Last checked at 18 Apr 2024 07:00
LEI: 213800NWMK3O4UWP9N91
18 April 2024
LendInvest plc
FY 2024 Trading Update
Good progress against strategic objectives in H2
LendInvest plc (AIM: LINV), the UK's leading platform for mortgages, announces its trading update for the year ended 31 March 2024, ahead of its full-year results announcement in July 2024.
Rod Lockhart, Chief Executive Officer of LendInvest, said:
"This past year has been a tale of two halves for us at LendInvest. The first half was characterised by significant internal restructuring - we prioritised liquidity, balance sheet flexibility, and reducing our cost base - crucial steps towards securing the financial health of the business. In the second half of the year we are now beginning to see the fruits of our labour. The benefits of our early-year actions are becoming apparent, and we're experiencing a turnaround in the operating environment.
"Throughout the year, despite the broader challenges, we've continued to make progress against our long-term strategic goals. Our adaptability in response to dynamic market conditions and commitment to our customers are underscored by our ongoing product innovation and the evolution of our proprietary next-gen technology.
"The launch of the LendInvest Mortgages Portal marks significant progress in our roadmap, seamlessly integrating our entire mortgage suite into one unified platform. This development has transformed our operations in the Mortgages division, significantly enhancing efficiency for both our customers and internal teams.
"There are also encouraging signs in the broader market landscape, and our achievement of a record number of Buy-to-Let offers in February reflects the robust demand and confidence in our product offerings and service. As we move forward, our sights are firmly set on bolstering these efforts, with a clear focus on driving towards our goal of returning to profitability during FY2025."
31 March 2024(£m) | 31 March 2023(£m) | Growth(%) | 30 September2023(£m) | Growth(%) | |
Platform Assets underManagement("Platform AuM") | 2,783.3 | 2,587.0 | 7.6 | 2,695.1 | 3.3 |
Funds under Management("FuM") | 4,127.3 | 3,605.9 | 14.5 | 4,167.4 | (1.0) |
Highlights
● Platform AuM increased by 7.6% year-on-year, and by 3.3% in H2, driven by growth across all key products in the Mortgages division, and 83% of Platform AuM is now off balance sheet.
○ The pace of recovery picked up in Q4 in particular, with quarter-on-quarter growth of 106% in Buy-to-Let (BTL) signed applications and 96% growth in offers. This helped drive 102% growth in completions in Q4 vs Q3, as a result of enhanced pricing agility, optimised operating capacity, and a superior customer journey, driven by our new proprietary next-gen Mortgages Portal.
● Growth in third-party managed Funds under Management, optimising the balance sheet primarily through the sale of the residual economic interest in Mortimer BTL 2023-1, in addition to the successful closing of a number of new Separate Account mandates.
○ Total FuM increased 14% year-on-year, driven by the completion of new Separate Account mandates (£700m) in the Mortgages division and the derecognition of Mortimer BTL 2023-1.
○ Sale of the residual economic interest in Mortimer BTL 2023-1 raised £410m of third-party managed Funds.
○ The proportion of Funds managed on behalf of third-party investors increased by 36% year-on-year and by 10% in H2 vs H1. We continue to explore a strong pipeline of investor opportunities that will optimise returns and increase our addressable market, we expect to secure new Separate Account/Forward Flow arrangements across both LendInvest divisions over this financial year.
● Launch of proprietary next-gen Mortgages Portal, which consolidates the management of Residential, BTL, and short-term mortgages into a single user-friendly mortgage platform, driving cost efficiencies through increased automation in operations. Headcount cost run rate has been reduced by 25% whilst maintaining operating and origination capacity.
○ This evolution of the portal streamlines the case management process from credit-backed decisions in principle ("DiPs") and applications, through to offers, removing unnecessary friction for brokers to manage their cases efficiently. Case information can now be retrieved up to 80% faster by brokers. A full application can be submitted by a broker in under five minutes, which is supported by automated data gathering and underwriting.
○ The portal provides the capability for a new product transfer process which will allow brokers to switch products at maturity with a few clicks, ensuring our offerings are as accessible and adaptable as possible to meet the evolving needs of our brokers and their customers, allowing us to improve customer retention.
○ The Mortgages Portal provides an enhanced capability to deliver pricing changes three times faster than before, reducing time 'out of the market', ensuring we remain competitive and responsive to market dynamics, but equally providing certainty to customers, particularly through periods of market volatility.
Outlook and market backdrop
The Board expects to announce results for the year ended 31 March 2024 in line with market expectations with respect to both Net Operating Income and Profit Before Tax, and remains cautiously optimistic of returning to profitability during FY2025 noting the following factors:*
Easing financial conditions boosting confidence
Following volatile financial conditions in 2023, we are observing rising confidence in the UK property market, largely due to expectations for falling inflation, declining interest rates and falling swap rates. The Bank of England (BoE) has reported a significant reduction in the market's average quoted mortgage rate for 75% LTV 2 year fixes, falling to 4.77% at the end of February, from a July peak of 6.18%.
Mortgage market activity
Mortgage approvals for house purchase for the period ending February 2024 were up 39.8% year-on-year and up 32.5% for remortgaging. Additionally, the Association of Short Term Lenders (ASTL) reported that the short term mortgage market has grown by 16% year on year, reaching a new high of £7.6bn outstanding as at the end of 2023, fuelled by a near 26% increase in applications, worth approximately £9.6bn in the final 3 months of 2023.
Market opportunities in Buy-to-Let lending
In late December when 5 year swap rates fell to 3.32% we were able to leapfrog the market by using the superior product management capabilities within the Mortgages Portal and release products that ultimately tripled BTL application volumes in early January. This indicates strong pent-up demand within the BTL sector, that can be capitalised on with further windows of opportunity. Through a combination of powerful, end-to-end mortgage processing technology and a diversified funding base that is expected to grow in coming months, we are well positioned to exploit this demand.
* Company compiled market expectations for net operating income and profit before tax for the year ended 31 March 2024: £36 million and -£15.9 million, respectively on a mean basis.