|Period||Net Return (after tax, un-invested weighting and losses)||Default Rate||Delinquency Rate|
|Forecast 2020-21||5.6 - 6.9%||4.6%||13.6%|
|Actual 2020-21||16.7% - 19.1%||5.2%||8.6%|
|Forecast 2021-22||5.9 - 6.7%||6.5%||10.8%|
Publication Date: 12th May 2021 2020-2021 Actual Returns As shown in the table above IRR returns for 2020-21 exceeded the expected returns shown in last year’s Outcomes statement, with an IRR (Internal Rate of Return) of 16.7%-19.1% as at 1st May 2021 for all loans written between 1st February 2020 and 31st January 2021. This is as a result of a lower-than-expected delinquency rate (partially repaid loans) of 8.6% which compensated for a higher-than-expected default rate (loans where there is no repayment) of 5.2%. Loan volumes in Calendar Year 2021 were roughly double those recorded in 2020. However, monthly volumes were volatile due to the impact of the Covid crisis on the economy. It should be noted that the figures above refer to the past and that past performance is not a reliable indicator of future results 2021-2022 Expected Returns For our financial year 2021-22 (1st February 2021 – 31st January 2022) we expect a Target Return of c 5.9 - 6.7%. Background The key assumptions for the 2021-2022 expected returns (when compared to forecasts made for 2020-21) are: A slightly higher default rate of 6.5%, reflecting the experience of 2020-21 A slightly lower delinquency rate of 10.8%, reflecting the experience of 2020-21 The macroeconomic situation faced by our borrowers is expected to be volatile in 2021-22 as the UK emerges from the Covid-19 pandemic and unprecedented government support is withdrawn, notably with the removal of the furlough scheme in H2 2021. However, we do not expect high levels of unemployment – the OBR’s March 2021 report forecast unemployment of 6.4% in Q4 2021. In general, we expect strong economic growth and a bounce back in activity following 2020 (4.0% GDP growth for 2021 is forecast by the OBR’s March 2021 report) – these heightened levels of activity will raise demand from high quality customers for our product. Uncertainty around the timing and breadth of the recovery in macro-economic environment is a significant cause for our caution and expectation that returns in 2021-22 may not match historic returns. Any deviation from our macro-economic assumptions, including for example further lockdown measures, swifter than expected withdrawal of government support, higher than expected inflation, further changes to the regulatory environment or political instability, could undermine the situation and result in higher levels of default and delinquency. Methodology for 2021-22 The Target Return is the total return calculated on an Internal Rate of Return (IRR) basis that an investor can expect to receive by 1st May 2022 on loans issued in the year from February 2021 to January 2022 (our company’s financial year). The conservative assumption is then made that all outstanding loan balances post May 2022 are written off for the purposes of this Target Return calculation. The Target Return is an IRR calculated on the basis of historic performance of our loan book adjusted for forward-looking expectations. We are constantly improving our credit decisioning as we accumulate data but given the macroeconomic uncertainties, we have included a buffer on our historic loss rate. The Target Return assumes an investor invests in a diversified portfolio of our loans each month throughout the Target Return period, and in proportion to the volume of loans issued each month by the Company. For the purposes of this Outcomes Statement the Target Return is based on expected cashflows from three different loan outcome-cohorts: Performing Loans, being those that are fully repaid within the reporting period. Defaulted loans, being those with no received payments. Delinquent loans, being those that at the end of the reporting period have only made partial payments or have entered into an alternative payment plan. Reasons why the actual return may differ from the Target Return: The default and/or delinquency rate being different to expected. The UK macroeconomic situation in 2021-2 being different to expected. The Company’s loan volumes each month being different from forecast. Changes to the regulatory environment in which the Company operates. An investor’s portfolio mix being different to the Company’s volume mix. The number of lenders on the platform impacting the forecast cash drag. Changes to The Money Platform’s economic model, for example a change to the income allocations between lenders and the platform (which would be communicated in advance to loan participation). Reduction in interest payable due to changes in customer behaviour resulting in more early repayments. What is an “Internal Rate of Return”? The internal rate of return on an investment is the annualised effective compounded return rate or rate of return that sets the net present value of all cash flows (both positive and negative) from the investment equal to zero. IRR is designed to account for the time value of money. A given return on investment received at a given time is worth more than the same return received at a later time, so the latter would yield a lower IRR than the former, if all other factors are equal.