REG - Lendinvest PLC LendInvest - LIV2 LendInvest - LIV3 LendInvest PLC-LINV - LendInvest plc Full Year Financial Results FY23
18/07/2023 07:00
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RNS Number : 3015G Lendinvest PLC 18 July 2023
LEI: 213800NWMK3O4UWP9N91
18 July 2023
LendInvest plc
FULL YEAR RESULTS FOR THE YEAR TO 31 MARCH 2023
Sustained growth in lending while navigating a challenging environment
LendInvest plc (AIM: LINV; the "Company" or the "Group"), the UK's leading
platform for mortgages, is pleased to announce its audited results for the
year ended 31 March 2023.
Rod Lockhart, Chief Executive of LendInvest, commented:
"I am pleased with the progress we have made over the past 12 months, despite
a challenging market environment. We have continued to grow Platform Assets
under Management, build new funding relationships, introduce new products and
make significant advancements in technology. Our ability to adapt to changing
market dynamics has been evident through our product offerings and pricing
strategies. Additionally, we have also focused on reducing our credit risk
profile and enhancing our capital efficiency.
"Whilst the economic backdrop remains uncertain, we remain confident in the
resilience of our business model and funding strategy, the increasingly
capital-efficient nature of our lending and the long-term opportunities for
our disruptive, differentiated offering."
Summary Financials
Audited Year to Year to
31 March 2023
31 March 2022
Change
Platform Assets under Management (Platform AuM) (£m)(1) 2,587.0 2,146.1 21%
Funds under management (FuM) (£m)(1) 3,605.9 2,936.6 23%
Net operating income (£m) 54.7 50.5 8%
Total operating expenses (£m) (40.4) (36.3) 11%
Adjusted EBITDA (£m)(1) 14.3 20.3 (30)%
Profit before tax (£m) 14.3 14.2 1%
Profit after tax (£m) 11.4 10.9 5%
Diluted earnings per share(1) 8.0p 8.0p -
Full year dividend per share(1) 4.5p 4.4p 2%
(1) Unaudited
Financial Highlights:
● Platform AuM increased by 21% to £2.6 billion (2022: £2.1
billion), driven by a 21% increase in Buy-to-Let ("BTL") Platform AuM.
● FuM increased by 23% to £3.6 billion (2022: £2.9 billion).
● Net operating income increased by 8% to £54.7 million (2022: £50.5
million), reflecting the increase in Platform AuM with net interest income
increased by 45% and net fee income reduced by 37%.
● Adjusted EBITDA decreased by 30% to £14.3 million (2022: £20.3
million) primarily driven by expected launch costs for the new residential
mortgage product in addition to an increase in impairment charges to £5.9
million (2022: £4.4 million) which was largely in relation to two legacy
defaulted loans.
● Profit before tax increased by 1% to £14.3 million (2022: £14.2
million).
● Diluted earnings per share was stable at 8.3 pence per share
(2022: 8.3 pence per share).
● The Board is recommending a final dividend of 3.2p per share
resulting in a full year dividend of 4.5p per share (2022: 4.4p per share).
● Effective interest rate accounting: behaviour patterns of
borrowers on the reversion rate are reviewed regularly.
Strategic highlights:
Products
● In December 2022, we successfully launched our first residential
mortgage product to underpin our future growth.
● We completed our first Residential Investment Portfolio Loan
product, launched in partnership with a US-based asset manager.
● In October 2022, in response to the interest rate volatility
following the mini-budget, we launched a new two year tracker product range.
Funding
● Lloyds Bank, as a new source of FuM, committed £300 million to
support the growth of our BTL business and our entry into the residential
mortgage market.
● We secured an upsized commitment from J.P. Morgan from £725
million to £1 billion and increased the investment period by three years.
● HSBC provided up to £100 million in funding for our development
finance programme, supported by the British Business Bank's ENABLE Guarantee
scheme.
● We issued our third listed bond, the LendInvest Secured Income II
plc 6.50% bonds due 2027, raising £38 million.
● We completed our fourth securitisation, which comprised £270
million of prime BTL mortgages with demand drawn from a broad range of
institutional investors.
● Post year end, we completed a new £500 million partnership with
Chetwood Financial to fund residential mortgages.
Strategic transactions
In line with our strategy to increase the proportion of our Platform AuM
managed for third parties we completed the sale of our residual economic
interest in:
● the Mortimer BTL 2020-1 securitisation for £7 million in March
2023.
● the Mortimer BTL 2022-1 securitisation for £5.8 million in August
2022.
ESG, people and culture
● As previously announced, Michael Evans will step down as CFO and
as an Executive Director on 31 July 2023. David Broadbent joined the Company
on 9 May 2023 and will become our CFO on Michael's departure in a non-board
capacity, with the intention of joining the Board at a later date to be
announced in due course.
● Our business operations were declared carbon neutral by third
party Climate Care Partners.
● We launched our first Green Bond Framework aligned with the ICMA
green bond principles.
● We opened our second UK office in Glasgow, providing access to a
pool of talent with great industry expertise.
● In November, we received the highest possible rating from ARC
Ratings, highlighting our technology creates a seamless application process.
To facilitate our stakeholders' understanding of our financial statements and
enable easier comparisons with our peer group, we have redesigned the format
of our consolidated statement of profit and loss. The revised layout now
provides a distinct breakdown of various income components. Specifically, it
presents net interest income recognised under IFRS 9, net fee income
recognised under IFRS 15, net gains on derecognition of financial assets, and
net other income as separate categories. This updated presentation aids in
segregating the income derived from assets held on our balance sheet from
those managed on behalf of third parties.
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 18 July 2023. 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
(https://lendinvest-plc-full-year-results-jul23.open-exchange.net/)
A playback facility will also be available in due course here
(https://corporate.lendinvest.com/reports-results/)
- Ends -
Enquiries:
LendInvest via Teneo
+44 (0)20 7353 4200
Rod Lockhart, Chief Executive Officer
Michael Evans, Chief Financial Officer
Alex Dee, Head of Investor Relations
Leigh Rimmer, Head of External Communications
investorrelations@lendinvest.com
Panmure Gordon (NOMAD and Joint Broker)
+44 (0)20 7886 2500
Atholl Tweedie / Stephen Jones / Tom Scrivens / David Watkins
finnCap Limited (Joint Broker)
+44 (0)20 7220 0500
Jonny Franklin-Adams / Tim Redfern / Alice Lane
Teneo (Financial PR)
+44 (0)20 7353 4200
Tom Murray / Haya Herbert-Burns / Olivia Lucas
About LendInvest
LendInvest is the UK's leading technology driven 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 over £6bn of short
term, development and buy-to-let 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 year has been one of significant strategic progress for LendInvest,
despite the challenging market backdrop. I am delighted that we launched our
first residential mortgage product range, a huge milestone in our development.
We also achieved record levels of both Platform AuM and FuM while navigating a
highly challenging macroeconomic backdrop, including rapidly accelerating
inflation and eight increases in the Bank Rate.
The dysfunctional economic environment, in the aftermath of the mini-budget in
September 2022, resulted in a gap in the mortgage market as rates increased to
more than 6%, having been around 2% a year earlier and many lenders withdrew
their products. This presented an opportunity for us to demonstrate, in real
time, the benefits of our agile working processes and a modern technology
architecture. Unlike many of our competitors, we remained operational and
swiftly launched products that were better suited for the new environment.
While mortgage rates reduced over the six months that followed, they have now
surpassed the highs reached after the mini-budget as a result of
worse-than-expected inflation data. This combined with a lack of market
confidence in the plans to tackle inflation has pushed up interest rate swap
rates. Until inflation begins to fall away more rapidly the markets may well
continue to price in higher rates.
Financial progress
Platform AuM increased by 21% to £2.6 billion. This was driven by a 21%
increase in BTL Platform AuM to £1.8 billion and a 19% increase in short-term
Platform AuM to £0.8 billion. I'm pleased to observe the growing momentum of
our market-leading broker portal for short-term mortgages. There is
significant potential to expand this product, especially as we consolidate all
our products into a single portal and establish seamless transitions between
them.
Net operating income increased by 8% to £54.7 million as we benefited from a
21% increase in BTL Platform AuM. This was partly offset by a 37% reduction in
net fee income as we sold fewer loans to J.P. Morgan, as they no longer met
minimum income levels due to the increase in swap rates.
In December 2022, we entered the residential mortgage market, a significant
driver of our future growth and a demonstration of the Board's confidence in
our ability to deliver value in the long term. The launch costs drove the 30%
decrease in adjusted EBITDA to £14.3 million, followed by higher impairment
charges. These also impacted PBT which increased by 1% to £14.3 million.
Strategic progress
This year, despite macro headwinds, we have remained true to our ethos as an
innovative lender by delivering new tailored products to our customers to meet
their changing needs. In October, we introduced a Tracker product range to
provide more options to borrowers seeking to navigate market volatility and
interest rate fluctuations. Shortly after, we unveiled our Stepped Bridge
product, designed for borrowers seeking shorter term finance with rate
increases at intervals throughout the loan term. Our ability to swiftly
provide new or adapted products based on our customers' evolving needs is
underpinned by our proprietary technology.
We achieved a significant milestone in December 2022. Through a concerted
company-wide effort, we successfully launched into the UK residential mortgage
market.
This strategic move allows us to expand into a market segment that currently
holds over £1.1 trillion of mortgages outstanding. Within this segment, our
main focus lies in borrowers who are typically underserved by traditional
lenders, specifically those with multiple incomes and self-employed
individuals.
On the funding side, we continued to grow our capital base and diversify our
FuM which increased by 23% to £3.6 billion. Our strategic priorities include
growing FuM from diverse sources and to manage an increasing proportion of
Platform AuM for third parties (instead of assets held on the Group's balance
sheet). This limits the reliance on our balance sheet to fund our growth and
reduces our credit risk exposure. In the first half of the year we: secured a
new core funding partnership with Lloyds Bank; expanded our relationship with
J.P. Morgan; completed our fourth securitisation; issued our third listed
bond; migrated our Real Estate Opportunity Fund to a new structure (LendInvest
Secured Income Fund II); called our first securitisation; and sold the
residuals in our fourth securitisation.
In the second half of the year we raised: £100 million from HSBC to support
SME house builders aiming to improve both the supply and quality of new homes
in the UK (supported by the British Business Bank); and approximately £125
million from Lloyds (taking Lloyds' capital commitments to £300 million) to
support underserved segments of the residential mortgage market.
An effective ESG strategy
Our ESG values and principles are central to our long-term success. We
recently commissioned a report to better understand our relative ESG market
positioning against other similar organisations. We were pleased to see that
we are well ahead of peers in terms of Board gender diversity; gender pay gap
on most metrics; and our commitment to Net Zero. There remains more to do and
we will continue to focus on these crucial areas in the months and years
ahead.
We are fully committed to reducing our carbon footprint and I am proud to
report that LendInvest is carbon neutral. In November 2022, we published a
Green Bond Framework, aligned with the ICMA Green Bond Principles. Future
proceeds from Green Bonds will be used exclusively to finance or refinance
loans for eligible green projects including the construction and purchase of
assets compliant with the high energy efficiency standards in the UK property
market, or enhancements to improve the energy performance of existing
properties. Our Green Bond Framework is designed to accelerate the allocation
of capital to eligible retrofit projects in the UK in an effort to decarbonise
the UK's housing stock, which is responsible for 14% of total UK greenhouse
gas emissions.
People and culture
Last year I announced several new senior appointments. I am pleased to say
that the team is working well together and has focused on delivering our
strategic objectives. Michael Evans will step down as CFO and as an Executive
Director on 31 July 2023. I would like to thank Michael for his incredible
contribution to the firm. We are sad to see him go and we wish him every
success for the future. In his place, we welcome David Broadbent who joined
the Company on 9 May 2023 and will become our CFO on Michael's departure. The
Nomination Committee will consider David's appointment to the Board at a later
date.
I would like to thank all our colleagues for their continued hard work and
commitment to the Group.
Outlook
Looking back at our achievements in what was one of the most challenging years
since the global financial crisis has reinforced my confidence in our ability
to execute successfully on our strategic objectives, our long-term growth
trajectory and the scope to optimise value for our shareholders.
Looking ahead we still face macro headwinds. Inflation is showing a slower
decline than forecast, so interest rates look like they have not yet reached
their peak. This is not a constructive backdrop for the UK property market and
we expect property prices to continue to decline. We should acknowledge that,
at present, the rental market is experiencing significant increases in rental
prices, and certain landlords are seeking to seize this opportunity by
expanding their portfolios.
Despite the challenges outlined above, we expect Platform AuM to maintain its
current growth trajectory, primarily driven by the Mortgages division. In July
2023, we announced a new £500 million partnership with Chetwood Financial to
fund residential mortgages. This new financial partnership will increase the
proportion of Platform AuM managed on behalf of third parties.
We remain confident in the resilience of our business model, our ability to
disrupt, to be agile and quickly respond to changing market conditions and to
win market share. Whilst it is early days, momentum is building for our new
residential mortgage product, a future contributor to our profitability. Gross
income is expected to increase due to growth in Platform AuM and higher
interest rates, which will also drive higher interest costs which will mute
net operating income. We expect performance in FY 2024 will be heavily
weighted towards the second half of the financial year, with the recently
announced financial partnership underpinning a stronger competitive position.
We are committed to successfully executing our strategic initiatives and
leveraging our competitive advantages. Our technology drives operational
efficiency, enhances the customer experience, and differentiates us from
competitors. Our talented and dedicated workforce is a crucial asset, enabling
us to innovate, adapt, and deliver superior service to our customers.
We are confident in our plans and the measures that we have taken to address
the prevailing business environment. While risks and challenges persist, we
believe that our proactive approach, coupled with our strategic focus and deep
industry expertise, will position us for sustainable growth and success in the
coming years.
CHIEF FINANCIAL OFFICER'S REVIEW
In order to assist our stakeholders in understanding our financial statements
and to be able to more easily compare them to our peer group, we have updated
the layout of our Consolidated statement of profit and loss. This separately
shows net interest income recognised under IFRS 9, net fee income recognised
under IFRS 15, net gains on derecognition of financial assets, and net other
income. This new presentation helps to split income generated from assets held
on our balance sheet from those managed on behalf of third parties.
Summary Consolidated statement of profit and loss
Year to Year to
31 March 2023
31 March 2022
Change
£'m £'m
%
Net interest income 38.4 26.4 45
Net fee income 11.2 17.8 (37)
Net gains on derecognition of financial assets 4.9 6.3 (22)
Net other income 0.2 - -
Net operating income 54.7 50.5 8
Administrative expenses (34.5) (31.9) 8
Impairment losses on financial assets (5.9) (4.4) 34
Total operating expenses (40.4) (36.3) 11
Profit before tax 14.3 14.2 1
Income tax charge (2.9) (3.3) (12)
Profit after taxation 11.4 10.9 5
Earnings per share for profit attributable to the ordinary equity holders of
the Group:
Basic earnings per share (pence/share) 8.3 8.3 0
Diluted earnings per share (pence/share) 8.0 8.0 0
Adjusted EBITDA 14.3 20.3 (30)
Platform AuM(1) 2,587.0 2,146.1 21
Net interest income increased by 45% to £38.4 million (2022: £26.4 million)
primarily driven by strong growth in our BTL Platform AuM which increased by
21% to £1.8 billion (2022: £1.5 billion) taking total Platform AuM to £2.6
billion (2022: £2.1 billion). Net interest income is recognised on loans and
advances held on the balance sheet and for BTL it decreased by 22% to £0.8
billion (2022: £1.0 billion). However, we completed the sale of the residual
economic interest in two of our securitisations, which led to the
derecognition of £280 million of BTL loans in August 2022, and an additional
£212 million of loans in March 2023. These assets contributed net interest
income prior to derecognition.
Net interest income also benefited from a £9.2 million gain recognised on the
exercise of the call option in our first securitisation, Mortimer BTL 2019-1
plc. The issued securities (loan notes) designated in a cash flow hedge were
settled and derecognised, resulting in the derivative fair value gains
previously deferred in the cash flow hedge reserve (OCI) being recycled to the
P&L.
Net fee income decreased by 37% to £11.2 million (2022: £17.8 million). This
was largely driven by a 71% decrease in net fees on origination of loans to
third parties to £2.0 million (2022: £6.8 million). The decline in loan
sales to J.P. Morgan was the main factor behind this reduction, as these loans
failed to meet the required minimum income levels due to the increase in swap
rates. Additionally, there has been a 17% decrease to £8.0 million (2022:
£9.6 million) in net fees on asset management due to performance fees not
being received from our Luxembourg-based real estate funds (2022: £0.8
million) as investors did not receive minimum income levels due to higher
levels of impairment provisions in the fund. Finally, a 12% decrease to £2.9
million (2022: £3.3 million) in fees received from the self-select platform
was due to slightly higher rates paid to investors, reflecting the wider
economic backdrop.
Net gains on derecognition of financial assets decreased by 22% to £4.9
million (2022: £6.3 million). The volatile market backdrop resulted in the
origination of fewer structured bridging and development loans which would
normally have been sold to our Luxembourg real estate funds.
