LEI: 213800NWMK3O4UWP9N91

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

30 November 2022

LendInvest plc

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022

45% growth in H1 PBT, FY outlook maintained

LendInvest plc (LSE: LINV; the "LendInvest", "Company" or the "Group"), a leading technology driven asset manager for property finance in the UK, is pleased to announce its unaudited results for the six months ended 30 September 2022.

¹ See Glossary for an explanation of these terms and their reconciliation, where relevant, to IFRS measures

These results include the impact of a prior period restatement, further details of which are set out in Note 1.4 below. All references to '2021', being the 6 months ended 30 September 2021, are restated figures.

Financial Highlights:

·      Platform AuM, which is the amount we have lent to our borrowers, increased 33% to £2.4 billion (30 Sep 2021: £1.8 billion), driven by a 44% increase in Buy-to-Let ("BTL") mortgages.

·      FuM, which is the amount we have lent and the additional capital we have available to lend, increased 20% to £3.4 billion (30 Sep 2021: £2.9 billion) partly driven by JP Morgan, which upsized its separate account, and Lloyds Bank who will help fund our growth in our BTL business.

·      Revenue decreased 8% to £42.5 million (30 Sep 2021: £46.3 million) primarily driven by lower average balance sheet loans on our short-term lending products, and lower performance fees from our funds.

·      Gross profit increased 17% to £31.1 million (30 Sep 2021: £26.5 million) primarily driven by a £9.2 million gain recognised when our Mortimer 2019-1 securitisation was called in September 2022.

·      Profit before tax increased by 45% to £14.8 million (30 Sep 2021: £10.2 million). £3.6 million was due to mark-to-market gains on interest rate swap pipeline hedges on the BTL portfolio. 

·      Diluted earnings per share increased 63% to 10.4 pence per share (30 Sep 2021: 6.4 pence per share).

·      The Board has declared an interim dividend of 1.3p per Ordinary Share which will be paid on 23 January 2023. The interim dividend is calculated on a set formula of 30 percent of last year's full year dividend. The Company maintains its progressive dividend policy.

Strategic highlights:

Continued growth, optimisation and diversification of FuM

·      In line with our strategy of growing FuM, we announced the upsize of the J.P. Morgan Separate Account from £725 million to £1 billion. This is consistent with our stated strategy of increasing the proportion of third party managed assets, strengthening our "asset-lite" asset management business model.

·      Following our partnerships with Barclays and HSBC in FY2022, we entered into a new £180 million financial agreement with Lloyds Bank to participate in the growth of our BTL lending business.

·      We completed our fourth securitisation, which comprised £270 million of prime Buy-to-Let mortgages in an oversubscribed Residential Mortgage-Backed Security (RMBS) transaction, "Mortimer BTL 2022-1" with demand from a broad range of institutional investors. The senior tranche was priced at 1.05% over SONIA.

·      In line with our strategy to optimise FuM, while at the same time selectively moving assets off balance sheet, we completed the sale of our residual economic interest in the "Mortimer BTL 2022-1" securitisation for a cash consideration of £5.8 million. The transaction reduced our gross loans and advances by more than £270 million and generated a net pre-tax gain of £3.3 million. 

·      We issued our third listed bond from our second Euro Medium Term Note programme, the LendInvest Secured Income II plc 6.50% bonds due 2027, raising £38 million in the process with a further £22 million retained in treasury for future sale. 

Growth across our broker network and regional footprint

·      We increased the number of active broker firms signed up to use the platform to more than 2,100 (31 March 2022: 1,800).

·      Our strong reputation for high quality products and excellent customer service continued, as evidenced by our Trustpilot rating of 4.3.

·      We launched an innovative tracker product range to support borrowers in response to market volatility.

·      Investment in technology continues to drive operating leverage; operational expenditure as a proportion of Platform AuM has dropped significantly from 3.4% to 1.27% over the past three-years (31 March 2022: 1.32%).

·      We opened an office in Glasgow, Scotland, and joined industry body Fintech Scotland as part of our commitment north of the border. Glasgow provides a deep pool of talent. We expect to grow more efficiently versus maintaining a sole office in Central London.

