Good day, ladies and gentlemen, and welcome to LendInvest PLC Interim Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session through the phone lines, and instructions will follow at that time. Alternatively, participants can submit written questions using the Ask a Question button on the webcast page. I would like to remind all participants that this call is being recorded. I will now hand over to the CEO of LendInvest, Rod Lockhart, to open the presentation. Please go ahead.
Good morning, everyone, and thanks for joining us today. I'm delighted to share our LendInvest Interim Results for H1 FY26. I'm joined this morning by Hugo Davies, our Chief Capital Officer, Stephen Shipley, our CFO. Over the next 20 minutes, we'll deep dive into our H1 26 performance, showcasing how we continue to grow our profitability and execute our medium-term strategy. These interim results tell an important story. Last year, we were transforming the business, modernizing operations, strengthening the balance sheet, reducing cost, and embedding automation. This year, that approach has become business as usual. We're seeing the impact of this with our growing profitability. Today's agenda is as follows. I'll start with the H1 highlights and a quick snapshot of LendInvest today. Hugo will then take you through the trading environment, our lending performance, and the funding position.
Stephen will then cover the financial review, and I'll come back and wrap up with the outlook and an overview of LendInvest tomorrow. Of course, there'll be time for Q&A. H1 was all about continuing to deliver the strategy we outlined last year as business as usual, focusing on scaling lending, efficient operations, and growing our profitability. Starting with a strong performance in lending, we delivered GBP 664 million of new lending during the first half, which is up 23% year on year. Platform AUM finished the half at GBP 3.45 billion, up 17%. Importantly, in terms of track record and scale, we've now lent GBP 8.6 billion in total since our inception. Turning to our funding highlights, funds under management reached GBP 5.3 billion, up 14% year on year.
Third-party FUM is now over GBP 4 billion, up 8%, and that now represents 75% of our total platform FUM, which underlines the institutional investor debt behind the business. And lastly, on profitability, net fee income was GBP 11.6 million, up 9%. Net operating income was GBP 21.5 million, up 29%. Adjusted EBITDA moved to a GBP 3.7 million profit, up from a GBP 300,000 loss last year. And lastly, crucially, we delivered GBP 1.2 million of profit before tax, and our second consecutive profitable half. So, a strong period of lending growth, strengthening funding lines, and clear progress on profitability. Before Hugo and Stephen go deeper into our results, I just want to spend a few minutes for anyone new to the business outlining our business model and then the impact of the change in strategy we laid out at the start of last year.
LendInvest was created to digitally revolutionize the U.K.'s colossal GBP 1.8 trillion property finance universe. We've built one of the U.K.'s leading alternative property finance platforms designed to leverage cutting-edge technology to seamlessly connect a diverse range of investors, shown on the left of this slide, with a range of property finance opportunities shown on the right. For 18 years and through GBP 8.6 billion of lending, we've been pioneers consistently simplifying property finance with innovative tailored products across short-term mortgages, development, Buy to Let, and residential mortgages. Our proprietary platform empowers property investors, landlords, developers, and homeowners to secure funding with unparalleled speed and simplicity. Our consistent track record has attracted formidable funding partners, including JP Morgan, HSBC, Lloyds, BNP Paribas, and many more. We generate income in several ways. We earn origination fees from borrowers on all of our lending.
When we're using our own capital with principal lending, we earn net interest income. When we're lending using third-party capital, we generate recurring income across a range of management, performance, and servicing fees. We're strategically shifting from a principal lender model to an asset management approach, and this transition is designed to deliver stable recurring revenue and capitalize on the success we've achieved in our investment programs. At the heart of our success is our proprietary tech stack tailored to the specialist needs of the specialist property finance universe. This is our competitive moat. Few new entrants to specialist lending possess the domain expertise and access to capital required to replicate the same depth of automation, configurability, and scale.