Administrative expenses increased by 8% to £34.5 million (2022: £31.9
million), or by 14% if the prior year exceptional costs relating to the
listing on the London Stock Exchange are excluded. This increase reflects the
investment we have made in our people during the year as we have built the
infrastructure to launch our new residential mortgage product.
Impairment losses have increased by 34% to £5.9 million (2022: £4.4
million). More than 90% of the charge in the year related to two legacy
defaulted loans as those positions deteriorated materially given the economic
backdrop. We have seen a 25% increase in loans in stage 2 as some borrowers
have shown signs of credit deterioration reflecting the weaker macroeconomic
conditions over the year. The impairment increases related to this were
largely offset by impairment releases as loans were derecognised from our
balance sheet.
In line with the guidance we provided in October 2022, profit before tax is
consistent with 2022 at £14.3 million (2022: £14.2 million). This reflects:
lower lending levels; net interest margin compression, as our funding rates
increased more rapidly than our lending rates, driven by fast-rising interest
rates; and higher administrative expenses, linked to building the headcount
and infrastructure for our new residential mortgage product, including ongoing
costs incurred prior to launch. It has been partially offset by higher net
interest income, which increased 45% to £38.4 million (2022: £26.4 million).
Profit after tax increased by 5% to £11.4 million (2022: £10.9 million). The
effective tax rate in the year was 20% which is slightly higher than the
corporate tax rate of 19% due to an adjustment for an under-provision of
deferred tax in the prior year.
Adjusted EBITDA decreased by 30% to £14.3 million (2022: £20.3 million),
primarily driven by higher non-exceptional administrative expenses and
impairment losses.
Basic earnings per share was flat at 8.3p per share (2022: 8.3p per share) and
diluted earnings per share was also flat at 8.0p per share (2022: 8.0p per
share)
Lending product highlights
Year to 31 March 2023 Year to 31 March 2022
Short-term Short-term
lending
lending
BTL Central Total
BTL Total
£'m
£'m
£'m £'m £'m £'m £'m
Statement of profit and loss:
Net interest income 8.7 29.7 38.4 9.7 16.7 26.4
Net fee income 8.1 3.1 11.2 11.7 6.1 17.8
Net gains on derecognition of financial 1.1 3.8 4.9 2.6 3.7 6.3
assets
Net other income - - 0.2 0.2 - - -
Net operating income 17.9 36.6 0.2 54.7 24.0 26.5 50.5
As at 31 March 2023 As at 31 March 2022
Short-term lending BTL Total Short-term lending BTL Total
£'m £'m £'m £'m £'m £'m
Platform AuM (unaudited) 767.7 1,819.3 2,587.0 646.0 1,500.1 2,146.1
Statement of financial position
- Loans and advances 329.9 793.0 1,123.9 186.5 1,022.6 1,209.1
Buy-to-Let lending
Platform AuM for BTL products increased by 21% to £1.8 billion (2022: £1.5
billion). The interest rate swap curve saw a sharp rise in H1 FY23, which
prompted us to raise our lending rate accordingly. As previously indicated,
this in turn affected demand in H2 FY23. We continually diversify our
partnerships with various financial institutions and in July 2023, we
announced a new £500 million partnership with Chetwood Financial to fund our
BTL and residential mortgage origination products. This will strengthen our
proposition and result in future BTL lending being predominantly sold to third
parties. Considering the current market conditions, we anticipate a rise in
demand in H2 FY24 as we expect more balanced competition between lenders with
retail deposits and those without.
Net operating income from BTL grew by 38% to £36.6 million (2022: £26.5
million). The increase was driven by higher net interest income, increasing by
78% to £29.7 million, partly due to higher gross interest received on loans
with interest income calculated using the effective interest rate increasing
by 27% to £42.9 million (2022: £33.9 million). Additionally, other interest
and similar income increased by 325% to £5.1 million (2022: £1.2 million).
This reflects mark-to-market gains from pipeline hedges generated as swap
rates sharply increased during the year to 31 March 2023.
Interest expense for BTL has remained consistent at £18.3 million (2022:
£18.4 million), this is largely due to a £9.2 million gain recognised
through interest expense from the exercise of the call option in our first
securitisation, Mortimer 2019-1 BTL plc. This large gain was linked to the
rise in interest rates over the years and offsets a corresponding increase in
interest expense across the rest of the portfolio.
Loans and advances decreased by 22% to £793 million (2022: £1,023 million).
During the year, we sold the residual economic interest in two of our
securitisations leading to the assets being derecognised at that point. These
comprised £280 million of BTL loans in August 2022, and an additional £212
million of loans in March 2023.
Short-term lending
Short-term Platform AuM increased by 19%, driven by the successful launch of
the broker portal in December 2021 and an increase in lending, specifically on
short-term mortgages (bridging loans up to £3 million), which the portal is
focused on. This is also reflected in the 77% increase in loans and advances
as those loans are usually funded on our balance sheet.
Net interest income decreased by 10% to £8.7 million (2022: £9.7 million).
The Group does not hedge its variable funding due to the short-term nature of
the loans. As funding costs rose more quickly than the commensurate increases
in borrower rates during the year, this resulted in lower net interest income.
This is expected to improve as interest rates stabilise.
Net fee income decreased by 31% to £8.1 million (2022: £11.7 million). This
is largely due to £2.8 million lower fees generated from our Luxembourg funds
through lower management and performance fees, as well as share creation fees
due to lower investment raised into the funds. Net gains on derecognition of
financial assets decreased by 58% to £1.1 million (2022: £2.6 million) as
fewer loans have been sold to the Luxembourg funds compared to the prior
period.
Cash flow
Year to Year to
31 March
31 March 2022
2023
(restated)
£'m
£'m
Net cash outflow from operations 1.3 (147.9)
Net cash outflow from investing activities (8.5) (3.4)
Net cash inflow from financing activities (64.3) 207.3
Net increase/(decrease) in cash and cash equivalents (71.5) 56.0
Cash and cash equivalents at beginning of the period 118.2 62.2
Cash and cash equivalents at end of the period 46.7 118.2
Cash and cash flow
Cash and cash equivalents decreased by 60% to £46.7 million (2022: £118.2
million). £33.0 million of the £71.5 million reduced balance is restricted
for loan funding purposes. The remaining cash balance decreased 65% to £13.7
million (2022: £39.4 million). This decrease is linked to an increase in our
balance sheet lending, whereby we co-invest between 5-8% of our own cash
alongside any of our financial partnerships. This accounts for £18.6 million
of this reduction during the year. We completed a portfolio sale of £250.0
million of BTL loans in May 2023, which released some of this equity back into
the business for future lending. Additionally, we paid £7.9 million of
dividends during the year (2022: nil), £6.1 million related to the prior full
year dividend and £1.8 million as an interim dividend for the year ended 31
March 2023.
Dividends
The Board remains confident in the growth prospects of the business and,
therefore, will recommend a final dividend of 3.2p per share resulting in a
full year dividend of 4.5p per share subject to the shareholders' approval at
the forthcoming Annual General Meeting. If approved, the final dividend will
be paid on 13 October 2023 to shareholders on the register at close of
business on 15 September 2023. The shares will go ex-dividend on 14 September
2023.
STRATEGY SUMMARY AND PROGRESS
Our Strategy - is to harness technology to disrupt one of the few remaining
verticals in UK financial services
To best tackle this problem, we have redefined our business operations into
two divisions:
LendInvest Mortgages which comprises our mortgage products. This includes BTL
mortgages and residential mortgages and short-term mortgages.
LendInvest Capital which comprises our investment products, (funds and our
self-select platform) and more bespoke property finance solutions such as
development and structured property finance.
The rationale behind dividing our product offering into these two divisions is
to bring together the products that share the same characteristics. Across
LendInvest mortgages we use similar processes for originations, loan
management and technology. LendInvest Capital brings together our more complex
products with bespoke processes. These usually need expert input and a
people-centric relationship approach. It also allows us to better communicate
with these two different audiences to deliver the highest quality customer
experience for our borrowers, intermediaries and investors.
Our core strategy is to:
(i) Grow - our global investor base with new major funding partnerships
We grow our platform investor base (our "FuM") by taking advantage of
prominent, developing trends that include a shift towards private debt, a
growing preference for real assets, and alternatives with an ESG focus. We
match the investment requirements of bank treasuries, pension funds and
insurance companies with the long-term, secure, stable income-producing asset
class of UK property finance.
We continue to see strong appetite from global financial institutions to
partner with LendInvest as a mortgage originator. During the year, J.P. Morgan
upsized their separate account to £1 billion; we partnered with the
government's British Business Bank and HSBC in a £100 million deal to fund
our development lending; and we entered into a £300 million deal with Lloyds
Bank to power our launch into the residential mortgage market and support our
BTL product.
Diversity of funding remains our differentiator. In the same time period we
issued our third listed retail bond raising £38 million in the process,
closed our fourth residential mortgages securitisation, and launched a new
Fund to support our development finance product. These were all organised
using the LendInvest Loan Engine which matches funding sources with loans of
the most appropriate risk profile, ensuring optimal capital allocation.
(ii) Optimise - to power our next stage of growth
We optimise our FuM by continuously seeking the most appropriate investors and
financial partners to match the risk-reward profiles of our assets, leveraging
our loan engine technology which automates and optimises loan allocation and
management.
We perform advanced data analytics to iterate our credit model and improve the
risk-adjusted returns provided to investors and financial partners. As a fast
growing and agile firm we are constantly reviewing costs to further grow
profitability and optimise shareholder returns.
In September we opened our first office outside of London, in Glasgow,
Scotland, and joined industry body Fintech Scotland. This marked an important
milestone in the company's expansion strategy to meet increasing borrower
demand for our products across the whole of the UK, and we continue to grow
our sales and operations teams in this office.
We have also continued to invest in, and deliver on, our ESG Strategy
throughout the year. Following the launch of our first full 'green' mortgage
range, developed to incentivise borrowers to build with the environment in
mind offering reduced rates for environmentally friendly properties, we
launched a Green Bond Framework, with the support of global ratings agency
S&P Global, and can now officially issue green bonds to finance our
lending. This year, third-party ESG analysis company, Kamma, declared
LendInvest carbon neutral for the year FY2023.
(iii) Expand - our product proposition and entering new markets
We expand our Platform AuM by delivering a superior service, leveraging our
Genesys technology to create a seamless application and case management
process. This leads to increased broker conversion and higher repeat rates,
resulting in a 'flywheel' effect. Our technology also enables us to launch new
products at scale, and penetrate markets that we do not yet operate in.
Entering the homeowner market with the launch of our Residential Mortgages
range has been a major milestone for the business. Designed for customers
traditionally underserved by incumbent lenders, our product range targets
those with multiple income streams, the self-employed and those with complex
incomes.
The economy has undoubtedly tested all borrowers this year. As a result the
team prioritised designing products that support borrowers and the unique
problems they may be facing at this time.
In October we launched a Tracker product range to support borrowers in
response to market volatility and interest rate fluctuations. This was
followed by our Stepped Bridge product, which rate increases at intervals
throughout the term of the loan, for borrowers looking for shorter-term
finance at an accessible initial rate. At the same time we also launched
Automated Valuation Models (AVMs) for a wider product range, increasing
accessibility and flexibility for borrowers.
(iv) Invest - in our platform, to deliver a market-leading customer experience
We continue to innovate and invest in our technology infrastructure, further
improving the customer experience. Focus on technology development provides a
platform for the launch of new products and offerings that will provide more
growth opportunities for our business.
Delivering innovative products at speed is made possible by our Genesys
platform. Throughout the year the team has developed and released a range of
new additions to the platform and customer portals, including the launch of
the new Residential Mortgages product within the platform. The team also
released an integration that allows the broker to access a panel of solicitors
and exchange key documents digitally, and implemented AVMs from Rightmove to
speed up the valuation process.
KEY PERFORMANCE INDICATORS
Platform AuM £2,587.0 million
What we measure
In simple terms, Platform AuM is the outstanding amount of money our customers
have borrowed from us. The more they borrow, the more we can earn. In less
simple terms, we measure Platform AuM as the (i) total amount of outstanding
loans and advances(1) and (ii) off-balance sheet assets, which is the total
amount of outstanding loans and advances(2) that we originate but do not hold
on our balance sheet, comprising those loans that are held by third parties.
How we performed
Platform AuM increased 21% to £2.6 billion driven by a 21% increase in BTL
Platform AuM to £1.8 billion as we continued to release new products to help
support landlords during a rising interest rate environment. Additionally, we
have seen a 40% increase to £0.3 billion in bridging loans completed through
the new broker portal that was introduced during December 2021.
FuM £3,605.9 million
What we measure
In simple terms, FuM is the amount of money our investors have committed to us
to invest into the UK mortgage market on their behalf. The more money they
invest with us, the more we can lend to our borrowers - ergo, the more we can
earn. In less simple terms, FuM is the aggregate sum available to us under
each of our funding lines. Our FuM is used to originate revenue-generating
AuM. We view the difference between the FuM and Platform AuM as an indication
of headroom for future growth.
How we performed
FuM increased 23% to £3.6 billion as we received funding from Lloyds to
support the launch of our homeowner product, extending the J.P. Morgan
Separate Account and completed our fourth RMBS of £270 million BTL loans in
May 2022.
Net operating income £54.7 million
What we measure
Net Operating Income includes income generated from interest on loans and
advances, origination and loan fees, and asset management, fund and servicing
fees net of the costs associated to this income. We also generate gains on
derecognition of financial assets when we sell loans, which have previously
been held on our balance sheet, to third party investors.
How we performed
Net operating income increased 8% to £54.7 million reflecting higher fees and
interest income generated as a result of the increase in Platform AuM, partly
offset by a reduction in gains on derecognition of financial assets.
Adjusted EBITDA £14.3 million
What we measure
The adjusted EBITDA figure represents our earnings before interest, tax,
depreciation and amortisation, adjusted for any non-cash income or expense
items. Growth in adjusted EBITDA supports our free cash flow which helps fund
our investments for growth and shareholder returns.
How we performed
Adjusted EBITDA decreased by 30% to £14.3 million driven by higher
non-exceptional administrative expenses - largely related to the launch of the
new residential mortgage product, as well as higher impairment charges.
Profit before tax £14.3 million
What we measure
The Group's profits before consideration of taxation.
How we performed
Profit before tax increased by 1% to £14.3 million. The challenging
macroeconomic environment resulted in the Group suffering a reduction in net
interest margin as interest costs grew faster than interest revenue.
Diluted EPS 8.0p
What we measure
Growth in diluted EPS reflects the increase in profitability of the business,
change in the tax rate and is adjusted for the effects of potentially dilutive
share options.
How we performed
Diluted EPS remained flat at 8.0p
1 Includes accrued interest, and gross of impairment provisions and fair value
adjustments, as reported on an IFRS basis in the notes to the accounts in our
financial statements.
2 Includes accrued interest.
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 2023
and of the Group's profit 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 2023
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 significant
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 Groups past experience of extending the maturity of
facilities, their discussions with new providers of funding and experience of
portfolio sales ;
● enquiring with the Directors and assessing the continued
economic impact of the cost of living crisis and developments in Ukraine on
the business and whether the impact thereof has been adequately factored into
their assessment of going concern; 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
100% (2022: 100%) of Group profit before tax
Coverage 100% (2022: 100%) of Group revenue
100% (2022: 100%) of Group total assets
2023 2022
Fraud in Revenue recognition
Determination of expected credit loss (ECL)
Valuation techniques of loans and advances
Key audit matters
Group financial statements as a whole
Materiality
£712,000 (2022: £711,000) based on 5% (2022: 5%) of Profit Before Tax.
Materiality
Group financial statements as a whole
£712,000 (2022: £711,000) based on 5% (2022: 5%) of 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-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.
In addition, there were 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
Fraud in Revenue recognition The amounts reported in relation to revenue represent information of Interest income
significant interest to many users of the financial statements. This puts
revenue at a greater risk of manipulation, bias and misstatement. Having
regard to the potential for fraud in relation to revenue recognition, we
The Group's accounting policies are disclosed in Note 1.8. identified the following as areas of significant risk of material We have reviewed the revenue recognition policies adopted by the Group, to
misstatement: check these are in accordance with requirements of the applicable accounting
standards. This includes an assessment of the types of fees and costs being
spread within the EIR models to determine if these should be recognised under
The effective interest rate adjustment for the year is included in Total
IFRS 9 or IFRS 15.
Interest and Similar Income as disclosed in note 6. Interest income
Interest income must be recognised using the effective interest rate ("EIR")
in accordance with IFRS 9: Financial Instruments. The behavioural life of loan We have assessed the completeness and accuracy of data and key model inputs
As disclosed in Note 9 the gain on de-recognition of securitised loan customers is necessary to accurately recognise interest income but highly feeding into the EIR models by selecting samples and agreed them back to the
portfolios is £4.5m (2022: Nil). subjective and involves the use of management's judgement and estimation. system or source documents.
Management is also in a unique position to manipulate financial results, by We have challenged the reasonableness of the loan behavioural life assumptions
recognising interest income on loans that have been sold and no longer held by used by management considering historical experience of loan behavioural lives
the Group. based on customer behaviour and recent performance.
