LEI:
213800NWMK3O4UWP9N91
24 July 2024
LendInvest plc
FULL YEAR RESULTS FOR THE
YEAR TO 31 MARCH 2024
Continued Innovation and
Resilience Amid Market Challenges
LendInvest plc (AIM: LINV; the
"Company" or the "Group"), the UK's leading platform for mortgages,
announces its audited results for the year ended 31 March
2024.
Rod
Lockhart, Chief Executive of LendInvest,
commented:
"Our strategic focus on technology, funding diversification
and exceptional customer service has bolstered our resilience
during what has undoubtedly been a challenging year, but also a
year of important strategic transition. The successful launch of
our Mortgages Portal is a testament to our innovative approach and
commitment to delivering operational efficiency and growth. We
remain confident in and focused on our target of returning to
profitability during the current financial year.
"Our team's strategic initiatives have
laid a strong foundation for future success, and I am particularly
thankful for their dedication over the last 12 months."
Summary
Financials
Audited
|
Year to
31 March 2024
|
Year to
31 March 2023
|
Change
|
Platform Assets under Management
(Platform AuM) (£m)1
|
2,783.3
|
2,587.0
|
8%
|
Funds under management (FuM)
(£m)1
|
4,127.3
|
3,605.9
|
14%
|
New Lending (£m)
|
886.5
|
994.8
|
(11%)
|
Net Fee Income
(£m)
|
15.9
|
11.2
|
42%
|
Net operating income
(£m)
|
23.5
|
54.7
|
(57%)
|
Total operating expenses
(£m)
|
(50.8)
|
(40.4)
|
26%
|
Adjusted EBITDA
(£m)1
|
(15.1)
|
14.3
|
(206%)
|
(Loss)/Profit
before tax (£m)
|
(27.3)
|
14.3
|
(291%)
|
(Loss)/Profit
after tax (£m)
|
(20.1)
|
11.4
|
(276%)
|
Diluted earnings per
share1
|
(14.5)p
|
8.0p
|
(281%)
|
Full year dividend per
share1
|
-
|
4.5p
|
-
|
1 Unaudited
Financial
Highlights
●
Platform AuM increased by 8% to £2.8 billion, driven by a 13%
increase in Buy-to-Let (BTL) and short-term mortgages
●
FuM grew by 14% to £4.1 billion, driven by £700 million in new
Separate Account mandates
●
Debt reduced by £645 million (56%)
●
Net Fee Income up 42%, primarily a result of a continued
strategic shift towards third-party managed assets
●
Adjusted EBITDA decreased to £(15.1) million, reflecting lower
originations and higher administrative costs, but H2 EBITDA of
£(4.3) million represented a 60% improvement on H1
●
Loss after Tax: £(20.1) million, driven by accelerated recoveries
of non-performing assets, disposal of low-margin assets, lower
lending volumes, and a higher degree of one-off costs
●
Cash and Cash Equivalents increased by 19% to £55.7 million,
enhancing our liquidity position
Strategic Highlights
Products and Technology
●
Launched LendInvest Mortgages Portal, a fully integrated platform
enhancing broker and customer experience and enhancing cross
selling opportunities
●
Strengthened residential mortgages offering, targeting underserved
market segments with significant growth potential
●
Implemented a seamless product switch process for brokers to
transition to a new loan at maturity, improving customer retention
and cross selling
●
Applications can now be completed in under five minutes
Diversified funding
●
Welcomed BNP Paribas to a £300 million funding syndicate with HSBC,
and Barclays
●
Secured two new Separate Account mandates, providing £500 million
to support the Mortgages division in Buy-to-Let and £200 million to
support short-term mortgages
●
Extended and enhanced our funding partnership with National
Australia Bank
Strengthening the balance sheet and de-risking the
business
● Reduced borrowing and
extended maturity profile
o Repaid our second £55 million retail-eligible bond and
launched a new £39 million retail-eligible bond
o Strategic reduction in balance sheet loans leading to
simplification of funding model
o Completed our fifth and largest oversubscribed RMBS
transaction to securitisation to date at £410 million, reflecting
strong market demand for LendInvest assets
o New three-year strategic funding facility of £42.5 million,
reducing mezzanine borrowing by £30 million
o Total debt reduced by £645 million (56%) with the leverage
ratio reducing by 39%
● Accelerated recovery of
non-performing assets
o Sold a £250 million low margin BTL portfolio at a loss of
£10.6 million, captured within net gains/(losses) on derecognition
of financial assets removing lower net interest margin assets that
would dilute future earnings
o Accelerated recovery of non-performing assets to prioritise
cash in our Capital division
● Restructured the cost
base
o Headcount restructured to c.200 employees with payroll costs
reduced by c.25% per annum
ESG and People
● Senior Management: In March 2024, Hugo Davies, our Chief
Capital Officer, took on the role of Interim CFO, ensuring business
continuity following the departure of predecessor David Broadbent.
Stephen Shipley, with over 30 years of financial sector experience,
including roles at Barclays and Foundation Home Loans, is now
appointed as Chief Financial Officer. Hugo will return to his role
as well as now assuming responsibilities as Managing Director of
the Mortgages division.
●
Maintained carbon neutrality and achieved a 61% reduction in
operating emissions
●
Continued focus on sustainable projects, supporting retrofit and
energy-efficient property financing
●
Launch of new Mortgages Academy in Glasgow to develop industry
talent and expertise
Outlook
● UK
mortgage market showing signs of improvement, giving cause for
cautious optimism
●
Leading technology and excellent market reputation providing
further support
●
Return to profitability expected during FY2025, as previously
forecast
Presentation and webcast for analysts and
investors
A conference call with management including an opportunity to ask
questions will commence at 9.00am (BST) on 24 July 2024. A copy
of the presentation will be available on the investor relations
section of www.lendinvest.com from 8.55am.
To access the webcast, please
register
here
A playback facility will also be
available in due course here
Change of name of nominated adviser and
broker
The Company also announces that its
Nominated Adviser and Broker has changed its name to Panmure
Liberum Limited
following completion of its own
corporate merger.
- Ends
-
Enquiries:
LendInvest via Teneo
+44 (0)20 7353 4200
Rod Lockhart, Chief Executive Officer
Hugo Davies, Interim CFO
and Chief Capital Officer
Leigh Rimmer, Director of Communications
investorrelations@lendinvest.com
Panmure Liberum (NOMAD and Broker)
+44 (0)20 7886 2500
Atholl Tweedie / Stephen Jones / / David Watkins
Teneo (Financial PR)
+44 (0)20 7353 4200
Ed Cropley
/ Olivia Lucas / Oscar Burnett
About LendInvest
LendInvest is the UK's leading
platform for mortgages, and is listed on the London Stock Exchange
(AIM: LINV). LendInvest offers short-term, buy-to-let and homeowner
mortgages. Its proprietary technology and user experience are
designed to make it simpler for both borrowers and investors to
access property finance. LendInvest has lent £7bn of short term,
development, buy-to-let and homeowner mortgages. Its funders and
investors include global institutions such as J.P. Morgan, HSBC,
Citigroup and NAB, and, in 2019, it was the first Fintech to
securitise a portfolio of buy-to-let mortgages.
The company was named Digital
Innovation Award Winner at the Sunday Times Tech Track 100 Awards,
Buy-to-Let Lender of the Year for 2020 at the NACFB awards, and one
of FT1000's Fastest Growing Companies in Europe for
2021.
Important Notices
The information contained within this
announcement is deemed by LendInvest to constitute inside
information as stipulated under the UK Market Abuse Regulation. By
the publication of this announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain. The person responsible for arranging for the release
of this announcement on behalf of LendInvest is Rod
Lockhart.
The information contained in this
announcement is for information purposes only. This announcement
has been prepared in accordance with English law, the UK Market
Abuse Regulation and the AIM Rules for Companies and information
disclosed may not be the same as that which would have been
prepared in accordance with the laws of jurisdictions outside
England. Subject to the requirements of
the UK Market Abuse Regulation and the AIM Rules for Companies, the
delivery of this announcement shall not create any implication that
there has been no change in the affairs of LendInvest since the
date of this announcement or that the information in this
announcement is correct as at any time subsequent to its
date.
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.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
The past financial year has
reflected both the complexities and opportunities of our evolving
market. In the first half of the year, we initiated an internal
restructuring, prioritising liquidity, enhancing the balance sheet
by reducing and extending our debt, and strategically reducing our
cost base. These were vital to navigate a turbulent period and lay
a solid foundation for future growth.
In the second half of the year, we
saw encouraging improvement in the operating environment, marked by
an uptick in market activity, allowing us to make significant
strides in our product offerings, funding partnerships and
technology developments.
Market backdrop and financial
performance
In 2023, rising interest rates in
the UK increased the cost of mortgages for borrowers and dampened
house prices, resulting in lower levels of mortgage approvals and
property transactions. Interest rate swaps remained volatile due to
major domestic and international macroeconomic events, creating
operational friction and making it harder to maintain a consistent,
competitively priced product range. As a result, our growth and
profitability were impacted.
Despite this, we continued to grow
our Funds under Management (FuM) and make strategic progress, a
testament to our resilience and the fundamental strengths of the
business. This has been especially evident in our decision to
achieve a balanced and diversified range of funding
sources.
2024, however, has brought renewed
confidence to the UK property market, underpinned by declining
inflation and lower interest rate swaps. We have also seen a
year-on-year increase in mortgage approvals for house purchases and
remortgaging. The adjustment in five-year swap rates to 3.32% in
late 2023 allowed us to reduce rates and test our capacity to
originate while demonstrating our ability to distribute effectively
as we become more price competitive. Utilising the superior
product-management capabilities of our Mortgages Portal, we
introduced highly competitive Buy-to-Let products that increased
our application volumes. In early January 2024, applications
tripled compared to December 2023.
Strategic progress
FY23 marked a pivotal year for
LendInvest with the smooth launch and steady growth of our
short-term mortgages product line. This launch signified a major
expansion of our services, tailored to meet the evolving needs of
our diverse customer base. Reflecting this expansion, we
established LendInvest Mortgages and LendInvest Capital,
formalising our corporate structure to better serve our different
customers and enhance operational efficiency.
Further enhancing our
technological edge, in early 2024 we launched the proprietary
next-gen Mortgages Portal. This platform revolutionises the
management of our Residential, Buy-to-Let (BTL), and short-term
mortgages by integrating these services into a single,
user-friendly platform. This consolidation has driven significant
cost efficiencies while maintaining our capacity for high-volume
operations.
Operational excellence and
innovation
The Mortgages Portal streamlines
the entire mortgage management process, from decisions in principle
to final offers, significantly reducing friction for brokers. This
efficiency is evidenced by an 80% faster retrieval of case
information and the ability for brokers to submit a full
application in under five minutes.
The portal also introduces a new
product transfer process, allowing brokers to easily switch
products at maturity with just a few clicks, enhancing customer
retention and satisfaction. Furthermore, the enhanced capability to
deliver pricing changes three times faster than before ensures that
we remain competitive, agile, and responsive to market
dynamics.
Strengthened funding partnerships
We have also strengthened our
financial foundations through strategic partnerships and
significant funding initiatives. We welcomed BNP Paribas into a
£300 million funding syndicate alongside HSBC and Barclays,
bolstering our short-term mortgages.
A landmark achievement was
securing a new £500 million Separate Account mandate which has
substantially strengthened our Buy-to-Let product offering, while
providing the opportunity to increase our fee revenue. The mandate
can also support our growing residential homeowner product once
scaled. Additionally, we successfully issued our fourth listed bond
under the LendInvest Secured Income II plc, due 2027, raising £39
million. The completion of our fifth and largest oversubscribed
RMBS transaction and subsequent sale of the residual economic
interest further underscored the strategic
objective of reducing the proportion of assets on the balance sheet
and supported our strategy to reduce our debt.
Commitment to sustainability and
good governance
In a year marked by global
economic adjustments, our commitment to sustainability has remained
steadfast. Our ESG strategy is more than a commitment - it is a
core component of our long-term success. This year, we have
maintained our carbon neutrality, and furthered our sustainability
initiatives to not only align with, but exceed industry standards;
reinforcing our position as a leader in responsible business
practices. Our efforts are focused on continuous improvement in our
governance practices, enhancing transparency, and fostering an
ethical culture that supports our business and stakeholder
interests.
People and culture
The dedication and hard work of
our team has been central to navigating this year's challenges. The
strategic appointments across our departments have injected fresh
perspectives and expertise that are vital for our growth and
operational excellence. The success of our existing Apprenticeship
scheme, and the recent launch of our Mortgages Academy in Glasgow
are highlights of the year, reflecting our commitment to developing
talent and ensuring that new entrants into the mortgage industry
are well-equipped with the necessary skills and
insights.
The ongoing expansion of our
Glasgow office also underscores our determination to grow our
presence in Scotland.
Outlook
As we look to the future, we
remain cautiously optimistic. Our investments in technology and
innovation are designed to ensure that we remain at the forefront
of the industry, adaptable to change, and competitive in our
offerings.
With a solid strategic plan and a
clear focus on increasing operational efficiency, we are
well-positioned to get our growth trajectory and profitability
firmly back on track during FY25, increasing origination volumes
and delivering sustained value to our customers and
shareholders.
CHIEF FINANCIAL OFFICER'S REVIEW
The first six to nine months of
the 2024 financial year presented significant challenges for our
business. In response to soaring inflation, the Bank of England
Base Rate rapidly increased from 0.10% to 5.25% in less than two
years, reaching its highest level since the Financial Crisis. This
increase impacted key markets that drive our revenue growth, such
as professional Buy-to-Let and Specialist Residential mortgages,
which saw volumes decrease by 50% and 30%, respectively, during
2023. These declines were primarily due to stringent affordability
conditions, a weaker housing market outlook, and a reduction in
investment confidence fuelled by political and economic
uncertainty. Consequently, the mortgage market, and our business,
were affected.
However, throughout the year, the
business continued to focus on its strategy to simplify operations
and transition to a more predictable, fee revenue model. This
strategic momentum has been demonstrated through several
significant accomplishments:
1.
Deployment of Proprietary
Technology: We introduced new, market-leading proprietary
technology for mortgage origination and case management, enhancing
efficiency and customer experience.
2.
Capital Markets Projects:
We successfully completed multiple capital markets projects,
optimising our balance sheet and demonstrating the strength of our
investor relationships and the attractiveness of our credit
performance through the cycle.
3.
Short-Term Mortgages Service
Proposition: Despite numerous price adjustments in response
to market interest rates, our short-term mortgage service
proposition saw completions grow by 14% year-on-year, underscoring
its robustness and market relevance.
Our comprehensive suite of
property finance solutions enables us to capitalise on
counter-cyclical dynamics, expanding our customer base and
providing substantial marketing potential for Buy-to-Let (BTL). In
the BTL sector, we were pleased to see a resurgence in demand in
Q4, which lifted H2 originations by 53% compared to H1. This
resurgence was further supported by a 111% increase in signed
applications in H2 versus H1, bolstering our pipeline through to
the first quarter of FY25, even as markets slowed due to sustained
higher interest rates.
Overall, AuM has grown by 8%
year-on-year, driven by a 13% increase in the LendInvest Mortgages
division, primarily fuelled by AuM growth in Buy-to-Let and
short-term mortgages. However, originations were down by 11% due to
broader economic factors as described above.
Balance sheet AuM saw a
significant reduction of nearly 60% year-on-year, primarily due to
an 88% reduction in the size of the Buy-to-Let balance sheet.
Balance sheet short-term mortgage AuM grew by less than 1%
year-on-year, despite originations growth, highlighting the rapid
deployment of new separate account arrangements in this area.
Our Funds under Management (FuM) remained resilient, achieving 14%
growth year-on-year, driven by the successful closing of several
key transactions:
1.
Refinancing of Retail-Eligible
Bonds: We successfully refinanced our 2023 retail-eligible
bonds with a new 2026 offer.
2.
Largest Securitisation: We
closed the Company's largest securitisation to date at £410
million, which was the tightest-priced Buy-to-Let RMBS in H2 of
2023.
3.
New Separate Account
Mandates: We secured two new Separate Account mandates,
providing £500 million to support the Mortgages division in
Buy-to-Let and £200 million to support short-term
mortgages.
4.
Revamped Financial
Partnerships: We revamped our Financial Partnership with
National Australia Bank, delivering new criteria to support growth
and adapt to changing market dynamics in Specialist Residential and
Buy-to-Let.
5.
New Partners: We welcomed
BNP Paribas as a new partner in our balance sheet-funded short-term
mortgage business and post-year end welcomed a further investor to
support the growth trajectory in short-term mortgages.
Additionally, we closed several
transactions that helped to reduce the business' debt by £645
million over the course of the year, continuing our strategy to a
fee led revenue model.
As of the end of the financial year, we maintained significant
headroom in our Funds under Management (FuM) relative to our Assets
under Management (AuM), ensuring robust support for the business's
continued growth and achievement of its objectives. The proportion
of AuM held on the balance sheet reduced year-on-year from c.45% to
c.17%, with £2.3 billion of our nearly £2.8 billion in assets
managed on behalf of third parties.
To provide clarity for our
investors on how structural changes in AuM impact revenue
generation, we outline our financial performance as follows. Net
interest income is recognised in accordance with IFRS 9, while net
fee income is recognised under IFRS 15.
Group £m
|
Year to 31 March 2024
|
Year to 31 March 2023
|
Change
(%)
|
Funds under management
|
4,127.3
|
3,605.9
|
14%
|
Platform assets under management
|
2,783.3
|
2,587.0
|
8%
|
On balance sheet
|
477.0
|
1,122.9
|
(58)%
|
Off balance sheet
|
2,306.3
|
1,464.1
|
58%
|
New Lending
|
886.5
|
994.8
|
(11)%
|
(Loss)/profit before tax
|
(27.3)
|
14.3
|
(291)%
|
Basic earnings per
share
|
(14.5)p
|
8.3p
|
(275)%
|
Diluted earnings per
share
|
(14.5)p
|
8.0p
|
(281)%
|
Adjusted EBITDA
|
(15.1)
|
14.3
|
(206)%
|
Group Financial
Performance
Group £m
|
Year to
31 March 2024
|
Year to
31 March 2023
|
Change
(%)
|
Net interest income
|
8.5
|
38.4
|
(78)%
|
Net fee income
|
15.9
|
11.2
|
42%
|
Net gains on derecognition of
financial assets
|
(1.0)
|
4.9
|
(120)%
|
Net other operating
income
|
0.1
|
0.2
|
(50)%
|
Net operating income
|
23.5
|
54.7
|
(57)%
|
Administrative expenses
|
(42.4)
|
(34.5)
|
23%
|
Impairment losses on financial
assets
|
(8.4)
|
(5.9)
|
42%
|
Total operating expenses
|
(50.8)
|
(40.4)
|
26%
|
(Loss)/profit before tax
|
(27.3)
|
14.3
|
(291)%
|
(Gains) from derecognised cash
flow hedge
|
-
|
(9.2)
|
-
|
Losses/(gains) from derivative
hedge accounting
|
4.0
|
(5.1)
|
(178)%
|
Restructuring costs
|
1.6
|
-
|
-
|
Exceptional professional
costs
|
1.1
|
-
|
-
|
Underlying (loss)/profit before tax
|
(20.6)
|
0.0
|
-
|
Net Interest Income (NII)
Net Interest Income decreased by
78% to £8.5 million (2023: £38.4 million), primarily due to the
strategic shift towards managing more assets on behalf of third
parties and higher debt costs. In 2023, NII benefited from a £9.2
million gain recognised on the exercise of a call option and the
settlement of a designated cash flow hedge. Net Interest
Income is recognised on loans and advances held on the balance
sheet.
The business continued to
transform the composition of its balance sheet, with the Mortgages
division now managing £1.5 billion worth of Separate Account
mandates in Buy-to-Let alone. Consequently, the proportion of
Buy-to-Let AuM held on the balance sheet reduced by 88%
year-on-year, significantly impacting Net Interest
Income.
The proportion of AuM held on the
balance sheet at any given time can fluctuate as the business
utilises three main funding tools to reduce the amount of loans and
advances held on the balance sheet:
1.
Separate Account Mandates:
These transactions affect front book origination, taking a greater
share of what would have ended up on the balance sheet.
2.
Private Portfolio Sales:
Mostly used as a tool to seed Separate Account mandates with a
mature loan book. These transitions affect the back
book.
3.
Transfer of Residual Interest in
RMBS Transactions: The business typically seeks to
securitise its BTL loans and advances, and place residual
certificates once a year, allowing it to recycle lending capital,
maintain liquidity, and release impairment adjustments by removing
exposure to credit risk.
Net Fee Income (NFI)
Net Fee Income increased by 42% to
£15.9 million (2023: £11.2 million). This growth is attributed to
our expanding third-party managed account business. NFI is not
expected to fully offset the reduction in Net Interest Income (NII)
as the NII is also impacted by credit provisioning in the
impairment losses on financial assets line. NII is primarily driven
by our stock of loans, while NFI is primarily driven by the flow of
loans. Given the challenges faced in 2023, originations would have
needed to be higher to compensate for the foregone revenue in NII.
Despite this, the business is pleased with the current growth in
this predictable and recurring income area.
The Capital division experienced a
challenging year, with originations down by 38%, in line with a 36%
reduction in enquiries. The difficulty in maintaining a robust
pipeline meant that redemptions outpaced originations, causing the
division's AuM to fall by approximately 11%, which exerted
additional downward pressure on NFI against our plan. Despite these
challenges, the Capital division generated £0.3m in net performance
fees in FY24.
Impact of derecognition on Financial
Performance
Throughout the year, the business
closed several transactions that transitioned assets to third-party
investors. These transactions successfully raised liquidity and
allowed us to reduce our debt by £645 million, despite being
generally unfavourable to profitability at the point of
derecognition.
Buy-to-Let Portfolio Sale: This project involved the sale of a prime portfolio of
Buy-to-Let (BTL) assets worth £250 million, which took place in the
first quarter of the financial year. The transaction was
economically impacted by wider market forces following the collapse
of Credit Suisse. Initially, we had received a bid that would have
delivered a more neutral P&L result, but the bidder had to
withdraw due to substantial investments in Credit Suisse's AT1
bonds that were written off overnight. As a result, the loss from
the transaction amounted to £10.6 million.This sale seeded a new
Separate Account funding partnership to fund future mortgage
originations.
Mortimer BTL 2023-1 Securitisation:
This transaction involved the derecognition of
£410 million in BTL assets, resulting in a loss. Despite the loss,
the transaction was cash generative and enabled the business to pay
down senior debt, repay mezzanine financing, and increase company
cash reserves.
Mortimer BTL 2021-1
Securitisation: This transaction involved the derecognition
of £236 million in BTL assets, resulting in a net pre-tax profit of
£10.8 million.
All gains or losses from such
transactions, alongside sales of individual loans to off balance
sheet entities, are recorded in the net gains on derecognition of
financial assets line above Net Operating Income.
Cost Management
During the first eight to 10
months of the year, administrative expenses grew significantly,
without the underlying market to support such levels of growth. The
business found it challenging to right-size operations given the
ongoing volatility of interest rates and inflation expectations,
which are natural leading indicators of mortgage market activity.
We were concerned that reducing our origination capability too soon
or too materially could result in the inability to capitalise on a
market recovery, should it occur. This would leave us with the tail
risk of having to backfill origination capacity, which is
suboptimal as new hires learn new products and processes. However,
the anticipated recovery did not materialise in 2023, causing our
cost base to reach a peak and ultimately necessitating a material
restructuring exercise in November.
Administrative expenses increased
by 23% to £42.4 million (2023: £34.5 million), significantly
impacting profit. To manage this cost inflation, we have
implemented several measures:
1.
People-Related
Restructuring: In November, we completed a substantial
restructuring exercise, reducing run rate people-related costs by
over 25%.
2.
Operational Shift to
Glasgow: We pivoted and prioritised lending operations and
support functions to our Glasgow office.
3.
Proprietary Technology
Rollout: We rolled out new proprietary origination and
mortgage processing technology, driving operating leverage and
allowing for more careful cost management without compromising
origination capacity.
We expect these measures to
positively influence long-run operational expense dynamics and
right-size the business in the context of smaller addressable
markets as soon as FY25, but with more benefits coming through in
FY26. In FY25, there will continue to be a slightly suboptimal cost
as support and operational roles are migrated. Furthermore, the
lease on our London office expires in 2025 providing the potential
for cost savings through a smaller presence, which will result in
lower lease costs from FY26.
The restructuring cost was £1.6 million and is considered a
one-off, booked in the additional item line of the P&L
statement.
More broadly, the business has
significantly tightened its approach to cost management,
implementing new processes to govern contracts and discretionary
expenditure. Further cost optimisation has been targeted towards
technology and group central cost areas in order to maintain
lending capacity. As market activity picks up once interest rates
fall, we will be able to capitalise on opportunities afforded by
our newly deployed proprietary technology from a position of
relative strength.
Impairments
Impairment losses grew 42% to £8.4
million (2023: £5.9 million ), but improved in H2 vs H1. This
primarily reflects accelerated management of recoveries coupled
with an increase in expected credit losses on a small number of
larger stage 3 Capital division loans in H1 (stage 3 grew by 140%,
whereas stage 2 grew by 6%). The majority (£7.6 million) of the
charge in the year, exacerbated by the market backdrop, can be
attributed to loans from our Capital division. The increase in
impairment losses for our Capital division was isolated, as loans
to three borrowers made up 50% (£3.2 million) of the total Capital
impairment charge.
Profit
As per our RNS released on
17 June, we announced that the sale of residual economic
interest in the Mortimer BTL 2023-1 PLC securitisation was no
longer expected to generate a net pre-tax gain. Consequently, the
Loss before Tax for FY24 is £(27.3) million (FY23: £14.3 million).
We had previously guided the market to expect a Loss before Tax in
line with average consensus expectations of £(15.9) million
including a net pre-tax gain of approximately £12 million from the
sale of residual economic interest in Mortimer BTL 2023-1 PLC
securitisation.
The negative adjustment stems from
swap and hedge accounting assumptions based on technical advice
received concerning the derecognition calculation for the Mortimer
2023-1 BTL PLC securitisation. The wider loss for the year can be
attributed to several factors:
●
Materially lower lending volumes against a higher administrative
cost base.
●
Transactional losses, including hedge accounting
ineffectiveness exacerbated by the challenging market
backdrop.
●
Increased impairment losses.
●
Tighter lending margins impacting Net Fee Income (NFI) and Net
Interest Income (NII).
●
Higher audit costs, that should reduce as the business model is
simplified
The underlying loss before tax for H2, before exceptional items,
was £(6.7) million, which represents a 52% improvement versus H1.
Similarly, adjusted EBITDA was £(4.3) million in H2, a 60%
improvement on H1. Exceptional professional costs contain £0.5m of
technology-related research and consultancy work and £0.6m of
finance transformation support from professional services
firms.
Profit after Tax decreased by 276% to £(20.1) million (FY23: £11.4
million). The effective tax rate in the year was 26%, a small
variance to the corporate tax rate of 25%.
Adjusted EBITDA decreased by 206% to £(15.1) million (FY23: £14.3
million), basic earnings per share was (14.5)p per share (FY23:
8.3p per share) and diluted earnings per share was (14.5)p per
share pence (FY23: 8.0p per share).
Outlook and dividend
Guidance for FY25 remains
unchanged, with respect to our expectation of returning to
profitability during the course of the financial year. We will not
be declaring a dividend given the scale of negative reserves, but
remain committed to pursuing a progressive dividend policy as soon
as it is prudent to do so.
Group Balance Sheet/Financial
position/Net assets
|
31 March
2024
|
31 March
2023
|
Change
(%)
|
Assets
|
|
|
|
Cash and cash
equivalents
|
55.7
|
46.7
|
19%
|
Trade and other
receivables
|
11.9
|
6.1
|
95%
|
Loans and advances
|
477.0
|
1,122.9
|
(58)%
|
Investment securities
|
41.1
|
23.9
|
72%
|
Derivative financial
asset
|
0.0
|
46.0
|
(100)%
|
Other assets
|
15.9
|
17.2
|
(8)%
|
Total assets
|
601.6
|
1,262.8
|
(52)%
|
|
|
|
|
Liabilities
|
|
|
|
Trade and other
payables
|
(23.4)
|
(23.7)
|
(1)%
|
Other liabilities
|
(2.3)
|
(3.3)
|
(30)%
|
Derivative financial
liability
|
(2.0)
|
0.0
|
-
|
Interest bearing
liabilities
|
(514.6)
|
(1,159.3)
|
(56)%
|
Total liabilities
|
(542.3)
|
(1,186.3)
|
(54)%
|
|
|
|
|
Net Assets
|
59.3
|
76.5
|
(22)%
|
|
|
|
|
Equity
|
|
|
|
Other reserves
|
10.1
|
2.3
|
339%
|
Share capital
|
0.1
|
0.1
|
0%
|
Share premium
|
55.2
|
55.2
|
0%
|
Retained
earnings/(losses)
|
(6.1)
|
18.9
|
(132)%
|
Total Equity
|
59.3
|
76.5
|
(22)%
|
AUM held on balance sheet
(represented as Loans and advances) equalled £477 million, down 58%
from 2023 (£1.123 billion). The reduction was driven by a £250
million portfolio sale and two RMBS derecognition transactions,
which were partially offset by balance sheet activity primarily in
the Mortgages division.
Cash and cash equivalents grew 19%
to £55.7 million (FY23: 46.7 million). The growth is
attributed to a £6.5 million increase in cash restricted for
loan funding purposes. Trade and other receivables increased by 95%
to £11.9.million (2023: £6.1 million) due to corporation tax
receivable from carry back of losses. Investment securities
increased by 72% to £41.1 million (2023: £23.9 million) due
to risk retention in our fifth Securitisation in November 2023. The
derivative financial asset reduced to nil in the period (2023:
£46.0 million) as we recognised a £2 million derivative financial
liability (2023: £0 million) and other assets reduced by 8% to
£15.9 million (2023: £17.2 million).
Interest bearing liabilities
reduced by 56% to £514.6 million (2023: £1.159 billion) as a result
of various transactions to pay down debt and two residual
sales during the year.
Total equity reduced by 22% to
£59.3 million (2023: £76.5 million), primarily as a result of 132%
reduction in retained earnings/(losses), from £18.9 million in 2023
to £(6.1) million. Other reserves increased by 339% to £10.1
million (2023: £2.3 million) largely due to positive movements in
the fair value reserve.
Cash and cash flow
|
Year to
31 March 2024 £'m
|
Year to
31 March 2023 £'m (restated)
|
Net cash outflow from
operations
|
28.6
|
(192.7)
|
Net cash outflow from investing
activities
|
(16.9)
|
(24.9)
|
Net cash inflow from financing
activities
|
(2.7)
|
146.1
|
Net increase/(decrease) in cash
and cash equivalents
|
9.0
|
(71.5)
|
Cash and cash equivalents at
beginning of the period
|
46.7
|
118.2
|
Cash and cash equivalents at end
of the period
|
55.7
|
46.7
|
Cash and cash equivalents grew 19%
to £55.7 million (2023: £46.7 million). £38.5 million of the total
balance is restricted for loan funding purposes (2023: £31.9
million).
The remaining cash balance
increased by 17% to £17.2 million from £14.7 million in FY23. The
growth is due to capital generated from residual sales, portfolio
sales and securitisations, which are then recycled at a slower pace
given the growth in Separate Accounts, further evidence that the
business has taken tough decisions to fortify its balance sheet,
especially when coupled with £645 million of debt reduction over
the year.
