LENDINVEST LIMITED · EBITDA arising from the following off balance sheet entities: the LendInvest Real Estate Opportunity Fund, Steorra Investments DAC, the self-select platform

LENDINVEST LIMITED

Interim consolidated condensed financial statements for the

6 month period ended 30 September 2020

Company registration number: 08146929

LENDINVEST LIMITED

Interim consolidated condensed financial statements for the 6 month period to 30 September 2020

2

CONTENTS

OFFICERS AND PROFESSIONAL ADVISORS 3

DIRECTORS’ REPORT 4

INDEPENDENT REVIEW REPORT TO LENDINVEST LIMITED 7

CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT AND LOSS 8

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME 9

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION 10

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY 12

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS 13

NOTES TO THE INTERIM FINANCIAL STATEMENTS 15

LENDINVEST LIMITED


3

OFFICERS AND PROFESSIONAL ADVISORS

Directors Christopher Barnes

Christian Faes

Roderick Lockhart

Angelie Panteli

Ian Thomas

Secretary Ruth Pearson

Company number 08146929

Registered office Two Fitzroy Place, 8 Mortimer Street, London, W1T 3JJ

Auditors BDO LLP

Bankers Barclays Bank PLC

HSBC Bank PLC

RBC Investor Services Bank SA

U.S. Bancorp, US

LENDINVEST LIMITED


4

DIRECTORS’ REPORT

Performance in the period

The unaudited condensed interim financial statements for the period ended 30 September 2020 have been prepared in

accordance with IAS 34 Interim Financial Statements.

The LendInvest Group financials are composed of the results of LendInvest Limited (the “Company”) and its subsidiaries

(together, the “Group”). The Group’s results have been prepared in accordance with IAS 34 as adopted by the European

Union.

The Group’s principal activity is the provision of secured property lending to third party borrowers. During the period under

review, the Group generated statutory revenue of £39.1m; a 28% increase on the comparative period in 2019.

The Group recognised, for the period, £30.2m of interest revenue and origination fees under the effective interest method

(6 months ended 30 September 2019: £26.6m). This was supplemented by £4.8m of advisory and servicing fees (6 months

ended 30 September 2019: £3.9m). The Group also successfully completed the transfer of a portfolio of buy-to-let loans to

a third party as part of an ongoing ‘forward flow’ agreement, resulting in a derecognition event. The Group recognised,

through revenue, a premium of £4.1m received upon transfer of the assets. The Group has a reasonable expectation of

receiving in future financial periods, premiums and servicing fees from further transfers of originated mortgage loans under

the terms of the ‘forward flow’ agreement.

The Group recorded a non-recurring realised gain of £1.4m on the repurchase and cancellation of issued bonds from an

external bond holder at below par value.

The Group incurred administrative expenses of £11.7m (6 months ended 30 September 2019: £12.4m) and impairment

provisions of £3.1m (6 months ended 30 September 2019: £1.1m). The Group incurred higher impairment provisions for the

period due to the adverse effects of Covid-19 on the economic metrics that feed into our credit loss modelling, discussed in

greater detail in Note 12 of these financial statements. The overall profit from operations was £4.2m (6 months ended 30

September 2019: £0.8m). The cost of a restructuring programme undertaken in the period was £0.8m and is expensed in the

statement of profit and loss under exceptional costs.

The Group is also reporting gains of £23.4m (6 months ended 30 September 2019: £4.3m) in other comprehensive income

for the period. These gains are primarily a result of a £32.9m (6 months ended 30 September 2019: £5.3m) increase in the

fair value of the Group’s originated loans, driven by narrower credit spreads and favourable movements in interest rate

curves. Offsetting these fair value gains is a £2.6m (6 months ended 30 September 2019: £nil) loss on derivative hedging

instruments deferred in the cash flow hedge reserve, a fair value loss of £1.4m on the bonds now cancelled and realised

through the P&L and a deferred tax charge of £5.5m (6 months ended 30 September 2019: £1.0m).

As an online property lending and investing business, the principal risks and uncertainties of the business arise from the

general economic environment and from the UK property market as a whole. Changes to the UK tax regime for property

purchases and investment, regulatory changes for mortgage lenders and any general macro economic factors that affect the

UK property market and economic climate may affect the business.

Covid-19 and the associated government restrictions remain a risk for wider economic activity. The Group maintained

performance in the initial round of ‘lockdowns’ and continues to successfully adapt to the challenging business environment

as reflected by the robust results reported for the period.

At the date of approval of the financial statements, there remains uncertainty regarding the future relationship between the

UK and the EU. The directors do not currently consider Brexit to be a principal risk for the Group. They note the Group is

focused predominantly on lending against property assets in the UK.

A general and persistent weakening of the UK economy and a fall in market sentiment caused by the uncertainty that Brexit

or Covid-19 may pose, has the potential to impact the performance of the Group’s underlying asset recovery. The Group’s

approach to credit risk however is sufficiently robust such that the directors believe the business could withstand fluctuations

in the UK property market in the event of economic uncertainty.

