TIDMMAB1
RNS Number : 8213S
Mortgage Advice Bureau(Holdings)PLC
22 March 2016
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
22 March 2016
Final Results for the year ended 31 December 2015 and sale of
stake in Capital Private Finance Limited
Mortgage Advice Bureau (Holdings) PLC is pleased to announce its
final results for the year ended 31 December 2015.
Financial highlights
-- Revenue up 33% to GBP75.5m (2014: GBP56.6m)
-- Gross margin maintained at 24.2% (2014: 24.1%)
-- Adjusted PBT up 31% to GBP10.4m (2014: GBP8.0m)
-- Underlying PBT margin(1,3) improved to 14.9% (2014:14.1%)
-- High operating profit to cash conversion(2) of 100% (2014: 100%)
-- Adjusted EPS(3,4) 17.2p up 35% (2014: 12.7p)
-- Proposed final dividend of 9.5p (H2 2015 payout ratio: 90%)
making a total of 14.4p for 2015
-- Strong financial position with significant surplus on regulatory capital
-- Total cash balances of GBP14.0m (31 Dec 2014: GBP9.3m)
-- Unrestricted cash balances of GBP8.2m (31 Dec 2014: GBP5.3m)
Operational highlights
-- Adviser numbers up 25% to 790 at 31 December 2015 (2014: 634)
-- Average number of Advisers in 2015 up 24% to 720 (2014: 581)
-- Purchase of freehold of Head Office Building for GBP2.4m from cash resources
Post year end highlights
-- Adviser numbers up 54 to 844 at 18 March 2016; front ended
new Appointed Representative recruitment in 2016
-- Sale of 49% stake in Capital Private Finance Limited confirmed for GBP2.7m;
-- 100% of post-tax proceeds of GBP2.2m to be distributed to
shareholders by special dividend of c. 4.25p in H2 2016
2015 2014 Change
------------------------------------------------ -------- -------- ------
Revenue GBP75.5m GBP56.6m +33%
------------------------------------------------- -------- -------- ------
Gross profit GBP18.3m GBP13.6m +34%
------------------------------------------------- -------- -------- ------
Gross profit margin 24.2% 24.1%
------------------------------------------------- -------- -------- ------
Profit before tax GBP10.4m GBP6.9m +51%
------------------------------------------------- -------- -------- ------
Adjusted PBT(3) GBP10.4m GBP8.0m +31%
------------------------------------------------- -------- -------- ------
Adjusted(3) PBT margin 13.8% 14.1%
------------------------------------------------- -------- -------- ------
Underlying PBT margin(1,3) 14.9% 14.1%
------------------------------------------------- -------- -------- ------
Adjusted EPS(3,4) 17.2p 12.7p +35%
------------------------------------------------- -------- -------- ------
Basic EPS 17.2p 9.6p +78%
------------------------------------------------- -------- -------- ------
Proposed final dividend per share 9.5p 2.0p
------------------------------------------------- -------- -------- ------
Adjusted operating profit to cash conversion(2) 100% 100%
------------------------------------------------- -------- -------- ------
(1) Before total additional costs of GBP0.8m in 2015, comprising
GBP0.5m in costs associated with being listed and additional FSCS
costs of GBP0.3m (not adjusted in 2015 as considered to be ongoing
costs, but did not feature in 2014). Excluding these costs, the
underlying PBT margin in 2015 would have been 14.9%, above the PBT
margin in 2014 of 14.1%.
(2) Cash flow from operating activities adjusted for non-trading
items including loans to Appointed Representative firms ("ARs"),
loans to associates and other non-trade receivables as a % of
operating profit before exceptional costs
(3) 2014 profit before tax and profit after tax adjusted for
non-recurring items (1) provision against loan in 2014 of
GBP347,891 and (2) IPO-related costs. There are no non-recurring
items in 2015.
(4) Adjusted EPS is based on 50.5m shares being in issue
throughout 2014 in order to allow comparability
Peter Brodnicki, Chief Executive commented:
"I am delighted to report that in the first full year following
our IPO, we have had another year of strong revenue and profit
growth, resulting from our strategy focused on our core areas of
specialism. 2015 marked our seventh consecutive year of significant
profit growth, demonstrating both our understanding of the market
in which we operate and our focus on building a high quality
business with sustainable profitability.
"Our share of UK new mortgage lending grew by 18% to 3.6% in
2015. We are confident that our strategy is on track to continue to
deliver strong revenue growth and attractive returns to
investors."
Current Trading and Outlook
Adviser numbers have continued to grow since the year end with
the Group reporting 844 Advisers at 18 March 2016 reflecting front
ended recruitment of new Appointed Representatives for 2016. MAB
expects to achieve a minimum of 15% compound annual growth in
Adviser numbers over the next few years which the Board believe to
be a very realistic and sustainable number.
UK gross mortgage lending grew by 8% in 2015, with the Council
of Mortgage Lenders ("CML") projecting that gross mortgage lending
growth will be sustained at 8% for 2016 and increase to 10% for
2017. MAB continues to see steady growth in mortgage lending with
increased activity in the remortgage market as borrowers look to
secure mortgage deals at the record low rates of interest which are
currently available.
MAB continues to seek targeted investment opportunities to build
upon the Group's existing expertise and to enhance distribution,
with technology and brand expected to be major influencing factors
on the intermediary sector over the coming years. The Board
believes the Group is ideally placed to capitalise on both of
these, strengthening MAB's position as a leading UK consumer
intermediary brand and specialist Appointed Representative Network,
and continuing our track record of profitable growth into 2016.
For further information please contact:
Mortgage Advice Bureau (Holdings) plc +44 (0)1332 525007
Peter Brodnicki, Chief Executive Officer
David Preece, Chief Operating Officer
Lucy Tilley, Finance Director
Nominated Adviser and Joint Broker:
Zeus Capital +44 (0)20 3829 5000
Martin Green
Nicholas How
Pippa Underwood
Joint Broker:
Canaccord Genuity +44 (0)20 7523 8350
Roger Lambert
Kit Stephenson
Richard Andrews
Media Enquiries:
Instinctif Partners +44 (0)20 7866 7904
Mike Davies
Giles Stewart
Louis Supple
Analyst presentation
There will be an analyst presentation to discuss the results at
09:30am today at Canaccord Genuity Limited, 88 Wood Street, London,
EC2V 7QR.
Those analysts wishing to attend are asked to contact Louis
Supple at Instinctif on +44 (0) 20 7866 7904 or
louis.supple@instinctif.com.
Copies of this final results announcement are available at
investor.mortgageadvicebureau.com
Strategic report - Chief Executive's Review
Introduction
I am delighted to report that in the year following our IPO we
have had another year of strong revenue and profit growth as we
continue to focus our strategy on our core areas of specialism.
This is our seventh consecutive year of strong profit growth,
demonstrating both our understanding of the market in which we
operate and our focus on building a high quality business with
sustainable profitability.
Our strategy
Our specialist approach in targeted sectors of intermediary
distribution continues to differentiate MAB, and helps us attract
many of the UK's leading firms and Advisers. Those areas of
specialisation have recently been extended to include on-line
estate agency and buy-to-let ("BTL"). MAB plans to further increase
market share by extending its reach in the intermediary sector and
broadening its distribution model through selected JV partners.
The intermediary proposition is hugely compelling for the
consumer, with advances in technology only likely to strengthen
this position. Our focus on technology and our in-house platform
MIDAS Pro has never been greater than it is today. We see
technology playing an ever increasing part in our lead generation
by taking control of and managing data, improving business and
Adviser efficiency/capacity to deliver a continuously improving
customer, Adviser and lender experience.
MAB will always seek to be an early adopter of new and emerging
technologies. This will ensure that our AR firms and their Advisers
are able to compete at the highest level by providing our customers
with the technological solutions they expect today, making research
and mortgage applications simpler, faster, and more convenient. By
doing so, we expect MAB to become a natural choice for the more
technology-led intermediary models entering the market.
We believe that trusted national brands are becoming
increasingly more important to consumers who are seeking advice
from an intermediary and, as with technology, MAB is ideally placed
to fully leverage its strong consumer brand to further increase its
market share.
MAB continues to be exceptionally well placed to attract
ambitious and growth-focused AR firms, and attract new Advisers to
those firms. The MAB Academy is now in its third year and we are
delighted with the quality and increasing numbers of new industry
recruits we are bringing through, which is a trend we expect to
continue.
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:01 ET (07:01 GMT)
Our strategy is to continue to grow our market share and deliver
strong revenue growth and attractive returns to investors year on
year. Central to this is ensuring that MAB and its growing number
of AR firms and Advisers continue to meet customers' changing needs
and expectations. We believe MAB is ideally positioned to do that
through the delivery of the quality of service and experience they
expect, and providing the choice of how and when they receive
advice.
Business Review of 2015
I am pleased to report strong growth in revenue of 33% to
GBP75.5m with adjusted profit before tax and exceptional items
rising by 31% to GBP10.4m. Mortgage lending activity slowed in the
second half of 2014 following a pre-MMR spike in volumes, but we
saw some encouraging signs of increased activity early in 2015
despite an election looming. Volumes continued to build following
the general election and we saw a stronger second half of 2015 with
overall lending volumes for 2015 being estimated by the CML at
GBP220bn, circa 8% above those of 2014 (GBP203bn). MAB's gross
mortgage lending increased by 31% to GBP7.8bn in 2015, with MAB's
overall share of UK new mortgage lending increasing by 18% to
3.6%.
