TIDMMAB1
RNS Number : 6003N
Mortgage Advice Bureau (Hldgs) PLC
26 September 2023
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
("MAB" or "the Group")
26 September 2023
Interim Results for the six months ended 30 June 2023
Mortgage Advice Bureau (Holdings) Plc (AIM: MAB1.L) is pleased
to announce its interim results for the six months ended 30 June
2023.
Financial summary
H1 2023 H1 2022 Change vs
H1 2022
Revenue GBP117.5m GBP96.5m +22%
---------- --------- ----------
Gross profit GBP32.9m GBP25.4m +30%
---------- --------- ----------
Gross profit margin 28.0% 26.4% +1.6pp(1)
---------- --------- ----------
Adjusted EBITDA(*) GBP10.5m GBP12.0m -13%
---------- --------- ----------
Adjusted EBITDA margin(*) 8.9% 12.4% -3.5pp
---------- --------- ----------
Adjusted profit before tax(*) GBP8.8m GBP11.5m -24%
---------- --------- ----------
Statutory profit before tax GBP7.6m GBP10.1m -25%
---------- --------- ----------
Adjusted profit before tax
margin(*) 7.5% 12.0% -4.5pp
---------- --------- ----------
Adjusted profit before tax
as a percentage of net revenue(*) 19.3% 38.6% -19.3pp
---------- --------- ----------
Reported profit before tax
margin 6.4% 10.5% -4.1pp
---------- --------- ----------
Adjusted EPS(*) 11.8p 16.4p -28%
---------- --------- ----------
Basic EPS 11.3 p 14.0 p -19%
---------- --------- ----------
Adjusted cash conversion(*) 131 % 124% +7pp
---------- --------- ----------
Interim dividend 13.4p 13.4p -
---------- --------- ----------
Operational highlights
-- Market share of new mortgage lending (2) up 19% to 8.1
% (H1 2022: 6.8%)
-- Gross mortgage completions(2) (including product transfers)
flat at GBP12.1bn (H1 2022: GBP12.2bn)
-- Gross new mortgage completions(2) (excluding product
transfers) down 13% to GBP9.0bn (H1 2022: GBP10.3bn)
-- Adviser numbers down 6% to 2,109 (3) at 30 June 2023
(31 December 2022: 2,254)
-- Average number of mainstream advisers(4) up 4% to 1,966
(H1 2022: 1,890)
-- Revenue per mainstream adviser(4) up 17% following the
acquisition of Fluent
-- Proportion of revenue from re-financing at 36% (H1 2022:
30%)
Post period end
-- 2,114 advisers at 22 September 2023, including 129 advisers
from Fluent
* In addition to statutory reporting, MAB reports alternative
performance measures ("APMs") which are not defined or specified
under the requirements of International Financial Reporting
Standards ("IFRS"). The Group uses these APMs to improve the
comparability of information between reporting periods, by
adjusting for certain items which impact upon IFRS measures, to aid
the user in understanding the activity taking place across the
Group's businesses. APMs are used by the Directors and management
for performance analysis, planning, reporting and incentive
purposes. A summary of APMs used and their closest equivalent
statutory measures is given in the Glossary of Alternative
Performance Measures.
Peter Brodnicki, Chief Executive, commented:
"It has been an exceptionally challenging year with interest
rates continuing to rise. This has clearly impacted consumer
confidence, resulting in many people deciding to delay their house
purchase, whilst for others there is understandably a reduced level
of urgency. This has created a toughening market for mortgage
brokers as the year has progressed, compounding the damaging impact
of the mini-budget last September.
"However, against this difficult backdrop I am pleased with how
MAB has significantly outperformed the market, with the organic
business performing above expectations. To ensure we are in the
best possible shape when market conditions improve we have
continued to carefully invest across the entire Group to deliver
optimal business and adviser efficiency. This has also been a
priority with Fluent, where the short-term impact of such a
significant downturn has been more strongly felt, and indeed
magnified due to the business having been in such a strong growth
phase at the point it was acquired by MAB.
"MAB has an exceptionally strong track record of outperformance,
and the progress made this year in the development of new lead
opportunities for Fluent and the rest of the Group will underpin
our plans to deliver continued market share growth in 2024, even if
difficult market conditions continue to prevail.
"There is a great deal to be positive about and our lead
initiatives, including the addition of Fluent to the Group, will
continue to strengthen our addressable market and growth plans,
whilst offsetting the potential impact of any downward cycles in
the future."
Current Trading and Outlook
Following a difficult Q1 2023, with activity levels still
affected by the fall in mortgage approvals post the September 2022
mini-budget, we saw an improvement in Q2 2023 and ended the half
year modestly ahead of the Board's original expectations.
However, market conditions have toughened again in Q3 2023,
impacting both purchase and re-financing activity. Expectations
that the Bank of England base rate might be peaking coincided with
a downward movement in mortgage rates, changing the behaviour of
customers in terms of the timing and their urgency to commit to a
new fixed mortgage rate, whether that be a product transfer or
re-mortgage. In addition, the summer months saw a sharper than
usual seasonal fall in mortgage financed house purchases.
This has prompted the Board to take a more cautious view on
expected activity levels in Q4 2023 and hence the outlook for the
full year. Although the Board still expects the MAB Group excluding
Fluent to be at least in line with its original expectations for
the year, it now expects the Group to report an adjusted profit
before tax of not less than GBP22m for the 2023 financial year,
with some upside likely to materialise should market conditions
normalise.
The underlying level of demand for home ownership and home moves
remains strong, and we are confident that once inflation is under
control and the Bank of England base rate has peaked or started to
fall back, we will see demand and activity strengthen again. When
they do MAB will be in a very strong position to capitalise on the
recovery and the inevitable catch-up in house purchase transactions
that will follow. This will be boosted by continued increases in
operational efficiency and market share, and the momentum that is
building in our lead generation and retention initiatives.
Our new AR pipelines continue to build strongly and are expected
to do so for the remainder of H2. Organic adviser growth will
return when the economic outlook is more certain and our AR firms
are able to plan with far more confidence.
For further information please contact:
Mortgage Advice Bureau (Holdings) Plc +44 (0)1332 525 007
Peter Brodnicki - Chief Executive Officer
Ben Thompson - Deputy Chief Executive Officer
Lucy Tilley - Chief Financial Officer
Nominated Adviser and Joint Broker:
Numis Securities Limited
Stephen Westgate / Giles Rolls +44 (0)20 7260 1000
Joint Broker:
Peel Hunt LLP
Andrew Buchanan / Mike Burke +44 (0)20 7418 8900
Media enquiries: investor.relations@mab.org.uk
Analyst presentation
There will be an analyst presentation to discuss the results at
9:30am today.
Those analysts wishing to attend are asked to contact
investor.relations@mab.org.uk
Copies of this interim results announcement are available at
www.mortgageadvicebureau.com/investor-relations
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 as it forms part of
UK Domestic Law by virtue of the European Union (Withdrawal) Act
2018 ("UK MAR").
(1) Percentage points.
(2) Based on first charge mortgage completions, excluding
secured personal loans (second charge mortgages), later life
lending mortgages and bridging finance, and, for H1 2022, including
completions from associates in the process of being onboarded under
MAB's AR arrangements.
(3) Includes 139 Fluent advisers as at 30 June 2023 (74 advisers
in the first charge mortgages division, 54 in the secured personal
loans division, 5 in the later life division, and 6 in the bridging
finance division). Includes a total of 188 advisers at 30 June 2023
who are later life advisers or advisers in directly authorised
firms that use MAB's subsidiary, Auxilium, a specialist protection
service provider, for protection. For both later life and directly
authorised advisers the fees received by MAB represent the net
income received by MAB as there are no commission payouts made by
MAB.
(4) Excludes directly authorised advisers, MAB's later life
advisers and, for H1 2022, advisers from associates in the process
of being onboarded under MAB's AR arrangements. Includes Fluent's
second charge, later life and bridging advisers who have a higher
revenue per adviser than first charge advisers.
Chief Executive's Review
H1 2023 was a very challenging period for the mortgage and
housing markets, as inflationary pressures and rising interest
rates significantly impacted consumer confidence and affordability,
with lending criteria being tightened, and ultimately the demand
and commitment to proceed with mortgaged property purchases.
Property transactions overall during the period fell by 18%
compared to H1 2022. However the contraction in first charge
mortgage lending in the purchase segment was much sharper at 30%,
as the proportion of property purchase completions by cash buyers
increased. Overall, gross new mortgage completions in the UK fell
by GBP40.1bn, or 27%, to GBP110.5bn in H1 2023 (H1 2022:
GBP150.6bn). Affordability constraints drove customers more towards
lower margin product transfers, which saw a GBP24.7bn, or 28%,
increase to GBP114.1bn.
Despite all this, Group revenue for the period was up 22% to
GBP117.5m (H1 2022: GBP96.5m), with organic growth (excluding the
Fluent, Auxilium and Vita acquisitions) of 1%, and Group first
charge mortgage completions remained flat at GBP12.1bn (H1 2022:
GBP12.2bn). Re-financing transactions accounted for 53% of the
Group's first charge mortgage completions by lending value (H1
2022: 43%), driven by a 61% increase in the Group's product
transfer completions to GBP3.1bn (H1 2022: GBP1.9bn). MAB's market
share of new first charge mortgage lending grew by 19% to 8.1% (H1
2022: 6.8%). This outperformance of the market once again
demonstrates the strength and resilience of MAB's business
model.
MAB's first charge mortgage completions are analysed as
follows:
H1 2023 H1 2022 vs 2022
GBPbn GBPbn
-------- -------- --------
New mortgage lending 9.0 10.3 -13%
-------- -------- --------
Product Transfers 3.1 1.9 +61%
-------- -------- --------
Gross mortgage lending 12.1 12.2 -1%
-------- -------- --------
Adjusted EBITDA on an organic basis was down by 11% to GBP10.7m
(H1 2022: GBP12.0m), primarily due to a GBP3.3m/23% increase in
administrative expenses reflecting the planned continued investment
in the Group's growth strategy despite these challenging market
conditions. Including recent acquisitions, the Group's adjusted
EBITDA was down by 13% to GBP10.5m (H1 2022: GBP12.0m), reflecting
Fluent's underperformance driven by the significant market
downturn, as set out in more detail below. MAB's core model and
First Mortgage have both outperformed the Board's original
expectations for H1 2023.
Delivering our growth strategy
Due to the market downturn that followed the mini-budget, the
Group entered 2023 with lower than expected pipelines of written
mortgages and new Appointed Representative ("AR") firms. In
addition, our existing AR firms have focused on efficiency and
paused recruitment, leading to a reduction in adviser numbers. The
total adviser number at 30 June 2023 was down 6%, as expected, to
2,109(1) (31 December 2022: 2,254).
Despite a 30% drop in higher margin purchase-related mortgage
transactions compared to H1 2022 in the UK, MAB's average adviser
productivity held up very well, with a 5% increase in organic
revenue per mainstream adviser in the period, in part benefitting
from a lower number of new advisers, who typically take a while to
reach full productivity. This is testament to the quality of the
firms we work with and how we support them, which is what
differentiates us from the wider market.
Against the backdrop of a very challenging market, we have
continued successfully to deliver our strategy to drive operational
improvements within the Group and maximise opportunities for our
advisers and ARs in terms of lead generation and productivity. Our
technology platform continues to support the Group's outperformance
of the market, and during the period we also made important strides
in terms of optimising our addressable market.