▪
Segmental analysis - LendInvest
Mortgages & LendInvest Capital
|
Year to
31 March 2024
|
Year to
31 March 2024
|
Year to
31 March 2024
|
Year to
31 March 2024
|
Mortgages (£'m)
|
Capital
(£'m)
|
Central
(£'m)
|
Group
(£'m)
|
Net interest income
|
(1.7)
|
10.2
|
-
|
8.5
|
Net fee income
|
7.9
|
8.0
|
-
|
15.9
|
Net gains on derecognition
of
financial assets
|
(1.6)
|
0.6
|
-
|
(1.0)
|
Net other income
|
0.1
|
-
|
-
|
0.1
|
Net operating income
|
4.7
|
18.8
|
0.0
|
23.5
|
Administrative expenses
|
(11.6)
|
(5.1)
|
(25.7)
|
(42.4)
|
Impairment losses on financial
assets
|
(0.8)
|
(7.6)
|
-
|
(8.4)
|
Total operating expenses
|
(12.4)
|
(12.7)
|
(25.7)
|
(50.8)
|
(Loss)/profit before tax
|
(7.7)
|
6.1
|
(25.7)
|
(27.3)
|
LendInvest Mortgages
The Mortgages division differentiates itself through a strategic
combination of competitive pricing and exceptional service. Given
the high price elasticity of the mortgage market segments we
address, it is crucial to offer pricing that keeps our products
competitive, particularly under current affordability constraints.
In contrast, the short-term mortgages segment is less
price-sensitive, with borrowers prioritising speed and certainty
over price, making our performance more dependent on our
capabilities than on market dynamics.
With banks, especially challenger
banks in specialist lending, needing to reprice savings deposits in
line with the base rate, non-bank lenders have narrowed the pricing
gap. This shift has been bolstered by favourable conditions in
securitisation markets. Securitisation pricing serves not only as a
reference for our balance sheet lending but also for our Separate
Account mandates, even when it is not the primary funding tool of
our partners.
We continuously refine our funding
base across the Mortgages division to maximise margins against the
risks we are exposed to, while ensuring our products remain
competitively positioned. Funding arrangements are reviewed at
least annually, and we nurture strong relationships with a broad
network of institutional investors. Our commitment to professional
service, underpinned by a 15-year legacy of finding ways to say
yes, further distinguishes us in the market. This strategic
approach, supported by a diverse funding base and a wide suite of
products, is enhanced by our proprietary technology.
The Mortgages division is ideally
suited for technological automation to maximise operating leverage.
Homogenous products are highly scalable, and our proprietary
technology can automate workflows and enable streamlined processing
across a range of specialist lending products. This eliminates the
need for extensive manual intervention, ensuring seamless product
development and iteration, in stark contrast to the restrictive
scorecard approach often seen in banks.
The past year for the Mortgages
division was marked by significant challenges. The first half of
the year involved a high cost base, substantial deleveraging, and a
reduced addressable market due to record interest rates and high
inflation. Despite these challenges, we have fortified our balance
sheet by prioritising liquidity, reducing debt, reducing costs, and
deploying advanced technology. This positions us more resiliently
for future growth.
The Mortgages division incurred a
loss before tax of £7.7 million for the year. This includes £4
million attributable to non-hedge accounted swap movements and
hedge accounting ineffectiveness which led to negative NII of £1.7
million, a net loss of £1.7 million from three derecognition
projects and individual sale of loans off balance sheet, and
challenges in aligning origination capacity with origination
potential. We look forward to leveraging our strengthened position
to drive future success and make up for this disappointing year,
given we started to see the greenshoots of our actions emerge in
Q4.
LendInvest Capital
The Capital division focuses on
complex lending that benefits from an expert, human-centric
approach. While the average loan size is larger, which offsets the
fewer opportunities available, these loans often come with more
favourable risk-reward profiles. The division is active in
Development Finance, Structured Bridging, Lending Joint Ventures,
and other forms of large commercial property lending.
Due to the complexity of these
products and the potential for larger impairment provisions, they
are primarily funded through third-party sources of capital. This
includes our funds platform, syndications, online investment
platform, private securitisation, separate accounts, and joint
ventures with our funds.
The Capital division has faced a
challenging capital-raising environment for some time, with core
milestones being delayed due to sentiment in global commercial real
estate markets. The success of our capital-raising efforts is
influenced by global trends, as capital is sourced from around the
world.
Looking ahead, the outlook is more
positive. We expect capital-raising activity to pick up, enabling
us to be more active in these markets once again and driving
recurring fee revenue over time. Furthermore, from our vantage
point, there continues to be a healthy deal supply that we can
capitalise on.
The Capital division posted a £6.1
million profit for FY24.
STRATEGY SUMMARY AND PROGRESS
LendInvest Mortgages
Strategy
LendInvest Mortgages provides
fast, flexible, and simple mortgages to homeowners, experienced
property investors, and portfolio landlords across the UK. Our
strategy is built on three pillars: Service, Technology, and
People.
1. Service: We distinguish
ourselves through the quality of our service. Our commitment to
professional service, underpinned by a 15-year legacy of finding
ways to say yes, sets us apart in the market. We focus on
delivering exceptional customer experiences, ensuring that our
products and services meet the needs of our borrowers and
brokers.
2. Technology: Our proprietary
technology platform powers our innovative mortgage products. We
have invested over £60 million in developing a market-leading
platform that enables seamless integration with third-party data
sources, automating underwriting processes, and ensuring
reliability and scalability. This year, we launched the latest
iteration of our Mortgages Portal, which centralises the mortgage
process, offering brokers and their clients real-time access to our
entire product range.
3. People: Our talented team is at
the core of our success. We invest in continuous professional
development, fostering a culture of innovation and responsibility.
This year, we launched the Mortgages Academy in Glasgow, reflecting
our commitment to developing talent and ensuring that new entrants
into the mortgage industry are well-equipped with the necessary
skills and insights.
Key Mortgage Products:
●
Buy-to-Let Mortgages: Tailored for investors and landlords seeking
to expand their portfolios.
●
Residential Mortgages: Designed for complex homeowner customers,
including the self-employed and those with diverse income
sources.
●
Short-term Mortgages: Flexible borrowing solutions with terms
ranging from 12 to 24 months.
Strategic Achievements:
1. Launch
of the LendInvest Mortgages Portal: A significant operational leap
forward, providing seamless access to our entire product range and
facilitating easier transitions for brokers and clients.
2. New
Product Transfer Process: Introduced a streamlined process allowing
brokers to easily switch products at maturity, enhancing customer
retention and satisfaction.
3.
Expansion of Funding Partnerships: Welcomed BNP Paribas to our
financing syndicate, bolstering our financial foundations and
supporting our growth strategy.
LendInvest Capital
Strategy
LendInvest Capital focuses on
complex lending that benefits from an expert, human-centric
approach. Our strategy is to draw on our deep industry expertise
and in-house real estate finance knowledge to match institutional
and individual investors with secure, income-producing UK property
finance assets.
1. Diverse Funding Lines: We
utilise a range of funding sources, including institutional
investors, funds, syndications, and joint ventures. This diversity
ensures a resilient and sustainable lending ecosystem, enabling us
to provide bespoke solutions that meet the evolving needs of our
clients.
2. Product Innovation: We
continuously innovate to address market dynamics and customer
requirements. Our product offerings include Development Finance,
Structured Property Finance, and Residential Investment Portfolio
Loans, tailored to meet the needs of property developers,
investors, and other stakeholders.
3. Strategic Partnerships: Our
strong relationships with global financial institutions support our
growth and expansion. This year, we secured a new £500 million
Separate Account mandate and revamped our partnership with National
Australia Bank, enhancing our ability to fund short-term mortgages
and adapt to market changes.
Key Funding Lines:
●
Luxembourg Funds: Offering access to secured credit
funds.
●
Self-Select Platform: Providing flexible loan syndication and
co-investment opportunities through Alternative Investment Fund
structures.
●
Co-Investors: Collaborating with third-party lenders to expand our
lending footprint.
KEY PERFORMANCE INDICATORS
Platform Assets Under Management (AuM)
Definition:
Platform Assets Under Management
(AuM) represents the total loan balance we have provided to our
customers, encompassing both the LendInvest Mortgages and Capital
divisions. This balance reflects the outstanding amount that has
not been repaid by a diverse clientele, including homeowners,
property investors, SME developers, and landlords.
Revenue from our AuM is generated
through fee and interest income. Fees associated with the
origination process, such as product, application, valuation, and
legal fees, are charged to the customer. Additional fees, including
servicing, asset management, and performance fees, are charged to
our investors and funding partners. For intermediated loans,
expenses such as procuration fees are paid to brokers, and these
costs can vary by product.
AuM can be held either on the
Group's balance sheet or off balance sheet. On-balance sheet AuM
generates interest income, partially offset by funding costs,
including interest and hedging expenses. Strategically, we aim to
grow the proportion of off-balance sheet AuM, where assets are
managed on behalf of investors, generating recurring fee income
without associated liquidity and credit risk.
Platform Funds Under Management (FuM)
Definition:
Platform Funds Under Management
(FuM) is the total funding available for lending from our investors
and funding partners. This includes both the funds already utilised
against our Platform AuM and the funding that is either drawn but
unutilised or committed but not yet drawn. FuM excludes any
pipeline capital or ongoing fundraising projects.
We raise funding from a diverse
array of financial institutions, institutional investors, and
individuals. Our funding partners, including BNP Paribas, HSBC,
Barclays, National Australia Bank, and Lloyds, primarily support
our LendInvest Mortgages products via the Group's balance sheet.
Additionally, we manage third party accounts on behalf of JP
Morgan, Chetwood Financial, and other institutional investors, and
serve as the servicer and mortgage originator for various
securitisation programmes. In the LendInvest Capital division, we
raise capital through funds, separate accounts, syndications, and
strategic partnerships.
The funding provided through these
investment solutions is used to originate larger and more complex
property finance opportunities. The difference between FuM and AuM
indicates the remaining lending capacity before the need to raise
additional funds or capital for lending.
How we measure value for our shareholders
Net Operating Income (NOI)
Definition:
Net Operating Income (NOI)
aggregates all revenue from fees and interest income, subtracting
the total interest and fee expenses associated with our AuM and
FuM.
While NOI typically grows in line
with AuM, certain capital markets transactions can impact this. For
instance, disposing of residual economic interests in a
securitisation accelerates the recognition of revenue and costs,
which would otherwise be spread over several years. This approach
optimises our balance sheet, enabling the business to extract more
value from its capital and release further liquidity.
Adjusted EBITDA
Definition:
Earnings before Interest, Tax,
Depreciation, and Amortisation (EBITDA) is a key measure of
underlying profitability. We use an Adjusted EBITDA figure to
exclude non-cash income or expenses. This KPI is important as it
supports s our cash flow, supporting reinvestment opportunities or
potential distributions. Our Earnings line, which includes Net
Operating Income, already accounts for directly attributable
financing and funding costs against the AuM and FuM.
Profit Before Tax (PBT)
Definition:
Profit Before Tax (PBT) represents
the Group's profits before the deduction of corporation tax, which
is the net of NOI and total operating expenses. In a loss-making
year, we may benefit from tax relief.
Diluted Earnings Per Share (EPS)
Definition:
Diluted Earnings Per Share (EPS)
measures our Profit After Tax (PAT) earnings per share, considering
all issued share capital plus outstanding options and equity grants
across the Group's share plans. This metric assumes the conversion
of all outstanding equity, providing a comprehensive view of
shareholder value.
Independent auditor's report to the members of LendInvest
Plc
Opinion on the financial statements
In our opinion:
•
the financial statements give a true and fair
view of the state of the Group's and of the Parent Company's
affairs as at 31 March 2024 and of the Group's loss for the year
then ended;
•
the Group financial statements have been properly
prepared in accordance with UK adopted international accounting
standards;
•
the Parent Company financial statements have been
properly prepared in accordance with UK adopted international
accounting standards and as applied in accordance with the
provisions of the Companies Act 2006; and
•
the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006.
We have audited the financial
statements of LendInvest
Plc (the 'Parent Company') and its subsidiaries
(the 'Group') for the year ended 31 March 2024 which comprise the
Consolidated statement of profit and loss, the Consolidated
statement of other comprehensive income, the Consolidated and
Company statements of financial position, the Consolidated and
Company statements of cash flows, the Consolidated and Company
statements of changes in equity and notes to the financial
statements, including a summary of material accounting policies.
The financial reporting framework that has been applied in their
preparation is applicable law and UK adopted international
accounting standards and, as regards the Parent Company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.
Basis for opinion
We conducted our audit in
accordance with International Standards on Auditing (UK)
(ISAs
(UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance
with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements.
Conclusions relating to going concern
In auditing the financial
statements, we have concluded that the Directors' use of the going
concern basis of accounting in the preparation of the financial
statements is appropriate. Our evaluation of the Directors'
assessment of the Group and the Parent Company's ability to
continue to adopt the going concern basis of accounting
included:
•
reviewing minutes of meetings of those charged
with governance and correspondence with regulators, such as the
Financial Conduct Authority, for any factors which could be of
higher risk in relation to going concern;
•
challenging the appropriateness of the Directors'
assumptions and judgements made in their base forecast and
stress-tested forecast. In doing so we agreed key assumptions such
as forecast growth to historic actuals and relevant data and
considered the historical accuracy of the Directors' forecasts by
comparing them to actual results;
•
enquiring with the Directors to determine whether
there were any breaches of borrowing covenants within the year or
subsequent to year end and the ability for the Group to manage any
potential breaches;
•
performing a review of compliance with borrowing
covenants which comprised obtaining and reviewing covenant
compliance statements to verify that no covenant breaches have
occurred which may trigger penalties or repayment of borrowings
ahead of the maturity dates;
•
obtaining and assessing the Directors plans in
respect of funding lines which are approaching maturity within the
next 12 months by considering the Group's past experience of
extending the maturity of facilities, their discussions with new
providers of funding and experience of portfolio sales;
and
•
inspecting the latest post year end management
accounts and reviewing minutes of Board meetings to determine if
there were any significant matters which could affect the going
concern of the Group and Parent Company.
Based on the work we have
performed, we have not identified any material uncertainties
relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and the
Parent Company's ability to continue as a going concern for a
period of at least twelve months from when the financial statements
are authorised for issue.
Our responsibilities and the
responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report.
Overview
Coverage
|
100% (2023: 100%) of Group profit before
tax
100% (2023: 100%) of Group revenue
100% (2023: 100%) of Group total assets
|
Key audit matters (KAM)
|
|
2024
|
2023
|
Revenue recognition - Behavioural
life within the Effective Interest Rate Model*
|
P
|
P
|
Loss/gain on derecognition of
financial assets*
|
P
|
P
|
Determination of expected credit
loss (ECL)
|
P
|
P
|
Valuation techniques of loans and
advances
|
P
|
P
|
* In the current year, we have split the Fraud in Revenue
recognition Key Audit Matter to disclose the Interest Income under
the effective interest rate method and loss/gains on derecognition
of financial assets as two Key Audit Matters.
|
|
Materiality
|
Group financial statements as a whole
£836,000 (2023: £715,000) based on
1% of Revenue (2023: 5% Profit Before Tax).
|
An overview of the scope of our audit
Our Group audit was scoped by
obtaining an understanding of the Group and its environment,
including the Group's system of internal control, and assessing the
risks of material misstatement in the financial statements.
We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by
the Directors that may have represented a risk of material
misstatement.
The Group is made up of the Parent
Company, its wholly owned subsidiaries and entities it consolidates
due to its assessed control. We identified twenty-two components
(2023 : twenty-three components) ,including the parent company and
all entities requiring a stand-alone statutory audit, which we
considered to be significant components, and which were subject to
full scope audits performed by the Group audit team. The location
of the significant components are all in the United
Kingdom.
In addition, there were six Group
components (2023 : nine group components) which were deemed to be
insignificant components, but which individually or collectively
contained balances material to the Group. The material balances of
the insignificant components were audited to component
materiality.
Key audit matters
Key audit matters are those
matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the
current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we
identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit,
and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key
audit matter
|
How
the scope of our audit addressed the key audit
matter
|
Revenue recognition - Behavioural lives within the Effective
Interest Rate Model
The Group's accounting policies are
disclosed in Note 1.6, and critical accounting estimates and
judgements are disclosed in Note 1.22.
The interest income calculated using
the effective interest rate method is included in Total interest
and similar income as disclosed in note 6.
|
The amounts reported in relation to
revenue represent information of significant interest to many users
of the financial statements. This puts revenue at a greater risk of
manipulation, bias and misstatement.
The behavioural life of loan
customers is necessary to accurately recognise interest income but
highly subjective and involves the use of management's judgement
and estimation.
For these reasons, we determined
Revenue recognition - Behavioural lives within the Effective
Interest Rate (EIR) Model to be a Key Audit Matter to be
communicated in our report.
|
We tested the operating
effectiveness of management's control over the estimates and
assumptions including behavioural lives of loan customers, that are
used to calculate the EIR adjustments.
We assessed and challenged the
appropriateness of key assumptions around the behavioural lives
within the EIR model used by management by considering the
historical experience of loan behavioural lives based on customer
behaviour , and also performed the following sensitivity
analysis:
1. Re-assessed the EIR
adjustment of prior year portfolio using the new EIR Model
developed during the year.
2. Flexed the
behavioural life of the loan to the weighted average post reversion
period.
We assessed whether management has
appropriately segmented the loan book. On a sample basis, we
reviewed the product types included within each loan segment and
checked if these are within the respective behavioural life based
on our knowledge of the business, and we challenged any exception
noted by assessing the vintage and fixed rate term of the
loan.
Using data analytics we have
recalculated the behavioural life curve based on the historic
performance of the loan book and approved assumption by
management.
Key
Observations:
We determine the judgement applied
by management to be reasonable.
|
Loss/gain on de-recognition of financial
assets
The Group's accounting policies are
disclosed in Note 1.6
The net loss on de-recognition of
financial assets is £0.9m (2023: gain of £4.9m) as disclosed in
Note 9.
|
Loans are de-recognised by the Group
or Company, by way of 'one-off transactions' whereby a loan
portfolio is sold to a third party, or a 'normal' transfer
off-balance sheet, which constitutes of individual loans, in the
course of standard business operations.
These transactions have led to gains
or losses either through settlement of the transaction (outright
sale of the loan) or through triggering a loss of control of an
entity that holds the loans which results in the crystallisation of
fee income and expense in respect of the de-recognised securitised
loan portfolios.
These transactions are complex and
have individually resulted in material gains and/or losses which is
subject to a risk of material misstatement due to error.
For these reasons, we determined
derecognition of financial assets to be a Key Audit Matter to be
communicated in our report.
|
For the one-off transactions, we
have reviewed the Regulatory News Service ('RNS') announcements and
the minutes of meetings held by the ALCO ("Asset and Liability
Committee") to identify any additional transactions which relate to
de-recognition of financial assets in order to assess completeness
of transactions.
We have obtained and reviewed the
schedule of recognised
fees and performed a recalculation of the
amount for mathematical
accuracy.
We have obtained a list of all
financial assets derecognised during the year and assessed the
validity of the de-recognition of these assets, in line with the
supporting contract. We have assessed the application of loss of
control in accordance with IFRS 10, and the assessment of
de-recognition of loans under IFRS 9.
For the portfolios de-recognised
and the corresponding fees crystallised during the year, we have
obtained a breakdown of the fees recognised from deferred income
and checked that these were crystallised in full, to the income
statement.
For the samples selected, we have
assessed all key inputs and journal entries, which support the
calculation of the loss/gain on de-recognition of financial assets,
with reference to relevant supporting documentation.
For all portfolios derecognised,
we assessed the deferred income and expenses schedule, and
checked that no transaction post crystallisation was
recorded.
We have assessed managements
technical paper on the accounting for the de-recognition of
financial assets and checked if this is in accordance with the
requirements of the applicable standard.
Key
Observations:
Based on our audit work performed
and the evidence obtained, we have not
identified any indicators that suggests that the derecognition of financial assets were not calculated and
accounted for appropriately.
|
Determination of expected credit loss (ECL)
The Group's accounting policies are
disclosed in note 1 with detail about judgements in
applying
accounting policies and critical
accounting estimates in note 1.22.
As disclosed in Note 18 the ECL
Provision at year-end is £8.6m (2023: £9.1m).
|
Commensurate with the activities of
the Group, the total expected credit loss provision is a material
balance subject to management judgement and estimation.
We have assessed the elements of the
ECL calculation which will significantly impact the determination
of the ECL as follows:
Accuracy of forward-looking information
IFRS 9 requires the Group to measure
the expected credit loss (ECL) on a forward-looking basis,
incorporating future macro- economic variables reflecting a range
of future conditions. The incorporation of such forward-looking
macroeconomic inputs and weighting of the scenarios is considered a
significant risk across all three portfolios, especially in the
continued downturn of the current economic environment.
Carrying value (loss given default) of individually assessed
Stage 3 (credit impaired) loans
The carrying value of loans and
advances to customers may be materially misstated if individual
impairments are not appropriately identified and estimated. These
estimates involve complex recoverability scenarios which involve
multiple differing recovery options where the timing and quantum of
recovery's are subject to significant management judgments and
estimates and the probability of scenarios weighting as recovery
cashflows can differ materially between individual
scenarios.
|
Accuracy of forward-looking information
We have engaged internal
credit and econometric experts to assist in assessing the
appropriateness of the regression models and the source and type of
macro-economic variables used such as GDP and unemployment
data.
We have challenged management on the
rationalisation of any changes made to information obtained from
external sources and have considered its appropriateness to the
current lending portfolio.
We have assessed the reasonability
of the economic scenarios used and the weighting applied by
considering the number of scenarios selected based on management's
support.
We have tested the completeness of
the data used for management overlays and assessed if other
overlays are required, based on our experience. We have tested the
arithmetical accuracy of the overlays.
We have performed sensitivity
analysis on the macro-economic variables and assessed the severity
of changes in the macro-economic variables to the overall Expected
Credit Loss. We also benchmarked the Macro-economic variables
applied in the models to independent third party industry
data
Carrying value (loss given default) of individually assessed
Stage 3 (credit impaired) loans.
We have selected a sample of
individual assessment cases as at 31 March 2024. We have challenged
management on the key inputs into these scenarios by obtaining
supporting evidence for recovery strategies, collateral values,
exit strategies, scenario weighting, expected timing of cash flows
and engaging internal experts as required in support of our
assessment.
We have assessed the accuracy and
validity of data that feeds into the individual assessment cases as
well as the progress on the preferred recovery scenario being
pursued to supporting documentation. Based on supporting evidence
assessed and discussions with the credit team, we evaluated and
challenged the judgements applied in the individually assessed Stage 3 loan assessments. This included
assessment of the recovery strategies, recovery timelines, and the
scenario weighting applied in the individual
assessments.
Key
observations:
Based on our audit work performed,
we consider the estimates and judgements made by management in the
calculation of the impairment provision for loans and advances to
be reasonable, and in line with the requirements of IFRS
9.
|
Valuation techniques of loans and advances
The Group's accounting policies are
disclosed in note 1 with detail about judgements in applying
accounting policies and critical accounting estimates on note
1.22.
As disclosed in Note 19 the Fair
Value Adjustment at year-end is £0.3m (2023: -£3.6m).
|
The Group's business model requires
the Group to measure the majority of the loan book at Fair value
through Other Comprehensive Income which requires modelling to
determine the fair value adjustment to be applied to Loans and
Advances.
The measurement of the loan book at
fair value requires modelling which is subject to material
management judgments and estimates in the determination of the
discount rate used to discount future cashflows.
The Group's models are materially
sensitive to small changes in the discount rate assumption,
particularly in the 'Buy-to-let' portfolio and therefore this area
is considered a significant risk.
|
We have undertaken sensitivity
analysis on the discount rates and ascertained how susceptible the
fair valuation of the model is to manipulation and material
misstatement.
With the use of our internal
valuation experts we:
· evaluated how the models calculated the fair value of the
loan portfolios.
· evaluated the selection of key estimates and judgments that
feed into the models, in particular the discount rates applied in
the models, contractual cashflows and capital repayments. We also
reviewed the calculations of the models to ensure that these are in
line with IFRS 9.
· assessed the models to verify whether the fair values
determined by management sit within our assessed acceptable
reasonable range.
We recalculated the computations of
the discount rates independently verifying rates offered by
competitors used in benchmarking calculation.
We have reviewed and benchmarked the
discount rates to external data sources where
appropriate.
Key
observations:
Based on our audit work performed,
we consider the valuation of loans and advances is a reasonable
estimate in consideration of the key assumptions and judgements
made.
|
Our application of materiality
We apply the concept of
materiality both in planning and performing our audit, and in
evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable
users that are taken on the basis of the financial
statements.
In order to reduce to an
appropriately low level the probability that any misstatements
exceed materiality, we use a lower materiality level, performance
materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of
identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial
statements as a whole.
Based on our professional
judgement, we determined materiality for the financial statements
as a whole and performance materiality as follows:
|
Group financial statements
|
Parent company financial statements
|
|
2024
£
|
2023
£
|
2024
£
|
2023
£
|
Materiality
|
836,000
|
715,000
|
545,000
|
419,000
|
Basis for determining materiality
|
1% of Revenue
|
5% of profit before tax
|
1.5% of Revenue
|
6.5% of profit before
tax
|
Rationale for the benchmark applied
|
Profit before tax is no longer
considered an appropriate benchmark as the Group reported a loss in
the period.
Revenue is therefore deemed the
next best appropriate benchmark as it is a relevant measure of
performance for the key stakeholders.
|
As this is a listed entity, profit
before tax was a significant metric and influential to the investor
group. Therefore, profit before tax was considered to be the most
appropriate benchmark.
|
Profit before tax is no longer
considered an appropriate benchmark as the Group reported a loss in
the period.
Revenue is therefore deemed the
next best appropriate benchmark as it is a relevant measure of
performance for the key stakeholders.
|
As this is a listed entity, profit
before tax was a significant metric and influential to the investor
group. Therefore, profit before tax was considered to be the most
appropriate benchmark.
|
Performance materiality
|
627,000
|
536,000
|
408,000
|
314,000
|
Basis for determining performance
materiality
|
75% of Materiality
|
Rationale for the benchmark applied
|
Determined on the basis of our
risk assessment together with our assessment of the overall control
environment.
|
Component materiality
We set materiality for each component dependent on the size
and our assessment of the risk of material misstatement of that
component. Component materiality ranged from £1 to £545,000 (2023:
£2 to £564,000) based on allocating materiality using relevant
benchmarks . In the audit of each component, we further applied
performance materiality levels of 75% (2023: 75%) of the component
materiality to our testing to ensure that the risk of errors
exceeding component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the Audit Committee
that we would report to them all individual audit differences in
excess of £41,000 (2023:£21,000) according to the Group
Materiality. We also agreed to report differences below this
threshold that, in our view, warranted reporting on qualitative
grounds.
Other information
The directors are responsible for
the other information. The other information comprises the
information included in the annual report and accounts other than
the financial statements and our auditor's report thereon. Our
opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and,
in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this
regard.
Other Companies Act 2006 reporting
Based on the responsibilities described
below and our work performed during the course of the audit, we are
required by the Companies Act 2006
and ISAs (UK) to report on certain opinions and
matters as described below.
Strategic report and Directors' report
|
In our opinion, based on the work
undertaken in the course of the audit:
·
the information given in the Strategic report and
the Directors' report for the financial year for which the
financial statements are prepared is consistent with the financial
statements; and
·
the Strategic report and the Directors' report
have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and
understanding of the Group and Parent Company and its environment
obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the Directors'
report.
|
Matters on which we are required to report by
exception
|
We have nothing to report in
respect of the following matters in relation to which the Companies
Act 2006 requires us to report to you if, in our opinion:
·
adequate accounting records have not been kept by
the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
·
the Parent Company financial statements are not
in agreement with the accounting records and returns; or
·
certain disclosures of Directors' remuneration
specified by law are not made; or
·
we have not received all the information and
explanations we require for our audit.
|
Responsibilities of Directors
As explained more fully in the
Statement of Directors' Responsibilities, the Directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial
statements, the Directors are responsible for assessing the Group's
and the Parent 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 Group or the Parent Company or to
cease operations, or have no realistic alternative but to do
so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain
reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud,
are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud is
detailed below:
Non-compliance with laws and regulations
Based on:
·
Our understanding of the Group and the industry
in which it operates;
·
Discussion with management and those charged with
governance; and
·
Obtaining and understanding of the Group's
policies and procedures regarding compliance with laws and
regulations.
We considered the significant laws
and regulations to be:
·
Companies Act 2006;
·
AIM Listing Rules
·
UK tax legislation
·
UK-adopted International Accounting
Standards
The Group is also subject to laws
and regulations where the consequence of non-compliance could have
a material effect on the amount or disclosures in the financial
statements, for example through the imposition of fines or
litigations. We identified such laws and regulations to be
Financial Conduct Authority rules and The General Data Protection
Regulation (GDPR).
Our procedures in respect of the
above included:
·
obtaining an understanding of the control
environment in monitoring compliance with laws and
regulations;
·
reviewing the financial statement disclosures and
testing to supporting documentation to assess compliance with the
relevant laws and regulations discussed above;
·
enquiring of management and those charged with
governance about their own identification and assessment of the
risks of irregularities, including fraud;
·
reviewing of legal expenditure accounts to
understand the nature of expenditure incurred; and
·
reviewing of minutes of meetings of those charged
with governance and correspondence with the Financial Conduct
Authority;
Fraud
We assessed the susceptibility of
the financial statements to material misstatement, including fraud.
Our risk assessment procedures included:
·
enquiring with management and those charged with
governance, including the Audit and Risk Committee, regarding any
known or suspected instances of fraud;
·
obtaining an understanding of the Group's
policies and procedures relating to:
o Detecting and responding to the risks of fraud;
and
o Internal controls established to mitigate risks related to
fraud.
·
reviewing of minutes of meeting of those charged
with governance for any known or suspected instances of
fraud;
·
discussion amongst the engagement team as to how
and where fraud might occur in the financial statements;
·
performing analytical procedures to identify any
unusual or unexpected relationships that may indicate risks of
material misstatement due to fraud; and
·
considering remuneration incentive schemes and
performance targets and the related financial statement areas
impacted by these.
Based on our risk assessment, we
considered the areas most susceptible to fraud to be revenue
recognition, management override of controls and in relation to
accounting estimates within the expected credit loss fair value of
loans.
Our procedures in respect of the
above included:
·
testing the appropriateness of a sample of
journal entries and other adjustments by agreeing to supporting
documentation;
·
involvement of internal credit, econometric
experts and internal valuation experts in the areas of high
estimation by management such as ECL and loans and advances
valuation which is covered in the KAM under 'Determination of ECL'
and 'Valuation techniques of loans and advances';
·
evaluating the business rationale of any
significant transactions that are unusual or outside the normal
course of business; and
·
assessing whether the judgements made in
accounting estimates are indicative of a potential bias which is
covered in the KAM under 'Fraud in revenue recognition' and
'Determination of ECL' and 'Valuation techniques of loans and
advances'.
We also communicated relevant
identified laws and regulations and potential fraud risks to all
engagement team who were all deemed to have appropriate competence
and capabilities and remained alert to any indications of fraud or
non-compliance with laws and regulations throughout the
audit.
Our audit procedures were designed
to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through
collusion. There are inherent limitations in the audit procedures
performed and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we are to become aware of
it.
A further description of our
responsibilities is available on the Financial Reporting Council's
website at:
www.frc.org.uk/auditorsresponsibilities.
This description
forms part of our auditor's report.
Use of our report
This report is made solely to the
Parent Company's members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Parent Company's members
those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Parent Company and the Parent Company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Stefan Beyers (Senior Statutory
Auditor)
For and on behalf of BDO LLP,
Statutory Auditor
London, United Kingdom
22 July 2024
BDO LLP is a limited liability
partnership registered in England and Wales (with registered number
OC305127).