That combination of proprietary technology, capital markets access, and exceptional talent supported by two office locations in London and Glasgow is what underpins a model now designed to deliver growing, stable earnings and resilience. So, where is the business today? Following the transformation we undertook last year, our strategy is now fully embedded, and the focus is firmly on execution as business as usual. In practice, this means we now have a lean, scalable platform with real operating leverage. We lent 23% more, with underlying admin expenses down 2.8%. Retention is embedded across our Buy to Let and short-term mortgages, and it's now a core growth engine, as Hugo will come on to describe. We're supported by a strong, diversified institutional funding base, which gives us the capacity to keep growing through the cycle.
We're seeing operating leverage build from stable costs and rising volumes, and that's driving improving earnings, stability, quality, and resilience. And finally, and most importantly, our customer-centric service proposition continues to drive both growth and pricing power. Borrowers are prepared to pay for faster, simpler, more reliable experience, and that shows up in the numbers. We're growing faster than our larger peers, and we're doing that without compromising price and margins. Stephen will come on to explain the financials in more detail shortly. As you can see from the box on the right, we're continuing to make strong progress across our key metrics, and thanks to the transformation last year, the business is set up for scalable, profitable growth going forward. Overall, I'm pleased to report strong progression in performance, and our strategy is delivering.
With that, let me hand over to Hugo, who will update you on our trading environment, lending performance, and our funding position.
Rod, many thanks and good morning all. Now, over the next few slides, as Rod just mentioned, I'll update you on the market backdrop, our lending performance, and how we've progressed from a funding perspective. So, I guess the fog has lifted a little bit now that we're through the budget. We did see purchases slow, particularly in areas like Buy to Let, but now it's out of the way. We're seeing a really good pickup in activity, suggesting the market went into a state of stasis given the extent of the rumors and the level of uncertainty at the time, because not only was it a late budget, we were seeing leaks as early as summer.
With purchases recovering despite the holiday season and a base rate cut expected in about 10 days' time, going into the new year does feel a bit like a structural reset with less policy overhang. At the front of the pack, forging a more positive path forward, are expectations for interest rates. Swap rates have been hovering at or close to year-to-date lows for the past month, and implied base rate pricing based on the OIS curve is at 3.78% for the 18th of December Monetary Policy Committee meeting. In fact, the OIS curve is the base rate heading towards 3.25%-3.5% towards the end of 2026, with some economists forecasting as low as 3% based on macro and fiscal dynamics at the moment, one of which is the prevailing assumption that CPI inflation peaked in September of this year.
Another defining feature of the market, a stalwart in many respects, is its chronic structural undersupply, and yes, on the one hand, it was positive to see housing starts pick up 16% in Q2. It is also true that completions were down 19% over the same period. Thus, the gap between what we build and what we need isn't closing. It's widening, and hence, without a new Help to Buy scheme, first-time buyers still find it as hard as ever to get onto the property ladder. An aging population that is slow to downsize means we see bottlenecks throughout the housing supply chain. This creates allocation and pricing inefficiencies based on distorted supply-demand dynamics. Naturally, this puts a second-order stress on the private rented sector, but is the exact reason why a well-functioning PRS must also be supported, and not just one that supports tenants. It must also support professional landlords too.
It's those same supply dynamics that would have ordinarily supercharged house prices. In this new world, with interest rates being relatively higher for longer, the demand side has probably done more to support house prices with a floor, given muted house price appreciation compared to historical standards as a result of pinched affordability, which limits LTVs. At the same time, you wouldn't be blamed for thinking that market conditions have simply restricted activity and done nothing else as a result of those interest rate dynamics. Any price comparison site or sourcing table will also tell you that product availability is incredibly strong. Customers are enjoying unrivaled choice because, as conditions ultimately stabilize, those conditions breed confidence, which in turn breeds ambition, which we have seen manifest with good innovation in mortgage products in response to those exact same conditions.
There isn't a day that goes by at LendInvest where we are not thinking about or executing on an idea to enhance existing products or introduce new ones. Now, all of what I have just described in turn makes for a very positive signal for SME developers because the narrative is now shifting from a crisis of costs. If you put shovels in the ground now, chances are you'll be exiting into one of the strongest residential markets since the first half of 2022 in about 18 to 24 months' time. Financing costs coming down in line with base rate will be the icing on the cake. Incremental planning reform in the meantime will be the cherry on top.
