efficiencies as the Group continued to scale its funds under management.

VCT performance fees

There were no VCT performance fees or associated costs recognised during the year to 31 March 2026. In the prior year, £785,000 became payable by Northern Venture Trust PLC, Northern 2 VCT PLC and Northern 3 VCT PLC based upon the growth in their respective net asset values per share for the year to 31 March 2025. Directly related VCT investment team bonuses (including employer's National Insurance) totalling £628,000 were recognised in the year to 31 March 2025.

Fair value movement in direct investments

The net unrealised fair value movement in direct investments resulted in a £12,837,000 decrease (2025: £274,000 increase) and as at 31 March 2026, the fair value of the Group's direct investment portfolio was £124,766,000 (2025: £125,960,000).

Unrealised fair value gains arose in six (2025: five) of the Group's direct investments. The largest unrealised fair value gain was in respect of Tozaro Limited, which accounted for £933,000 of the total (2025: £1,916,000 unrealised fair value gain in respect of Aonic Founder SCS).

There were seven (2025: three) unrealised fair value decreases, the largest being £6,243,000, which arose in respect of Netacea Group Limited (2025: £1,268,000 unrealised fair value decrease in sureCore Limited). In addition, the Group permanently impaired its holdings in Impression Technologies Limited, Akamis Bio Limited and sureCore Limited.

Share-based payments charge

The £571,000 non-cash charge (2025: £938,000) arose from the total number of issued and vested share options held by employees throughout the Group, ranging from 28 January 2020 to 31 March 2026.

Amortisation of intangible assets

The amortisation charge for the year of £2,989,000 (2025: £2,989,000) represented amortisation of the acquired intangible assets of Frontier Development Capital ("FDC") and the VCT fund management business.

Movement in fair value of deferred consideration

No movement in fair value of deferred consideration occurred in the year to 31 March 2026 (2025: £454,000), as the deferred consideration was paid in full during the prior year, with the movement in the fair value of this contingent deferred consideration recognised during the year to 31 March 2025.

Net finance income

Total gross finance income of £1,298,000 (2025: £2,626,000) arose largely from interest receivable on cash deposits (as shown in note 8 of this report), together with the crystallisation of convertible loan interest within the direct investment portfolio. Finance costs of £81,000 (2025: £56,000) comprised interest payable on office leases and the Group's staff electric car scheme. The year-on-year reduction in finance income principally reflects the lower average cash balances held during the year and lower interest rates on deposits.

Taxation

The components of the Group's tax charge are shown in note 9 of this report. The overall tax charge for the year comprises a corporation tax charge on taxable profits, partially offset by the continued unwinding of the deferred tax liability in respect of the intangible assets which arose on the acquisition of FDC and the VCT fund management business.

(Loss)/profit and total comprehensive (expense)/income for the year

The Group recorded a consolidated total comprehensive loss of £8,611,000 (2025: income of £3,455,000). This has resulted in a basic loss per Ordinary share of 2.00 pence (2025: basic earnings per Ordinary share of 0.80 pence).

Summarised statement of financial position

*    425,092,860 Ordinary shares, excluding those held in treasury, were in issue as at 31 March 2026 and therefore used as the denominator for calculating net assets per share.                                                     431,336,370 Ordinary shares, excluding those held in treasury, were used as the denominator for calculating net assets per share as at 31 March 2025.

Intangible assets

The Group's intangible assets consist of goodwill and the intangible assets recognised on the acquisitions of FDC and the VCT fund management business.

Direct investment portfolio

During the year, Mercia's direct investment portfolio decreased from £125,960,000 as at 1 April 2025 (2025: £116,861,000 as at 1 April 2024) to £124,766,000 as at 31 March 2026 (2025: £125,960,000 as at 31 March 2025).

The Group invested £11,643,000 net (2025: £9,704,000 net) into nine existing direct investments (2025: seven existing direct investments), with the top 10 direct investments representing 82.1% of the total direct investment portfolio value (2025: 84.7%).

Cash and cash equivalents

At the year end, Mercia had cash and cash equivalents totalling £26,380,000 (2025: £40,093,000).