Consolidated statement of profit and loss
Note
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Interest income calculated using the effective interest rate
|
6
|
66.5
|
68.1
|
Other interest and similar income
|
6
|
(4.0)
|
5.1
|
Interest expense and similar charges
|
7
|
(54.0)
|
(34.8)
|
Net
interest income
|
8.5
|
38.4
|
Fee income
|
8
|
19.5
|
13.5
|
Fee
expenses
|
8
|
(3.6)
|
(2.3)
|
Net fee income
|
15.9
|
11.2
|
Net gains on derecognition of financial assets
|
9
|
(1.0)
|
4.9
|
Net other operating income
|
0.1
|
0.2
|
Net
operating income
|
23.5
|
54.7
|
Administrative expenses
|
10
|
(42.4)
|
(34.5)
|
Impairment losses
on financial
assets
|
18
|
(8.4)
|
(5.9)
|
Total
operating expenses
|
(50.8)
|
(40.4)
|
(Loss)/profit before
tax
|
(27.3)
|
14.3
|
Income
tax credit/(charge)
|
13
|
7.2
|
(2.9)
|
(Loss)/profit after
taxation
|
(20.1)
|
11.4
|
|
|
|
Earnings
per share for profit attributable to the ordinary equity holders of
the Group:
|
|
|
Basic
earnings/loss per share (pence/share)
|
34
|
(14.5)
|
8.3
|
|
|
|
Diluted earnings per share (pence/share)
|
34
|
(14.5)
|
8.0
|
All amounts relate to continuing
activities and to owners of the Group.
Consolidated statement of other comprehensive income
For the year ended 31 March
2024
Note
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
(Loss)/profit after
taxation
|
(20.1)
|
11.4
|
Other comprehensive
income/(loss):
|
|
|
Items reclassified
to profit
or loss
at residual
sale due
to de-recognition
|
|
|
Cash flow hedge adjustment through other comprehensive income
|
23
|
(21.4)
|
(4.8)
|
Items that will or may be reclassified to profit or loss
|
|
|
Fair
value gain/(loss) on loans and advances measured at fair value
through other comprehensive income
|
23
|
30.5
|
(35.0)
|
Deferred tax (charge)/credit on
Fair Value
movement
|
13
|
(7.6)
|
8.8
|
Deferred tax credit on Cash Flow Hedge movement
|
13
|
5.4
|
1.2
|
Other comprehensive
income/(loss) for
the year
|
6.9
|
(29.8)
|
Total comprehensive
(loss) for
the year
|
(13.2)
|
(18.4)
|
Consolidated statement of financial position
Note
|
As at 31
March 2024
£'m
|
As at 31
March 2023
£'m
|
Equity
|
|
|
Share capital
|
22
|
0.1
|
0.1
|
Share premium
|
22
|
55.2
|
55.2
|
Own share
reserve
|
(0.1)
|
(0.6)
|
Employee share reserve
|
3.8
|
3.3
|
Fair
value reserve
|
23
|
6.4
|
(16.5)
|
Cash flow
hedge reserve
|
23
|
-
|
16.1
|
Retained earnings/(losses)
|
(6.1)
|
18.9
|
Total
equity
|
59.3
|
76.5
|
Note
|
As at 31
March 2024
£'m
|
As at 31
March 2023
£'m
|
Assets
|
|
|
Cash and
cash equivalents
|
17
|
55.7
|
46.7
|
Other receivables
|
16
|
8.7
|
6.1
|
Corporation tax receivable
|
16
|
3.2
|
-
|
Loans and advances
|
18
|
477.0
|
1,122.9
|
Fair
value adjustment for portfolio hedged risk asset
|
25
|
-
|
0.1
|
Investment securities
|
19
|
41.1
|
23.9
|
Property, plant and equipment
|
14
|
1.3
|
2.2
|
Net investment in sublease
|
2
|
0.6
|
1.0
|
Intangible fixed assets
|
15
|
10.7
|
10.5
|
Investment in joint venture
|
28
|
-
|
0.2
|
Investment in third parties
|
29
|
-
|
2.0
|
Deferred
taxation
|
13
|
3.3
|
1.2
|
Derivative financial
asset
|
26
|
-
|
46.0
|
Total
assets
|
601.6
|
1,262.8
|
Liabilities
|
|
|
Other payables
|
20
|
(23.4)
|
(23.7)
|
Interest bearing liabilities
|
21
|
(514.6)
|
(1,159.3)
|
Lease
liabilities
|
2
|
(2.3)
|
(3.3)
|
Derivative financial
liability
|
26
|
(2.0)
|
-
|
Total
liabilities
|
(542.3)
|
(1,186.3)
|
Net
assets
|
59.3
|
76.5
|
|
|
The financial statements of LendInvest plc
(registration number 08146929) on pages 65
to 128 were approved and authorised for issue by the Board of
Directors on 23 July 2024 and were signed on its behalf by:
Rod Lockhart Director
Consolidated statement of cash flows
Interest received was £60.8 million (2023: £58.5 million) and interest paid was
£53.4 million (2023: £47.4 million).
Consolidated statement of changes in equity
|
Note
|
Share capital
£'m
|
Share premium
£'m
|
Own share
reserve
£'m
|
Employee
share reserve
£'m
|
Fair value reserve net of deferred
tax
£'m
|
Cash flow hedge reserve net of
deferred tax
£'m
|
Retained Earnings/
(losses)
£'m
|
Total
£'m
|
Balance as at 31 March 2022
|
|
0.1
|
55.2
|
0.1
|
2.7
|
9.5
|
19.8
|
15.9
|
103.3
|
Profit
after taxation
|
|
-
|
-
|
-
|
-
|
-
|
-
|
11.4
|
11.4
|
Fair
value adjustments on loan and advances through OCI
|
|
-
|
-
|
-
|
-
|
(26)
|
-
|
-
|
(26.0)
|
Employee share scheme tax
|
|
-
|
-
|
-
|
-
|
-
|
-
|
0.2
|
0.2
|
Current tax movement through equity
|
|
-
|
-
|
-
|
-
|
-
|
-
|
0.4
|
0.4
|
Cash flow
hedge adjustment through OCI
|
|
-
|
-
|
-
|
-
|
-
|
(3.7)
|
-
|
(3.7)
|
Shares
issued from own share reserve
|
|
-
|
-
|
2.4
|
-
|
-
|
-
|
(2.4)
|
-
|
Shares purchased by EBT
|
|
-
|
-
|
(3.1)
|
-
|
-
|
-
|
-
|
(3.1)
|
Reinstatement of dilapidations provision
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
Transfer
of share option costs
|
|
-
|
-
|
-
|
(1.4)
|
-
|
-
|
1.4
|
-
|
Dividends paid
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(7.9)
|
(7.9)
|
Employee share options schemes
|
25
|
-
|
-
|
-
|
2.0
|
-
|
-
|
-
|
2.0
|
Balance as at 31 March 2023
|
|
0.1
|
55.2
|
(0.6)
|
3.3
|
(16.5)
|
16.1
|
18.9
|
76.5
|
Profit
after taxation
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(20.1)
|
(20.1)
|
Fair
value adjustments on loan and advances through OCI
|
|
-
|
-
|
-
|
-
|
22.9
|
-
|
-
|
22.9
|
Employee share scheme tax
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(0.8)
|
(0.8)
|
Cash flow
hedge recycled to the P&L
|
|
-
|
-
|
-
|
-
|
-
|
(16.1)
|
-
|
(16.1)
|
Shares
issued from own share reserve
|
|
-
|
-
|
0.5
|
-
|
-
|
-
|
(0.5)
|
-
|
Transfer
of share option costs
|
|
-
|
-
|
-
|
(0.8)
|
-
|
-
|
0.8
|
-
|
Dividends paid
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(4.4)
|
(4.4)
|
Employee share options schemes
|
25
|
-
|
-
|
-
|
1.3
|
-
|
-
|
-
|
1.3
|
Balance as at 31 March 2024
|
|
0.1
|
55.2
|
(0.1)
|
3.8
|
6.4
|
-
|
(6.1)
|
59.3
|
Notes to the financial statements
1. Basis of preparation and material accounting
policies
1.1 Going concern
The Group's business activities
together with the factors likely to affect its future development
and position are set out in the Strategic report. The Directors
also considered the impact of the funding lines maturing in the
next 12 months from the date of approval
of the financial statements. In line with the normal operations of
the Group, there are a number of facilities which mature during
this period.
The Directors believe that the
Group will be able to refinance these facilities either with the
existing funding provider or with new third parties to continue its
growth trajectory. If these facilities
were not to be refinanced, the Group would be able to sell
individual loans or portfolio of loans to facilitate the repayment
of the outstanding amounts. This strategy is in line with the
existing approach of the Group to both hold assets on its balance
sheet and sell to the third parties.
The Directors do not consider that
this creates a material uncertainty in the going concern assessment
of the Group. Directors have a reasonable expectation that the
Group will have adequate resources to continue to operate for a
period of at least 12 months from the signing of these accounts and
therefore it is on this basis that the Directors have continued to
prepare the accounts on a going concern basis. More information on the Directors' assessment of going
concern is set out in the Directors' report.
A future securitisation of £300m
is planned for Nov/Dec 24 when the book reaches an optimal level to
release the mezzanine and equity positions held by Retail Bonds
(c.£17m) and another third party financing provider
(c.£7m).
1.2 General information
LendInvest plc (previously
LendInvest Limited) is a public company incorporated and domiciled
in the United Kingdom under the Companies Act 2006. The Group
listed on
the Alternative
Investment Market
(AIM), a
market operated
by the
London Stock
Exchange on 14 July 2021. The address of its registered office is
given on page
53. The Company's registered
number is 08146929. The principal place of business of the Group is
the United Kingdom.
1.3
Basis of
preparation
The financial statements have been
prepared in accordance with the Companies Act 2006 and the
UK-adopted International accounting standards.
The financial statements have been
prepared on a historical cost basis, except as required in the
valuation of certain financial instruments which are carried at
fair value. The preparation of financial
statements, in conformity with IFRS, requires the use of certain
critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements, are disclosed in this
note
1.20. The financial statements
have been prepared on a going concern basis, see note 1.1 for
further details.
Items included in the financial
statements are measured using the currency of the primary economic
environment in which the Group operates (functional
currency). The Group maintains its
books and records in pounds sterling ('£') and its financial
statements are presented in pounds sterling, which is the Company's
functional currency. All amounts have been rounded to the nearest
million, unless otherwise indicated.
Changes in accounting standards
and policies since the last published Annual Report
New standards,
interpretations and
amendments adopted
from 1
January 2023
The following amendments are
effective for the period beginning 1
January 2023:
• IFRS 17 Insurance Contracts;
• Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement 2
Making Materiality Judgements);
• Definition of Accounting Estimates (Amendments to IAS 8
Accounting Policies, Changes in Accounting Estimates and
Errors);
• Deferred Tax related to Assets and Liabilities arising from a
Single Transaction(Amendments to IAS 12 Income Taxes);
• International Tax Reform - Pillar Two Model Rules (Amendment
to IAS 12 Income Taxes) (effective immediately upon the issue of
the amendments and retrospectively);
1. Basis of preparation and material accounting
policies continued
1.3 Basis of preparation
continued
Changes in accounting standards
and policies since the last published Annual Report
continued
Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement 2
Making Materiality Judgements);
The IASB issued Disclosure of
Accounting Policies (Amendments to IAS 1
and IFRS Practice Statement 2) in February 2021, which are
mandatorily effective from annual reporting periods beginning on or
after 1 January 2023. The amendments
now require entities to disclose
'material accounting policy information' rather than 'significant
accounting policies'.
The Group has carefully assessed
the impact which accounting policy information is material and requires disclosure. The material accounting
policies in Section 1 are updated to consider the above
amendment.
The Group have carefully assessed
each of the new pronouncement above. Except as stated above, these
amendments had no effect on the consolidated financial statements
of the Group.
New standards
and amendments
not yet
effective
The IASB has issued a number of
amendments to reporting standards which the Group has determined as being applicable to its financial
reporting. These amendments are effective in future accounting periods
and the
Group has
not
opted for any early adoption. The
following amendments are effective for the period beginning on or
after 1 January 2024 and are not expected to have a material impact
on the Group:
• Liability in a Sale and Leaseback (Amendments to IFRS 16
Leases);
• Classification of Liabilities as Current or Non-Current
(Amendments to IAS 1 Presentation of
Financial Statements);
• Non-Current Liabilities with Covenants (Amendments to
IAS 1 Presentation of Financial
Statements);
• Supplier Finance Arrangements (Amendments to IAS 7 Statement
of Cash Flows and IFRS 7 Financial Instruments: Disclosures);
and
• Lack of Exchangeability (Amendments to IAS 21 The Effects of
Changes in Foreign Exchange Rates).
1.4
Cash and
cash equivalents
Cash and cash equivalents comprise
of cash balances and short-term balances that are highly liquid and
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
1.5 Basis of consolidation
Subsidiary companies and other controlled entities
The consolidated financial
statements incorporate the financial statements of the Company and
entities controlled by the Company as if they were a single
entity.
Intra-Group transactions, balances
and unrealised gains or losses are eliminated on consolidation.
The Group operates a share
incentive plan (SIP) trust and an employee benefit trust (EBT).
These trusts are accounted for under IFRS 10 and the assets and
liabilities are consolidated into the
Group's balance sheet and shares held by the trusts in the Group
are presented as a deduction from equity.
1.6 Revenue recognition
Revenue represents interest and
other income from borrowers and for the provision of finance.
Revenue recognised on loans held by related and third parties is
recognised as follows:
Recognised under IFRS 9:
Interest income calculated using
the effective interest rate Interest on loans and advances made by
the Group is recognised in the Consolidated statement of profit and
loss using the effective interest rate method. Under the effective
interest rate method fees earned from borrowers and transaction
costs incurred which are integral to the creation of a loan such as
arrangement, valuation and broker fees are amortised over the
expected life of the loan.
Net gains on derecognition of
financial assets are recognised immediately upon a transfer resulting
in derecognition
of the
loan and
fees earned
from borrowers
and transaction
costs incurred which were previously deferred under the effective
interest rate method are crystallised.
Other interest and similar income
represents income related to derivative gains and bank interest
income earned on cash deposits.
1. Basis of preparation and material accounting
policies continued
1.6 Revenue recognition continued
Recognised under IFRS 15:
Revenue
description within scope of IFRS 15
|
Performance obligation
|
Timing
and satisfaction of performance obligation
|
Allocation of transaction price
|
Separate
account partnership fees
|
Originate
and transfer BTL loans to customer
|
Transfer
of loans to customer
|
Allocated
to each loan transferred (and of loan principal)
|
Servicing
fees
|
Provide
|
Series of
distinct
|
Allocated
to distinct
|
|
administrative
|
services with a similar
|
services
transferred
|
|
loan servicing to
|
pattern
of transfer over
|
forming
one performance
|
|
customers
|
time
|
obligation (accrued
|
|
|
|
monthly
in arrears)
|
Share
creation fees
|
To
source and
|
Introduction of new
|
Allocated
according
|
|
introduce new
|
funds to
customer
|
to value
of new capital
|
|
investment capital
|
|
(%
of new
capital)
|
|
to
customer
|
|
|
Management fees
|
To
provide
|
Series of
distinct
|
Variable consideration
|
|
management and
|
services
with a similar
|
on
% of NAV (under
|
|
administration
|
pattern
of transfer over
|
management) and accrued
|
|
of loans
held by
|
time
|
in
arrears monthly
|
|
customers
|
|
|
Performance fees
|
To
provide
|
Performance
|
Variable consideration
|
|
investment
|
obligations satisfied
|
accrued
when hurdle rate
|
|
advisory services
|
when
increase in NAV
|
is
exceeded
|
|
in the
interest
|
(under management)
|
|
|
of
achieving
|
exceeds hurdle rate
|
|
|
investment
|
|
|
|
objectives
|
|
|
|
|
Fee income recognised in the Consolidated
statement of profit and loss represents the fees and performance
obligations shown in the table below.
Revenue comprises the fair value
of the consideration received or receivable in the ordinary course
of the Group's activities.
All revenue recorded in the
financial statements is sourced from transactions
relating to property loans. Fees on these
transactions are calculated based on the above revenue recognition
policy.
1.7
Interest expense
and similar
charges
Interest expense and similar charges are comprising and recognised as follows:
• Interest expenses incurred on interest bearing liabilities.
These are recognised on an accrual's basis.
• Non-utilisation fees are incurred on any interest-bearing
liabilities that are unutilised. These are recognised on an
accrual's basis.
• Funding line amortisation of initial funding line set up
costs. These are recognised evenly over the life of the
facility.
• Realised effective fair value changes of hedging instruments
designated in qualifying hedging accounting
relationships.
1.8 Fee expenses
Fee expenses are recognised as follows:
• Origination costs incurred on loans originated and
immediately transferred to third parties
under the Separate account partnership are recognised in full at
the point origination and transfer in the Consolidated statement of
profit and loss.
• Asset management, fund and servicing fees, representing
introducer fees, and trail commission
derived from off-balance sheet funds, these costs are recognised as
they occur.
1.9 Property, plant and equipment
Items of property, plant and
equipment are initially recognised at cost. As well as the purchase
price, the cost includes directly attributable costs and the
estimated present value of any future unavoidable costs of
dismantling and removing items. The corresponding liability is
recognised within provisions.
Depreciation is provided on all
items of property, plant and equipment, so as to write off their
carrying value over their expected useful economic life. It is
provided at the following rates and is recognised under
administration expenses in the Consolidated statement of profit and
loss:
Computer equipment
33-50% per annum straight line
Furniture and fittings
20-50% per
annum straight
line
Leasehold improvements
lesser of lease period or useful life
1. Basis of preparation and material accounting
policies continued
1.10 Intangible fixed assets
Where it meets the criteria of IAS
38, internally developed software expenditure is capitalised as an
intangible fixed asset and is amortised on a straight-line
basis
over its useful economic life once
the asset is available for use. The useful economic life of the
assets is identified as part of the project planning stage in line
with wider business objectives. The assets are amortised over their
expected useful life at 20% per annum through administration
expenses in the Consolidated statement of profit and
loss.
Software licences that meet the
definition of an intangible asset, i.e. identifiable, controlled by
the Group and from which future economic benefits will flow,
are initially recognised at cost.
Depreciation is provided, so as to write off their carrying value
over their expected useful economic life at the following
rates:
Computer and telephony software
20-50% per
annum straight
line
1.11 Deposit interest receivable
Interest receivable on bank
deposits is recognised on an accruals basis within Other interest
and similar income in the Consolidated statement of profit and
loss.
1.12 Administrative expenses
Expenses are recognised as an
expense in the Consolidated statement of profit and loss on the
accruals basis.
1.13 Provisions, contingent
liabilities and
contingent assets
Provisions are liabilities of
uncertain timing or amount and contingent liabilities and
contingent assets are dependent on one or more
uncertain future events. Provisions are recognised when the Group
has a present legal or constructive obligation as a result of a
past event, it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation. The
amount recognised as provisions is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation.
1.14 Financial instruments
Recognition
Financial instruments are
recognised in the Consolidated statement of financial
position when the Group attains the
right/obligation to receive/deliver cash flows from the instrument
and when the risks and rights associated with ownership are
transferred to the Group.
Classification and measurement
As per IFRS 9, the Group
classifies its financial instruments with reference to both
the Group's business model for managing the
assets and the contractual cash flow characteristics of the
instrument.
Financial assets
The Group's financial
assets have
been classified
into the
following categories:
(i) At amortised cost
These are assets for which the
business model is to hold the asset and collect the
contractual cash flows. The cash flows are solely
payments of principal and interest and are on specified
dates.
The Group measures drawn loans and
advances held under this business model, cash and cash equivalents
and trade and other receivables at amortised cost.
On initial recognition the asset
is held at its fair value minus any transaction costs. Subsequent
measurement is calculated on the effective interest rate method
and is subject to impairment where the
recoverable value falls below the carrying value. This assessment
is performed quarterly.
(ii) At
fair value
through other
comprehensive income
These are assets for which the
business model is to collect the contractual cash flows and to sell
the assets. The contractual cash flows are solely payments of
principal and interest and are on specified dates.
The Group measures drawn loans and
advances held under this business model at fair value through other
comprehensive income.
These assets are initially
recognised at fair value, plus any attributable costs.
Subsequent changes in fair value are recognised
in equity, except for impairment losses which are recognised in the
Consolidated statement of profit and loss.
For further information on the
measurement of impairment losses, please see note 18.
Upon derecognition, any
accumulated movements in fair value previously recognised in equity (fair value reserve) are reclassified to
profit or loss in the Consolidated statement of profit and
loss.
(iii) At
fair value
through profit
or loss
These are assets for which the
business model is neither to hold nor to hold or sell, or where
contractual cash flows are not solely payments of principal and
interest.
The assets that result on
origination of the loans are initially recognised at fair value,
adjusting for the recorded fair value to date.
1. Basis of preparation and material accounting
policies continued
1.14 Financial instruments
continued
Financial liabilities
(i) At amortised cost
All financial liabilities are
measured at amortised cost, unless IFRS 9 specifically determines
they should be valued at fair value through profit or
loss.
The Group holds trade and other
payables and interest-bearing liabilities at amortised
cost.
On initial recognition the
liability is held at its fair value plus any transaction costs.
Subsequent measurement is based on the effective interest rate
method.
(ii) At
fair value
through profit
or loss
Financial liabilities are measured
at fair value through profit or loss when they meet
the definition of held for trading, or when they
are designated as such to eliminate or significantly reduce an
accounting mismatch that would otherwise arise.
The carrying value of each of the categories described
is disclosed
in note
25.
Derivatives
The Group holds a portfolio of
derivatives for risk management purposes. The Group's accounting treatment for derivatives that qualify for
hedge accounting is discussed in note 3.
Derivatives that do not qualify
for hedge accounting are held at fair value through profit or
loss.
Forbearance
The Group maintains a forbearance
policy for the servicing and management of customers who are in
financial difficulty and require some form of concession to be
granted, even if this concession entails a loss for the Group. A
concession may be either of the following:
• a modification of the previous terms and conditions of an
agreement, which the borrower is considered unable to comply with
due to its financial difficulties, to allow for sufficient debt service ability, that would not
have been granted had the borrower not been in financial
difficulties; or
• a total or partial refinancing of an agreement that would not
have been granted had the borrower not been in financial
difficulties.
Forbearance in relation to an
exposure can be temporary or permanent depending on the
circumstances, progress on financial rehabilitation and the detail
of the concession(s) agreed. The Group excludes short-term
repayment plans that are up to three months in duration from its
definition of forborne loans.
Modification of financial assets
and financial liabilities
When a financial asset or
financial liability is modified, a quantitative and qualitative
evaluation is performed to assess whether or not the new terms are
substantially different to the original terms. For financial
assets, the Group considers the specific circumstances
including:
• if the borrower is in financial difficulty, whether the
modification merely reduces the
contractual cash flows to amounts the borrower is expected to be
able to pay;
• whether any substantial new terms are introduced that
substantially affects the risk profile of the loan;
• significant extension of the loan term when the borrower is
not in financial difficulty;
• significant change
in the
interest rate;
and
• insertion of collateral, other security or credit
enhancements that significantly affect the credit risk associated
with the loan.
The Group specifically, but not
exclusively, considers the outcome of the '10% test'. This involves
a comparison of the cash flows before and after the modification,
discounted at the original EIR, whereby a difference of more than
10% indicates the modification is substantial.
If the terms and cash flows of the
modified financial instrument are deemed to be substantially different, the derecognition criteria are met
and the original financial instrument is derecognised and a 'new'
financial instrument is recognised at fair value. The difference
between the carrying amount of the derecognised financial
instrument and the new financial instrument with modified terms is
recognised in the statement of profit and loss.
If the terms and cash flows of the
modified financial instrument are not deemed to be substantially
different, the financial instrument is not derecognised and the
Group recalculates the 'new' gross carrying amount of the financial
instrument based on the revised cash flows of the modified
financial instrument discounted at the original EIR and recognises
any associated gain or loss in the statement of profit and
loss.
Any costs and fees incurred are
recognised as an adjustment to the carrying amount of the financial
instrument and are amortised over the remaining term of the
modified financial instrument by recalculating the EIR on the
financial instrument.
1. Basis of preparation and material accounting
policies continued
1.14 Financial instruments
continued
De-recognition
Financial instruments are only
derecognised when the contractual rights/obligations to
receive/deliver cash flows from them have expired or when the Group
has transferred substantially all risks and rewards of
ownership.
1.15
Share capital
Financial instruments issued by
the Group are classified as equity only to the extent that they do
not meet the definition of a financial liability or financial
asset.
The costs of equity transactions
are accounted for as a deduction from equity to the
extent they are incremental costs directly
attributable to the equity transactions that otherwise would have
been avoided. Transaction costs that relate jointly to an equity
transaction and other transactions are allocated using a basis of
allocation that is rational and consistent with similar
transactions, with the costs allocated to other transactions
reported through the Consolidated statement of profit and
loss.
1.16
Share-based payments
Where the issuance of shares or
rights to shares are awarded to employees, the fair value of the
options at the date of grant is charged to the Consolidated
statement of profit and loss over the vesting period. Non-market
vesting conditions are considered by adjusting the number of equity
instruments expected to vest at each reporting date so that,
ultimately, the cumulative amount recognised over
the vesting period is based on the
number of options that eventually vest. Non- vesting conditions and
market vesting conditions are factored into the fair value of the
options granted. If all other vesting conditions are satisfied, a
charge is made irrespective of whether the
market vesting conditions are satisfied. The cumulative expense is
not adjusted for failure to achieve a market vesting condition or
where a non-vesting condition is not satisfied.
Where the terms and conditions of
options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the Consolidated statement of profit and loss over the remaining
vesting period.
1.17
Current and
deferred taxation
The tax expense for the period
comprises current and deferred tax. Current tax is
provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or
substantively enacted by the year end date.
Deferred income tax is provided in
full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. However, deferred tax is not
accounted for if it arises from the initial recognition of an asset
or liability in a transaction other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit and loss. Deferred
tax is determined using tax rates and laws that have been enacted
or substantially enacted at the year-end date and are expected to
apply when the related deferred tax asset is realised or the
deferred tax liability
is settled. Deferred tax balances
are not discounted. Deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary
differences can be utilised.
1.18 Dividends
Dividends are recognised when they
become legally payable. In the case of interim dividends to
ordinary and preferred share shareholders, this is when paid by the
Group. In the case of final dividends to ordinary and preferred
share shareholders, this is when declared
by Directors and approved by the shareholders at the relevant Board
meeting.
1.19 Write-offs
Loans and advances are written off
(either partially or in full) when there is no reasonable prospect
of recovery. This is generally the case when the primary security
has been realised and the Group is unable to reach an agreement
with the borrower for immediate or
short-term repayment of the amounts subject to the write- off.
Financial assets that are written off can still be subject to
enforcement activities in order to recover amounts due. Amounts
subsequently recovered on assets previously written off are
recognised in impairment losses on financial assets in the
statement of profit and loss.
1. Basis of preparation and material accounting
policies continued
1.20 Critical accounting
estimates and
judgements
The preparation of these financial
statements in accordance with IFRS requires the use of estimates.
It also requires management to exercise judgement in applying the
accounting policies.
Judgements
Consolidated Financial Statements
Subsidiary undertakings are all
entities (including special purpose entities) over
which the Group has control, exposure or rights
to variable returns, and the ability to affect those returns
through its control over the undertaking.
The Group has a number of
associated entities that it considers for consolidation under IFRS
10. Control is reassessed and judgement is used whenever facts and
circumstances indicate that there may be a change in these elements
of control.
Significant increase in credit risk
The determination of how
significant an increase in lifetime PD should be to trigger a move
between credit risk stages for impairment requires significant
judgement. Management have adopted a test-based approach to derive
objective thresholds such that credit deterioration is recognised
at the appropriate point. See note 18 for further
details.
Similarly significant judgement is
also applied when assessing the risk of a default occurring
following the modification of a financial asset that does not
result
in derecognition.
Fair value
measurement
Judgements were applied to
determine the unobservable inputs to the fair value models used to
calculate the fair values of loans and advances. These include the
discount rate, prepayment rates, PDs, LGDs, recovery costs and cure
probabilities driven from the ECL models.
Estimates and assumptions
Fair value
measurement
Estimating the fair value for
share-based payment transactions requires determination of the most
appropriate valuation method, which depends on the terms and
conditions of the award. This estimate also requires determination
of the most appropriate inputs to the valuation model, including
the expected life of the share option, volatility and the dividend
yield and making assumptions about them. The Group uses a
Black-Scholes option pricing model for the employee share schemes.
The Group estimates the forfeiture rate of schemes based on the
historic evidence of schemes that have been awarded in previous
years. The assumptions for estimating the fair value for share-
based payment transactions are disclosed in note 25.
Level 1: Quoted prices in active
markets for identical items.
Level 2: Observable direct or
indirect inputs other than Level 1
inputs.
Level 3: Unobservable inputs (i.e.
not derived from market data and require a level of estimates and
judgements within the model). See note 26 for more detailed
information related to fair value measurement.
Expected Credit Loss Calculation
The accounting estimates with the
most significant impact on the calculation of impairment loss provisions under IFRS 9 are macroeconomic
variables, in particular UK house price inflation and unemployment,
and the probability weightings of
the macroeconomic scenarios used.
The Group has used three macroeconomic scenarios, which are considered to represent a range of
possible outcomes over a normal economic cycle, in determining
impairment loss provisions:
• a central scenario aligned to the Group's business plan;
• a downside scenario as modelled in the Group's risk management process; and
• an upside scenario representing the impact of modest
improvements to assumptions used in the central
scenario.
For the period ended 31 March 2024
management considered the third party weightings to adequately
represent the macroeconomic environment across all
products and have therefore applied 40%/40%/20%
to the central, downside and upside scenarios
respectively.
Changes to macroeconomic
assumptions, as expectations change over time, are expected to lead
to volatility in impairment loss provisions and may lead to pro-
cyclicality in the recognition of impairment provisions.
1. Basis of preparation and material accounting
policies continued
1.20
Critical accounting estimates
and judgements
continued
Sensitivity analysis on ECL
models
Sensitivity analysis has been
completed on a number of different scenarios to better assess the
impact of changing variables on the ECL calculation in the current
environment:
• A 100% downside was applied to the models. This would
increase the ECL by £1.7 million.
• A 100% upside was applied to all the models. This would
decrease the ECL by £2.2 million.
• A 10% increase in the forced sale discount. This would
increase the ECL by £1.2 million.
• A 20% increase in the unemployment rate (peak of 5.6%). This
would increase the ECL by £0.1 million.
• A 20% decrease in UK house price inflation would increase the
ECL by £1.0 million.
Valuation of
share-based payments
Estimating the fair value for
share-based payment transactions requires determination of the most
appropriate valuation method, which depends on the terms and
conditions of the award. This estimate also requires determination
of the most appropriate inputs to the valuation model including the
expected life of the share option,
volatility and the dividend yield and making assumptions
about
them. The Group uses a
Black-Scholes option pricing model for the employee share schemes.
The assumptions for estimating the fair value for share-based
payment transactions are disclosed in note 25.
Effective interest
rate revenue
recognition
Interest income calculated using
the effective interest rate shown in the Consolidated statement of profit and loss. The effective
interest rate is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial
asset.
The expected life of the financial
asset is a significant area of judgement which is estimated using
the observed behavioural performance of the assets over time
and the business model under which they are
managed by the Group. Using these metrics a repayment profile is
derived and applied in determining the performing capital balance
used to calculate expected future interest receipts.
1.21
Non-controlling interests
The group recognises
non-controlling interests in an acquired entity either at fair
value or at the noncontrolling interest's proportionate share of
the acquired entity's net identifiable assets. This decision is
made on an acquisition-by-acquisition basis. For the
non-controlling interests in Group, the group elected to recognise
the non- controlling interests at fair value. The subsequent
accounting will be done based on principles of IFRS 10
1.22
Impairment of
financial assets
Impairment of financial assets is
calculated using a forward-looking expected credit loss (ECL)
model. ECLs are an unbiased probability weighted estimate of credit
losses determined by evaluating a range of scenarios and possible
outcomes.
Further detail regarding the
impairment of financial assets can be found in note 19.
1.23
Fair value
of financial
assets
Fair value is defined as the price
expected to be received on sale of an asset in an orderly
transaction between market participants at the measurement date.