LENDINVEST LIMITED


5

Going Concern

The Group’s business activities together with the factors likely to affect its future development are set out in this Directors’

Report. The directors have considered these factors alongside the Group’s financial plan and any associated risks, and it is

on this basis that the directors have continued to prepare the financial statements on a going concern basis.

The impact of Covid-19 has been assessed and several financial forecasts have been prepared across a range of potential

scenarios. Alongside this, a comprehensive review of all covenants attached to all funding sources, has been conducted to

ensure ongoing compliance both under expected circumstances and potential stressed scenarios. The directors have

reviewed these plans and consider the Group to have sufficient resources to continue its activities for 12 months from the

reporting date, including against the most severe but plausible outcome and do not consider there to be any material

uncertainty.

Key Performance Indicators (KPIs)

Interim gross management accounts Interim financial statements

6 month period ended 30

September 2020


September 2019


September 2020


September 2019

(Unaudited and unreviewed)

(Unaudited and unreviewed)

(Unaudited) (Unaudited)

Revenue (£m) 56.4 51.0 39.1 30.5

Gross profit (£m) 17.6 14.4 17.6 14.4

Profit from operations (£m) 4.2 0.8 4.2 0.8

EBITDA (£m) 6.2 1.8 n/a n/a

Loans and advances (£m) 1,386.2 1,094.2 836.6 786.3

The gross management accounts KPIs above include revenue, gross profit, loans and advances, profit from operations and

EBITDA arising from the following off balance sheet entities: the LendInvest Real Estate Opportunity Fund, Steorra

Investments DAC, the self-select platform and BTL Aggregator 1 Limited. Loans and advances held in off balance sheet entities

continue to be serviced by the Group.

The KPIs provided above for both the gross management accounts and the interim financial statements are a non-statutory

complimentary component of these financial statements.

Events after the period end date

In November 2020 the United Kingdom government imposed a second nationwide Covid-19 lockdown. The new restrictions

are scheduled to end on 2 December 2020 and are not as restrictive as those imposed in March 2020. The UK property

market will remain open during the second lockdown and to date the restrictions have had a minimal effect on the Group’s

operations.

The Group is deeply saddened to announce that Angelie Panteli, Chief Financial Officer, executive director and hugely

respected colleague, passed away on 30 November 2020.

LENDINVEST LIMITED


6

Responsibility statement of the directors in respect of the interim condensed consolidated financial statements for the 6

month period ended 30 September 2020

We confirm that to the best of our knowledge:

● the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting,

as adopted by the EU.

Approved on behalf of the board:

Ian Thomas

Director

10 December 2020

LENDINVEST LIMITED


7

INDEPENDENT REVIEW REPORT TO LENDINVEST LIMITED

Introduction

We have been engaged by the Company to review the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 September 2020 which comprises the condensed consolidated interim statement of profit and loss, the condensed consolidated interim statement of comprehensive income, the condensed consolidated interim statement of financial position, the condensed consolidated interim statement of changes in equity, the condensed consolidated interim statement of cash flows and the related explanatory notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors’ responsibilities

The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The condensed set of financial statements included in this half—yearly financial report has been prepared in accordance with International Accounting Standard 34, ”Interim Financial Reporting”, as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

BDO LLP

Chartered Accountants and Registered Auditors London

10 December 2020

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

LENDINVEST LIMITED


8

CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT AND LOSS

Note 6 month period ended 30 September 2020

£’000


£’000


Revenue 4 39,081 30,504

Cost of sales (21,443) (16,094)

Gross profit 17,638 14,410

Gain on derecognition of financial liability 5 1,361 -

Total operating income 18,999 14,410

Administrative expenses (11,730) (12,447)

Impairment provisions1 (3,112) (1,125)

Profit from operations 4,157 838

Finance income 2 36

Finance expense 6 (2,219) (6,153)

Exceptional costs (767) -

Profit/(loss) before tax 7 1,173 (5,279)

Tax (charge)/credit 9 (197) 1,061

Profit/(loss) for the period 976 (4,218)

1£1.4m of this provision relates to accrued fees due to the group from loans held in an off balance sheet entity.

LENDINVEST LIMITED


9

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

Note 6 month period ended 30 September 2020

£’000


£’000


Profit/(loss) for the period 976 (4,218)

Other comprehensive income:

Gain on derecognition of interest

bearing liabilities reclassed to profit and loss

19 (1,361) -

Items that will or may be reclassified to profit

or loss:

Cash flow hedge adjustment (2,582) -

Fair value gain on loans and advances measured

at fair value through other comprehensive

income

19 32,848

5,261

Deferred tax charge on fair value adjustment 19 (5,491) (999)

Other comprehensive income for the period 23,414 4,262

Total comprehensive income for the period 24,390 44

LENDINVEST LIMITED


10

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

Note As at 30 September 2020

£’000

As at 31 March 2020

£’000

Assets (Unaudited) (Audited)