The Group continues to have limited working capital needs due to the nature of its business and during the year cash generated from operating activities totalled £6,532,000 (2025: £9,409,000). The year-on-year decrease in closing cash principally reflects the Group's net investment into its direct investment portfolio of £11,642,000 (2025: £8,516,000) together with returns to shareholders comprising £4,176,000 of dividends paid and £2,960,000 relating to the share buyback programme.

As at 31 March 2026, the Group's cash was spread across four leading United Kingdom banks, earning an average overall yield of c.3.5%.

The summarised movements in the Group's cash and cash equivalents during the year are shown below.

Outlook

The financial results for the year to 31 March 2026 are a reflection of the two sides of Mercia's current business model, being its profitable and fast-growing private asset fund management operations and its direct investment portfolio, where a softening of market multiples has reduced the unrealised fair value of the portfolio.

Looking ahead, the priority remains growing our funds under management through new mandate successes and additional fundraises/allocations to our existing mandates, and through the continued disciplined support of our direct investment portfolio, through to realisation. We will also continue to consider acquisitions that meet our established criteria.

Mercia remains financially strong, and focused on progressing its strategic objectives.

Martin Glanfield
Chief Financial Officer

Summary Financial Information

Consolidated statement of comprehensive income

For the year ended 31 March 2026

All results derive from continuing operations.

Consolidated statement of financial position

As at 31 March 2026

Consolidated statement of cash flows

For the year ended 31 March 2026

Consolidated statement of changes in equity

For the year ended 31 March 2026

1.  General information

Mercia Asset Management PLC (the "Group", "Mercia") is a public limited company, incorporated and domiciled in England, United Kingdom, and registered in England with registered number 09223445. Its Ordinary shares are admitted to trading on the AIM market of the London Stock Exchange. The registered office address is Mercia Asset Management PLC, Forward House, 17 High Street, Henley-in-Arden, Warwickshire, B95 5AA.

2.    Basis of preparation

The summary financial information included in this announcement has been extracted from the audited financial statements of the Group for the year ended 31 March 2026, which have been approved by the Board of Directors. The summary financial information does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 (the "Act"). The auditor's report on the financial statements for the year ended 31 March 2026 was unqualified and did not contain any statement under section 498 of the Act. The Group's Annual Report and financial statements will be delivered to the Registrar of Companies in due course.

The financial statements have been prepared on a historical cost basis, as modified by the revaluation of certain financial assets and financial liabilities in accordance with International Financial Reporting Standard ("IFRS") 9 Financial Instruments. The accounting policies presented in this summary financial information are consistent with those set out in the audited financial statements.

3.   Going concern

Based on the Group's balance sheet, including its liquidity position at the year end, its forecast future operating and investment activities, the Directors have a reasonable expectation that the Group has adequate financial resources to manage business risks in the current economic environment and continue in operational existence for a period of at least 12 months from the date of this report. Accordingly, the Directors continue to adopt the going concern basis in preparing these consolidated financial statements.

4.   Significant accounting policies

Basis of consolidation

Subsidiary undertakings are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.  The financial statements of entities held within the Group's direct investment portfolio are not included within the consolidated financial statements as these fall within the IFRS 10 Investment Entity exemption.

The Group accounts for business combinations using the acquisition method from the date that control is transferred to the Group. Both the identifiable net assets and the consideration transferred in the acquisition are measured at fair value with transaction costs expensed as incurred. Goodwill arising on acquisitions is tested annually for impairment.

New standards, interpretations and amendments effective in the current financial year

No new standards, interpretations and amendments effective in the year have had a material effect on the Group's financial statements.

New standards, interpretations and amendments not yet effective

IFRS 18, 'Presentation and Disclosure in Financial Statements', replaces IAS 1 'Presentation of Financial Statements' and is effective for accounting periods beginning on or after 1 January 2027, with earlier application permitted.

The standard does not change the recognition or measurement of items in the financial statements. Its principal changes relate to:

(a)  Presentation of the statement of profit or loss: IFRS 18 introduces a requirement to classify all income and expenses into one of five prescribed categories - operating, investing, financing, income taxes and discontinued operations. Specific items that are not operating in nature are classified into the investing or financing categories as defined by the standard.

(b)  Management-defined performance measures (MPMs): Entities that use financial measures of their own definition in public communications outside the financial statements (for example "adjusted operating profit") will be required to disclose and reconcile those measures within the notes to the financial statements, together with the related tax and non-controlling interest effects.