We have performed sensitivity analysis on key EIR management judgments and
estimates such as the behavioural life assumptions applied when assessing
Gains on derecognition of financial assets future cashflows.
Loans are derecognised by the Group or Company, by way of "normal" transfer Using data analytics we have identified those facilities which have moved off
off balance sheet in the course of standard business operations or via balance sheet and have selected a sample of these and agreed to supporting
securitisation transactions. documents that the interest recognised within the entity in the year has the
contractual rights to recognise interest income.
LendInvest have entered into a number of transactions during the year which
either re-financed, or disposed of, the residual interest in securitisation Gains on derecognition of financial assets
arrangements. These transactions have led to gains either through settlement
of the transaction or through triggering a loss of control that crystalises
fee income and expense in respect of the de-recognised loan portfolios.
We have reviewed the Regulatory News Service ('RNS') announcements to identify
These transactions are complex and have resulted in material gains. any transactions which relate to de-recognition of financial assets.
We have obtained a listing of all financial assets, de-recognised during the
period and assessed the validity of the de-recognition of these assets, in
line with the supporting contracts. We have assessed the application of (loss
of) control, in accordance with IFRS 10: Consolidated Financial Statements.
We have obtained a breakdown of the crystallised fees and tested the
transactions, to check these are correctly accounted for, under the applicable
accounting standards. This was done by agreeing that the amount in respect of
crystallised fees post disposal amounted to zero.
For the samples selected, we have verified all key inputs and journal entries,
which support the calculation of the Gain on de-recognition of financial
assets, with reference to third party supporting documentation where possible.
For financial assets derecognised, we have obtained assurance by testing the
completeness of interest income to the underlying system and checked that no
income post derecognition of loans, have been recorded in the general ledger.
Key observations:
We have not identified any indicators that the assumptions included in the EIR
models are unreasonable in consideration of the Group's mortgage portfolio.
Based on our audit work performed and the evidence obtained, we concluded that
that the accuracy of the gains on derecognition of assets was appropriate
and accounted for appropriately.
Determination of expected credit loss (ECL) Commensurate with the activities of the Group, the total loan loss provision Accuracy of forward-looking information
is a material balance subject to management judgement and estimation.
The Group's accounting policies are disclosed in note 1 with detail about
We have engaged internal credit and econometric experts to assist in
judgements in applying We have assessed the elements of the ECL calculation which will significantly assessing the appropriateness of the regression models and the source and type
impact the determination of the ECL as follows: of macro economic variables used such as GDP and unemployment data.
Accounting policies and critical accounting estimates in note 1.22.
Accuracy of forward-looking information We have challenged management on the rationalisation of any changes made to
As disclosed in Note 19 the ECL Provision at year-end is £9.1m (2022: £11m).
information obtained from external sources and have checked its
appropriateness to the current lending portfolio.
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 We have assessed the reasonability of multiple economic scenarios used and
forward-looking macroeconomic inputs and weighting of the scenarios is weighting by considering the number of scenarios selected based on managements
considered a significant risk across all three portfolios, especially in the support.
continued downturn of the current economic environment.
We have obtained an understanding of management's process and identified and
Moreover, there is also a risk that management overlays applied to the model tested key controls relating to post model adjustments, such as approval from
are not directionally consistent with observable macro-economic variables and appropriate governance committees and completeness and accuracy of management
forward-looking information. As model recalibration and rebuild options are overlays.
not always practical, management implement post model adjustments to bridge
the gap between outdated models and recalibrating them for current events.
While the use of post-model adjustments is susceptible to management bias,
there is also a risk that these are not applied at the most granular level We have tested the completeness of the data used for management overlays and
possible. As these are adjustments posted outside of the ECL model, management assessed if other overlays are required, based on our experience. We have
overlays are subject to management bias and significantly judgemental area of tested the arithmetical accuracy of the overlay.
audit.
Carrying value (loss given default) of individually assessed Stage 3 (credit
Carrying value (loss given default) of individually assessed Stage 3 (credit impaired) loans.
impaired) loans
We have selected a sample of individual assessment cases at 31 March 2023.
The carrying value of loans and advances to customers may be materially We have challenged management on the key inputs into these scenarios by
misstated if individual impairments are not appropriately identified and obtaining supporting evidence for recovery strategies, collateral values, exit
estimated. These estimates involve complex recoverability scenarios which strategies, scenario weighting, expected timing of cash flows and engaging
involve multiple differing recovery options where the timing and quantum of internal experts as required in support of our assessment. We have assessed
recovery's are subject to significant management judgments and estimates and the accuracy and validity of data that feeds into the individual assessment
the probability of scenarios weighting as recovery cashflows can differ cases as well as the progress on the preferred recovery scenario being pursued
materially between individual scenarios. to supporting documentation. Based on supporting case 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 assessment.
Key observations:
Based on our audit work performed, we consider the estimates 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 business model requires the Group to measure the majority of the We have undertaken sensitivity analysis on the discount rates and ascertained
loan book at Fair value through Other Comprehensive Income which requires how susceptible the fair valuation of the model is to manipulation and
modelling to determine the fair value adjustment to be applied to Loans and material misstatement.
Advances.
The Group's accounting policies are disclosed in note 1 with detail about
judgements in applying
With the use of our internal valuation experts we:
Accounting policies and critical accounting estimates on note 1.22. The measurement of the loan book at fair value requires modelling which is
subject to material management judgments and assumptions in the determination ● evaluated how the models calculated the fair value of the loan
of the discount rate used to discount future cashflows. portfolios.
As disclosed in Note 19 the Fair Value Adjustment at year-end is -£35.5m ● evaluated the selection of key estimates and judgments that feed
(2022: £5.2m).
into the models, in particular the discount rates applied in the models. We
The Group's models are materially sensitive to small changes in the discount also checked that the calculations of the models are in line with relevant
rate assumption, particularly in the 'Buy-to-let' portfolio and therefore this accounting standards.
area is considered a significant risk.
● assessed the models to check whether the fair values determined by
management sit within our assessed acceptable reasonable range.
We recalculated the computations of the discount rates, agreeing inputs used
to supporting documentation.
With the assistance of our valuations expert team we have reviewed and
benchmarked the discount rates to external data sources where appropriate.
With the support of our valuation expert team, we have assessed the models to
determine whether the fair values determined by management sit within our
assessed acceptable range.
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
2023 2022 2023 2022
£ £ £ £
Materiality 715,000 711,000 421,000 510,000
Basis for determining materiality 5% of profit before tax 5% of profit before tax 7.5% of profit before tax
Rationale for the benchmark applied As this is a listed entity, profit before tax is a significant metric and
influential to the investor group. Therefore, profit before tax is considered
to be the most appropriate benchmark.
Performance materiality 536,000 533,250 315,000 382,500
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 £2 to £564,000 (2022: £34,000 to £510,000) based on allocating
materiality using relevant benchmarks . In the audit of each component, we
further applied performance materiality levels of 75% (2022: 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 £21,000 (2022: £14,220). 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.
1
2 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 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:
3
● 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,
determination of expected credit loss (ECL) and valuation techniques of loans
and advances.
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
(http://insite.bdo.co.uk/sites/audit/Documents/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.
Ariel Grosberg (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
17 July 2023
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 Year ended Exceptional listing expenses Year ended
31 March 2022 before exceptional items (restated(1))
31 March 2022 (restated(1))
31 March 2023
£'m
£'m £'m
£'m
Interest income calculated using the effective 6 68.1 58.6 - 58.6
interest rate
Other interest and similar income 6 5.1 1.2 - 1.2
Interest expense and similar charges 7 (34.8) (33.4) - (33.4)
Net interest income 38.4 26.4 - 26.4
Fee income 8 13.5 22.7 - 22.7
Fee expenses 8 (2.3) (4.9) - (4.9)
Net fee income 11.2 17.8 - 17.8
Net gains on derecognition of financial assets 9 4.9 6.3 - 6.3
Net other operating income 0.2 - - -
Net operating income 54.7 50.5 - 50.5
Administrative expenses 10 (34.5) (30.3) (1.6) (31.9)
Impairment losses on financial assets (5.9) (4.4) - (4.4)
Total operating expenses (40.4) (34.7) (1.6) (36.3)
Profit before tax 14.3 15.8 (1.6) 14.2
Income tax charges 13 (2.9) (3.3) - (3.3)
Profit after taxation 11.4 12.5 (1.6) 10.9
Earnings per share for profit attributable
to the ordinary equity holders of the Group:
Basic earnings per share (pence/share) 34 8.3 8.3
Diluted earnings per share (pence/share) 34 8.0 8.0
All amounts relate to continuing activities and to owners of the Group.
1 ( ) Refer to note 1.6 for changes to the presentation of
the Consolidated statement of profit and loss. The restatement of figures in
the prior year relates to the change in presentation only.
Consolidated statement of other comprehensive income
Note Year ended Year ended
31 March 2023 31 March 2022 (restated(1))
£'m £'m
Profit after taxation 11.4 10.9
Other comprehensive (loss)/income:
Items that will or may be reclassified to profit or loss
Fair value loss on loans and advances measured at fair value through other 19 (35.0) (22.7)
comprehensive income
Cash flow hedge adjustment through other comprehensive income 3 (4.8) 29.2
Deferred tax credit on fair value movement 13 8.8 3.5
Deferred tax credit/(charge) on cash flow hedge movement 13 1.2 (7.1)
Other comprehensive (loss)/income for the year (29.8) 2.9
Total comprehensive (loss)/income for the year (18.4) 13.8
1( ) Refer to note 1.25
Consolidated statement of financial position
Note As at As at
31 March 2023 31 March 2022 (restated(1))
£'m £'m
Assets
Cash and cash equivalents 18 46.7 118.2
Trade and other receivables 17 6.1 6.3
Loans and advances 19 1,122.9 1,209.1
Fair value adjustment for portfolio hedged risk asset 3/26 0.1 -
Investment securities 20 23.9 -
Derivative financial asset 27 46.0 32.5
Property, plant and equipment 15 2.2 2.8
Net investment in sublease 2 1.0 1.2
Intangible fixed assets 16 10.5 6.1
Investment in joint venture 29 0.2 -
Investment in third parties 30 2.0 -
Deferred taxation 13 1.2 -
Total assets 1,262.8 1,376.2
Liabilities
Trade and other payables 21 (23.7) (45.8)
Corporation tax payable - (0.4)
Interest-bearing liabilities 22 (1,159.3) (1,214.1)
Lease liabilities 2 (3.3) (4.1)
Deferred taxation 13 - (8.5)
Total liabilities (1,186.3) (1,272.9)
Net assets 76.5 103.3
Equity
Share capital 23 0.1 0.1
Share premium 23 55.2 55.2
Employee share reserve 3.3 2.7
Own share reserve (0.6) 0.1
Fair value reserve 24 (16.5) 9.5
Cash flow hedge reserve 24 16.1 19.8
Retained earnings 24 18.9 15.9
Total equity 76.5 103.3
1( ) Refer to note 1.25
The financial statements of LendInvest plc (registration number 08146929) on
pages [75 to 118] were approved and authorised for issue by the Board of
Directors on [5 July 2023] and were signed on its behalf by:
Michael Evans
Director
Consolidated statement of cash flows
Cash flow from operating activities Note Year ended Year ended
31 March 2023 31 March 2022 (restated)
£'m £'m
Profit after taxation 11.4 10.9
Adjusted for:
Depreciation of property, plant and equipment 15 0.2 0.1
Amortisation of intangible assets 16 1.9 2.6
Transfer of share option costs (0.6) -
Income tax expense 13 2.9 3.3
Derivative, hedge accounting and committed facility fair value profits 3.3/3.4 (35.2) (1.0)
Funding line costs 7 3.2 0.2
Impairment provision 5.9 4.6
Depreciation of right-of-use asset 2/15 0.6 0.9
Interest expense - lease liability 2 0.5 0.5
Costs relating to market listing - 1.6
Equity-settled share-based payments 25 2.0 1.1
Net gain on derecognition of loans and loan portfolios 9 (1.1) -
Gain on disposal of residual interest 20 (3.8) -
Income from sublease (0.2) -
Change in working capital
Decrease/(increase) in gross loans and advances 20.2 (187.6)
Cash consideration for sold residuals 12.7 -
Derivative settlements 26.1 -
Swap initial exchange 27 (18.2) -
Decrease in trade and other receivables 17 0.2 0.1
(Decrease)/increase in trade and other payables 21 (24.9) 18.5
Income taxes paid (2.5) (3.7)
Cash from / (used in) operating activities 1.3 (147.3)
Cash flow used in investing activities
Purchase of property, plant and equipment 15 (0.2) (0.2)
Capitalised development costs 16 (6.3) (3.2)
Increase in investment in joint ventures (0.2) -
Increase in investment in third parties (2.0) -
Income from sublease 0.2 -
Net cash used in investing activities (8.5) (3.4)
Cash flow from financing activities
Proceeds to fund securitisation repayments 176.1 -
Redemption of securitisation facilities (188.1) -
(Decrease)/increase in interest-bearing liabilities (20.3) 173.9
Proceeds from the issuance of retail bonds 9.3 -
Repayment of retail bonds (28.1) -
Cost of bond issuance (0.5) -
Principal elements of finance lease payments 2 (0.9) (0.9)
Interest expense - lease liabilities 2 (0.5) (0.5)
Proceeds from an equity share issue - 40.0
Cash settlement of derivative losses - (1.2)
Equity raise costs - (3.9)
Funding line costs (3.5) (0.1)
Dividends paid (7.8) -
Net cash (used in) / from financing activities (64.3) 207.3
Net (decrease)/increase in cash and cash equivalents (71.5) 56.0
Cash and cash equivalents at beginning of the period 18 118.2 62.2
Cash and cash equivalents at end of the period 18 46.7 118.2
Interest received was £58.5 million (2022: £56.6 million) and interest paid
was £47.4 million (2022: £25.6 million).
Consolidated statement of changes in equity
Note Share capital Share premium Own share reserve Employee share reserve Fair value reserve net of deferred tax Cash flow hedge reserve net of deferred tax Retained earnings Total
£'m £'m £'m £'m £'m £'m £'m £'m
Balance as at 31 March 2021 (restated(1)) - 17.5 - 1.6 28.9 (2.4) 4.4 50.0
Profit after taxation - - - - - - 10.9 10.9
Fair value adjustments on loan and advances through OCI - - - - (19.4) - - (19.4)
Employee share scheme tax - - - - - - 0.6 0.6
Cash flow hedge adjustment through OCI - - - - - 22.2 - 22.2
Employee share options schemes - - - 1.1 - - - 1.1
Bonus issue of free shares funded by share premium 0.1 (0.1) - - - - - -
Issue of new shares on IPO - 40.0 - - - - - 40.0
Cost incurred in issuing new shares - (2.2) - - - - - (2.2)
Own shares held in SIP trust - - 0.1 - - - - 0.1
Balance as at 31 March 2022 (restated(1)) 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 - - - - (26.0) - - (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
1 ( ) Refer to note 1.25
Notes to the financial statements
1. Basis of preparation and significant 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 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. 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. More
information on the Directors' assessment of going concern is set out in the
Directors' Report.
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 58 . 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.
LendInvest plc transitioned to UK-adopted international accounting standards
in its consolidated financial statements on 1 April 2021. This change
constitutes a change in accounting framework. However, there is no impact on
recognition, measurement or disclosure in the period reported as a result of
the change in framework.
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 1.22. 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 pound sterling ("£")
and its financial statements are presented in pounds sterling, which is the
Group's and 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 IBOR reform amendments
The IASB issued a Phase 1 Amendments to IAS39, IFRS 9 and IFRS7 for IBOR
Reform in September 2019. The amendments provide temporary relief from
applying specific hedge accounting requirements to hedging relationships
directly affected by IBOR reform. The reliefs have the effect that IBOR reform
should not generally cause hedge accounting to terminate.
In prior periods, the Group adopted specific amendments that provide temporary
relief to the requirements of its fair value hedge accounting for a portfolio
hedge of interest rate risk ("macro hedge"); these are:
● Risk components - the Group separately identifies an interest rate
risk component only at initial hedge designation and not an ongoing basis.
● IAS 39 prospective assessments - the Group assumes that interest rate
cash flows of the hedged item and hedging instrument do not change as a result
of IBOR reform.
● IAS 39 retrospective effectiveness test - if the effect of IBOR reform
results in fair value changes that cause hedge effectiveness to fail the
prescribed 80%-125% range, hedge accounting is not discontinued.
The amendments set out triggers for when the reliefs are to end, which include
the uncertainty arising from interest rate benchmark reform no longer being
present.
During the year ended 31 March 2022, the Group had transitioned the entirety
of its interest rate swap portfolio to a SONIA index and all interest rate
swap agreements entered into since are indexed to SONIA. The newly originated
BTL loans with a fixed interest term that form the hedged item carry a
reversion rate indexed to BBR which is closely aligned to the SONIA. As such,
the uncertainty arising from the interest rate benchmark reform with respect
to hedge accounting no longer applies to the Group. The Group has not applied
the phase 1 amendments for IBOR reform to the hedge results presented in these
financial statements.