Cash and cash equivalents 11 72,114 91,609

Trade and other receivables 10 10,097 12,538

Loans and advances 12 836,552 786,348

Property, plant and equipment 13/14 5,155 5,615

Intangible assets 15 5,475 5,357

Investment in third parties 30 -

Fair value adj. for portfolio hedged risk asset 2,875 3,421

Deferred taxation 9 1,058 3,383

Total assets 933,356 908,271

Liabilities

Trade and other payables 16 (29,489) (32,896)

Interest bearing liabilities 17 (844,607) (846,164)

Lease liabilities (5,424) (5,717)

Derivative financial liabilities 19/20 (15,476) (12,993)

Deferred taxation 9 (3,736) (373)

Total liabilities (898,732) (898,143)

Net assets 34,624 10,128

Equity

Share capital 21 - -

Share premium 21 17,540 17,540

Employee share reserve 22 1,020 915

Fair value reserve 22 21,392 (4,113)

Cash flow hedge reserve (5,872) (3,782)

Retained earnings 22 544 (432)

Total equity 34,624 10,128

LENDINVEST LIMITED


11

These interim financial statements of LendInvest Limited, with registered number 08146929, were approved by the Board

of Directors and authorised for issue on 10 December 2020. Signed on behalf of the Board of Directors by:

I Thomas

Director

LENDINVEST LIMITED


12

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

Share capital

£’000

Share premium

£’000

Employee Share

Reserve £’000

Fair value reserve

net of deferred

tax £’000

Cash flow hedge

reserve net of

deferred tax

£’000

Retained earnings

£’000

Total

£’000

(Unaudited)

Balance as at 31 March 2019 - 17,278 455 549 - 2,332 20,614

Loss after taxation - - - - - (4,218) (4,218)

Fair value adjustments on loan & advances through OCI

- - - 4,262 - - 4,262

Recognition of employee share schemes

- - 246 - - - 246

Transitional impact of adopting IFRS 16

- - - - - (551) (551)

Balance as at 30 September 2019

- 17,278 701 4,811 - (2,437) 20,353

Profit after taxation - - - - - 2,005 2,005

Issue of new equity and associated costs

- 262 - - - - 262

Recognition of employee share options schemes

- - 214 - - - 214


- - - (8,924) - - (8,924)

Cash flow hedge adjustments through OCI

- - - - (3,782) - (3,782)

Balance as at 31 March 2020 - 17,540 915 (4,113) (3,782) (432) 10,128

Profit after taxation - - - - - 976 976

Recognition of employee share options schemes

- - 105 - - - 105

Transfer of gain on derecognition of liability from OCI to retained earnings

- - - (1,102) - - (1,102)


- - - 26,607 - - 26,607

Cash flow hedge adjustments through OCI

- - - - (2,090) - (2,090)

Balance as at 30 September 2020

- 17,540 1,020 21,392 (5,872) 544 34,624

LENDINVEST LIMITED


13

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

Note 6 month period ended 30 September

2020 £’000

6 month period ended 30 September

2019 £’000


Cash flows from operating activities

Profit/(loss) for the period1 976 (4,218)

Adjusted for:

Depreciation of property, plant and equipment 13 102 106

Amortisation of intangible fixed assets 15 1,099 549

Share option scheme 8 106 246

Finance income (2) (36)

Current income tax (credit) - (1,003)

Unrealised loss on derivatives 20 2,237 6,153

Impairment provision2 12 3,327 1,133

Depreciation of right of use asset 14 464 391

Interest expense of right of use asset 14 288 278

Non – capitalised financing cost 83 -

Change in working capital

Increase in loans and advances (20,683) (241,500)

Increase in trade and other receivables (726) (2,623)

Increase/(decrease) in trade and other payables (45) 196

Income taxes paid - (115)

Net cash outflow from operations (12,774) (240,443)

LENDINVEST LIMITED


14

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS (continued)

Cash flow from investing activities

Purchase of property, plant and equipment 13 - (136)

Capitalisation of internally developed software 15 (1,217) (1,636)

Investments in third parties (30) -

Interest received 2 36

Net cash outflow from investing activities (1,245) (1,736)

Cash flow from financing activities

(Decrease)/Increase in interest bearing liabilities (1,557) 251,190

Cancellation of interest bearing liabilities (7,315) -

Redemption of interest bearing liabilities 5,954 -

Principal elements of finance lease payments 14 (391) (570)

Interest expense of right of use asset 14 (288)

Proceeds from an equity share issue - -

Equity raising costs - -

Cash settled derivative losses 20 (1,796) -

Non – capitalised financing cost (83) -

Net cash (outflow) / inflow from financing activities (5,476) 250,620

Net (decrease) / increase in cash and cash equivalents (19,495) 8,441

Cash and cash equivalents at beginning of the period 91,609 40,081

Cash and cash equivalents at end of the period 72,114 48,522

1The cash flows related to the transfer of buy-to-let loans that form part of the ‘forward flow’ agreement are deemed operational cash flows

and included in revenue reported for the period. 2The non-cash movement in the impairment provision differs from the charge to the statement of profit and loss in respect to the impairment

provision for the 6 month period ended 30 September 2020. This is due to the charge to the statement of profit and loss including a credit

of £215k in respect of cash amounts recovered in the period on loans that have previously been written off.