(c)  Aggregation and disaggregation: The standard introduces enhanced principles to guide the level of detail at which information is presented in the primary statements and the notes.

The first mandatory application for the Group will be for the year ending 31 March 2028 and the comparative period (for the year ending 31 March 2027) will be restated on a retrospective basis. No impact on the amounts recognised for revenue, expenses, assets or liabilities is anticipated, however, the presentation of the consolidated statement of comprehensive income is expected to change. The Group uses management defined performance measures, including EBITDA. These will require disclosure and reconciliation under the MPM requirements of IFRS 18.

IFRS 19 'Subsidiaries without Public Accountability: Disclosures' is a new disclosure-only standard issued in May 2024. It is effective for accounting periods beginning on or after 1 January 2027, with earlier application permitted. There is no material impact expected on the Group consolidated financial statements as a result of this standard.

Amendments to the following standards, effective for accounting periods beginning on or after 1 January 2026, are not expected to have a material impact on the Group consolidated financial statements:

i) Amendments to the Classification and Measurement of Financial Instruments - Amendments to IFRS 9 and IFRS 7;

ii) Contracts Referencing Nature-dependent Electricity - Amendments to IFRS 9 and IFRS 7; and

iii) Annual Improvements to IFRS Accounting Standards - Volume 11.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

The Directors have made the following judgements and estimates, which have had the most significant effect on the carrying amounts of the assets and liabilities in this summary financial information.

Fair value measurements and valuation processes

The judgements required to determine the appropriate valuation methodology of unquoted equity investments mean there is risk of a material adjustment to the carrying amounts of assets and liabilities. These judgements include a decision on whether or not to impair or uplift investment valuations.

The fair value of unlisted securities is established using the International Private Equity and Venture Capital Valuation Guidelines ("IPEVCVG") as revised in 2025.

Investments are measured at fair value at each measurement date. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that a hypothetical transaction to sell an asset takes place in the principal market or, in its absence, the most advantageous market for the asset. For quoted investments, available market prices will be the exclusive basis for the measurement of fair value for identical instruments.

For unquoted investments, the measurement of fair value requires the valuer to assume the underlying business or instrument is realised or sold at the measurement date, appropriately allocated to the various interests, regardless of whether the underlying business is prepared for sale or whether its shareholders intend to sell in the near future.

In estimating fair value for an investment, the valuer should apply a methodology that is appropriate in light of the nature, facts and circumstances of the investment in the context of the total investment portfolio and should use reasonable current market data and inputs, combined with reasonable market participant assumptions.

The price of recent investment can be used to estimate the enterprise value, before allocating to the various interests. The Group believes that this is still the most relevant technique to measure fair value for early-stage investments. However, it has also taken into consideration time elapsed, performance since the investment round and external market events to help inform its judgements.

0-6 months post last funding round

The Group will apply the price of a recent investment for up to six months post the last funding round, subject to there being no material change to the investee company's prospects (which would include the prospects of drawing down the next tranche or raising the next round of funding).

7-18 months post last funding round

Beyond the six months point, the Group seeks assurance that the investee company is progressing against the development milestones which were set out in the initial assessment. Failing to hit milestones will not necessarily impact the valuation - this may simply be an indicator that incremental value will take longer to deliver, but the performance against milestones is assessed as an indicator of a potential change in value. The Group will be cautious about increasing the valuation of an early-stage investee company, unless it is based on a new market price or maintainable revenues and/or earnings.

19+ months post last funding round

From this point onwards, the Group looks for additional support for the 'price of recent investment' by calibrating back to that using a discounted cash flow ("DCF") methodology. However, unless the investee company has become established with maintainable revenues and/or earnings and can be valued on an earnings basis, given the inherent risk in early-stage investing and the lack of reliability of using estimates yet to be delivered a number of years into the future, the Group is unlikely to increase the fair value, even if a DCF calculation suggests a higher value. Nevertheless, the DCF calculation helps support the proposed fair value at the valuation point.

The recent macroeconomic uncertainty has created uncertainty in the fair value of the direct investment portfolio. The Directors believe that they have reflected this uncertainty in a balanced way through the assumptions used in the valuation of each investee company. The Directors have assessed the estimates made in relation to each individual valuation and do not believe that a reasonable possible change in estimate would result in a material change in the value of each investment.

