Vector Capital revenue up 21%, with loan portfolio growth of 27%

Vector Capital plc (LON:VCAP), a commercial lending group that provides secured loans primarily to businesses located in the United Kingdom, has announced its interim results for the six months ended June 30, 2022.

Strong points

· Loan portfolio growth of 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 strong performance

Operational Highlights

· Increase in wholesale banking facilities from £35m to £40m post-period
· Ongoing investment in the technology platform to ensure operational resilience and efficiency
· Invested in staff training to improve expertise, which made it possible to handle higher volumes and more complex transactions
· Established a new NOMAD and Broker relationship and experienced a pleasant 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 set of very healthy interim results despite the general economic environment in which we operate. The war in Ukraine, high inflation and rising base rates pose a challenge to all businesses in the UK. The interim results are therefore an affirmation of our effective business model as we continue to improve shareholder value.

“The loan portfolio at the end of the period was £51.6 million (30 June 2021: £40.6 million, 31 December 2021: £46.3 million). The average monthly book value of loans for the six-month period was £50.8m (average monthly loan book H1 2021: £38.4m, average monthly loan book 2021: 40 £.8 million).

“While the economic backdrop remains uncertain, we continue to see a steady stream of good proposals from our network of brokers.

“No doubt there will be regional corrections in the real estate market over the next few months, but we expect to continue to deliver excellent growth and earnings.”

CHAIRMAN’S STATEMENT

I am pleased to present our 2022 interim results for the half year ended 30 June 2022, which show consolidated pre-tax profit of £1,556,000 (30 June 2021: £1,298,000), and to provide a interim dividend of 1.00 pence per share payable 30 September 2022. First half results reflect continued development of activity in 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 enterprise (SME) sector.

It is very pleasing to report that since the end of the period, we have increased our wholesale banking facilities from £35m to £40m, providing the opportunity for additional lending on terms prescribed by the group as opportunities arise.

While the UK economy, like many others, is plagued by concerns about rising interest rates, rising inflation, severe cost of living issues related to electricity and foodstuffs, supply chain dislocation and political uncertainty, for us the UK mortgage market in which we operate has so far 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 to the corresponding period last year, combined with a 27% increase in the value of the loan portfolio during the first half of 2022, are based on the continued hard work of the management team, the quality of the underlying operational systems and the robustness of the business model.

Despite the uncertainties surrounding the immediate economic outlook in the UK, we remain committed to building on the strong business foundations of the group and continuing to grow the loan portfolio using our own capital resources, increased facilities provided by our lenders wholesale and, on a selective basis, co-financing arrangements. This will involve continuous vigilance over the quality, value and liquidity of the underlying security taken.

We are very aware of our broader environmental, social and governance responsibilities to shareholders and other stakeholders and we follow what we believe to be market best practices and develop procedures to address these important issues. Details of our ESG policies and procedures, primarily aimed at lending responsibly and encouraging sustainability and avoiding waste in all that we do, are set out on the company’s website www.vectorcapital.co.uk

The results for the period were only possible through the efforts of the Company’s management team and my fellow members of the Board of Directors and considerable thanks are due to them and our business partners.

We believe our team has the skills and experience to continue to grow the business and capitalize on the opportunities that are expected to arise throughout 2022 and beyond. Accordingly, I am optimistic about the company’s prospects and look to the future with confidence.

Robin Stevens

President

September 6, 2022

STATEMENT BY THE CHIEF EXECUTIVE OFFICER

Introduction

I am pleased to report a set of very healthy interim results despite the general economic environment. The war in Ukraine, high inflation and rising base rates pose a challenge to all businesses in the UK. The intermediate results are therefore an affirmation of our efficient economic model.

The loan portfolio at the end of the period was £51.6m (30 June 2021: £40.6m, 31 December 2021: £46.3m). The average monthly book value of loans for the six-month period was £50.8m (average monthly loan book H1 2021: £38.4m, average monthly loan book 2021: 40 £.8 million).

The average interest rate earned on loans for the period was 11.69% per annum (H1 2021: 11.87%, 12 months to December 21 was 11.84%).

Profit before tax for the six month period was £1.56m (H1 2021: £1.30m).

Diversified portfolio

Our loan portfolio securities portfolio includes:

residential investment properties
home renovations
mixed use (commercial ground floor with apartments above)
commercial (warehouse, retail, hospitality)
development projects (construction of houses and apartments)
land with planning permission

Our travel intention is to increase our weighting towards small home renovations.

Total %
Residential (internal renovation, investment, buy-to-let) 29,079,987 56%
Commercial (retail, hotel, golf, etc.) 11,620,744 23%
Agrarian development 4,991,599 ten%
Mixed (Residential & Commercial) 4,844,644 9%
2n/a charge 767,023 1%
Other 300,000 1%
51,603,997 100%

Funding

Our capital and liquidity remain healthy and we continue to be able to fund select new lending opportunities. Subsequent to period end, our wholesale banking lines increased to £40 million, available primarily for residential transactions.

We still have a very low debt ratio, so it is possible to use appropriate credit facilities to continue to increase the loan portfolio.

The increase in the Bank of England’s base rates will affect our credit facilities which the company will seek to pass on to its customers.

Infrastructure

We implemented a major software platform upgrade in the second quarter of this year, which further improved our operational efficiency.

Gordon Robinson was appointed Non-Executive Director in February 2022. Gordon has 30 years’ experience in the banking industry and has brought considerable sector expertise to the Group.

Apart from this appointment, we have not needed to increase our workforce and the current operational team is able to cope with the expected growth in activity.

Dividend

Based on the financial performance of the first half of the year, an increased dividend of 1.00 pence per share is declared (2021: 0.95 pence). This will be paid on September 30, 2022 to shareholders registered on September 16, 2022.

Outlook

As mentioned at the beginning, the economic environment remains uncertain, but we continue to see a constant flow of good proposals from our network of brokers.

This is true for our industrial sector as a whole. Data compiled by our trade body ASTL (Association of Short Term Lenders) shows a 12-month growth in members’ loan portfolios of around £5bn to £6bn at the end of June 2022.

There will undoubtedly be regional corrections in the real estate market over the next few months, however, we expect to continue to deliver excellent growth and earnings.

Agam Jain

Chief executive officer, Vector capital

September 6, 2022

Sallie R. Loera