LENDINVEST LIMITED


15

NOTES TO THE INTERIM FINANCIAL STATEMENTS

1. Basis of preparation

1.1 General information

LendInvest Limited is a private company incorporated on 17 July 2012 in the United Kingdom under the Companies Act. The

address of its registered office is given on page 3.

These interim condensed consolidated financial statements of LendInvest Limited, for the six month period ended 30

September 2020, comprise the results of the Company and its subsidiaries (together referred to as the Group) (collectively

“these financial statements”).

1.2 Basis of accounting

These financial statements have been prepared in accordance with IAS 34 “Interim Financial Reporting” and have been

prepared on a historical cost basis, except as required in the valuation of certain financial instruments which are carried at

fair value. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, these financial

statements have been prepared applying the accounting policies and presentation that were applied in the preparation of

the Group’s published financial statements for the year ended 31 March 2020.

These financial statements are not statutory accounts. The Group statutory accounts for the year ended 31 March 2020 have

been reported on by its auditor and delivered to the Registrar of Companies. The report of the auditor on those statutory

accounts (i) was unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of

emphasis without qualifying their report, and (iii) did not contain a statement under Section 498(2) or (3) of the Companies

Act 2006.

The Group maintains its books and records in pound sterling (“£”).

1.3 Accounting policies

The accounting policies and methods of computation are consistent with those set out in the Annual Report 2020.

LENDINVEST LIMITED


16

2. Financial risk management

General objectives, policies and processes

The board has the overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management activities and exposure to credit, liquidity and market risk are consistent with those set out in

the Annual Report 2020. The tables below analyse the Group’s contractual undiscounted cash flows of its financial assets

and liabilities:

As at 30 September 2020

Carrying amount

£’000

Gross nominal inflow/ (outflow)

£’000

Amount due within one year

£’000

Amount due post one year

£’000

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Financial assets

Cash and cash equivalents 72,114 72,114 72,114 -

Trade and other receivables 2,673 2,673 1,438 1,235

Loans and advances 836,552 1,231,908 251,299 980,609

911,339 1,306,695 324,851 981,844

Financial liabilities

Trade and other payables 28,922 28,922 28,922 -

Interest bearing liabilities 844,607 909,220 27,112 882,108

Derivative financial liability 15,476 15,476 4,949 10,527

Lease liability 5,424 5,424 851 4,573

894,429 959,042 64,441 894,601

As at 31 March 2020

Carrying amount

£’000

Gross nominal inflow/ (outflow)

£’000

Amount due within one year

£’000

Amount due post one year

£’000

(Audited) (Audited) (Audited) (Audited)

Financial assets

Cash and cash equivalents 91,609 91,609 91,609 -


Loans and advances 786,348 1,197,535 211,009 986,526

882,347 1,293,534 305,773 987,761


Trade and other payables 32,273 32,273 32,273 -



Lease liability 5,717 5,717 785 4,932

897,147 967,845 84,332 883,513

LENDINVEST LIMITED


17

3. 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.

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 are 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

are up to 30 years.

Please see below for a segmental analysis of the profit and loss and statement of financial position balances:

6 month period to 30 September 2020

Short Term Lending £'000

Buy-To-Let £'000

Total £'000

Statement of Profit and Loss Information

Revenue 21,146 17,935 39,081

Interest Expense (8,929) (12,514) (21,443)

Gross Profit 12,217 5,421 17,638

All other lines in the statement of profit and loss would have been disclosed within a central segment as they are

not allocated to either of the above segments. This central segment has not been disclosed.

As at 30 September 2020 Short Term Lending £'000

Buy-To-Let £'000

Total £'000

Statement of Financial Position Information

Loans & Advances 228,745 607,807 836,552

All other lines in the statement of financial position would have been disclosed within a central segment as they are not

allocated to either of the above segments. This central segment has not been disclosed.

LENDINVEST LIMITED


18

4. Revenue


£’000


£’000


Interest on loans and advances 23,612 21,058

Origination fees 6,612 5,548

Advisory fees 4,020 3,898

Servicing Fees * 735 -

Premium received - derecognition of financial assets**

4,102 -

39,081 30,504

* Servicing fee comprised of asset management and performance fees from sheet entities.

**Premium received on transfer of portfolio of buy-to-let mortgages to third party, culminating in a derecognition event.

5. Gain on derecognition of financial liability

The Group repurchased bonds with a par value of £7.3m from an external party in the financial year ended 31 March 2020.

The bonds were subsequently cancelled in the period under review. The bonds were repurchased at discount, realising in

the statement of profit and loss a £1.4m gain on derecognition of the bond liability.