Where possible, fair value is determined
with reference to quoted prices in an active market. A market is
regarded as active if transactions for the asset take place with
sufficient frequency and volume to provide pricing information on
an ongoing basis. Where quoted prices are not available, generally
accepted valuation techniques such as discounted cash flow models
are used. Where possible these valuation techniques use
independently sourced market parameters such as asset backed
security spreads. Further detail regarding the fair value of
financial assets can be found in note 26.
1.24
Prior period adjustments
The Group has restated its
Consolidated statement of cash flow due to the following prior
period adjustments:
i) To reflect the correct movement in Trade and Other payables
and Interest bearing liabilities. In the year ended 31 March 2023,
the Group noted and corrected the historical error by reclassifying
accrued interest expense on interest-bearing liabilities previously
recognised as part of trade and other payables to interest- bearing
liabilities. This was updated in the Consolidated Statement of
Financial position however, the movement in the affected accounts
in Consolidated statement of cash flows was incorrectly stated. In
the current year, the Group has restated its March 2023
Consolidated Cash Flow Statement to update the correct movement of
£2.8m.
1. Basis of preparation and material accounting
policies continued
Restated Consolidated statement
of cash
flows (Extract)
1.24 Prior period adjustments continued
Restated Consolidated statement
of cash
flows (Extract)
Movement in
Cash consideration
for sold
residuals
(£m)
Proceeds
from disposal of subsidiaries (sale of cash residuals) less cash and cash equivalents disposed of
(£m)
Movement
in loans and advances (New originations net of redemptions)*
(£m)
|
(Decrease)/ increase in trade
and other payables
|
Decrease in interest bearing
liabilities
|
accrued interest in interest
bearing
liabilities
|
(£m)
|
(£m)
|
(£m)
|
FY2023
(reported)
|
(24.9)
|
(20.3)
|
-
|
Impact of
FY2022 accrued interest reclassification
|
2.8
|
(2.8)
|
-
|
Deconsolidated balance
|
2.1
|
214.7
|
-
|
Net
impact of gross financing receipts and payments*
|
-
|
(366.2)
|
-
|
Reclassification of redemption in securitisation
facilities
|
-
|
176.1
|
-
|
Reclassification of movement in accrued interest
|
-
|
(1.5)
|
1.5
|
FY2023
(restated)
|
(20.0)
|
-
|
1.5
|
|
|
FY2023 (Reported)
12.7
-
20.2
Reclassification of
cash
consideration for sold
residuals
(12.7)
12.7
-
Investments in securitisation
vehicles (Mortimer 2022)
-
13.2
Deconsolidated balance
-
(212.6) Reclassification of cash held
in
Mortimer 2022 and Mortimer
2020
-
(15.9)
15.9
FY2023
(Restated)
-
(3.2)
(163.3)
*
This is the net impact of prior period adjustments relating to
gross financing receipts and payments which is discussed
below.
ii) To
reflect the correct balance for "Proceeds received on disposal of
subsidiaries". During the year, the Group noted that as per
requirements of Section 42 of IAS 7, the proceeds received from
disposal of a subsidiary need to be presented net of the cash and
cash equivalents disposed as part of the transaction. Historically,
this has been disclosed on a Gross basis. The error has been
corrected by netting the cash and cash equivalents in Mortimer 2022
and 2020 entities from residual sale consideration on the date of
sale. The Group has restated its March 2023 Consolidated Cash Flow
Statement to update the correct balance £(3.2)m.
* As the
cash held in Mortimer 2022 and Mortimer 2020 were shown in error in
the movement in loans and advances, the adjustment is recorded in
that line item in the cash flow statement.
iii)
To reflect the funding movement in financing activities on gross
basis. During the year, the Group noted that as per requirements of
Section 21 of IAS7, major financing activities have been disclosed
on a net basis and presented as "Increase/Decrease" in interest
bearing liabilities. The error has been corrected by reflecting
cash movements for funding received and repaid to our funding
partners on a gross basis. It was noted from this error that
deconsolidated balances from the disposal of Mortimer 2020-1 plc
had been erroneously included in the movement analysis of their
respective lines presented in the statement of cash flows. To
correctly reflect the gross payments and receipts, deconsolidated
balances have now been adjusted from the movement analysis of
respective balances.
1.
Basis of
preparation and
material accounting policies
continued
|
|
1.24 Prior period adjustments
continued
|
Restated Consolidated
statement of
cash flows
(Extract)
|
|
Repayment of
|
Funding
received from institutional
|
|
|
|
Proceeds
from external
|
(Decrease)/ increase in
|
funder liabilities
(excluding
|
lenders (excluding risk
|
Repayments of funding obtained
|
Funding received
|
Proceeds to fund
|
investors
for securitisation of
|
interest bearing
|
risk retention
|
retention
notes)
|
for risk
retention
|
for risk retention
|
securitisation
|
portfolio of loans
|
liabilities (£m)
|
funding) (£m)
|
(£m)
|
notes (£m)
|
notes (£m)
|
payments (£m)
|
(£m)
|
FY2023
(reported)
(20.3)
|
-
|
-
|
-
|
-
|
176.1
|
-
|
Impact of
gross financing receipts and payments
(366.2)
|
(335.0)
|
691.7
|
(3.5)
|
13.0
|
-
|
-
|
Impact of
FY2022 accrued interest reclassification
(2.8)
|
-
|
-
|
-
|
-
|
-
|
-
|
Deconsolidation balance
214.7
|
-
|
-
|
-
|
-
|
-
|
-
|
Reclassification of
redemption in
securitisation facilities
176.1
|
-
|
-
|
-
|
-
|
(176.1)
|
-
|
Reclassification of movement in accrued interest
(1.5)
|
-
|
-
|
-
|
-
|
-
|
-
|
Reclassification of
redemption in
securitisation vehicles
-
|
(176.1)
|
176.1
|
-
|
-
|
-
|
-
|
Proceeds
from external investors for securitisation of portfolio of
loans
-
|
-
|
(261.2)
|
-
|
-
|
-
|
261.2
|
FY2023
(restated)
-
|
(511.1)
|
606.6
|
(3.5)
|
13.0
|
-
|
261.2
|
Investments in securitisation
vehicles which was erroneously presented as part of movement in
loans and advances, under operating activities has also now been
presented separately in line with Section 21 of IAS7.
Movement in loans and advances
(New
|
Investment in securitisation
vehicles (£m)
|
originations net of redemptions)
(£m)
|
FY2023
(Reported)
|
-
|
20.2
|
Investments in securitisation vehicles
(Mortimer 2022)
|
(13.2)
|
13.2
|
Deconsolidated balance
|
-
|
(212.6)
|
Reclassification of
cash held
in Mortimer
2022 and
Mortimer 2020
|
-
|
15.9
|
FY2023
(Restated)
|
(13.2)
|
(163.3)
|
(a)
Total cashflows on operating activities has
decreased from net inflow of £1.3m to net outflows of £192.7 m
because of the three PPAs.
(b)
Total cashflows on investing activities has moved
from net outflows of £8.5m to net outflows of £24.9m because of
PPAs (ii) and (iii).
(c) Total cashflows on financing activities has increased from
net outflows of £64.3m to net inflows of £146.1m because of PPAs
(i) and (iii).
These changes do not impact the
Consolidated statement of profit and loss, Consolidated statement
of financial position, Consolidated statement of other
comprehensive income or Consolidated statement of
other changes in equity. There is no change to the earnings per
share of the Group resulting from this change.
2. Leases
The Group reports its leases as
prescribed by IFRS 16. The Group is a lessee in a property lease
arrangement in which treatment of the lease components are as
follows:
Right-of-use assets
The Group recognises a
right-of-use asset at the lease commencement date. The right-of-use
asset is measured at cost, less any accumulated depreciation and
impairment losses, and is adjusted for any remeasurement of the
lease liability. The cost of the right-of-use asset includes the
amount of the lease liability recognised, initial direct costs
incurred, costs of removal and restoration, and lease payments made
at or before the commencement date less any lease incentives
received.
The Group presents right-of-use
assets under property, plant and equipment in the statement of
financial position.
Right-of-use assets are depreciated on a straight-line basis over the shorter of
2. Leases continued
Lease term
The Group determines the lease
term as the non-cancellable term of the lease, together with any periods covered by an option to extend the
lease if it is reasonably certain to be exercised, or any periods
covered by an option to terminate the lease if it is reasonably
certain not to be exercised.
Sublease
In December 2021 the Group entered
into an arrangement to sublease a proportion of its property
lease.
The sublease is classified as a
finance lease with reference to the right-of-use asset from the
head lease.
The lease liability relating to
the head lease is unchanged by the new sublease arrangement. The
Group's net investment in the sublease is included in the
Consolidated statement of financial position as a separate line
item.
|
in sublease
£'m
|
leasehold property
£'m
|
liabilities
£'m
|
As
at 1 April 2022
|
1.2
|
2.4
|
4.1
|
Depreciation expense
|
-
|
(0.6)
|
-
|
Interest expense
|
0.1
|
-
|
0.5
|
Payments
- Interest
|
-
|
-
|
(0.5)
|
Payments
- Principal
|
(0.3)
|
-
|
(0.9)
|
Dilapidations provision
|
-
|
-
|
0.1
|
As
at 1 April 2023
|
1.0
|
1.8
|
3.3
|
|
|
the estimated useful life and the lease term.
Right-of-use assets are subject to impairment. Depreciation and impairment losses are charged to
administrative expenses in the Consolidated statement of profit and
loss.
Lease liabilities
Depreciation expense
|
-
|
(0.7)
|
-
|
Interest expense
|
-
|
-
|
0.3
|
Payments
- Interest
|
-
|
-
|
(0.3)
|
Payments
- Principal
|
(0.4)
|
-
|
(1.1)
|
Dilapidations provision
|
-
|
-
|
0.1
|
As
at 31
March 2024
|
0.6
|
1.1
|
2.3
|
|
|
At the lease commencement date, the Group
recognises a lease liability measured at the present value of the
lease payments to be made over the lease term. The lease payments
include fixed payments less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and
amounts expected to be paid under residual value guarantees. The
lease payments also include the exercise price of a purchase option
reasonably certain to be exercised by the Group and payments of
penalties for terminating a lease, if the lease term reflects the
Group exercising the option to terminate. The variable lease
payments that do not depend on an index or a rate are recognised as
an administrative expense in the Consolidated statement of profit
and loss in the period in which the event or condition that
triggers the payment occurs.
In calculating the present value
of lease payments, the Group uses the incremental borrowing rate at
the lease commencement date, unless the interest rate implicit in
the lease is readily determinable. After the commencement date, the
lease liability is increased to reflect the accretion of interest
and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed-lease payments, or a change in the assessment to
purchase the underlying asset.
Net investment
Right-of-use
Lease
2. Leases continued
The below table sets out the
amounts recognised in the Consolidated statement of profit and
loss:
At the inception of each hedge
relationship, a formal hedge documentation is prepared,
describing:
• the hedged item, a financial asset or liability which is being economically
hedged;
•
Year ended 31 March 2024
|
Administrative
expenses
£'m
|
Interest expense
£'m
|
Total
£'m
|
Depreciation expense
of right-of-use
asset
|
0.7
|
-
|
0.7
|
Interest expense on lease liabilities
|
-
|
0.3
|
0.3
|
Increase in dilapidations provision
|
0.1
|
-
|
0.1
|
Total
recognised in the Consolidated statement of profit and
loss
|
0.8
|
0.3
|
1.1
|
|
|
the hedging instrument, a derivative financial
instrument with economic characteristics that appropriately
mitigate the risk being hedged; and
• the methods that will be used to determine the effectiveness
of the designated hedge relationship.
IAS 39 and IFRS 9 both require
that an effectiveness criterion be met for an entity
to qualify for hedge accounting. Both accounting
standards also require that hedge effectiveness be assessed
prospectively at inception and retrospectively at each reporting
date. Hedge effectiveness is the degree to which changes in the
fair value of the hedged item and hedging instrument offset. IAS 39
specifies that the
Year ended 31 March 2023
Administrative
expenses
£'m
Interest
expense
£'m
Total
£'m
offset ratio be within the range
80%-125% for its highly effective requirement to be met. IFRS 9
does not require a specific offset ratio to meet hedge accounting
requirements, but instead requires that there is an economic
relationship between the hedged item and hedging
instrument.
Depreciation expense
of right-of-use
asset
|
0.7
|
-
|
0.7
|
Interest expense on lease liabilities
|
-
|
0.5
|
0.5
|
Total
recognised in the Consolidated statement of profit and
loss
|
0.7
|
0.5
|
1.2
|
|
|
Fair value and cash flow hedges may have residual
ineffectiveness. Ineffectiveness is the extent to which changes in
the fair value of the hedging instrument fail to offset changes in
the fair value of the hedged item. Ineffectiveness is
recognised
in the Consolidated statement of profit and loss as it occurs. Sources of
3. Derivatives and hedge accounting
3.1 Hedge accounting
The Group uses interest rate swaps
to manage its exposure to fluctuations in interest rates and not
for speculative purposes.
When transactions meet
the criteria
of the
applicable standard:
The Group applies the requirements
of IFRS 9 when hedge accounting for variability in cash flows of a
financial asset or liability (cash flow hedge
accounting).
The Group applies the requirements
of IAS 39 for its fair value hedge of interest rate
risk of a portfolio of financial assets or
liabilities (macro fair value hedge accounting).
The financial statement note for
derivative financial instruments details the derivative portfolio
of the hedge in place at the balance sheet date.
ineffectiveness
include:
• differences in the size and timing of future expected cash
flow of the hedged instruments and hedged item due to unexpected
changes in hedged item;
• differences in the curves used to value the hedging
instrument and hedged item; and
• the designation of off-market derivatives.
The Group discontinues
hedge accounting
when:
• the hedge relationship matures;
• effectiveness testing indicates that a designated hedge
relationship ceases to meet the effectiveness
requirements;
• the hedging instrument is derecognised upon
a sale,
transfer or
termination; or
• the hedged item is derecognised upon sale or transfer.
3. Derivatives and hedge accounting continued
3.1 Hedge accounting continued
3.1.1
Fair value
hedge accounting
Fair value hedge accounting
results in the carrying value of the hedged item being adjusted to
reflect changes in fair value attributable to the risk being
hedged, creating an offset to the change
in the fair value of the hedging instrument. The fair value
movement of both the hedged item and hedging instruments are
reported in the Consolidated statement of profit and loss through
the other interest and similar income line item.
The Group designates a portfolio
of financial assets with similar interest rate risk exposure in a
portfolio (macro) hedge. The risk item is sorted into repricing
time buckets based on expected repricing periods and hedged
accordingly using interest rate swaps with matching tenors. The
fair value movements are measured using a SONIA benchmark. For
portfolio hedges that are highly effective, the Group records fair
value adjustment movements through other comprehensive income if
the hedged item is measured at fair value through other
comprehensive income and then recycles
immediately the amount of fair value movements due to the hedge
risk into the statement of profit or loss. If the hedged item is
measured at amortised cost the carrying amount will be adjusted for
fair value movements due to the hedged risks and recorded through
the statement of profit or loss. The portfolio hedges are
rebalanced regularly to include newly originated financial
assets.
If portfolio hedge accounting no
longer meets the criteria for hedge accounting, the cumulative fair
value hedge adjustment is amortised over the period to maturity of
the previously designated hedge relationship. If the hedged item is
sold or repaid, the unamortised fair value adjustment is
immediately recognised in the income statement.
3.1.2
Cash flow hedge accounting
Cash flow hedge accounting allows
for the portion of the change in the fair value of the hedging
instrument that is deemed to be effective to be deferred to the
cash flow hedge reserve instead of being immediately recognised in
the Consolidated statement of profit and loss. The ineffective
portion of the hedging instrument fair value movement is
immediately recognised in the Consolidated statement of profit and
loss.
The fair value movement deferred
in the cash flow hedge reserve is subsequently 'recycled' to the
Consolidated statement of profit and loss in the period when
the underlying hedged risk item impacts
the Consolidated statement of profit and loss. If the cash flow
hedge relationship ceases to meet the effectiveness criterion
required for hedge accounting and the hedged cash flows are still
expected to occur, the deferred derivative fair value movement is
held in other comprehensive income until the underlying hedged item
is recognised in the Consolidated statement of profit and loss
through the interest expense and similar charges line item. If the
hedged item is derecognised, the cumulative gain or loss in other
comprehensive income is immediately recognised in the Consolidated
statement of profit and loss through the interest expense and
similar charges line item.
3.2 Gains or Losses from derivatives and hedge accounting
As part of its risk management
strategy, the Group uses derivatives to economically hedge the
interest rate exposure of financial assets and liabilities. The
Group applies hedge accounting to minimise the income statement
volatility resulting from changes in the fair value of derivative
financial instruments that will ordinarily be measured at fair
value through profit or loss. Such volatility does not reflect the
economic reality of the Group's hedging activities; however,
volatility can arise from hedge accounting ineffectiveness, hedge
accounting not being applied or not being achievable at the present
time.
3. Derivatives and hedge accounting continued
3.2 Gains or Losses from derivatives and hedge accounting continued
Note 3.1 discusses the effect of
fair value and cash flow hedge accounting on the
Group's financial statements, including
accounting treatment of hedge accounting ineffectiveness.
3.4
Cash flow
hedge accounting
The Group manages interest rate
risk associated with cash flows using interest rate swaps with
floating legs benchmarked to SONIA. The cash flows hedged
are fully indexed SONIA interest payments
due on issued debt securities. The hedging instrument effectively
fixes the interest payments on the issued debt
securities.
Gains/(losses) from derivatives hedge accounting
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
(Losses)/Gains from fair value hedge accounting1
|
(2.4)
|
(0.7)
|
Fair
value gains from other derivatives2
|
(1.6)
|
5.8
|
Total Gains included in other interest and similar income
|
(4.0)
|
5.1
|
|
|
Hedged
item balance sheet classification
|
Hedging
Instrument
|
Risk Category
|
Hedged
Item1
£'m
|
Instrument1
£'m
|
Hedge ineffectiveness
recognised
in income statement
£'m
|
Net amounts
deferred to other comprehensive
income
£'m
|
Interest
bearing liabilities
|
Interest rate swaps
|
Interest rate: SONIA
|
-
|
-
|
-
|
-
|
|
|
Year ended
31 March
2024
1 All fair value hedges in place are portfolio hedges of interest rate risk exposure on originated financial assets.
2 This category includes the fair value losses of hedging
instruments prior to designation to a hedge accounting relationship.
3.3 Fair value hedge accounting
The Group manages interest rate
risk using interest rate swaps that exchange fixed cash flows for
floating cash flows indexed to market SONIA rates. These derivative
instruments are designated in a fair value hedge of the interest
rate exposure of a portfolio of financial
assets. The table below provides information on the Group's fair
value hedges.
Year ended 31 March 2023
balance
sheet classification
|
Hedging
Instrument
|
Risk
Item1 Instrument1
Category
£'m
£'m
|
statement
£'m
|
income
£'m
|
Interest
bearing liabilities
|
Interest rate swaps
|
Interest
(12.9)
12.9
rate:
SONIA
|
-
|
12.9
|
|
|
Hedged item
Hedged
Hedge
ineffectiveness recognised
in
income
Net
amounts
deferred to other comprehensive
Hedged
item balance sheet
|
Hedging
Instrument
|
Risk
Category
|
Hedged Item1
£'m
|
Instrument1
£'m
|
Ineffectiveness
£'m
|
Loans to
customers
|
Interest
rate swaps
|
Interest
rate: SONIA
|
0.4
|
(0.3)
|
0.1
|
|
|
Year ended
31 March
2024
The fair value hedge
ineffectiveness is reported through the interest and similar income
line item of the consolidated statement of profit and
loss.
Year ended 31 March 2023
1
Change in fair value used in determining hedge ineffectiveness.
On 14 April 2023, the Group sold
its non-risk retention residual economic interest in the Mortimer
BTL 2021-1 PLC securitisation for a cash
consideration of £8.66m. The sale of the certificate (residual
notes) resulted in a derecognition event as substantially all the
risks, rewards, and control of the vehicle passed to the
investor.
As the control of the vehicle
(Mortimer BTL 2021-1) had been transferred, the vehicle has been
deconsolidated from the Group's results. This also resulted in the
recycling of a loss of £21.5m from the cash flow hedge reserves to
the line item 'Net gain on derecognition of financial assets' in
the profit and loss.
Hedged item
Hedging
Hedged Item1
Instrument1
Ineffectiveness
balance
sheet
|
Instrument
|
Risk
Category
|
£'m
|
£'m
|
£'m
|
Loans to
customers
|
Interest
rate swaps
|
Interest
rate: SONIA
|
(14.6)
|
13.9
|
(0.7)
|
1
Change in fair value used in determining hedge ineffectiveness.
3. Derivatives and hedge accounting continued
3.5
Derivatives by
instrument and
hedge type
All the Group's derivative
financial instruments are used to manage economic risk, although
not all the derivatives are subject to hedge accounting. The table
below provides an analysis of the notional amount and fair value of
derivatives by both hedge accounting type and instrument type.
Notional amount is the amount on which payment flows are derived
and does not represent amounts at risk.
3.6
Contractual maturity of hedging instruments
notional amounts
|
As
at 31
March 2024
|
As
at 31
March 2023
|
Notional Amount
£'m
|
Fair value - Assets
£'m
|
Fair value - Liabilities
£'m
|
Notional Amount
£'m
|
Fair value - Assets
£'m
|
Fair value - Liabilities
£'m
|
Macro
fair value hedge:
|
|
|
SONIA
indexed interest rate swaps
|
39.9
|
-
|
(0.9)
|
527.8
|
13.9
|
-
|
Cash flow
hedge:
|
|
|
SONIA
indexed interest rate swaps
|
-
|
-
|
-
|
236.3
|
21.8
|
-
|
Not
subject to hedge accounting:
|
|
|
SONIA
indexed interest rate swaps1
|
108.4
|
-
|
(1.1)
|
15.0
|
10.3
|
-
|
Total
|
148.3
|
|
(2.0)
|
779.1
|
46.0
|
-
|
|
|
As at
31 March
2023
Macro
fair value hedge:
Less
than one year
As
at 31
March 2024
|
Less than one year
£'m
|
Between one and five years
£'m
|
Over five
years
£m
|
Total
£'m
|
Macro
fair value hedge:
|
SONIA indexed interest rate swaps
|
8.7
|
31.0
|
0.2
|
39.9
|
Cash flow
hedge:
|
SONIA indexed interest rate swaps
|
-
|
-
|
-
|
-
|
Other:
|
SONIA indexed interest rate swaps
|
47.2
|
58.9
|
2.4
|
108.5
|
Total
|
55.9
|
89.9
|
2.6
|
148.4
|
|
|
£'m
Between
one and five
years
£'m
Over five
years
£m
Total
£'m
1
Includes FV gains on forward starting swaps now designated in
FVH.
SONIA indexed interest rate swaps
138.9
241.7
147.2
527.8
Cash
flow hedge:
SONIA indexed interest rate swaps
25.1
211.2
-
236.3
Other:
SONIA
indexed interest rate swaps
12.5
2.5
15.0
Total
164
465.4
149.7
779.1
3. Derivatives and hedge accounting continued
3.7
Carrying amount
of hedged
items
|
As
at 31
March 2024
|
As
at 31
March 2023
|
Hedged
item
£'m
|
Fair value change of hedged risk
£'m
|
Hedged
item
£'m
|
Fair value change of hedged risk
£'m
|
Macro
fair value hedge:
|
|
|
BTL
Mortgage Loans
|
39.9
|
0.3
|
501.3
|
14.6
|
Cash flow
hedge:
|
|
|
Interest bearing securities (loan notes)
|
-
|
-
|
236.3
|
21.8
|
Total
|
39.9
|
0.3
|
737.6
|
36.4
|
For the fair value hedges £0.1m has been recorded as a fair value hedge adjustment to the carrying amount in the statement of financial position
for hedged items carried at amortised costs. For all other fair
value hedges the fair value movements due to the hedged risk has
been recycled from other comprehensive income to profit or
loss.
4. Financial risk management
General objectives, policies
and processes
The Board of Directors has overall
responsibility for the establishment and oversight of the Group's
risk management framework. The risk management policies are
established to identify and analyse the risks faced by the Group,
to set appropriate risk limits and controls, and to monitor risks
and ensure any limits are adhered to.
The Group's activities are
reviewed regularly, and potential risks are considered.
The overall objective of the Board is to set
policies that seek to reduce risk as far as possible without unduly
affecting the business's competitiveness and
flexibility.
Risk factors
The Group has exposure to the
following risks from its use of financial instruments: credit risk,
liquidity risk, interest rate risk. Further details regarding these
policies are set out below:
(i) Credit risk management
Credit risk is the risk of
financial loss to the Group if a customer or counterparty to
a financial instrument fails to meet its
contractual obligations and arises principally from the Group's
loans and advances and cash and cash equivalents held at
banks.
The Group's maximum exposure to
credit risk by class of financial asset is as follows:
Assets
|
31 March 2024
£'m
|
31 March 2023
£'m
|
Loans and advances
|
477.0
|
1,122.9
|
Investment securities
|
41.1
|
23.9
|
Derivative financial
asset
|
-
|
46.0
|
Other receivables
|
6.4
|
4.2
|
Cash and
cash equivalents
|
55.7
|
46.7
|
|
580.2
|
1,243.7
|
The Group manages its exposure to
credit losses on loans and advances by assessing borrowers'
affordability of loan repayments, risk profile, and
stability during the underwriting process.
Impairments are monitored and provided for under IFRS 9. The credit
policy is designed to ensure that the credit process is
efficient
for the applicant while providing
the Group with the necessary details to make an informed credit
decision.
Investment securities held by the
Group relate to a 5% retained position in structured securitisation entities that are no longer
consolidated. Recoverability of these amounts is linked to the
underlying loan portfolios within the structured securitisation
entities. Additionally, credit enhancement measures within the
securitisation structure reduce the Group's exposure to credit
losses.
4. Financial risk management continued
Risk factors continued
(i) Credit risk management continued
Trade and other receivables
principally comprise of amounts due from third parties.
The recoverability of these amounts is reviewed
on an ongoing basis, at least annually.
The fair value of cash and cash
equivalents at 31 March 2024 and 31 March 2023 approximates the carrying value. Further details
regarding cash and cash
equivalents can be found in note
17. Credit risk relating to cash and cash equivalents is mitigated
as cash and cash equivalents are held with reputable institutions.
These institutions have a Moody's credit rating of Prime-1
(superior ability to repay short- term debt
obligations).
The risk of movements in the price
of the underlying collateral secured by the Group against loans to
borrowers is actively managed by the Group. Security over loan
collateral is registered with the Land Registry, and only
properties within England, Wales and Scotland are suitable for
security. Loans are capped at 80% of the open market value of the property against which security is held,
and minimum loan period interest is retained on completion for some
short-term loans.
(ii) Liquidity risk management
Liquidity risk is the risk that
the Group will not be able to meet its financial obligations as
they fall due. The Group's approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when
due, under both normal and stressed conditions, without
incurring
unacceptable losses or risking
damage to the Group's position. The Group's liquidity position is
monitored and reviewed on an ongoing basis by the Board and the
Assets and Liabilities Committee. A key component of liquidity risk
is the Group's funding for the purpose of its long-term Buy-to-Let
lending. Once the facility is utilised or the term is reached, the
Buy-to-Let portfolio will be refinanced via securitisation or sale
to third-party purchasers.
The tables overleaf analyse the
Group's contractual undiscounted cash flows of its financial assets
and liabilities:
As
at 31
March 2024
|
Carrying amount
£'m
|
Gross nominal inflow/
(outflow)
£'m
|
Amount due in less than 6 months
£'m
|
Amount due 6-12 months
£'m
|
Amount due between one and five years
£'m
|
Amount due after five years
£'m
|
Financial
assets
|
Cash and
cash equivalents
|
55.7
|
55.7
|
55.7
|
-
|
-
|
-
|
Other receivables
|
6.4
|
6.4
|
6.4
|
-
|
-
|
-
|
Loans and advances
|
477.0
|
739.3
|
218.5
|
97.8
|
48.7
|
374.3
|
Investment Securities
|
41.1
|
46.8
|
1.3
|
1.3
|
44.2
|
-
|
|
580.2
|
848.2
|
281.9
|
99.1
|
92.9
|
374.3
|
Financial
liabilities
|
Other payables
|
(23.4)
|
(23.4)
|
(23.4)
|
-
|
-
|
-
|
Interest bearing liabilities
|
(514.6)
|
(586.6)
|
(63.4)
|
(357.5)
|
(96.6)
|
(69.1)
|
Derivative financial
liability
|
(2.0)
|
(2.0)
|
(0.3)
|
(0.3)
|
(1.4)
|
-
|
Lease
liability
|
(2.3)
|
(2.6)
|
(0.7)
|
(0.7)
|
(1.2)
|
-
|
|
(542.3)
|
(614.6)
|
(87.8)
|
(358.5)
|
(99.2)
|
(69.1)
|
|
Gross
|
Amount
|
|
Amount
due
|
|
nominal
|
due in
|
Amount
|
between
|
Amount
|
|
Carrying
|
inflow/
|
less than
|
due 6-12
|
one and
|
due after
|
|
amount
|
(outflow)
|
6 months
|
months
|
five years
|
five years
|
As
at 31
March 2023
|
£'m
|
£'m
|
£'m
|
£'m
|
£'m
|
£'m
|
Financial
assets
|
|
|
|
|
|
|
Cash and
cash equivalents
|
46.7
|
46.7
|
46.7
|
-
|
-
|
-
|
Trade and
other receivables
|
4.2
|
4.2
|
3.0
|
-
|
1.2
|
-
|
Loans and advances
|
1,122.9
|
1,927.1
|
205.3
|
164.6
|
203.9
|
1,353.3
|
Derivative financial
asset
|
46.0
|
46.0
|
9.1
|
7.9
|
26.4
|
2.6
|
Investment Securities
|
23.9
|
25.6
|
11.1
|
0.4
|
14.1
|
-
|
|
1,243.7
|
2,049.6
|
275.2
|
172.9
|
245.6
|
1,355.9
|
Financial
liabilities
|
|
|
|
|
|
|
Trade and
other payables
|
(22.3)
|
(22.3)
|
(22.3)
|
-
|
-
|
-
|
Interest bearing liabilities
|
(1,159.3)
|
(1,369.2)
|
(219.2)
|
(347.7)
|
(409.1)
|
(393.2)
|
Lease
liability
|
(3.3)
|
(3.8)
|
(0.7)
|
(0.7)
|
(2.4)
|
-
|
|
(1,184.9)
|
(1,395.3)
|
(242.2)
|
(348.4)
|
(411.5)
|
(393.2)
|
During the current financial year
the Group sold its residual interest in both Mortimer 2021-1 BTL
PLC (April 2023) and Mortimer 2023-1 BTL PLC (January
2024).
4. Financial risk management continued
Risk factors continued
(iii) Interest rate risk management
The risk is managed on a
continuous basis through the use of interest rate swaps.
The Group monitors exposure to repricing risk through an interest rate gap report and matches the repricing
characteristics of its assets with its liabilities naturally where
it can. The Group uses derivatives to
manage any risk above tolerable levels. Derivatives are only used
for economic hedging purposes and not as speculative
investments.
See note 3 and 26 for further
details on the derivatives held by the Group.
(iv) Interest rate sensitivity
31
March 2024
|
Profit
and Loss
|
(Restated*)
|
Equity (net of tax)
|
100 bp
increase
£'m
|
100 bp
decrease
£'m
|
100 bp
increase
£'m
|
100 bp
decrease
£'m
|
Interest
rate swaps
|
1.5
|
(1.5)
|
-
|
-
|
Cash and
cash equivalents
|
0.2
|
(0.2)
|
-
|
-
|
Loans and advances
|
0.3
|
(0.3)
|
(5.5)
|
5.8
|
Investment securities
|
0.4
|
(0.4)
|
-
|
-
|
Interest bearing liabilities
|
(4.3)
|
4.3
|
-
|
-
|
|
|
The sensitivity analysis below has been
determined based on the exposure to interest rates as at the
reporting date. This analysis assumes a 100 basis point
change which represents the Board's assessment of
a reasonable change in interest rates. All other variables are held
constant.