For the year ending 31 March 2023, the Group's risk exposure that is directly
affected by the IBOR reform is a portfolio of BTL fixed-rate mortgages, that
revert to a floating rate indexed to LIBOR after a fixed term, £380.4 million
(2022: £622.6 million). £38 million of these loans have entered the
reversion period and further £134 million is expected to revert to a LIBOR
floating index before the Group transitions the entirety of this portfolio of
buy-to-let loans to a BBR index by March 2024.
Since 2021 Q1, the Group has originated buy-to-let mortgages with a BBR
reversion index. In September 2021, the FCA announced that it would permit and
support the use of synthetic LIBOR with respect to legacy contracts that had
proved difficult to transition. The FCA has not set a date for the withdrawal
of synthetic LIBOR, but has compelled the IBA to continue to publish synthetic
three-month LIBOR settings up until 28 March 2024.
Synthetic LIBOR fixing is an aggregate of the risk free rate and a fixed
spread. The fixed spread element of the synthetic LIBOR rate will generate a
maximum additional £0.2 million of interest revenue on the LIBOR indexed BTL
portfolio prior to transition to BBR.
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 April 2023 and are not expected to have a
material impact on the Group:
● IAS 1 (Amendment to classification of liabilities as current or
non-current when settlement date is uncertain).
● IAS 1 (Amendment regarding disclosures of accounting policies).
● IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment - Definition of an accounting estimate, and distinction between
change in accounting estimate and change in accounting policy).
● IAS 12 Income Taxes (Amendments regarding deferred tax on leases).
● IFRS 16 Leases (Amendments to clarify how a seller-lessee subsequently
measures sale and leaseback transactions).
1.4 Foreign currency
Items included in the financial statements are measured using the functional
currency and are recorded at the rates ruling when the transactions occur.
Foreign currency monetary assets and liabilities are translated at the rates
ruling at the reporting date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised
immediately in the statement of profit and loss.
1.5 Cash and cash equivalents
Cash and cash equivalents comprise 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.
1.6 Changes in the presentation of the Consolidated statement of profit and
loss
The purpose of IAS 1 - Presentation of Financial Statements - is to prescribe
the basis of general purpose financial statements, to ensure comparability
both within the entity's financial statements of previous periods and the
financial statements of other entities. During the year, the composition of
the Consolidated statement of profit and loss has been amended to more clearly
reflect the nature of the profits from operations and to align the
Consolidated statement of profit and loss to wider industry standards to
enable comparability.
The cost of sales and gross profit lines items as reported in the Consolidated
statement of profit and loss in prior periods are not terms generally
associated with financial services entities and the components of this line
item has been reclassified to enhance comparability to our peers, in the
following way:
The interest expense and funding line costs line items are directly related to
the derivation of interest on loans and advances under IFRS 9 - Financial
Instruments, and are reported as an element of net interest income.
Origination fees, and asset management and fund fees, relate to fee income
under IFRS 15 - Revenue recognition, and are reported as a component of net
fee income. Please refer to notes 6-9 for enhanced disclosure of the
composition of the amended line items.
The revised layout is a truer reflection of these two main categories of
profit drivers:
● Net interest income: reflective of profits/losses from interest and
similar charges accounted for under the effective interest rate basis as
prescribed by IFRS 9 - Financial Instruments.
● Net fee income: reflective of profits from fees and similar income
accounted for under IFRS 15 - Revenue from Contracts with Customers.
The table below shows the comparative position for those items which have been
reclassified and where those amounts have been reclassified to in the
Consolidated Statement of profit and loss.
Consolidated statement of profit and loss extract
Year ended
31 March 2022
£'m
Gain on derecognition of financial assets 6.5
- Reported as gain on derecognition of financial assets 6.5
Cost of sales (38.1)
- Amounts reclassified to interest expenses and similar charges (33.2)
- Amounts reclassified to fee expenses (4.9)
Finance income 1.2
- Amounts reclassified to interest and similar income 1.2
Finance expense (0.4)
- Amounts reclassified to interest and similar charges (0.2)
- Amounts reclassified to gain on derecognition of financial assets (0.2)
This change has no effect on the Group's profits or net assets.
See note 1.8 for details of the recognition criteria of interest and fee
income. See note 1.9 for details and interest expense recognition criteria and
see note 1.10 for details of fee expense recognition criteria.
The term 'Gross profit' is not generally associated with financial services
entities and has been removed from the Statement of Profit and Loss. The line
items "Net Interest Income", "Net Fee Income" and "Net Operating Income" have
been added to the restated Statement of Profit and Loss to enhance
comparability with our peers.
1.7 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.
1.8 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.
Recognised under IFRS 15:
Fee income recognised in the Consolidated statement of profit and loss
represents the fees and performance obligations shown in the table below.
Revenue description within scope of IFRS 15 Category per note 8 Performance obligation Timing and satisfaction Allocation of transaction price
of performance obligation
Extension fees Fee income on When the tenure of the loan When amended tenure and/or terms are effective Allocated as % of outstanding loan balance or agreed fixed consideration,
loans and advances
extends its original contractual based on the nature of the amendment
term and/or amended loan terms are agreed with the customer
Separate account partnership fees Fee income on origination of loans Originate and transfer BTL loans Transfer of loans to customer Allocated to each loan transferred (and of loan principal)
to third parties
to customer
Servicing fees Fee income on Provide administrative loan servicing to customers Series of distinct services with Allocated to distinct services transferred forming one performance obligation
asset management
a similar pattern of transfer over time (accrued monthly in arrears)
Share creation fees Fee income on asset management To source and introduce new investment capital to customer Introduction of new funds to customer Allocated according to value of new capital (% of new capital)
Management fees Fee income on To provide management and administration of loans held by customers Series of distinct services Variable consideration on % of NAV (under management) and accrued in arrears
asset management
with a similar pattern of transfer over time monthly
Performance fees Fee income on To provide investment advisory services in the interest of Performance obligations Variable consideration accrued when hurdle rate is exceeded
asset management
achieving investment objectives
satisfied when increase in NAV (under management) exceeds hurdle rate
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.
1.9 Interest expense and similar charges
Interest expense and similar charges comprise and are recognised as follows:
● Interest expenses incurred on interest-bearing liabilities. These are
recognised on an accruals basis.
● Non-utilisation fees are incurred on any interest-bearing liabilities
that are unutilised. These are recognised on an accruals 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.
1.10 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 of 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.
1.11 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
1.12 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.
A change has been made to the accounting estimate for the useful economic life
of intangible fixed assets relating to the capitalisation of internally
developed software expenditure. These assets have previously been amortised
over a three-year period. This amortisation period has been increased to five
years following a review of the useful economic life of intangible fixed
assets previously created by the Group. This change has been applied on a
prospective basis in the Consolidated statement of profit and loss. The change
in accounting estimate has reduced the amortisation charge in the 12 month
period to 31 March 2023 from £3.5m to £1.8m. The impact on future periods is
detailed in the table below.
Future amortisation
Useful economic life NBV at Year ended Year ended Year ended Year ended Year ended
31 March 2023
31 March 2024
31 March 2025
31 March 2026
31 March 2027
31 March 2028
£'m £'m £'m £'m £'m £'m
3 years 8.8 (4.1) (3.3) (1.4) - -
5 years 10.5 (2.5) (2.5) (2.4) (2.1) (1.0)
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
1.13 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.
1.14 Administrative expenses
Administrative expenses are recognised as an expense in the Consolidated
statement of profit and loss on an accruals basis.
1.15 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.
1.16 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 19.
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 Group designates loan commitments as financial liabilities at fair value
through profit or loss. The assets that result in origination of the loans are
initially recognised at fair value adjusting for the recorded fair value to
date.
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
26.
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.
Derecognition
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.
1.17 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.
1.18 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.
1.19 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.
1.20 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.
1.21 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.
1.22 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 power, exposure or rights to variable returns, and
the ability to affect those returns through its power 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 probability of
default ("PD") should be to trigger a move between credit risk stages for
impairment requires significant judgement. Management has adopted a test-based
approach to derive objective thresholds such that credit deterioration is
recognised at the appropriate point. See note 19 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, loss given default ("LGDs"),
recovery costs and cure probabilities driven from the ECL models.
Estimates and assumptions
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 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).
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.
The central scenario represents management's current view of the most likely
economic outturn. In the period ended 31 March 2022, significant uncertainty
around the level and trajectory of UK inflation and the subsequent impacts on
the wider economy led management to increase the downside weighting. The
following weightings of the different scenarios were used across both
Buy-to-Let and short-term ECL models for the period ended 31 March 2022:
● 45%/50%/5% to the central, downside and upside scenarios.
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.
For the period ended 31 March 2023, management considers that the significant
uncertainty that led to the increased downside weighting is adequately
represented in the macroeconomic data and has reverted the scenario weightings
to those provided by the macroeconomic data source across both Buy-to-Let and
short-term ECL models as follows:
● 40%/40%/20% to the central, downside and upside scenarios.
Sensitivity analysis on ECL models
Sensitivity analyses have 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 £1.0 million.
● A 100% upside was applied to the models. This would decrease the ECL
by £1.1 million
● A 10% increase in the forced sale discount. This would increase the
ECL by £0.2 million.
● A 20% increase in the unemployment rate (peak of 5.2%). This would
increase the ECL by £0.1 million
● A 20% decrease in UK house price inflation would increase the ECL by
£0.5 million
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').See note 26 for more detailed information related to fair
value measurement.
Effective interest rate revenue recognition
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.
1.23 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.
1.24 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.
1.25 Prior period adjustments
(i) The Group has restated its March 2022 Consolidated statement of financial
position, Consolidated statement of other comprehensive income, and
Consolidated statement of changes in equity, in accordance with IFRS 9. This
requires entities which use fair value hedge accounting where the hedged
instrument compromises assets that are held at fair value through other
comprehensive income to initially recognise the fair value gains or losses of
the asset through other comprehensive income and subsequently reclassify
amounts that relate to changes in the hedged risk from equity to profit or
loss over the hedged period. For the year ending 31 March 2022, the Group
was incorrectly recognising a separate fair value gain or loss in the
Consolidated statement of financial position instead of reclassifying it
through other comprehensive income. The prior period net assets of the Group
have been increased by £5.8 million through this change. This change does not
effect the Consolidated statement of profit and loss, the retained earnings of
the Group or the earnings per share of the Group.
The comparative prior period opening Consolidated statement of financial
position has not been included as it is not considered to show a material
change to the financial statements. If shown, this would have reduced net
assets and total equity by less than £0.1 million. Total assets would have
been reduced by £2.5 million being the fair value adjustment for portfolio
hedged risk asset. Instead the hedge accounting adjustment would have been
recognised net of a deferred tax amount of £0.6 million through the
Consolidated statement of other comprehensive, resulting in a net adjustment
of £1.9 million. Total liabilities would have been reduced by £2.4 million
fair value adjustment for portfolio hedged risk liability. The adjustment
would have otherwise been reported through the Consolidated statement of other
comprehensive net of a deferred tax amount of £0.6 million, leaving in a net
adjustment of £1.8 million.
(ii) The Group has restated its March 2022 Consolidated statement of financial
position and Consolidated statement of cash flows in accordance with IFRS 9.
This requires accrued interest expense on interest-bearing liabilities to be
included in the carrying value of the liability. For the year ended 31 March
2022, the Group was incorrectly recognising accrued interest expense on
interest-bearing liabilities in trade and other payables instead of in
interest-bearing liabilities. The trade of other payables of the Group have
reduced by £2.8 million with a commensurate increase in the Group's
interest-bearing liabilities on the Consolidated statement of financial
position. An equivalent change has been made to the Consolidated statement of
cash flows from the movements in these accounts.
This change does not impact the Consolidated statement of profit and loss,
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.
The comparative prior period opening Consolidated statement of financial
position has not been included as it is not considered to show a material
change to the financial statements. If shown, this would have reduced trade
and other payables by £2.3 million and increased interest-bearing liabilities
by £2.3 million.There would be no change to total liabilities, net assets or
total equity.
Restated Consolidated statement of other comprehensive income
Year ended Restatement Year ended
31 March 2022 £'m 31 March 2022 (restated)
(reported) £'m
£'m
Profit after taxation 10.9 - 10.9
Other comprehensive (loss)/income:
Items that will or may be reclassified to profit or loss
Fair value loss on loans and advances measured at fair value through other (30.4) 7.7 (22.7)
comprehensive income
Cash flow hedge adjustment through other comprehensive income 29.2 - 29.2
Deferred tax credit on fair value movement 5.4 (1.9) 3.5
Deferred tax charge on cash flow hedge movement (7.1) - (7.1)
Other comprehensive (loss)/income for the year (2.9) 5.8 2.9
Total comprehensive income for the year 8.0 5.8 13.8
Restated Consolidated statement of changes in equity
Share capital Share premium Own share reserve Employee share reserve Fair value reserve net of deferred tax Cash flow hedge reserve net of deferred tax Retained earnings Total
£'m £'m £'m £'m £'m £'m £'m £'m
Balance as at 31 March 2021 (reported) - 17.5 - 1.6 28.8 (2.4) 4.4 49.9
Restatement - - - - 0.1 - - 0.1
Balance as at 31 March 2021 (restated) - 17.5 - 1.6 28.9 (2.4) 4.4 50.0
Restated Consolidated statement of cash flows (extract)
As at Adjustment (i) Adjustment (ii) As at
31 March 2022 (reported) £'m £'m 31 March 2022 (restated)
£'m £'m
Cash used in operating activities
Increase in trade and other payables 21.3 - (2.8) 18.5
Cash used in operating activities (145.1) - (2.8) (147.9)
Cash generated from financing activities
Increase in interest-bearing liabilities 171.1 - 2.8 173.9
Cash generated from financing activities 204.5 - 2.8 207.3
Restated Consolidated statement of financial position (extract)
As at Adjustment (i) Adjustment (ii) As at
31 March 2022 (reported) £'m £'m 31 March 2022 (restated)
£'m £'m
Assets
Fair value adjustment for portfolio hedged risk asset 1.7 (1.7) - -
Total assets 1,377.9 (1.7) - 1,376.2
Liabilities
Trade and other payables (48.6) - 2.8 (45.8)
Interest-bearing liabilities (1,211.3) - (2.8) (1,214.1)
Fair value adjustment for portfolio hedged risk liability (9.4) 9.4 - -
Deferred taxation (6.6) (1.9) - (8.5)
Total liabilities (1,280.4) 7.5 - (1,272.9)
Net assets 97.5 5.8 - 103.3
Equity
Own share reserve - 0.1 - 0.1
Fair value hedge reserve - 5.7 - 5.7
Total equity 97.5 5.8 - 103.3
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 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
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.
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 sublet 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.
Net investment in sublease Right-of-use leasehold property Lease liabilities
£'m £'m £'m
As at 1 April 2021 - 4.3 5.0
Additions - 0.2 -
Derecognition of ROU asset transferred to sublease 1.2 (1.2) -
Depreciation expense - (0.9) -
Interest expense - - 0.5
Payments - Interest - - (0.5)
Payments - Principal - - (0.9)
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 31 March 2023 1.0 1.8 3.3
The below table sets out the amounts recognised in the Consolidated statement
of profit and loss:
Year ended 31 March 2023 Administrative Interest expense Total
expenses £'m £'m
£'m
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
Year ended 31 March 2022 Administrative Interest expense Total
expenses £'m £'m
£'m
Depreciation expense of right-of-use asset 0.9 - 0.9
Interest expense on lease liabilities - 0.5 0.5
Total recognised in the Consolidated statement of profit and loss 0.9 0.5 1.4
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 separates
the derivative portfolio between the two types of hedges in place at the
balance sheet date.
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;
● 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 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.
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 ineffectiveness include:
● differences in the size and timing of future expected cash flow of the
hedging instruments and hedged item;
● differences in the curves used to value the hedging instrument and
hedged item;
● unexpected changes to the 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.
3.1.1 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 costs 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
Consolidate 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 other 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.
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.
(Losses)/gains from derivatives hedge accounting Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
(Losses)/gains from fair value hedge accounting(1) (0.7) 0.1
Fair value gains from other derivatives(2) 5.8 1.1
Total gains included in other interest and similar income 5.1 1.2
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
Hedged item Hedging Instrument Risk category Hedged Item(1) Instrument(1) Ineffectiveness
balance sheet
£'m £'m £'m
Loans to customers Interest rate swaps Interest rate: SONIA (14.6) 13.9 (0.7)
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 2022
Hedged item Hedging Instrument Risk category Hedged Item(1) Instrument(1) Ineffectiveness
balance sheet
£'m £'m £'m
Loans to customers Interest rate swaps Interest rate: SONIA (8.7) 8.8 0.1
1 Change in fair value used in determining hedge 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.
Year ended 31 March 2023
Hedged item Hedging Risk Hedged Item(1) Instrument(1) Hedge ineffectiveness recognised in Net amounts deferred to other comprehensive
income statement
income
balance sheet Instrument category £'m £'m
£'m £'m
classification
Interest-bearing Interest rate Interest rate: (12.9) 12.9 - 12.9
liabilities swaps SONIA
Year ended 31 March 2022
Hedged item Hedging Risk Hedged Item(1) Instrument(1) Hedge ineffectiveness recognised in Net amounts deferred to other comprehensive
balance sheet Instrument category £'m £'m income statement income
classification £'m £'m
Interest-bearing Interest rate Interest rate: (27.0) 27.0 - 27.0
liabilities swaps SONIA
1 Change in fair value used in determining hedge ineffectiveness.
£6.6 million of derivative fair value gains designated in a cash flow hedge
relationship with loan note interest payments and deferred through the cash
flow hedge reserve in prior periods were recycled through interest in the
consolidated statement of profit and loss. A further £22.9 million of
derivative fair value gains held in the cash flow hedge reserve was recycled
to interest expense on derecognition of the hedged item (loan note securities)
which were redeemed upon recall of the associated securitised assets.