H1 2023 has seen our recruitment pipelines for new AR firms
build back to pre-mini-budget levels and we expect this strong
activity to continue into 2024. With increasing expectations and
even higher standards of consumer protection expected from the
regulator, more directly authorised firms are seeking greater
support from a strategic partner like MAB. Organic adviser growth
will return when the economic outlook is more certain, which will
enable our AR firms to plan with far greater confidence and the
Group to further accelerate its growth.
We are confident that once market conditions normalise, we will
be in an even stronger position to build on the significant market
share gains we have made and realise our medium to long term growth
objectives.
Fluent
Fluent experienced significant growth in lead flow from price
comparison websites and other national lead sources right through
to the point of the mini-budget. Accordingly, the business had
continued to scale up its adviser base and fulfilment capabilities
in anticipation of a consistent and sustained growth path.
The significant market downturn has hit Fluent hard across all
product lines, and unlike more mature first charge mortgage
businesses, they have not had the benefit of a significant client
bank to counter this effect. Fluent's existing major lead sources
have also been adversely affected in the short term both in terms
of lead numbers and conversion potential.
In response to these market conditions, management took decisive
action due to the negative short-term outlook and implemented a
programme of "right-sizing" the cost base, which was substantially
completed in Q1 2023.
Once inflation is brought under control and interest rates are
at or close to their peak levels, consumer demand will recover, and
we are confident that Fluent will return to its historic growth
path. In the meantime, we have implemented new ways to leverage
MAB's expertise and significant fulfilment capabilities to help
Fluent optimise peaks and troughs in demand and drive further
efficiencies, so that the impact of any future extreme market
downturn, such as this one, will be greatly mitigated.
MAB's expertise and solutions in terms of customer protection
and retention are now embedded within Fluent. These improvements
which we are now seeing will further enhance Fluent's revenues and
profit margins.
Fluent's performance to date has been below our original
expectations due to the timing of completion of the acquisition
relative to the onset of the market downturn. However, the
compelling strategic rationale for acquiring the business remains.
Fluent is the leading intermediary dealing with the fast-growing
national lead source sector and has continued to grow its new lead
sources in H1 2023 with notable blue-chip additions in the first
charge mortgages division.
Both Fluent and MAB continue to have a strong pipeline of
further new national lead sources, that seek to partner with firms
that have the market leading processes, technology, and quality of
service and that can drive the best consumer outcomes. The Group is
ideally positioned to capitalise on this momentum, and in the
meantime we will continue to drive further efficiencies within
Fluent in H2 2023 and into 2024 which will benefit the Group's
future profitability.
Customer lead generation
The last few years have seen MAB put major focus and investment
in early customer capture and nurture, optimising opportunities
from existing lead sources, and ensuring high levels of retention
of existing customers.
This has included building new proprietary software, featuring a
lead management system that can enable significant lead volumes to
be ingested, distributed immediately to advisers across our Group,
and then progressed under strict SLAs and reported on both
internally and externally to third party introducers. MAB has built
multiple lead sources into this new system and continues to focus
on increasing the overall lead flow to ARs.
Lead generation initiatives also include MAB rolling out its
Mortgage Monitoring Tool and enhancing the functionality on its
Home Buying App. The former delivers personalised monthly
communications enabling a far richer engagement with existing
customers and homeowners in early stages of research, and the
latter has enabled us to support future First Time Buyers preparing
for their first purchase.
As a result of these nurture initiatives, we expect further
improvements in customer retention, whilst helping our partner
firms to build a client base of potential new customers from their
existing lead sources. These initiatives will ultimately help us
drive productivity and further market share growth in all market
conditions, with the first meaningful benefits of this strategy
expected to be seen in 2024.
In addition, we continue to pursue increased lead flow into
Fluent, as well as exploring new processes that can drive higher
conversion rates and even better customer outcomes.
Optimising our addressable market
Our plans to leverage our acquisition of Aux Group Ltd
("Auxilium"), the specialist protection platform servicing directly
authorised firms, have progressed well. Access to the protection
expertise MAB has developed over the last two decades will greatly
benefit the forward-thinking and ambitious directly authorised
firms of scale that the Auxilium proposition is aimed at.
In addition, our leading protection and general insurance advice
firm Vita Financial Ltd is launching a new proposition to access
the largely untapped UK business protection market and leverage the
Group's significant distribution in this area.
In Australia, the technology integration with our joint venture
partner, Australian Finance Group Ltd, is expected to complete in
the second half of this year, allowing us to further progress our
growth plans there.
The FCA's New Consumer Duty (NCD) implementation
All the FCA's NCD requirements have been owned and considered
across each area of MAB's business by the business leaders,
ensuring full coverage and a detailed focus on making sure that MAB
delivers the best possible outcomes across the customer journey. In
addition, the MAB team engaged with external parties and trade
associations to ensure the right approach was taken and validated
along the way.
The Board was actively engaged throughout the project, from
approving the project plan and approach on 31 October 2022 to the
31 July 2023 implementation deadline. Ongoing engagement with the
Board now continues as "business-as-usual".
MAB's Vision, Mission, and Cultural values, embedded in the
business since 2021, are closely aligned with Consumer Duty and
have supported the delivery of good outcomes for consumers. As part
of the NCD project, we mapped the existing customer journey,
including how we communicate with customers before, during and
after the sales process, to identify potential gaps and areas where
the standards of customer outcomes could be further strengthened.
Important deliverables that resulted from this analysis included
our bespoke vulnerable customers workstream.
Summary
Despite these extreme market conditions, MAB has delivered
another period of strong market share growth and we are better
positioned than ever to keep doing so.
On an organic basis, the Group is performing ahead of the
Board's original expectations for 2023. Our acquisition of Fluent
will bring significant earnings enhancement to the Group when
market conditions improve. We continue to make good progress with
Fluent to help them maximise profitability through driving further
efficiencies as part of the wider MAB Group, including sharing best
practice in customer retention and the provision of protection.
The longer-term fundamentals for the property and mortgage
markets remain strong, and our strategy underpins our confidence in
the outlook when market conditions improve, with the significant
progress made in terms of customer retention and lead generation
further supporting that confidence.
Market review
The fall in new mortgage approval volumes in the aftermath of
the September 2022 mini-budget continued throughout much of H1 2023
as rising costs of living and higher interest rates created further
affordability constraints and reduced consumer confidence. New
mortgage approvals in Q1 2023 were 40% down year-on-year, and
despite a slightly improving picture in Q2 2023, new mortgage
approvals were still 25% down year-on-year.
This led to gross new mortgage completions being down 27% to
GBP110.5bn in H1 2023 (H1 2022: GBP150.6bn). The purchase segment
was down 30% and the re-mortgaging segment down 24%, as illustrated
in the table and graph below.
UK Gross new mortgage lending by segment, GBPbn
----------------------------------------------------------
H1 2023 H1 2022 %
-------------------------------- -------- -------- ----
Residential purchase 55.4 77.3 -28
Buy-to-let purchase 4.2 8.4 -50
Purchase segment 59.6 85.7 -30
-------- -------- ----
Residential re-mortgage 34.9 41.1 -15
Buy-to-let re-mortgage 10.4 18.7 -44
Re-mortgage segment 45.3 59.8 -24
-------- -------- ----
Buy-to-let segment 14.6 27.1 -46
-------------------------------- -------- -------- ----
Source: UK Finance
http://www.rns-pdf.londonstockexchange.com/rns/6003N_1-2023-9-25.pdf
Source: UK Finance
Whilst affordability pressures restricted the external
re-mortgaging sector during the period, Product Transfers saw a 28%
increase by value.
Property transactions were down 18% in H1 2023 compared to H1
2022, as illustrated in the graph below. The smaller contraction
relative to mortgage lending volumes indicates an increasing
proportion of cash buyers, with higher interest rates putting cash
buyers in an increasingly favourable position to those taking out a
mortgage.
http://www.rns-pdf.londonstockexchange.com/rns/6003N_2-2023-9-25.pdf
Source: UK Finance
The value of mortgage lending was also impacted by average house
prices starting to fall from the peak reached in 2022. Average
house prices fell 1.8% in the period compared to H2 2022, and we
expect this trend to continue in the short term. However, average
house prices in H1 2023 were still up 3.3% compared to H1 2022.
The share of UK residential mortgage transactions via
intermediaries (excluding buy to let, where intermediaries have a
higher market share, and product transfers where intermediaries
have a lower market share) continued to grow to 87% (H1 2022: 84%),
with consumers increasingly needing choice, advice, and support in
a more complex and uncertain macro environment. We expect this
increased intermediary market share to remain stable in the short
term and that house prices will stabilise once affordability and
consumer confidence improve.
In December 2022 UK Finance predicted GBP275bn of gross new
mortgage lending in 2023. IMLA's estimate was GBP265bn. Gross new
mortgage lending in H1 2023 amounted to GBP110.5bn, and we expect
the actual figure for the full year to fall well short of those
estimates. However, re-financing activity should continue to
perform strongly, driven by product transfers as fewer customers
are able to move away from their existing lender.
Despite the current headwinds, the underlying level of demand
for home ownership and mortgages remains strong, and we expect
activity levels to strengthen again once inflation is under control
and mortgage rates have peaked or start to fall back.
Financial review
We measure the development, performance, and position of our
business against several key indicators.
http://www.rns-pdf.londonstockexchange.com/rns/6003N_3-2023-9-25.pdf
Revenue
Group revenue for the six months ended 30 June 2023 increased by
22% to GBP117.5m (H1 2022: GBP96.5m), with organic(1) growth of 1%
despite the market seeing a 40% drop in new mortgage approvals
following the mini-budget in September 2022.
Following the Group's acquisition of Fluent, the average number
of mainstream advisers(2) during the period increased by 4% to
1,966 (H1 2022: 1,890). On an organic basis we saw a 4% reduction
in the average number of mainstream advisers to 1,814 (H1 2022:
1,890), as our existing AR firms paused recruitment and focused on
efficiency following the impacts of the mini-budget. This led to a
circa 5% increase in organic revenue per adviser, though this
figure is somewhat flattered by a lower proportion of new advisers
in the period. In addition, we entered 2023 with a
lower-than-expected pipeline of written mortgages and new AR
firms.
The Group continued to generate revenue from three core areas,
summarised as follows:
Group revenue
Income source H1 2023 H1 2022 Change vs
2022
-------- -------- ----------
GBPm GBPm %
-------- -------- ----------
Mortgage Procuration Fees 48.4 44.9 +8%
-------- -------- ----------
Protection and General Insurance
Commission 44.9 37.2 +21%
-------- -------- ----------
Client Fees 21.9 11.8 +86%
-------- -------- ----------
Other Income 2.3 2.6 -12%
-------- -------- ----------
Total 117.5 96.5 +22%
-------- -------- ----------
MAB's organic revenue(1) across the three core areas was as
follows:
Organic revenue
Income source H1 2023 H1 2022 Change vs
2022
-------- -------- ----------
GBPm GBPm %
-------- -------- ----------
Mortgage Procuration Fees 42.1 44.9 -6%
-------- -------- ----------
Protection and General Insurance
Commission 42.7 37.2 +15%
-------- -------- ----------
Client Fees 10.9 11.8 -7%
-------- -------- ----------
Other Income 1.8 2.6 -27%
-------- -------- ----------
Total 97.5 96.5 +1%
-------- -------- ----------
In this period of market downturn, MAB's organic first charge
banked mortgage mix saw a lower proportion of house purchase
business compared to the prior period with an increase in
re-financing. In particular, the proportion of product transfer
completions, which have a lower average procuration fee and
typically have lower protection, general insurance and client fee
attachment rates, further increased to 29% (H1 2022: 18%).