31
March 2023
|
|
Interest
rate swaps
|
7.8
|
(7.8)
|
4.7
|
(4.9)
|
Cash and
cash equivalents
|
0.5
|
(0.5)
|
-
|
-
|
Loans and advances
|
0.8
|
(0.8)
|
(19.0)
|
20.0
|
Investment securities
|
0.3
|
(0.3)
|
-
|
-
|
Interest bearing liabilities
|
(10.1)
|
10.1
|
-
|
-
|
|
|
* Prior Year
interest rate swap sensitivity numbers have been amended to reflect
an updated methodology used in the current year.
(iv)
Interest rate
sensitivity continued
The profit and loss figures for
cash and cash equivalents, loan and advances, investment securities and interest-bearing liabilities
represent the effect on interest receipts and payments recorded
through profit and loss resulting from changes in interest
rates.
The figures shown under the equity
columns for loans and advances reflect the expected change to fair value measured through other comprehensive income.
The Group designates its portfolio
of interest rate swaps in a fair value or cash flow hedge. The
indicative figures in the above profit and loss columns represent a
fair value change in interest rate swaps designated in a fair value
hedge, these changes are mostly offset in the Consolidated
statement of profit or loss by an equivalent change in fair value of the hedged items. Figures in the
equity columns represent fair value changes in interest rate swaps
designated in a cash flow hedge relationship,
in the event of such a change the
Group will benefit from offsetting lower interest payments on the
indexed liabilities hedged by the swaps.
The sensitivity analysis of the
Group's loan assets with interest rate exposure is disclosed in
note 25 (d).
(v) Capital management
The Group considers its capital to
comprise of its share capital, share premium, retained earnings and the employee share reserve. The Group's
objectives when maintaining capital are:
• to safeguard the Group's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and;
• to provide an adequate return to shareholders by pricing
products and services commensurately with the level of
risk.
The Group sets the amount of
capital it requires in proportion to risk. The Group manages its
capital structure and makes adjustments to it in light of changes
in economic conditions and the risk characteristics of the
underlying assets. The Group uses external debt to fund its
principal activity and sets the amount of debt that it requires in
proportion to risk and lending requirements. It should also be
noted the Group does not have to comply with any specific
regulatory Capital requirements.
5. Segmental analysis
The Group's lending operations are
carried out solely in the UK, and effective from
1 April 2023, were carried out solely from the
Group's LendInvest Mortgages and Capital Divisions, reflective of
the product offerings. The results and net assets
of the Group are derived from the
provision of property related loans only. The following describes
the operations of the two reportable segments for the year ended 31
March 2024:
LendInvest Mortgages
LendInvest Mortgages provides
mortgages to both professional BTL landlords and homeowners as well
as a range of short-term mortgages.
LendInvest Capital
The LendInvest Capital division
provides larger, more structured finance primarily to property
developers and larger Bridging loans and houses the Fund and
Self-Select Platform.
In prior periods the Group's
lending operations were previously carried out alongside the two
main lending products: short-term lending and BTL mortgages. Due to
the information to restate prior periods not being available and
the costs to develop would be excessive, management have made the
decision to not restate prior period results in the new reportable
segments.
In accordance with the provision
of paragraphs 29 and 30 of IFRS 8 Operating Segments, the prior
year segmental analysis has not been restated for the new operating
segments because the information is not readily available and the
cost to develop it would be excessive. The current year has not
been presented in the previous segmental format because the
information is not readily available and the cost to develop it
would be excessive.
5.
Segmental analysis continued
Please see below for a segmental
analysis of the profit and loss and statement of financial position
balances:
Year
ended 31 March 2024 Consolidated statement
of profit and loss information
|
Mortgages
£'m
|
Capital
£'m
|
Central
£'m
|
Total
£'m
|
Interest
income calculated using the effective interest rate
|
45.9
|
20.6
|
-
|
66.5
|
Other interest and similar income
|
(4.0)
|
-
|
-
|
(4.0)
|
Interest expense and similar charges
|
(43.6)
|
(10.4)
|
-
|
(54.0)
|
Net
interest income
|
(1.7)
|
10.2
|
-
|
8.5
|
Fee income
|
10.5
|
9.0
|
-
|
19.5
|
Fee
expenses
|
(2.6)
|
(1.0)
|
-
|
(3.6)
|
Net fee income
|
7.9
|
8.0
|
-
|
15.9
|
Net gains
on derecognition of financial assets
|
(1.6)
|
0.6
|
-
|
(1.0)
|
Net other operating income
|
0.1
|
-
|
-
|
0.1
|
Net
operating income
|
4.7
|
18.8
|
-
|
23.5
|
Administrative expenses
|
(11.6)
|
(5.1)
|
(25.7)
|
(42.4)
|
Impairment losses
on financial
assets
|
(0.8)
|
(7.6)
|
-
|
(8.4)
|
Total
operating expenses
|
(12.4)
|
(12.7)
|
(25.7)
|
(50.8)
|
Profit/(loss) before tax
|
(7.7)
|
6.1
|
(25.7)
|
(27.3)
|
As
at 31
March 2024
Consolidated statement of financial position information
|
Mortgages
£'m
|
Capital
£'m
|
Total
£'m
|
Assets
|
Loans and advances
|
346.6
|
130.4
|
477.0
|
Total segment assets
|
346.6
|
130.4
|
477.0
|
Cash and
cash equivalents
|
|
|
55.7
|
Trade and
other receivables
|
|
|
8.7
|
Corporate tax Receivable
|
|
|
3.2
|
Property, plant and equipment
|
|
|
1.3
|
Investment securities
|
|
|
41.1
|
Net investment in sublease
|
|
|
0.6
|
Intangible fixed assets
|
|
|
10.7
|
Deferred
taxation
|
|
|
3.3
|
Total
assets
|
|
|
601.6
|
Liabilities
|
Interest bearing liabilities
|
(201.8)
|
(312.8)
|
(514.6)
|
Total segment liabilities
|
(201.8)
|
(312.8)
|
(514.6)
|
Derivative financial
liabilities
|
|
|
(2.0)
|
Trade and
other payables
|
|
|
(23.4)
|
Lease
liabilities
|
|
|
(2.3)
|
Total
liabilities
|
|
|
(542.3)
|
|
|
5. Segmental
analysis continued
Year ended 31 March 2023 Consolidated statement of profit and loss information
|
Short-term
lending
£'m
|
Buy-to-Let
lending
£'m
|
Central
£'m
|
Total
£'m
|
Interest
income calculated using the effective interest rate
|
25.2
|
42.9
|
-
|
68.1
|
Other interest and similar income
|
-
|
5.1
|
-
|
5.1
|
Interest expense and similar charges
|
(16.5)
|
(18.3)
|
-
|
(34.8)
|
Net
interest income
|
8.7
|
29.7
|
-
|
38.4
|
Fee income
|
9.1
|
4.4
|
-
|
13.5
|
Fee
expenses
|
(1.0)
|
(1.3)
|
-
|
(2.3)
|
Net fee income
|
8.1
|
3.1
|
-
|
11.2
|
Net gains
on derecognition of financial assets
|
1.1
|
3.8
|
-
|
4.9
|
Net other operating income
|
-
|
-
|
0.2
|
0.2
|
Net
operating income
|
17.9
|
36.6
|
0.2
|
54.7
|
Administrative expenses
|
-
|
-
|
(34.5)
|
(34.5)
|
Impairment losses
on financial
assets
|
(5.5)
|
(0.4)
|
-
|
(5.9)
|
Total
operating expenses
|
(5.5)
|
(0.4)
|
(34.5)
|
(40.4)
|
Profit/(loss) before tax
|
12.4
|
36.2
|
(34.3)
|
14.3
|
5. Segmental analysis
continued
As at 31 March 2023
Consolidated statement of
financial position information
Assets
Short-term
lending
£'m
Buy-to-Let
lending
£'m
Total
£'m
6.
Interest and
similar income
Loans
and
advances
329.9
793.0
1,122.9 Fair value adjustment for
portfolio hedged risk asset
0.1
0.1
Derivative financial asset
46.0
46.0
Total segment assets
329.9
839.1
1,169.0
Cash and
cash equivalents
46.7
Trade
and other receivables
6.1
Property, plant and equipment
2.2
Investment securities
23.9
Net
investment in sublease
1.0
Intangible fixed assets
10.5
Investment in joint venture
0.2
Investment in third parties
2.0
Deferred taxation
1.2
Total
assets
1,262.8
Liabilities
Interest bearing liabilities
(331.5)
(827.8)
(1,159.3)
Total segment liabilities
(331.5)
(827.8)
(1,159.3)
Trade
and other payables
(23.7)
Lease
liabilities
(3.3)
Total
liabilities
(1,186.3)
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Interest
income calculated using the effective interest rate
method
|
|
|
On loans
and advances to customers
|
62.8
|
66.5
|
On
investment securities
|
2.1
|
0.6
|
On cash
deposits
|
1.6
|
1.0
|
Total
interest income calculated using the effective interest rate
method
|
66.5
|
68.1
|
|
|
|
Other interest and similar income
|
|
|
Gain/(loss) on derivative financial instruments and hedge
accounting
|
(4.0)
|
5.1
|
Total other interest and similar income
|
(4.0)
|
5.1
|
|
|
|
Total interest and similar income
|
62.5
|
73.2
|
|
|
Revenue is
recognised with
reference to
the accounting
policy detailed
in note
1.6.
7. Interest expense and similar expense
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
On
amounts due to funding partners
|
(40.1)
|
(21.6)
|
On
debt securities
in issue
|
(10.2)
|
(10.0)
|
Funding
line cost amortisation
|
(3.7)
|
(3.2)
|
Total interest expense and similar charges
|
(54.0)
|
(34.8)
|
Interest expense is recognised
with reference to the accounting policy detailed in note
1.9.
8. Net fee income
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Fee
income on loans and advances
|
3.6
|
1.9
|
Fee
income on asset management
|
12.2
|
8.8
|
Fee
income on origination of loans to third parties
|
3.7
|
2.8
|
Fee
income
|
19.5
|
13.5
|
|
|
|
Fee
expense on origination of loans to third parties
|
(2.5)
|
(1.5)
|
Fee
expense on asset management
|
(1.1)
|
(0.8)
|
Fee
expense
|
(3.6)
|
(2.3)
|
|
|
|
Net fee
and commission income
|
15.9
|
11.2
|
Fee income and expense are
recognised with reference to the accounting policy detailed in
notes 1.8 and 1.10.
9.
Derecognition of
financial assets
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Net
(losses)/gains on sale of loans and loan portfolios
|
(9.2)
|
1.1
|
Net gains on derecognition of securitised loan portfolios
|
8.2
|
3.8
|
Net gains
on derecognition of financial assets
|
(1.0)
|
4.9
|
During the year, Mortimer
2021-1 Limited and Mortimer 2023-1 Limited
were deconsolidated when the residual notes were sold and the
impact of the deconsolidation is as follows:
a) total consideration
received -
£13.5m
b) the portion of the cash consideration
consisting of
cash and
cash equivalents
-
£13.5m
c) the
amount of cash and cash equivalents in the subsidiaries which
control is lost -
£22.4m
d) the
amount of the asset and liabilities other than the cash or cash
equivalents in the subsidiaries which control is lost:
Loans and Advances - (£639.6m)
Interest Bearing Liabilities - £662.5m Derivative financial asset -
(£25.9m) Other assets and liabilities - £0.9m
10. Profit from operations
Profit from operations has been
stated after charging:
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Wages and
salaries
|
20.1
|
18.0
|
Depreciation and amortisation
|
3.2
|
2.1
|
Depreciation of right-of-use asset
|
0.7
|
0.7
|
Interest expense - lease liabilities
|
0.3
|
0.5
|
Fees
payable to the auditors for the audit of the financial statements
|
1.4
|
1.0
|
Fees
payable to the auditors for the audit of the prior year financial
statements
|
0.3
|
-
|
Audit-related assurance
services
|
0.1
|
0.1
|
Share-based payment charge
|
1.3
|
1.9
|
Rent
|
0.2
|
-
|
Other administrative expenses are
incurred in the ordinary course of the business and do not require
further disclosure under IAS 1.
11. Employee benefit expense
Employee benefit expense (including Directors)
comprises:
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Wages and
salaries
|
20.1
|
18.0
|
Defined contribution
pension cost
|
0.7
|
0.6
|
Share-based payment charge
|
1.3
|
1.9
|
Social security contributions and
similar taxes
|
2.4
|
2.2
|
|
24.5
|
22.7
|
During the year, share options and
ordinary shares were issued to employees of the Company, see note
24 for further details.
12.
Number of
employees and
key management
compensation
The average monthly number of
employees during the year was:
|
Year ended 31 March 2024
Number
|
Year ended 31 March 2023
Number
|
Technology and product
|
37
|
60
|
Operations and administration
|
129
|
134
|
Sales and marketing
|
32
|
35
|
|
198
|
229
|
Key management personnel
compensation
Key management personnel are those
persons having authority and responsibility for planning, directing and controlling the activities of the
Group. Key management is defined as the Directors of the Company
listed on page 53.
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Salary, short-term
benefits and
pension
|
1.2
|
1.5
|
Equity-based compensation
|
-
|
0.1
|
|
1.2
|
1.6
|
The highest paid Director in the
year was paid £418,395 (2023: £437,424). Further details on
Directors' remuneration are disclosed in the Remuneration Report in
the Corporate Governance section of the
Annual Report and Accounts on pages 48 to 52.
13.
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Tax expense
|
|
|
Current
tax:
|
|
|
Current
tax on (loss)/profit for the year
|
-
|
2.5
|
Adjustments in respect of prior periods
|
(2.1)
|
(0.3)
|
Foreign taxes
|
-
|
0.1
|
Total current tax (credit)/charge
|
(2.1)
|
2.3
|
|
|
|
Deferred
tax:
|
|
|
Origination and reversal of temporary differences
|
(4.9)
|
0.2
|
Adjustments in respect of prior periods
|
(0.2)
|
0.4
|
Total deferred tax (credit)/charge
|
(5.1)
|
0.6
|
Total tax (credit)/charge
|
(7.2)
|
2.9
|
|
|
|
The tax (credit)/charge on the
profit for the year is different to the notional tax charge
calculated at the UK corporation tax rate of 25%. The differences
are explained below:
|
|
|
(Loss)/profit before
tax
|
(27.3)
|
14.2
|
(Loss)/profit before tax multiplied by the standard rate of
corporation tax of 25%
|
(6.8)
|
2.7
|
Tax
effects of:
|
|
|
(Losses)/profits not subject to taxation under securitisation
regime
|
(1.7)
|
-
|
Consolidation adjustments
not brought
into tax
|
1.0
|
-
|
Tax
losses not recognised
|
0.8
|
-
|
Tax losses not carried back
|
1.1
|
-
|
Difference in tax rate on carried back losses
|
0.4
|
-
|
Tax difference on employee share schemes exercised
|
0.3
|
-
|
Foreign taxes charged
|
0.1
|
0.1
|
(Over) provision of current tax
|
(2.1)
|
(0.3)
|
(Over)/under provision of deferred tax
|
(0.3)
|
0.4
|
Total tax (credit)/charge
|
(7.2)
|
2.9
|
|
|
Taxation on
(loss)/profit on
ordinary activities
13.
Taxation on
(loss)/profit on
ordinary activities continued
Deferred taxation
Deferred tax is presented in the
statement of financial position as follows:
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Deferred tax assets
|
5.6
|
10.8
|
Deferred tax liabilities
|
(2.3)
|
(9.6)
|
Net deferred tax assets/(liabilities)
|
3.3
|
1.2
|
The movements during the year are
analysed as follows:
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Net
deferred tax assets/(liabilities) at the beginning of the
year
|
1.2
|
(8.5)
|
Credit/(charge) to the statement of profit and loss for the
year
|
4.9
|
(0.2)
|
(Charge)/credit to
other comprehensive income
|
(2.3)
|
10.0
|
Rate change through equity
|
-
|
0.2
|
(Charge)/credit to
equity
|
(0.8)
|
0.1
|
Under/(over) provision
of deferred
tax
|
0.3
|
(0.4)
|
Net
deferred tax assets at the end of the year
|
3.3
|
1.2
|
13. Taxation on (loss)/profit on ordinary activities
continued
Category of deferred tax
2024
|
Opening balance
£'m
|
Credit to equity
£'m
|
Credit to
the statement of profit and loss
Current
year
£'m
|
(Charge)/
credit through
OCI
Current
year
£'m
|
Credit to
the statement of profit and loss Prior
year
£'m
|
Rate change through profit and
loss
£'m
|
Rate change through equity
£'m
|
Closing balance
£'m
|
Share and
share option schemes
|
1.4
|
(0.9)
|
(0.2)
|
-
|
-
|
-
|
-
|
0.3
|
IFRS
16
transitional adjustment
|
0.1
|
-
|
-
|
-
|
-
|
-
|
-
|
0.1
|
Fair value reserve
|
5.5
|
-
|
|
(7.6)
|
|
|
|
(2.1)
|
Cash flow hedge adjustment
|
(5.4)
|
-
|
-
|
5.4
|
-
|
-
|
-
|
-
|
IFRS 9
ECL
Provision
|
0.1
|
-
|
-
|
-
|
-
|
-
|
-
|
0.1
|
Research
& Development
|
(0.6)
|
-
|
0.1
|
-
|
0.3
|
-
|
-
|
(0.2)
|
Losses
|
-
|
0.1
|
5.0
|
-
|
-
|
-
|
-
|
5.1
|
Total
|
1.1
|
(0.8)
|
4.9
|
(2.2)
|
0.3
|
-
|
-
|
3.3
|
|
|
2023
Share
and share
Opening
balance
£'m
Credit
to equity
£'m
Credit to the statement of profit and loss
- CY
£'m
(Charge)/
credit
through
OCI -
CY
£'m
Credit to the statement of profit and loss
- PY
£'m
Rate change through profit
and loss
£'m
Rate change through
equity
£'m
Closing
balance
£'m
option schemes
1.1
0.1
-
-
(0.1)
0.1
0.2
1.4
IFRS
16
transitional
adjustment
0.1
-
-
-
-
-
-
0.1
Fair
value on loans
and
advances
(3.2)
-
-
8.8
-
-
-
5.6
Cash
flow hedge
adjustment
(6.6)
-
-
1.2
-
-
-
(5.4)
IFRS 9
ECL
provision
0.1
-
-
-
-
-
-
0.1
Research and
development
-
-
(0.2)
-
(0.3)
(0.1)
-
(0.6)
Total
(8.5)
0.1
(0.2)
10
(0.4)
-
0.2
1.2
The Group has gross unrecognised
tax losses of £3.3m available for offset against future taxable
profits. The total amount of unused losses is £23.6m. Deferred
tax Assets recognition is based on
management forecasts accounting for the unwinding of deferred tax
assets and liabilities.
14. Property, plant and equipment
The Group and Company
Cost
|
Computer equipment
£'m
|
Furniture and fittings
£'m
|
Leasehold improvements
£'m
|
Right-of- use asset
£'m
|
Total
|
Balance as at 31 March 2022
|
0.3
|
0.1
|
0.4
|
5.2
|
6.0
|
Additions
|
0.2
|
-
|
-
|
-
|
0.2
|
Disposals
|
(0.1)
|
-
|
-
|
-
|
(0.1)
|
Balance as at 31 March 2023
|
0.4
|
0.1
|
0.4
|
5.2
|
6.1
|
Additions
|
-
|
-
|
-
|
-
|
-
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
Balance as at 31 March 2024
|
0.4
|
0.1
|
0.4
|
5.2
|
6.1
|
|
|
|
|
|
|
|
|
|
| |
14. Property, plant and equipment continued
The Group and Company continued
15. Intangibles
|
|
|
Software
|
Internally developed
|
|
Cost
|
licences
£'m
|
Software
£'m
|
Total
£'m
|
Balance as at 31 March 2022
|
0.7
|
12.0
|
12.7
|
Additions
|
-
|
6.3
|
6.3
|
Balance as at 31 March 2023
|
0.7
|
18.3
|
19.0
|
|
|
Accumulated depreciation and impairment
|
Computer equipment
£'m
|
Furniture and fittings
£'m
|
Leasehold improvements
£'m
|
Right-of-
£'m
|
Total
|
Balance as at 31 March 2022
|
0.2
|
0.1
|
0.1
|
2.8
|
3.2
|
Charge
for the year
|
0.1
|
-
|
0.1
|
0.6
|
0.8
|
Disposals
|
(0.1)
|
-
|
-
|
-
|
(0.1)
|
Balance as at 31 March 2023
|
0.2
|
0.1
|
0.2
|
3.4
|
3.9
|
|
|
use asset
Additions
-
3.2
3.2
|
Balance as at 31 March 2024
0.7
21.5
22.2
|
Net carrying value
as at 31 March 2023
0.2
-
0.2
1.8
2.2
Lease commitment
Future minimum payments under non-cancellable
leases
Premises
|
Year Ended 31 March 2024
£'m
|
Year Ended 31 March 2023
£'m
|
Due
within a year
|
1.4
|
1.1
|
Due
between one and five years
|
0.7
|
2.2
|
Due later
than five years
|
-
|
-
|
|
2.1
|
3.3
|
The Group has a dilapidation
requirement to return the leased office to the specification as per the lease agreement. The total
dilapidation is expected to be
£204k (2023: £138k). The Group and
the Company have no significant contingent liabilities at year
end.
Charge for the year
0.1
1.8
1.9
Charge
for the year
|
-
|
3.0
|
3.0
|
Balance as at 31 March 2024
|
0.7
|
10.8
|
11.5
|
Net carrying value as at 31 March 2024
|
-
|
10.7
|
10.7
|
|
|
Charge
for the year
|
0.1
|
-
|
0.1
|
0.7
|
0.9
|
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Balance as at 31 March 2024
|
0.3
|
0.1
|
0.3
|
4.1
|
4.8
|
|
|
Software
|
Internally
developed
|
|
|
|
Accumulated amortisation and impairment
|
licences
£'m
|
Software
£'m
|
Total
£'m
|
|
|
|
|
|
|
|
|
|
|
|
Net
carrying value
as
at 31
March 2024
|
0.1
|
-
|
0.1
|
1.1
|
1.3
|
|
Balance as at 31 March 2022
|
0.6
|
6.0
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as
at 31
March 2023
0.7
7.8
8.5
Net
carrying value as at 31 March 2023
-
10.5
10.5
Internally developed software
development has been capitalised as an intangible asset and is
being amortised over 5 years.
16. Other receivables
Due within one year
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Trade receivables
|
5.2
|
0.5
|
Other
receivables:
|
|
|
-
Prepayments and
accrued income
|
2.3
|
1.9
|
-
Corporate tax
receivable
|
3.2
|
-
|
- Other
receivables
|
1.2
|
2.5
|
Due after one year
|
|
|
Rent deposit
|
-
|
1.2
|
|
11.9
|
6.1
|
The carrying value of trade and
other receivables approximates fair value and represents the
maximum exposure to credit losses. Expected credit losses on trade
receivables are immaterial.
The maximum exposure to credit
risk at the reporting date is the carrying value
of each class of receivables mentioned above.
During the current year (and prior period) the Group had no trade
receivables that are past due, but not impaired.
17. Cash and cash equivalents
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Cash at
bank
|
53.2
|
40.4
|
Trustees'
account
|
2.5
|
6.3
|
|
55.7
|
46.7
|
Trustees' account relates to
monies held on account for the benefit of our investors in the
Self-Select Platform, prior to them either investing in loans or
withdrawing their capital. Operationally, the Company does not
treat the Trustees' balances as available funds. An equal and
opposite payable amount is included within the trade payables
balance (see note 20).
18.
Loans and
advances
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Gross loans and advances
|
477.0
|
1,168.5
|
ECL
provision
|
(8.5)
|
(9.1)
|
Fair
value adjustment1
|
8.5
|
(36.5)
|
Loans and advances2
|
477.0
|
1,122.9
|
1 Fair value adjustment to gross loans and advances due to
classification as FVOCI, based on the Group's business model for
managing these financial assets. The significant year-on-year
decrease is due to an increase between reporting dates in market
discount rates used in calculating the fair value of the Group's
Buy-to-Let loans. Key inputs into the market discount rates used in
the Group's Buy-to-Let fair value calculation are forward-looking
SONIA rates and market Buy-to-Let asset backed security spreads
which both increased steeply in the latter
part of the financial year causing
the increased discount rates and a lower fair value adjustment.
This has been offset by mark-to-market increases in the Group's
interest rate swaps.
2 Loans and advances are held at FVOCI and amortised cost as per IFRS 9.
ECL provision
Movement
in the period
|
£'m
|
Under
IFRS 9 at 1 April 2023
|
(9.1)
|
Additional provisions
made during
the period1
|
(8.7)
|
Utilised
in the period2
|
9.3
|
Under
IFRS 9 at 31 March 2024
|
(8.5)
|
1 The ECL provision of £8.5 million is stated including the
expected credit losses incurred on the interest income recognised
on stage 3 loans and advances. The net ECL impact on the income
statement for the year is
£8.4 million (2023: £7.7 million).
This includes the £7.0 million (2023: £6 million) of impairment
provisions shown in the income statement and the total impact of
expected credit losses on income recognised on stage 3 loans and
advances using the effective interest rate of £1.4 million (2023:
£1.7 million).
2 Loans that are written off can still be subject to
enforcement activities in order to comply with the Group's
procedures for recovery of amounts due. The
contractual amount outstanding on loans and advances that have
previously been written off and are still subject to enforcement
activity is £7.4 million (2023: £4.4 million).
18. Loans and advances continued
ECL provision continued
Movement in the period
£'m
Under IFRS 9 at 1 April
2022
(11.0)
Additional provisions made during
the period1
(7.7)
Utilised
in the period2
9.6
Under IFRS 9 at 31 March
2023
(9.1)
1 The ECL provision of £9.1 million is stated including the
expected credit losses incurred on the interest income recognised
on stage 3 loans and advances. The net ECL impact on the income
statement for the year is £7.7 million (2022: £5.5 million). This
includes the £6.0 million (2022: £4.4million) of impairment
provisions
shown in the income statement and
the total impact of expected credit losses on income recognised on
stage 3 loans and advances using the effective interest rate of
£1.7 million (2022: £1.1 million).
2 Loans that are written off can still be subject to
enforcement activities in order to comply with the Group's
procedures for recovery of amounts due. The
contractual amount outstanding on loans and advances that have
previously been written off and are still subject to enforcement
activity is £8.4 million (2022: £9.0 million).
Analysis of loans and advances by stage
Year ended 31 March 2024
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
Gross loans and advances
|
305.2
|
89.1
|
82.7
|
477.0
|
ECL
provision
|
(0.1)
|
(0.5)
|
(7.9)
|
(8.5)
|
Fair
value adjustment
|
6.9
|
1.5
|
0.1
|
8.5
|
Loans and advances
|
312.0
|
90.1
|
74.9
|
477.0
|
The maximum LTV on stage
1 loans is 86%. The maximum LTV on stage 2 loans
is 242%. The maximum LTV on stage 3 loans is 195%. The average LTV
on stage 1 loans is 67%. The average LTV on stage 2 loans is 70%.
The average LTV on stage 3 loans is 67% and the total value of
collateral (capped at the gross loan value) held on stage 3 loans
is £76.8 million.
Year ended 31 March 2023
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
Gross loans and advances
|
935.7
|
196.7
|
36.1
|
1,168.5
|
ECL
provision
|
(0.5)
|
(1.3)
|
(7.3)
|
(9.1)
|
Fair
value adjustment
|
(32.9)
|
(3.6)
|
-
|
(36.5)
|
Loans and advances
|
902.3
|
191.8
|
28.8
|
1,122.9
|
The maximum LTV on stage 1 loans
is 82%. The maximum LTV on stage 2 loans is 87%. The maximum LTV on
stage 3 loans is 247% and the total value of collateral (capped at
the gross loan value) held on stage 3 loans is £34.3
million.
Impairment provisions are
calculated on an expected credit loss (ECL) basis. Financial assets
are classified individually into one of the categories
below:
• Stage 1 - assets are allocated to
this stage on initial recognition and remain in this stage if there
is no significant increase in credit risk since initial
recognition. Impairment provisions are recognised to cover 12-month
ECL, being the proportion of lifetime ECL arising from default
events expected within 12 months of the reporting date.
• Stage 2 - assets where it is determined that there has been a
significant increase in credit risk since initial recognition, but
where there is no objective evidence of impairment. Impairment
provisions are recognised to cover lifetime. An asset is deemed to
have increase a significant increase in credit risk
where:
- The creditworthiness of the borrower deteriorates such that
their risk grade increases by at least one grade compared with that
at origination.
- The borrower falls more than one month in arrears.
- LTV exceeds 85% for Buy-to-Let, Bridging
and Residential.
- LTGDV exceeds 75% for development loans.
- For Development assets, where a development will not meet
practical completion by the date anticipated at
origination.
- 30 days prior to maturity for bridging loans.
• Stage 3 - assets where there is objective evidence of
impairment, i.e. they are considered to be
in default. Impairment provisions are recognised against lifetime
ECL. For assets allocated to stage 3, interest income is recognised
on the balance net of impairment provision.
• Purchased or originated credit impaired (POCI) - POCI assets
are financial assets that are credit impaired on initial
recognition. On initial recognition they are recorded at fair
value. ECLs are only recognised or released to the extent that
there is a subsequent change in the ECLs. Their ECL is always
measured on a lifetime basis.
Where there is objective evidence
that asset quality has improved, assets will be allocated to a lower risk category; for example loans no
longer in default (stage 3) will be allocated to either stage 2 or
stage 1.
18. Loans and advances continued
Analysis of loans and advances by stage continued
Evidence that asset quality has improved will include:
• Repayment of arrears
• Improved credit worthiness
• Term extensions and the ability to service outstanding
debt
If a loss is ultimately realised,
it is written off against the provision previously
provided for with any excess charged to the
impairment provision in the statement of profit and
loss.
Critical accounting estimates
relating to
the impairment
of financial
assets:
The calculation of ECLs requires
the Group to make a number of assumptions and estimates. The
accuracy of the ECL calculation would be impacted by movements
in the forward-looking economic scenarios
used, or the probability weightings applied to these scenarios and
by unanticipated changes to model assumptions that differ from
actual outcomes.
The key assumptions and estimates
that, depending on a range of factors, could result in a material adjustment in the next financial year
relate to the use of forward- looking information in the
calculation of ECLs and the inputs and assumptions used in the ECL
models.
Additional information about both
of these areas is set out below.
Forward-looking information
The Group incorporates
forward-looking information into the calculation of ECLs
and the assessment of whether there has been a
SICR. The use of forward-looking information represents a key
source of estimation uncertainty.
The Group uses three forward-looking
economic scenarios:
• a central scenario aligned to the Group's business plan;
• the downside economic assumption scenario is given a 100%
weighting in the model; and
•
Macro
Assumptions
|
2024
|
2025
|
2026
|
2027
|
2028
|
2029
|
2030
|
2031
|
2032
|
2033
|
Base
|
3.25%
|
4.35%
|
4.02%
|
3.03%
|
2.07%
|
1.60%
|
1.30%
|
1.10%
|
0.95%
|
0.78%
|
Upside
|
14.19%
|
7.27%
|
4.99%
|
1.24%
|
0.12%
|
0.04%
|
0.05%
|
0.09%
|
0.13%
|
0.12%
|
Downside
|
-5.69%
|
3.17%
|
4.17%
|
4.34%
|
3.57%
|
2.79%
|
2.26%
|
1.87%
|
1.57%
|
1.29%
|
|
|
an upside scenario representing the impact of
modest improvements to assumptions used in the central
scenario.