6. Finance Expense


£’000


£’000


FV loss from derivatives and hedge accounting -realised

(1,827) -

FV loss from derivatives and hedge accounting -unrealised

(271) (6,153)

FV value movements on undrawn committed loan facility through P&L*

150 -

Funding line exit fee (271) -

(2,219) (6,153)

*Fair value movements through profit and loss arise as a result of one loan within the lending portfolio being subject to a

committed facility. The undrawn committed facility and amount subject to fair value through profit and loss as at 30

September 2020 is £26.9m.

LENDINVEST LIMITED


19

7. Profit before taxation

Profit before taxation has been stated after charging:


£’000


£’000


Wages and salaries 6,043

5,889

Depreciation and amortisation 1,664 1,046

Fees payable to the auditors for the audit of the financial statements

197 174

Audit related assurance services 75 68

Share-based payments 106 246

Lease finance expense 288 278

8. Share-based payments

Company Share Option Plans

During the financial year ended 31 March 2016, the Group issued an Enterprise Management Incentives scheme (EMI) to

employees. During prior financial years, the Group also issued a Company Share Option Plan (CSOP) to employees.

The grant of share options may be made on an annual or on an ad hoc basis.

Share Option expense recognised

During the six month ended 30 September 2020, the Group recognised a £106,000 expense as a result of issued share options

vesting.


£’000


£’000


The expense is included in administrative expenses, as part of employee expenses

106 246

9. Taxation on profit on ordinary activities

The Group is subject to all taxes applicable to a commercial company in the United Kingdom. The UK business profits of the

Group are subject to UK income tax at the prevailing basic rate of 19% (2019:19%). The Group’s effective consolidated tax

rate for the period to 30 September 2020 was 17% (30 September 2019: 20%). The current period effective rate of tax is

reflective of the applicable corporate tax rate for the period and reconciling items.

LENDINVEST LIMITED


20

As of 30 September 2020, the Group had £2,678k in net deferred tax liabilities (DTLs) (31 March 2020: net deferred tax asset

of £3,010k). These DTAs/DTLs include:

• Assets of £194k (31 March 2020: Assets of £173k) related to temporary differences arising between the tax base

of share based payments and the carrying amount;

• Liabilities of £96k (31 March 2020: Liabilities of £114k) related to temporary differences arising between the tax

base of property, plant and equipment and the carrying amount;

• Liabilities of £3,640k (31 March 2020: Assets of £1,852k) related to the fair value reserve on loans and advances

and cash flow hedge reserve;

• Assets of £131k (31 March 2020: Assets of £140k) related to the ECL provision on transition to IFRS 9;

• Assets of £100k (31 March 2020: Assets of £110k) related to transition to IFRS 16;

• Assets of £633k (31 March 2020: Assets of £849k) related group tax losses.

10. Trade and other receivables

As at 30 September 2020 £’000

As at 31 March 2020 £’000

(Unaudited) (Audited)

Due within one year

Trade receivables 768 1,941

Other receivables:

Prepayments and accrued income 7,345 8,069

Corporation tax receivable 79 79

Other receivables 670 1,214

Due after one year

Rent deposit 1,235 1,235

10,097 12,538

11. Cash and cash equivalents


As at 31 March 2019 £’000


Cash and cash equivalents 64,463 81,983

Trustee's account 7,651 9,626

72,114 91,609

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 16).

LENDINVEST LIMITED


21

12. Loans and advances


£’000

As at 31 March 2020

£’000


Gross loans and advances 818,423 798,491

ECL provision (8,711) (5,985)

Fair value adjustment (*) 26,840 (6,158)

Loans and advances 836,552 786,348

(*) Fair value adjustment to gross loans and advances due to classification as FVTOCI. Fair value adjustments are a function

of changes in interest rates and credit spreads on the Group’s loan assets. The changes in these variables during the period

and effect on fair value is discussed in Note 22.

ECL provision

Movement in the period £’000

Under IFRS 9 at 1 April 2020 (5,985)

Additional provisions made during the period1 (3,450)

Utilised in the period 724

Under IFRS 9 at 30 September 2020 (8,711)

1The ECL provision of £8.7m 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 £3.5m. This includes the £3.1m of

bad debt expense 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 is £0.4m.

The ECL provision has increased since 1 April 2020 due to the downturn in the macroeconomic landscape caused by

significant falls in forecast GDP and HPI resulting from the Covid-19 pandemic. In addition to this, an increase in the

proportion of stage 2 loans and decrease in proportion of stage 1 loans has led to a further increase to the ECL provision.

Additional provisions have also been made during the period relating to accrued exit fee income and the expected

recoverability of these by the Group.

Analysis of loans and advances by stage


Stage 1 £’000

Stage 2 £’000

Stage 3 £’000

POCI £’000

Total £’000

Gross loans and advances 598,537 181,808 37,943 135 818,423

ECL provision (1,049) (2,260) (5,397) (5) (8,711)

Fair value adjustment 19,821 5,953 1,065 1 26,840

Loans and advances 617,309 185,501 33,611 131 836,552

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As at 31 March 2020

Stage 1 £’000

Stage 2 £’000

Stage 3 £’000

POCI £’000

Total £’000

Gross loans and advances 613,960 148,917 35,184 430 798,491

ECL provision (294) (1,216) (4,468) (7) (5,985)

Fair value adjustment (6,038) (352) 206 26 (6,158)

Loans and advances 607,628 147,349 30,922 449 786,348

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;

• Stage 3 – assets where there is objective evidence of impairment, i.e. they are considered to be in default.

