Solid H1 amidst weakening macro environment

LendInvest continued to grow and gain market share in H1 of FY23 (to 30 Sep 22), with AUM closing on £2.43bn, 33% up y-o-y (30 Sep 21: £1.83bn) and 13% up over the half-year (31 Mar 22: £2.15bn). In the four years since the end of H1-19, when AUM stood at £546m, AUM has grown by a compounded annual growth rate of 45%.

And despite a worsening macro-economic environment, half-year financial results were also solid. H1 revenue fell 8% y-o-y from £46.3m to £42.5m; adjusted EBITDA grew 7% from £13.4m to £14.3m; PBT grew 45% from £10.2m to £14.8m (boosted by a one-off finance income gain), while basic EPS increased 64% from 6.6p to 10.8p.

The weak macro-economic environment, and recent dislocations in the mortgage market has resulted in LendInvest experiencing depressed demand, and short-term growth forecasts are relatively weak. But LendInvest, and indeed many housing market experts, suggest that the market is heading for a slowdown, not a crash, and fundamental long-term market drivers remain intact.

On top of this, LendInvest has developed a technology-led market-leading proposition, is about to launch its ‘specialist’ mortgage product (aimed at the self-employed, those with multiple incomes which traditional lenders don’t always take into account, etc) which should fuel further growth, and it has ample lending capital headroom of c. £1bn.

We have made small adjustments to our forecasts – slightly lower growth for the remainder of FY23 with slightly higher growth in FY24 – following the company’s H1 results release, update and outlook. These largely negate each other and our fundamental valuation remains at 180p per share.