The macroeconomic data inputs
applied in determining the Group's expected credit losses are sourced from Oxford Economics (a
third-party provider of global economic forecasting and
analysis).
Oxford Economics combines two
decades of forecast errors with its quantitative
assessment of the current risks facing the global
and domestic economy to produce robust forward-looking
distributions for the economy.
Using specific percentile points
in the distribution of several key metrics such as GDP,
unemployment, house prices and commercial real estate prices, we
receive three alternative scenarios relating to a base case (most
likely), downside (broadly equivalent to a 1-in-10 year event) and
a moderate upside scenario. Our assumptions on the likely out turn
represents a weighted average of these three scenarios provided by
Oxford Economics, and are detailed below:
Macro
Assumptions
|
2024
|
2025
|
2026
|
2027
|
2028
|
2029
|
2030
|
2031
|
2032
|
2033
|
Base
|
0.52%
|
2.02%
|
1.96%
|
1.64%
|
1.61%
|
1.55%
|
1.54%
|
1.53%
|
1.51%
|
1.46%
|
Upside
|
3.39%
|
5.17%
|
3.10%
|
2.35%
|
1.46%
|
1.40%
|
1.39%
|
1.38%
|
1.37%
|
1.31%
|
Downside
|
-1.96%
|
-0.31%
|
1.41%
|
1.50%
|
1.72%
|
1.66%
|
1.65%
|
1.64%
|
1.63%
|
1.57%
|
Macro
Assumptions
|
2024
|
2025
|
2026
|
2027
|
2028
|
2029
|
2030
|
2031
|
2032
|
2033
|
Base
|
4.00%
|
3.90%
|
3.80%
|
3.80%
|
3.80%
|
3.80%
|
3.80%
|
3.80%
|
3.80%
|
3.80%
|
Upside
|
3.50%
|
2.40%
|
2.10%
|
2.10%
|
2.20%
|
2.30%
|
2.40%
|
2.50%
|
2.70%
|
2.80%
|
Downside
|
4.60%
|
5.70%
|
6.63%
|
6.84%
|
6.63%
|
6.42%
|
6.21%
|
6.01%
|
5.80%
|
5.59%
|
Macro
Assumptions
|
2024
|
2025
|
2026
|
2027
|
2028
|
2029
|
2030
|
2031
|
2032
|
2033
|
Base
|
1.77%
|
2.22%
|
5.47%
|
5.12%
|
3.50%
|
2.82%
|
2.53%
|
2.74%
|
3.16%
|
3.44%
|
Upside
|
5.10%
|
6.27%
|
9.41%
|
6.19%
|
3.27%
|
2.59%
|
2.30%
|
2.52%
|
2.93%
|
3.21%
|
Downside
|
-4.80%
|
-3.26%
|
0.28%
|
4.19%
|
3.91%
|
3.22%
|
2.93%
|
3.14%
|
3.56%
|
3.84%
|
18. Loans and advances continued
Analysis of loans and advances by stage continued
GDP, unemployment rates and HPI
are key metrics that indicate the appetite for credit within the
economy, the ability of borrowers to service debt and value
of underlying securities that underpin
credit risk management; all of which directly impact the Group's
operational activities and success.
The probability weightings applied
to the above scenarios are another area of estimation uncertainty.
They are generally set to ensure that there is an asymmetry in the
ECL. The probability weightings applied to the three economic
scenarios used are as follows:
Model estimations
ECL calculations are outputs of
complex models with a number of underlying assumptions regarding
the choice of variable inputs and their interdependencies. The
Group considers the key assumptions impacting the ECL calculation
to be within the PD and LGD. Sensitivity analysis is performed by
the Group to assess the impact of changes in these key assumptions
on the loss allowance recognised on loans and advances.
A summary of the key assumptions
and sensitivity analysis as at 31 March 2024 is provided in the
following table:
Assumption
Sensitivity analysis
|
2024
|
2023
|
Base
|
40%
|
40%
|
Upside
|
20%
|
20%
|
Downside
|
40%
|
40%
|
|
|
Unemployment A 20%
increase in the unemployment rate would increase the total loss
allowance by £0.1m
Forced sale discount
A 10% absolute increase in the
forced sale discount would increase the
loss allowance cost on loans and advances to customer by
£1.0m
The Group undertakes a review of
its economic scenarios and the probability weightings applied at
least quarterly and more frequently if required. The results
of this review are recommended to the Audit
Committee and the Board prior to any changes being
implemented.
Movement analysis of net loans by stage
Single
Factor Sensitivities
ECL Impact
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2023
|
902.2
|
191.8
|
28.9
|
1,122.9
|
Transfer
to stage 1
|
35.5
|
(35.5)
|
-
|
-
|
Transfer
to stage 2
|
(64.5)
|
64.5
|
-
|
-
|
Transfer
to stage 3
|
(36.8)
|
(33.9)
|
70.7
|
-
|
New financial assets originated
|
349.7
|
-
|
-
|
349.7
|
New
financial assets originated and transferred to stage 2 or stage
3
|
(68.0)
|
63.5
|
4.5
|
-
|
Financial assets which have repaid
|
(223.2)
|
(71.4)
|
(12.0)
|
(306.6)
|
Balance movements
in loans
|
(582.9)
|
(88.9)
|
(17.2)
|
(689.0)
|
Total movement in loans and advances
|
(590.2)
|
(101.7)
|
46.0
|
(645.9)
|
|
As
at 31
March 2024
|
312.0
|
90.1
|
74.9
|
477.0
|
|
|
(£m)
A 20% increase in unemployment
0.1
10%
increase in Forced Sale Discount
1.0
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2022
|
1,025.7
|
153.4
|
35.8
|
1,214.9
|
Transfer
to stage 1
|
40.3
|
(40.3)
|
-
|
-
|
|
|
18. Loans
and advances
continued
Movement analysis of gross loans by stage continued
|
£'m
|
£'m
|
£'m
|
£'m
|
|
Transfer
to stage 2
|
(103.6)
|
104.5
|
(0.9)
|
-
|
As
at 1 April 2022
|
1,029.1
|
153.5
|
26.5
|
1,209.1
|
|
Transfer
to stage 3
|
(10.5)
|
(5.4)
|
15.9
|
-
|
Transfer
to stage 1
|
40.5
|
(40.5)
|
-
|
-
|
|
New financial assets originated
|
645.2
|
-
|
-
|
645.2
|
|
|
Transfer
to stage 2
|
(103.8)
|
104.7
|
(0.9)
|
-
|
Transfer
to stage 3
|
(10.5)
|
(5.3)
|
15.8
|
-
|
New financial assets originated
|
621.6
|
-
|
-
|
621.6
|
New
financial assets originated and transferred to stage 2 or stage
3
|
(102.7)
|
99.1
|
3.6
|
-
|
Financial assets which have repaid
|
(149.4)
|
(58.7)
|
(12.6)
|
(220.7)
|
Balance movements
in loans
|
(422.6)
|
(61.0)
|
(3.5)
|
(487.1)
|
|
|
Stage 1
Stage 2
Stage 3
Total
New financial assets originated
and
|
|
transferred to stage 2 or stage 3
|
(106.1)
|
102.4
|
3.7
|
-
|
Financial assets which have repaid
|
(147.7)
|
(59.1)
|
(13.4)
|
(220.2)
|
Balance movements
in loans
|
(407.6)
|
(58.8)
|
(2.0)
|
(468.4)
|
Write-offs
|
-
|
-
|
(3.0)
|
(3.0)
|
Total movement in loans and advances
|
(90.0)
|
43.3
|
0.3
|
(46.4)
|
As at 31 March 2023
935.7
196.7
36.1
1,168.5
Total movement in loans and advances
|
(126.9)
|
38.3
|
2.4
|
(86.2)
|
|
|
|
|
|
|
Movement analysis
of ECL
by stage
|
As
at 31
March 2023
|
902.2
|
191.8
|
28.9
|
1,122.9
|
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2023
|
0.5
|
1.2
|
7.4
|
9.1
|
Transfer
to stage 1
|
0.4
|
(0.4)
|
-
|
-
|
Transfer
to stage 2
|
(0.1)
|
0.1
|
-
|
-
|
Transfer
to stage 3
|
-
|
-
|
-
|
-
|
New financial assets originated
|
0.5
|
-
|
-
|
0.5
|
New
financial assets originated and transferred to stage 2 or stage
3
|
(0.4)
|
0.4
|
-
|
-
|
Financial assets which have repaid
|
(0.2)
|
(0.3)
|
(2.5)
|
(3.0)
|
Changes
in models/risk parameters
|
(0.6)
|
(0.5)
|
10.9
|
9.8
|
Adjustments for interest on impaired loans
|
-
|
-
|
1.4
|
1.4
|
Write-offs
|
-
|
-
|
(9.3)
|
(9.3)
|
Total movement in impairment provision
|
(0.4)
|
(0.7)
|
0.5
|
(0.6)
|
|
As
at 31
March 2024
|
0.1
|
0.5
|
7.9
|
8.5
|
|
|
Movement analysis
of gross
loans by
stage
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2023
|
935.7
|
196.7
|
36.1
|
1,168.5
|
Transfer
to stage 1
|
37.7
|
(37.7)
|
-
|
-
|
Transfer
to stage 2
|
(66.1)
|
66.1
|
-
|
-
|
Transfer
to stage 3
|
(36.6)
|
(34.0)
|
70.6
|
-
|
New financial assets originated
|
341.7
|
-
|
-
|
341.7
|
New
financial assets originated and transferred to stage 2 or stage
3
|
(66.7)
|
62.2
|
4.5
|
-
|
Financial assets which have repaid
|
(223.5)
|
(71.7)
|
(14.5)
|
(309.7)
|
Balance movements
in loans
|
(617.0)
|
(92.5)
|
(4.9)
|
(714.4)
|
Write-offs
|
-
|
-
|
(9.1)
|
(9.1)
|
Total movement in loans and advances
|
(630.5)
|
(107.6)
|
46.6
|
(691.5)
|
|
As
at 31
March 2024
|
305.2
|
89.1
|
82.7
|
477.0
|
18. Loans and advances continued
Movement analysis of ECL by stage continued
Stage 1
As
at 1 April 2022
|
0.2
|
0.9
|
9.9
|
11.0
|
Transfer
to stage 1
|
0.3
|
(0.3)
|
-
|
-
|
Transfer
to stage 2
|
-
|
0.1
|
(0.1)
|
-
|
Transfer
to stage 3
|
-
|
(0.1)
|
0.1
|
-
|
New financial assets originated
|
1.2
|
-
|
-
|
1.2
|
New
financial assets originated and transferred to stage 2 or stage
3
|
(0.9)
|
0.7
|
0.2
|
-
|
Financial assets which have repaid
|
-
|
(0.3)
|
(1.0)
|
(1.3)
|
Changes
in models/risk parameters
|
(0.3)
|
0.2
|
6.1
|
6.0
|
Adjustments for interest on impaired loans
|
-
|
-
|
1.8
|
1.8
|
Write-offs
|
-
|
-
|
(9.6)
|
(9.6)
|
Total movement in impairment provision
|
0.3
|
0.2
|
(2.5)
|
(1.9)
|
|
|
|
|
|
As
at 31
March 2023
|
0.5
|
1.2
|
7.4
|
9.1
|
|
|
£'m
Stage
2
£'m
Stage
3
£'m
Total
Year ended 31 March 2023
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
Risk
grades 1-5
|
934.2
|
170.2
|
-
|
1,104.4
|
Risk
grades 6-9
|
1.5
|
26.5
|
-
|
28.0
|
Default
|
-
|
-
|
36.1
|
36.1
|
Total
|
935.7
|
196.7
|
36.1
|
1,168.5
|
|
|
£'m
Credit risk on gross loans and advances
The table below provides
information on the Group's loans and advances by stage and risk
grade.
Risk grades detailed in the table
range from 1 to 10 with a risk grade of 1
being assigned to cases with the lowest credit risk and 10
representing cases in default. Equifax Risk Navigator (RN) scores
as well as internal data is used to assign the initial risk grade
score with additional SICR rules used to generate the final risk
grade.
Year ended 31 March 2024
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
Risk
grades 1-5
|
305.2
|
81.0
|
-
|
386.2
|
Risk
grades 6-9
|
-
|
8.1
|
-
|
8.1
|
Default
|
-
|
-
|
82.7
|
82.7
|
Total
|
305.2
|
89.1
|
82.7
|
477.0
|
Critical judgements relating
to the
impairment of
financial assets
The Group reviews and updates the
key judgements relating to impairment of financial assets
bi-annually, in advance of the Interim Financial Report and
the Annual Report and Accounts. All key
judgements are reviewed and recommended to the Audit Committee for
approval prior to implementation.
Assessing whether there has been a
significant increase in credit risk (SICR)
If a financial asset shows a SICR,
it is transferred to Stage 2 and the ECL recognised changes from a
12-month ECL to a lifetime ECL. The assessment of whether there has
been a SICR requires a high level of judgement as detailed below.
The assessment of whether there has been a SICR also incorporates
forward-looking information.
The Group considers that a SICR
has occurred when any of the following have occurred:
1. The overall credit worthiness of the borrower has materially
worsened to a level that the probability
of default has at least doubled. This is indicated by a migration
to a higher risk grade (see below for risk grades and probability
of default (PDs)
by product).
2. Where a borrower is currently a month or more in arrears.
3. Where a borrower has sought some form of forbearance.
4. Where the overall leverage of the account has surpassed a
predetermined level. 75% Loan to Gross Development Value for
Development loans and 85% for all other products.
5. Where a short-term bridging loan has less than one month
before maturity.
6. Where there is a material risk that a development loan will
not reach practical completion on time.
These factors reflect the credit
lifecycle for each product and are based on prior
experience as well as insight gained from the
development of risk ratings models (probability of
default).
18. Loans and advances continued
Assessing whether there has been a
significant increase in credit risk ("SICR") continued
Stage 2 criteria are designed to
be effective indicators of a SICR. As part of the bi-annual review
of key impairment judgements, the Group undertakes
detailed
analysis to confirm that the stage
2 criteria remain effective. This includes (but is not limited
to):
• Criteria effectiveness: this includes the emergence to
default for each stage 2 criterion when compared to stage 1, stage
2 outflow as a percentage of stage 2, percentage of new defaults
that were in stage 2 in the months prior to default, time in stage
2 prior to default and percentage of the book in stage 2 that are
not progressing to default or curing.
• Stage 2 stability: this includes stability of inflows and
outflows from stage 2 and 3.
• Portfolio analysis: this includes the percentage of the
portfolio that is in stage 2 and not defaulted, the percentage of
the stage 2 transfer driven by stage 2 criterion other than the backstops and back-testing of the
defaulted accounts.
For low credit risk exposures, the
Group is permitted to assume, without further analysis, that the
credit risk on a financial asset has not increased significantly
since initial recognition if the financial asset is determined to
have low credit risk at the reporting date. The Group has opted not
to apply this low credit risk exemption.
A summary of the risk grade
distribution is provided in the table below. As the Group utilises
three different risk rating models, three separate PDs have been
provided for each portfolio.
Risk grades 1 to 9 are for non-defaulted accounts with 10 indicating
default. Therefore, all stage 3 loans are assigned to this
grade.
As stated previously, degradation
in a borrower's creditworthiness is an indication
of SICR. Therefore, as shown in the table below,
stage 2 loan distributions are in the main assigned to risk grades
higher than risk grade 1.
Risk Grade
|
Gross
loans and advances (£'m)
|
|
ECL
(£'m)
|
|
|
Probability of default
|
Stage 1
|
Stage 2
|
Stage 3
|
Stage 1
|
Stage
2
|
Stage 3
|
Bridging
|
Buy-to-let
|
Development
|
RG1
|
267.6
|
4.1
|
0.0
|
(0.1)
|
(0.0)
|
0.0
|
6.6%
|
0.4%
|
0.1%
|
RG2
|
28.8
|
21.9
|
0.0
|
(0.0)
|
(0.1)
|
0.0
|
11.6%
|
1.5%
|
0.4%
|
RG3
|
4.3
|
20.0
|
0.0
|
(0.0)
|
(0.1)
|
0.0
|
18.9%
|
2.1%
|
0.6%
|
RG4
|
2.7
|
14.8
|
0.0
|
(0.0)
|
(0.1)
|
0.0
|
30.0%
|
3.4%
|
1.2%
|
RG5
|
1.8
|
20.2
|
0.0
|
(0.0)
|
(0.1)
|
0.0
|
44.6%
|
4.2%
|
2.3%
|
RG6
|
0.0
|
3.4
|
0.0
|
(0.0)
|
(0.1)
|
0.0
|
68.9%
|
6.2%
|
4.1%
|
RG7
|
0.0
|
2.5
|
0.0
|
0.0
|
(0.0)
|
0.0
|
79.0%
|
8.1%
|
7.2%
|
RG8
|
0.0
|
0.5
|
0.0
|
0.0
|
(0.0)
|
0.0
|
87.5%
|
10.6%
|
11.6%
|
RG9
|
0.0
|
1.7
|
0.0
|
0.0
|
(0.0)
|
0.0
|
93.2%
|
15.5%
|
18.9%
|
RG10
|
0.0
|
0.0
|
82.7
|
0.0
|
0.0
|
(7.9)
|
100%
|
100%
|
100%
|
Total
|
305.2
|
89.1
|
82.7
|
(0.1)
|
(0.5)
|
(7.9)
|
|
|
|
Determining whether a financial asset is in default or credit impaired
When there is objective evidence
of impairment and the financial asset is considered
to be in default, or otherwise credit-impaired,
it is transferred to stage 3. The Group's definition of default
follows product specific characteristics allowing for the provision
to reflect operational management of the portfolio. Below we set
out a short description of each product type and the Group's
definition of default as specific to each product.
Bridging Loans - Bridging loans
are short-term loans designed for customers requiring timely access
to funds to facilitate property purchases. Typically, loans involve
residential securities, however Commercial, semi-commercial and
Land is also taken as security.
A bridging loan is considered to be in
default if:
a) a
borrower fails to repay their loan after 30 days and does not seek
an authorised extension; and
b) the
loan is two months in arrears either in term or after expiry.
18. Loans and advances continued
Determining whether a financial asset is in default or credit impaired
continued
Buy-to-Let and Residential
Loans - Buy-to-let loans constitute
LendInvest's long- term lending proposition. Loans are extended to
borrowers looking to purchase
a new rental property or refinance
an existing rental property. All loans carry structured repayments of interest, with the principal paid at
the end of the term.
The default definition
for Buy-to-Let
loans is:
a) an
account that reaches an arrears balance equivalent to, or greater
than, three Contractual Monthly Subscription payments;
and
b) the
property is taken into receivership, or the borrower has been
declared bankrupt.
Development Loan
- Development Loans support borrowers looking to
undertake a significant property or site development. The resulting
site should be for residential purposes only. Loan terms are
typically for short-term (less than three years) with no structured
repayments.
A development loan is defined as
being in default if it has not been redeemed 60 days after the
maturity of the loan.
The Group does not apply the
rebuttable presumption that default does not occur later when a
financial asset is 90 days past due.
Improvement in credit risk or
cure - There is no cure period assumed for
loans showing improvement in credit risk. This means that any loan
that does not meet the SICR criteria is assigned to stage
1.
19. Investment securities
As at year end the Group
investment securities were £41.1 million (2023: £23.9
million). The investment securities relate to a
5% retained position in structured securitisation entities that are
no longer consolidated.
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Retained
interest in:
|
|
|
Mortimer
BTL 2020-1 PLC
|
-
|
10.7
|
Mortimer
BTL 2021-1 PLC
|
10.1
|
-
|
Mortimer
BTL 2022-1 PLC
|
12.0
|
13.2
|
Mortimer
BTL 2023-1 PLC
|
19.0
|
-
|
|
41.1
|
23.9
|
The Group sold its residual
interest it held in Mortimer BTL 2020-1
PLC on 1 March 2023. The sale of the certificate and Mortimer 2020
asset being called on March 1, 2023, resulted in a derecognition
event, as substantially all of the risk, rewards and control of the
vehicle passed to the Purchaser. As the variable returns, and
control of the vehicle had been transferred, the Mortimer BTL
2020-1 PLC entity has also been deconsolidated from the Group's
results. Subsequent to this, Mortimer BTL 2020-1 PLC was called by
the certificate holder in June 2023, redeeming all notes at par
value. Therefore, the retained interest was repaid at par value
such that there is no longer any retained interest in Mortimer BTL
2020-1 PLC held by the Group.
The Group sold its holding of the
certificate for Mortimer BTL 2021-1 PLC on 19 April 2023. The sale
of the certificate represents the excess spreads in the
securitisation vehicle as well as an option to repurchase the asset
from the vehicle on 25 June 2026. The sale of the certificate and
call options resulted in a derecognition event as substantially all
the risks, rewards, and control of the vehicle passed to the
purchaser. As the variable returns, and control of the vehicle had
been transferred, the Mortimer BTL 2021-1 PLC entity has also been
deconsolidated from the Group's results. This has resulted in a
gain on sale of £10.7m pre-tax. The investment securities of £10.1m
represents the retained risk retention in the form of debt
securities issued by unconsolidated structured entities as part of
the securitisation transactions that are retained by the
Group.
19. Investment securities
continued
The Group securitised a portfolio
of mortgage loans into a securitisation vehicle, Mortimer BTL
2023-1 PLC, on 29 November 2023. On 4
January 2024, the Group sold its holdings of residual notes in the
securitisation vehicle, Mortimer BTL 2023-1 PLC. The sale of the
residual notes represented the excess spreads in the
securitisation vehicle as well as
an option to repurchase the assets from the vehicle on 26 December
2026. The sale of the residual notes and call options resulted in
a derecognition event as substantially all
the risks, rewards, and control of the vehicle passed to the
purchaser. As the variable returns, and control of the vehicle had
been transferred, the Mortimer BTL 2023-1 PLC entity has also been
deconsolidated from the Group's results. This has resulted in a
loss on sale of £2.5m pre-tax. The investment securities of £19m
represent the retained risk retention in the form
of debt securities issued by
unconsolidated structured entities as part of the securitisation
transactions that are retained by the Group.
The investment securities
are carried
at amortised
cost.
20.
Other payables
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Trade payables
|
14.1
|
15.1
|
Other
payables:
|
|
|
- Taxes
and social security costs
|
1.2
|
1.4
|
-
Accruals and
deferred income
|
7.9
|
7.0
|
-
Sub-lease deposit rent payable
|
0.2
|
0.2
|
|
23.4
|
23.7
|
The trade payables balance includes Trustees' balances
of £2.5
million (2023:
£6.3 million) in respect of
uninvested cash held on the Self-Select platform, which may be
withdrawn by investors at any time.
The Company has no non-current trade and other payables.
The carrying value of trade and other payables approximates
fair value.
21. Interest bearing liabilities
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Funds from investors and partners
|
514.0
|
1,159.6
|
Accrued
interest
|
3.9
|
4.3
|
Unamortised funding
line costs
|
(3.3)
|
(4.6)
|
|
514.6
|
1,159.3
|
For an analysis of contractual
maturity and liquidity risk, refer to note 4. The
Group is not in breach or default of any
provisions of the terms or conditions of the agreements governing
borrowings. Interest bearing liabilities of the Group are a
combination of both fixed and floating rate liabilities and the
Group's annualised
interest cost on funding has
ranged between 1% to 12% in the current financial year. Interest
bearing liabilities have decreased in line with the decrease in
loans and advances at the financial year end.
Funding line costs are amortised
on an effective interest rate basis. Interest bearing liabilities
are secured by charges over the assets and operations of the
Group.
21. Interest bearing liabilities continued
Net debt represents interest
bearing liabilities (as above), less cash at bank and in
hand (excluding cash held for clients) and
excluding unamortised funding line costs but including accrued
interest relating to the Group's third-party
indebtedness.
A reconciliation of net debt
is:
|
As at 31
March 2024
£'m
|
As at 31
March 2023
£'m
|
Interest bearing liabilities
|
514.6
|
1,159.3
|
Deduct: cash as reported in financial statements
|
(55.7)
|
(46.7)
|
Net debt:
borrowings less cash as reported in the financial
statements
|
458.9
|
1,112.6
|
Add back: unamortised funding
line costs
|
3.3
|
4.6
|
Add back: trustees' account
balances
|
2.5
|
6.3
|
Add back: accrued interest
|
3.9
|
4.3
|
Deduct: retained interest
|
(4.1)
|
(5.9)
|
Net
debt
|
464.5
|
1,121.9
|
Interest-bearing
liabilities
£'m
|
Leases
£'m
|
31
March 2023
|
(1,159.3)
|
(3.3)
|
Cash
flows
|
(2.5)
|
1.4
|
Deconsolidation of
subsidiaries
|
662.5
|
-
|
Movement
in accrued interest on interest bearing liabilities
|
0.4
|
-
|
Amortisation of Funding line costs
|
(3.7)
|
-
|
Investment securities
|
(12.0)
|
-
|
Lease
liability interest
|
-
|
(0.3)
|
Dilapidations provision
|
-
|
(0.1)
|
31
March 2024
|
(514.6)
|
(2.3)
|
|
Interest-bearing
liabilities
£'m
|
Leases
£'m
|
31
March 2022
|
(1,214.1)
|
(4.1)
|
Cash
flows
|
(155.8)
|
1.4
|
Movement
in accrued interest on interest bearing liabilities
|
(1.5)
|
-
|
Amortisation of Funding line costs
|
(3.2)
|
-
|
Derivative, hedge accounting and committed facility fair
value (profits)/losses
|
215.3
|
-
|
Reinstatement of dilapidations provision
|
-
|
(0.1)
|
Lease
liability interest
|
-
|
(0.5)
|
31
March 2023
|
(1,159.3)
|
(3.3)
|
22. Share capital
|
|
|
Issued
and fully paid up
|
Year ended 31 March 2024
|
Year ended 31 March 2023
|
Number
|
£
|
Number
|
£
|
Ordinary shares
|
141,032,025
|
70,516
|
139,631,046
|
69,816
|
Total number of shares issued
|
141,032,025
|
70,516
|
139,631,046
|
69,816
|
Ordinary shares held in EBT Trust
|
(1,641,645)
|
(821)
|
(1,640,205)
|
(820)
|
Forfeited ordinary
shares held
in SIP
Trust
|
(154,966)
|
(77)
|
(48,056)
|
(24)
|
Total number of shares in circulation
|
139,235,414
|
69,618
|
137,942,785
|
68,972
|
Share premium
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
1
April
|
55.2
|
55.2
|
Issue of
new equity
|
-
|
-
|
Costs incurred in issuing new equity
|
-
|
-
|
31
March
|
55.2
|
55.2
|
The balance on the share capital
account represents the aggregate nominal value of all ordinary
shares in issue. There is no maximum number of shares authorised by
the articles of association.
22. Share capital continued
LendInvest plc has one class of
ordinary share, the shares have attached to them full voting,
dividend and capital distribution rights.
They do not confer any rights of
redemption.
The balance on the share premium
account represents the amounts received in excess of the nominal value of the ordinary and preferred
shares. All ordinary shares have a nominal value of
£0.0005.
Reconciliation of movements during the period
Ordinary shares
|
As at 1
April 2023
139,631,046
|
Issue of shares into the
Employment Benefit Trust
1,400,979
|
As at 31 March 2024
141,032,025
|
On 5 September 2023, the company
issued and allotted the remaining 67,592 ordinary shares from its existing block admission (completed
in August 2021) for the purposes of granting share awards under the
company's SIP. The remainder of the shares granted under the SIP
were sourced from the EBT.
On 25 September 2023, the company
issued a further 1,333,387 ordinary shares into the EBT to satisfy
the expected exercise of vested share options held by employees
under the Company's share plans.
23. Reserves
Reserves comprise retained
earnings, own share reserve, the employee share reserve,
fair value
reserves, and
cash flow
hedge reserves.
Retained earnings
represent all
net gains and losses of the Group less
directly attributable costs associated with the issue of new equity
and the employee share reserve represents the fair value of share
options issued to employees but not exercised. Own share reserve
represents the weighted average
cost of
shares of
Lendinvest plc
that are
held by
the employee
benefit trust
for the purpose of fulfilling obligations
in respect of various employee share plans.
Cash flow hedge reserve movement
Financial liabilities
£'m
|
Deferred
tax
£'m
|
Cash flow
hedge reserve
£'m
|
Balance as at 1 April 2023
|
21.5
|
(5.4)
|
16.1
|
Movement
in fair value of loans and advances at fair value through other comprehensive income
|
-
|
-
|
-
|
Cash flow
hedge reserve recycled to profit and loss on derecognition of
interest bearing obligations
|
(21.5)
|
5.4
|
(16.1)
|
Cash flow hedge reserve at 31 March 2024
|
-
|
-
|
-
|
On 14 April 2023, the Group sold
its non-risk retention residual economic interest in the Mortimer
BTL 2021-1 PLC securitisation for a cash
consideration of £8.66m. The sale of the certificate (residual
notes) resulted in a derecognition event as substantially all the
risks, rewards, and control of the vehicle passed to the
investor.
As the control of the vehicle
(Mortimer BTL 2021-1) had been transferred, the vehicle has been
deconsolidated from the Group's results. This also resulted in the
re- cycling of a loss of £21.5m from the cash flow hedge reserves
to the line item 'Net gain on derecognition of financial assets' in
the profit and loss.
Fair value reserve movement
Gross
£'m
|
Deferred
tax
£'m
|
Net
£'m
|
Fair value reserve balance as at 1 April 2023
|
(22.0)
|
5.5
|
(16.5)
|
Fair
value movement on loans during the period
|
56.2
|
(14.0)
|
42.2
|
Less:
Recycles to profit and loss as part of sale and maturity of
portfolio
|
(36.0)
|
9.0
|
(27.0)
|
Less:
Release of fair value on hedged items to profit and loss
|
10.3
|
(2.6)
|
7.7
|
Fair value reserve at 31 March 2024
|
8.5
|
(2.1)
|
6.4
|
In the prior year, the Cash Flow
Hedge Reserve and Fair Value Reserve were presented cumulatively in
note 26(d).
24. Share-based payments
Company Share Option Plan
During the prior financial years,
the Company issued share options to employees under a Company Share Option Plan (CSOP). The following
information is relevant in the determination of the fair value of
options granted during the year under the equity-settled share
based remuneration schemes operated by the Group. These
|
Year ended
|
Year ended
|
Year ended
|
31 March 2019
|
31 March 2020
|
31 March 2021
|
Option pricing model used
|
Black-Scholes
model
|
Black-Scholes
model
|
Black-Scholes
model
|
Valuation
of share options at grant date
|
£0.6 per share
|
£0.6 per share
|
£0.9 per share
|
Amortisation period
|
4 years
|
4 years
|
4 years
|
Strike
price
|
£0.0005
|
£0.0005
|
£0.0005
|
Expiry
date
|
September 2028
|
August 2029
|
January 2031
|
Grant date
|
September 2018
|
August 2019
|
January 2021
|
|
|
options vest annually on a straight-line basis
according to the amortisation period of each award.
The movement in options is as
follows:
Awards granted in the year to 31 March 2024
During the period ended 31 March
2024, the Company operated the following share- based payment
plans, all of which are equity settled.
a) Executive share option plans -
Under the
LendInvest plc
2021 Long-Term
Incentive Plan
(LTIP):
During the year ending 31 March
2024, conditional nil-cost option awards were granted, consisting
of deferred bonus shares and LTIP share awards made to the
Directors and a limited number of the Senior Management team. These
awards vest over a three-year period and are subject to performance
conditions. For the LTIPs awarded in 2021, the performance
conditions are based solely on total shareholder return over the
three-year period. The LTIPs awarded in 2022 are based solely on a
measure of cumulative earnings per share over the three-year
period.
b) Deferred Bonus Plan (DBP)
The DBP is awarded as part of the
Company bonus scheme which is eligible to all employees not part of
a separate commission scheme. The DBP vests 12 months
after the award date and is forfeited by
employees if they leave the business during this period.