The Group generates revenue from three core areas, as
follows:
http://www.rns-pdf.londonstockexchange.com/rns/8213S_1-2016-3-21.pdf
All income sources continued to grow strongly with the average
number of Advisers increasing by 24%, whilst average revenue per
Adviser increased by 8%.
Understanding our customers' needs and providing them with the
right advice is at the heart of MAB's strategy and delivering
outstanding customer service is an integral part of this. By giving
our customers expert mortgage and protection advice through our
expanding network of intermediary businesses, we will continue to
deliver strong revenue growth and attractive returns to
investors.
Organic growth continues to be a key focus for MAB, as we work
closely with our ARs to help them increase Adviser numbers and
market share. This is supported by our recently increased
recruitment team and our in-house academy for training new Advisers
to the industry which is now well established in its third year. We
maintain very high standards of recruitment both in growing Adviser
numbers organically and in recruiting new ARs. Our new ARs are
typically forward thinking and ambitious; they too will contribute
to MAB's organic growth in the years to come.
Technology is transforming everything we do and this is led by
our customers who are using technology every day to make life
simpler, faster and more convenient. MAB intends to continue to
compete at the highest level and, by embracing technology in the
same way as an increasing number of our customers do, this will
make our ARs more efficient and profitable, whilst also delivering
an improved customer, Adviser and lender experience. We also
believe technological advances will make the intermediary
proposition even more compelling. We are already seeing new lenders
and on-line estate agents challenging existing models with
technology being the driver, and that has started to trigger a
response from the more traditional models which helps to drive
continued innovation across the whole sector.
At MAB we made the decision 15 years ago to develop technology
in-house rather than being held back by often inflexible 'one size
fits all' third party systems. That investment has never been
greater than it is today, and we are making significant inroads in
using this technology to generate a greater number of leads for
Advisers, simplifying and streamlining the mortgage application
process, whilst enabling the customer to be far more engaged and in
control.
The lender and intermediary sectors have been behind the pace in
terms of meeting customers' technology expectations, but we expect
this to change, with organisations such as MAB driving this change
with new thinking and without being constrained by legacy issues to
hold them back, and with technology at their core.
The Mortgage Advice Bureau consumer brand is a major
differentiator for our business, our ARs and their Advisers. We see
our brand becoming increasingly important as, more than ever
before, consumers seek out mortgage intermediaries that provide
high quality customer-focused and expert advice. Fully leveraging
the strength of our brand is an area of focus for 2016 and
beyond.
During 2015 we have continued to significantly strengthen our
senior team with the addition of our new Finance Director,
Compliance Director and Head of Brand and Marketing.
Sale of 49% stake in Capital Private Finance Limited ("CPF")
In 2011 MAB and Countrywide plc ("Countrywide") entered into a
five year joint venture agreement. CPF is an AR of the Group and
provides mortgage and protection advice to customers of
Countrywide's premium real estate brands, including Hamptons
International, John D Wood & Co., Faron Sutaria and UK
Sotheby's International Realty. MAB holds 49% of the issued share
capital of CPF with Countrywide holding the remaining 51%. The
joint venture agreement included a put and call option for MAB's
49% shareholding, exercisable any time after five years from the
date of commencement. Countrywide has now exercised its call option
with the price for MAB's 49% stake agreed at GBP2.7m. This
associate investment has a carrying cost in MAB's balance sheet of
GBP4,900. Completion is anticipated in early H2 2016. After
completion, MAB will cease to receive its share of profit from CPF,
but will also save c. GBP0.1m of overhead cost per annum. The net
effect on profit before tax on an annual basis is a reduction of c.
GBP0.25m. MAB intends to declare a special dividend equivalent to
the post-tax sale proceeds shortly after completion. This special
dividend will equate to c. 4.25p per ordinary share.
We anticipated that Countrywide may exercise this option and our
expected minimum 15% compound annual growth in Adviser numbers
allows for the removal of the CPF Advisers from the Group.
Regulatory changes
On 21 March 2016 the EU Mortgage Credit Directive ("EU MCD")
came into effect. EU MCD applies to all first and second charge
brokers and lenders, who will all follow the same regulatory regime
from that date. MAB has adapted its procedures to ensure it is
fully compliant with EU MCD.
Industry data and trends
Housing purchase transactions by volume in the UK for the whole
of 2015 were broadly flat compared with 2014, as demonstrated in
the graph below, with property inflation being the primary factor
that accounted for the increase of 8% in UK mortgage lending
overall. By contrast, in H2 2015 housing purchase transactions by
volume were up 6% compared to H2 2014, and this has translated to a
higher run rate at the beginning of 2016.
http://www.rns-pdf.londonstockexchange.com/rns/8213S_4-2016-3-21.pdf
The increases in gross mortgage lending, and particularly in the
remortgage market, are illustrated in the graph below.
http://www.rns-pdf.londonstockexchange.com/rns/8213S_3-2016-3-21.pdf
UK gross mortgage lending in 2015 for home-owner and BTL
purchases grew by 5% and 26% respectively. UK gross mortgage
lending in 2015 for home-owner and BTL remortgages increased by 20%
and 51% respectively.
Approximately 70% of UK mortgage transactions (excluding BTL
mortgages) were via an intermediary in 2015, up from less than 50%
in 2012 as shown in the graph below. MAB expects this market share
to remain broadly stable going forwards.
http://www.rns-pdf.londonstockexchange.com/rns/8213S_2-2016-3-21.pdf
We measure the development, performance and position of our
business against a number of key indicators.
http://www.rns-pdf.londonstockexchange.com/rns/8213S_-2016-3-21.pdf
Financial performance
Revenues
Revenues were up 33% to GBP75.5m (2014: GBP56.6m). A key driver
of revenue is the average number of Advisers in each financial
year. Our business model attracts forward thinking ARs who are
seeking to expand and grow their market share. Average Adviser
numbers increased by 24% to 720 (2014: 581) during the period from
a combination of the recruitment of new ARs, and the expansion of
existing ARs.
MAB's total revenue can be analysed as follows:
Income source 2015 2014
----------------------- ---- ----
Mortgage procuration
fees 41% 41%
----------------------- ---- ----
Protection and General
Insurance Commission 40% 42%
----------------------- ---- ----
Client Fees 17% 16%
----------------------- ---- ----
Other Income 2% 1%
----------------------- ---- ----
Total 100% 100%
----------------------- ---- ----
Mortgage procuration fees and client fees have increased and
this has had the effect of reducing the proportion of total income
attributable to insurance commission.
Gross profit margin
Gross profit margin was maintained at 24.2% (2014: 24.1%). The
Group receives a slightly reduced margin as our existing ARs grow
their revenue organically through increasing their Advisers. In
2015, MAB continued to attract some larger ARs, which has driven
strong growth in Adviser numbers and revenue. These larger new ARs,
however, typically join the Group on lower than average margins due
to their existing scale. In 2016 we expect to see the gross margin
impact of the larger businesses brought on in 2015. Going forwards
we expect to see some erosion of our gross profit margin due to
both the continued growth of our existing ARs and the acquisition
of new larger ARs.
Overheads
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Overheads as a percentage of revenue were 11.6% (2014: 11.1%).
During 2015, total additional costs of GBP0.8m, comprising GBP0.5m
in costs associated with being listed and additional FSCS costs of
GBP0.3m (not adjusted in 2015 as considered to be ongoing costs,
but did not feature in 2014) were incurred. Excluding these costs,
overheads as a percentage of revenue would have improved to 10.5%
(2014: 11.1%), demonstrating the scalable nature of the cost base
and, in part, countering the expected erosion on gross margin as
the business continues to grow. Going forward, we expect to
continue to see a reduction in overheads as a proportion of
revenue. Certain costs, primarily those relating to compliance,
which represent approximately one third of our cost base, are
closely correlated to the growth in the number of Advisers, due to
the high standards we demand and the requirement to maintain
regulatory spans of control. The remainder of our costs typically
rise at a slower rate than revenue.
Adjusted profit before tax and margin thereon
Adjusted profit before tax rose by 31% to GBP10.4m (2014:
GBP8.0m). To facilitate a like-for-like comparison with prior
years, the costs associated with the Company's admission to AIM in
November 2014 and a one-off provision made during 2014 against a
loan advanced in 2011 have been treated as exceptional costs when
calculating adjusted profit before tax. There are no non-recurring
items in 2015. The adjusted profit before tax margin was 13.8%
(2014: 14.1%). Excluding the GBP0.8m of additional costs noted
above, the underlying PBT margin in 2015 is 14.9% (2014: 14.1%).
Unadjusted reported profit before tax increased to GBP10.4m (2014:
GBP6.9m), an increase of 51%.
Net finance revenue
Net finance revenues of GBP0.14m (2014: GBP0.12m) reflect
continued low interest rates. The loan of GBP1m to HBB Bridging
Loans has now been repaid.
Taxation
The effective rate of tax fell to 16.9% (2014: 21.6%)
principally due to MAB's research and development claim for
development on MIDAS Pro during 2014 and 2015 both being credited
against the 2015 tax charge and also reductions in the UK
corporation tax rate, with a higher effective rate in 2014, due to
the costs of the AIM listing being disallowed for tax purposes.
Going forwards we would expect our effective tax rate to be
marginally below the prevailing UK corporation tax rate subject to
the tax legislation behind MAB's research and development claim
still being in existence and available to MAB in respect of
continued development on MIDAS Pro.