Impairment provisions are recognised against lifetime ECL. For assets allocated to Stage 3, interest income is

recognised on the balance net of impairment provision;

• Purchased or originated credit impaired (“POCI”) – POCI assets are financial assets that are credit impaired on initial

recognition. On initial recognition they are recorded at fair value. ECLs are only recognised or released to the extent

that there is a subsequent change in the ECLs. Their ECL is always measured on a lifetime basis.

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.

The impairment loss provisions under IFRS 9 is calculated using 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. During the period, the

following weightings of the different scenarios where used:

• BTL ECL model – 40% / 40% / 20% to the central, downside and upside scenarios.

• Short Term Lending ECL models – 40% / 50% /10% to the central, downside and upside scenarios.

A further downside was applied to the scenario weightings for the short-term lending models compared to March 2020,

increasing the downside from 40% to 50%. The scenario weighting for BTL lending model remains unchanged from March

2020. The change was applied to reflect the impact of the Covid-19 pandemic and the Group’s expectation of a reduction of

property values over the medium term. This is expected to have a much greater impact on the short-term lending book.

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.

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The methodology on which the ECL model is based has not changed from the financial statements dated 31 March 2020. The

macroeconomic data inputs have been updated as at 30 September 2020.

Credit risk on gross loans and advances

The table below provides information on the Group’s loans and advances by stage and risk grade.


Stage 1 £’000

Stage 2 £’000

Stage 3 £’000

POCI Total £’000

Risk Grades 1 – 5 459,366 65,653 - - 525,019

Risk Grades 6 - 10 125,878 88,492 - - 214,370

Risk Grade 11 -15 13,293 27,663 - - 40,956

Risk Grade 16 - 17 - - - - -

Default - - 37,943 135 38,078

Total 598,537 181,808 37,943 135 818,423

The Group had two POCI loans during the period.

As at 31 March 2020

Stage 1 £’000

Stage 2 £’000

Stage 3 £’000

POCI Total £’000

Risk Grades 1 – 5 461,147 28,661 - - 489,808

Risk Grades 6 - 10 131,353 72,234 - - 203,587

Risk Grade 11 -15 20,473 44,729 - - 65,202

Risk Grade 16 - 17 987 3,293 - - 4,280

Default - - 35,184 430 35,614

Total 613,960 148,917 35,184 430 798,491

13. Property, plant and equipment

Acquisitions and disposals: During the six months ended 30 September 2020, the Group did not purchase additional assets

(the six months ended 30 September 2019: £136,000). Depreciation: During the six months ended 30 September 2020, the

Group depreciated £102,000 against property, plant and equipment (the six months ended 30 September 2019: £106,000).

14. Lease arrangements

The Group is the lessee to a property lease arrangement. The lease agreement was amended in the period, resulting in

additions of £103,000 to the right of use asset and lease liability recognised by the Group.

Depreciation: In the six months ended 30 September 2020 the Group depreciated £464,000 against the right of use asset

(the six months ended 30 September 2019: £391,000). Amortisation: During the six months ended 30 September 2020 the

Group expensed finance charges of £288,000 (the six months ended 30 September 2019: £278,000).

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15. Intangible fixed assets

During this period, the Group also capitalised intangible assets with a cost of £1,217,000 (the six months ended 30 September

2019: £1,636,000). Amortisation: During the six months ended 30 September 2020, the Group amortised £1,099,000 against

intangible fixed assets (the six months ended 30 September 2019: £549,000).

16. Trade and other payables


As at 31 March 2020 £’000


Trade payables 16,679 16,797

Other payables:

Corporation tax (3) (4)

Taxation and social security costs 570 627

Accruals and deferred income 12,243 15,476

29,489 32,896

The trade payables balance includes Trustees’ balances of £7.7m 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.

17. Interest bearing liabilities


As at 31 March 2020 £’000


Funds from investors and partners 849,994 852,935

Funding line costs (5,387) (6,771)

844,607 846,164

The Group’s interest on funding has ranged between 3% to 8% in the 6 month period ended 30 September 2020.

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.