Under the
LendInvest plc
2021 Long-Term
Incentive Plan
(LTIP):
Movements in the number of LTIP
shares outstanding and their exercise prices are set out
below:
Year
ended 31 March
2019
Year ended 31 March 2020
Year ended 31 March 2021
Balance at
1 April
2022
912,200
687,000
1,957,000
Granted during the
year
-
-
- Options exercised during the
year
(838,800)
(508,250)
(202,169)
Cancelled during the year
(8,750)
(22,000)
(91,000)
Balance at 31 March 2023
64,650
156,750
1,663,831
Granted during the year
|
-
|
-
|
-
|
Options exercised
during the
year
|
(17,000)
|
(43,000)
|
(284,500)
|
Cancelled during the year
|
|
(8,000)
|
(171,250)
|
Balance at 31 March 2024
|
47,650
|
105,750
|
1,208,081
|
Year of
introduction
|
Share price per award
|
Exercise
price per award
|
Date of vesting
|
Number of
shares for which awards
outstanding
at March
2023
|
Awards granted during
period
|
Awards vested during
period
|
Awards lapsed during
period
|
Number of
shares for which awards
outstanding
at March
2024
|
2021.1
|
2.185
|
Nil
|
Aug
2024
|
1,901,850
|
-
|
-
|
(364,872)
|
1,536,978
|
2021.2
|
2.010
|
Nil
|
Dec 2024
|
161,615
|
-
|
-
|
(22,727)
|
138,888
|
2022
|
1.535
|
Nil
|
July
2025
|
2,645,899
|
-
|
-
|
(725,181)
|
1,920,718
|
2022
|
1.535
|
Nil
|
July
2023
|
188,680
|
-
|
-
|
(26,461)
|
162,219
|
2023
|
0.45
|
Nil
|
July
2026
|
-
|
2,719,000
|
-
|
(577,167)
|
2,141,833
|
2023
|
0.47
|
Nil
|
July
2024
|
-
|
1,358,765
|
-
|
(231,922)
|
1,126,843
|
|
|
The weighted average share price at the time of
exercise for all of the options exercised in the year was
£0.58.
The weighted average fair value of
these awards granted during the period was
£0.46 per award.
24. Share-based payments
continued
Awards granted in the year to 31 March 2024
c) Other Share Plans
Share Incentive
Plan
An award of shares was made to
employees in September 2023. The shares awarded are held in trust
for three years on the employee's behalf, during which period the
employee is entitled to any dividends paid on such shares. The
award is subject to a non-market based condition. If an employee
leaves the Group within this three-year period for other than a
'good' reason, all of the shares awarded will be
forfeited.
On 5 September 2023, an award of
free shares was made to all eligible employees. The number of
shares awarded was, with a fair value of 0.51p based on the market
price at the date of award.
Movements in the number of SIP
shares outstanding are set out below:
Share-based payment charge recognised
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Executive Share Option Plans:
|
|
|
Long-Term
Incentive Plan:
|
|
|
Options granted in the year
|
0.2
|
0.4
|
Options granted in prior years
|
(0.1)
|
0.4
|
Other
Share Plans:
|
|
|
Deferred Bonus plan
|
|
|
Options granted in the year
|
0.0
|
0.1
|
Options
to be granted as part of Company bonus scheme
|
0.5
|
0.4
|
Share Incentive Plan
|
|
|
Shares
granted in the year
|
0.1
|
0.1
|
Options granted in prior years
|
0.2
|
0.2
|
Company Share Options Plan
|
0.2
|
0.3
|
Total all plans
|
1.1
|
1.9
|
Social
security expense
|
0.1
|
0.1
|
Total charge to the income statement (note 10)
|
1.2
|
2.0
|
|
|
Year ended 31 March 2023 Number of
shares
|
Outstanding at March 2023
|
477,902
|
Granted
|
1,020,662
|
Forfeited
|
(477,140)
|
Outstanding at March 2024
|
1,021,424
|
|
|
Weighted average
exercise price
£
At 1 April 2023
0.01
a)
24. Share-based payments continued
|
|
Weighted average remaining contractual
life
|
|
Years
|
Number of
Options
|
2018
CSOP
|
4.4
|
47,650
|
2019
CSOP
|
5.3
|
105,750
|
2020 CSOP
|
6.8
|
1,210,081
|
2021.1 LTIPs
|
0.4
|
1,536,978
|
2021.2
LTIPs
|
0.7
|
138,888
|
2022 DBP
|
0.0
|
162,219
|
2022 LTIPs
|
1.3
|
1,920,718
|
2023
DBP
|
0.3
|
1,126,843
|
2023
LTIPs
|
2.3
|
2,141,833
|
All
schemes
|
1.6
|
8,390,960
|
|
|
Carrying amount
of financial
instruments
A summary of the financial instruments held by category is provided below:
25. Financial instruments
Principal financial instruments
The principal financial
instruments used by the Group, from which financial
instrument risk arises, are: loans and advances,
interest bearing liabilities, trade
and other receivables, cash and
cash equivalents, loans and borrowings, derivatives, and trade and
other payables.
Categorisation of financial assets and financial liabilities
The financial assets of the Group
are carried at amortised cost, fair value through
other comprehensive income or fair value through
profit and loss as at 31 March 2024 and 31 March 2023 according to
the nature of the asset. All financial liabilities of the Group are
carried at amortised cost as at 31 March 2024 and 31 March 2023 due
to the nature of the liability, with the exception of derivatives
which are measured at
fair value.
Financial instruments measured
at amortised
cost
Financial instruments measured at
amortised cost, rather than fair value, include cash and cash
equivalents, trade and other receivables, trade and other payables
and interest-bearing liabilities. Due to their short-term nature,
the carrying value of cash and cash equivalents, trade and other
receivables, and trade and other payables approximates their fair
value.
|
As at 31
March 2024
£'m
|
As at 31
March 2023
£'m
|
Financial
assets at amortised cost
|
|
|
Cash and
cash equivalents
|
55.7
|
46.7
|
Trade and
other receivables
|
6.4
|
4.2
|
Loans and advances1
|
10.2
|
174.2
|
Investment securities
|
41.1
|
23.9
|
Financial
assets at fair value through other comprehensive income
|
|
|
Loans and advances
|
466.8
|
948.7
|
Financial assets at fair value through profit and loss
|
|
|
Derivative financial
asset
|
-
|
46.0
|
Fair value adjustment for portfolio hedged risk asset
|
-
|
0.1
|
Total
financial assets
|
580.2
|
1,243.8
|
|
|
1 As at 31 March
2024 the Group hold these loans valued at amortised cost within the
accounts. The portfolio of BTL loans that had previously been held
at fair value through other comprehensive income as at 31 March
2023 are now being held under amortised costs as at 31 March 2024
as a result of a change in classification to 'hold to
collect'.
|
As at 31
March 2024
£'m
|
As at 31
March 2023
£'m
|
Financial
liabilities at amortised cost
|
|
|
Trade and
other payables
|
(23.4)
|
(22.3)
|
Interest bearing liabilities
|
(514.6)
|
(1,159.3)
|
Lease
liability
|
(2.3)
|
(3.3)
|
Financial
liabilities at fair value through profit and loss
|
|
|
Derivative financial
liability
|
(2.0)
|
-
|
Total
financial liabilities
|
(542.3)
|
(1,184.9)
|
25. Financial instruments
continued
Financial instruments measured
at amortised
costs continued
b) Carrying amount versus fair value
The following table compares the
carrying amounts and fair values of the Group's financial assets and financial liabilities as at 31
March 2024 and the comparative figures:
|
As
at 31
March 2024
|
As
at 31
March 2023
|
Carrying Amount
£'m
|
Fair Value
£'m
|
Carrying Amount
£'m
|
Fair Value
£'m
|
Financial
assets
|
|
|
Cash and
cash equivalents
|
55.7
|
55.7
|
46.7
|
46.7
|
Trade and
other receivables
|
6.4
|
6.4
|
4.2
|
4.2
|
Loans and advances
|
477.0
|
477.0
|
1,122.9
|
1,122.9
|
Derivative financial
asset
|
-
|
-
|
46.0
|
46.0
|
Investment securities
|
41.1
|
41.1
|
23.9
|
23.9
|
Fair
value adjustment for portfolio hedged risk asset
|
-
|
-
|
0.1
|
0.1
|
Total
financial assets
|
580.2
|
580.2
|
1,243.8
|
1,243.8
|
Financial
liabilities
|
|
|
Trade and
other payables
|
(23.4)
|
(23.4)
|
(22.3)
|
(22.3)
|
Interest bearing liabilities
|
(514.6)
|
(508.1)
|
(1,159.3)
|
(1,157.9)
|
Derivative financial
liability
|
(2.0)
|
(2.0)
|
-
|
-
|
Lease
liability
|
(2.3)
|
(2.3)
|
(3.3)
|
(3.3)
|
Total
financial liabilities
|
(542.3)
|
(535.8)
|
(1,184.9)
|
(1,183.5)
|
The fair value of Retail Bond 3
interest bearing liabilities is calculated based on the mid-market
price of 86.3 on 31 March 2024 (price of 98.7 on 31 March
2023).
The fair value of Retail Bond 4
interest bearing liabilities is calculated based on the mid-market
price of 100.1 on 31 March 2024.
As per IFRS 9, loans and advances
are classified as fair value through other comprehensive income and
any changes to fair value are calculated based on the fair value
model and are recognised through the statement of other
comprehensive income.
Interest bearing liabilities
continue to be classified at amortised cost and the fair value in
the table above is for disclosure purposes only.
c)
Fair value
hierarchy
The level in the fair value
hierarchy within which the financial asset or financial liability
is categorised is determined on the basis of the lowest level input
that is relevant to the fair value
measurement. Financial assets and liabilities are classified in
their entirety into only one of the three levels. The fair value
hierarchy has the following levels:
• Level 1 - quoted prices (unadjusted)
in active markets for identical assets or liabilities;
• Level 2 - inputs other than quoted prices included within
Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
• Level 3 - inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
The objective of valuation techniques
is to
arrive at
a fair
value measurement
that reflects the price
that would be received to sell the asset or paid to transfer the
liability in an orderly transaction between market participants at
the measurement date.
As at 31
March 2024
£'m
|
Level 1
£'m
|
Level 2
£'m
|
Level 3
£'m
|
Financial
instruments measured or disclosed at fair value
|
Interest
rate swap
|
(2.0)
|
-
|
(2.0)
|
-
|
Loans and advances
|
466.8
|
-
|
-
|
466.8
|
Financial
instruments measured or disclosed at amortised cost
|
Loans and advances
|
10.2
|
-
|
-
|
10.2
|
Interest
bearing liabilities1
|
(508.1)
|
(74.9)
|
-
|
(433.2)
|
For all other financial
instruments, the fair value is equal to the carrying value and has
not been included in the table above.
Level 3
Financial Instruments
|
Year ended 31 March 2024
£'m
|
Level 3
assets at beginning of the period
|
948.7
|
Additional impairment
provisions made
during the
period1
|
(8.7)
|
Impairment provision
utilised in
the period
|
9.3
|
Fair
value adjustments on loan & advances through OCI
|
8.5
|
New level
3 assets originated
|
349.7
|
Level 3
assets that have repaid
|
(242.3)
|
Balance movements
in level
3 assets
|
(598.4)
|
Level 3
assets at the end of the period
|
466.8
|
|
|
25. Financial
instruments continued
Financial instruments measured
at amortised
costs continued
|
31 March 2023
£'m
|
Level 1
£'m
|
Level 2
£'m
|
Level 3
£'m
|
Financial
instruments measured
|
|
|
|
|
Interest
rate swap
|
46.0
|
-
|
46.0
|
-
|
Loans and advances
|
948.7
|
-
|
-
|
948.7
|
Financial
instruments measured or disclosed at amortised cost
|
|
|
|
|
Loans and advances
|
174.2
|
-
|
-
|
174.2
|
Interest
bearing liabilities1
|
(1,157.9)
|
(94.6)
|
-
|
(1,063.3)
|
|
|
As at
or disclosed at fair value
1 Interest bearing liabilities are
held at amortised cost on the statement of financial position.
Level 1 financial instruments include the Group's listed retail
bond notes. Level 3 interest bearing liabilities are short term in
nature and their carrying value approximates their fair
value.
1 ECL provision of £8.7 million is
stated including the expected credit losses incurred on the
interest income recognised on stage 3 loans and advances. The net
ECL impact on the income statement for the year is £8.5 million
(2023: £7.7 million). This includes the £7.1 million (2023: £6
million) of impairment provisions shown in the income statement and
the total impact of expected credit losses on income recognised on
stage 3 loans and advances using the effective interest rate of
£1.4 million (2023: £1.7 million).
Significant
Level 2 instruments include
interest rate swaps which are either two, three or five
Financial instrument Valuation technique
used
unobservable inputs
Range
years in length. These lengths are
aligned with the fixed interest periods of the underlying loan
book.
Level 3 instruments include loans
and advances. The valuation of the asset is not based on observable
market data (unobservable inputs). Valuation techniques include net
present value and discounted cash flow methods. The
assumptions used in such models include
benchmark interest rates and borrower risk profile. The objective
of the valuation technique is to determine a fair value that
reflects the price of the financial instrument that would have been
used by two counterparties in an arm's length
transaction.
For the year ended 31 March 2024
the Group opted to engage a third-party expert to perform the
valuation of Buy-to-Let assets held at fair value. The discount
rate used in this valuation consists of three
components:
• A risk-free rate implied from the 1-month SONIA forward
curve
• Credit spread based on a comparable market deal which is
adjusted for movements in UK BTL indices
• Illiquidity premium
Loan and advances
Discounted cash flow valuation
Prepayment rate
0%-10%
Probability of
default
7%-100% Discount
rate
4%-12%
Information about sensitivity
to change
in significant
unobservable inputs
The significant unobservable
inputs used in the fair value measurement of the reporting entity's
loans and advances are prepayment rates and discount rates.
Significant increase/(decrease) in any of those inputs in isolation
would result in a lower/(higher) fair value measurement. A change
in the assumption of these inputs will not
correlate to a change in the other inputs. The impact of changes
in
observable inputs shown in
sensitivity analysis below will be reported through other
comprehensive income.
25. Financial instruments
continued
Impact of
changes in unobservable inputs at 31 March 2024
|
+100bps
£'m
|
-100bps
£'m
|
Prepayment rates
|
(0.2)
|
0.2
|
Discount rate
|
(7.4)
|
7.7
|
Probability of default
|
-
|
-
|
|
|
Sensitivity Analysis
Impact
of changes in unobservable inputs at 31 March 2023
+100bps
£'m
-100bps
£'m
The Group received £35.1 million
in cash on termination of in-the-money derivatives and a further
£5.2 million in quarterly interest receipts during the year. The
Group paid an initial amount on Wells
Fargo swap of £9.9 million to set the fixed leg of below market as
part of the capital structure of two special purpose vehicles
formed during the year.
The net notional principal amount
of the outstanding interest rate swap contracts at 31 March 2024
was £148.3 million (2023: £779.1 million).
27.
|
Year ended 31 March 2024
|
Year ended 31 March 2023
|
Pence per
£'m
share
|
Pence per
£'m
share
|
Final
dividend for the prior year
|
-
-
|
6.1
4.4
|
Interim
dividend for the current year
|
-
-
|
1.8
1.3
|
Total
|
-
|
7.9
|
|
|
Dividends
Prepayment rates
0.6
(0.6)
Discount rate
(25.3)
26.6
Probability of default
-
-
The fair value of the Buy-to-Let
portfolio significantly decreased during the financial year under
review and is largely driven by a rise in market SONIA rates and
inflated securitisation rates compared to prior year
end.
The fair value movement of loan
and advances primarily consist of movements in the fair value of
the Buy-to-Let portfolio. The Buy-to-Let fair value is most
sensitive to discount rate movements. The
movements in the Buy-to-Let discount rate are directly linked to
changes in interest rates which the Group hedges through interest
rate swaps. Any increase or decrease in the fair value of
Buy-to-Let loans and advances will be offset by a corresponding
decrease or increase in the fair value of the derivative on the
Group's balance sheet.
Instrument Type
|
Year ended 31 March 2024
|
Year ended 31 March 2023
|
Asset
Liability
£'m
£'m
|
Asset
Liability
£'m
£'m
|
SONIA indexed interest rate swaps
|
-
2.0
|
46.0
-
|
Total
|
-
2.0
|
46.0
-
|
|
|
26. Derivatives
held for
risk management
All derivatives are held at fair
value for the purpose of managing risk exposures arising on the
Group's business activities, assets and liabilities, although not
all the derivatives are subject to hedge accounting.
There was a net decrease of £48
million on the derivative asset position during the year (2023:
increase of £13.5 million).
28.
Investment in
joint ventures
During FY23 LendInvest Loan
Holdings Limited entered into an agreement to establish a private company limited by shares, Tradelend Limited.
Under
the agreement, Tradelend Limited
is a private company limited by shares and incorporated in England
under the Companies Act 2006. LendInvest Loan Holdings Limited
beneficially owns 51% of the paid up capital of the
company.
In FY23, Tradelend Limited was
disclosed as a joint venture under IFRS 11
- Joint Arrangements and accounted using the equity method under
IAS 28 - Investments in Associates and Joint Ventures. Tradelend
Limited did not trade during the year.
During FY24 the Group subsequently
evaluated that under IFRS 10 Para 6 Control criteria, Tradelend is
an indirect subsidiary of LI Plc and should not be accounted
as Joint Venture. Given Tradelend did not trade
during FY23, the Group determines the size and nature of error to
be immaterial and therefore prior period restatement is not
required.
The Group also assessed the
accounting implications of recognising Tradelend NCI
portion in line with accounting policy 1.21. The
NCI of Tradelend is considered to be immaterial and hence the
financial information is not disclosed.
29.
Investment in
third parties
No new investments in third
parties during the year but a return on investment of
£0.05m was realised during the year.
In December 2022 LendInvest
Capital GP II Sarl invested in LendInvest
Capital GP II, subsequently a redemption was placed and with effect
from 3rd July 2023,
LendInvest Capital GP II Sarl was
no longer recognised as an investor, but a creditor. At this point
the receivable value of £2,052k was crystalised and reclassified
from an investment to a receivable.
30.
Disclosure of
interest in
unconsolidated structures
During the year, the Group sold
its holding of the residual certificate in Mortimer BTL 2021 -1 PLC
securitisation on 19 of April 2023. The securitisation entity was
sponsored by LI BTL Limited by funding X notes and setup costs. The
sale of the certificate and call options
resulted in a derecognition event as substantially all
the
Summarised financial information
of interests:
Summarised below is the table
providing carrying amounts of all assets at the time of transfer in
relation to Mortimer 2023-1 Plc and
Mortimer 2021-1 PLC as below:
£m
Mortimer
23
Mortimer 21
Cash and cash equivalents
16.0
6.3
Other
current assets
-
7.8
Deemed loans
401.0
238.1
Derivatives
4.1
21.8
Other Liabilities
7.6
-
Summarised statement of comprehensive income:
Summarised below is the table
which sets out the income from structured entities during the
reporting period:
|
£m
|
£m
|
Interest
income
|
4.1
|
0.5
|
Other interest and similar income
|
0.1
|
-
|
Interest expense
|
(2.0)
|
(0.6)
|
Net
interest income
|
2.2
|
(0.1)
|
Admin
Expenses
|
-
|
0.1
|
Total
operating expenses
|
-
|
-
|
Profit
for the period
|
2.2
|
-
|
|
|
risks, rewards, and control of the vehicle passed
to the purchaser and therefore the entity was
deconsolidated.
Additionally, the Group
securitised a portfolio of mortgage loans into a securitisation
vehicle, Mortimer BTL 2023-1 PLC, on 29 November 2023. The
securitisation entity was sponsored by LI BTL Limited by funding X
notes and setup costs. On 4 January 2024, the Group sold its
holdings of residual notes in the securitisation
vehicle,
Mortimer BTL
2023-1 PLC. The sale of the residual notes
and call options resulted in a derecognition event as substantially
all the risks, rewards, and control of the vehicle passed to the
purchaser.
The following notes disclose
interest in these entities as per the requirements of para B25 IFRS
12:
Mortimer 23
Mortimer 21
31. Related-party transactions
See note 12 for analysis of
Director compensation. There were no other related party
transactions during the period to 31 March 2024 that would
materially affect the position or performance of the
Group.
32.
Controlling party
In the opinion of the Directors,
the Group does not have a single controlling party.
33.
Events after
the reporting
date
On 4th January 2024, the Group
sold its residual economic interest in the Mortimer 2023
securitisation and announced a gain of £12.1m. Subsequently, the
company identified an accounting issue concerning the sale of
residual interest. The issue related to swap and hedge accounting
assumptions as part of the derecognition calculation. As a result of the issue identified, the Group
released an announcement on 17th June 2024 and advised the market
to reduce expectations of net operating income and profit before
tax for Financial year 2024 by disregarding the previously expected
net gain of £12.1m from the sale.
On 1st June 2024, the Group
entered into a three-year strategic funding facility with a third
party financing provider. On the same date, the Group repaid its
funding facility with GCP Asset Backed Income Fund Ltd. The
proceeds from the arrangement were used to provide term loans to
Group subsidiaries for the
purposes of funding mezzanine
positions under the BTL and/or bridging facilities, to warehouse
whole loans or to provide intercompany loans to Lendinvest
PLC.
34.
Earnings per
share
Basic
earnings per share
|
Year ended 31 March 2024 Pence/share
|
Year ended 31 March 2023 Pence/share
|
Total
basic earnings per share attributable to
the ordinary equity holders of the Group
|
(14.5)
|
8.3
|
Diluted
earnings per share
|
Year ended 31 March 2024 Pence/share
|
Year ended 31 March 2023 Pence/share
|
Total
basic earnings per share attributable to
the ordinary equity holders of the Group
|
(14.5)
|
8.0
|
Number of
shares used as denominator
|
Year
ended 31 March
2024
|
Year
ended 31 March
2023
|
Number of
ordinary shares used as the denominator in calculating basic
earnings per share
|
138,439,688
|
137,437,395
|
Adjustment for calculations of diluted earnings per share:
Options
|
-
|
4,602,267
|
Number of ordinary shares and
potential ordinary shares used as denominator in calculating
diluted earnings per share
|
138,439,688
|
142,039,662
|
The loss after tax reported in the
consolidated statement of profit and loss,
£20.1 million (31 March 2023:
£11.4 million profit), is the numerator (earnings) used in
calculating earnings per share.
Company statement of financial position
Note
|
As at 31
March 2024
£'m
|
As at 31
March 2023
£'m
|
Equity
|
|
|
Employee share reserve
|
3.8
|
3.3
|
Share capital
13
|
0.1
|
0.1
|
Share premium
13
|
55.2
|
55.2
|
Own Share
Reserve
|
(0.1)
|
(0.6)
|
Accumulated losses/(Retained earnings) 14
|
(3.0)
|
10.3
|
Total
equity
|
56.0
|
68.3
|
Note
|
As at 31
March 2024
£'m
|
As at 31
March 2023
£'m
|
Assets
|
|
|
Cash and
cash equivalents
9
|
19.8
|
19.6
|
Trade and
other receivables
8
|
32.9
|
28.2
|
Corporate tax receivable
8
|
1.7
|
3.2
|
Loans and
advances
10
|
62.0
|
63.8
|
Property, plant and equipment
5
|
1.3
|
2.2
|
Net investment in sublease
2
|
0.6
|
1.0
|
Intangible assets
6
|
10.7
|
10.5
|
Deferred taxation
4
|
0.8
|
0.8
|
Total
assets
|
129.8
|
129.3
|
Liabilities
|
|
|
Trade and
other payables
11
|
(59.0)
|
(22.8)
|
Interest bearing liabilities
12
|
(12.5)
|
(34.9)
|
Lease liabilities
2
|
(2.3)
|
(3.3)
|
Total
liabilities
|
(73.8)
|
(61.0)
|
Net
assets
|
56.0
|
68.3
|
|
|
The Company has elected to take the exemption
under section 408 of the Companies Act 2006 not to present its
statement of profit and loss and other comprehensive income.
The (loss)/profit after tax of the
parent company for the year was £(8.3) million (2023: £4.9
million).
The financial statements on pages
115 to 128 were approved and authorised for issue by the Board of
Directors on 23 July 2024 and were signed on its behalf
by:
Rod Lockhart Director
Company statement of cash flows
Cash flow
from operating activities
|
Note
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023 (restated)
£'m
|
Cash flow
from financing activities
|
|
|
Repayment of funder liabilities
|
12
|
(22.3)
|
(2.6)
|
Funding
received from Institutional
lenders
|
12
|
(0.2)
|
15.2
|
Principal elements
of finance
lease payments
|
(0.7)
|
(0.9)
|
Interest expense - lease liabilities
|
(0.3)
|
(0.5)
|
Dividends
paid
|
(4.4)
|
(7.8)
|
Net cash generated/(used in)
from financing
activities
|
(27.9)
|
3.4
|
|
|
|
Net increase/(decrease)
in cash
and cash
equivalents
|
0.2
|
(32.8)
|
Cash and cash equivalents at beginning of the period
|
9
|
19.6
|
52.4
|
Cash and cash equivalents at end of the period
|
9
|
19.8
|
19.6
|
Cash flow
from operating activities
|
Note
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023 (restated)
£'m
|
(Loss)/profit after
taxation
|
(8.3)
|
4.9
|
Adjusted for:
|
|
|
Depreciation of property, plant and equipment
|
5
|
0.2
|
0.2
|
Amortisation of intangible assets
|
6
|
3.0
|
1.9
|
Company share and share option schemes
|
1.3
|
(1.0)
|
Income
tax (credit)/expense
|
(1.3)
|
3.0
|
Impairment provision
|
10
|
6.6
|
7.6
|
Depreciation of right-of-use asset
|
2
|
0.7
|
0.6
|
Dilapidations provision
|
2
|
0.1
|
-
|
Interest expense - lease liabilities
|
2
|
0.3
|
0.5
|
Income
from sublease
|
(0.1)
|
(0.2)
|
Change in
working capital
|
|
|
Increase
in gross loans and advances
|
10
|
(4.8)
|
(26.8)
|
Increase
in trade and other receivables
|
8
|
(1.6)
|
(14.8)
|
Increase/(decrease) in
trade and
other payables
|
11
|
36.2
|
(5.8)
|
Income
taxes paid
|
4
|
(1.1)
|
-
|
Cash generated/(used
in) from
operations
|
31.2
|
(29.9)
|
Purchase of property, plant and equipment
|
5
|
-
|
(0.2)
|
Capitalised development
costs
|
6
|
(3.2)
|
(6.3)
|
Income
from sublease
|
0.1
|
0.2
|
Net cash
used in investing activities
|
(3.1)
|
(6.3)
|
|
|
Interest received was £0.3 million (2023: £0.2
million) and interest paid was £0.0 million (2023: £3.0
million).
Company statement of changes in equity
|
|
Retained
|
|
Employee
|
Earnings /
|
|
Share
|
Share
|
Own Share
|
share
|
(accumulated
|
|
capital
|
premium
|
Reserve
|
reserve
|
deficit)
|
Total
|
|
£'m
|
£'m
|
£'m
|
£'m
|
£'m
|
£'m
|
Balance as at 31 March 2022
|
0.1
|
55.2
|
-
|
2.6
|
13.8
|
71.7
|
Profit
after taxation
|
-
|
-
|
-
|
-
|
4.9
|
4.9
|
Employee share scheme tax
|
-
|
-
|
-
|
-
|
0.3
|
0.3
|
Current tax movement through equity
|
-
|
-
|
-
|
-
|
0.4
|
0.4
|
Shares purchased by EBT
|
-
|
-
|
(3.0)
|
-
|
-
|
(3.0)
|
Shares
issued from own share reserve
|
-
|
-
|
2.4
|
-
|
(2.4)
|
-
|
Reinstatement of Dilapidations provision
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
Transfer
of share option costs
|
-
|
-
|
-
|
(1.3)
|
1.3
|
-
|
Dividends paid
|
-
|
-
|
-
|
-
|
(7.9)
|
(7.9)
|
Employee share option schemes
|
-
|
-
|
-
|
2.0
|
-
|
2.0
|
Balance as at 31 March 2023
|
0.1
|
55.2
|
(0.6)
|
3.3
|
10.3
|
68.3
|
Loss after taxation
|
-
|
-
|
-
|
-
|
(8.3)
|
(8.3)
|
Employee share scheme tax
|
-
|
-
|
-
|
-
|
(0.8)
|
(0.8)
|
Share
issued from own share reserve
|
-
|
-
|
0.5
|
-
|
(0.5)
|
-
|
Transfer
of share option costs
|
-
|
-
|
-
|
(0.8)
|
0.8
|
-
|
Dividends paid
|
-
|
-
|
-
|
-
|
(4.5)
|
(4.5)
|
Employee share option schemes
|
-
|
-
|
-
|
1.3
|
-
|
1.3
|
Balance as at 31 March 2024
|
0.1
|
55.2
|
(0.1)
|
3.8
|
(3.0)
|
56.0
|
Notes forming part of the Company
financial statements
1. Basis of preparation and material accounting
policies
1.1 Basis of preparation and going concern
The separate financial statements
of the Company are presented as required by the Companies Act 2006.
As permitted by that Act, the separate financial statements have
been prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those standards.
LendInvest plc (previously LendInvest Limited) is a public company
incorporated and domiciled in the United Kingdom under the
Companies Act 2006. The Group listed on AIM, a market operated by
the London Stock Exchange on 14 July 2021.
The address of its registered office is given on page 53. The
Company's registered number is 08146929. The principal place of
business of the subsidiaries is the UK.
The financial statements have been
prepared on the historical cost basis except as required in the
valuation of certain financial instruments which are carried at
fair value. The principal accounting policies adopted are the same
as those set out in note 1 to the
consolidated financial statements except as noted below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
The principal activities of the
Company and the nature of the Company's operations are as a holding
company for a global SME loan platform.
The financial statements are
prepared on a going concern basis as the Directors are satisfied
that the Company has the resources to continue in business for
the foreseeable future (which has been
taken as 12 months from the date of approval of the financial
statements). The Group's business activities, including those of
the Company, together with the factors likely to affect its future
development and position are set out in the strategic
report.
Investments in subsidiaries are
stated at cost less impairment. Investments in subsidiaries, the
majority of which are engaged in providing secured lending to
third-party borrowers, are recorded on the balance sheet at
historical cost less any impairment. At the end of each reporting
period investment balances are assessed for objective evidence of impairment. Impairment is indicated
where the investment
exceeds the recoverable amount.
The recoverable amount is higher of value in use or net realisable
value of the Company. If objective evidence of impairment is found,
an impairment is recognised in the statement of profit or
loss.
Estimates and assumptions
Fair value
measurement
A number of assets and liabilities
included in the Group's financial statements require disclosure of
fair value. The fair value measurement of the Group's financial and
non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs
used in determining fair value measurements are categorised into
different levels based on how observable the inputs used in the
valuation technique utilised are (the fair value
hierarchy).
Level 1: Quoted prices in active
markets for identical items.
Level 2: Observable direct or
indirect inputs other than Level 1
inputs.
Level 3: Unobservable inputs (i.e.
not derived from market data and require a level of estimates and
judgements within the model).
See Group note 25 for more
detailed information related to fair value measurement.
Expected Credit Loss Calculation
The accounting estimates with the
most significant impact on the calculation of impairment loss provisions under IFRS 9 are macroeconomic
variables, in particular UK house price inflation and unemployment,
and the probability weightings of the macroeconomic scenarios used.
The Company has used three macroeconomic scenarios, which are
considered to represent a range of possible outcomes over a normal
economic cycle, in determining impairment loss
provisions:
• a central scenario aligned to the Group's business plan;
• a downside scenario as modelled in the Group's risk management process; and
• an upside scenario representing the impact of modest
improvements to assumptions used in the central
scenario.