Current trading and outlook: 

We are mindful of the headwinds facing the economy and the impact on activity in the mortgage markets. Our full year guidance as per the last trading update on 10 October 2022 remains unchanged. We expect profit before tax for the full year to be in-line with that of the previous year. Our expectation is based on the following: 

·      we have our lowered Platform AuM growth forecast as a result of the government's mini budget announced on 23 September and the subsequent increases, and volatility in interest rates; 

·      we expect some margin compression from higher input interest rate costs in H1 FY23 as lending rates were slower to follow, although we expect margins to normalise towards the end of H2 FY23; 

·      we grew operational expenditure as planned in FY22 and H1 FY23 on the basis of our previously anticipated higher activity levels throughout FY23 and for the launch of our new specialist homeowner product. However, the challenging market conditions has inevitably slowed activity in the mortgage market in H2 and we now expect growth in Platform AuM to lag growth in the cost base until FY24; 

·      a reduction of swap rates in H2 would result in a partial or full reversal of the £3.6 million mark-to-market gain reported in H1. This gain pertains to hedges used to mitigate the financial impact of swap rates changing between the time we make a mortgage offer to a borrower and the completion of the loan. 

Given the transient nature of these factors and the upcoming launch of our specialist homeowner product we have confidence in our ability to return to growth in profitability in FY24.

Our proprietary technology platform and robust business model provide us with flexibility and agility, while maintaining rigorous credit discipline, especially under evolving market conditions. Most recently, this was evidenced by our ability to reprice our mortgages overnight following the fallout from the 'mini-budget', when more than a thousand products were pulled by other lenders. 

In the short to medium term, our borrowers, the vast majority of whom are developers and professional landlords, are well-placed to withstand these macroeconomic headwinds, given the proportion of borrowing on fixed rates. Loan-to-value across our lending portfolio is, on average, below 70%. On the funding side, we continue to see healthy investor appetite and we continue to diversify our sources of FuM. In November we signed the first investment into a new separate account with a leading US-based asset manager and annuity provider to grow our nascent residential portfolio BTL business. This will initially add £30 million to Platform AuM. 

We remain confident in the medium-term ambitions that we set out at the time of our IPO in July 2021. We are also confident about the long-term prospects for the Group. Our confidence is underpinned by our technology platform, our strong financial position, our talent and customer-centric approach, and the clear scope to win an increasing share of the large and fragmented UK property finance market.

Rod Lockhart, Chief Executive of LendInvest, commented:

"Our performance in the first half has been robust, and we continue to make good progress on our strategic priorities. A 20% increase in FuM, driven by commitments from both new and existing investors, including Lloyds Bank and JP Morgan, is testament to the trust that leading financial institutions have in our talent and our technology. There is considerable scope for further growth in our existing markets. In a few weeks borrowers in the £100 billion specialist homeowner market will have access to superior customer care and technology driving a seamless, simpler and faster application process as we launch our first product focused on this segment.

"We are well-positioned to weather the current difficult macroeconomic backdrop, given our robust business model, diverse sources of capital and ability to respond with new products in a fast-changing environment. We recently launched a two-year tracker product to support landlords while they navigate the changing economic environment, which is already proving popular. Our ESG values are central to our success. We are now carbon neutral and have published our first Green Bond Framework which is designed to accelerate the allocation of capital to eligible green projects funded by refurbishment loans.

"Underpinning our business, we have strong cash reserves with rigorous credit discipline. In addition, we have more than £1 billion in lending headroom to support our borrowers when market conditions improve. Given this confidence we remain committed to our progressive dividend policy."

Analysts and investors presentation: 9.00am on Wednesday 30 November 2022

A webcast for analysts and investors will be hosted by Rod Lockhart, Chief Executive Officer, and Michael Evans, Chief Financial Officer, at 9.00am today, Wednesday 30 November 2022.
To access the webcast, please register here
A playback facility will also be available in due course.

- Ends - 

Enquiries:                 

About LendInvest 

LendInvest is a technology-focused property finance asset manager in the United Kingdom. Since inception we have developed proprietary technology and digital solutions that have allowed us to capture market share from incumbents and attract significant third-party capital.