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Net debt represents interest bearing liabilities (as above), less cash at bank and in hand (excluding cash held for clients) and

excluding unamortised debt issue costs but including accrued interest relating to the Group’s third-party indebtedness. A

reconciliation of net debt is:


£’000

As at 31 March 2020

£’000


Interest bearing liabilities 844,607 846,164

Deduct: cash as reported in financial statements (72,114) (91,609)

Net debt: borrowings less cash as reported in the financial statements

772,493 754,555

Add back: unamortised funding line costs 5,387 6,771

Add back: trustees account cash 7,651 9,626

Add: accrued interest 2,927 2,893

Deduct: retained interest (5,311) (3,180)

Net debt 783,147 770,665

18. Reconciliation of liabilities arising from financing activities

Interest bearing liabilities

£’000

Finance Leases

£’000

Derivatives

£’000

31 March 2019 (Audited) (388,147) - (2,871)

Cash flows (459,378) - -

Fair value changes 1,361 - (10,122)

Finance leases - (5,717) -

Other

31 March 2020 (Audited) (846,164) (5,717) (12,993)

Cash flows 1,557 679 1,796

Fair value changes - - (4,279)

Finance leases - (386) -

Other - - -

30 September 2020 (Unaudited) (844,607) (5,424) (15,476)

19. Financial instruments

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are: loans and advances,

trade and other receivables, cash and cash equivalents, loans and borrowings, derivatives, and trade and other payables.

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Categorisation of financial assets and financial liabilities

With the exception of loan commitments classified as fair value through profit or loss, all financial assets of the Group are

carried at amortised cost or fair value through other comprehensive income as at 30 September 2020 and 31 March 2020

depending on the business model under which the Group manages the financial assets. All financial liabilities of the Group

are carried at amortised cost as at 30 September 2020 and 31 March 2020 due to the nature of the liability, with the

exception of derivatives that are measured at fair value.

Financial instruments measured at amortised cost, rather than fair value, include cash and cash equivalents, trade and

other receivables, trade and other payables, rent deposit 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:


As at 31 March 2020 £’000


Financial assets at amortised cost

Cash and cash equivalents 72,114 91,609

Trade and other receivables 2,673 4,390

Financial assets at fair value through other comprehensive income

Loans and advances 836,121 786,067

Financial assets at fair value through profit and loss

Fair value adjustment for portfolio hedged risk asset

2,875 3,421

Loans and advances 431 281

Total financial assets 914,214 885,768

Financial liabilities at amortised cost

Trade and other payables 28,922 32,273

Interest bearing liabilities 844,607 846,164

Lease liability 5,424 5,717

Financial liabilities at fair value through profit & loss

Derivative financial liability 15,476 12,993

Total financial liabilities 894,429 897,147

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(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 30 September 2020.


£’000


£’000

As at 31 March 2020

£’000

As at 31 March 2020

£’000

Carrying Amount Fair Value Carrying Amount Fair Value

(Unaudited) (Unaudited) (Audited) (Audited)

Financial assets

Cash and cash equivalents 72,114 72,114 91,609 91,609


Loans and advances 836,552 836,552 786,348 786,348

Fair value adjustment for portfolio hedged risk asset

2,875 2,875 3,421 3,421

Total financial assets 914,214 914,214 885,768 885,768


£’000


£’000

As at 31 March 2020

£’000

As at 31 March 2020

£’000

Carrying Amount Fair Value Carrying Amount Fair Value

(Unaudited) (Unaudited) (Audited) (Audited)


Trade and other payables 28,922 28,922 32,273 32,273



Lease liability 5,424 5,424 5,717 5,717

Total financial liabilities 894,429 888,325 897,147 885,918

The fair value of the Retail Bond 1 interest bearing liability is calculated based on the mid-market price of £95.425 on 30

September2020.

The fair value of the Retail Bond 2 interest bearing liability is calculated based on the mid-market price of £92.200 on 30

September 2020.

Loans and advances are classified as fair value through other comprehensive income and any changes to fair value are

calculated based on a fair value model and recognised through the Statement of Other Comprehensive Income. Interest

bearing liabilities are 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 significant 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. prices) or indirectly (i.e. derived from prices);

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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

As at 30 September

2020

£’000

Level 1

£’000

Level 2

£’000

Level 3

£’000

Interest rate swap * (15,476) - (15,476) -

Fair value adjustment for portfolio hedged risk asset*

2,875 2,875

Loans and advances* 836,552 - - 836,552

Interest bearing liabilities** (838,503) (838,503) - -

*Measured at fair value

**Measured at amortised cost

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

As at 31 March 2020

£’000

Level 1

£’000

Level 2

£’000

Level 3

£’000

Interest rate swap* (12,993) - (12,993) -

Fair value adjustment for portfolio hedged risk asset*

3,422 - 3,422 -

Loans and advances* 786,348 - - 786,348

Interest bearing liabilities** (831,914) (831,914) - -

*Measured at fair value

**Measured at amortised cost

Level 2 instruments include interest rate swaps which are either 2 or 5 years in length. These lengths are aligned with the

fixed interest period of the 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 techniques 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.