I'll take this opportunity to reiterate that we need a universally adopted digital-first planning system that operates on a set of facts and rules applied to clearly zoned land that guarantees allocations to SME developers. So, to wrap up, we've had a budget that ultimately accelerates an existing theme of professionalization in Buy to Let, a residential lending market defined by increasing complexity and specialist requirements, and a deep need to support both sectors with either newly developed or refurbished homes, courtesy of development finance and short-term mortgages, dynamics in which LendInvest is set to thrive. Now, moving on to the next slide, we'll now address our lending momentum over this period. And the numbers do tell a very clear story. So, for once, I will try and keep it brief, but I'm not making any promises.
Total new lending reached GBP 663 million, up 23% year on year, with Buy to Let up 19% year on year. We're particularly proud of that because, according to U.K. Finance, the Buy to Let sector in Q2 contracted by 0.2%, and according to MLAR reporting, the mortgage market as a whole was down 2.4%. Buy to Let remains our primary growth engine, supported by operational efficiency and our retention strategies. Furthermore, we saw 46% year-on-year growth in short-term mortgages, powered by 82% growth in bridge-to-let, a crucial and burgeoning sector of short-term mortgages that seamlessly connects and transitions a project from its retrofit phase onto term financing. All of this is continued to be underpinned by our category-leading innovations, digital valuation solutions, and a growing presence in the U.K.'s auction markets.
On the topic of transition, our customer retention strategy in Buy to Let alone has increased retention rates from 35%-57%, which is a 75% improvement. This is clear evidence that this is a platform with a lending engine that is delivering consistent volume, retention, and credit performance. Now, on the next slide, some of our more avid listeners will recall that over the past few results sessions, we've spoken about the strategic and operational importance of customer retention because the operational expenditure and, in theory, the credit risk associated with retained customers is better. But it has also become evident that product transfers increase in popularity in periods of uncertainty and display a correlation to the direction of interest rates.
If swap rates increase and mortgage rates follow, a broker or borrower might be more inclined to opt for a product transfer or a rate switch over shopping around for a new deal. Hence, in an environment where rates are generally going to be higher than where they have been post-financial crisis, it is an area that cannot be neglected. So, I'm very proud of the work that has been achieved by our various internal teams in this space, which is not finished but has driven a material improvement in our customer retention rates thus far. The crux for us, somewhat ironically, is to try and replicate the journey you'd have with a bank because, generally, the standards that govern bank product transfers tend to be less restrictive than those in the context of securitization markets.
But with the power of our technology, we've done a pretty good job where we can now emulate that bank experience whilst also maintaining the integrity of our collateral that has come to be expected in the Mortimer RMBS program and various other securitization programs that contain or will contain LendInvest-originated loans. More broadly, we never stop thinking about product transitions, which is akin to a cross-product transfer. We can take the findings and lessons learned in particular products or segments and apply them across the whole franchise. It goes back to a point that defined the platform very early on, being one of the first alternative finance providers, if not the only one at that time, to be a truly one-stop shop. You know, in 2017, we were offering Buy to Let, short-term mortgages, and development finance at scale.
And whilst others have now adopted a similar approach, we remain ahead of the pack from a technological perspective. And we now turn our attention to the role that agentic AI could play in these experiences too, which will continue to cement our position as a category leader in this space. Now, finally, the funding story. It's easy to forget, but we had just one single day of quote-unquote peace on the 1st of April, the start of our new financial year, before Donald Trump announced his Liberation Day package of trade tariffs that sent markets everywhere reeling. There wasn't a corner of financial markets that wasn't affected. The selloffs were spectacular, as were the recoveries, but geopolitical tensions also reached fever pitch. And for good measure, we had a solid dose of both fiscal and monetary policy uncertainty to contend with.