Earnings per share and dividend
Adjusted EPS(1) amounted to 17.2 pence. Comparison with 2014 is
difficult as the share structure was significantly changed in
preparation for the IPO in November 2014. Had there been a similar
number of ordinary shares in issue throughout 2014, adjusted EPS(1)
would have been 12.7 pence per share.
The Board is pleased to propose a final dividend for the year
ended 31 December 2015 of 9.5p per share, amounting to a total of
GBP4.8m. Following payment of the dividend, the Group will continue
to maintain significant surplus regulatory reserves. This final
dividend represents circa 90% of the Group's post-tax profits for
H2 2015 and reflects our intention to distribute excess capital
going forward. MAB requires c. 10% of profit after tax to fund
increased regulatory capital and other capital expenditure.
Furthermore, in respect of the sale of its stake in CPF, MAB
intends to declare a special dividend equivalent to the post-tax
sale proceeds shortly after completion. This special dividend will
equate to c. 4.25p per ordinary share.
The record date for the final dividend is 6 May 2016 and the
payment date is 1 June 2016. The ex-dividend date will be 5 May
2016.
Cash flow
The Group's operations produce positive cash flow. This is
reflected in the net cash inflow from operating activities of
GBP11.0m (2014: GBP8.4m).
Adjusted net cash flow(2) from operating activities as a % of
adjusted operating profit(3)
2015 100%
2014 100%
Using the same basis on which cash conversion was calculated in
MAB's results for the year ended 31 December 2014 would not give a
meaningful result in the year ended 31 December 2015 as the figure
would be distorted by the Group's purchase of Capital House; hence
a new methodology has been applied which excludes net cash flow
from investing activities.
The Group's operations are capital light with our most
significant ongoing capital investment being in computer equipment.
Only GBP0.14m of capital expenditure was required during the year
(2014: GBP0.14m). Group policy is not to provide company cars, and
no significant capital expenditure is foreseen in the coming year.
All development work on MIDAS Pro is treated as revenue
expenditure.
The Group had no bank borrowings at 31 December 2015 (2014:
GBPnil) with unrestricted bank balances of GBP8.2m (2014:
GBP5.3m).
The Group has a regulatory capital requirement amounting to 2.5%
of regulated revenue. At the end of 2015 this regulatory capital
requirement was GBP1.7m (2014: GBP1.3m).
The following demonstrates how cash generated from operations
was applied:
Unrestricted bank balances at the beginning of the year GBP5.3m
Cash generated from operating activities excluding from associates, repayment of loans advanced GBP8.9m
for commercial return and movements in restricted balances
Repayment of loans advanced for commercial return GBP1.0m
Interest received GBP0.1m
Dividends received from associates GBP0.6m
Redemption of shares GBP0.0m
Dividends paid (GBP3.5m)
Tax paid (GBP1.3m)
Capital expenditure, including purchase of Capital House (GBP2.6m)
Investments in associates (GBP0.3m)
Unrestricted bank balances at the end of the year GBP8.2m
The Group's emphasis is to reduce risk by spreading deposits
over a number of institutions rather than to seek marginal
improvements in returns.
(1) Adjusted EPS is based on 50.5m shares being in issue
throughout 2014 in order to allow comparability
(2) Cash flow from operating activities adjusted for non-trading
items including loans to ARs, loans to associates and other
non-trade receivables
(3) 2014 operating profit and profit before tax has been
adjusted for non-recurring items (1) provision against loan in 2014
of GBP347,891 and (2) IPO-related costs. There are no non-recurring
items in 2015.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MORTGAGE ADVICE
BUREAU (HOLDINGS) PLC
We have audited the financial statements of Mortgage Advice
Bureau (Holdings) Plc for the year ended 31 December 2015 which
comprise the primary statements such as the group statement of
financial position and company balance sheet, the group statement
of comprehensive income, the group statement of cash flows, the
group statement of changes in equity and the related notes. The
financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The financial reporting framework that has been
applied in preparation of the parent company financial statements
is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice) including Financial
Reporting Standard 102 'The Financial Reporting Standard applicable
in the UK and Republic of Ireland'.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting
Council's (FRC's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the FRC's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and the parent company's affairs as at 31
December 2015 and of the group's profit for the year then
ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company's financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
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Opinion on other matters prescribed by the Companies Act
2006
In our opinion the information given in the strategic report and
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Leigh Wormald (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
for the year ended 31 December 2015
Note
2015 2014
GBP'000 GBP'000
------------------------------------- ----- --------- ---------
Revenue 3 75,466 56,578
Cost of sales 4 (57,173) (42,933)
------------------------------------- ----- --------- ---------
Gross profit 18,293 13,645
Administrative expenses (8,722) (6,257)
Share of profit of associates 14 703 458
------------------------------------- ----- --------- ---------
Operating profit before exceptional
costs 10,274 7,846
Exceptional costs 8 - (1,094)
Operating profit 5 10,274 6,752
Finance income 7 143 124
Profit before tax 10,417 6,876
Tax expense 9 (1,759) (1,485)
------------------------------------- ----- --------- ---------
Profit for the year attributable
to equity holders of parent
company 8,658 5,391
------------------------------------- ----- --------- ---------
Total comprehensive income
attributable to equity holders
of parent company 8,658 5,391
------------------------------------- ----- --------- ---------
Earnings per share attributable to the
owners of the parent company
Basic 10 17.151p 9.626p
------------------------------------- ----- --------- ---------
Diluted 10 16.653p 9.588p
------------------------------------- ----- --------- ---------
Consolidated statement of financial position
as at 31 December 2015
2015 2014
Note GBP'000 GBP'000
------------------------------- ------ --------- ---------
Assets
Non-current assets
Property, plant and
equipment 12 2,621 204
Goodwill 13 4,114 4,114
Other intangible assets 13 27 45
Investments 14 715 253
Total non-current assets 7,477 4,616
------------------------------- ------ --------- ---------
Current assets
Trade and other receivables 16 2,852 2,921
Cash and cash equivalents 17 13,956 9,270
------------------------------- ------ --------- ---------
Total current assets 16,808 12,191
------------------------------- ------ --------- ---------
Total assets 24,285 16,807
------------------------------- ------ --------- ---------
Equity and liabilities
Equity attributable to owners
of the parent company
Share capital 22 51 51
Share premium 3,042 3,042
Capital redemption
reserve 20 20
Share option reserve 157 11
Retained earnings 9,635 4,497
------------------------------- ------ --------- ---------
Total equity 12,905 7,621
------------------------------- ------ --------- ---------
Liabilities
Non-current liabilities
Provisions 20 918 751
Deferred tax liability 21 28 25
------------------------------- ------ --------- ---------
Total non-current liabilities 946 776
------------------------------- ------ --------- ---------
Current liabilities
Trade and other payables 18 9,519 7,908
Corporation tax liability 915 502
------------------------------- ------ --------- ---------
Total current liabilities 10,434 8,410
------------------------------- ------ --------- ---------
Total liabilities 11,380 9,186
------------------------------- ------ --------- ---------
Total equity and liabilities 24,285 16,807
------------------------------- ------ --------- ---------
The financial statements were approved by the Board of Directors
on 21 March 2016
P Brodnicki L Tilley
Director Director
Consolidated statement of changes in equity
for the year ended 31 December 2015
Capital Share
Share Share redemption option Retained Total
capital premium reserve reserve earnings Equity
GBP'000 GBP'000 GBP,000 GBP GBP'000 GBP'000
----------------------- --------- ---------- ------------ --------- ----------- -----------
Balance at 1
January 2014 71 2,989 - - 7,622 10,682
Profit for the
year - - - - 5,391 5,391
----------------------- --------- ---------- ------------ --------- ----------- -----------
Total comprehensive
income - - - - 5,391 5,391
----------------------- --------- ---------- ------------ --------- ----------- -----------
Transactions
with owners
Share based
payment transactions - - - 11 - 11
Issues of new
shares - 53 - - - 53
Redemption of
shares (20) - 20 - (4,558) (4,558)
Dividends paid - - - - (3,958) (3,958)
----------------------- --------- ---------- ------------ --------- ----------- -----------
Transactions
with owners (20) 53 20 11 (8,516) (8,452)
----------------------- --------- ---------- ------------ --------- ----------- -----------
Balance at 31
December 2014
and 1 January
2015 51 3,042 20 11 4,497 7,621
Profit for the
year - - - - 8,658 8,658
----------------------- --------- ---------- ------------ --------- ----------- -----------
Total comprehensive
income - - - - 8,658 8,658
----------------------- --------- ---------- ------------ --------- ----------- -----------
Transactions
with owners
Share based
payment transactions - - - 146 - 146
Redemption of
shares - - - - (38) (38)
Dividends paid - - - - (3,482) (3,482)
Transactions
with owners - - - 146 (3,520) (3,374)
----------------------- --------- ---------- ------------ --------- ----------- -----------
At 31 December
2015 51 3,042 20 157 9,635 12,905
----------------------- --------- ---------- ------------ --------- ----------- -----------
Consolidated statement of cash flows
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for the year ended 31 December 2015
Notes 2015 2014
GBP'000 GBP'000
--------------------------------- ------ ---------- ---------
Cash flows from operating
activities
Profit for the year before
tax 10,417 6,876
Adjustments for
Depreciation of property,
plant and equipment 12 131 112
Amortisation of intangibles 13 18 18
Share based payments 146 11
Share of profit from associates 14 (703) (458)
Dividends received from
associates 14 586 404
Finance income 7 (143) (124)
--------------------------------- ------ ---------- ---------
10,452 6,839
Changes in working capital
Decrease in trade and other
receivables 69 384
Increase in trade and other
payables 1,611 2,496
Increase in provisions 167 162
Cash generated from operating
activities 12,299 9,881
Income taxes paid (1,343) (1,521)
--------------------------------- ------ ---------- ---------
Net cash inflow from operating
activities 10,956 8,360
--------------------------------- ------ ---------- ---------
Cash flows from investing
activities
Purchase of property, plant
and equipment 12 (2,548) (139)
Acquisitions of associates
and investments 14 (345) -
--------------------------------- ------ ---------- ---------
Net cash (outflow)/inflow
from investing activities (2,893) (139)
--------------------------------- ------ ---------- ---------
Cash flows from financing
activities
Interest received 7 143 124
Redemption of shares (38) (4,558)
Issue of shares - 53
Dividends paid 11 (3,482) (3,958)
--------------------------------- ------ ---------- ---------
Net cash outflow from financing
activities (3,377) (8,339)
--------------------------------- ------ ---------- ---------
Net increase/(decrease)
in cash and cash equivalents 4,686 (118)
Cash and cash equivalents
at the beginning of year 9,270 9,388
--------------------------------- ------ ---------- ---------
Cash and cash equivalents
at the end of the year 13,956 9,270
--------------------------------- ------ ---------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2015
1 Accounting policies
Basis of preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented.