5.  Segmental reporting

The Group's revenue and profits are derived from its principal activity within the United Kingdom.

IFRS 8 Operating Segments defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Chief Operating Decision Maker has been identified as the Board of Directors. The Directors are of the opinion that under IFRS 8 the Group has only one operating segment, being private capital asset management, because the results of the Group are monitored on a Group-wide basis. The Board of Directors assesses the performance of the operating segment using financial information which is measured and presented in a consistent manner.

An analysis of the Group's revenue is as follows:               

6.  Fair value movements in investments

7.  Operating (loss)/profit

Operating (loss)/profit is stated after charging:

8.  Finance income

Interest income arising from:

9.  Taxation

The UK standard rate of corporation tax is 25% (2025: 25%). The deferred tax credit of £748,000 (2025: £748,000) represents the unwinding of the deferred tax liabilities recognised in respect of the intangible assets arising on the acquisition of the VCT fund management business and Frontier Development Capital Limited.

A reconciliation from the reported (loss)/profit to the total tax charge is shown below:

The Group's deferred tax liability has been calculated at a rate of 25% as at 31 March 2026 (2025: 25%).

A total deferred tax liability of £2,296,000 (2025: £3,044,000) as at 31 March 2026 relates to the intangible assets recognised on the acquisition of FDC in December 2022 and on the acquisition of the VCT fund management business in 2019. The Group has excess management expenses carried forward of £18,950,000 (FY25: £10,808,000) as at 31 March 2026, on which a deferred tax asset of £4,737,000 (FY25: £2,701,000) has not been recognised, as their future use is uncertain. Under current UK corporation tax legislation, these amounts may be carried forward indefinitely. 

At 31 March 2026, short-term timing differences of £1,163,000 (FY25: £2,518,000) arose in respect of estimated future deductible temporary differences relating to employee share options and £425,000 (FY25: £28,000) in respect of remuneration accruals, fixed asset timing differences and other short-term provisions. A deferred tax asset of £397,000 (FY25: £637,000) has not been recognised as their future use is uncertain.

10.      (Loss)/earnings per share

Basic (loss)/earnings per share is calculated by dividing the (loss)/profit for the financial year by the weighted average number of Ordinary shares in issue during the year. Diluted (loss)/earnings per share is calculated by dividing the (loss)/profit for the financial year by the weighted average number of Ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including share options, on an as-if-converted basis. The potential dilutive shares are included in diluted (loss)/earnings per share calculations on a weighted average basis for the year. The (loss)/profit and weighted average number of shares used in the calculations are set out below:

The calculation of basic and diluted (loss)/earnings per share is based on the following number of Ordinary shares:

The potential dilutive impact of 7,450,760 employee share options for the year ended 31 March 2026 has been excluded from the weighted average number of diluted Ordinary shares, as including them is anti-dilutive to diluted earnings per share.

11. Dividends

The proposed final dividend for the year ended 31 March 2026 is subject to shareholder approval at the AGM on 24 September 2026, and as such has not been included as a liability in these financial statements in accordance with IAS 10.

12.      Goodwill

Goodwill arising on the businesses acquired to date is set out in the table below:

Goodwill for each business acquired has been assessed for impairment as at 31 March 2026. Recoverable amounts for each cash generating unit ("CGU") are based on the higher of value in use and fair value, less costs of disposal ("FVLCD").

The value in use calculations are based on future expected cash flows generated by each CGU, as derived from the approved budget for the year ending 31 March 2027. Key assumptions are the post-tax discount rate of 9.4% (pre-tax discount rate of 12.7%) and the growth rates used in forecasting future operating results. Where the fund management contracts are 'evergreen', a value into perpetuity has been used based on a zero growth rate beyond a five-year forecast period.

The review concluded that the value in use of each CGU exceeds its carrying value. The Directors do not consider that a reasonably possible change in a key assumption would reduce the recoverable amount of the CGUs to below their carrying value.

13.      Intangible assets

The net book value of intangible assets represents contractual arrangements in respect of the acquisition of the VCT fund management business in 2019 and the acquisition of FDC in December 2022, where it is probable that the future economic benefits that are attributable to those assets will flow to the Group and the fair value of the assets can be measured reliably.  The remaining useful lives of the intangible assets relating to the VCT fund management business and the FDC acquisition are 3.7 and 1.7 years respectively.