Yes, with the benefit of hindsight, the macro lens was volatile. But despite this, looking through our funding lens, there continued to be strong momentum and support in our capital markets franchise. We're delighted that our funds under management didn't just hold steady against this backdrop, but have grown a further 14% year on year to a record GBP 5.3 billion. To achieve double-digit funding growth in this environment is not an accident. It is the proof point of our hybrid model. SMAs or separately managed accounts are especially dominant in our funding mix, anchored by JP Morgan, who remains an exceptionally supportive partner for us. But why does this matter to you as shareholders and potential shareholders? It's important because it creates a funding flywheel. We use our principal capital to have skin in the game.
This then creates alignment and protects our strategic control of both products and customers, allowing us to scale our SMAs, maximizing the opportunity set and incrementally unlocking the potential that is embedded in our operating platform that Rod described before. This combination means our ambition is never limited by our own balance sheet, but only by our ability to originate strong risk-adjusted collateral. And so far, this flywheel has powered our platform AUM to a new high of GBP 3.4 billion, up 17% year on year. More crucially, 75% of that deployment, about GBP 2.6 billion, is capital managed on behalf of third parties, another record high. And if, for whatever reason, we could not raise capital for an extended period of time, the gap between our FUM and our platform AUM represents our dry powder. But we're not ones to stand still.
We have executed two landmark transactions that demonstrate the breadth of our funding access, completing within weeks of each other, all while progressing two more that will complete before Christmas. First, we tapped the retail eligible bond market, issuing our fifth retail eligible bond on the London Stock Exchange's ORB platform from the LendInvest Secured Income EMTN series. We raised GBP 75 million with a 2030 maturity at an 8.25% coupon. This wasn't just a fundraise. It was a statement of brand strength, attracting a diverse mix of institutional and retail capital that believes in the quality of the LendInvest story. This transaction, which does incur a cost this year, fundamentally lowers our cost of capital over the next five years and materially de-risks the refinancing of the bonds due in October of next year, as 70% of those outstanding bonds elected to exchange into the new offer.
Second, we successfully priced and settled our seventh RMBS securitization, Mortimer 2025, that raised GBP 310 million, securitizing a portfolio of prime U.K. Buy to Let and residential mortgages. This transaction was our best price deal since 2021, despite a spike in the VIX volatility index at the time, which reaffirms that the securitization markets remain a deep, highly cash-efficient liquidity and funding tool for our core products, with a halo effect that inevitably supports the success of our SMAs. The success and longevity of the Mortimer program means that securitization allows us to load, unload, and reload our balance sheet in a highly sustainable way. Now, finally, looking at the runway into Christmas, we are in the final stages of closing two further significant deals. One supports development finance. The other supports structured bridging.
Both are strategically disciplined by being structured as off-balance sheet solutions, and both will supercharge our LendInvest Capital division with the funding it has been yearning for over the last 18 months. We believe with planning reform and base rate cuts around the corner, the tide is turning for SME developers, and we're ready to support them in their pursuit of delivering more homes. So, to conclude, our AUM is up, our FUM is up, our funding is diverse and resilient, and we have the dry powder to execute on the opportunities that lie ahead. Thank you very much, and I'll now pass over to Stephen.
Thank you, Hugo, and thank you for keeping it brief. Okay, firstly, I want to highlight the sustained momentum we have coming out of H1, which, as you can see from the four charts, is strong upward progress.
We've talked about the strong growth in new lending of 23%, increasing our market share in Buy to Let, and the continued success of our retention strategy. The growth in lending is directly benefiting our net operating income, which increased 29% to GBP 21.5 million. We are now over 70% above where we were two years ago. The improvement in operating leverage is also evident in adjusted EBITDA, which increased from broadly break-even last year to GBP 3.7 million in H1. That's a material uplift driven by stronger revenue and stable underlying operating costs. This is important because we consider EBITDA to be a leading indicator of future earnings growth and free cash flow generation. Again, as we look at progress over three years, we can see a very strong turnaround we have delivered.