We use our technology to disrupt the £1.6 trillion* property finance market which is dominated by manual paper processes and poor customer care. Our platform, unencumbered by legacy systems, offers attractive products and pricing to borrowers and intermediaries through a seamless and customer-focused process. In addition, it also provides us with a highly scalable origination platform for future Platform AuM growth.

As an asset manager, we have designed a variety of investment solutions and products for our investors. These range from funds and separate accounts to financial partnerships and RMBS. These products are tailored to address their specific risk return and investment criteria. Through the platform, investors from around the world gain exposure to attractive UK property finance assets without requiring them to establish direct lending operations or borrower services.

Our innovative business model is underpinned by our proprietary end-to-end technology infrastructure, which facilitates operating leverage and delivers better pricing for our customers. This drives efficiency and underpins our business' roadmap for growth.

*Source, FCA -The outstanding value of all residential mortgage loans was £1.6 trillion at the end of Q2 2022.

Forward-looking statements

Certain statements in this announcement are forward-looking statements. In some cases, these forward looking statements can be identified by the use of forward looking terminology including the terms "anticipate", "believe", "intend", "estimate", "expect", "may", "will", "seek", "continue", "aim", "target", "projected", "plan", "goal", "achieve" and words of similar meaning or in each case, their negative, or other variations or comparable terminology. Forward-looking statements are based on current expectations and assumptions and are subject to a number of known and unknown risks, uncertainties and other important factors that could cause results or events to differ material from what is expressed or implied by those statements. Many factors may cause actual results, performance or achievements of LendInvest to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of LendInvest to differ materially from the expectations of LendInvest, include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and changes in regulation and policy, changes in its business strategy, political and economic uncertainty and other factors. As such, undue reliance should not be placed on forward-looking statements. Any forward-looking statement is based on information available to LendInvest as of the date of the statement. All written or oral forward-looking statements attributable to LendInvest are qualified by this caution. Other than in accordance with legal and regulatory obligations, LendInvest undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Nothing in this announcement should be regarded as a profit forecast. 

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Operating Review

LendInvest is a leading UK asset management platform focussed on property finance. We originate and manage portfolios of property loans for investors by providing borrowers and brokers with transparent, convenient and competitively priced products. We benefit from a diversified revenue stream, with revenue generated through annual management, performance and servicing fees on Separate Accounts and Funds, and interest charged to borrowers on assets funded through Financial Partnerships and Residential Mortgage-Backed Securities (RMBS). Arrangement fees are earned on every loan originated. We currently provide three types of secured property lending to borrowers in the form of bridging loans, development loans, (collectively, "short term lending"), and Professional Buy-to-Let ("BTL") loans. In a few weeks, we expect to launch a fourth type of secured property lending, specialist homeowner mortgages.

One of our key objectives is to have a diverse and highly scalable client investor base that provides us with both flexibility and resilience. We already benefit from a diverse pool of capital and have continued to add to our investor base in line with this objective during the period.

Technology underpins every aspect of our business, it is a key driver of our roadmap for growth, it provides a competitive advantage and is critical as we grow our share in longer-term, higher-volume products. The investment made into the technology platform enables us to scale efficiently and launch new products.

We have made strong progress in our strategic goals over the past six months which will facilitate further growth in future periods:

1.     Technology investment

·      Our technology has continued to generate operating leverage and we expect this trend to continue over the medium term. A significant amount of our technology capability has been focussed on the development of our new Specialist Homeowner product, which we plan to launch in a few weeks and expect to be a significant contributor to our platform AuM growth. In the short term, costs associated with the launch will result in a small reversal of this trend as we invest in our growth and reach critical mass. 

·      As stated at the time of the IPO, part of the £40 million raised was to accelerate the delivery of our technology roadmap. As part of that process, we have continued to build out our technology team. Since the start of the financial year, we have increased the size of our technology team by more than 28% to 90 full time employees. In particular, we have strengthened our capabilities in product management, engineering and Salesforce. 

·      We increased the level of automation in our post-offer processes through the launch of our panel of solicitors to digitise the conveyancing process, improve the handling of inbound communications from brokers, and delivered the capability to instruct physical valuations directly from our Genesys platform. Our new BTL legal panel in partnership with Smoove, provides borrowers and brokers access to a wider selection of legal firms across the country.