Consequently, while the Group's organic gross first charge
mortgage completions by value (excluding GBP0.5bn of completions
that did not generate procuration fees for the Group in H1 2022
from ARs in the process of being onboarded) remained stable,
mortgage procuration fees decreased by 6% and client fees decreased
by 7% as a result of the higher proportion of product transfers.
However, the Group's organic protection and general insurance
commissions increased by 15%, which reflects the strong focus of
MAB's advisers on protection when the mortgage market falls,
particularly in our invested businesses, and the strength of MAB's
proposition and support in these areas.
Fluent's revenue contribution across the Group's three core
revenue streams in H1 2023 was as follows, with GBP0.4m of revenue
synergies realised:
Income source (GBPm) H1 2023
Mortgage procuration fees 6.4
---------
Protection and General Insurance Commission 1.7
---------
Client Fees 11.0
---------
Other Income 0.4
---------
Total 19.5
---------
Auxilium, a specialist protection service provider, contributed
revenue of GBP0.5m for H1 2023. Auxilium's revenues represent the
total income received and accordingly are classified under
Protection and General Insurance Commission , with no commission
payouts to the directly authorised entities serviced by the
business.
MAB's average first charge mortgage size decreased by 5.3%
compared to the prior period, with average house prices increasing
by 3.3% compared to H1 2022, reflecting the increased proportion of
re-financing completions where the average mortgage size is lower
than for purchase transactions.
MAB's overall revenue from re-financing (including both
re-mortgages and product transfers) represented circa 36% of total
revenue (H1 2022: 30%).
The proportion of organic revenue derived from each of the
Group's core revenue streams has changed slightly as summarised
below, with the movements reflecting the change in banked mortgage
mix, and in particular the large increase in product transfers
during the period, and also the increase in protection
revenues.
Income source H1 2023 H1 2022
Mortgage Procuration Fees 43% 47%
-------- --------
Protection and General Insurance Commission 44% 38%
-------- --------
Client Fees 11% 12%
-------- --------
Other Income 2% 3%
-------- --------
Total 100% 100%
-------- --------
The proportion of total revenue derived from each of the Group's
core revenue streams has also changed, affected by the dynamics as
set out above for organic revenue, but also by client fees as a
proportion of Fluent's revenue being higher than the organic
Group's proportion due to client fees on second charge mortgages,
and conversely by protection and general insurance commission being
a lower proportion of total revenue for Fluent due to lower
attachment rates on second charge mortgages, as summarised
below.
Income source H1 2023 H1 2022
Mortgage Procuration Fees 41% 47%
-------- --------
Protection and General Insurance Commission 38% 38%
-------- --------
Client Fees 19% 12%
-------- --------
Other Income 2% 3%
-------- --------
Total 100% 100%
-------- --------
In first charge mortgages we expect client fees to become
increasingly dependent upon the type and complexity of the mortgage
transaction, as well as the delivery channel, leading to a broader
spread of client fees on first charge mortgage transactions, which
represent the organic Group's lowest margin revenue stream.
Gross profit margin
The Group's gross profit margin increased to 28.0% (H1 2022:
26.4%) and MAB's organic gross profit margin also increased to
28.3% (H1 2022: 26.4%). This is due to the increased proportion of
protection revenue in the organic Group in H1 2023. The network
organic business of the Group receives slightly reduced revenue
share as existing ARs grow organically by increasing their adviser
numbers. In addition, larger new ARs typically join the Group on
lower-than-average margins due to their existing scale, hence a
degree of erosion is expected in MAB's underlying gross profit
margin due to the continued growth of our existing ARs and the
addition of new larger ARs.
Looking ahead, we expect any further erosion in underlying
organic gross margin to be offset by operational leverage reducing
the Group's administrative expenses ratio(*) .
Administrative expenses
Group administrative expenses increased by GBP9.5m (+67%) to
GBP23.7m, mainly reflecting the impact of the acquisitions of
Fluent and Vita. Organic administrative expenses increased by
GBP3.3m (+23%) to GBP17.5m, reflecting MAB's continued investment
in growth, and specifically in its technology platform and
marketing team through a mix of employee and third-party costs,
which we expect to drive enhanced lead generation opportunities and
future revenue growth. Head office costs, including those of First
Mortgage, also increased to support the Group's growth strategy.
MAB's Head office refurbishment at the end of 2022 led to a GBP0.3m
increase in the depreciation charge. All development work on MAB's
MIDAS platform continues to be fully expensed. The Group's
administrative expenses ratio was 20.2% (H1 2022: 14.7%), and the
organic administrative expenses ratio* increased to 17.9% (H1 2022:
14.7%) reflecting the adverse impact of the market downturn on
revenue growth in a period where the Board originally expected to
deliver operational leverage.
The Group expects to continue to benefit from the relatively
fixed cost nature of much of its cost base, where those costs
typically rise at a slower rate than revenue, with the operational
leverage offsetting the expected slight erosion of MAB's underlying
organic gross margin as the business continues to grow.
Associates and investments
MAB's share of profits from associates was GBP0.1m (H1 2022:
GBP0.3m) with a slower start to the year for the Group's associates
resulting from the market downturn.
MAB considers the value of a number of these investments exceeds
their balance sheet value as accounted for using the equity
accounting method under IAS 28.
Adjusted EBITDA, profit before tax and margin thereon
Adjusted EBITDA(*) was down 13% to GBP10.5m (H1 2022: GBP12.0m),
with the reduction in the margin thereon to 8.9% (H1 2022: 12.4%)
primarily reflecting the impact of the current market conditions,
particularly on the Fluent acquisition, and lower revenue growth
than originally anticipated.
Organic adjusted EBITDA(*) was GBP10.7m (H1 2022: GBP12.0m),
with the margin thereon of 11.0% (H1 2022: 12.4%).
Fluent, Vita and Auxilium contributed adjusted EBITDA of
-GBP0.5m, GBP0.0m(3) and GBP0.3m respectively in H1 2023. These
figures exclude the impact of any non-cash charges associated with
the put and call options for Fluent and Auxilium.
Adjusted profit before tax(*) as a percentage of net revenue(*)
reduced to 19.3% (H1 2022: 38.6%).
Adjusted profit before tax(*) was GBP8.8m (H1 2022: GBP11.5m),
with the margin thereon being 7.5% (H1 2022: 12.0%). Organic
adjusted profit before tax(*) was GBP9.6m (H1 2022: GBP11.5m), with
the margin thereon of 9.8% (H1 2022: 12.0%). Statutory profit
before tax was GBP7.6m (H1 2022: GBP10.1m) with the margin thereon
being 6.4% (H1 2022: 10.5%).
Finance income and expense
Finance income of GBP0.1m (H1 2022: GBP0.04m) reflects interest
income accrued or received on loans to associates and other
appointed representatives. Finance expenses of GBP(2.4)m (H1 2022:
GBP0.1m) includes GBP0.7m of interest and non-utilisation fees
payable on MAB's new debt facilities and the interest expense on
lease liabilities, a GBP3.5m gain relating to the remeasurement of
the redemption liability relating to the Fluent Option and a
GBP0.4m charge relating to the unwinding of the redemption
liability of the Fluent Option.
Taxation
The effective tax rate on adjusted profit before tax(*)
increased to 20.6% (H1 2022: 19.8%) and the effective rate of tax
on reported profit before tax reduced to 15.2% (H1 2022: 21.9%),
despite the increase in the prevailing UK corporation tax rate from
1 April 2023. This was primarily due to the large movement in
deferred tax resulting from the unwinding of the acquired
intangibles deferred tax liability relating to Fluent and also the
deferred tax asset arising from losses within Fluent. We expect the
effective tax rate on adjusted PBT in future years to be in line
with the prevailing UK corporation tax rate.
Earnings per share and dividend
Adjusted earnings per share(*) was 11.8p (H1 2022: 16.4p) and
adjusted earnings per share* on an organic basis (also excluding
the impact of the increased share capital as a result of the
placing) was 13.5p (H1 2022: 16.9p). Basic earnings per share fell
to 11.3p (H1 2022: 14.0p) due to acquisition-related costs,
amortisation of acquired intangibles and non-cash operating
expenses associated with the put and call option agreements on
recent acquisitions.
The Board is pleased to confirm an interim dividend for the year
ending 31 December 2023 of 13.4p per share (H1 2022: 13.4p per
share), reflecting the Group's dividend policy based on a minimum
payout ratio of 75% of the Group's annual adjusted post-tax and
minority interest profits. This represents a cash outlay of GBP7.7m
(H1 2022: GBP7.6m). Following payment of the dividend, the Group
will continue to maintain significant surplus regulatory
reserves.
The record date for the interim dividend is 6 October 2023 and
the payment date is 3 November 2023. The ex-dividend date will be 5
October 2023.
Balance sheet
In connection with the acquisitions of Fluent, Vita and Auxilium
in 2022, the Group recognised separately identifiable intangible
assets with a fair value at 30 June 2023 of GBP50.7m and goodwill
totalling GBP38.7m. Redemption liabilities of GBP3.8m and GBP0.2m
in respect of the put and call options relating to the Fluent and
Auxilium acquisitions respectively, are included in other payables
as at 30 June 2023.
In March 2022, the Group entered into an agreement with NatWest
for a new term loan of GBP20m and a revolving credit facility of
GBP15m, to part fund the cash consideration on the acquisition of
Fluent. As at 30 June 2023, the Group had drawn down GBP6.0m on the
revolving credit facility, in addition to an outstanding balance of
GBP18.1m on the term loan, and had GBP0.3m of accrued interest net
of prepaid loan arrangement fees. Net debt (adjusting only for
unrestricted cash balances of GBP5.0m) was GBP19.4m.
Cash flow and cash conversion
The Group's operations produce positive cash flow. This is
reflected in the net cash generated from operating activities of
GBP8.8m (H1 2022: GBP11.5m).
Adjusted cash conversion(*) was:
H1 2023 131%
H1 2022 124%
-----
Other than the GBP2.8m refurbishment of the Group's head office
in Derby in Q4 2022, the Group's operations are typically
capital-light, with the most significant ongoing capital investment
being in computer equipment. Only GBP0.3m of general capital
expenditure on office and computer equipment was required during
the period (H1 2022: GBP0.1m), with a further GBP0.4m spent on the
finalisation of the refurbishment of the Group's head office in
Derby. Group policy is not to provide company cars and no other
significant capital expenditure is foreseen.
The Group has a regulatory capital requirement amounting to 2.5%
of regulated revenue. At 30 June 2023 this regulatory capital
requirement was GBP5.6m (31 December 2022: GBP5.5m), with the Group
having a surplus of GBP23.4m (31 December 2022: GBP26.8m).