Financial instrument Valuation techniques used Significant unobservable inputs

Range

Loans and advances Discounted cash flow valuation

Prepayment Rate Probability of default

Discount Rate

2% - 14% 17% - 83%

2.3% - 12.2%

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(d) Fair value reserve

Six months to 30 September 2020 Financial assets £’000

Deferred tax £’000

Fair value reserve £’000

Balance as at 1 April 2020 (9,747) 1,852 (7,895)

Movement in fair value of loans and advances at fair value through other comprehensive income

32,848 (6,241) 26,607

Gain on derecognition of interest

bearing liabilities reclassed to profit and loss

(1,361) 259 (1,102)

Cash flow hedge adjustment through other comprehensive income

(2,581) 491 (2,090)

Fair value reserve at 30 September 2020

19,159 (3,639) 15,520

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, probability of default 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.

Sensitivity Analysis

Impact of changes in unobservable inputs Gain or loss at 30 September 2020

£’000

+5bps £’000

-5bps £’000

Prepayment rates 26,840 26,510 27,180

Discount rate 26,840 25,848 27,836

20. Derivatives held for risk management and hedge accounting

As at 30 September 2020 As at 31 March 2020

Unaudited Audited

Instrument type Asset £’000

Liability £’000

Asset £’000

Liability £’000

Interest rate swap - (15,476) - (12,993)

All derivatives are held at fair value for the purpose of managing risk exposures associated with the buy-to-let mortgage

portfolio. The net notional principal amount of the outstanding interest rate swap contracts at 30 September 2020 was

£581.4m (31 March 2020: £601.6m).

The Group incurred a net loss of £4.7m on its derivatives positions during the period. £2.6m of these losses were accumulated

in an effective cash flow hedge and therefore deferred in the cash flow hedge reserve.

£2.1m has been recorded in the consolidated statement of profit and loss as a finance expense. £1.8m of the Group’s

accumulated derivative losses was realised and settled during the period.

LENDINVEST LIMITED


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21. Share capital

As at 30 September 2020 number

As at 31 March 2020 number


Issued and fully paid up

Ordinary Shares of £0.000001 each 20,973,850 21,168,175

"A" Ordinary shares of £0.000001 each 687,556 687,556

"A2" Ordinary shares of £0.000001 each 880,000 880,000

Series B1 Preferred shares of £0.000001 each 1,615,881 1,615,881

Series B2 Preferred shares of £0.000001 each 2,308,402 2,308,402

Series C Preferred shares of £0.000001 each 1,711,181 1,711,181

28,176,870 28,371,195

As at 30 September 2020 £

As at 31 March 2020 £

Issued and fully paid up (Unaudited) (Audited)

Ordinary Shares of £0.000001 each 21 21

"A" Ordinary shares of £0.000001 each 1 1

"A2" Ordinary shares of £0.000001 each 1 1

Series B1 Preferred shares of £0.000001 each 2 2

Series B2 Preferred shares of £0.000001 each 2 2

Series C Preferred shares of £0.000001 2 2

29 29

Share premium As at 30 September 2020 £

As at 31 March 2020 £

£’000 £’000

Closing balance 17,540 17,540

The balance on the share capital account represents the aggregate nominal value of all ordinary and preferred shares in

issue. There is no maximum number of shares authorised by the articles of association.

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 and preferred shares have a nominal value of £0.000001.

The C Preferred shares, B Preferred shares, Ordinary shares, “A” Ordinary shares and "A2" Ordinary shares shall rank pari

passu in all respects save for:

- On distribution of assets on liquidation, holders of the C Preferred shares and B Preferred shares rank ahead of

holders of the Ordinary shares.

LENDINVEST LIMITED


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22. Reserves

Reserves are comprised of retained earnings and the employee share reserve. Retained earnings represent all net gains and

losses of the Group less prior period adjustments 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 FVTOCI. The movements in

fair value are a function of changes in credit spreads, interest rate curves and size of the loan portfolio. The Group has

reported significant fair value movements between the period ended 31 March 2020 and the period ended 30 September

2020. The unusually large movements are due to highly volatile credit spreads, which were driven by market reactions to

Covid-19. At the onset of the pandemic credit spreads widened driving losses in the measured fair value of the Group’s

financial assets for the period ended 31 March 2020. The stimulus programmes undertaken by governments and liquidity

injected into financial markets by central banks underpinned a recovery in market confidence resulting in spreads narrowing,

leading to significant fair value gains for the Group in the six months ended 30 September 2020.

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.

23. Related party transactions

There were no related party transactions during the period to 30 September 2020 that would materially affect the position

or performance of the Group. Details of the transactions for the year ended 31 March 2020 can be found in the 2020

Annual Report.

24. Events after reporting date

In November 2020 the United Kingdom government imposed a second nationwide Covid-19 lockdown. The new restrictions

are scheduled to end on 2 December 2020 and are not as restrictive as those imposed in March 2020. The UK property

market will remain open during the second lockdown and to date the restrictions have had a minimal effect on the Group’s

operations.

The Group is deeply saddened to announce that Angelie Panteli, Chief Financial Officer, executive director and hugely

respected colleague, passed away on 30 November 2020.

Documents

LENDINVEST LIMITED · EBITDA arising from the following off balance sheet entities: the LendInvest Real Estate Opportunity Fund, Steorra Investments DAC, the self-select platform