17th Jun 2024 11:58
(Alliance News) - A negative change by LendInvest PLC in the accounting treatment of a prior-year purchase risks overshadowing the more-important positive benefit of the disposal itself, an analyst said on Monday.
In January, the London-based non-bank mortgage lender said the sale of its residual economic interest in the Mortimer BTL 2023-1 securitisation would generate a net gain of around GBP12.1 million before tax.
But on Monday, LendInvest told the market to disregard this advice after it identified an isolated issue with the accounting advice concerning the sale.
As a result, LendInvest warned the market to reduce expectations for pretax profit for the financial year that ended on March 31 as well as net operating income.
In response, shares in LendInvest lost 5.5% to 27.40 pence in London on Monday.
Back in April, the company-compiled market expectations for net operating income were GBP36 million for financial 2024, down 34% from GBP54.7 million in financial 2023. Pretax loss expectations were at GBP15.9 million, swung from a pretax profit of GBP14.3 million.
The adjustments have no impact on the company's current cash position while guidance for the current financial year is unchanged, LendInvest said.
Results for the twelve months that ended on March 31, together with an update on strategy, will be announced in July, the company added.
"The change in accounting view of the potential gain on a disposal effected some months back is a nuisance, but not more," analysts at Panmure Gordon remarked.
"It is after all a change for a year which ended over two months ago," the broker added.
"To focus on the loss of an accounting gain on an important element of capital management risks missing the point of the disposal itself freeing up capital and in demonstrating strong market demand for assets and managed by LendInvest's technology-led business market," Panmure Gordon stated.
The broker thinks the financial 2024 results statement and strategy update from LendInvest in July will be an "important step" in highlighting the progress made in the last year in "reducing costs, simplifying the business, growing third party assets and attracting new financial partners."
By Jeremy Cutler, Alliance News reporter
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