The following table demonstrates how cash generated by the Group
was applied:
GBPm
Unrestricted bank balances at the beginning of the year 7.2
Cash generated from operating activities excluding movements in restricted balances and dividends
received from associates 11.7
Dividends paid (8.4)
Dividends paid to minority interest (0.3)
Tax paid (3.3)
Investment in subsidiary, associates and minority interests (0.7)
Proceeds from borrowings 2.8
Repayment of borrowings (1.9)
Net interest paid and principal element of lease payments (0.9)
Capital expenditure (1.2)
Unrestricted bank balances at the end of the period 5.0
-------------------------------------------------------------------------------------------------- -----
* In addition to statutory reporting, MAB reports alternative
performance measures ("APMs") which are not defined or specified
under the requirements of International Financial Reporting
Standards ("IFRS"). The Group uses these APMs to improve the
comparability of information between reporting periods, by
adjusting for certain items which impact upon IFRS measures, to aid
the user in understanding the activity taking place across the
Group's businesses. APMs are used by the Directors and management
for performance analysis, planning, reporting and incentive
purposes. A summary of APMs used and their closest equivalent
statutory measures is given in the Glossary of Alternative
Performance Measures.
(1) Organic means the Group before the impact of the
acquisitions made in 2022 (Fluent, July 2022; Vita, July 2022; and
Auxilium, November 2022).
(2) Excludes directly authorised advisers, MAB's later life
advisers and advisers from associates in the process of being
onboarded under MAB's AR arrangements. Includes Fluent's second
charge, later life and bridging advisers who have a higher revenue
per adviser than first charge advisers.
(3) Vita's revenue, being protection and general insurance
commission only, has been incorporated into the Group's figures
since 2016 when it became an AR of the Group.
Cautionary Statement
Certain statements included or incorporated by reference within
this announcement may constitute "forward-looking statements" in
respect of the Group's operations, performance, prospects and/or
financial condition. Forward-looking statements are sometimes, but
not always, identified by their use of a date in the future or such
words and words of similar meaning as "aims", "anticipates",
"believes", "continues", "could", "due", "estimates", "expects",
"goal", "intends", "may", "objectives", "outlook", "plans",
"potential", "probably", "project", "seeks", "should", "targets",
or "will" or, in each case, their negative or other variations or
comparable terminology.
By their nature, forward-looking statements involve a number of
risks, uncertainties and assumptions and actual results or events
may differ materially from those expressed or implied by those
statements. Accordingly, no assurance can be given that any
particular expectation will be met and reliance should not be
placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities
should not be taken as a representation that such trends or
activities will continue in the future. Except as required by
applicable law or regulation, no responsibility or obligation is
accepted to update or revise any forward-looking statement
resulting from new information, future events or otherwise. Nothing
in this announcement should be construed as a profit forecast.
This announcement does not constitute or form part of any offer
or invitation to sell, or any solicitation of any offer to purchase
any shares or other securities in the Company, nor shall it or any
part of it or the fact of its distribution form the basis of, or be
relied on in connection with, any contract or commitment or
investment decisions relating thereto, nor does it constitute a
recommendation regarding the shares or other securities of the
Company. Past performance cannot be relied upon as a guide to
future performance and persons needing advice should consult an
independent financial adviser authorised under the Financial
Services and Markets Act 2000 (as amended). Statements in this
announcement reflect the knowledge and information available at the
time of its preparation. Liability arising from anything in this
announcement shall be governed by English law. Nothing in this
announcement shall exclude any liability under applicable laws that
cannot be excluded in accordance with such laws.
INDEPENT REVIEW REPORT TO MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
("the Company") AND ITS GROUP
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the London
Stock Exchange AIM Rules for Companies.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises the interim condensed
consolidated statement of financial position, interim condensed
consolidated statement of comprehensive income, interim condensed
consolidated statement of changes in equity and interim condensed
consolidated statement of cash flows.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with
the London Stock Exchange AIM Rules for Companies which require
that the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange AIM Rules for Companies for no
other purpose. No person is entitled to rely on this report unless
such a person is a person entitled to rely upon this report by
virtue of and for the purpose of our terms of engagement or has
been expressly authorised to do so by our prior written consent.
Save as above, we do not accept responsibility for this report to
any other person or for any other purpose and we hereby expressly
disclaim any and all such liability.
BDO LLP
Chartered Accountants
London
United Kingdom
25 September 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Interim condensed consolidated statement of comprehensive income
for the six months ended 30 June 2023
Six months ended
30 June
Note 2023 2022
Unaudited Unaudited
GBP'000 GBP'000
-------------------------------------- ----- ----------- -----------
Revenue 2 117,545 96,468
Cost of sales 3 (84,601) (71,032)
-------------------------------------- ----- ----------- -----------
Gross profit 32,944 25,436
Administrative expenses (23,713) (14,214)
Costs relating to First Mortgage,
Fluent and Auxilium options 4 (1,081) (423)
Amortisation of acquired intangibles 4 (2,580) (183)
Acquisition costs 4 (148) (1,453)
Restructuring costs (238) -
Net gains on fair value measurement
of deferred consideration 10 - 650
Net fair value losses on fair value
measurement of derivative financial
instruments 10 (214) (25)
Share of profit of associates 10 75 314
Profit on sale of non-listed equity
investment 11 - 59
Operating profit 5,045 10,161
-------------------------------------- ----- ----------- -----------
Finance income 5 130 42
Finance expense 5 2,404 (96)
Profit before tax 7,579 10,107
Tax expense 6 (1,149) (2,214)
-------------------------------------- ----- ----------- -----------
Profit for the period 6,430 7,893
-------------------------------------- ----- ----------- -----------
Total comprehensive income 6,430 7,893
-------------------------------------- ----- ----------- -----------
Profit is attributable to:
Equity owners of Parent Company 6,423 7,698
Non-controlling interests 7 195
-------------------------------------- ----- ----------- -----------
6,430 7,893
-------------------------------------- ----- ----------- -----------
Earnings per share attributable
to the owners of the Parent Company
Basic 7 11.3p 14.0p
Diluted 7 11.2p 13.8p
Interim condensed consolidated statement of financial
position
as at 30 June 2023 and 31 December 2022
30 June 2023 31 Dec
Note Unaudited 2022
GBP'000 Audited
GBP'000
---------------------------------- ------ ------------- ---------
Assets
Non-current assets
Property, plant and equipment 6,227 6,128
Right of use assets 3,442 3,872
Goodwill 9 53,885 53,885
Other intangible assets 53,629 55,823
Investments in associates and
joint venture 10 11,931 11,387
Derivative financial instruments 274 320
Other receivables 12 682 831
Deferred tax asset 2,551 1,797
---------------------------------- ------ ------------- ---------
Total non-current assets 132,621 134,043
---------------------------------- ------ ------------- ---------
Current assets
Trade and other receivables 12 13,974 10,288
Corporation tax 812 -
Cash and cash equivalents 13 23,642 25,462
---------------------------------- ------ ------------- ---------
Total current assets 38,428 35,750
---------------------------------- ------ ------------- ---------
Total assets 171,049 169,793
---------------------------------- ------ ------------- ---------
Interim condensed consolidated statement of financial
position
as at 30 June 2023 and 31 December 2022 (continued)
Note 30 June 2023 31 Dec
Unaudited 2022
GBP'000 Audited
GBP'000
---------------------------------- ----- ------------- ---------
Equity and liabilities
Share capital 17 57 57
Share premium 48,155 48,155
Capital redemption reserve 20 20
Share option reserve 5,718 4,511
Retained earnings 13,616 15,154
---------------------------------- ----- ------------- ---------
Equity attributable to owners
of Parent Company 67,566 67,897
Non-controlling interests 7,058 7,548
---------------------------------- ----- ------------- ---------
Total equity 74,624 75,445
---------------------------------- ----- ------------- ---------
Liabilities
Non-current liabilities
Trade and other payables 14 5,230 9,438
Provisions 8,554 8,038
Lease liabilities 2,605 3,014
Derivative financial instruments 178 10
Loans and other borrowings 15 14,270 16,598
Deferred tax liability 14,181 14,659
---------------------------------- ----- ------------- ---------
Total non-current liabilities 45,018 51,757
---------------------------------- ----- ------------- ---------
Current liabilities
Trade and other payables 14 40,334 34,397
Lease liabilities 903 933
Loans and other borrowings 15 10,170 6,809
Corporation tax - 452
---------------------------------- ----- ------------- ---------
Total current liabilities 51,407 42,591
---------------------------------- ----- ------------- ---------
Total liabilities 96,425 94,348
---------------------------------- ----- ------------- ---------
Total equity and liabilities 171,049 169,793
---------------------------------- ----- ------------- ---------
Interim condensed consolidated statement of changes in equity
for the six months ended 30 June 2023
Attributable to the holders of the
Parent Company
----------------------------------------------------------------------
Share
Capital option Non-controlling
Share Share redemption reserve Retained Interest Total
capital premium reserve GBP'000 earnings Total GBP'000 equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ---------- ------------ --------- ---------- ---------- ----------------- ----------
Balance at
1 January
2022 53 9,778 20 3,523 25,408 38,782 2,205 40,987
Profit for the
period - - - - 7,698 7,698 195 7,893
Total
comprehensive
income - - - - 7,698 7,698 195 7,893
--------------- --------- ---------- ------------ --------- ---------- ---------- ----------------- ----------
Transactions
with owners
Issue of
shares 4 38,377 - - - 38,381 - 38,381
Share based
payment
transactions - - - 532 - 532 - 532
Deferred tax
asset
recognised
in equity - - - 25 - 25 - 25
Dividends paid - - - - (8,382) (8,382) (415) (8,797)
--------------- --------- ---------- ------------ --------- ---------- ---------- ----------------- ----------
Total
transactions
with owners 4 38,377 - 557 (8,382) 30,556 (415) 30,141
--------------- --------- ---------- ------------ --------- ---------- ---------- ----------------- ----------
Balance at
30 June 2022
(unaudited) 57 48,155 20 4,080 24,724 77,036 1,985 79,021
--------------- --------- ---------- ------------ --------- ---------- ---------- ----------------- ----------
Balance at
1 January
2023 57 48,155 20 4,511 15,154 67,897 7,548 75,445
Profit for the
period - - - - 6,422 6,422 7 6,429
--------------- --------- ---------- ------------ --------- ---------- ---------- ----------------- ----------
Total
comprehensive
income - - - - 6,422 6,422 7 6,429
--------------- --------- ---------- ------------ --------- ---------- ---------- ----------------- ----------
Transactions
with owners
Share based
payment
transactions - - - 1,289 - 1,289 - 1,289
Deferred tax
asset
recognised
in equity - - - 296 - 296 - 296
Acquisitions - - - - 46 46 (140) (94)
Reserve
transfer - - - (378) 378 - - -
Dividends paid - - - - (8,384) (8,384) (357) (8,741)
--------------- --------- ---------- ------------ --------- ---------- ---------- ----------------- ----------
Total
transactions
with owners - - - 1,207 (7,960) (6,753) (497) (7,250)
Balance at
30 June 2023
(unaudited) 57 48,155 20 5,718 13,616 67,566 7,058 74,624
--------------- --------- ---------- ------------ --------- ---------- ---------- ----------------- ----------
Interim condensed consolidated statement of cash flows for the
six months ended 30 June 2023
Six months ended
30 June
Note 2023 2022
Unaudited Unaudited
GBP'000 GBP'000
------------------------------------------ ----- ------------ -----------
Cash flows from operating activities
Profit for the period before tax 7,578 10,107
Adjustments for
Depreciation of property, plant
and equipment 621 175
Depreciation of rights of use assets 443 198
Amortisation of intangibles 2,693 282
Profit on sale of non-listed equity
investment 11 - (59)
Share-based payments 1,473 532
Share of profit from associates,
net of tax 10 (75) (314)
Dividends received from associates 10 - 600
Net gains on fair value measurement
of deferred consideration 10 - (650)
Net losses on fair value movements
taken to profit and loss 214 25
Finance income 5 (130) (42)
Finance expense 5 (2,404) 96
10,413 10,950
Changes in working capital
Increase in trade and other receivables 12 (3,529) (1,086)
Increase in trade and other payables 14 4,721 3,120
Increase in provisions 516 687
Cash generated from operating activities 12,121 13,671
Income taxes paid (3,308) (2,141)
------------------------------------------ ----- ------------ -----------
Net cash generated from operating
activities 8,813 11,530
------------------------------------------ ----- ------------ -----------
Cash flows from investing activities
Purchase of property, plant and
equipment (720) (77)
Purchase of intangibles (498) (151)
Acquisition of minority interest (189) -
Acquisition of associates 10 (469) (457)
Proceeds from sale of non-listed
equity investment 11 - 114
Net cash used in investing activities (1,876) (571)
------------------------------------------ ----- ------------ -----------
Cash flows from financing activities
Proceeds from borrowings 2,800 -
Repayment of borrowings (1,875) -
Interest received 5 122 32
Interest paid 5 (608) (48)
Principal element of lease payments (455) (195)
Issue of shares 17 - 40,000
Costs relating to issue of shares 17 - (1,619)
Dividends paid 8 (8,384) (8,382)
Dividends paid to minority interest (357) (415)
------------------------------------------ ----- ------------ -----------
Net cash (used)/generated in financing
activities (8,757) 29,373
------------------------------------------ ----- ------------ -----------
Net (decrease)/increase in cash
and cash equivalents (1,820) 40,332
Cash and cash equivalents at the
beginning of the period 25,462 34,411
------------------------------------------ ----- ------------ -----------
Cash and cash equivalents at the
end of the period 23,642 74,743
------------------------------------------ ----- ------------ -----------
Notes to the interim condensed consolidated financial statements
for the six months ended 30 June 2023
1 Accounting policies
Corporate information
The interim condensed consolidated financial statements of
Mortgage Advice Bureau (Holdings) plc and its subsidiaries
(collectively, "the Group") for the six months ended 30 June 2023
were authorised for issue in accordance with a resolution of the
directors on 25 September 2023.