Finally, moving to PBT, it increased to GBP 1.2 million, an improvement of GBP 3.6 million, demonstrating the actions we've taken over the past 18 months are now consistently flowing through to the bottom line. So, breaking out our revenue mix, we're seeing a good balance between interest income and fee-based revenue, reinforcing the quality and stability of earnings. Net fee income grew 9%, supported by the continuing build-out of a third-party asset management strategy, continued growth in origination fees, and increased servicing income driven by 17% growth in AUM. Net interest income grew by an impressive 55%, led by similar growth in the portfolio, combined with good pricing discipline and management of the funding mix. Overall, we are happy with the strong growth in our annuity NII income if it is capital and risk-efficient.
These drivers combined pushes net operating income to grow at nearly 30%, which is a particularly good performance in the uncertain market Hugo described. Overall, the revenue profile is shifting towards more recurring, predictable income streams, supporting margin resilience and medium-term earnings quality. The income statement, the story is one of continued growth and strengthening. We delivered GBP 1.2 million of PBT, up 150% year on year, reflecting back-to-back periods of profitability. We've largely covered the revenue story, but some further observations. Net interest income benefits from a five basis points improvement in net interest margin to 2.4%. Importantly, 32% of principal AUM was securitized, releasing capital and improving return on equity. Post the half year, this mix has improved further with the Mortimer 2025 securitization Hugo mentioned.
Net fee income rose 9%, but this increases to 15% when you include the fees released in the gain on loan sales, continuing the build-out of third-party asset management strategy. During the period, we prioritized origination into principal investment AUM to support our seventh RMBS securitization. This builds longer-term annuity income at the expense of upfront fee growth. We expect the mix to switch towards more third-party originations in the next six months. On the cost side, underlying administrative expenses reduced by 3%, reflecting a leaner operating model and continued automation. While reported admin expenses rose due to the absence of prior year share-based payments credits, employee incentives, and restructuring costs, the underlying trend is downward.
The strong net operating income growth is also combined with a reduction in underlying operating costs, means we are now delivering strong operating jaws and a clear indicator of a more resilient and profitable operating model going forwards. Overall, the income statement demonstrates a high-quality earnings progression built on recurring revenue, disciplined cost control, and improved capital efficiency. On the balance sheet, note the comparison here is to March 2025. Net assets increased by 10% to GBP 73 million, driven by improved portfolio performance and profitability.
Loans and advances grew 23%, driven by the growth in new lending, but with a higher mix deployed on balance sheet. 23% growth in six months demonstrates the continued demand across Buy to Let and bridging. Unrestricted cash reduced to GBP 7 million, reflecting our intentional deployment of liquidity into principal investments ahead of our securitization. Interest-bearing liabilities increased 18%, consistent with the expansion of principal investments AUM.
Importantly, corporate debt reduced 3%, evidencing disciplined and efficient capital structure management and a lower cost of borrowing. The balance sheet is now well positioned to support growth into H2 and has been further strengthened post-half year by the transactions Hugo referred to. So, to recap our H1 performance, this waterfall bridges us from H1 last year into the GBP 1.2 million of PBT we delivered in H1 this year. Excluding one-offs, primarily share-based payments and restructuring, the underlying businesses generated GBP 4.9 million of profit uplift for only a six-month period. The key drivers were a very strong GBP 3.3 million increase in net interest income from very strong principal AUM growth and disciplined margin management, GBP 1 million uplift in net fee income supported by stronger loan sales and higher recurring servicing fees, GBP 0.6 million contribution from gains on other financial instruments and other income.
This bridge underscores that the profitability improvement is fundamentally operational and sustainable, not reliant on one-offs. This reflects a step change in earnings capacity as we grow in a disciplined way. And with that, I'll hand back to Rod.
Thank you, Stephen. Before we reach Q&A, there's just two more things from me on our outlook and our medium-term plans. So, in terms of outlook, there are five key points I want to highlight. First, we enter H2 with a strong lending pipeline and a highly efficient design-to-scale platform that's performing well. Second, earnings trajectory and funding capacity continue to improve. Third, we did see, as Hugo pointed out, a temporary slowdown in property purchases ahead of the November budget, but that was short-lived. Completions are now coming through strongly, and pipelines have remained strong.