These financial statements have been prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards, International Accounting Standards
and Interpretations (collectively IFRSs) issued by the
International Accounting Standards Board (IASB) as adopted by the
European Union ("adopted IFRSs") and with those parts of the
Companies Act 2006 that are applicable to companies that prepare
financial statements in accordance with IFRSs.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement
in applying the Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing
the financial statements and their effect are disclosed in note
2.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report as set out earlier in this
announcement. The financial position of the Group, its cash flows
and liquidity position are described in these financial
statements.
The Group made an operating profit of GBP10.3m during 2015
(2014: GBP6.8m) and had net current assets of GBP6.4m at 31
December 2015 (31 December 2014: GBP3.8m) and equity attributable
to owners of the Group of GBP12.9m (31 December 2014: GBP7.6m).
After making enquiries, the Directors have a reasonable
expectation that the Group have adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the annual
report and accounts.
Changes in the presentation of the financial statements
For 2015 the classification of certain amounts included in trade
and other receivables and trade and other payables were changed to
more accurately reflect the nature of the items. Accordingly the
2014 comparatives have been restated such that the classification
is consistent with the 2015 presentation. The change has had no
impact on the reported results of the group for either year.
Changes in accounting policies
New standards, interpretations and amendments effective year
ended 31 December 2015
The following new standards, interpretations and amendments are
effective for annual periods beginning on or after 1 January 2015
and have been applied in preparing these financial statements. None
of these new standards or interpretations have a significant impact
on the annual consolidated financial statements of the Group.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
1 Accounting policies (continued)
New standards, interpretations and amendments effective year
ended 31 December 2015 (continued)
Annual Improvements 2010-2012 Cycle
These improvements are effective from 1 July 2014 and the Group
has applied these amendments for the first time in these annual
consolidated financial statements. They include:
IFRS 2 Share-based Payment
This improvement is applied prospectively and clarifies various
issues relating to the definitions of performance and service
conditions which are vesting conditions, including:
-- A performance condition must contain a service condition
-- A performance target must be met while the counterparty is
rendering service
-- A performance target may relate to the operations or
activities of an entity, or to those of another entity in the same
group
-- A performance condition may be a market or non-market
condition
-- If the counterparty, regardless of the reason, ceases to
provide service during the vesting period, the service condition is
not satisfied
The above definitions are consistent with how the Group has
identified any performance and service conditions which are vesting
conditions in previous periods, and thus these amendments do not
impact the Group's accounting policies or financial statements.
IFRS 3 Business Combinations
The amendment is applied prospectively and clarifies that all
contingent consideration arrangements classified as liabilities (or
assets) arising from a business combination should be subsequently
measured at fair value through profit or loss whether or not they
fall within the scope of IAS 39. This is consistent with the
Group's current accounting policy and therefore did not impact the
Group's accounting policy.
IAS 16 Property, Plant and Equipment and IAS 38 Intangible
Assets
The amendment is applied retrospectively and clarifies in IAS 16
and IAS 38 that the asset may be revalued by reference to
observable data by either adjusting the gross carrying amount of
the asset to market value or by determining the market value of the
carrying value and adjusting the gross carrying amount
proportionately so that the resulting carrying amount equals the
market value. In addition, the accumulated depreciation or
amortisation is the difference between the gross and carrying
amounts of the asset. The group did not record any revaluation
adjustments during the year.
IAS 24 Related Party Disclosures
The amendment is applied retrospectively and clarifies that a
management entity (an entity that provides key management personnel
services) is a related party subject to the related party
disclosures. In addition, an entity that uses a management entity
is required to disclose the expenses incurred for management
services. This amendment is not relevant for the Group as it does
not receive any management services from other entities.
Notes to the consolidated financial statements
for the year ended 31 December 2015
1 Accounting policies (continued)
New standards, interpretations and amendments not yet
effective
The following new standards, interpretations and amendments
which will or may have an effect on the Group are effective for
annual periods beginning on or after 1 January 2015 and have not
yet been applied in preparing these financial statements. None of
these new standards or interpretations are expected to have a
material impact on the financial statements of the Group.
-- IFRS 9 will eventually replace IAS 39 in its entirety.
However, the process has been divided into three main components
(classification and measurement, impairment and hedge accounting).
This standard becomes effective for accounting periods beginning on
or after 1 January 2018. Its adoption may result in changes to the
classification and measurements of the Group's financial
instruments, including any impairment thereof.
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-- IFRS 15 'Revenue from Contracts with Customers' was issued by
the IASB on 28 May 2014 and applies to an entity's first annual
IFRS financial statements for a period beginning on or after 1
January 2018. It sets out the requirements for recognising revenue
that apply to contracts with customers, except for those covered by
standards on leases, insurance contracts and financial
instruments
The above two standards have not yet been endorsed by the
EU.
-- Amendments to IFRS11 "Accounting for Acquisitions of
Interests in Joint Operations" provides guidance on how to account
for the acquisition of joint operations that constitute a business
as defined in IFRS 3 Business Combinations. It is effective for
accounting periods beginning on or after 1 January 2016.
-- Amendments to IAS 16 and IAS 38 "Clarification of Acceptable
Methods of Depreciation and Amortisation". The amendment to IAS 16
prohibits entities from using a revenue-based depreciation method
for items of property, plant and equipment. The amendment to IAS 38
introduces a rebuttable presumption that revenue is not an
appropriate basis for amortisation of intangible assets. It is
effective for accounting periods beginning on or after 1 January
2016. These amendments are not expected to have any impact to the
Group given that the Group has not used a revenue-based method to
depreciate its non-current assets.
-- Amendments to IAS 27 "Equity Method in Separate Financial
Statements". The amendment will allow entities to use the equity
method to account for investments in subsidiaries, joint ventures
and associates in their separate financial statements. Entities
already applying IFRS and electing to change to the equity method
in its separate financial statements will have to apply that change
retrospectively. These amendments are effective for annual periods
beginning on or after 1 January 2016. These amendments will not
have any impact on the Group's consolidated financial
statements.
Annual Improvements 2012-2014 Cycle
These improvements are effective for annual periods beginning on
or after 1 January 2016. They include:
IAS 19 Employee Benefits
The amendment clarifies that market depth of high quality
corporate bonds is assessed based on the currency in which the
obligation is denominated, rather than the country where the
obligation is located. When there is no deep market for high
quality corporate bonds in that currency, government bond rates
must be used. This amendment must be applied prospectively.
Notes to the consolidated financial statements
for the year ended 31 December 2015
1 Accounting policies (continued)
New standards, interpretations and amendments not yet effective
(continued)
IAS 34 Interim Financial Reporting
The amendment clarifies that the required interim disclosures
must either be in the interim financial statements or incorporated
by cross-reference between the interim financial statements and
wherever they are included within the interim financial report
(e.g. in the management commentary or risk report). The other
information within the interim financial report must be available
to users on the same terms as the interim financial statements and
at the same time. This amendment must be applied
retrospectively.
These amendments are not expected to have any impact on the
Group.
Amendments to IAS 1 Disclosure Initiative
The amendments to IAS 1 Presentation of Financial Statements
clarify, rather than significantly change, existing IAS 1
requirements. The amendments clarify:
-- The materiality requirements in IAS 1
-- That specific line items in the statement(s) of profit or
loss and other comprehensive income and the statement of financial
position may be disaggregated
-- That entities have flexibility as to the order in which they
present the notes to financial statements
-- That the share of other comprehensive income of associates
and joint ventures accounted for using the equity method must be
presented in aggregate as a single line item, and classified
between those items that will or will not be subsequently
reclassified to the statement of comprehensive income.
Furthermore, the amendments clarify the requirements that apply
when additional subtotals are presented in the statement of
financial position and the statement(s) of profit or loss and other
comprehensive income. These amendments are effective for annual
periods beginning on or after 1 January 2016, with early adoption
permitted. These amendments are not expected to have any impact on
the Group.
Notes to the consolidated financial statements
for the year ended 31 December 2015
1 Accounting policies (continued)
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.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs.
