Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LendInvest PLC (STU:82H, Financial) has launched a fully integrated mortgage portal, enhancing broker and customer experience and increasing cross-selling opportunities.
- The company secured diversified funding sources, including a GBP300 million syndicate with BNP Paribas, HSBC, and Barclays.
- LendInvest PLC (STU:82H) raised GBP700 million across two separate account mandates and extended its relationship with National Australia Bank.
- The company successfully refinanced GBP42.5 million of strategic mezzanine financing facility.
- LendInvest PLC (STU:82H) achieved 14% year-on-year growth in funds under management and 26% growth in short-term mortgage AUM.
Negative Points
- LendInvest PLC (STU:82H) recorded a full-year pre-tax loss of GBP27 million and a post-tax loss of GBP20 million.
- The company faced exceptional restructuring costs of GBP2.7 million and an increase in impairment charges by 42%.
- Net interest income substantially reduced due to a GBP3.7 million unrealized loss on hedge accounting in the second half of the year.
- The company experienced a 50% year-on-year contraction in both buy-to-let purchases and buy-to-let remortgages.
- Due to negative reserves, LendInvest PLC (STU:82H) will not declare a dividend for the period.
Q & A Highlights
Q: Can you discuss the current state of the market and your competitive positioning on pricing? How has the pipeline developed, and what feedback are you getting from brokers and landlords, especially after the change in government?
A: (Roderick Lockhart, CEO) We're in a much better relative position across most of our products compared to the last 18 months. Our pricing is now much closer to our competitors, within about 25 basis points, which is encouraging brokers to choose our products. As a result, our lending volumes are materially higher, up 20% in the first quarter compared to last year. (Hugo Davies, Chief Capital Officer) The bifurcation in the buy-to-let space between non-banks and banks is fading. The market has been agile and innovative, and there's growing demand for our development finance solutions, supported by our partnerships with HSBC and the British Business Bank.
Q: Regarding the cost takeout in the business, if things pick up faster than expected, will you need to reinvest in costs? Have you cut back too far?
A: (Roderick Lockhart, CEO) We believe we have maintained lending capacity while reducing costs. Our new mortgages portal allows us to process mortgages more efficiently, and we have the capacity to expand as the market grows. We've also trained underwriters across various products to handle spikes in demand. (Hugo Davies, Chief Capital Officer) Our technology cycle has naturally evolved, and we are now in a position where our built technology is ready for deployment, reducing the need for additional tech-related staff.
Q: How do you see the outlook for the buy-to-let market, and what are the key factors influencing it?
A: (Hugo Davies, Chief Capital Officer) The buy-to-let market has been innovative, with new higher fee, lower rate products helping with affordability. The fundamental difference now is the expectation that interest rates will come down, which was not the case last year. This provides a more stable outlook for the market.
Q: Can you elaborate on the strategic actions taken to deleverage the balance sheet and their impact?
A: (Stephen Shipley, Finance Director) We reduced debt by GBP645 million and our leverage ratio by 39%. We also increased cash and cash equivalents by 19%, providing liquidity to support ongoing operations and growth opportunities. These actions have strengthened our balance sheet and reduced our risk profile.
Q: What are the key pillars of your strategy for Lendinvest Mortgages?
A: (Hugo Davies, Chief Capital Officer) Our strategy is built on three key pillars: service, technology, and people. We focus on delivering exceptional customer experiences, leveraging our market-leading technology platform, and investing in continuous professional development for our staff. This year, we launched the Mortgages Academy in Glasgow to develop the best talent.
Q: How has the market backdrop influenced your financial performance, and what are your expectations for FY25?
A: (Stephen Shipley, Finance Director) The challenging market backdrop led to a pre-tax loss of GBP27 million and a post-tax loss of GBP20 million, impacted by several one-offs. However, we expect to return to profitability in FY25, driven by our strategic actions and the improving market conditions.
Q: What are the key factors driving the growth in your short-term mortgage AUM?
A: (Hugo Davies, Chief Capital Officer) We achieved 26% growth in short-term mortgage AUM, driven by the rapid deployment of new separate account arrangements. This highlights the agility of our platform and our ability to capitalize on emerging opportunities in the market.
Q: How do you plan to capitalize on the potential tailwinds from the new government's housing and planning reforms?
A: (Roderick Lockhart, CEO) The new government's commitment to housing targets and planning reforms is encouraging for the UK housing market. We are well-positioned to take advantage of these potential tailwinds, supported by our strong track record, market-leading technology, and diverse range of funding partners.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