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.
Macro fair value hedge: As at 31 March 2023 As at 31 March 2022
Notional amount Fair value -assets Fair value -liabilities Notional amount Fair value -assets Fair value -liabilities
£'m £'m £'m £'m £'m £'m
SONIA indexed interest rate swaps 527.8 13.9 - 289.0 9.3 -
Cash flow hedge:
SONIA indexed interest rate swaps 236.3 21.8 - 714.9 23.2 -
Not subject to hedge accounting:
SONIA indexed interest rate swaps(1) 15.0 10.3 - - - -
Total 779.1 46.0 - 1,003.9 32.5 -
1 Includes FV gains on forward starting swaps now designated in FVH.
3.6 Contractual maturity of hedging instruments notional amounts
As at 31 March 2023 Less than Between Over Total
Macro fair value hedge:
one year
one and five years
five years
£'m
£'m £'m £'m
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 164.0 465.4 149.7 779.1
As at 31 March 2022 Less than Between Total
Macro fair value hedge:
one year
one and five years
£'m
£'m £'m
SONIA indexed interest rate swaps - 289.0 289.0
Cash flow hedge:
SONIA indexed interest rate swaps 45.2 670.5 715.7
Total 45.2 959.5 1,004.7
3.7 Carrying amount of hedged items
As at 31 March 2023 As at 31 March 2022
Macro fair value hedge: Notional amount Fair value change of hedged risk Notional amount Fair value change of hedged risk
£'m £'m £'m £'m
Buy-to-let mortgage loans 501.3 14.6 289.0 9.3
Cash flow hedge:
Interest-bearing securities (loan notes) 236.3 21.8 714.9 23.2
Total 737.6 36.4 1,003.9 32.5
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 cost. 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 Group's competitiveness and flexibility.
Risk factors
The Group has exposure to the following risks from its use of financial
instruments: credit risk, liquidity risk, and 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 2023 31 March 2022
£'m £'m
Loans and advances 1,122.9 1,209.1
Investment securities 23.9 -
Derivative financial asset 46.0 -
Trade and other receivables 4.2 3.6
Cash and cash equivalents 46.7 118.2
1,243.7 1,330.9
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 and is assessed with reference
to publicly available information on the underlying securitisation vehicles.
Additionally, credit enhancement measures within the securitisation structure
reduce the Group's exposure to credit losses.
Derivative financial assets are held by the Group for the purpose of hedging
interest rate risk. Credit risk is mitigated on these assets as the derivative
counterparties are with reputable institutions. The counterparties have a
Fitch credit rating of at least A+ (stable), denoting high credit quality.
Trade and other receivables principally comprise amounts due from related
companies. 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 2023 and 31 March 2022
approximates the carrying value. Further details regarding cash and cash
equivalents can be found in note 18. 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. New loans are
capped at 85% 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. There is elevated risk of collateral price movements given
the volatility caused by the COVID-19 pandemic and the Group continues to
monitor this closely and will take proactive action to protect its position,
where required.
(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 below analyse the Group's contractual undiscounted cash flows of
its financial assets and liabilities:
As at 31 March 2023 Carrying Gross nominal Amount due Amount Amount due Amount due
inflow/(outflow)
Financial assets amount
in less than due within one year between after five
£'m
one and five years
£'m six months £'m
years
£'m
£'m £'m
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) (1,371.6) (257.8) (305.9) (415.9) (392.0)
Derivative financial liability - - - - - -
Lease liability (3.3) (3.8) (0.7) (0.7) (2.4) -
(1,184.9) (1,397.7) (280.8) (306.6) (418.3) (392.0)
Loans and advances greater than five years are partly funded through the
Group's securitisation vehicle (Mortimer 2021-1 BTL Plc) which has a final
maturity of June 2053, in line with the corresponding loan maturities. The
maturity profile of the loan notes presented above within interest bearing
liabilities is based on the contractual maturity. Subsequent to the financial
year end the Group sold its residual interest in Mortimer 2021-1 BTL Plc and
prior to this it was the Group's expectation to exercise the option to
repurchase the underlying loan portfolios to redeem the liabilities, and to
refinance them by June 2026.
As at 31 March 2022 (restated) Carrying Gross nominal Amount due Amount due Amount due Amount due
Financial assets amount inflow/(outflow) in less than within one between after five
one and five years
£'m £'m six months year
years
£'m
£'m £'m £'m
Cash and cash equivalents 118.2 118.2 118.2 - - -
Trade and other receivables 3.6 3.6 2.4 - 1.2 -
Loans and advances 1,209.1 1,892.0 96.0 99.4 188.3 1,508.3
Derivative financial asset 32.5 32.5 1.6 4.5 26.4 -
1,363.4 2,046.3 218.2 103.9 215.9 1,508.3
Financial liabilities
Trade and other payables (45.3) (45.3) (45.3) - - -
Interest-bearing liabilities (1,214.1) (1,658.1) (58.8) (3.8) (443.8) (1,151.7)
Derivative financial liability - - - - - -
Lease liability (4.1) (5.1) (0.7) (0.7) (3.7) -
(1,263.5) (1,708.5) (104.8) (4.5) (447.5) (1,151.7)
(iii) Interest rate risk management
Interest rate risk arises on fixed-rate Buy-to-Let fixed loans where the
funding of these loans is variable based on three-month LIBOR or three-month
SONIA. 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 notes 3 and 27 for further details on the derivatives held by the Group.
(iv) Interest rate sensitivity
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 Profit and loss Equity (net of tax)
100 bp increase 100 bp decrease 100 bp increase 100 bp decrease
£'m £'m £'m £'m
Interest rate swaps 41.5 5.7 19.8 12.7
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) 0.2 (0.2)
Interest-bearing liabilities (10.1) 10.1 - -
31 March 2022
Interest rate swaps 20.7 (2.7) 29.7 4.6
Cash and cash equivalents 1.2 (1.2) - -
Loans and advances 0.4 (0.4) (22.5) 23.6
Interest-bearing liabilities (10.6) 10.6 - -
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 Group's 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 26 (d).
(v) Capital management
The Group considers its capital to comprise 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.
5. Segmental analysis
The Group's operations are carried out solely in the UK with two main lending
products: short-term lending and Buy-to-Let mortgages. The results and net
assets of the Group are derived from the provision of property-related loans
only. Within the Group, the Chief Operating Decision Maker ('CODM') is
determined to be the Executive Committee and it uses revenue, interest
expense, and loans and advances to manage and make decisions on the reportable
operating segments. The following summary describes the operations of the two
reportable segments:
Short-term lending
Provides finance for borrowers who need to quickly secure property, generate
cash flow or fund works through the Group's bridging products, and provides
property developers with funding to start or exit a project through
development products. The term of these loans is generally up to 24 months.
Buy-to-Let lending
Provides finance for professional portfolio landlords looking to purchase or
remortgage buy-to-let investment properties in England, Wales and Scotland.
The mortgages are available to both individual and corporate borrowers, and
funds are lent against standard properties as well as houses in multiple
occupation and multi-unit freehold blocks. The term of these loans is up to 30
years.
Year ended 31 March 2023 Short-term lending Buy-to-let lending Central Total
Consolidated statement of profit and loss information £'m £'m £'m £'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 before tax 12.4 36.2 (34.3) 14.3
Year ended 31 March 2022 (restated) Short-term lending Buy-to-let lending Central Total
Consolidated statement of profit and loss information £'m £'m £'m £'m
Interest income calculated using the effective interest rate 24.7 33.9 - 58.6
Other interest and similar income - 1.2 - 1.2
Interest expense and similar charges (15.0) (18.4) - (33.4)
Net interest income 9.7 16.7 - 26.4
Fee income 13.5 9.2 - 22.7
Fee expenses (1.8) (3.1) - (4.9)
Net fee income 11.7 6.1 - 17.8
Net gains on derecognition of financial assets 2.6 3.7 - 6.3
Net operating income 24.0 26.5 - 50.5
Administrative expenses - - (31.9) (31.9)
Impairment losses on financial assets - - (4.4) (4.4)
Total operating expenses - - (36.3) (36.3)
Profit before tax 24.0 26.5 (36.3) 14.2
As at 31 March 2023 Short-term lending Buy-to-let lending Central Total
Consolidated statement of financial position information £'m £'m £'m £'m
Assets
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 46.7
Trade and other receivables - - 6.1 6.1
Property, plant and equipment - - 2.2 2.2
Investment in securities - - 23.9 23.9
Net investment in sublease - - 1.0 1.0
Intangible fixed assets - - 10.5 10.5
Investment in joint venture - - 0.2 0.2
Investment in third parties - - 2.0 2.0
Deferred taxation - - 1.2 1.2
Total assets 329.9 839.1 93.8 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) (23.7)
Lease liabilities - - (3.3) (3.3)
Total liabilities (331.5) (827.8) (27.0) (1,186.3)
As at 31 March 2022 (restated) Short-term lending Buy-to-let lending Central Total
Consolidated statement of financial position information £'m £'m £'m £'m
Assets
Loans and advances 186.5 1,022.6 - 1,209.1
Derivative financial asset - 32.5 - 32.5
Total segment assets 186.5 1,055.1 - 1,241.6
Cash and cash equivalents - - 118.2 118.2
Trade and other receivables - - 6.3 6.3
Property, plant and equipment - - 2.8 2.8
Net investment in sublease - - 1.2 1.2
Intangible fixed assets - - 6.1 6.1
Total assets 186.5 1,055.1 134.6 1,376.2
Liabilities
Interest-bearing liabilities (195.3) (1,018.8) - (1,214.1)
Total segment liabilities (195.3) (1,018.8) - (1,214.1)
Trade and other payables - - (45.8) (45.8)
Corporation tax payable - - (0.4) (0.4)
Lease liabilities - - (4.1) (4.1)
Deferred taxation - - (8.5) (8.5)
Total liabilities (195.3) (1,018.8) (58.8) (1,272.9)
6. Interest and similar income
Year ended Year ended
31 March 2023 31 March 2022 (restated(1))
£'m £'m
Interest income calculated using the effective interest rate method
On loans and advances to customers 66.5 58.6
On investment securities 0.6 -
On cash deposits 1.0 -
Total interest income calculated using the effective interest rate method 68.1 58.6
Other interest and similar income
On derivative financial instruments and hedge accounting 5.1 1.2
Total other interest and similar income 5.1 1.2
Total interest and similar income 73.2 59.8
Revenue is recognised with reference to the accounting policy detailed in note
1.8.
7. Interest expense and similar expense
Year ended Year ended
31 March 2023 31 March 2022 (restated(1))
£'m £'m
On amounts due to funding partners (21.6) (12.0)
On debt securities in issue (10.0) (18.0)
Funding line cost amortisation (3.2) (3.4)
Total interest expense and similar charges (34.8) (33.4)
( )
1 ( ) See note 1.6 for details of the change in presentation of
the Consolidated statement of profit and loss.
Interest expense is recognised with reference to the accounting policy
detailed in note 1.9.
8. Net fee income
Year ended Year ended
31 March 2023 31 March 2022 (restated(1))
£'m £'m
Fee income on loans and advances 1.9 2.9
Fee income on asset management 8.8 11.3
Fee income on origination of loans to third parties 2.8 8.5
Fee income 13.5 22.7
Fee expense on origination of loans to third parties (1.5) (3.2)
Fee expense on asset management (0.8) (1.7)
Fee expense (2.3) (4.9)
Net fee and commission income 11.2 17.8
1 ( ) See note 1.6 for details of the change in presentation of
the Consolidated statement of profit and loss.
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 Year ended
31 March 2023 31 March 2022
£'m (restated(1))
£'m
Net gains on sale of loans and loan portfolios 1.1 6.3
Net gains on derecognition of securitised loan portfolios 3.8 -
Net gains on derecognition of financial assets 4.9 6.3
1 ( ) See note 1.6 for details of the change in presentation
of the Consolidated statement of profit and loss.
10. Profit from operations
Profit from operations has been stated after charging:
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Wages and salaries 18.0 15.8
Depreciation and amortisation 2.1 2.8
Depreciation of right-of-use asset 0.7 0.8
Interest expense - lease liabilities 0.5 0.5
Fees payable to the auditors for the audit of the financial statements 1.0 0.5
Audit-related assurance services 0.1 0.1
Fees payable to the auditors for other assurance services - -
Share-based payment charge 1.9 1.2
IPO Costs - 1.6
Other administrative expenses are incurred in the ordinary course of the
business and do not require further disclosure under IAS 1.Included within the
£1.0 million of fees payable to the auditors for the audit of the financial
statements, includes fees payable to the auditors for the audit of the
financial statements of the subsidiaries, amounting to £323,000 (FY22:
116,000).
Non-recurring items
The Group recorded £1.6 million of non-recurring costs in the consolidated
statement of profit and loss for the prior period, the year ended 31 March
2022, relating to the listing onto the London Stock Exchange. This is
aggregated as part of administrative expenses but is deemed as infrequent or
non-recurring items by management. It has been highlighted in the Consolidated
statement of profit and loss and recognised as exceptional operational
expenditure to aid users in making an informed assessment of the Group's
revenue-generating unit.
11. Employee benefit expense
Employee benefit expense (including Directors) comprises:
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Wages and salaries 18.0 15.6
Defined contribution pension cost 0.6 0.5
Share-based payment charge 1.9 1.2
Social security contributions and similar taxes 2.2 1.9
22.7 19.2
During the year, share options and Ordinary Shares were issued to employees of
the Company, see note 25 for further details.
12. Number of employees and key management compensation
The average monthly number of employees during the year was:
Year ended Year ended
31 March 2023 31 March 2022
Number Number
Technology and product 60 45
Operations and administration 134 112
Sales and marketing 35 30
229 187
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 [34 to
35].
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Salary, short-term benefits and pension 1.5 1.3
Equity-based compensation 0.1 0.1
1.6 1.4
The highest paid Director in the year was paid £437,424 (2022: £413,129).
Further details on Directors' remuneration are disclosed in the Remuneration
Report in the Corporate Governance section of the Annual Report and Accounts
on pages [49 to 57].
13. Taxation on profit on ordinary activities
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Tax expense
Current tax:
Current tax on profit for the year 2.5 3.0
Adjustments in respect of prior periods (0.3) 0.6
Foreign taxes 0.1 -
Total current tax charge 2.3 3.6
Deferred tax:
Origination and reversal of temporary differences 0.2 (0.2)
Adjustments in respect of prior periods 0.4 (0.1)
Total deferred tax charge/(credit) 0.6 (0.3)
Total tax charge 2.9 3.3
The tax charge on the profit for the year is different to the notional tax
charge calculated
at the UK corporation tax rate of 19%. The differences are explained below:
Profit before tax 14.3 14.2
Profit before tax multiplied by the standard rate of corporation tax of 19% 2.7 2.7
Tax effects of:
Research and development tax credit(1) - (0.1)
IPO costs not deductible - 0.2
Foreign taxes charged 0.1 -
(Over)/under provision of current tax (0.3) 0.6
(Under)/over provision of deferred tax 0.4 (0.1)
Total tax charge 2.9 3.3
Factors that may affect future tax charges
In March 2021, it was announced in the 2021 Budget that the main rate of UK
corporation tax would rise to 25% from 1 April 2023. The proposal to increase
the rate to 25% was substantively enacted in May 2021.
Deferred taxation
Deferred tax is presented in the statement of financial position as follows:
Year ended Year ended
31 March 2023 31 March 2022 (restated)
£'m £'m
Deferred tax assets 10.8 1.3
Deferred tax liabilities (9.6) (9.8)
Net deferred tax assets/(liabilities) 1.2 (8.5)
Given the corporate tax rate change to 25%, which came into effect from 1
April 2023, in the previous financial year the Group had previously valued its
deferred tax liability in respect of fair value gains through OCI at 25%.
However, as there was uncertainty over when the remainder of the net deferred
tax asset would be reclassified to current tax, the Group took the prudent
position to minimise the value of the asset and hold the remainder at 19%. Now
the rate change has taken effect, the remainder of the deferred tax asset has
been subject to a deferred tax rate change adjustment through the Consolidate
statement of profit and loss to increase the value to 25%.
