LONDON — Online mortgage marketplace LendInvest saw revenue growth slow and profits dive last year as it invested for growth and dealt with “challenging” market conditions.
Accounts seen by Business Insider show LendInvest’s revenue grew from £18.6 million to £22.1 million in the year to March 2017. That’s a significant slowdown on the prior year when revenues jumped to £18.6 million from £7.2 million in 2015.
The company made a loss of £1 million in the year to March 2017, down from a pre-tax profit of £2.4 million in 2016. Operating profits shrunk from £3.3 million to £52,000.
LendInvest, founded in 2008, lets people invest in property loans to developers looking to do up and sell houses. It finances loans through its online investment portal and a dedicated fund.
CEO and cofounder Christian Faes says the slump in profits was largely down to investing for growth.
“It was always going to be a year of investment last year,” he told Business Insider. “We’d taken equity investment the year before. We had a lot of costs associated with that investment.
“Our team grew quite significantly and we also spread the geographical reach. We’ve got a team now in Manchester, York, and up in Scotland. We’ve moved into a new office, had fairly large fit-out costs. We implemented Pepper, which is an external servicing platform that helps us get access to institutional investors. And the other big cost we had was buying out our Chinese investor, which had certain costs associated with it.”
Beijing Kunlun invested £22 million in LendInvest in 2015 but the startup ended up repaying the investment in October of last year. Faes says the move came after a change of plans for Beijing Kunlun, which has been looking to increase investments in Europe but decided to focus domestically instead.
Addressing one-off costs last year, Faes said: “Those are the things you can strip out and see the underlying business was very strong. Having made that investment, we’re certainly back on track now. Q1 2017 was the best quarter we’ve had in terms of lending growth, profitability, and revenue. It looks like Q2 will beat Q1. That investment is starting to pay off.”
“Q1 2017 was the best quarter we’ve had in terms of lending growth, profitability, and revenue. It looks like Q2 will beat Q1. That investment is starting to pay off.”
As well as investment costs, Faes says difficult market conditions last year contributed to slowing growth and profit slump.
“There’s no denying that last year, the market conditions were challenging,” Faes said. “The biggest challenge we had was actually the Stamp Duty increase, more specific changes to the property market. In some respects that actually made us more focused, not actually just relying on the momentum of the property market and the buzz around fintech.”
He added: “Brexit was not ideal but for us we’re just moving on.”
2017 has the potential to be just as difficult, with data suggesting a continued slowdown in the property market and more political uncertainty in the form of the hung parliament and the start of Brexit negotiations.
Faes is unphased, saying: “I think for us, we fundamentally believe that there are not enough houses being built. There’s a fundamental shortage of housing in the UK. Our business really does address that issue in a very real way. We’re lending to property entrepreneurs. For us, that keeps us going.
“There’s going to be headwinds, there are headwinds but until there’s a glut of housing I think our business will do very well.”
Faes told Business Insider last year that LendInvest is planning to launch a buy-to-let loan product and says plans are still in progress.
“We have a couple of term sheets that we’re working through now with banks,” he said. “We’ve been running a process over the past two or three months to get a funding line. We’re pretty confident that we’re going to get there and be able to make an impact in that space. That’s where the business gets taken to the next level. We’re moving into a very, very deep market.”
Faes said the product is likely to launch in the third or fourth quarter of this year.
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