Mortgage Advice Bureau (Holdings) plc ("the Company") is a
limited company incorporated and domiciled in England whose shares
are publicly traded on the Alternative Investment Market ("AIM").
The registered office is located at Capital House, Pride Place,
Pride Park, Derby, DE24 8QR. The Group's principal activity is the
provision of financial services.
Basis of preparation
These condensed consolidated interim financial statements for
the six months ended 30 June 2023 have been prepared in accordance
with IAS 34 'Interim financial reporting' and also in accordance
with the measurement and recognition principles of UK adopted
international accounting standards. They do not include all of the
information required for full annual financial statements and
should be read in conjunction with the 2022 Annual Report and
Accounts, which were prepared in accordance with UK - adopted
international accounting standards.
The comparative figures for the six months ended 30 June 2022
are not the Group's statutory accounts for that financial period.
The accounts for the year ended 31 December 2022 have been reported
on by the Group's auditors and delivered to the registrar of
companies. There are no changes in the basis of preparation
adopted, which remains in line with the 2022 audited accounts.
Following the acquisitions of Project Finland Topco Limited, Vita
Financial Limited and AUX Group Limited in 2022, these entities are
now included in the consolidated accounts for the period.
Going concern
The Directors have assessed the Group's prospects until 31
December 2024, taking into consideration the current operating
environment, including the impact of the ongoing geopolitical and
macroeconomic uncertainty and inflationary pressures on property
and lending markets. The Directors' financial modelling considers
the Group's profit, cash flows, regulatory capital requirements,
borrowing covenants and other key financial metrics over the
period.
These metrics are subject to sensitivity analysis, which
involves flexing a number of key assumptions underlying the
projections, including the effect of the ongoing geopolitical and
macroeconomic uncertainty and inflationary pressures and their
impact on the UK property and lending markets and the Group's
revenue mix, which the Directors consider to be severe but
plausible stress tests on the Group's cash position, banking
covenants and regulatory capital adequacy. The Group's financial
modelling shows that the Group should continue to be cash
generative, maintain a surplus on its regulatory capital
requirements and be able to operate within its current financing
arrangements.
Based on the results of the financial modelling, the Directors
expect that the Group will be able to continue in operation and
meet its liabilities as they fall due over the 12 months from the
approval of the financial statements. Accordingly, the Directors
continue to adopt the going concern basis for the preparation of
the financial statements.
Significant estimates and judgements
The judgements, estimates and assumptions applied in the interim
financial statements, including the key sources of estimation
uncertainty, were the same as those applied in the Group's last
annual financial statements for the year ended 31 December 2022.
There have been no material revisions to the nature and amount of
estimates of amounts reported in prior period.
Significant accounting policies
The accounting policies applied are consistent with those
described in the Annual Report and Group financial statements for
the year ended 31 December 2022. New or amended standards effective
in the period have not had a material impact on the condensed
consolidated interim financial statements.
The Group has not early adopted any standards, interpretations
or amendments that have been issued but are not yet effective.
New standards with limited impact on the Group
-- Amendments to IAS 1 and IAS 8 IFRS Practice Statement 2 -
Disclosure of accounting policies. In February 2021, the IASB
issued amendments to IAS 1 'Presentation of Financial Statements'
and IFRS Practice Statement 2 'Making Materiality Judgements'
aiming to improve accounting policy disclosures. This amendment is
applicable for annual reporting periods beginning on or after 1
January 2023, with early application permitted.
-- Amendments to IAS 8 - Definition of accounting estimates. In
February 2021, the IASB issued amendments to IAS 8 to clarify how
reporting entities distinguish changes in accounting policies from
changes in accounting estimates. This amendment is applicable for
annual reporting periods beginning on or after 1 January 2023, with
early application permitted.
-- Amendments to IAS 12 - Deferred tax related to assets and
liabilities arising from a single transaction. In May 2021, the
IASB issued an amendment to IAS 12 which provides clarification on
the existing exemption from recognising deferred tax in specific
circumstances where this arises from a single transaction. This
amendment is applicable for annual reporting periods beginning on
or after 1 January 2023, with early application permitted.
-- IFRS 17 - Insurance contracts. In May 2017, the IASB
published IFRS 17 Insurance contracts to replace IFRS 4. IFRS 17
applies to all insurance contracts that an entity issues, detailing
the method of measuring insurance contracts, distinguishing between
types of contracts, the measurement of insurance contract revenue
and presentation in the financial statements. This standard is
applicable for annual reporting periods beginning on or after 1
January 2023, with early application permitted.
Future new standards and interpretations
A number of new standards and amendments to standards and
interpretations will be effective for future annual and interim
periods, and therefore have not been applied in preparing these
condensed consolidated interim financial statements. At the date of
authorisation of these financial statements, the following
standards and interpretations, which have not been applied in these
financial statements, were in issue but not yet effective:
Periods commencing
Standard or Interpretation on or after
Amendments to IFRS 16 Leases - Additional requirements 1 January
for the accounting of sale and leaseback transactions 2024
Amendments to IAS 1 Presentation of financial statements 1 January
- On classification of liabilities 2024
Amendments to IAS 1 Presentation of financial statements 1 January
- Treatment of non-current liabilities with covenants 2024
Other than to expand certain disclosures within the Financial
Statements, the Directors do not expect the adoption of these
standards and interpretations listed above to have a material
impact on the Financial Statements of the Group in future
periods.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Entities that are not subsidiaries but where the Group has
significant influence (i.e. the power to participate in the
financial and operating policy decisions) are accounted for as
associates. The results and assets and liabilities of the
associates are included in the consolidated accounts using the
equity method of accounting.
Segment reporting
An operating segment is a distinguishable segment of an entity
that engages in business activities from which it may earn revenues
and incur expenses and whose operating results are reviewed
regularly by the entity's chief operating decision maker ("CODM").
The Board reviews the Group's operations and financial position as
a whole and therefore considers that it has only one operating
segment, being the provision of financial services operating solely
within the UK. The information presented to the CODM directly
reflects that presented in the financial statements and they review
the performance of the Group by reference to the results of the
operating segment against budget.
Operating profit is the profit measure, as disclosed on the face
of the consolidated statement of comprehensive income, that is
reviewed by the CODM.
During the six month period to 30 June 2023, there have been no
changes from the prior year in the measurement methods used to
determine operating segments and reported segment profit or
loss.
2 Revenue
The Group operates in one segment being that of the provision of
financial services in the UK. Revenue is derived as follows:
Six months ended 30
June
2023 2022
Unaudited Unaudited
GBP'000 GBP'000
Mortgage procuration fees 48,456 44,928
Protection and general insurance commission 44,913 37,197
Client fees 21,899 11,766
Other income 2,277 2,577
--------------------------------------------- ----------- -----------
117,545 96,468
--------------------------------------------- ----------- -----------
3 Cost of sales
Costs of sales are as follows:
2023 2022
Unaudited Unaudited
GBP'000 GBP'000
Commissions paid 65,556 66,573
Fluent affinity partner payments 6,660 -
Impairment of trade receivables - 9
Other cost of sales 644 -
Wages and salary costs 11,741 4,450
---------------------------------- ------------ ------------
84,601 71,032
---------------------------------- ------------ ------------
4 Acquisition related costs, acquisition of minority interests and redemption liability
Acquisition related costs
First Mortgage Direct Limited
On 2 July 2019 Mortgage Advice Bureau Limited, a subsidiary of
Mortgage Advice Bureau (Holdings) plc acquired 80 per cent of First
Mortgage Direct Limited ("First Mortgage" or the "Business"). The
option (comprising the put and the call option) over the remaining
20% of the issued share capital of First Mortgage has been
accounted for under IAS 19 Employee Benefits and IFRS 2 Share-based
Payments due to its link to the service of First Mortgage's
Managing Director.
The costs relating to this acquisition for the period are made
up as follows:
Six months ended 30 June
2023 2022
Unaudited Unaudited
GBP000 GBP000
-------------------------------------- ------------- ------------
Amortisation of acquired intangibles 183 183
Option costs (IAS19) 224 218
Option costs (IFRS2) 205 205
-------------------------------------- ------------- ------------
Total costs 612 606
-------------------------------------- ------------- ------------
The Fluent Money Group Limited
On 28 March 2022 Mortgage Advice Bureau (Holdings) plc announced
that it had agreed to acquire 75.4% of Project Finland Topco
Limited, which indirectly owns 100% of The Fluent Money Group
Limited ("Fluent" or the "Business"), from its shareholders
including Beech Tree Private Equity and founders for a total cash
consideration of GBP72.7 million (the "Acquisition"). The
Acquisition completed on 12 July 2022. On 6 April 2023, Mortgage
Advice Bureau Limited, a subsidiary of Mortgage Advice Bureau
(Holdings) plc acquired a further 0.8% of Project Finland Topco
Limited, thereby increasing its stake to 76.2%.