For the period ended 31 March 2024
management considered the third-party weightings to adequately
represent the macroeconomic environment across all
products and have therefore applied 40%/40%/20%
to the central, downside and upside scenarios
respectively.
Changes to macroeconomic
assumptions, as expectations change over time, are expected to lead
to volatility in impairment loss provisions and may lead to pro-
cyclicality in the recognition of impairment provisions.
1. Basis of preparation and material accounting
policies
1.1 Basis of preparation and going concern
Intermediary Fees
The intermediary fee is charged by
the company, to its subsidiaries. This charge relates to the
service provided by the group, in terms of management oversight,
use of intellectual property and an allocation of costs incurred by
the group, among various subsidiaries. This fee is based on a
discretionary basis after due consideration on tax and regulatory
requirements. This includes consideration made to pre-tax positions
on the profit and loss of the individual entities and
minimum cash balances to be maintained as a
result of regulatory requirements.
1.2
Prior period adjustments
Restated statement of cash flows (Extract)
To reflect the funding movements
in Financing activities on Gross basis. During the year, the
Company noted that as per requirements of Section 21 of IAS7, major
investing and financing activities should be on gross basis unless
exempt.
Historically, some major financing
activities has been disclosed on a net basis and
presented as "Increase/Decrease in Interest
Bearing Liabilities". The error has been corrected by reflecting
cash movements for funding received and repaid to our funding
partners on gross basis as below.
|
FY2023
|
Changes
|
FY2023
(Now restated)
|
Increase in interest bearing liabilities
|
12.6
|
(12.6)
|
0.0
|
Repayment of funder liabilities
|
-
|
(2.6)
|
(2.6)
|
Funding
received from institutional lenders
|
-
|
15.2
|
15.2
|
2. Leases
Please refer to Group financial
statements, note 2.
3.
Financial risk
Management
Liquidity risk management
Liquidity risk is the risk that
the Company will not be able to meet its financial obligations as
they fall due. The Company's approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or
risking damage to the Company's position. The Company's liquidity
position is monitored and reviewed on an ongoing basis by the Board
and the Assets and Liabilities Committee.
The table below analyses the
Company's contractual undiscounted cash flows of its financial
assets and liabilities:
As at 31
March 2024 Financial assets
|
Carrying amount
£'m
|
Gross nominal inflow/
(outflow)
£'m
|
Amount due in less than 6
months
£'m
|
Amount due 6-12 months
£'m
|
Amount due between one
and five
years
£'m
|
Amount due after five years
£'m
|
Cash and
cash equivalents
|
19.8
|
19.8
|
19.8
|
-
|
-
|
-
|
Other receivables
|
30.7
|
30.7
|
30.7
|
-
|
-
|
-
|
Loans and advances
|
62.0
|
62.4
|
2.8
|
23.9
|
35.1
|
0.6
|
|
112.5
|
112.9
|
53.3
|
23.9
|
35.1
|
0.6
|
Financial
liabilities
|
Other payables
|
(57.8)
|
(57.8)
|
(57.8)
|
-
|
-
|
-
|
Interest
bearing liabilities
|
(12.5)
|
(12.9)
|
(12.9)
|
-
|
-
|
-
|
Lease
liability
|
(2.3)
|
(2.6)
|
(0.7)
|
(0.7)
|
(1.2)
|
-
|
|
(72.6)
|
(73.3)
|
(71.4)
|
(0.7)
|
(1.2)
|
-
|
3. Financial risk Management continued
Liquidity risk management continued
Gross
As
at 31
March 2023
Financial assets
|
Carrying amount
£'m
|
nominal inflow/
(outflow)
£'m
|
Amount due in less than 6
months
£'m
|
Amount due 6-12 months
£'m
|
Amount due between one
and five
years
£'m
|
Amount due after five years
£'m
|
Cash and
cash equivalents
|
19.6
|
19.6
|
19.6
|
-
|
-
|
-
|
Other receivables
|
23.9
|
23.9
|
23.9
|
-
|
-
|
-
|
Loans and advances
|
63.8
|
64.0
|
1.8
|
35.0
|
26.8
|
0.4
|
|
107.3
|
107.5
|
45.3
|
35.0
|
26.8
|
0.4
|
Financial
liabilities
|
|
|
|
|
|
|
Other payables
|
(22.8)
|
(22.8)
|
(22.8)
|
-
|
-
|
-
|
Interest
bearing liabilities
|
(34.9)
|
(40.6)
|
(2.3)
|
(2.3)
|
(36.0)
|
-
|
Lease
liability
|
(3.3)
|
(3.8)
|
(0.7)
|
(0.7)
|
(2.4)
|
-
|
|
(61.0)
|
(67.2)
|
(25.8)
|
(3.0)
|
(38.4)
|
-
|
4. Taxation on (loss)/profit on ordinary activities
Deferred taxation
Deferred tax is presented in the statement of financial
position as follows:
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Deferred tax assets
|
0.9
|
1.5
|
Deferred tax liabilities
|
(0.1)
|
(0.7)
|
Net
deferred tax assets
|
0.8
|
0.8
|
The movements during the year are
analysed as follows:
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Net
deferred tax assets at the beginning of the year
|
0.9
|
1.2
|
Credit to
the statement of profit and loss for the year
|
0.4
|
(0.7)
|
Credit/(charge) to
equity
|
(0.8)
|
0.3
|
Over
provision of deferred tax
|
0.3
|
-
|
Net
deferred tax assets at the end of the year
|
0.8
|
0.8
|
Category of deferred tax
2024
|
Opening Balance
£'m
|
Opening Balance
Adjustment
|
Charge/ (Credit)
to the
statement
of profit and loss - CY
£'m
|
Charge/ (Credit) through
equity - CY
£'m
|
Charge/ (Credit)
to the
statement of profit and loss - PY
£'m
|
Closing Balance
£'m
|
Share and
share option schemes
|
1.3
|
-
|
(0.1)
|
(0.9)
|
-
|
0.3
|
IFRS 16
transitional adjustment
|
0.1
|
-
|
-
|
-
|
-
|
0.1
|
Research and development
|
(0.6)
|
-
|
0.1
|
-
|
0.3
|
(0.2)
|
Losses
|
-
|
-
|
0.4
|
0.1
|
-
|
0.5
|
|
0.8
|
-
|
0.4
|
(0.8)
|
0.3
|
0.7
|
2023
Share and share
option schemes
1.1
-
-
0.3
(0.1)
1.3
IFRS 16
transitional
adjustment
0.1
-
-
-
-
0.1
Research and
development
-
-
(0.3)
(0.3)
(0.6) Losses
-
-
-
-
-
-
1.2
-
(0.3)
0.3
(0.4)
0.8
At 31 March 2023, the Company had
no unrecognised deferred taxation assets (2022: £nil).
5. Property, plant and equipment
Refer to consolidated financial statements,
note 14.
6. Intangibles
Internally
7. Investment in subsidiaries
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
As at 1
April
|
-
|
-
|
As at 31
March
|
-
|
-
|
Additions
-
3.2
3.2
|
Balance as at 31 March 2024
0.4
21.5
21.9
|
|
|
LendInvest Loan Holdings Limited
Intermediary holding company
Company
|
|
|
LendInvest Capital Advisors Limited
Intermediary holding company
LendInvest Capital
Management Limited
|
|
|
|
Software
licences
|
developed
Software
|
Total
|
Costs
|
£'m
|
£'m
|
£'m
|
Balance as at 31 March 2022
|
0.4
|
12.0
|
12.4
|
|
|
The Company owned either directly or indirectly,
100% of the share capital of the following
subsidiaries during the year. All entities, other than those marked
with an asterisk (*), were also in place during the prior
year:
|
|
Additions
|
-
|
6.3
|
6.3
|
|
Balance as at 31 March 2023
|
0.4
|
18.3
|
18.7
|
|
Entity
name
Principal activities
|
Direct
Holding
|
|
|
|
|
|
|
|
|
|
|
|
|
LendInvest Capital
Management Limited Intermediary holding company
|
Company
|
|
Software
|
Internally developed
|
|
|
LendInvest Finance
No. 2 Limited
Provides secured
lending
|
LendInvest Capital
|
|
licences
|
Software
|
Total
|
|
to
third-party borrowers
|
Management Limited
|
Accumulated amortisation and impairment
|
£'m
|
£'m
|
£'m
|
|
|
|
Balance as at 31 March 2022
|
0.3
|
6.0
|
6.3
|
|
|
|
Charge
for the year
|
0.1
|
1.8
|
1.9
|
|
LendInvest Funds Management Limited
Fund management
company
|
Company
|
Balance as at 31 March 2023
|
0.4
|
7.8
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
third-party borrowers
|
Holdings
Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LendInvest Finance No. 4
Limited
Provides secured
lending
LendInvest Loan
to third-party borrowers
Holdings Limid
|
LendInvest Private Finance General
Dormant
Company Partners Limited
|
Charge
for the year
|
0.0
|
3.0
|
3.0
|
Balance as at 31 March 2024
|
0.4
|
10.8
|
11.2
|
|
Net carrying value as at 31 March 2024
|
-
|
10.7
|
10.7
|
|
|
LendInvest Development Limited
Provides secured
lending
LendInvest Loan
LendInvest Warehouse Limited
Intermediate holding company and
Company
secured lending to third-party borrowers
|
Net carrying value as at 31 March
2023
-
10.5
10.5
Internally developed software
development has
been capitalised
as an
intangible
LendInvest Finance No. 3 Limited
Dormant
LendInvest Loan
Holding Limited
LendInvest Security Trustees Limited
Holds securities
Company
|
asset and is being amortised over
five years.
LendInvest Finance No.
5 Limited
Provides secured
lending
to third-party borrowers
LendInvest Loan Holdings
Limited
LendInvest Finance No. 6
Limited
Provides secured
lending
LendInvest Loan
to third-party borrowers
Holdings Limited
|
LendInvest Finance
No. 7 Limited*
Provides secured
lending
to third-party borrowers
LendInvest Loan Holdings
Limited
LendInvest Secured Income
Plc
Provides secured
lending
LendInvest Loan
to third-party borrowers
Holdings Limited
|
LendInvest Limited
Provides secured lending to third-party
borrowers
LendInvest Loan Holdings
Limited
7. Investment in subsidiaries continued
Entity name
Principal activities
Direct Holding
As at 31/3/2024 Lendinvest PLC no
longer held control of Mortimer BTL 2021-1
Limited, Mortimer BTL 2022-1 Limited and Mortimer BTL 2023-1
Limited.
LendInvest Platform Limited
Provides secured
lending
LendInvest Loan
to third-party borrowers
Holdings Limited
|
|
|
The registered address of all subsidiaries is Two
Fitzroy Place, 8 Mortimer Street, London W1T 3JJ, with the
exception of those noted below -
LendInvest Loans Limited
Provides secured
lending
LendInvest Loan
to third-party borrowers
Holdings Limited
|
|
|
LendInvest Bridge Limited
Provides secured lending to third-party borrowers
LendInvest Capital GP
Sarl
Managing partner of an alternative investment fund
LendInvest Loan Holdings
Limited
LendInvest Funds Management Limited
The registered address of BTL
No. 1 Limited, BTL No. 2 Limited, BTL No.
3 Limited, Titan No.1 Limited, Puma BTL Limited, Mortimer BTL
2021-1 PLC, Mortimer BTL 2022- 1 PLC, Mortimer BTL 2023-1 PLC is
8th floor 100 Bishopsgate, London, EC2N 4AG.
LendInvest Capital GP II
Sarl
Provides secured
lending
LendInvest Loan
to third-party borrowers
Holdings Limited
|
|
|
The registered address of Tradelend Limited is 13
David Mews, London, W1U 6EQ.
8. Other receivables
Due within one year
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Trade receivables
|
30.5
|
22.0
|
Other
receivables:
|
|
|
-
Prepayments and
accrued income
|
2.2
|
3.1
|
- Other
receivables
|
0.2
|
1.9
|
-
Corporate tax
receivable
|
1.7
|
3.2
|
Due after one year
|
|
|
Rent deposit
|
-
|
1.2
|
|
34.6
|
31.4
|
|
|
Management has also assessed the Company as being
in control of the investee's listed below,
based on judgements with regard to the control criteria prescribed
in paragraph 7 of IFRS 10.
Entity name
Principal activities
Direct Holding
BTL
No. 1
Limited
Warehousing vehicle
for
NA Buy-to-Let mortgages
|
BTL No. 2 Limited
Warehousing vehicle for NA Buy-to-Let mortgages
BTL No. 3
Limited
Warehousing vehicle
for
NA Buy-to-Let mortgages
|
Puma BTL
Limited
Securitisation loan
note
NA repurchasing vehicle
|
|
|
Titan No.1 Limited
Warehousing vehicle
for
NA Buy-to-Let & Bridging loans
Mortimer BTL
2021-1 Limited
Securitisation vehicle for
NA
Mortimer BTL 2022-1 Limited*
Securitisation vehicle for
NA
Buy-to-Let mortgages
|
|
|
Buy-to-Let mortgages
Mortimer BTL
2023-1 Limited*
Securitisation vehicle for
NA
Buy-to-Let mortgages
The carrying value of trade and
other receivables approximates fair value and represents the
maximum exposure to credit losses. Expected credit losses on trade
receivables are immaterial.
The maximum exposure to credit
risk at the reporting date is the carrying value
of each class of receivables mentioned above.
During the current year (and prior
period) the Company had no trade
receivables that are past due, but not impaired.
LendInvest Employee Benefit Trust
Issues shares to staff under the
NA
Group's CSOP and LTIPs schemes
|
LendInvest Share Incentive
Plan
Issues shares to staff under
NA
the Group's SIP scheme
Tradelend
Limited
Provides development finance, bridging LendInvest Loan loans, and
any other finance loans
Holdings Limited
|
9. Cash and cash equivalents
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Cash at
bank
|
17.3
|
16.0
|
Trustees'
account
|
2.5
|
3.6
|
|
19.8
|
19.6
|
Trustees' account relates to
monies held on account for the benefit of our investors in the
Self-Select Platform, prior to them either investing in loans or
withdrawing their capital. This amount excludes £2.6 million due to
timing differences, which sit as a
receivable. Operationally, the Company does not treat the Trustees'
balances as available funds. An equal and opposite payable amount
is included within the trade payables balance (see note
11).
10. Loans and advances
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Gross loans and advances1
|
77.6
|
72.8
|
ECL
provision
|
(15.6)
|
(9.0)
|
Fair
value adjustment2
|
-
|
-
|
Loans and advances
|
62.0
|
63.8
|
1 Included in gross loans and advances is £73.8 million (2023:
£70.3 million) of loans made to Group entities. The ECL provision
has been calculated on these loans.
2 Fair value adjustment to gross loans and advances due to classification as
FVOCI.
ECL provision
Movement
in the period
|
£'m
|
Under
IFRS 9 at 1 April 2023
|
(9.0)
|
Additional provisions
made during
the period
|
(6.8)
|
Utilised
in the period
|
0.2
|
Under
IFRS 9 at 31 March 2024
|
(15.6)
|
Movement in the period
£'m
Under IFRS 9 at
1 April 2022
(1.4)
Additional provisions made during
the period
(7.6)
Utilised in the period
-
Under IFRS 9 at 31 March
2023
(9.0)
Analysis of loans and advances by stage
Year ended 31 March 2024
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
Gross loans and advances
|
74.5
|
0.5
|
2.6
|
77.6
|
ECL
provision
|
(15.3)
|
-
|
(0.3)
|
(15.6)
|
Fair
value adjustment
|
-
|
-
|
-
|
-
|
Loans and advances
|
59.2
|
0.5
|
2.3
|
62.0
|
Year ended 31 March 2023
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
Gross loans and advances
|
70.9
|
0.6
|
1.3
|
72.8
|
ECL
provision
|
(8.6)
|
-
|
(0.4)
|
(9.0)
|
Fair
value adjustment
|
-
|
-
|
-
|
-
|
Loans and advances
|
62.3
|
0.6
|
0.9
|
63.8
|
The maximum LTV on stage 2 loans
is 75%. The maximum LTV on stage 3 loans is 195%. The average LTV
of stage 1 loans is 78%. The average LTV
of stage 2 loans is 62%. The average LTV of stage 3 loans is 72%
and the total value of collateral held on stage 3 loans is £0.8
million.
10. Loans and advances continued
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2023
|
62.3
|
0.6
|
0.9
|
63.8
|
|
Transfer
to stage 3
|
(0.3)
|
(0.1)
|
0.4
|
-
|
Financial assets which have repaid
|
(0.1)
|
(0.4)
|
(0.2)
|
(0.7)
|
Balance movements
in loans
|
(2.7)
|
0.4
|
1.2
|
(1.1)
|
Total
movement in loans and advances
|
(3.1)
|
(0.1)
|
1.4
|
(1.8)
|
|
As at 31
March 2024
|
59.2
|
0.5
|
2.3
|
62.0
|
|
|
Movement analysis
of net
loans by
stage
Movement analysis of gross loans by stage
|
|
| |
|
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2023
|
70.9
|
0.6
|
1.3
|
72.8
|
|
Transfer
to stage 3
|
(0.3)
|
(0.1)
|
0.4
|
-
|
Financial assets which have repaid
|
(0.1)
|
(0.4)
|
(0.4)
|
(0.9)
|
Balance movements
in loans
|
4.0
|
0.4
|
1.3
|
5.7
|
Total
movement in loans and advances
|
3.6
|
(0.1)
|
1.3
|
4.8
|
|
As at 31
March 2024
|
74.5
|
0.5
|
2.6
|
77.6
|
|
|
|
|
|
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2022
|
43.3
|
1.3
|
1.4
|
46.0
|
|
|
|
|
|
Transfer
to stage 1
|
0.2
|
(0.2)
|
-
|
-
|
Transfer
to stage 3
|
-
|
(0.2)
|
0.2
|
-
|
New financial assets originated
|
0.1
|
-
|
-
|
0.1
|
New
financial assets originated and transferred to stage 2 or stage
3
|
(0.1)
|
-
|
-
|
(0.1)
|
Financial assets which have repaid
|
0.2
|
(0.5)
|
(0.3)
|
(0.6)
|
Balance movements
in loans
|
27.2
|
0.2
|
(0.1)
|
27.3
|
Write-offs
|
-
|
-
|
0.1
|
0.1
|
Total
movement in loans and advances
|
27.6
|
(0.7)
|
(0.1)
|
26.8
|
|
|
|
|
|
As at 31
March 2023
|
70.9
|
0.6
|
1.3
|
72.8
|
|
|
|
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2022
|
42.2
|
1.3
|
1.1
|
44.6
|
|
|
|
|
|
Transfer
to stage 1
|
0.2
|
(0.2)
|
-
|
-
|
Transfer
to stage 3
|
-
|
(0.2)
|
0.2
|
-
|
New financial assets originated
|
0.1
|
-
|
-
|
0.1
|
Financial assets which have repaid
|
-
|
(0.5)
|
(0.3)
|
(0.8)
|
Balance movements
in loans
|
19.8
|
0.2
|
(0.1)
|
19.9
|
Total
movement in loans and advances
|
20.1
|
(0.7)
|
(0.2)
|
19.2
|
|
|
|
|
|
As at 31
March 2023
|
62.3
|
0.6
|
0.9
|
63.8
|
|
|
|
10. Loans and advances continued
Movement analysis of ECL by stage
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2023
|
8.6
|
-
|
0.4
|
9.0
|
|
Financial assets which have repaid
|
-
|
-
|
(0.2)
|
(0.2)
|
Changes
in models/risk parameters
|
6.7
|
-
|
0.2
|
6.9
|
Adjustments for interest on impaired loans
|
-
|
-
|
0.1
|
0.1
|
Write-offs
|
-
|
-
|
(0.2)
|
(0.2)
|
Total movement in impairment provision
|
6.7
|
-
|
(0.1)
|
6.6
|
|
As at 31
March 2024
|
15.3
|
-
|
0.3
|
15.6
|
The Company held no POCI loans
during the year to 31 March 2024.
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
As
at 1 April 2022
|
1.1
|
-
|
0.3
|
1.4
|
|
|
|
|
|
Changes
in models/risk parameters
|
7.5
|
-
|
-
|
7.5
|
Adjustments for interest on impaired loans
|
-
|
-
|
0.1
|
0.1
|
Total movement in impairment provision
|
7.5
|
-
|
0.1
|
7.6
|
|
|
|
|
|
As at 31
March 2023
|
8.6
|
-
|
0.4
|
9.0
|
Credit risk on gross loans and advances
The table below provides
information on the Company's loans and advances by stage and risk
grade. See note 18 of the Group's accounts for details of the
change of the calculation of risk grades
during the current year. A table has been included to show the 31
March 2023 position had the new scores been retrospectively
applied.
Year ended 31 March 2024
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
Risk
grades 1-5
|
74.5
|
0.4
|
-
|
74.9
|
Risk
grades 6-9
|
-
|
0.1
|
-
|
0.1
|
Default
|
-
|
-
|
2.6
|
2.6
|
Total
|
74.5
|
0.5
|
2.6
|
77.6
|
Year ended 31 March 2023
|
Stage 1
£'m
|
Stage 2
£'m
|
Stage 3
£'m
|
Total
£'m
|
Risk
grades 1-5
|
70.9
|
0.2
|
-
|
71.1
|
Risk
grades 6-9
|
-
|
0.4
|
-
|
0.4
|
Default
|
-
|
-
|
1.3
|
1.3
|
Total
|
70.9
|
0.6
|
1.3
|
72.8
|
11. Other
payables
|
|
|
|
|
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Trade payables
|
53.0
|
14.9
|
Other
payables:
|
|
|
- Taxes
and social security costs
|
1.2
|
1.3
|
-
Accruals and
deferred income
|
4.5
|
6.3
|
-
Sublease deposit repayable
|
0.2
|
0.2
|
-
Employee free share award
|
0.1
|
0.1
|
|
59.0
|
22.8
|
The trade payables balance includes Trustees' balances
of £2.5
million (2023:
£3.6 million) in respect of
uninvested cash held on the self-select platform, which may be
withdrawn by investors at any time.
The Company has no non-current trade and other payables.
The carrying value of trade and other payables approximates
fair value.
12.
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
Funds from investors and partners
|
12.5
|
34.9
|
|
12.5
|
34.9
|
|
|
Interest bearing
liabilities
The Company is not in breach or
default of any provisions of the terms or conditions of the
agreements governing borrowings. The Company's annualised interest
cost on funding was 8% in the current financial year.
13. Share Capital
Refer to Group financial
statements, note 22.
14. Reserves
Reserves are comprised of retained
earnings and the employee share reserve, and fair value reserves. Retained earnings represent all net
gains and losses of the Group less directly attributable costs
associated with the issue of new equity and the employee share
reserve represents the fair value of share options issued to
employees but not exercised.
The fair value reserve represents
movements in the fair value of the financial assets classified as
FVOCI.
15. Share-based payments
Refer to Group financial statements,
note 24.
16. Financial instruments
Principal financial instruments
The principal financial
instruments used by the Company, from which financial
instrument risk arises, are loans and advances,
trade and other receivables, cash and cash equivalents, loans and
borrowings, and trade and other payables.
Categorisation of financial assets and financial liabilities
The financial assets of the
Company are carried at amortised cost or fair value
through other comprehensive as at 31 March 2024
and 31 March 2023 according to the nature of the asset. All
financial liabilities of the Company are carried at amortised cost
as at 31 March 2024 and 31 March 2023 due to the nature
of
the liability.
Financial instruments measured
at amortised
costs
Financial instruments measured at
amortised cost, rather than fair value, include cash and cash
equivalents, trade and other receivables, trade and other
payables and interest-bearing liabilities.
Due to their short-term nature, the carrying value of cash and cash
equivalents, trade and other receivables, lease liabilities and
trade and other payables approximates their fair value.
Carrying amount of financial instruments
A summary of the financial instruments held by category is provided below:
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023 (restated)
£'m
|
Financial
assets at amortised cost
|
|
|
Cash and
cash equivalents
|
19.8
|
19.6
|
Trade and
other receivables
|
30.7
|
30.7
|
Financial
assets at fair value through other comprehensive income
|
|
|
Loans and advances
|
62.0
|
63.9
|
Total financial assets
|
112.5
|
114.2
|
|
|
|
Financial
liabilities at amortised cost
|
|
|
Trade and
other payables
|
(57.8)
|
(21.5)
|
Interest bearing liabilities
|
(12.5)
|
(34.9)
|
Lease
liability
|
(2.3)
|
(3.3)
|
Total financial liabilities
|
(72.6)
|
(59.7)
|
Prior year has been restated to
remove taxes and social security costs from Trade
Payables.
16. Financial instruments
continued
Fair value hierarchy
The level in the fair value
hierarchy within which the financial asset or financial liability
is categorised is determined on the basis of the lowest level input
that is relevant to the fair value
measurement. Financial assets and liabilities are classified in
their entirety into only one of the three levels. The fair value
hierarchy has the following levels:
Level 1 -
quoted prices (unadjusted) in active markets for identical assets
or liabilities;
Level 2 - inputs other than quoted
prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
Level 3 - inputs for the asset or
liability that are not based on observable market data
(unobservable inputs).
The objective of valuation
techniques is to arrive at a fair value measurement
that reflects the price that would be received to
sell the asset or paid to transfer the liability in an orderly
transaction between market participants at the measurement
date.
As at 31
March 2024
£'m
|
Level 1
£'m
|
Level 2
£'m
|
Level 3
£'m
|
Financial
instruments measured or disclosed at fair value
|
Loans and advances
|
62.0
|
|
62.0
|
|
Financial
instruments measured or disclosed at amortised cost
|
Interest
bearing liabilities1
|
(12.5)
|
(12.5)
|
|
For all other financial
instruments, the fair value is equal to the carrying value and has
not been included in the table above.
|
As at
|
|
31
March 2023
|
Level 1
|
Level 2
|
Level 3
|
£'m
|
£'m
|
£'m
|
£'m
|
Financial
instruments measured or disclosed at fair value
|
|
|
|
|
Loans and advances
|
63.9
|
-
|
-
|
63.9
|
|
|
|
|
|
Financial
instruments measured or disclosed at amortised cost
|
-
|
-
|
-
|
-
|
Interest
bearing liabilities1
|
(34.9)
|
(34.9)
|
-
|
-
|
1
Interest bearing liabilities are held at amortised cost on the
statement of financial position.
For all other financial
instruments, the fair value is equal to the carrying value and has
not been included in the table above.
Level 3 instruments include loans
and advances. The valuation of the asset is not based on observable
market data (unobservable inputs). Valuation techniques include net
present value and discounted cash flow methods. The
assumptions used in such models include
benchmark interest rates and borrower risk profile. The objective
of the valuation technique is to determine a fair value that
reflects the price of the financial instrument that would have been
used by two counterparties in an arm's length
transaction.
Level 3
Financial Instruments
|
Year ended 31 March 2024
£'m
|
Level 3
assets at beginning of the period
|
63.8
|
Additional impairment
provisions made
during the
period
|
(6.8)
|
Impairment provision
utilised in
the period
|
0.2
|
Level 3
assets that have repaid
|
(0.7)
|
Balance movements
in level
3 assets
|
5.5
|
Level 3
assets at the end of the period
|
62.0
|
17. Reconciliation of
liabilities arising from financing activities
Interest bearing
liabilities
£'m
|
Leases
£'m
|
31
March 2023
|
(34.9)
|
(3.3)
|
Cash
flows
|
22.3
|
1.4
|
Lease
liability interest
|
-
|
(0.3)
|
31
March 2024
|
(12.6)
|
(2.2)
|
31
March 2022
|
(22.3)
|
(4.1)
|
Cash
flows
|
(12.6)
|
1.4
|
Lease
liability interest
|
-
|
(0.6)
|
31
March 2023
|
(34.9)
|
(3.3)
|
18. Related Party Transactions
The Company has made loans to
LendInvest Warehouse Limited to fund a portfolio
of loans. During the year to 31 March 2024, the
Company made loans of £12.9 million (2023: £4.0 million) and
received repayments in respect of loans of £0.2 million (2023: £0.1
million). The balance as at 31 March 2024 was £24.0 million
(2023:
£11.1 million). These loans are
interest-bearing at 8% per annum.
£14.1 million (2023: £21.8
million) of the Company's trade receivables (see note 8) are
unsecured intercompany receivables owed by Company's
subsidiaries.
The Company also received the following fees from related party subsidiaries;
|
Year ended 31 March 2024
£'m
|
Year ended 31 March 2023
£'m
|
LendInvest Funds Management Limited
|
2.4
|
2.8
|
LendInvest Capital
Management Limited
|
-
|
-
|
19. Controlling party
In the opinion of the Directors,
the Company does not have a single controlling party.
Glossary
Alternative Performance Measures
In the reporting of financial
information, the Directors have adopted various alternative
performance measures (APMs). APMs should be considered in addition
to IFRS measurements. The Directors believe that these APMs assist
in providing useful information on the underlying performance of
the Group, enhance the comparability of information between
reporting periods, and are used internally
by the Directors to measure the
Group's performance, not necessarily comparable to other entities'
APMs.
Platform AuM
The Group defines Platform AuM as
the sum of (i) the total amount of outstanding loans and advances
(including accrued interest, and gross of impairment
provisions and fair value adjustments), as
reported on an IFRS basis in the notes to the accounts in the
Group's Financial Statements, and (ii) off-balance sheet assets,
which represents the total amount of outstanding loans and advances
(including accrued interest) that the Group originates but does not
hold on its balance sheet, comprising those loans that are held by
its off-balance sheet entities. Off-Balance Sheet Assets are not
presented net of any impairment provisions relating
thereto.
The Directors view Platform AuM as
a useful measure because it is used to analyse and evaluate the volume of revenue-generating assets
of the platform
on an aggregate basis and is
therefore helpful for understanding the performance of the
business.
The following table provides a
reconciliation from the Group's reported gross loans and
advances.
FuM
The Group defines FuM as the
aggregate sum available to the Group under each of
its funding lines. The Group's FuM are used to
originate revenue generating Platform AuM. The Directors view the
difference between the Group's FuM and Platform AuM as the headroom
for future growth. A reconciliation from Platform AuM, which has
been reconciled to IFRS measures above, to FuM is shown
below.
Unaudited
|
Year ended 31 March 2024
(£'m)
|
Year ended 31 March 2023
(£'m)
|
Platform AuM
|
2,783.3
|
2,587.0
|
Committed funding
available for
lending
|
1,344.0
|
1,018.9
|
FuM
|
4,127.3
|
3,605.9
|
Adjusted EBITDA
The Group defines Adjusted EBITDA
as Group profit or loss before finance income, finance expenses,
income tax,
depreciation and
amortisation, and
exceptional items. The Directors view
Adjusted EBITDA as a useful measure because it is used to analyse
the Group's operating profitability, and shows the results of
normal core operations exclusive of non-cash changes that the Group
considers to be non-recurring and
Unaudited
|
Year ended 31 March 2024
(£'m)
|
Year ended 31 March 2023
(£'m)
|
(Loss)/profit after
taxation
|
(20.1)
|
11.4
|
Derivative financial
instruments and
hedge accounting
|
4.0
|
(5.1)
|
Corporation tax
|
(7.2)
|
2.9
|
Depreciation and amortisation
|
3.2
|
2.1
|
Depreciation of right-of-use asset
|
0.7
|
0.7
|
Interest expense - lease liabilities
|
0.3
|
0.4
|
Share-based payment charge
|
1.3
|
1.9
|
Exceptional operating
expenses
|
2.7
|
-
|
Adjusted
EBITDA
|
(15.1)
|
14.3
|
|
|
not part of the Group's core day-to-day business.
The following table provides a reconciliation from the Group's reported profit for the
period to Adjusted EBITDA.
Unaudited
|
Year ended 31 March 2024
(£'m)
|
Year ended 31 March 2023
(£'m)
|
Gross
Loans and advances
|
477.0
|
1,168.5
|
Off-Balance Sheet
Assets
|
2,306.3
|
1,418.5
|
Platform
AuM
|
2,783.3
|
2,587.0
|