CEO’s Blog

The lending businesses within the Novellus group have had quite the journey. Our first full year was 2018/19, making just shy of £200,000 profit with revenue of c. £480,000. 

We have taken lots of positive steps since that first full year. The business has two dedicated offices: our UK office in Bromley, Kent and the Irish office in Dublin. The lending businesses employ 25 full time staff members and we have been incredibly fortunate to attract some exceptional talent to the business. Our loan book has now grown to c. £200m (currency adjusted). Our 2023/24 accounts will show revenue has increased to c. £25,000,000. The average drawn balance during 2023/24 was £160m (all currency adjusted).  

We have not experienced any capital losses or interest impairment on any loan since our inception. This is testament to the quality of the team and our approach to credit. We employ individuals with deep sector specific experience in all of the asset classes we lend into. We also have first class professional advisors whose advice and guidance we rely heavily on, alongside our internal diligence. This is in direct contrast to many of our peers who allow borrowers to select the legal representatives of the lender and select the valuer which we feel can leave loan books materially exposed.  

Real estate lending is one of the most straight forward businesses that I am involved in. The lending group set out with a number of key principals (and business objectives): 

  • Aim to double revenue (year on year).  
  • Zero losses (strong disciplined approach to credit.)  
  • Profitable from the outset and at all times. Any lending business that doesn’t make money (especially given the market conditions over the past 12 years) is not going to suddenly succeed. This has always been a very basic trade.  
  • Invest materially in the technology and personnel to significantly scale (if market conditions present the right opportunity). 
  • Ensure the business is well capitalised to scale.  
  • Continue to re-evaluate and assess the market.  

We have had a number of bumps since 2018/19. During Covid we invested in a small niche lending business. This took a significant amount of senior resource away from the core business and resulted in the most subdued of financial results. This provided the jolt we needed to re-focus our energy on our internal business and our results have benefited greatly.  

As the business has grown, people are very much at the core of our progress. The lending businesses have been fast-growing and revenue is now 52 times larger than in 2018/19. As we have expanded, some hires haven’t been a success. With every hire that doesn’t work out (especially senior appointments), there is a lot of disruption. Time spent, recruitment costs, opportunity cost (lack of progress) to name a few. Fortunately, we have identified some first-class replacements and we are confident in the foundations the lending businesses have to push on for 2024/25.  

We have also matured as a business and have been incredibly fortunate to attract five exceptionally talented new starters (three graduates and two with 2-5 years of work experience). This is all happening at the moment and imbedding new starters is time consuming. We are committed to getting this right and developing them within the business but again, that’s time out of people’s already very full day jobs. 

Another challenge has been the lack of interaction between the finance and operational teams. As we continue to grow, the need for the finance team to be deeply imbedded in operations has never been greater. We have invested significantly in trying to transform how we manage the group finance function and have recently appointed three new employees and will pivot two full time operational team members into finance roles. This is to ensure we have an experienced and efficient finance function to drive us forwards.  

We are also going live with phase one of our bespoke loan management software. A project on this scale requires significant investment in technology resources. The business has also invested time alongside their BAU roles to help guide the design of the solution. We are fully committed to investing in the best people and technology to help grow the business, and the lending platform is reflective of this commitment. Phase 2 scope has been approved and we can’t wait to roll this out across our existing loan book and into any new businesses we are performing diligence on.  

This year, financial performance to date has been modest. We will still likely see revenue grow by c.20-30% whilst maintaining the no loss record and also staying consistent on cost management (as a % of revenue) and profitability levels. We are reaching the end of our Year One audit. Having a big 4 accountancy practice take us on as an audit client is further testament to the progress Novellus has made. Again, a lot of resource has been deployed as we have supported the auditors through this process and this has certainly further highlighted some of our challenges within finance (which we have now addressed).  

Novellus continues to partner with a number of high performing athletes. In addition, we get a lot of pleasure from being able to assist with a number of community led, grass roots initiatives in both the UK and Ireland. This year, marks our first event sponsorship where we are delighted to be Co-Sponsor for the 2024 KPMG Woman’s Irish Open at Carton House, Ireland. We continue to look at community projects and charities that we can potentially support as we are very grateful for the position we are in from how the business has performed.  

 On balance, it’s a year of consolidation. I have lofty ambitions for Novellus and a lot of belief in our team. It’s important to also recognise the growing pains we are experiencing and recognise that we will fall some way short of the revenue number I had hoped for 24/25.  

In nearly all businesses, there comes a point where doubling revenue (YoY) becomes a bridge too far. I’m not quite willing to accept this is where we are at but we must be honest with ourselves that we will come up short this year. We will be working very hard to recruit and originate the volume of business required to see us back on track for £40m + for the 2025/26 year.  

We continue to explore complimentary businesses and loan books as natural ways to further bolster our growth and take advantage of our loan management software. We have a number of vacancies with a particular focus on origination within the Irish real estate market and we’d love to hear from any individuals interested in exploring a role at Novellus.     

The mid-term goal of £100m (currency adjusted) annual revenue across the lending businesses remains. We may have stumbled this year for the reasons outlined above but we believe we will be able to make up the time and arrive at that figure by full year 2027/28. Time will of course tell but having it committed to paper will act as a reminder of either how wrong I was or that we were not entirely crazy to continue to embark on this journey. 

Author: Billy McManus