Fourth, the bond exchange, which was completed post-period end, does have a one-off charge in H2, but it strengthens the balance sheet by extending the expiry profile of our debt, reduces the cost of funding over five years, and improves our medium-term earnings. And fifth, and most importantly, despite the slowdown ahead of the budget and the bond charge, we remain on track with full-year market expectations, and we carry positive momentum into the second half. Two final points I want to make here. Firstly, as I look at the business today, one of the key things that gives me confidence is the positive jaws of our performance. Net Operating Income is growing as expected with a 29% year-on-year gain. At the same time, our underlying costs continue to reduce down 2.8%, and we expect them to continue trending down.
That widening gap is our positive jaws, and it's what's driving the step change you're seeing in our profitability. This is now a structurally more profitable business, and this sets up the LendInvest of tomorrow. As we set out in our last annual report, our medium-term ambition is simple: scale our lending and AUM accordingly as we strengthen our capital-like model without similarly scaling our costs. Broaden our institutional capital, as Hugo stated earlier, with some really positive developments in that respect. Continue to focus on automation and deploying AI-powered solutions, but always empowering human expertise that we're lucky to have across the centers, our centers in London and Glasgow. But lastly, and most importantly, maintain the disciplined execution we're now delivering to ensure our performance across growth and long-term value generation is sustainable. And with that, thank you for your time this morning.
We'll now open the call to questions.
Thank you, ladies and gentlemen. We'll now begin the conference line questions. As a reminder, participants can submit their written questions using the Ask a Question button on the webcast page. For the conference line, in order to ask a question, please press star followed by the number one on your telephone keypad. We will pause for a moment to assemble the queue. Our first question on the conference line comes from the line of Rae Maile from Panmure Liberum. Please go ahead.
Thanks. Morning, everyone. I wonder, Rod, can I get you to talk a bit more about the timing of the budget and what was going on both before and subsequently? Because obviously, that recovery since the budget sounds quite encouraging.
So, yeah, thanks, Rae.
I think that you cut off just at the end, but I think I got the question. In terms of the budget, I mean, we talked about a slowdown in property purchases. If you think about all of our lending as a combination of financing both property purchases, but also remortgages, refinancing. So, we only saw a slowdown in the property purchases side, and specifically in two product areas, Buy to Let and development finance. They were the two areas where borrowers just paused their purchase activity ahead of the budget. And really, what was going on there was, as Hugo described, a whole raft of policies being floated really from the summer onwards that could have materially impacted the property market, and then, of course, a late budget.
Our pipelines throughout that period remained very strong and continued to attract new business, but we did see a slowdown in completions in those two product areas. Encouragingly, post the budget at the end of November, we are seeing completions come through very strongly into December, as Hugo alluded to, and our pipelines as we head into the new financial year remain strong. Despite that slight slowdown, temporary slowdown just in purchases, we are confident about the lending for H2 overall.
Rae, your line is still open. Please go ahead.
Oh, sorry, I got cut off, I think, halfway through the question, so I'll be quick at this time. Can you tell us a bit more about how you're getting on with partnerships as well, please? Because that's obviously an important part of the funding model going forward. Are you seeing your current partners come back for more?
Are there talks with new partners?
That's a good question. We have, in a previous period, upsized our JP Morgan transaction, which was really important to make sure that we continue to grow that. But importantly, and I think during this period, we've been really focused on attracting new capital to the business. And as you may be aware, Rae, there's a huge amount of capital that's being raised into private credit funds, and we've been looking to exploit that dynamic and look for new partners to bring into the business. And we're hopeful of closing transactions over the coming weeks, and we'll announce those to the market as they close. As Hugo alluded to in his section, one relates to development finance, another to structured bridging, both together looking to support our LendInvest Capital division, which you'll remember supports SME developers and larger investors.
That's great. Thank you, Rod.
And that is all we have on the conference line questions. We will now move on to the written questions. If you feel like to take the written questions, please go ahead.
Yeah, we've got one from James Ainley at Investec, who says, "Please, can you give examples of how you're using AI to drive efficiency?" And I'll leave you with the other one, which is also with reference to operating leverage. "Please, can you break down your realigned cost base between percentage fixed and variable?" Do you go for the last one?