Depreciation is provided on all items of property, plant and
equipment at rates calculated to write off the cost of each asset
on a straight line basis over its expected useful lives, as
follows:
Freehold land not depreciated
Freehold buildings 36 years
Fixtures and fittings 20%
Computer equipment 33%
Gains and losses on disposal are determined by comparing the
proceeds with the carrying amount and are recognised in the income
statement. The Directors reassess the useful economic life of the
assets annually.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
1 Accounting policies (continued)
Goodwill
Goodwill represents the excess of the cost of a business
combination over, in the case of business combinations completed
prior to 1 January 2011, the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired. For business combinations completed after 1 January 2011,
the goodwill represents the excess of a cost of a business
combination over the Group's interest in the fair value of
identifiable assets under IFRS 3 Business Combinations.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date.
Other intangible assets
Intangible assets other than goodwill acquired by the Group
comprise licences and are stated at cost less accumulated
amortisation and impairment losses. Amortisation is charged to the
statement of comprehensive income within administrative expenses on
a straight line basis over the period of the licence agreements.
Assets are tested annually for impairment or more frequently if
events or circumstances indicate potential impairment.
Amortisation, which is reviewed annually, is provided on
licences at 16.7% per annum, calculated to write off the cost of
the asset on a straight line basis over its expected useful
life.
Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of the asset exceeds its recoverable amount
(i.e. the higher of value in use and fair value less costs to
sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows, its cash generating units
('CGUs'). Goodwill is allocated on initial recognition to each of
the group's CGUs that are expected to benefit from the synergies of
the combination giving rise to the goodwill.
Unquoted investments
Unquoted investments are shown at cost less provision for
impairment.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
1 Accounting policies (continued)
Financial assets
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In the consolidated statement of financial position, the Group
classifies its financial assets as loans, trade receivables and
cash and cash equivalents. The classification depends on the
purpose for which the financial assets were acquired. Loans and
trade receivables are non-derivative financial assets with fixed or
determinable payments which arise principally through the Group's
trading activities. These are recognised at original fair value
less appropriate provision for impairment and subsequently measured
at amortised cost.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts, the amount
of such a provision being the difference between the net carrying
amount and the present value of the future expected cash flows
associated with the impaired receivable. For trade receivables,
which are reported net; such provisions are recorded in a separate
allowance 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.
Cash and cash equivalents include cash in hand and deposits held
at call with banks with an original maturity of three months or
less.
Trade and other payables
Trade and other payables are recognised initially at fair value
and subsequently carried at amortised cost.
Retirement benefits: Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated statement of comprehensive income in
the year to which they relate.
Provisions
A provision is recognised in the statement of financial position
when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Share capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Company's ordinary shares are classified
as equity instruments. Incremental costs directly attributable to
the issue of new shares are shown in share premium as a deduction
from the proceeds.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
1 Accounting policies (continued)
Revenue
Revenue comprises commissions, client fees and other income.
Commissions are included at the gross amounts receivable by the
Group in respect of all services provided. Commissions payable to
trading partners in respect of their share of the commissions
earned are included in cost of sales.
Commissions and client fees earned are accounted for when
received or guaranteed to be received, as until received it is not
possible to be certain that the transaction will be completed. In
the case of life commissions there is a possibility for a period
after the inception of the policy that part of the commission
earned may have to be repaid if the policy is cancelled during this
period. A provision is made for the expected level of commissions
repayable.
Other income comprises income from ancillary services such as
survey and conveyancing fees and is credited to the statement of
comprehensive income partly on an accruals basis.
Leased assets
Rentals under operating leases are charged on a straight line
basis over the lease term, even if the payments are not made on
such a basis. Benefits received and receivable as an incentive to
sign an operating lease are similarly spread on a straight line
basis over the lease term.
Finance income
Finance income comprises interest receivable on cash at bank.
Interest income is recognised in the statement of comprehensive
income as it accrues.
Exceptional items
As permitted by IAS 1 'Presentation and disclosure' - certain
items are presented separately in the income statement as
exceptional where, in the judgement of the Directors, they need to
be disclosed by virtue of their nature, size or incidence in order
to obtain a clear and consistent presentation of the Group's
underlying business performance. Examples of material and
non-recurring costs which may give rise to disclosure as
exceptional items include asset impairments and costs associated
with acquiring new businesses.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
1 Accounting policies (continued)
Taxation
Income tax comprises current and deferred tax. Income tax is
recognised in profit or loss other than if it relates to items
recognised in other comprehensive income in which case it is
recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year using tax rates enacted or substantively enacted by
the statement of financial position date and any adjustment to tax
payable in respect of previous years.
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on investments in subsidiaries and jointly
controlled entities where the Group is able to control the timing
of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantially enacted by the
statement of financial position date and are expected to apply when
the deferred tax liabilities or assets are settled or recovered.
Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company, or
-- different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
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 combined income statement that is reviewed by the CODM.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
1 Accounting policies (continued)
Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends to equity shareholders, this is when
they are paid. In the case of final dividends, this is when they
are approved by the shareholders.
Share based payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
statement of comprehensive income over the vesting period.
Non-market vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at each reporting
date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Non-vesting conditions and market vesting conditions are
factored into the fair value of the options granted. As long as all
other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition or where a non-vesting condition
is not satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the statement of comprehensive income over the remaining vesting
period.
Where options are granted to persons other than employees, the
statement of comprehensive income is charged with the fair value of
the options at the date of the grant over the vesting period.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
2 Critical Accounting Estimates and Judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The Directors consider that the
following estimates and judgements that have the most significant
effect on the carrying amounts of assets and liabilities within the
financial statements are discussed below.
(a) Impairment of goodwill
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The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment. The recoverable amount is
determined based on value in use calculations. The use of this
method requires the estimation of future cash flows and the choice
of a discount rate in order to calculate the present value of the
cash flows. Actual outcomes may vary. More information including
carrying values is included in note 13.
(b) Impairment of trade and other receivables
Judgement is required when determining if there is any
impairment to the trade and other receivable balances. Trade
receivables are reviewed for impairment if they are past due and
are not repaid within the terms of the contracts. Other
receivables, which include loans, are reviewed for impairment when
there are any indications that they may not be recoverable and that
security held against the balance may be inadequate to fully cover
the amount outstanding. A provision for impairment will be made if
following review of the balances, the Group considers it unlikely
that any balance will be recovered. More information is included in
note 16.
(c) Clawback Provision
The provision relates to the estimated cost of repaying
commission received on life assurance policies that may lapse in a
period of up to four years following inception. The provision is
calculated using a model that has been developed over several
years. The model uses a number of factors including the total
unearned commission at the point of calculation, the age profile of
the commission received, the Group's proportion of any clawback,
likely future lapse rates, and the success of the Group's team that
focuses on preventing lapses and/or generating new income at the
point of a lapse. More information is included in note 20.
(d) Freehold building
The freehold building is depreciated over its useful life. The
useful life is based on management's estimate of the period that
the asset will generate revenue and will be reviewed annually for
continued appropriateness. The carrying value will be tested for
impairment when there is an indication that the value of the asset
might be impaired. When carrying out an impairment test this would
be based on future cash flow forecasts and these forecasts would be
based on management judgement. No such indication of impairment has
been noted.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
3 Revenue
The Group operates in one segment being that of the provision of
financial services in the UK. Revenue is derived as follows:
2015 2014
GBP'000 GBP'000
Mortgage related products 43,794 32,149
Insurance and other protection
products 30,412 23,702
Conveyancing and survey fees
and other income 1,260 727
--------------------------------- -------- --------
75,466 56,578
-------------------------------- -------- --------
4 Cost of sales
Costs of sales are as follows:
2015 2014
GBP'000 GBP'000
Commissions paid 56,148 41,888
Wages and salary costs 1,025 1,045
------------------------- -------- --------
57,173 42,933
------------------------ -------- --------
2015 2014
Wages and salary costs GBP'000 GBP'000
------------------------------ ---------- ---------
Gross 800 823
Employers National Insurance 83 87
Pension 21 18
Other Direct Costs 121 117
1,025 1,045
------------------------------ ---------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
5 Profit from operations
Profit from operations is stated after charging the
following:
2015 2014
GBP'000 GBP'000
--------------------------------- ---------- ----------
Depreciation of property, plant
and equipment 131 112
Amortisation of intangibles 18 18
Operating leases 106 141
Auditors' remuneration:
Fees payable to the Group's
auditors for the audit of the
Group's financial statements. 10 10
Fees payable to the Group's
auditors for the audit of the
Group's subsidiary financial
statements. 24 23
--------------------------------- ---------- ----------
Other administrative expenses are incurred in the ordinary
course of the business and do not include any non-recurring
items.
Profits from associates are disclosed as part of the operating
profit as this is the operational nature of the Group.
6 Staff costs
Staff costs, including directors' remuneration, were as
follows:
2015 2014
GBP'000 GBP'000
------------------------------- ---------- ---------
Wages and salaries 5,629 4,769
Share based payments 250 64
Social security costs 618 522
Defined contribution pension
costs 113 112
------------------------------- ---------- ---------
6,610 5,467
------------------------------- ---------- ---------
The average number of people Number Number
employed by the Group during
the year was:
------------------------------- ---------- ---------
Executive Directors 3 4
Compliance 42 34
Sales and marketing 34 27
Operations 44 40
Employed Advisers - 9
------------------------------- ---------- ---------
Total 123 114
------------------------------- ---------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
6 Staff costs (continued)
Key management compensation
Key management are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group. These are the directors of Mortgage Advice
Bureau (Holdings) Plc.