The movements during the year are analysed as follows:
Year ended Year ended
31 March 2023 31 March 2022
£'m (restated)
£'m
Net deferred tax liabilities at the beginning of the year (8.5) (5.8)
(Charge)/credit to the statement of profit and loss for the year (0.2) 0.2
Credit to other comprehensive income 10.0 (1.3)
Rate change through other comprehensive income - (2.3)
Rate change through equity 0.2 -
Credit to equity 0.1 0.6
(Under)/over provision of deferred tax (0.4) 0.1
Net deferred tax assets/(liabilities) at the end of the year 1.2 (8.5)
Category of deferred tax
2023 Opening balance Credit to equity Charge to the statement of profit and loss - CY Credit/(charge) through OCI - CY Charge to the statement of profit and loss - PY Rate change through profit and loss Rate change through equity Closing balance
(restated) £'m £'m £'m £'m £'m £'m £'m
£'m
Share and share 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)
Research & development - - (0.2) - (0.3) (0.1) - (0.6)
IFRS 9 ECL provision 0.1 - - - - - - 0.1
(8.5) 0.1 (0.2) 10.0 (0.4) - 0.2 1.2
2022 (restated) Opening balance Credit to equity Credit to the statement of profit and loss - CY Credit/(charge) through OCI - CY Credit to the statement of profit and loss - PY Rate change through OCI - CY Closing
balance
£'m £'m £'m £'m £'m £'m
£'m
Property, plant and equipment (0.1) - - - 0.1 - -
Share and share option schemes 0.3 0.6 0.2 - - - 1.1
IFRS 16 transitional adjustment 0.1 - - - - - 0.1
Fair value on loans and advances (restated) (6.8) - - 4.3 - (0.7) (1.2)
Cash flow hedge adjustment 0.6 - - (5.6) - (1.6) (6.6)
IFRS 9 ECL provision 0.1 - - - - - 0.1
(5.8) 0.6 0.2 (1.3) 0.1 (2.3) (8.5)
14. Dividends
The Company paid £7.9m of dividends during the year. Of the £7.9m paid,
£6.1m relates to the final dividend for the year ended 31 March 2022, and
£1.8m relates to the interim dividend for the year ended 31 March 2023 (2022:
£nil).
15. Property, plant and equipment
The Group and Company
Cost Computer equipment Furniture and fittings Leasehold improvements Right-of-use asset Total
£'m £'m £'m £'m
Balance as at 31 March 2021 0.6 0.4 0.3 6.4 7.7
Additions 0.1 - 0.1 - 0.2
Disposals (0.4) (0.3) - - (0.7)
Derecognition of ROU asset - - - (1.2) (1.2)
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
Accumulated depreciation and impairment Computer equipment Furniture and fittings Leasehold improvements Right-of-use asset Total
£'m £'m £'m £'m
Balance as at 31 March 2021 0.5 0.4 0.1 1.9 2.9
Charge for the year 0.1 - - 0.9 1.0
Disposals (0.4) (0.3) - - (0.7)
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
Net carrying value as at 31 March 2023 0.2 - 0.2 1.8 2.2
Net carrying value as at 31 March 2022 0.1 - 0.3 2.4 2.8
Lease commitment
Future minimum payments under non-cancellable leases:
Premises Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Due within a year 1.1 1.0
Due between one and five years 2.2 3.1
Due later than five years - -
3.3 4.1
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 £0.1 million (2022: £0.1 million). The Group and the Company have no
significant contingent liabilities at year end.
16. Intangibles
Premises Software licences Internally developed Total
£'m software £'m
£'m
Balance as at 31 March 2021 0.7 8.8 9.5
Additions - 3.2 3.2
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 amortisation and impairment Software licences Internally developed Total
£'m software £'m
£'m
Balance as at 31 March 2021 0.4 3.6 4.0
Charge for the year 0.2 2.4 2.6
Balance as at 31 March 2022 0.6 6.0 6.6
Charge for the year 0.1 1.8 1.9
Balance as at 31 March 2023 0.7 7.8 8.5
Net carrying value as at 31 March 2023 - 10.5 10.5
Net carrying value as at 31 March 2022 0.1 6.0 6.1
Internally developed software development has been capitalised as an
intangible asset and is being amortised over five years. This amortisation
period has been increased from three years in the previous reporting period.
See note 1.12 for more details, including the impact on future periods.
Significant projects include development of the Loan Engine, website lead
generation and an automated borrower/broker portal for loan applications.
Intangible assets are reviewed for indicators of impairment annually.
17. Trade and other receivables
Due within one year Year ended Year ended
31 March 2023 1 March 2022
£'m £'m
Trade receivables 0.5 1.3
Other receivables:
- Prepayments and accrued income 1.9 2.7
- Corporate tax receivable - -
- Other receivables 2.5 1.1
Due after one year
Rent deposit 1.2 1.2
6.1 6.3
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.
18. Cash and cash equivalents
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Cash at bank and in hand 40.4 99.3
Trustees' account 6.3 18.9
46.7 118.2
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).
19. Loans and advances
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Gross loans and advances 1,168.5 1,214.9
ECL provision (9.1) (11.0)
Fair value adjustment(1) (36.5) 5.2
Loans and advances 1,122.9 1,209.1
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.
ECL provision
Movement in the period £'m
Under IFRS 9 at 1 April 2022 (11.0)
Additional provisions made during the period(1) (7.7)
Utilised in the period(2) 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:
£4.4 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 £1.7 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).
Movement in the period £'m
Under IFRS 9 at 1 April 2021 (8.5)
Additional provisions made during the period(1) (5.5)
Utilised in the period(2) 3.0
Under IFRS 9 at 31 March 2022 (11.0)
1 The ECL provision of £11.0 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
£5.5 million (2021: £5.3 million). This includes the £4.4 million (2021:
£4.6 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 £1.1 million (2021: £0.7
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 £9.0 million (2021: £12.2 million).
Analysis of loans and advances by stage
Year ended 31 March 2023 Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'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 loan-to-value ("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.
Year ended 31 March 2022 Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
Gross loans and advances 1,025.7 153.4 35.8 1,214.9
ECL provision (0.2) (0.9) (9.9) (11.0)
Fair value adjustment 3.6 1.0 0.6 5.2
Loans and advances 1,029.1 153.5 26.5 1,209.1
The maximum LTV on stage 1 loans is 82%. The maximum LTV on stage 2 loans is
119%. The maximum LTV on stage 3 loans is 168% and the total value of
collateral (capped at the gross loan value) held on stage 3 loans is £31.4
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 probability of default. An asset is deemed to have 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 and Bridging
● For Development assets, where a development will not meet practical
completion by the date anticipated at origination.
● 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
ECLs are 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.
Evidence that asset quality has improved will include:
● repayment of arrears;
● improved credit worthiness; and
● 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 significant increase in
credit risk ('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;
● 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.
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 one-in-ten 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 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Real GDP growth
(% growth YoY)
Base 0.01% 0.60% 2.40% 2.62% 1.43% 1.44% 1.33% 1.36% 1.37% 1.38%
Upside 0.00% 5.90% 3.80% 3.80% 1.30% 1.30% 1.20% 1.20% 1.20% 1.20%
Downside 0.01% -3.84% 1.70% 2.25% 1.54% 1.56% 1.44% 1.47% 1.49% 1.49%
Unemployment %
Base 3.87% 4.26% 4.04% 3.76% 3.75% 3.75% 3.75% 3.75% 3.75% 3.75%
Upside 3.87% 3.22% 2.40% 2.12% 2.16% 2.27% 2.39% 2.50% 2.61% 2.73%
Downside 3.87% 5.58% 6.60% 6.93% 6.71% 6.50% 6.29% 6.08% 5.88% 5.67%
House price inflation
Base 1.16% -7.15% -2.06% 2.68% 5.93% 5.07% 3.70% 3.39% 3.37% 3.40%
Upside 1.16% -1.45% 1.59% 6.38% 5.68% 4.82% 3.45% 3.14% 3.11% 3.15%
Downside 1.16% -13.37% -6.72% -2.58% 6.32% 5.45% 4.07% 3.77% 3.74% 3.77%
Commercial real estate
(% growth YoY)
Base -10.08% 3.34% 2.16% 3.11% 1.80% 1.68% 1.29% 1.22% 1.11% 1.02%
Upside -10.08% 15.50% 4.08% 3.83% -0.48% -0.15% -0.17% 0.04% 0.16% 0.25%
Downside -10.08% -6.39% 1.63% 3.44% 3.56% 3.09% 2.42% 2.12% 1.83% 1.60%
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:
Year ended Year ended
31 March 2023 31 March 2022
Base 40% 45%
Upside 40% 50%
Downside 20% 5%
In the period ended 31 March 2022, significant uncertainty around the level
and trajectory of UK inflation and the subsequent impacts on the wider economy
led management to increase the downside weighting (as per the table above).
For the period ended 31 March 2023, management considered that the significant
uncertainty that led to the increased downside weighting is adequately
represented in the macroeconomic data and have reverted the scenario
weightings to those provided by the macroeconomic data source across both
buy-to-let and short-term ECL models.
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 & Risk Committee
and the Board prior to any changes being implemented.
Scenario ECL
£'m
Expected credit losses under 100% upside 7.9
Expected credit losses under 100% downside 10.0
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 2023
is provided in the following table:
Assumption Sensitivity analysis
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 by £0.2m
Movement analysis of net loans by stage
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
As at 1 April 2022 1,029.1 153.5 26.5 1,209.1
Transfer to stage 1 40.5 (40.5) - -
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)
Total movement in loans and advances (126.9) 38.3 2.4 (86.2)
As at 31 March 2023 902.2 191.8 28.9 1,122.9
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
As at 1 April 2021 804.3 225.7 26.6 1,056.6
Transfer to stage 1 62.3 (61.4) (0.9) -
Transfer to stage 2 (78.8) 79.5 (0.7) -
Transfer to stage 3 (10.5) (9.2) 19.7 -
New financial assets originated 491.7 - - 491.7
New financial assets originated and transferred to (50.8) 50.2 0.6 -
stage 2 or stage 3
Financial assets which have repaid (165.0) (89.8) (7.2) (262.0)
Balance movements in loans (24.1) (41.5) (11.6) (77.2)
Total movement in loans and advances 224.8 (72.2) (0.1) 152.5
As at 31 March 2022 1,029.1 153.5 26.5 1,209.1
Movement analysis of gross loans by stage
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
As at 1 April 2022 1,025.7 153.4 35.8 1,214.9
Transfer to stage 1 40.3 (40.3) - -
Transfer to stage 2 (103.6) 104.5 (0.9) -
Transfer to stage 3 (10.5) (5.4) 15.9 -
New financial assets originated 645.2 - - 645.2
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
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
As at 1 April 2021 775.9 221.1 32.3 1,029.3
Transfer to stage 1 59.8 (58.8) (1.0) -
Transfer to stage 2 (76.3) 77.0 (0.7) -
Transfer to stage 3 (10.4) (9.2) 19.6 -
New financial assets originated 492.6 - - 492.6
New financial assets originated and transferred to stage 2 or stage 3 (50.8) 50.2 0.6 -
Financial assets which have repaid (161.7) (89.4) (7.9) (259.0)
Balance movements in loans (3.4) (37.5) (4.1) (45.0)
Write-offs - - (3.0) (3.0)
Total movement in loans and advances 249.8 (67.7) 3.5 185.6
As at 31 March 2022 1,025.7 153.4 35.8 1,214.9
Movement analysis of ECL by stage
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
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 0.3 (2.5) (1.9)
As at 31 March 2023 0.5 1.2 7.4 9.1
No POCI loans were originated during the year to 31 March 2023 and none are
held at 31 March 2023.
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
As at 1 April 2021 0.7 1.7 6.1 8.5
Transfer to stage 1 0.7 (0.6) (0.1) -
Transfer to stage 2 (0.1) 0.1 - -
Transfer to stage 3 - - - -
New financial assets originated 0.4 - - 0.4
New financial assets originated and transferred to stage 2 or stage 3 (0.3) 0.3 - -
Financial assets which have repaid (0.3) (0.4) (1.0) (1.7)
Changes in models/risk parameters (0.9) (0.2) 6.9 5.8
Adjustments for interest on impaired loans - - 1.1 1.1
Write-offs - - (3.1) (3.1)
Total movement in impairment provision (0.5) (0.8) 3.8 2.5
As at 31 March 2022 0.2 0.9 9.9 11.0
No POCI loans were originated during the year to 31 March 2022 and none are
held at 31 March 2022.
Credit risk on gross loans and advances
The table below provides information on the Group's loans and advances by
stage and risk grade.
In the year to 31 March 2022, the underlying methodology was changed to better
align loss forecasting with portfolio risk. A ten-point risk grading has been
implemented that is derived from the behavioural score of the borrower.
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 are used to assign the
initial Risk Grade score with additional SICR rules used to generate the final
Risk Grade.
Year ended 31 March 2023 Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'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
Year ended 31 March 2022 Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
Risk Grades 1-5 1,024.2 147.5 - 1,171.7
Risk Grades 6-9 1.5 5.9 3.3 10.7
Default - - 32.5 32.5
Total 1,025.7 153.4 35.8 1,214.9
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 & Risk 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,
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 bridging 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).
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 1-9 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.
Balances (£'m) ECL (£'m) Probability of default
Risk Grade Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Bridging Buy-to-let Development
RG1 882.1 0.9 - (0.4) - - 7% 0% 0%
RG2 34.1 93.9 - (0.1) (0.4) - 12% 0% 1%
RG3 7.3 37.7 - - (0.3) - 19% 1% 2%
RG4 4.3 24.7 - - (0.2) - 30% 1% 3%
RG5 6.4 13.0 - - (0.1) - 45% 2% 4%
RG6 1.2 21.1 - - (0.1) - 69% 4% 6%
RG7 0.3 1.5 - - (0.1) - 79% 7% 8%
RG8 - 0.5 - - - - 88% 12% 11%
RG9 - 3.4 - - (0.1) - 93% 19% 15%
RG10 - - 36.1 - - (7.3) 100% 100% 100%
Total 935.7 196.7 36.1 (0.5) (1.3) (7.3) - - -
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.
b) It is structured and the loan is two months in arrears.
Buy-To-Let 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,
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 the 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.
20. Investment securities
During the year, the Group obtained investment securities of £23.9 million
(2022: £nil). The investment securities relate to a 5% retained position in
structured securitisation entities that are no longer consolidated.
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Retained interest in:
Mortimer BTL 2020-1 PLC 10.7 -
Mortimer BTL 2022-1 PLC 13.2 -
Total 23.9 -
Lendinvest BTL Limited sold its residual interest it held in Mortimer BTL
2020-1 Plc . It also sold its residual interest it held in Mortimer BTL 2022-1
Plc. The gain on sale of the residual interests amounted to £4.6 million. It
was assessed that with the sale control and exposure to variable return was
transferred to the purchaser which related to the deconsolidation of Mortimer
BTL 2020-1 Plc and Mortimer BTL 2022-1 Plc. The investment securities are
carried at amortised cost.
21. Trade and other payables
Year ended Year ended
31 March 2023 31 March 2022
£'m (restated)
£'m
Trade payables 15.1 26.4
Other payables:
- Taxes and social security costs 1.4 0.7
- Accruals and deferred income 7.0 18.5
- Sublease deposit rent payable 0.2 0.2
23.7 45.8
The trade payables balance includes Trustees' balances of £6.3 million (2022:
£18.9 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.
22. Interest-bearing liabilities
Year ended Year ended
March 2023
March 2022
(restated)
£'m
£'m
Funds from investors and partners 1,159.6 1,215.6
Accrued interest 4.3 2.8
Unamortised funding line costs (4.6) (4.3)
1,159.3 1,214.1
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 8% 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.
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 As at
31 March 2023 31 March 2022 (restated)
£'m £'m
Interest-bearing liabilities 1,159.3 1,214.1
Deduct: cash as reported in financial statements (46.7) (118.2)
Net debt: borrowings less cash as reported in the financial statements 1,112.6 1,095.9
Add back: unamortised funding line costs 4.6 4.3
Add back: Trustees' account balances 6.3 18.9
Add back: accrued interest 4.3 2.8
Deduct: retained interest (5.9) (2.6)
Net debt 1,121.9 1,119.3
Interest-bearing liabilities Leases Derivatives
£'m £'m £'m
31 March 2022 (restated) (1,214.1) (4.1) 32.5
Cash flows 54.8 1.4 (8.4)
Fair value changes - - 21.9
Reinstatement of dilapidations provision - (0.1)
Lease liability interest - (0.5)
31 March 2023 (1,159.3) (3.3) 46.0
Interest-bearing liabilities Leases Derivatives
£'m £'m £'m
31 March 2021 (restated) (1,043.0) (5.0) (6.8)
Cash flows (171.1) 1.4 2.9
Fair value changes - - 36.4
Lease liability interest - (0.5) -
31 March 2022 (restated) (1,214.1) (4.1) 32.5
23. Share capital
Issued and fully paid up Year ended Year ended Year ended Year ended
31 March 2023 31 March 2023 31 March 2022 31 March 2022
Number £ Number £
Ordinary Shares 139,631,046 69,816 137,698,910 68,849
Total number of shares issued 139,631,046 69,816 137,698,910 68,849
Ordinary Shares held in EBT Trust (1,626,705) (813) (861,000) (430)
Forfeited Ordinary Shares held in SIP Trust (48,056) (24) (3,344) (2)
Total number of shares in circulation 137,956,285 68,979 136,834,566 68,417
Share premium Year ended Year ended
March 2023
March 2022
£'m £'m
1 April 55.2 17.5
Issue of new equity - 40.0
Costs incurred in issuing new equity - (2.3)
31 March 55.2 55.2
On 14 July 2021, the Group completed a listing onto the London Stock Exchange
and all existing share classes were converted to Ordinary Shares.