There is a put and call option over the remaining 23.8% of the
issued share capital of Fluent which has been accounted for under
IAS 32 and IFRS 2 Share-based Payments, as respectively a
proportion is treated as consideration under IAS 32, with the
balance treated as remuneration under IFRS 2, because the amount
payable on exercise of the option consists of a non-contingent
element, and an element that is contingent upon continued
employment of the option holders within the Group. The put and call
option over certain growth shares that were issued to Fluent's
wider management team has been accounted for under IFRS 2
Share-based Payments as exercise is solely contingent upon
continued employment.
The costs relating to this acquisition for the period are made
up as follows:
Six months ended 30 June
2023 2022
Unaudited Unaudited
GBP000 GBP000
-------------------------------------- ------------- ------------
Amortisation of acquired intangibles 2,199 -
Option costs (IFRS2) 630 -
Acquisition related costs 128 1,453
-------------------------------------- ------------- ------------
Total costs 2,957 1,453
-------------------------------------- ------------- ------------
Vita Financial Limited
On 12 July 2022, Mortgage Advice Bureau Limited, a subsidiary of
Mortgage Advice Bureau (Holdings) plc, increased its stake in Vita
Financial Limited ("Vita") from 49% to 75% of the entire issued
share capital for a consideration of GBP460,306.
The costs relating to this acquisition for the period are made
up as follows:
Six months ended 30 June
2023 2022
Unaudited Unaudited
GBP000 GBP000
------------------------------------- ------------- ------------
Amortisation of acquired intangibles 33 -
Acquisition related costs 10 -
------------------------------------- ------------- ------------
Total costs 43 -
------------------------------------- ------------- ------------
Aux Group Limited
On 3 November 2022, Mortgage Advice Bureau Limited, a subsidiary
of Mortgage Advice Bureau (Holdings) plc, acquired 75% of Aux Group
Limited and its subsidiary undertaking (together referred to as the
"Aux Group"). There is a put and call option over the remaining 25%
of the issued share capital of Aux Group which has been accounted
for under IAS 32 and IFRS 2 Share-based Payments, as respectively a
proportion is treated as consideration under IAS 32, with the
balance treated as remuneration under IFRS 2 because the amount
payable on exercise of the option consists of a non-contingent
element, and an element that is contingent upon continued
employment of the option holder within the Group.
The costs relating to this acquisition for the period are made
up as follows:
Six months ended 30 June
2023 2022
Unaudited Unaudited
GBP000 GBP000
------------------------------------- ------------- ------------
Amortisation of acquired intangibles 165 -
Option costs (IFRS2) 22 -
Acquisition related costs 10 -
------------------------------------- ------------- ------------
Total costs 197 -
------------------------------------- ------------- ------------
The total acquisition costs relating to the four entities above
that are included in the Consolidated statement of comprehensive
income are as follows:
Six months ended 30 June
2023 2022
Unaudited Unaudited
GBP000 GBP000
-------------------------------------- ------------- ------------
Amortisation of acquired intangibles 2,580 183
Option costs (IFRS2 and IAS19) 1,081 423
Acquisition related costs 148 1,453
-------------------------------------- ------------- ------------
Total costs 3,809 2,059
-------------------------------------- ------------- ------------
Acquisition of minority interests
On 11 April 2023, Mortgage Advice Bureau Ltd acquired a further
0.8% of the ordinary share capital of Project Finland Topco Limited
for GBP188,967 taking its shareholding to 76.2%. This purchase
reduced the redemption liability by GBP94,484 and parent equity by
GBP94,484.
Further to this, GBP140,067 of accumulated non-controlling
interest was transferred to retained earnings.
Remeasurement of redemption liability
At 30 June 2023, the expected cash flows relating to the
redemption liability were remeasured resulting in gain of GBP3.5m
included within finance expenses. GBP0.4m has also been included
within finance expenses relating to the unwinding of the redemption
liability from the end of the prior year.
5 Finance income and expense
Six months ended 30
June
2023 2022
Unaudited Unaudited
Finance income GBP'000 GBP'000
------------------------------------------------ ------------ -----------
Interest income 122 32
Interest income accrued on loans to associates 8 10
------------------------------------------------ ------------ -----------
130 42
------------------------------------------------ ------------ -----------
Finance expenses
----------------------------------------------- -------- ---
Interest expense 620 68
Interest expense on lease liabilities 58 28
Gain on remeasurement of redemption liability (3,485) -
Unwinding of redemption liability 403 -
----------------------------------------------- -------- ---
(2,404) 96
----------------------------------------------- -------- ---
Included within interest expense is interest of GBP618,301
(2022: GBP66,584) in relation to the Group's term loan and
revolving credit facility. During the period, the group accrued
interest income on loans to associates of GBP8,201 (2022:
GBP7,760).
6 Income tax
The Group calculates the period income tax expense using the tax
rate that would be applicable to the expected total annual
earnings. The major components of income tax expense in the interim
condensed statements of comprehensive income are:
Six months ended 30
June
2023 2022
Unaudited Unaudited
GBP'000 GBP'000
------------------------------------------------ ------------ -----------
Current tax expense
UK corporation tax charge on profit for
the period 2,085 2,129
Total current tax 2,085 2,129
------------------------------------------------ ------------ -----------
Deferred tax expense
Origination and reversal of timing differences (936) 85
Total deferred tax (936) 85
------------------------------------------------ ------------ -----------
Total tax expense 1,149 2,214
------------------------------------------------ ------------ -----------
For the period ended 30 June 2023, the deferred tax recognised
in equity was GBP295,622 (2022: GBP24,513).
The deferred tax asset is recognised after being assessed as
recoverable on the basis of available evidence including projected
profits, capital and liquidity position. The deferred tax asset is
only recognised to the extent that it is probable that future
taxable profits will be available against which the asset can be
utilised. The deferred tax asset is reviewed at each reporting date
and reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
7 Earnings per share
Both the basic and diluted earnings per share have been
calculated using the profit attributable to shareholders of the
Parent Company, Mortgage Advice Bureau (Holdings) Plc, as the
numerator.
The weighted average number of shares for the purposes of the
calculation of diluted earnings per share can be reconciled to the
weighted average number of ordinary shares used in the calculation
of basic earnings per share as follows:
Six months ended 30 June
2023 2022
Unaudited Unaudited
---------------------------------------- ------------- ------------
Weighted average number of shares used
in basic earnings per share 57,054,481 55,140,943
Potential ordinary shares arising from
options 233,571 456,243
---------------------------------------- ------------- ------------
Weighted average number of shares used
in diluted earnings per share 57,288,052 55,597,186
---------------------------------------- ------------- ------------
The Group uses adjusted results as key performance indicators,
as the Directors believe that these provide a more consistent
measure of operating performance. Adjusted profit is therefore
stated before one-off acquisition costs, ongoing non-cash items
relating to the acquisitions of First Mortgage, Fluent and
Auxilium, amortisation of acquired intangibles and the
remeasurement and unwinding of the redemption liabilities relating
to the Fluent and Auxilium options. Adjusted profit is also stated
before restructuring costs, net fair value gains on deferred
consideration and net fair value losses on derivative financial
instruments relating to options to increase shareholdings in
Associate businesses, net of tax.
The reconciliation between the basic and adjusted figures is as
follows:
Six months ended 30 June Six months ended
30 June
2023 2022 2023 2022 2023 2022
Unaudited Unaudited Basic Basic Diluted Diluted
GBP'000 GBP'000 earnings earnings earnings earnings
per per share per per
share pence share share
pence pence pence
Profit for the period 6,423 7,698 11.3 14.0 11.2 13.8
Adjustments:
Amortisation of acquired
intangibles 2,580 183 4.5 0.3 4.5 0.3
Costs relating to the
First Mortgage, Fluent
and Auxilium options 920 423 1.6 0.8 1.6 0.8
Costs relating to Fluent,
Vita and Auxilium acquisitions 148 1,453 0.3 2.6 0.3 2.6
Net fair value gains on
deferred consideration - (657) - (1.2) - (1.2)
Net fair value losses
on derivative financial
instruments 214 25 0.4 0.0 0.4 0.0
Remeasurement and unwinding
of redemption liability (3,082) - (5.4) - (5.4) -
Restructuring costs 182 - 0.3 - 0.3 -
Tax effect of
adjustments (644) (70) (1.2) (0.1) (1.1) (0.1)
--------------------------------- ----------- ----------- ---------- ----------- ---------- ----------
Adjusted earnings 6,741 9,055 11.8 16.4 11.8 16.2
--------------------------------- ----------- ----------- ---------- ----------- ---------- ----------
8 Dividends
Six months Six months Year ended
ended 30 ended 30 31 December
June June 2022
2023 2022 Audited
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Dividends paid and declared during
the period:
On ordinary shares at 14.7p per
share (2022: 14.7p) 8,384 8,382 8,382
Interim dividend for 2022: 13.4p
per share - - 7,642
8,384 8,382 16,024
------------------------------------ ----------- ----------- -------------
Equity dividends on ordinary shares:
Declared:
Interim dividend for 2023: 13.4p
per share (2022: 13.4p) 7,655 7,642 -
Proposed for approval:
Final dividend for 2022: 14.7p per
share - - 8,384
-------------------------------------- ------ ------ ------
7,655 7,642 8,384
-------------------------------------- ------ ------ ------
9 Intangible assets
Goodwill and identified intangible assets arising on
acquisitions are allocated to the cash-generating unit of that
acquisition. The Board considers that the Group has only one
operating segment and five cash-generating units (CGUs). The
goodwill relates to the following acquisitions:
-- Talk Limited in 2012, and in particular its main operating
subsidiary Mortgage Talk Limited ("Mortgage Talk")
-- First Mortgage Direct Limited ("First Mortgage") in 2019
-- Project Finland Topco Limited ("Fluent") in 2022
-- Vita Financial Limited ("Vita") in 2022
-- Auxilium Partnership Limited (Auxilium") in 2022
The goodwill is deemed to have an indefinite useful life. It is
currently carried at cost and is reviewed annually for
impairment.
Under IAS 36, "Impairment of assets", the Group is required to
review and test its goodwill annually each year or in the event of
a significant change in circumstances. The impairment reviews
conducted at the end of 2022 concluded that there had been no
impairment of goodwill.
The key basis for determining that there was no impairment to
the carrying value of goodwill was disclosed in the annual
consolidated financial statements for the year ended 31 December
2022. There are no matters which have arisen in the period to 30
June 2023 which indicated that an impairment was required at that
date.
10 Investments in associates and joint ventures
The investment in associates and a joint venture at the
reporting date is as follows:
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
-------------------------------------- ----------- ------------
At start of the period 11,387 12,433
Additions 469 -
Disposals - (848)
Credit to statement of comprehensive
income
Share of profit 75 712
75 712
Dividends received - (910)
-------------------------------------- ----------- ------------
At period end 11,931 11,387
-------------------------------------- ----------- ------------
Acquisitions and disposals
2023
On 26 May 2023, First Mortgage Direct Limited, an 80% owned
subsidiary of the Group, acquired a further 12% of M & R FM
Limited for a consideration of GBP469,454, bringing its total stake
to 37%.