2015 2014
GBP'000 GBP'000
------------------------------ --------- ---------
Wages and salaries 1,540 1,117
Share based payments 39 8
Defined contribution pension
costs 11 3
------------------------------ --------- ---------
1,590 1,128
------------------------------ --------- ---------
During the year retirement benefits were accruing to 1 director
(2014 -- 1) in respect of defined contribution pension schemes.
The total amount payable to the highest paid director in respect
of emoluments was GBP653,217 (2014: GBP537,764). The value of the
Group's contributions paid to a defined contribution pension scheme
in respect of the highest paid director amounted to GBPnil (2014:
GBP2,800).
7 Finance income
2015 2014
GBP'000 GBP'000
----------------- ---------- ---------
Interest income 143 124
----------------- ---------- ---------
8 Exceptional costs
The following items have been included in arriving at profit
before tax:
2015 2014
GBP'000 GBP'000
---------------------------- ----------- ---------
Costs incurred in relation
to the IPO - 746
Provision against loan - 348
---------------------------- ----------- ---------
Total - 1,094
---------------------------- ----------- ---------
In November 2014, the Group was listed on the Alternative
Investment Market ("AIM"). The costs charged to the income
statement relate to costs incurred as a result of the listing.
These costs include such items as legal and professional fees
relating to work performed for the listing and marketing
expenditure.
During the year the loan outstanding to Client Data Systems
Group Limited of GBP347,891 (2014: GBP347,891), a company in which
Mortgage Advice Bureau Limited has a 7% shareholding, was written
off as it is not considered recoverable in the short term but
recovery of the loan will continue to be pursued. The loan was
fully provided for in the year to 31 December 2014 and therefore
the write off has had no impact on the accounts for the year ended
31 December 2015.
Notes to the consolidated financial statements
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:01 ET (07:01 GMT)
for the year ended 31 December 2015 (continued)
9 Income Tax
2015 2014
GBP'000 GBP'000
----------------------------------- ---------- ---------
Current tax expense
UK corporation tax charge on
profit for the year 1,870 1,555
Adjustments for over provision
in prior years (114) (77)
----------------------------------- ---------- ---------
Total current tax 1,756 1,478
----------------------------------- ---------- ---------
Deferred tax expense
Origination and reversal of
timing differences 6 9
Adjustment for over provision (1) -
in prior years
Effect of change in tax rate
on opening liability (2) (2)
----------------------------------- ---------- ---------
Total Deferred Tax (see note
21) 3 7
----------------------------------- ---------- ---------
Total tax expense 1,759 1,485
----------------------------------- ---------- ---------
The reasons for the difference between the
actual charge for the year and the standard
rate of corporation tax in the United Kingdom
of 20.25% (2014: 21.5%) applied to profit for
the year is as follows:
2015 2014
GBP GBP
----------------------------------- ---------- ---------
Profit for the year before
tax 10,417 6,876
----------------------------------- ---------- ---------
Expected tax charge based on
corporation tax rate 2,109 1,478
Expenses not deductible for
tax purposes
amortisation and impairment 38 185
Research & Development allowances (129) -
Adjustments to tax charge in
respect of prior periods (114) (77)
Adjustment to deferred tax (1) -
charge in respect of prior
periods
Profits from associates (142) (99)
Rate change on deferred tax
liability (2) (2)
----------------------------------- ---------- ---------
Total tax expense 1,759 1,485
----------------------------------- ---------- ---------
Changes in the taxation rate
The standard rate of corporation tax in the United Kingdom
changed from 21% to 20% with effect from 1 April 2015. In addition
legislation to reduce the main rate of corporation tax to 19% from
1 April 2017 and to 18% from 1 April 2020 had been enacted and so
the deferred tax balance has been calculated at 18%. In the budget
of 16 March 2016 it was announced that the rate is now to be
reduced to 17% from 1 April 2020.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
10 Earnings Per Share
a) Earnings per share
2015 2014
Basic earnings per share GBP'000 GBP'000
---------------------------------------------------------------------------------------------------------- ----------- -----------
Profit for the year attributable
to the owners of the parent 8,658 5,391
---------------------------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of shares
in issue 50,478,038 56,009,100
---------------------------------------------------------------------------------------------------------- ----------- -----------
Basic earnings per share (in
pence per share) 17.151p 9.626p
---------------------------------------------------------------------------------------------------------- ----------- -----------
For diluted earnings per share, the weighted
average number of ordinary shares in existence
is adjusted to include all dilutive potential
ordinary shares arising from share options.
2015 2014
Diluted earnings per share GBP'000 GBP'000
---------------------------------------------------------------------------------------------------------- ----------- -----------
Profit for the year attributable
to the owners of the parent 8,658 5,391
---------------------------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of shares
in issue 51,987,564 56,229,933
---------------------------------------------------------------------------------------------------------- ----------- -----------
Basic earnings per share (in
pence per share) 16.653p 9.588p
---------------------------------------------------------------------------------------------------------- ----------- -----------
The share data used in the basic
and diluted earnings per share
computations are as follows: Weighted average number of ordinary shares 2015 2014
---------------------------------------------- ----------- -------------
Issued ordinary shares at start of period 50,509,600 69,960,000
Effect of share changes during year ended
31 December 2014 - (13,950,900)
Effect of shares purchased during year ended (31,562) -
31 December 2015
---------------------------------------------- ----------- -------------
Basic weighted average number of shares 50,478,038 56,009,100
Effect of dilutive options at the statement
of financial position date 1,509,526 220,833
---------------------------------------------- ----------- -------------
Diluted weighted average number of shares 51,987,564 56,229,933
---------------------------------------------- ----------- -------------
b) Adjusted earnings per share
2015 2014
GBP'000 GBP'000
---------------------------------------------------------------------------------------------------------- ----------- -----------
Profit for the year attributable
to the owners of the parent 8,658 5,391
Adjusted for the following items
net of tax:
Exceptional costs - 1,019
---------------------------------------------------------------------------------------------------------- ----------- -----------
Adjusted earnings net of tax 8,658 6,410
---------------------------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of shares
in issue 50,478,038 56,009,100
---------------------------------------------------------------------------------------------------------- ----------- -----------
Adjusted basic earnings per share
(in pence per share) 17.151p 11.445p
Adjusted diluted earnings per
share (in pence per share) 16.653p 11.400p
---------------------------------------------------------------------------------------------------------- ----------- -----------
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
11 Dividends
2015 2014
GBP'000 GBP'000
------------
Dividends paid and declared
during the year:
On B ordinary shares at GBPnil
per share (2014: GBP52.078) - 2,083
On C ordinary shares at GBPnil
per share (2014: GBP10) - 25
Final dividend for 2014: 2.0p
per share (2014:GBP36.625) 1,009 1,850
Interim dividend for 2015: 2,473 -
4.9p per share (2014: GBPnil)
-------------------------------------- ------ ------------
3,482 3,958
------------------------------------- ------ ------------
Proposed for approval:
Equity dividends on ordinary
shares:
Final dividend for 2015: 9.5p
per share (2014: 2.0p) 4,794 1,009
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:01 ET (07:01 GMT)
-------------------------------- ------ ------
4,794 1,009
------------------------------- ------ ------
The record date for the final dividend is 6 May 2016 and the
payment date is 1 June 2016. The ex-dividend date will be 5 May
2016.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
12 Property, Plant and Equipment
Freehold
land Fixtures Computer
and & fittings equipment Total
building GBP'000 GBP'000 GBP'000
GBP'000
------------------- ---------- ------------- ------------ ----------
Cost
At 1 January 2015 - 262 475 737
Additions 2,409 26 113 2,548
At 31 December
2015 2,409 288 588 3,285
------------------- ---------- ------------- ------------ ----------
Depreciation
At 1 January 2015 - 220 313 533
Charge for the
year 13 20 98 131
At 31 December
2015 13 240 411 664
------------------- ---------- ------------- ------------ ----------
Net Book Value
At 31 December
2015 2,396 48 177 2,621
------------------- ---------- ------------- ------------ ----------
Freehold
land Fixtures Computer
and & fittings equipment Total
building GBP'000 GBP'000 GBP'000
GBP'000
------------------- ---------- ------------- ------------ ----------
Cost
At 1 January 2014 - 234 364 598
Additions - 28 111 139
At 31 December
2014 - 262 475 737
------------------- ---------- ------------- ------------ ----------
Depreciation
At 1 January 2014 - 208 213 421
Charge for the
year - 12 100 112
At 31 December
2014 - 220 313 533
------------------- ---------- ------------- ------------ ----------
Net Book Value
At 31 December
2014 - 42 162 204
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
13 Intangible Assets
Goodwill 2015 2014
GBP'000 GBP'000
------------------------ --------- ---------
Cost
As at 1 January and 31
December 4,267 4,267
-------------------------- --------- ---------
Accumulated impairment
At 1 January 153 153
At 31 December 153 153
-------------------------- --------- ---------
Net book value
At 31 December 4,114 4,114
-------------------------- --------- ---------
The goodwill relates to the acquisition of Talk Limited in 2012,
and in particular its main operating subsidiary Mortgage Talk
Limited. 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 review
conducted at the end of 2015 concluded that there had been no
impairment of goodwill.