2.             Launch of new products

·      Following the market turmoil after the mini budget, we launched a new two-year tracker product range to support landlords while they navigate the changing economic environment. The new two-year tracker range seeks to provide borrowers with flexibility while offering competitive interest coverage ratio stress tests to maximise borrowing. With no early repayment charges, borrowers can secure a preferential rate with the knowledge they have the flexibility to remortgage if market conditions change over the next couple of years.

·      We launched a new refurbishment product for our Bridging suite. The new product is for residential properties, including houses of multiple occupancy (HMOs), and is available through our new broker portal. We are now seeing more than 95% of new enquiries and applications being submitted directly through our portal which further streamlines the application and case management process. 

3.             Broker market penetration

·      Broker market penetration continued to improve with active brokers completing applications, up 7% since the start of the financial year to more than 2,100.

·      Repeat business from our broker population was 69% in H1 reflecting the ease with which brokers can complete an application and the friction removed from the process through our technology platform. 

·      The UK property market is highly intermediated and therefore brokers are LendInvest's primary route to market and represent 100% of BTL originations. We are focused on being the partner of choice to mortgage brokers in the UK and an important part of our strategy is ensuring we are providing high quality products characterised by excellent service, evidenced by our Trustpilot rating of 4.3.

4.             Increased investment in our platform

o  A further endorsement of JP Morgan's trust in our capabilities was an increase in the size of the separate account for BTL loans that we manage for them from £725 million to £1,000 million. This also aligns with our strategy of growing and optimising FuM, as through time it will increase the proportion of third party managed assets and strengthen our asset management business model.

o  As we diversify our sources of FuM, we continue to grow our list of financial partners or financial institutions who work closely with us. In September, Lloyds Bank, part of the UK's third largest banking group, entered into a £180 million financial agreement to participate in the growth of our BTL lending business.

o  In line with our strategy of diversifying sources of FuM, in August we issued our third listed bond from our second Euro Medium Term Note programme, the LendInvest Secured Income II plc 6.50% bonds due 2027, raising £38 million in the process with a further £22 million retained in treasury. 

o  During H1 FY2023, we announced the completion of our fourth securitisation, which comprised £270 million of prime BTL mortgages in an oversubscribed RMBS transaction, "Mortimer BTL 2022-1" with demand from a broad range of institutional investors. The senior tranche was priced at 1.05% over SONIA.

o  The sale of our residual economic interest in the "Mortimer BTL 2022-1" securitisation for a cash consideration of £5.8 million is in line with our strategy to optimise our funds under management, while at the same time selectively moving more assets off our balance sheet. As previously announced, the transaction reduced our gross loans and advances by approximately £270 million, brought forward profit recognition and generated a net pre-tax gain of £3.3 million, which has been recognised in H1 FY2023.  

5.             ESG 

o  Our ESG values and principles are central to the success of our platform. The nature of our business means that for many of the loans we originate new housing stock is put into the system, which helps to alleviate the housing crisis, or older stock is improved to comply with higher energy efficiency standards, which helps minimise the carbon impact of housing. We produced our first green bond framework for refurbishing and retrofitting, a first in our industry. The framework is aligned with the ICMA green bond principles. 

o  We are carbon neutral and have offset all of our Scope 1 & 2 emissions, plus a proportion of our Scope 3 emissions, by supporting a number of high-impact emission reduction projects that deliver tangible results under the United Nations Sustainable Developments Goals.

o  We aim to achieve an average EPC rating of C (based on the UK government's standard assessment procedure (SAP) score) across our Platform AuM by 2030.

o  ARC Ratings, a regulated European credit rating agency, affirmed its highest possible rating, SQ1 Servicer Quality for the eighth consecutive year. Following a comprehensive review, they noted our strengthened financial performance, and technology driven infrastructure which "create a seamless application process facilitating increased broker conversion and higher repeat rates."

Finance Review

The principal activity of the Group is to provide asset management services for property finance in the United Kingdom.

¹Refer to the Glossary for an explanation of this term and reconciliation back to relevant IFRS measures

The reported figures for the comparative period have been restated. This change to the consolidated interim statement of profit and loss and a reclassification between revenue and cost of sales and does not change the overall profitability during the prior period. Further details of the prior period restatement are disclosed in note 1.4 of these condensed consolidated interim financial statements. The prior period restatement did not impact the profit before tax.