2022
On 14 April 2022, Mortgage Advice Bureau Limited paid a further
GBP277,600 in deferred consideration in respect of its acquisition
of a 49% stake in Heron Financial Limited in November 2021. A
further estimated deferred consideration of GBP0.2m is payable
following finalisation of Heron's audit for the year ending 31
December 2022.
On 27 April 2022, Mortgage Advice Bureau Limited paid a further
GBP179,252 in deferred consideration in respect of its acquisition
of a further 29% interest in Vita Financial Limited in May 2021. No
further deferred consideration is estimated to be payable following
finalisation of Vita's audit for the year ending 31 December
2022.
On 21 July 2022, Mortgage Advice Bureau Limited paid a further
GBP625,567 in deferred consideration in respect of its acquisition
of a 49% stake in Evolve FS Limited in July 2021.
On 12 July 2022, Mortgage Advice Bureau Limited acquired a
further 26% of Vita Financial Limited having previously held 49% of
the share capital of Vita Financial Limited. As a result, the Group
now exercises control over Vita Financial Limited and so the
investment is considered a subsidiary of the Group. The carrying
value of the 49% holding in Vita Financial Limited was GBP848,022.
The fair value of the previously held equity interest was
established to be GBP867,500, therefore a gain of GBP19,478 is
recognised in the consolidated statement of comprehensive income as
this previously held interest is treated as though it has been
disposed of.
On 15 July 2022, First Mortgage Direct Limited, an 80% owned
subsidiary of the Group, paid a further GBP244,858 in deferred
consideration in respect of its acquisition of a 25% stake in M
& R FM Limited in January 2021.
On 19 October 2022, Mortgage Advice Bureau Limited disposed of
its 49% stake in Lifetime FS Limited for nil consideration.
A total net gain of GBP650,213 was recognised in the
consolidated statement of comprehensive income in respect of the
actual deferred consideration paid or expected to be paid on the
above associate businesses in H1 2022.
Derivative financial instruments
The fair value of the call option at 30 June 2023 for Evolve FS
Ltd is GBP272,901 (31 December 2022: GBP255,994). The fair values
of the call option and put option at 30 June 2023 for Heron
Financial Limited are GBP1,461 (31 December 2022: GBP64,114) and
GBP178,124 (31 December 2022: GBP10,280) respectively. The put and
call option in respect of Meridian Holdings Group Ltd was not
exercised during the year ended 31 December 2022, consequently it
has no value at 30 June 2023 and 31 December 2022.
A total net loss of GBP213,590 has been recognised in the
consolidated statement of comprehensive income in respect of fair
value movements on derivative financial instruments since 31
December 2022.
The fair values of the option contracts have been calculated
using an option valuation model. The key assumptions used to value
the options in the model are the value of shares in the associate,
the anticipated growth of the business, the option exercise price,
the expected life of the option, the expected share price
volatility of similar businesses, forecast dividends and the
risk-free interest rate. The gain and losses relating to the
derivative financial instruments is included within 'operating
profit'. These financial instruments are categorised as Level 3
within the fair value hierarchy.
11 Investments in non-listed equity shares
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
------------------------- ------------ ------------
At start of the period - 2,783
Additions - -
Revaluation - -
Write-off of investment - (2,783)
At period end - -
------------------------- ------------ ------------
The investment recognised at the start of 2022 represented a
shareholding of 2.92% in PD Innovations Limited, trading as Boomin,
at a value of GBP2,783,000. The Group originally paid cash
consideration of GBP2.5m on 9 April 2021 for a 3.17% stake. This
investment was classified as Level 3 for the purpose of disclosure
in the fair value hierarchy, with any fair value movements taken to
the consolidated statement of comprehensive income. Boomin was put
into liquidation in October 2022, having not been able to secure
new investors in the challenging economic climate, which led to a
GBP2.8m non-cash write-off of the investment in 2022.
Final consideration for Yourkeys Technology Ltd, originally sold
on 23 April 2021, of GBP113,541 was received on 1 April 2022
leading to a further profit on disposal of GBP58,541. The
investment was originally sold on 23 April 2021.
12 Trade and other receivables
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
---------------------------------------- ----------- ------------
Trade receivables 4,908 3,029
Less provision for impairment of trade
receivables (476) (476)
---------------------------------------- ----------- ------------
Trade receivables - net 4,432 2,553
Receivables from related parties 37 29
Other receivables 981 962
Loans to related parties 533 559
Less provision for impairment of loans
to related parties (2) (2)
Total non-derivative financial assets
other than cash and cash equivalents
classified at amortised cost 5,981 4,101
Prepayments and accrued income 8,675 7,018
Total trade and other receivables 14,656 11,119
---------------------------------------- ----------- ------------
Less: non-current portion - Loans to
related parties (159) (305)
Less: non-current - Trade receivables (523) (526)
---------------------------------------- ----------- ------------
Current portion 13,974 10,288
---------------------------------------- ----------- ------------
30 June 30 June
2023 2022
Reconciliation of movement in trade and Unaudited Unaudited
other receivables to cash flow GBP'000 GBP'000
------------------------------------------------ ---------- ----------
Movement per trade and other receivables
(current and non-current) 3,537 1,042
------------------------------------------------ ---------- ----------
Accrual of deferred consideration for Yourkeys
disposal - 55
Accrued interest movement (8) (11)
------------------------------------------------ ---------- ----------
Total movement per cash flow 3,529 1,086
------------------------------------------------ ---------- ----------
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
Included within trade receivables are GBP1.6m (2022: GBP1.5m) of
operational business development loans to the Group's Appointed
Representatives. The non-current trade receivables balance is
comprised solely of a proportion of these loans.
Also included in trade receivables are amounts due from
Appointed Representatives relating to commissions that are
refundable to the Group when policy lapses or other reclaims exceed
new business. As these balances have no credit terms, the Board of
Directors consider these to be past due if they are not received
within seven days. In the management of these balances, the
Directors can recover them from subsequent new business entered
into with the Appointed Representative or utilise payables that are
owed to the same counterparties and included within payables as the
Group has the legally enforceable right of set off in such
circumstances. These payables are considered sufficient by the
Directors to recover receivable balances should they default, and
accordingly, credit risk in this respect is minimal .
In light of the above, the Directors do not consider that
disclosure of an aging analysis of trade and other receivables
would provide useful additional information. Further information on
the credit quality of financial assets is set out in note 16.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within cost of sales in the consolidated
statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision. At 30 June
2023 the lifetime expected loss provision for trade receivables is
GBP0.5m (2022: GBP0.4m). The movement in the impairment allowance
for trade receivables has been included in cost of sales in the
consolidated statement of comprehensive income.
Impairment provisions for loans to associates are recognised
based on a forward-looking expected credit loss model. The
methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk
since initial recognition of the financial asset. For those where
the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those
for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised. In determining the lifetime expected credit
losses for loans to associates, the Directors have considered
different scenarios for repayments of these loans and have applied
percentage probabilities to each scenario for each associate where
applicable.
13 Cash and cash equivalents
For the purpose of the interim condensed statement of cash
flows, cash and cash equivalents are comprised of:
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
-------------------------------------------- ----------- ------------
Unrestricted cash and bank balances 5,021 7,219
Bank balances held in relation to retained
commissions 18,621 18,243
Cash and cash equivalents 23,642 25,462
-------------------------------------------- ----------- ------------
Bank balances held in relation to retained commissions earned on
an indemnity basis from protection policies are held to cover
potential future lapses in Appointed Representatives commission.
Operationally, the Group does not treat these balances as available
funds. An equal and opposite liability is shown within trade and
other payables (note 14).
14 Trade and other payables
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
----------------------------------------------- ----------- ------------
Appointed Representatives retained commission 18,621 18,243
Other trade payables 12,050 8,658
----------------------------------------------- ----------- ------------
Trade payables 30,671 26,901
Social security and other taxes 2,027 2,190
Other payables 210 208
Redemption liability 4,010 7,186
Accruals and deferred income 8,646 7,350
----------------------------------------------- ----------- ------------
Total trade and other payables 45,564 43,835
----------------------------------------------- ----------- ------------
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
-------------------------------- ----------- ------------
Current 40,334 34,397
Non-current 5,230 9,438
-------------------------------- ----------- ------------
Total trade and other payables 45,564 43,835
-------------------------------- ----------- ------------
30 June 30 June
2023 2022
Reconciliation of movement in trade Unaudited Unaudited
and other payables to cash flow GBP'000 GBP'000
------------------------------------------ ---------- ----------
Movement per trade and other payables 1,729 2,061
Deferred consideration cash payment - 457
Deferred consideration non-cash movement - 650
Accrued interest on bank loans - (48)
Redemption liability 3,176 -
Share based payments (184) -
Total movement per cash flow 4,721 3,120
------------------------------------------ ---------- ----------
Should a protection policy be cancelled within four years of
inception, a proportion of the original commission will be clawed
back by the insurance provider. The majority of any such repayment
is payable by the Appointed Representative. It is the Group's
policy to retain a proportion of commission payable to the
Appointed Representative to cover such potential future lapses;
these sums remain a liability of the Group. This commission is held
in a separate ring-fenced bank account as described in note 13.
As at 30 June 2023 and 31 December 2022, the carrying value of
trade and other payables classified as financial liabilities
measured at amortised cost approximates fair value.
15 Loans and borrowings
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
---------------------------------------- ----------- ------------
Bank loans 24,440 23,407
---------------------------------------- ----------- ------------
Total loans and borrowings 24,440 23,407
Less: non-current portion - Bank loans (14,270) (16,598)
Current portion 10,170 6,809
---------------------------------------- ----------- ------------
A summary of the maturity of loans and borrowings is as
follows:
30 June 31 December
2023 2022
Unaudited Audited
Bank loans GBP'000 GBP'000
---------------------- ----------- ------------
Payable in 1 year 10,170 6,809
Payable in 1-2 years 3,750 3,750
Payable in 2-5 years 10,520 12,848
Total bank loans 24,440 23,407
---------------------- ----------- ------------
In connection with the acquisition of Fluent, the Group entered
into an agreement on 28 March 2022 with NatWest, in respect of a
new term loan for GBP20m and a revolving credit facility for GBP15m
(the "Facilities Agreement"), in order to part fund the cash
consideration payable in relation to the acquisition. It is the
Group's intention to repay the drawn down proportion of the
revolving element of this debt facility as soon as practicable. In
respect of the new facilities, the Group has given security to
NatWest in the form of fixed and floating charges over the assets
of Mortgage Advice Bureau Limited, Mortgage Advice Bureau (Derby)
Limited, Mortgage Advice Bureau (Holdings) plc, First Mortgage
Direct Limited, First Mortgage Limited, Project Finland Bidco
Limited, Fluent Money Limited and Fluent Mortgages Limited.
Loan covenants
Under the terms of the Facilities Agreement , the Group is
required to comply with the following financial covenants:
-- Interest cover shall not be less than 5:1
-- Adjusted leverage shall not exceed 2:1
The Group has complied with these covenants since the Facilities
Agreement was entered into.
16 Financial instruments - risk management activities
Credit risk
Credit risk is the risk of financial loss to the Group if a
trading partner or counterparty to a financial instrument fails to
meet its contractual obligations. The Group is mainly exposed to
credit risk from loans to its trading partners. It is Group policy
to assess the credit risk of trading partners before advancing
loans or other credit facilities. Assessment of credit risk
utilises external credit rating agencies. Personal guarantees are
generally obtained from the Directors of its trading partners.