The Board considers that it now has only one operating segment
so accordingly it is necessary to assess the impact of the
acquisition of Mortgage Talk Limited to the Group. The value in use
of Mortgage Talk Limited has therefore been estimated based on the
improvements in net profits which that unit continues to bring to
the Group. The forecast on-going profits generated by the
acquisition of Mortgage Talk Limited significantly exceed the value
of goodwill and therefore no impairment of the goodwill is
required. A discount rate of 10% has been applied to these
calculations. Management has considered forecast profits over a
three year period in determining the value in use. Management
believes that any possible changes to any of the key assumptions
applied in determining the value in use would not cause the
carrying amount of goodwill to exceed the forecast ongoing
profits.
Licences 2015 2014
GBP'000 GBP'000
-------------------------- --------- ---------
Cost
As at 1 January and 31
December 108 108
---------------------------- --------- ---------
Accumulated Amortisation
At 1 January 63 45
Charge for the year 18 18
At 31 December 81 63
---------------------------- --------- ---------
Net book value
At 31 December 27 45
---------------------------- --------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
14 Investments
GBP'000
-------------------------- --------
Investment in Associates 715
Other Investments -
-------------------------- --------
At 31 December 2015 715
-------------------------- --------
At 31 December 2014 253
-------------------------- --------
Investment in Associates
The Group holds investments in associates, all of which are
accounted for under the equity method, as follows:
Percentage
Reporting Country of ordinary
Company name date of incorporation shares Description
held
----------------------- -------------- ------------------- ------------- --------------
England Provision
Capital Private 31 December and Wales 49 of financial
Finance Limited services
Property
England 49 surveyors
CO2 Commercial 31 December and Wales
Limited
England Provision
Buildstore Limited 31 December and Wales 25 of financial
services
MAB Wealth Management England Provision
Limited 31 December and Wales 49 of financial
services
Portal for
England conveyancing
Sort Limited 31 December and Wales 23 services
----------------------- -------------- ------------------- ------------- --------------
The Group is entitled to 49% of the results for Capital Private
Finance Limited, CO2 Commercial Limited, and MAB Wealth Management
Limited by virtue of its 49% equity stakes. CO2 Commercial Limited
is a dormant holding company, and trades through its wholly owned
subsidiary, Pinnacle Surveyors (England & Wales) Limited. The
Group is entitled to 25% of the results of Buildstore Limited by
virtue of its 25% equity stake. The Group acquired a 23% interest
stake in Sort Limited on 10 December 2015. The Group is entitled to
23% of the results of Sort Limited by virtue of its 23% equity
stake. Details of changes to the holding in Sort Limited subsequent
to the year end are given in note 30.
The investment in associates at the reporting date is as
follows:
2015 2014
GBP'000 GBP'000
-------------------- --------- ---------
At 1 January 253 199
Additions 345 -
Share of profit 703 458
Dividends received (586) (404)
-------------------- --------- ---------
At 31 December 715 253
-------------------- --------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
14 Investments (continued)
(MORE TO FOLLOW) Dow Jones Newswires
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As the associates are private companies published share prices
are not available. The aggregate amounts of certain financial
information of the associates is summarised as follows:
Pinnacle
Surveyors Capital
(England Private
& Wales) Finance 2015
Limited Limited Others Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----------- ---------- ---------- ----------
Non-current assets 12 3 228 243
Current assets 802 547 1,060 2,409
Current liabilities (497) (257) (760) (1,514)
Non-current liabilities
and provisions (2) (87) (200) (289)
Revenue 2,978 1,983 5,734 10,695
Profit before taxation 765 897 726 2,388
Total comprehensive
income 607 715 617 1,939
Profit attributable
to Group 298 350 55 703
------------------------- ----------- ---------- ---------- ----------
Dividends received
from associates 257* 329 - 586
------------------------- ----------- ---------- ---------- ----------
Pinnacle
Surveyors Capital
(England Private
& Wales) Finance 2014
Limited Limited Others Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----------- ---------- ---------- ----------
Non-current assets 15 5 179 199
Current assets 582 469 383 1,434
Current liabilities (358) (220) (509) (1,087)
Non-current liabilities
and provisions - (103) (200) (303)
Revenue 2,357 1,938 2,165 6,460
Profit before taxation 572 626 (226) 972
Total comprehensive
income 453 482 (226) 709
Profit attributable
to Group 222 236 - 458
------------------------- ----------- ---------- ---------- ----------
Dividends received
from associates 191* 213 - 404
------------------------- ----------- ---------- ---------- ----------
Pinnacle Surveyors (England & Wales) Limited, Capital
Private Finance Limited and Buildstore Limited prepare their
financial statements using FRS 102 and the other associates prepare
their financial statements using UK GAAP. There would be no
material difference to the accounts of any of the associates if
these were prepared using IFRS.
* These dividends are received from CO2 Commercial Limited, the
parent undertaking of Pinnacle Surveyors (England & Wales)
Limited. All other information disclosed above relates to Pinnacle
Surveyors (England & Wales) Limited.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
14 Investments (continued)
Other investments
Unlisted investment
The unlisted investment represents a 0.05% shareholding in
Twenty7tec Limited, a company that licenses certain mortgage
sourcing software. The investment was acquired during the year
ended 31 December 2014 for GBP150 and the net book value at 31
December 2015 was GBP150 (2014: GBP150).
15 Subsidiaries
The subsidiaries of Mortgage Advice Bureau (Holdings) Plc at the
reporting date have been included in the consolidated financial
statements. The subsidiaries are as follows:
Country Percentage
Company name of Incorporation of ordinary Nature of
shares business
held
---------------------------- ------------------ ------------- ------------------
Provision
Mortgage Advice England 100 of financial
Bureau Limited and Wales services
Mortgage Advice Provision
Bureau (Derby) England 100 of financial
Limited and Wales services
Provision
Capital Protect England 100 of financial
Limited and Wales services
MABWM Limited England 100 Dormant
and Wales
Provision
Mortgage Talk Limited England 100 of financial
and Wales services
Intermediate
Talk Limited England 100 holding company
and Wales
L&P 137 Limited England 100 Dormant
and Wales
Mortgage Talk (Partnership)
Limited England 100 Dormant
and Wales
Financial Talk England 100 Dormant
Limited and Wales
Survey Talk Limited England 100 Dormant
and Wales
L&P 134 Limited England 100 Dormant
and Wales
Loan Talk Limited England 100 Dormant
and Wales
---------------------------- ------------------ ------------- ------------------
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
15 Subsidiaries (continued)
Mortgage Advice Bureau (Holdings) Plc holds 100% of the ordinary
share capital of Mortgage Advice Bureau Limited and Talk
Limited.
Mortgage Advice Bureau Limited holds 100% of the ordinary share
capital of Mortgage Advice Bureau (Derby) Limited, Capital Protect
Limited and MABWM Limited.
Talk Limited holds 100% of the ordinary share capital of
Mortgage Talk Limited, L&P 137 Limited, Mortgage Talk
(Partnership) Limited, Financial Talk Limited and Survey Talk
Limited.
Mortgage Talk Limited holds 100% of the ordinary share capital
of Loan Talk Limited.
L&P 137 Limited holds 100% of the ordinary share capital of
L&P 134 Limited.
There are no restrictions regarding the utilisation of cash or
other resources held by any subsidiary.
16 Trade and Other Receivables
2015 2014
GBP'000 GBP'000
-------------------------------- -------- --------
Trade receivables not past
due 564 370
Trade receivables past due
but not impaired 49 88
Trade receivables past due
but impaired 459 441
-------------------------------- -------- --------
Trade receivables 1,072 899
Less provision for impairment
of trade receivables (459) (441)
-------------------------------- -------- --------
Trade receivables - net 613 458
Amounts due from associates 116 133
Other receivables - 1,000
Prepayments and accrued income 2,123 1,330
-------------------------------- -------- --------
2,852 2,921
-------------------------------- -------- --------
Trade and other receivables are all current and the book value
is the same as their fair value. Trade receivables are reviewed for
impairment if they are past due and are not repaid within the terms
of the contracts.
Trade receivables include advances granted to Appointed
Representatives, which have contractual repayment terms. These
advances are considered to be past due when there is a delinquency
in interest or principal payments.
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.
(MORE TO FOLLOW) Dow Jones Newswires
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In light of the above, the Directors do not consider that
disclosure of an aging analysis of past due but not impaired
receivables would provide useful additional information. The Group
has not recognised a provision for impairment of these balances
because there is no objective evidence that they are impaired.
Further information on the credit quality of financial assets is
set out in note 19.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
16 Trade and Other Receivables (continued)
A summary of the movement in the provision for the impairment of
receivables is as follows:
2015 2014
GBP'000 GBP'000
--------------------------------- -------- --------
At 1 January 441 556
Impairment losses recognised 20 -
Impairment provisions no longer
required (2) (115)
--------------------------------- -------- --------
At 31 December 459 441
--------------------------------- -------- --------
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivables mentioned above less
collateral held as security. Details of security held are given in
note 19.
No other balances are past due or impaired.
17 Cash and cash equivalents
2015 2014
GBP'000 GBP'000
--------------------------------- --------- ---------
Unrestricted cash and bank
balances 8,189 5,281
Bank balances held in relation
to retained commissions 5,767 3,989
--------------------------------- --------- ---------
Cash and cash equivalents 13,956 9,270
--------------------------------- --------- ---------
Bank balances held in relation to retained commissions are held
to cover potential future lapses in Appointed Representatives
commissions. Operationally the Group does not treat these balances
as available funds. An equal and opposite liability is shown within
Trade Payables (note 18).
