Vector Capital plc (LON:VCAP), a commercial lending group that offers secured loans primarily to businesses located in the United Kingdom, has announced its interim results for the six months ended 30 June 2022.
Highlights
| · | Loan book growth 27% to £51.6m (H1 2021: £40.6m) |
| · | Revenue up 21% to £3.0m (H1 2021: £2.5m) |
| · | PAT up 20% to £1.26m (H1 2021: £1.05m) |
| · | EPS of 2.79p (H1 2021: 2.50p) |
| · | Interim dividend of 1.00p per share (2021: 0.95p), reflecting a strong performance |
Operational Highlights
| · | Increased wholesale banking facilities from £35m to £40m after the period end |
| · | Continued investment into technology platform to ensure operational resilience and efficiency |
| · | Invested in staff training to enhance expertise which has led to an ability to handle higher volumes and more complex transactions |
| · | Established a new NOMAD and Broker relationship and experienced a pleasing increase in research coverage |
| · | Best practice ESG policies in place to support responsible lending and encourage sustainability across the business |
Agam Jain, CEO of Vector Capital, commented: “I am pleased to report a very healthy set of interim results despite the general economic environment in which we are operating. The Ukraine war, high inflation and rising base rates pose a challenge to all businesses in the UK. The interim results are therefore an affirmation of our efficient business model as we continue to enhance shareholder value.
“The loan book at the end of the period was £51.6m (30 June 2021: £40.6m, 31 December 2021: £46.3m). The average monthly loan book value for the six month period was £50.8m (H1 2021 average monthly loan book: £38.4m, 2021 average monthly loan book: £40.8m).
“Although the economic backdrop remains uncertain, we are still seeing a steady stream of good proposals coming through our broker network.
“No doubt there will be some regional corrections in the property market during the coming months, however we expect to continue to deliver excellent growth and profits.”
CHAIRMAN’S STATEMENT
It is my pleasure to present our 2022 interim results for the six months ended 30 June 2022, which report consolidated pre-tax profits of £1,556,000 (30 June 2021: £1,298.000), and to propose an interim dividend of 1.00 pence per share payable on 30 September 2022. The results for the first half of the year reflect the continued development of the business linked to building the Group’s loan book to £51.6m (30 June 2021: £40.6m) and creating a leading market presence in the provision of secured loans to the small and medium-sized enterprises (SMEs) sector.
It is very pleasing to report that since the period-end, we have increased our wholesale banking facilities from £35m to £40m, providing scope for additional lending within the Group’s prescribed terms as opportunities arise.
While the UK economy, like many others, is beset by concerns around rising interest rates, higher inflation, severe cost of living concerns linked to power and foodstuffs, supply chain dislocation and political uncertainty, for us the UK property lending market in which we operate has to date remained resilient.
The Group’s half year results, recording revenue growth of 20.8%, and an increase in net profit before tax of 19.9% compared with the corresponding period last year, combined with an 27% rise in the value of the loan book during H1 2022, is based on the continued hard work of the executive team, the quality of the underlying operational systems and the robustness of the business model.
Despite the uncertainties in the immediate economic outlook in the UK, we remain keen to build on the Group’s strong business foundations and to continue to grow the loan book utilising our own capital resources, the increased facilities provided by our wholesale lenders and, on a selective basis, co-funding arrangements. This will involve continued vigilance over the quality, value and liquidity of the underlying security taken.
We are very mindful of our wider environmental, social and governance responsibilities to shareholders and other stakeholders and we are following what we believe to be market best practice and developing procedures to address these important issues. Details of our ESG policies and procedures, aimed principally at responsible lending and encouraging sustainability and avoidance of waste in all we do, are set out on the Company’s website www.vectorcapital.co.uk
The results for the period, were only possible thanks to the efforts of the Company’s executive team and my fellow Board members and considerable thanks are due to them and our business partners.
We believe that our team has the skills and experience to continue to build the business and to capitalise on the opportunities that are expected to arise through the rest of 2022 and beyond. As a result, I am optimistic about the prospects of the business and view the future with confidence.
Robin Stevens
Chairman
6 September 2022
CHIEF EXECUTIVE’S STATEMENT
Introduction
I am pleased to report a very healthy set of interim results despite the general economic environment. The Ukraine war, high inflation and rising base rates pose a challenge to all businesses in the UK. The interim results are therefore an affirmation of our efficient business model.
The loan book at the end of the period was £51.6m (30 June 2021: £40.6m, 31 December 2021: £46.3m). The average monthly loan book value for the six month period was £50.8m (H1 2021 average monthly loan book: £38.4m, 2021 average monthly loan book: £40.8m).
The average interest rate achieved on loans for the period was 11.69% p.a. (H1 2021: 11.87%, 12 months to Dec 21 was 11.84%).
Pre-tax profit for the six month period was £1.56m (H1 2021: £1.30m).
Diverse portfolio
Our loan book security portfolio comprises:
| • | residential investment properties |
| • | residential refurbishments |
| • | mixed use (commercial ground floor with flats above) |
| • | commercial (warehouse, retail, hospitality) |
| • | development projects (construction of houses and flats) |
| • | land with planning permission |
Our intended direction of travel is to increase our weighting towards smaller residential refurbishments.
| Total | % | |
| Residential (internal refurb, investment, buy to let) | 29,079,987 | 56% |
| Commercial (retail, hotel, golf, etc.) | 11,620,744 | 23% |
| Land & Development | 4,991,599 | 10% |
| Mixed (Residential & Commercial) | 4,844,644 | 9% |
| 2nd charge | 767,023 | 1% |
| Other | 300,000 | 1% |
| 51,603,997 | 100% |
Funding
Our capital and liquidity remain healthy, and we continue to be in a position to fund selected new loan opportunities. After the period end our wholesale banking lines increased to £40m, available primarily for residential transactions.
We still have very low gearing so there is good scope to use suitable debt facilities to continue to increase the loan book.
The increased Bank of England base rates will filter through to our debt facilities which the Company will look to pass on to customers.
Infrastructure
We implemented a major software platform upgrade in Q2 this year which has further improved our operational efficiency.
Gordon Robinson was appointed as a Non-Executive Director in February 2022. Gordon has 30 years of senior banking experience and has added considerable sector expertise to the Group.
Apart from this appointment we have not needed to increase our head count and the current operational team is well able to handle the expected growth of activity.
Dividend
On the basis of the financial performance in the first half of the year, an increased dividend of 1.00 pence per share is being declared (2021: 0.95 pence). This will be paid on 30 September 2022 to shareholders on the register on 16 September 2022.
Outlook
As mentioned at the outset, the economic backdrop remains uncertain, but we are still seeing a steady stream of good proposals coming through our broker network.
This is true for our industry sector as a whole. Data compiled by our trade body ASTL (Association of Short-Term Lenders) shows 12 months growth in loan books of members from circa £5 billion to £6 billion to end June 2022.
No doubt there will be some regional corrections in the property market during the coming months, however, we expect to continue to deliver excellent growth and profits.
Agam Jain
Chief Executive Officer, Vector Capital
6 September 2022