14.      Investments

The net change in the value of investments for the year is a decrease of £1,194,000 (2025: increase of £9,099,000).
The table below reconciles the opening to closing value of investments for both the current and prior years.

The Group permanently impaired its holdings in Impression Technologies Limited, Akamis Bio Limited and sureCore Limited. During the year ended 31 March 2026 £550,000 of loan repayments were subsequently received in respect of Impression Technologies Limited and recognised within fair value gains.

Investments held as part of the Group's direct investment portfolio are carried at fair value in accordance with the IFRS 10 Investment Entity exemption.

The measurement basis for determining the fair value of investments held as at 31 March is as follows:

15. Cash and cash equivalents       

Included within cash and cash equivalents are amounts held in a highly liquid money market fund of £nil (2025: £10million). All cash and cash equivalents are freely available for use by the Group and there are no amounts subject to restriction.

16. Deferred taxation

Under IAS 12 Income Taxes, provision is made for the deferred tax liability associated with the recognition of intangible assets arising as part of the acquisitions of the VCT fund management contracts and FDC.

As at 31 March 2026, the deferred tax liability has been calculated using a 25% tax rate.

17.      Issued share capital

The total allotted and fully paid number of shares of 436,839,318 (2025: 446,679,523) includes treasury shares of 11,746,458 (2025: 15,343,153). The outstanding Ordinary shares as at 31 March 2026, being 425,092,860 (2025: 431,336,370) with a par value of £0.00001 pence per share, are entitled to one vote each and have equal rights as to dividends. The Ordinary shares are not redeemable.

18.      Share premium

19.      Treasury reserve

20.      Other distributable reserve

The other distributable reserve represents amounts available for distribution to shareholders, and is used to fund dividend payments and the cancellation of shares repurchased under the Group's annual share buyback programme.

21.      Fair value measurements

The fair values of the Group's financial assets and liabilities are considered a reasonable approximation to the carrying values shown in the consolidated statement of financial position. Subsequent to their initial recognition at fair value, measurements of movements in fair values of financial instruments are grouped into Levels 1 to 3, based on the degree to which the fair value is observable.

The following table gives information about how the fair values of these financial assets and financial liabilities are determined and presents the Group's assets measured at fair value as at 31 March 2026. There have been no movements in financial assets or financial liabilities between levels during the current or prior year. The table in note 14 sets out the movement in the Level 1 and 3 financial assets from the start to the end of the year.

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate to their fair values.

Financial instruments in Level 1

The Group had one direct investment listed on the AIM market of the London Stock Exchange, Fortis Frontier PLC, which is valued using the closing bid price as at 31 March 2026.

Financial instruments in Level 3

If one or more of the significant inputs required to fair value an instrument is not based on observable market data, the instrument is included in Level 3. Apart from the one investment classified in Level 1, all other investments held in the Group's direct investment portfolio have been classified in Level 3 of the fair value hierarchy and the individual valuations for each of the companies have been arrived at using appropriate valuation techniques. The Group has adopted the IPEVCVG for determining its valuation techniques, which specify that the price of a recent investment represents one of a number of inputs used to arrive at fair value and uses a single classification for all Level 3 investments. Note 4 provides further information on the Group's valuation methodology, including a detailed explanation of the valuation techniques used for Level 3 financial instruments.

A reconciliation of the movement in Level 1 and 3 financial assets from 1 April to 31 March is disclosed in note 14.

Valuation inputs and sensitivities

The following table summarises quantitative information about the significant unobservable inputs used in Level 3 fair value measurements as at 31 March 2026 and 31 March 2025.

22.      Availability of Annual Report

The Annual Report of Mercia Asset Management PLC will be made available to all shareholders on 24 July 2026. An electronic copy will be available on Mercia Asset Management PLC's website at www.mercia.co.uk.

23.      Annual General Meeting

The Annual General Meeting of Mercia Asset Management PLC will be held at the offices of Gowling WLG, 4 More London Riverside, London, SE1 2AU on 24 September 2026 at 10.00 am.

Directors, secretary and advisers

Directors