Gross Profit & Revenue

Revenue decreased by 8% to £42.5 million (30 Sep 2021: £46.3 million) primarily driven by short term lending products. Of the £6.4 million reduction in revenue, £3.5 million was a consequence of our average balances for loans and advances being £42 million lower at £214 million. This reflected a decrease in short term lending during the previous financial year, as borrowers were able to quickly sell properties on completed projects due to the strength of the UK property market. £1.3 million of the reduction in revenue is related to nil performance fees for some of the short-term loans in our Luxembourg-based Real Estate Opportunity fund as levels of impairment provisioning increased. A 44% increase in Platform AuM from BTL increased BTL revenue by 11%. This was partly offset by lower fees from reduced loan sales to J.P.Morgan as some loans originated did not meet minimum income levels. 

Cost of sales decreased by 42% to £11.4 million (30 Sep 2021: £19.8 million) primarily as a result of a £9.2 million gain from the exercise of the call option in our first securitisation, Mortimer 2019-1 BTL plc.

Gross profit increased by 17% to £31.1 million (30 Sep 2021: £26.5 million) and our gross profit margin increased by 16 percentage points to 73%. This elevated gross profit margin is not expected to be maintained in future periods.

Operating Expenses

Administrative expenses increased by 12% to £17.1 million (30 Sep 2021: £15.3 million). This was driven by our investment in key hires, and total headcount increased by 80 to 277. A significant number of these hires have been into the technology team to facilitate the development of our specialist homeowner product. Share based payments increased by 75% to £0.7 million (30 Sep 2021: £0.4 million) due to new share schemes for staff introduced following the admission to AIM. We expect to grow headcount more slowly in the second half of the year, reflecting the slowdown in the wider economy.

In the prior period, we incurred total IPO listing costs of £3.9 million, £1.6 million of which is expensed in the statement of profit and loss as administrative expenses but considered to be a non-recurring item. 

Impairment

Impairment provisions increased by 12% to £1.9 million (30 Sep 2021: £1.7 million) reflecting the weaker macroeconomic outlook. We have applied a £0.6 million model overlay to its expected credit loss model to adjust for the sharp increase in interest rates over the 6 month period, which were further exacerbated prior to 30 September following the UK's mini-budget. The overlay accounts for any BTL Loans where the rental income is not expected to cover the interest payments at any point in the next five years.

Finance Income / Finance Expense

Finance income increased by £1.6 million to £2.7 million (30 Sep 2021: £1.1 million). The gain in the current year is largely due to interest rates hedges we have in place on our pipeline of BTL assets. These are in place to mitigate the risk from rising swap rates while the loans are in the pipeline before completing. The mark-to-market gain on these hedges occurred as the interest rate swap curve increased sharply prior to 30 September 2022. These gains could reverse in the second half of the year if swap rates reduce.

Finance expense in the prior year of £0.4 million was related to fair value of the undrawn portion of a loan commitment. This loan commitment was removed from the Group prior to 1 April 2022. There is no finance expense in the current period.

Adjusted EBITDA

Adjusted EBITDA has increased 7% to £14.3 million (30 Sep 2021: £13.4 million) due to the 17% increase in gross profit. The increase in Adjusted EBITDA is lower than the 45% increase in gross profit due to the £2.7 million in finance income in the current period.

Cash, Cash Flow, and Free Cash Flow

As at 30 September 2022, we held cash and cash equivalents of £113.3 million, a 4% reduction during the 6 month period. Of this total, £82.1 million of this balance is held for loan funding purposes. The remaining cash balance of £31.3 million has reduced by £38.5 million since the prior year partially due to £11 million used for the 5% equity funding in loans on the Group's balance sheet, and £7 million used to originate loans, just prior to 30 September 2022, before sale to other group entities. The remaining £20 million movement is due to a part repayment of a financial partnership given the high level of cash held by the Group.