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.
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
Ord Shares
As at 1 April 2022 137,698,910
Issue of shares into the Employment Benefit Trust 1,932,136
As at 31 March 2023 139,631,046
On 13 July 2022, the Group issued 682,136 shares into its Employee Benefit
Trust so it could issue shares to employees exercising share options. On 23
March 2023, the Group issued a further 1,250,000 shares into the Employee
Benefit Trust to ensure there were sufficient shares to issue to employees for
future option exercises.
In accordance with UITF 38, all shares held by employee trusts are deducted
from shareholders' funds and are not classified as assets. The Group operates
a SIP trust and an Employee Benefit Trust. Shares held by these trusts are
treated as a deduction from shareholders' funds in the financial statements.
Other assets and liabilities of the trusts are consolidated in the Group's
financial statements as if they were assets and liabilities of the Group.
Included in the total number of Ordinary Shares outstanding above are
1,626,705 (year ended 31 March 2022: 861,000) shares held by the Group's
Employee Benefit Trust, the entirety of which is excluded from the total
number of shares in circulation. 477,902 (year ended 31 March 2022: 282,408)
shares held by the Group's Share Incentive Plan Trust form part of the number
of Ordinary Shares issued; 48,056 of these shares are excluded from the total
number of shares in circulation.
24. 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.
The fair value reserve represents movements in the fair value of the financial
assets classified as FVOCI and the deferred portion of the change in the fair
value of the hedging instrument that is deemed to be effective. For the year
ended 31 March 2023, the Group recognised £35.0 million of fair value losses
through other comprehensive income (£41.8 million losses due to higher
interest curves on which the Group measures its loans and advances). For the
comparative period, a loss of £22.7 million was recognised (£30.4 million
losses due to a rising interet rate environment on the Group's loans and
advances and £7.7 million derivative fair value gains).
The cash flow hedge reserve is the deferred portion of the change in the fair
value of the hedging instrument that is deemed to be effective. During the
year under review, £4.8 million of derivative fair value losses were recorded
through the cash flow hedge reserve (2022: £29.4 million gain). A net £29.6
million of deferred gains were reclassified to profit and loss and recognised
through interest expense (2022: £2.8 million loss).
25. 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 options vest annually on a straight-line
basis according to the amortisation period of each award.
Year ended Year ended Year ended Year ended Year ended
31 March 2017 31 March 2018 31 March 2019 31 March 2020 31 March 2021
Option pricing Black Scholes model Black Scholes model Black Scholes model Black Scholes model Black Scholes model
model used
Valuation of share options at grant date £0.15 per share £0.30 per share £0.6 per share £0.6 per share £0.9 per share
Amortisation period three years four years four years four years four years
Strike price £0.0125 £0.0005 £0.0005 £0.0005 £0.0005
Expiry date September 2026 November 2027 September 2028 August 2029 January 2031
Grant date September 2016 November 2017 September 2018 August 2019 January 2021
The movement in options is as follows:
Year ended Year ended Year ended Year ended Year ended
31 March 2017 31 March 2018 31 March 2019 31 March 2020 31 March 2021
Balance at 1 April 2021 154,197 107,375 242,650 189,250 561,500
4:1 share/option split 462,591 322,125 727,950 567,750 1,684,500
Granted during the year - - - - -
Options exercised during the year - (16,000) (22,052) (10,000) (19,500)
Cancelled during the year - (12,000) (36,348) (60,000) (269,500)
Balance at 31 March 2022 616,788 401,500 912,200 687,000 1,957,000
Granted during the year - - - - -
Options exercised during the year (616,788) (401,500) (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
The weighted average share price at the time of exercise for all of the
options exercised in the year was £1.38.
Awards granted in the year to 31 March 2023
During the period ended 31 March 2023, 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 2023, 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 schemes. The DBP vests 12
months after the award date and are forfeited by employees if they leave the
business during this period.
Movements in the number of options outstanding and their exercise prices are
set out below:
Year of Scheme Share price Exercise Date of Number of shares for which awards outstanding at Awards granted during Awards vested during Awards Number of shares
price per
lapsed during
for which awards outstanding at March 2023
introduction per award
vesting March 2022 period period
award period
2021 LTIP 2.185 Nil Aug 2024 2,144,410 - - (242,560) 1,901,850
2021 LTIP 2.010 Nil Dec 2024 212,120 - - (50,505) 161,615
2022 LTIP 1.535 Nil Jul 2025 - 2,942,309 - (296,410) 2,645,899
2022 DBP 1.535 Nil Jul 2023 - 209,160 - (20,480) 188,680
The weighted average fair value of these awards granted during the period was
£1.535 per award.
c) Other Share Plans
Share Incentive Plan ('SIP')
An award of shares was made to employees in August 2022. 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 16 August 2022, an award of free shares was made to all eligible employees.
The number of shares awarded was 296,900, with a fair value of £1.495 based
on the market price at the date of award.
Movements in the number of SIP shares outstanding are set out below:
Year ended
31 March 2023
Number of shares
Outstanding at March 2022 272,076
Granted 296,900
Forfeited (91,074)
Outstanding at March 2023 477,902
Share-based payment charge recognised
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Executive Share Option Plans:
Long Term Incentive Plan:
Options granted in the year 0.4 0.3
Options granted in prior years 0.4 -
Other Share Plans:
Deferred bonus plan
Options granted in the year 0.1 -
Options to be granted as part of Company bonus scheme 0.4 -
Share Incentive Plan
Shares granted in the year 0.1 0.1
Options granted in prior years 0.2 -
Company Share Options Plan 0.3 0.7
Total all plans 1.9 1.1
Social security expense 0.1 0.1
Total charge to the income statement (note 10) 2.0 1.2
Weighted average exercise price
£
At 1 April 2022 0.01
At 31 March 2023 0.01
Weighted average remaining contractual life
Years Number of options
2018 CSOP 4.6 64,650
2019 CSOP 5.4 156,750
2020 CSOP 6.3 1,663,831
2021.1 LTIPs 1.4 1,901,850
2021.2 LTIPs 1.7 161,615
2022 DBP 0.3 2,645,899
2022 LTIPs 2.3 209,160
All schemes 3.4 6,803,755
26. 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 2023 and 31 March 2022 according to the nature of the asset. All
financial liabilities of the Group are carried at amortised cost as at 31
March 2023 and 31 March 2022 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, and trade and other payables approximates their fair value.
(a) Carrying amount of financial instruments
A summary of the financial instruments held by category is provided below:
Financial assets at amortised cost As at As at
31 March 2023 31 March 2022
£'m £'m
Cash and cash equivalents 46.7 118.2
Trade and other receivables 4.2 3.6
Loans and advances(1) 174.2 16.1
Investment securities 23.9 -
Financial assets at fair value through other comprehensive income
Loans and advances 948.7 1,193.0
Financial assets at fair value through profit and loss
Derivative financial asset 46.0 32.5
Loans and advances - -
Fair value adjustment for hedged risk asset 0.1 -
Total financial assets 1,243.8 1,363.4
1 As at 31 March 2023, the Group held loans originated under the
Government's CBILs scheme. These loans are valued at amortised cost within the
accounts. In addition, a portfolio of BTL loans that had previously been held
at fair value through other comprehensive income as at 31 March 2022 are now
being held under amortised costs as at 31 March 2023 as a result of a change
in classification to 'hold to collect'.
Financial liabilities at amortised cost As at As at
31 March 2023 31 March 2022 (restated)
£'m £'m
Trade and other payables (22.3) (45.3)
Interest-bearing liabilities (1,159.3) (1,214.1)
Lease liability (3.3) (4.3)
Financial liabilities at fair value through profit and loss
Derivative financial liability - -
Total financial liabilities (1,184.9) (1,263.7)
(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 2023 and the
comparative figures:
Financial assets As at 31 March 2023 As at 31 March 2023 As at 31 March 2022 As at 31 March 2022
carrying amount fair value carrying amount fair value
£'m £'m (restated) (restated)
£'m £'m
Cash and cash equivalents 46.7 46.7 118.2 118.2
Trade and other receivables 4.2 4.2 3.6 3.6
Loans and advances 1,122.9 1,122.9 1,209.1 1,209.1
Derivative financial asset 46.0 46.0 32.5 32.5
Investment securities 23.9 23.9 - -
Fair value adjustment for portfolio hedged risk asset 0.1 0.1 - -
Total financial assets 1,243.8 1,243.8 1,363.4 1,363.4
Financial liabilities
Trade and other payables (22.3) (22.3) (45.3) (45.3)
Interest-bearing liabilities (1,159.3) (1,157.9) (1,214.1) (1,215.0)
Derivative financial liability - - - -
Lease liability (3.3) (3.3) (4.3) (4.3)
Total financial liabilities (1,184.9) (1,183.5) (1,263.7) (1,264.6)
The fair value of Retail Bond 2 interest-bearing liabilities is calculated
based on the mid-market price of 98.1 on 31 March 2023 (price of 100.7 on 31
March 2022).
The fair value of Retail Bond 3 interest-bearing liabilities is calculated
based on the mid-market price of 98.7 on 31 March 2023.
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.
Financial instruments measured As at 31 March 2023 Level 1 Level 2 Level 3
or disclosed at fair value
£'m £'m £'m £'m
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 liabilities(1) (1,157.9) (94.6) - (1,063.3)
For all other financial instruments, the fair value is equal to the carrying
value and has not been included in the table above.
Financial instruments measured As at 31 March 2022 Level 1 Level 2 Level 3
or disclosed at fair value
£'m £'m £'m £'m
Interest rate swap 32.5 - 32.5 -
Loans and advances 1,193.0 - - 1,193.0
Financial instruments measured or disclosed at amortised cost
Interest-bearing liabilities(1) (restated) (1,215.0) (114.2) - (1,)
1 Interest-bearing liabilities are held at amortised cost on the
statement of financial position. Level 1 financial instruments includes the
Group's listed retail bond notes.
Level 2 instruments include interest rate swaps which are either two, three or
five years in length. These lengths are aligned with the fixed interest
periods of the underlying loan book. These interest rates swaps are valued
using models used to calculate the present value of expected future cash flows
and may be employed when there are no quoted prices available for similar
instruments in active markets.
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 2023 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 one-month SONIA forward curve
● Credit spread based on a comparable market deal which is adjusted for
movements in UK BTL indices
● Illiquidity premium
Level 3 financial instruments Year ended
31 March 2023
£'m
Level 3 assets at beginning of the period 1,193.0
Additional impairment provisions made during the period(1) (7.3)
Impairment provision utilised in the period 9.6
Fair value adjustments on loan & advances through OCI (40.8)
New level 3 assets originated 645.2
Level 3 assets that have repaid (206.7)
Balance movements in level 3 assets (644.3)
Level 3 assets at the end of the period 948.7
1 The net ECL impact on the income statement for the year is £7.3m
(2022: £5.5m). This includes the £5.6m (2022: £4.4m) 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 £1.7m (2022: £1.1m).
Financial instrument Valuation technique used Significant unobservable inputs Range
Loans and advances Discounted cash flow valuation Prepayment rate 2%-12.4%
Probability of default 16%-84%
Discount rate 2.5%-10%
(d) Fair value and cash flow hedge reserves
Financial assets Deferred tax Fair value reserve
£'m £'m £'m
Fair value and cash flow reserves at 1 April 2022 (restated) 39.2 (9.9) 29.3
Movement in fair value of loans and advances at fair value through other (35.0) 8.8 (26.2)
comprehensive income
Cash flow hedge adjustment through other comprehensive income (4.8) 1.2 (3.6)
Fair value and cash flow reserves at 31 March 2023 (0.6) 0.1 (0.5)
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 the sensitivity analysis below will
be reported through other comprehensive income.
Sensitivity analysis
Impact of changes in unobservable inputs at 31 March 2023 +100bps -100bps
£'m £'m
Prepayment rates 0.6 (0.6)
Discount rate (25.3) 26.6
Probability of default - -
Impact of changes in unobservable inputs at 31 March 2022 +100bps -100bps
£'m £'m
Prepayment rates (0.3) 0.3
Discount rate (30.0) 31.5
Probability of default (0.4) 0.8
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.
27 Derivatives held for risk management
Instrument type Year ended 31 March 2023 Year ended 31 March 2022
Asset Liability Asset Liability
£'m £'m £'m £'m
SONIA indexed interest rate swaps 46.0 - 32.5 -
Total 46.0 - 32.5 -
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 increase of £13.5 million on the derivative asset position
during the year (2022: gain of £39.3 million).
The Group received £17.9 million in cash on termination of in-the-money
derivatives and a further £8.7m in quarterly interest receipts during the
year. The Group paid an initial amount on two swaps of £11.9m and £6.3m to
set the fixed leg of below market as part of the capital structure of two
special purpose vehicles formed during the year.
A net fair value gain of £21.9 million of fair value gain is recognised
through the derivative asset line item in the consolidated statement of
financial position. The net notional principal amount of the outstanding
interest rate swap contracts at 31 March 2022 was £779.1 million (2022:
£1,004.7 million).
28. Dividends
Year ended 31 March 2023 Year ended 31 March 2022
£'m Pence per share £'m Pence per share
Final dividend for the prior year 6.1 4.4 - -
Interim dividend for the current year 1.8 1.3 - -
Total 7.9 - - -
The Directors propose that a final dividend in respect of the year ended 31
March 2023 of 3.2p per share will be paid on the 13 October 2023 to all
shareholders on the Register of Members on the 15 September 2023. This
dividend is subject to approval by shareholders at the AGM and has not been
accrued as a liability in these financial statements in accordance with IAS 10
'Events after the reporting period'.
29. Investment in joint ventures
During the year the Lendinvest Loan Holdings Limited entered into a Joint
Venture Agreement to establish a private company limited by shares, Tradelend
Limited. Under the joint venture 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. The company is set up to carry out the business of
making available development finance, bridging loans, and any other finance
loans to intermediaries, landlords and developers across the United Kingdom.
Tradelend Limited is accounted for as a joint venture under IFRS 11 - Joint
Arrangements, using the equity method under IAS 28 - Investments in Associates
and Joint Ventures, and subject to the disclosure requirements for joint
ventures under IFRS 12 - Disclosure of Interest in Other Entities.
Tradelend Limited did not trade during the year.
30. Investment in third parties
In December 2022, LendInvest Capital GP II S.a.r.l. invested £2.0m into
LendInvest SCA SICAV-RAIF (the Fund) - LendInvest Secured Credit Fund II (the
sub-fund). The investment was made into Share Class II which is an
accumulating GBP share class. The share class provides a targeted net return
of between 6-8% a year based on the profits generated from the property loans
which the fund has invested. It provides no control over the fund and
represents less than 2% of the total invested by all investors into the fund.
31. Related-party transactions
See note 12 for analysis of director compensation. In March 2023, the Group
engaged with Nina Spencer, one of the non-executive directors, via Addidat
Limited, to provide ESG benchmarking services against other AIM listed
companies. The total cost of the services was £26,000, of which half of this
amount was recognised in the year ended 31 March 2023. There were no other
related-party transactions during the period to 31 March 2023 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 14 April 2023 the Group sold its residual economic interest in its third
securitisation Mortimer 2021-1 BTL plc and derecognised the loans from its
balance sheet, resulting in a derecognition of financial assets of £226.5
million.
On 26 May 2023, the Group sold a portfolio of £250m of Buy-to-Let loans for a
total consideration of £243 million inclusive of the proceeds from cancelled
interest rate derivatives.
On 30 June 2023, the Group agreed terms for a forward flow arrangement
allowing for the origination and immediate sale of £500m of Buy-to-let and
residential mortgages that will not be funded on the Group's balance sheet.
34. Earnings per share
Basic earnings per share Year ended Year ended
31 March 2023 31 March 2022
Pence/share Pence/share
Total basic earnings per share attributable to the ordinary equity holders of 8.3p 8.3p
the Group
Diluted earnings per share Year ended Year ended
31 March 2023 31 March 2022
Pence/share Pence/share
Total basic earnings per share attributable to the ordinary equity holders of 8.0p 8.0p
the Group
Number of shares used as denominator Year ended Year ended
31 March 2023 31 March 2022
Number of Ordinary Shares used as the denominator in calculating basic 137,437,395 130,578,156
earnings per share
Adjustment for calculations of diluted earnings per share: options 4,602,267 4,776,225
Number of Ordinary Shares and potential Ordinary Shares used as denominator in 142,039,662 135,354,381
calculating diluted earnings per share
The profit after tax reported in the Consolidated statement of profit and
loss, £11.4 million (31 March 2022: £10.9 million), is the numerator
(earnings) used in calculating earnings per share.