Quantitative disclosures of the credit risk exposure in relation
to financial assets are set out below. Further disclosures
regarding trade and other receivables are given in note 12.
Financial assets - maximum exposure
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
------------------------------------------ ----------- ------------
Cash and cash equivalents 23,642 25,462
Trade and other receivables (amortised
cost) 5,981 4,101
Derivative financial instruments (FVTPL) 274 320
------------------------------------------ ----------- ------------
Total financial assets 29,897 29,883
------------------------------------------ ----------- ------------
Financial liabilities
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
---------------------------------- ----------- ------------
Trade and other payables 30,880 29,299
Loans and borrowings 24,440 23,407
Accruals 8,646 7,350
Redemption liability 4,010 7,186
Lease liabilities 3,508 3,947
Derivative financial instruments 178 10
---------------------------------- ----------- ------------
Total financial liabilities 71,662 71,199
---------------------------------- ----------- ------------
The carrying amounts stated above represent the Group's maximum
exposure to credit risk for trade and other receivables. An element
of this risk is mitigated by collateral held by the Group for
amounts due to them.
Trade receivables consist of a large number of unrelated trading
partners and therefore credit risk is not concentrated. Due to the
large volume of trading partners the Group does not consider that
there is any significant credit risk as a result of the impact of
external market factors on their trading partners. Additionally,
within trade payables are amounts due to the same trading partners
as those included in trade receivables; this collateral
significantly reduces the credit risk.
The Group's credit risk on cash and cash equivalents is limited
because the Group places funds on deposit with National Westminster
Bank plc (rated A+), The Royal Bank of Scotland plc (rated A+),
Barclays plc (rated A), HSBC Bank plc (rated AA-) and Bank of
Scotland plc (rated A+).
17 Share capital
Issued and fully paid
30 June 31 December
2023 2022
Unaudited Audited
GBP'000 GBP'000
------------------------------- -------- ------------
Ordinary shares of 0.1p each 57 57
Total share capital 57 57
------------------------------- -------- ------------
18 Related party transactions
The following table shows the total amount of transactions that
have been entered into with related parties during the six months
ended 30 June 2023 and 2022, as well as balances with related
parties as at 30 June 2023 and 31 December 2022.
Commission Balance of retained Loans owed to
Relationship received/(paid) commissions* MAB
30 June 30 June 30 June 31 December 30 June 31 December
2023 2022 2023 2022 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------------- --------- --------- --------- ------------ --------- ------------
Buildstore Limited Associate (419) (468) 15 14 - -
Sort Limited Associate 811 748 - - 201 218
Clear Mortgage
Solutions Limited Associate (2,506) (2,229) 600 652 - -
Evolve FS Ltd Associate (1,876) (783) 123 76 - -
The Mortgage
Broker Limited Associate (728) (820) 67 67 12 20
Meridian Holdings
Group Ltd Associate (2,085) (1,983) 548 546 202 319
M & R FM Ltd Associate (1,460) (1,167) 139 107 - -
Heron Financial
Limited Associate (724) - 18 - - -
Pinnacle Surveyors Associate - - - - 100 -
(England & Wales)
Ltd
BPR Protect Associate (209) - - - -
Limited**
Vita Financial Associate (661) - - - -
Limited**
MAB Broker Services Joint venture - - - - 15 -
PTY Limited
--------------------- --------------- --------- --------- --------- ------------ --------- ------------
* Balances in relation to retained commissions are to cover
future lapses
** Vita Financial Limited and BPR Protect Limited were
associated companies of the Group until they became subsidiaries on
12 July 2022 following Mortgage Advice Bureau Limited's acquisition
of Vita Financial Limited. Subsidiary transactions are fully
eliminated.
During the period the Group received dividends from associate
companies as follow:
Six months ended 30 June
2023 2022
Unaudited Unaudited
GBP'000 GBP'000
------------------------ ------------ -----------
CO2 Commercial Limited - 167
------------------------ ------------ -----------
Evolve FS Ltd - 245
------------------------ ------------ -----------
M & R FM Ltd - 188
------------------------ ------------ -----------
Total dividends - 600
------------------------ ------------ -----------
19 Share based payments
On 31 May 2023, 296,375 options over ordinary shares of 0.1
pence each in the Company were granted to the Executive Directors
and senior executives of the Group under the equity-settled
Mortgage Advice Bureau Executive Share Option Plan (the "Options").
Exercise of the Options is subject to the service conditions and
achievement of performance conditions based on total shareholder
return and earnings per share criteria. Subject to achievement of
the performance conditions, the Options will be exercisable 34
months from the date of grant. The exercise price for the Options
is 0.1 pence, being the nominal cost of the Ordinary Shares.
Options exercised in April 2023 resulted in 2,996 ordinary
shares being issued at an exercise price of GBP0.01. The price of
the ordinary shares at the time of exercise were GBP6.80 and
GBP7.05.
Options exercised in May 2023 resulted in 93,043 ordinary shares
being issued at an exercise price of GBP0.01. The price of the
ordinary shares at the time of exercise was GBP8.50.
The share-based remuneration costs for the period are made up as
follows:
Six months ended 30 June
2023 2022
Unaudited Unaudited
GBP000 GBP000
----------------------------------- ------------- ------------
Charge for equity settled schemes 416 327
National Insurance Contributions
on equity settled schemes (13) 169
Share incentive plan costs 80 59
Free shares awarded to employees 133 47
Acquisition option costs 857 205
----------------------------------- ------------- ------------
Total costs 1,473 807
----------------------------------- ------------- ------------
20 Events after the reporting date
There were no material events after the reporting period, which
have a bearing on the understanding of these interim condensed
consolidated financial statements.
Glossary of Alternative Performance Measures ("APMs") for the
Group's interim report
Certain numerical information and other amounts and percentages
presented have been subject to rounding adjustments. Accordingly,
in certain instances, the sum of the numbers in a column or a row
in tables may not conform exactly to the total figure given for
that column or row or the sum of certain numbers presented as a
percentage may not conform exactly to the total percentage
given.
APM Closest Definition and purpose
equivalent
statutory
measure
Income statement measures
================================== ===============================================================================
Net revenue Gross profit Net revenue is revenue less commissions
paid to Appointed Representative firms and
payments to Fluent affinity partners. GBPm H1 2023 H1 2022
-------------------- -------- --------
Revenue 117.5 96.5
Commissions paid (65.5) (66.6)
Payments to Fluent (6.7) -
affinity partners
Net revenue 45.3 29.9
-------------------- -------- --------
=============== =================================================================================
Administrative None Calculated as administrative expenses divided
expenses by revenue.
ratio
=============== =================================================================================
Adjusted None Calculated as EBITDA before charges associated
EBITDA with acquisition and investments, and other
adjusting items that the Group deems, by
their nature, require adjustment in order
to show more accurately the underlying business
performance of the Group from period to
period in a consistent manner.
Charges associated with acquisition or investments
in businesses include:
-- non-cash charges such as depreciation
and amortisation of acquired intangibles
and the effect of fair valuation of acquired
assets,
-- non-cash operating expenses relating
to put and call option agreements and cash
charges including transaction costs,
-- fair value movements on deferred consideration,
and
-- fair value movements on derivative financial
instruments.
GBPm H1 2023 H1 2022
------------------------- -------- --------
Gross Profit 32.9 25.4
Administrative Expenses (23.7) (14.2)
Depreciation 1.1 0.4
Amortisation 0.1 0.1
Share of profit from
associates 0.1 0.3
Adjusted EBITDA 10.5 12.0
------------------------- -------- --------
=============== =================================================================================
Adjusted None Calculated as adjusted EBITDA divided by
EBITDA margin revenue.
=============== =================================================================================
Adjusted Operating Calculated as operating profit before charges
operating profit associated with acquisition and investments,
profit and other adjusting items that the Group
deems, by their nature, require adjustment
in order to show more accurately the underlying
business performance of the Group from period
to period in a consistent manner.
Charges associated with acquisition or investments
in businesses include:
* non-cash charges such as amortisation of acquired
intangibles and the effect of fair valuation of
acquired assets,
* non-cash operating expenses relating to put and call
option agreements and cash charges including
transaction costs,
* fair value movements on deferred consideration, and
* fair value movements on derivative financial
instruments.
GBPm H1 2023 H1 2022
----------------------------- -------- --------
Operating profit 5.0 10.2
Acquisition of acquired
intangibles 2.6 0.2
Acquisition costs 0.1 1.5
Non-cash operating expenses
relating to put and
call option agreements 1.1 0.4
Impairment losses - -
Non-cash fair value
losses / (gains) on
financial instruments 0.2 (0.6)
Restructuring costs 0.2 -
Rounding difference 0.1 (0.1)
Adjusted operating
profit 9.3 11.6
----------------------------- -------- --------
=============== =================================================================================
Adjusted Profit Calculated as profit before tax before charges
profit before before associated with acquisition and investments,
tax tax and other adjusting items that the Group
deems, by their nature, require adjustment
in order to show more accurately the underlying
business performance of the Group from period
to period in a consistent manner.
Charges associated with acquisition or investments
in businesses include:
* non-cash charges such as amortisation of acquired
intangibles and the effect of fair valuation of
acquired assets,
* non-cash operating expenses relating to put and call
option agreements and cash charges including
transaction costs,
* fair value movements on deferred consideration, and
* fair value movements on derivative financial
instruments.
GBPm H1 2023 H1 2022
----------------------------- -------- --------
Profit before tax 7.6 10.1
Amortisation of acquired
intangibles 2.6 0.2
Acquisition costs 0.1 1.5
Non-cash operating expenses
relating to put and
call option agreements 1.1 0.4
Impairment losses - -
Non-cash fair value
losses / (gains) on
financial instruments 0.2 (0.6)
Restructuring costs 0.2 -
Unwinding of redemption (3.1) -
liability
Rounding difference 0.1 (0.1)
----------------------------- -------- --------
Adjusted profit before
tax 8.8 11.5
----------------------------- -------- --------
=============== =================================================================================
Adjusted None Calculated as adjusted profit before tax
profit before divided by revenue.
tax margin
=============== =================================================================================
Adjusted Basic earnings Calculated as basic earnings per share before
earnings per share charges (net of tax) associated with acquisition
per share and investments, and other adjusting items
that the Group deems, by their nature, require
adjustment in order to show more accurately
the underlying business performance of the
Group from period to period in a consistent
manner.
=============== =================================================================================
Cash flow measures
==================================================
Adjusted None Adjusted cash conversion is cash generated
cash conversion from operating activities adjusted for movements
in non-trading items, including loans to
AR firms and associates and cash transaction
costs, and for increases in restricted cash
balances, as a percentage of adjusted operating
profit.
GBPm H1 2023 H1 2022
-------------------------- -------- --------
Cash generated from
operating activities 12.1 13.7
Acquisition costs 0.1 1.5
Restructuring costs 0.2 -
Increase in loans to
AR firms and associates 0.1 (0.3)
Increase in restricted
cash balances (0.4) (0.5)
Rounding difference 0.1 -
Adjusted cash generated 12.2 14.4
-------------------------- -------- --------
===== ====================================================
Balance sheet measures
============================= ==================================================
Net debt None Loans and borrowings less unrestricted cash
balances.
===== ====================================================
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END
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