The table below shows the free cash flow of the business, defined as the net cash outflow from operating activities, less purchases of property, plant and equipment and capitalisation of internally developed software. Additionally, an adjustment has been made to reverse movements in loans and advances. This reflects the operating model of the business to finance increases in loan and advances through increases in interest bearing liabilities, which are excluded from this calculation. The free cash flow in the six months to 30 September 2022 is £9.2 million, with a free cash flow margin over Adjusted EBITDA of 80%. An interim dividend payment of 1.3 pence per share,  approximately £1.8 million would be sufficiently covered by the free cash flow.

Earnings per share and interim dividend

Earnings per share increased 64% to 10.8 pence per share (30 Sep 2021: 6.6 pence per share) and fully diluted earnings per share increased by 63% to 10.4 pence per share (30 Sep 2021: 6.4 pence per share). The Board is pleased to announce an interim dividend of 1.3 pence per share.

Dates for the interim dividend

Net Assets

Our net assets decreased by 38% to £60.2 million (31 Mar 2022: £97.5 million). This reduction has largely been caused by an £81.5 million fall in the fair value of the BTL loans since the year end. The portfolio is fair valued using the expected cash flow of the loans, discounted using the relevant securitisation rates. Securitisation rates have significantly worsened in the six months to 30 September 2022. This has significantly reduced the value of the portfolio, with UK BTL AAA bond rates increasing from 100 bps to 200bps over the 6 month period, and corresponding increases across other bonds, with the AAA rate increasing from 150 bps on 23 September immediately following the UK's mini budget. Since 30 September 2022, the UK BTL AAA bond has reduced to 165bps, with reduction across other bonds too. If these more recent rates were used, the BTL fair value, and net assets balance would increase by £7 million. As market conditions improve and the securitisation market continues to normalise, we would expect to see additional improvements in the fair value of the portfolio. We do not intend to securitise a portfolio of BTL assets until market conditions materially improve. 

Lending Product Highlights

*Refer to the Glossary for an explanation of this term and reconciliation to Loans & Advances

Short Term Lending

Short term Platform AuM increased by 12% to £681.9 million (30 Sep 2021: £608.0 million), with loans and advances on the statement of financial position increasing by 30%, £57.5 million, to £243.5 million. The increase has been largely driven by the new broker portal that we released in December 2021. This makes it easier for brokers to apply for new loans with us, and better track the loan through to completion. It has been well received by the broker population, leading to an increase in lending. The larger increase in loans and advances reflects the success of the broker portal, as it is targeted towards bridging loans less than £3 million in size, which are financed through our retail bonds, and HSBC and Barclays facility, which are all held on our balance sheet.

Short term lending gross profit has decreased by 37%, to £8.2 million (30 Sep 2021: £13.0 million), £1.6 million of this reduction is caused by the reduction in average balances on the statement of financial position over the two periods. The average loan book in the 6 months to 30 September 2022 was £214 million, a £42 million reduction compared to the average loan book in the 6 months period to 30 September 2021 of £256 million. An additional £0.5 million of the reduction was caused by fewer loans being sold to third parties, resulting in a lower gain on derecognition of financial assets. The remaining reduction in gross profit is largely due to not achieving performance fees from the Luxembourg domiciled Real Estate Opportunity Fund due to higher levels of impairment provisioning. This has led to £1.3 million less in asset management and fund fees compared to the prior comparable period. These factors caused the gross profit margin to reduce to 52% (30 Sep 2021: 59%) since the prior period.

Buy-to-Let Lending

BTL lending delivered strong growth in H1 was a 44% increase in Platform AuM to £1,749 million (30 Sep 2021 £1,218 million). The sharp increase in the interest rate swap curve in H1 led to a corresponding increase in our lending rate. The fixed term lending rate on 5-yr fixed rate BTL loans in September 2021 was, on average, 3.5%, whilst the average rate for the same loans at 30 September 2022, following the UK's mini budget was 7.5%. We expect that this sharp increase in interest rates will lead to a reduction in our pipeline for new lending which will reduce Platform AuM growth in the second half of the year.

BTL lending interest revenue increased by 31% to £20.7 million (30 Sep 2021: £15.8 million) and is in line with the growth in the average gross loans and advances balance. The gross loans and advances balance was significantly higher during the period than at 30 September 2022 as £270 million of loans in Mortimer BTL 2022-1 plc securitisation were consolidated into our results up until the residual economic interest in the securitisation vehicle was sold in August 2022.