Company statement of financial position
Note As at As at
31 March 2023 31 March 2022
£'m £'m
Assets
Cash and cash equivalents 8 19.6 52.4
Trade and other receivables 7 31.4 16.5
Corporate tax receivable - 2.0
Loans and advances 9 63.8 44.6
Property, plant and equipment 4 2.2 2.8
Net investment in sublease 2 1.0 1.2
Intangible assets 5 10.5 6.1
Deferred taxation 3 0.8 1.2
Total assets 129.3 126.8
Liabilities
Trade and other payables 10 (22.8) (28.7)
Interest-bearing liabilities 11 (34.9) (22.3)
Lease liabilities 2 (3.3) (4.1)
Total liabilities (61.0) (55.1)
Net assets 68.3 71.7
Equity
Share capital 12 0.1 0.1
Share premium 12 55.2 55.2
Own share reserve 12 (0.6) -
Employee share reserve 3.3 2.6
Retained earnings 13 10.3 13.8
Total equity 68.3 71.7
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 profit after tax of the Parent Company for the year was £4.9 million
(2022: £1.8 million).
The financial statements on pages [122 to 132] were approved and authorised
for issue by the Board of Directors on 5 July 2023 and were signed on its
behalf by:
Michael Evans
Director
Company statement of cash flows
Cash flow from operating activities Note Year ended Year ended
March 2023
March 2022
£'m £'m
Profit after taxation 4.9 1.8
Adjusted for:
Depreciation of property, plant and equipment 4 0.2 0.1
Amortisation of intangible assets 5 1.9 2.6
Company share and share option schemes (1.0) 1.2
Income tax expense 3.0 0.7
Impairment provision 9 7.6 0.5
Depreciation of right-of-use asset 2 0.6 0.9
Interest expense - lease liabilities 2 0.5 0.5
Income from sublease (0.2) -
Costs relating to market listing - 1.6
Change in working capital
Increase in gross loans and advances 9 (26.8) (23.1)
(Increase)/decrease in trade and other receivables 7 (14.8) 21.2
(Decrease)/increase in trade and other payables 10 (5.8) 8.9
Income taxes paid 3 - (3.7)
Cash used in / generated from operations (29.9) 13.2
Cash flow from investing activities
Purchase of property, plant and equipment 4 (0.2) (0.4)
Capitalised development costs 5 (6.3) (3.2)
Income from sublease 0.2 -
Net cash used in investing activities (6.3) (3.6)
Cash flow from financing activities
Decrease in interest-bearing liabilities 11 12.6 (19.8)
Principal elements of finance lease payments (0.9) (0.9)
Interest expense - lease liabilities (0.5) (0.5)
Proceeds from an equity share raise - 40.0
Equity raise costs - (3.9)
Dividends paid (7.8) -
Net cash generated from financing activities 3.4 14.9
Net decrease in cash and cash equivalents (32.8) 24.5
Cash and cash equivalents at beginning of the period 8 52.4 27.9
Cash and cash equivalents at end of the period 8 19.6 52.4
Interest received was £0.2m (2022: £0.2m) and interest paid was £3.0m
(2022: £3.2m).
Company statement of changes in equity
Share Share premium Own share reserve Employee share reserve Retained earnings Total
capital
£'m £'m £'m £'m £'m
£'m
Balance as at 31 March 2021 - 17.5 - 1.6 11.4 30.5
Profit after taxation - - - - 1.8 1.8
Employee share scheme tax - - - - 0.6 0.6
Employee share option schemes - - - 1.0 - 1.0
Bonus issue of free shares funded by share premium 0.1 (0.1) - - - -
Issue of new shares at IPO - 40.1 - - - 40.1
Cost incurred in issuing new shares - (2.3) - - - (2.3)
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 the 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
Notes forming part of the Company financial statements
1. Basis of preparation and significant 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 58 . 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 Group 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.
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 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.
The central scenario represents management's current view of the most likely
economic outturn. In the period ended 31 March 2022, significant uncertainty
around the level and trajectory of UK inflation and the subsequent impacts on
the wider economy led management to increase the downside weighting. The
following weightings of the different scenarios were used across both
Buy-to-Let and short-term ECL models for the period:
● 45%/50%/5% to the central, downside and upside scenarios.
For the period ended 31 March 2023 management consider that the significant
uncertainty that led to the increased downside weighting is adequately
represented in the macroeconomic data and has reverted the scenario weightings
to those provided by the macroeconomic data source across both Buy-to-Let and
short-term ECL models as follows:
● 40%/40%/20% to the central, downside and upside scenarios.
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.
Sensitivity analysis on ECL models
Sensitivity analyses have 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 all the models. This would increase the
ECL by £0.01 million.
● A 100% upside was applied to all the models. This would decrease the
ECL by £0.01 million.
● A 10% increase in the forced sale discount. This would increase the
ECL by £nil million.
● A 20% increase in the unemployment rate (peak of 5.2%). This would
increase the ECL by £nil million.
2. Leases
Please refer to Group financial statements, note 2.
3. Taxation on profit on ordinary activities
Factors that may affect future tax charges
In March 2021, it was announced in the 2021 Budget that the main rate of UK
corporation tax would rise to 25% from 1 April 2023. The proposal to increase
the rate to 25% was substantively enacted in May 2021.
Deferred taxation
Deferred tax is presented in the statement of financial position as follows:
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Deferred tax assets 1.5 1.2
Deferred tax liabilities (0.7) -
Net deferred tax assets 0.8 1.2
The movements during the year are analysed as follows:
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Net deferred tax assets at the beginning of the year 1.2 0.3
(Charge)/credit to the statement of profit and loss for the year (0.7) 0.2
Credit to equity 0.3 0.6
Over provision of deferred tax - 0.1
Net deferred tax assets at the end of the year 0.8 1.2
Category of deferred tax
2023 Opening balance Opening balance (Charge)/credit to the statement of profit and loss - CY Credit through equity - CY (Charge)/credit to the statement of profit and loss - PY Closing balance
£'m adjustment £'m £'m £'m £'m
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)
1.2 - (0.3) 0.3 (0.4) 0.8
2022
Property, plant and equipment (0.1) - - - 0.1 -
Share and share option schemes 0.3 - 0.2 0.6 - 1.1
IFRS 16 transitional adjustment 0.1 - - - - 0.1
0.3 - 0.2 0.6 0.1 1.2
At 31 March 2023, the Company had no unrecognised deferred taxation assets
(2022: £nil).
4. Property, plant and equipment
Refer to consolidated financial statements, note 15.
5. Intangibles
Premises Software licences Internally developed Total
£'m software £'m
£'m
Balance as at 31 March 2021 0.4 8.8 9.2
Additions - 3.2 3.2
Balance as at 31 March 2022 0.4 12.0 12.4
Additions - 6.3 6.3
Balance as at 31 March 2023 0.4 18.3 18.7
Accumulated amortisation and impairment Software licences Internally developed Total
£'m software £'m
£'m
Balance as at 31 March 2021 0.1 3.6 3.7
Charge for the year 0.2 2.4 2.6
Balance as at 31 March 2022 0.3 6.0 6.3
Charge for the year 0.1 1.8 1.9
Balance as at 31 March 2023 0.4 7.8 8.2
Net carrying value as at 31 March 2023 - 10.5 10.5
Net carrying value as at 31 March 2022 0.1 6.0 6.1
Internally developed software development has been capitalised as an
intangible asset and is being amortised over five years. This amortisation
period has been increased from three years in the previous reporting period.
See Group note 1.12 for more details, including the impact on future periods.
Significant projects include development of the Loan Engine, website lead
generation and an automated borrower/broker portal for loan applications.
Intangible assets are reviewed for indicators of impairment annually.
6. Investment in subsidiaries
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
As at 1 April - -
Additional investment in subisidiaries - -
As at 31 March - -
The Company owned either directly or indirectly, 100% of the share capital of
the following subsidiaries as at 31 March 2023. All entities, other than those
marked with *, were also in place during the prior year:
Entity name Principal activities Direct holding
LendInvest Loan Holdings Limited Intermediary holding company Company
LendInvest Capital Management Limited Intermediary holding company Company
LendInvest Capital Advisors Limited Intermediary holding company LendInvest Capital Management Limited
LendInvest Finance No. 2 Limited Provides secured lending to third-party borrowers LendInvest Capital Management Limited
LendInvest Finance No. 4 Limited Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Funds Management Limited Fund management company Company
LendInvest Private Finance General Partners Limited Dormant Company
LendInvest Development Limited Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Warehouse Limited Intermediate holding company and secured lending to third-party borrowers Company
LendInvest Finance No. 3 Limited Dormant LendInvest Loan Holding Limited
LendInvest Security Trustees Limited Holds securities Company
LendInvest Finance No. 5 Limited Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Finance No. 6 Limited Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Secured Income Plc Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Secured Income II Plc* Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Limited Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Platform Limited Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Bridge Limited Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Loans Limited Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
LendInvest Capital GP Sarl Managing partner of an alternative investment fund LendInvest Funds Management Limited
LendInvest Capital GP II Sarl* Provides secured lending to third-party borrowers LendInvest Loan Holdings Limited
The registered address of all subsidiaries is: Two Fitzroy Place, 8 Mortimer
Street, London W1T 3JJ.
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 Buy-to-Let mortgages NA
BTL No. 2 Limited Warehousing vehicle for Buy-to-Let mortgages NA
BTL No. 3 Limited* Warehousing vehicle for Buy-to-Let mortgages NA
Titan No.1 Limited Warehousing vehicle for Buy-to-Let & bridging loans NA
Puma BTL Limited Securitisation loan note repurchasing vehicle NA
Mortimer BTL 2021-1 Limited Securitisation vehicle for Buy-to-Let mortgages NA
LendInvest Employee Benefit Trust Issues shares to staff under the Group's CSOP and LTIPs schemes NA
LendInvest Share Incentive Plan Issues shares to staff under the Group's SIP scheme NA
7. Trade and other receivables
Due within one year Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Trade receivables 22.0 12.4
Other receivables:
- Prepayments and accrued income 3.1 2.4
- Other receivables 1.9 0.5
Corporate tax receivable 3.2 -
Due after one year
Rent deposit 1.2 1.2
31.4 16.5
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.
8. Cash at bank and in hand
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Cash and cash equivalents 16.0 33.5
Trustees' account 3.6 18.9
19.6 52.4
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 sits 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 10).
9. Loans and advances
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Gross loans and advances(1) 72.8 46.0
ECL provision (9.0) (1.4)
Fair value adjustment(2) - -
Loans and advances 63.8 44.6
1 Included in gross loans and advances is £70.3 million (2022:
£43.1 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 2022 (1.4)
Additional provisions made during the period (7.6)
Utilised in the period -
Under IFRS 9 at 31 March 2023 (9.0)
Movement in the period £'m
Under IFRS 9 at 1 April 2021 (0.9)
Additional provisions made during the period (0.4)
Utilised in the period (0.1)
Under IFRS 9 at 31 March 2022 (1.4)
Analysis of loans and advances by stage
Year ended 31 March 2023 Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'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 1 loans is 66%. The maximum LTV on stage 2 loans is
77%. The maximum LTV on stage 3 loans is 247% and the total value of
collateral held on stage 3 loans is £1.1 million.
Movement analysis of net loans by stage
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'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 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 - - - -
Financial assets which have repaid - (0.5) (0.3) (0.8)
Balance movements in loans 19.8 0.2 (0.1) 19.9
Write-offs - - - -
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
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
As at 1 April 2021 20.5 0.9 0.6 22.0
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
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 (0.1) (0.7) (0.3) (1.1)
Balance movements in loans 21.8 1.0 0.8 23.6
Write-offs - - - -
Total movement in loans and advances 21.7 0.4 0.5 22.6
As at 31 March 2022 42.2 1.3 1.1 44.6
Movement analysis of gross loans by stage
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'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 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 Stage 2 Stage 3 Total
£'m £'m £'m £'m
As at 1 April 2021 21.2 0.9 0.8 22.9
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
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 (0.1) (0.7) (0.3) (1.1)
Balance movements in loans 22.2 1.0 0.8 24.0
Write-offs - - 0.1 0.1
Total movement in loans and advances 22.1 0.4 0.6 23.1
As at 31 March 2022 43.3 1.3 1.4 46.0
Movement analysis of ECL by stage
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
As at 1 April 2022 1.1 - 0.3 1.4
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
New financial assets originated - - - -
New financial assets originated and transferred to stage 2 or stage 3 - - - -
Financial assets which have repaid - - - -
Changes in models/risk parameters 7.5 - - 7.5
Adjustments for interest on impaired loans - - 0.1 0.1
Write-offs - - - -
Total movement in impairment provision 7.5 - 0.1 7.6
As at 31 March 2023 8.6 - 0.4 9.0
The Company held no POCI loans during the year to 31 March 2023.
Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
As at 1 April 2021 0.7 - 0.2 0.9
Transfer to stage 1 - - - -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
New financial assets originated - - - -
New financial assets originated and transferred to stage 2 or stage 3 - - - -
Financial assets which have repaid - - - -
Changes in models/risk parameters 0.4 - 0.1 0.5
Adjustments for interest on impaired loans - - - -
Write-offs - - - -
Total movement in impairment provision 0.4 - 0.1 0.5
As at 31 March 2022 1.1 - 0.3 1.4
The Company held no POCI loans during the year to 31 March 2022.
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 19 of the Group's accounts for details of the
change of the calculation of risk grades during the current year.
Year ended 31 March 2023 Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'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
Year ended 31 March 2022 Stage 1 Stage 2 Stage 3 Total
£'m £'m £'m £'m
Risk Grades 1-5 42.2 1.0 - 43.2
Risk Grades 6-9 - 0.3 - 0.3
Default - - 1.1 1.1
Total 42.2 1.3 1.1 44.6
10. Trade and other payables
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Trade payables 14.9 22.6
Other payables:
- Taxes and social security costs 1.3 0.7
- Accruals and deferred income 6.3 5.1
- Sublease deposit repayable 0.2 0.2
- Employee free share award 0.1 0.1
22.8 28.7
The trade payables balance includes Trustees' balances of £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.
11. Interest-bearing liabilities
Year ended Year ended
March 2023
March 2022
£'m £'m
Funds from investors and partners 34.9 22.3
34.9 22.3
For an analysis of contractual maturity and liquidity risk, refer to note 4 in
the Group accounts. 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.
12. Share capital
Refer to Group financial statements, note 23.
13. Reserves
Reserves comprise 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.
14. Share-based payments
Refer to Group financial statements, note 25.
15. 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, fair value
through other comprehensive income or fair value through profit and loss as at
31 March 2023 and 31 March 2022 according to the nature of the asset. All
financial liabilities of the Company are carried at amortised cost as at 31
March 2023 and 31 March 2022 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, 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:
Financial assets at amortised cost Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
Cash and cash equivalents 19.6 52.4
Trade and other receivables 30.7 26.8
Financial assets at fair value through other comprehensive income
Loans and advances 63.9 44.6
Total financial assets 114.2 123.8
Financial liabilities at amortised cost
Trade and other payables (22.8) (28.0)
Interest-bearing liabilities (34.9) (22.3)
Lease liability (3.3) (4.1)
Total financial liabilities (61.0) (54.4)
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.
Financial instruments measured or disclosed at fair value As at Level 1 Level 2 Level 3
31 March 2023 £'m £'m £'m
£'m
Loans and advances 63.9 - - 63.9
Financial Instruments measured or disclosed at amortised cost - - - -
Interest-bearing liabilities(1) (34.9) (34.9) - -
For all other financial instruments, the fair value is equal to the carrying
value and has not been included in the table above.
Financial instruments measured or disclosed at fair value As at Level 1 Level 2 Level 3
31 March 2022 £'m £'m £'m
£'m
Loans and advances 44.6 - - 44.6
Financial Instruments measured or disclosed at amortised cost - - - -
Interest-bearing liabilities(1) (22.3) (22.3) - -
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 2 instruments include interest rate swaps which are either two, three or
five 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.
16. Reconciliation of liabilities arising from financing activities
Interest-bearing liabilities Leases
£'m £'m
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)
31 March 2021 (42.1) (5.0)
Cash flows 19.8 1.4
Lease liability interest - (0.5)
31 March 2022 (22.3) (4.1)
17. Related-party transactions
In March 2023, the Company engaged with Nina Spencer, one of the non-executive
directors, via Addidat Limited, to provide ESG benchmarking services against
other AIM listed companies. The total cost of the services was £26,000, of
which half of this amount was recognised in the year ended 31 March 2023.
The Company has made loans to LendInvest Warehouse Limited to fund a portfolio
of loans. During the year to 31 March 2023, the Company made loans of £4.0
million (2022: £7.1 million) and received repayments in respect of loans of
£0.1 million (2022: £2.7 million). The balance as at 31 March 2023 was
£11.1 million (2022: £7.2 million). These loans are interest-bearing at 8%
per annum.
£21.8 million (2022: £12.0 million) of the Company's trade receivables (see
note 19) are unsecured intercompany receivables owed by Company's
subsidiaries.
The Company also received the following fees from related-party subsidiaries:
Year ended Year ended
31 March 2023 31 March 2022
£'m £'m
LendInvest Funds Management Limited 2.8 4.6
LendInvest Capital Management Limited - -
18. Controlling party
In the opinion of the Directors, the Company does not have a single
controlling party.
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