Yeah, let me pick up the AI piece first.
I guess with AI overall, we are running a phase in our business where we're encouraging all parts of our business to use generative AI to support them in their roles, and that is creating efficiency improvements in divisions as broadly as technology and engineering, as you would expect, through to even our internal legal and other teams adopting generative AI that's really supporting everyone in their roles. But beyond that, we are adopting AI within the lending process and using it to support and improve the speed at which we're lending. So one great example is, as you can imagine, our head of underwriting deals with internal queries on loan applications all day, every day. We have a model now which we've adopted. All parts of the business have access to.
We see in a transparent way, so we can understand all the outputs, effectively automated a large number, almost all of the queries and questions that come through on a daily basis to that person and make us much quicker in dealing with the inbound that we get from brokers all day, every day. Just one of the areas in which we're adopting AI in the lending process. Second part of that question, probably I'll let Stephen pick up.
Yeah, and I think we haven't got one straight percentage to that. I think if we're talking about the most obvious variable cost, it's our loan servicing charge, which is very variable and is around about 10% of the cost base. In the future, we're looking at optimizing that variable cost and maybe being able to reduce that percentage. We then think about the underwriters and other staff.
You then have a lot of semi-variable costs that's linked to the SBVs and structuring of the business. So I don't think I've got an exact percentage. I think what I would say is we are aiming to hold the fixed costs particularly flat as the business grows, which should help us drive our cost-income ratio downwards. And there's lots of initiatives there, including there was a question about AI. There's even AI that we're applying in the finance world to reconciliations. So I hope that's helpful.
And just a follow-up from James. Please, can you quantify the one-off cost from the bond exchange program?
Yeah, Stephen, John will talk to that quickly.
Yeah, so the one-off cost of the bond program is around GBP 1 million. That's taking the benefit of the lower interest rate as well for the second half of the year that we will achieve.
And then, of course, we will get the continued lower interest rate for the next five or four and a half years, which is beneficial to the business.
Next question we've got from Andy Edmond. This is excellent progress. "Can you add a little more color on what competitors are doing in tough markets? Your tech moat seems to be ever stronger."
Hugo, do you want to pick this one up?
Yes, thanks, Rod. And hi, Andy. Look, I think the reality is today's market is challenging. It is tough, but it's probably been the most productive environment that we've been in for a number of years. So there's not necessarily anything being done differently today compared to prior updates that we've given.
That said, what I would say is probably one of the larger risks, and it picks up on a theme that we spoke about during the full year results, is that there is a lot of capital being attracted to the specialist lending world at the moment. Clearly, one of the risks associated with that is that some platforms in our space take greater risks in order to either demonstrate that they can deploy the capital or to show that they have deployed the capital. Ironically, probably the converse of what you're asking is true, which is maybe we certainly hear about lending standards slipping in some areas. That goes back to the point that we've made throughout this presentation, that discipline is key. We have arguably also seen maybe a greater tolerance to stomach interest rate volatility than prior periods.
Again, that's something that's not a game clearly that we want to be a part of for obvious reasons. So looking through 2026, I'd say what is probably more likely to happen is a further round of consolidation again. If you cast your mind back a few years, probably go back to 2022 when we first started doing these updates, there was a great deal of consolidation within the world of specialist finance and asset-backed finance. And then there's the well-documented events of September 2022, which kind of derailed that. I think now that we're through that period of uncertainty, the market stabilized a bit by sheer fact of the amount of capital that's coming into the sector and the difficulty that some platforms will have in deploying that capital.
I think consolidation will be a key theme throughout this year, and that will be the way that the market evolves and moves on.
That was our last question. So I'll hand back to you, Rod, to finish up.
Thanks. And thank you all for your time this morning and the opportunity to talk through our results. Our focus remains on executing the strategy diligently, building a business that delivers sustainable value. If we're not seeing you on our roadshow, I look forward to seeing you soon and hope you and your families have a great holiday season. If you have any follow-up questions, please do reach out to our investor relations email address. Thank you.