The gain on derecognition of financial assets decreased by 10% to £3.3 million (30 Sep 2021: £3.7 million) and was in relation to the gain we recognised from the sale of the residual economic interest in our fourth securitisation, Mortimer BTL 2022-1 plc. In the prior period, the gain of £3.7 million was recognised from the sale of a £100 million BTL portfolio to J.P. Morgan. Fees and other income reduced by 40% to £2.8 million (30 Sep 2021: £4.7 million). This was largely driven by fewer loans sold to J.P. Morgan as they didn't hit minimum income levels.

The gross profit in BTL increased by 76% to £23.1 million (30 Sep 2021: £13.5 million). This increase was largely due to a reduction in cost of sales, driven by a £9.2 million gain on the call of the Mortimer BTL 2019-1 assets. BTL delivered a gross profit margin of 85% (30 Sep 2021: 56%), although this elevated gross profit margin is not expected to be maintained in future periods.

The BTL loans and advances balance was stable at £879.7 million (30 Sep 2022 £880.8 million). This is partially due to the £270 million sale of the Mortimer 2022-1 BTL plc residual economic interest and derecognition of the loans from our balance sheet. There has also been a £79.0 million reduction in the fair value of the BTL assets at 30 September 2022 (30 Sep 2021: £39.4 million increase). The portfolio is fair valued using the expected cash flow of the loans, discounted using the relevant securitisation rates. Securitisation rates have worsened in the twelve months to 30 September 2022, reducing the value of the portfolio, with UK BTL AAA bond rates increasing from 68bps to 200bps with corresponding increases across other bonds. As market conditions improve and the securitisation market begins to normalise, we expect to see an improvement in the fair value of the portfolio, and the UK BTL AAA bond rate has improved to 150bps by the end of November 2022. We do not intend to securitise a portfolio of BTL assets until market conditions improve.

Going Concern

The Group's business activities together with the factors likely to affect its future development are set out in this operating review. The directors have considered these factors alongside the Group's financial plan and any associated risks, and it is on this basis that the directors have continued to prepare the financial statements on a going concern basis.

The impact of the tragic events in Ukraine, increasing interest rates, the impact on the cost of living in the United Kingdom from the high levels of inflation, and other factors have been assessed and several financial forecasts have been prepared across a range of potential scenarios. Alongside this, a comprehensive review of all material financial covenants and all funding sources, has been conducted to ensure ongoing compliance both under expected circumstances and potential stressed scenarios. The directors have reviewed these plans and consider the Group to have sufficient resources to continue its activities for 12 months from the date these financial statements were authorised for issue, including against the most severe but plausible outcome and do not consider there to be any material uncertainty.

Events after the period end date

There were no events to report after the period end date.

Responsibility statement of the directors in respect of the interim consolidated financial statements for the 6 month period ended 30 September 2022

We confirm that to the best of our knowledge:

 ●       the condensed set of financial statements has been prepared in accordance the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority 

Approved on behalf of the board:

Michael Evans

Director

30 November 2022

INDEPENDENT REVIEW REPORT TO LENDINVEST PLC

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Interim consolidated financial statements for the six months ended 30 September 2022 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the London Stock Exchange AIM Rules for Companies.

We have been engaged by the company to review the condensed set of financial statements in the Interim consolidated financial statements for the six months ended 30 September 2022 which comprises of the directors' report, Condensed consolidated interim statement of profit or loss, Condensed consolidated interim statement of comprehensive income, Condensed consolidated interim statement of financial position, Condensed consolidated interim statement of changes in equity, condensed interim statements of cash flows and notes to the condensed interim financial statements.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in the Interim consolidated financial statements has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities of directors

The directors are responsible for preparing the Interim consolidated financial statements in accordance with the London Stock Exchange AIM Rules for Companies which require that the Interim consolidated financial statements be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

In preparing the Interim consolidated financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the Interim consolidated financial statements, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the Interim consolidated financial statements. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange AIM Rules for Companies for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

BDO LLP

Chartered Accountants

London, UK

29 November 2022

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).