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
18 Trade and Other Payables
2015 2014
GBP'000 GBP'000
------------------------------------- --------- ---------
Appointed Representatives retained
commission 5,767 3,989
Other trade payables 2,224 2,462
------------------------------------- --------- ---------
Trade payables 7,991 6,451
Social security and other taxes 242 206
Other payables 53 122
Accruals and deferred income 1,233 1,129
------------------------------------- --------- ---------
9,519 7,908
------------------------------------- --------- ---------
Should a life 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 17.
As at 31 December 2015 and 31 December 2014, the book value of
trade and other payables approximates their fair value given that
they are short term in nature.
Appointed Representatives retained commission is expected to be
payable after more than one year. Other trade payables normally
fall due within 30 to 60 days.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
19 Financial Instruments - risk management
The group is exposed through its operations to the following
financial risks:
-- Credit risk
-- Liquidity risk
-- Interest rate risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument
risk arises, are
as follows
* Trade and other receivables
* Cash and cash equivalents
* Trade and other payables
The Group does not issue or use financial instruments of a
speculative nature. A summary of financial instruments held by
category is provided below:
Financial assets 2015 2014
GBP'000 GBP'000
----------------------------- -------- --------
Cash and cash equivalents 13,956 9,270
Trade and other receivables 729 1,591
Total financial assets 14,685 10,861
----------------------------- -------- --------
Financial liabilities 2015 2014
GBP'000 GBP'000
----------------------------- -------- --------
Trade and other payables 9,519 7,908
Total financial liabilities 9,519 7,908
----------------------------- -------- --------
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
19 Financial Instruments - risk management (continued)
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and designs and
operates processes that ensure the effective implementation of the
objectives and policies to the Group's finance function. The Board
sets guidelines to the finance team and monitors adherence to its
guidelines on a monthly basis.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competiveness and flexibility. Further details regarding
these policies are set out below.
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 16.
Financial assets - maximum 2015 2014
exposure
GBP'000 GBP'000
----------------------------- -------- --------
Cash and cash equivalents 13,956 9,270
Trade and other receivables 729 1,591
----------------------------- -------- --------
Total financial assets 14,685 10,861
----------------------------- -------- --------
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 limited. 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
that are included in trade receivables; this collateral of
GBP398,480 (2014: GBP258,753) 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 several UK banks all
of whom are A rated.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
19 Financial Instruments (continued)
Credit risk (continued)
During the year ended 31 December 2015 the loan outstanding to
Client Data Systems Group Limited of GBP347,891 (2014: GBP347,891),
a company in which Mortgage Advice Bureau Limited has a 7%
shareholding was written off as it is not considered recoverable in
the short term but recovery of the loan will continue to be
pursued. The Group holds security against this balance but due to
changes in market conditions the value of the security may be
inadequate to cover the amount due and therefore the loan was fully
provided for in the year to 31 December 2014.
Interest rate risks
The Group's interest rate risk arises from cash on deposit. The
Group aims to maximise its return on cash on deposit whilst
ensuring that cash is available to meet liabilities as they fall
due. Current market deposit interest rates are minimal and
therefore any fall in these rates is unlikely to have a significant
impact on the results of the Group.
Foreign exchange risk
As the Group does not operate outside of the United Kingdom, it
is not exposed to any foreign exchange risk.
Liquidity risk
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Liquidity risk arises from the Group's management of working
capital and finance charges. It is the risk that the Group will
encounter difficulty in meeting its financial obligations as they
fall due.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The Group's trade and other payables are repayable
within one year from the reporting date.
The Board receives annual 12-month cash flow projections based
on working capital modelling as well as information regarding cash
balances monthly. At the end of the financial year, these
projections indicated that the Group expected to have sufficient
liquid resources to meet its obligations under all reasonably
expected circumstances. Additionally the Group has financial
resource requirements set by its regulator, the Financial Conduct
Authority. The Board has set a policy to ensure that adequate
capital is maintained to ensure that these externally set financial
resource requirements are exceeded at all times. Quarterly reports
are made to the Financial Conduct Authority and submission is
authorised by the Finance Director, at which time capital adequacy
is re-assessed.
Capital management
The Group monitors its capital which consists of all components
of equity (i.e. share capital, share premium, capital redemption
reserve, share option reserve and retained earnings).
The Group's objectives when maintaining capital are
-- To safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders.
-- To ensure that capital is maintained at all times to ensure
that financial resource requirements set by its regulator, the
Financial Conduct Authority, are exceeded at all times.
-- To ensure the Group has the cash available to develop the
services provided by the Group to provide an adequate return to
shareholders.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
20 Provisions
Clawback provision 2015 2014
GBP'000 GBP'000
----------------------------- --------- ---------
At 1 January 751 589
Charged to the statement of
comprehensive income 167 162
----------------------------- --------- ---------
At 31 December 918 751
----------------------------- --------- ---------
The provision relates to the estimated cost of repaying
commission income received on life assurance policies that may
lapse in the four years following issue. Provisions are held in the
financial statements of three of the group's subsidiaries: Mortgage
Advice Bureau Limited, Mortgage Advice Bureau (Derby) Limited and
Mortgage Talk Limited. The exact timing of any clawbacks is
uncertain and the provision was based on the directors' best
estimate, using industry data where available, of the probability
of clawbacks to be made.
21 Deferred Tax Liability
Deferred tax liability is calculated in full on temporary
differences using a tax rate of 18% (2014: 20%). The reduction in
the main rate of corporation tax as set out in note 9 has been
applied to deferred tax balances which are expected to reverse in
the future.
The movement in deferred tax is shown below:
2015 2014
GBP'000 GBP'000
----------------------------- -------- --------
Deferred tax liability
- opening balance 25 18
Recognised in the statement
of comprehensive income 3 7
----------------------------- -------- --------
Deferred tax liability
- closing balance 28 25
----------------------------- -------- --------
The deferred tax balance is made up as follows:
2015 2014
GBP'000 GBP'000
-------------------------------- -------- --------
Accelerated capital allowances 28 25
-------------------------------- -------- --------
Deferred tax liabilities have arisen due to capital allowances
which have been received ahead of the depreciation charged in the
accounts.
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
22 Share Capital
Issued and fully paid 2015 2014
GBP'000 GBP'000
------------------------- --------- ---------
Ordinary shares of 0.1p
each 51 51
------------------------- --------- ---------
Total share capital 51 51
------------------------- --------- ---------
On 6 May 2015, 48,000 ordinary shares of 0.1p each were
purchased by the Company and cancelled for a consideration of
GBP37,847.
23 Reserves
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share premium Amount subscribed for share
capital in excess of nominal
value.
Capital redemption The capital redemption reserve
reserve represents the cancellation
of part of the original share
capital premium of the company
at par value of any shares
Share option repurchased.
reserve
The fair value of equity instruments
granted by the Company in
respect of share based payment
transactions.
Retained earnings All other net gains and losses
and transactions with owners
(e.g. dividends) not recognised
elsewhere.
There is no restriction on the distribution of retained
earnings.
24 Leases
The total future value of minimum lease payments due under
operating leases are as follows:
2015 2014
GBP'000 GBP'000
---------------------------- ---------- ---------
In one year or less - 141
Between one and five years - 566
In five years or more - 24
---------------------------- ----------- ---------
- 731
----------- --------------------------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
25 Retirement Benefits
The Group operates a defined contribution pension scheme for the
benefit of its employees and also makes contributions to a
self-invested personal pension ("SIPP"). The assets of the scheme
and the SIPP are held separately from those of the Group in
independently administered funds. The pension cost charge
represents contributions payable by the Group to the fund and the
SIPP and amounted to GBP112,658 (2014 - GBP112,123). Contributions
totalling GBP20,023 (2014 --GBP15,717) were payable to the fund at
the statement of financial position date and are included in other
payables.
26 Related Party Transactions
At 31 December 2014 there was an amount of GBP1,000,000 due to
the Group from HBB Bridging Loans Limited, a company in which S
Blunt and D Preece are directors and shareholders and this amount
was repaid in full during the year ended 31 December 2015. This
loan was included in other receivables and was secured, by a fixed
and floating charge over the assets of the company and personal
guarantees from certain directors of HBB Bridging Loans Limited.
The loan accrued interest at a rate of 9.5% per annum above RBS
bank base rate.
The Group made purchases of GBP50,214 (2014: GBP45,283) and
sales of GBP2,785 (2014: GBP2,606) to BriefYourMarket Limited. At
31 December 2015 there was an amount of GBP4,556 (2014: GBP4,627)
included in trade and other payables due from the Group and GBPnil
(2014: GBP521) included in trade receivables due to the Group from
BriefYourMarket Limited, a company in which R Palmer, P Robinson
and P Brodnicki are or were directors and are shareholders.
During the year the loan outstanding to Client Data Systems
Group Limited of GBP347,891 (2014: GBP347,891), a company in which
Mortgage Advice Bureau Limited has a 7% shareholding was written
off as it is not considered recoverable in the short term but
recovery of the loan will continue to be pursued. The loan was
fully provided for in the year to 31 December 2014 and therefore
the write off has had no impact on the accounts for the year ended
31 December 2015.
During the year the Group made purchases of sundry insurance
from Astute Insurance Solutions Limited of GBP19,585 (2014:
GBP5,514), a company in which P Robinson is a shareholder and was a
director. There is no balance outstanding with Astute Insurance
Solutions Limited at 31 December 2015 (2014: GBPnil).
During the year the Group received introducer fees of GBP22,121
(2014: GBP34,038) from Capital Private Finance Limited, an
associated company. At 31 December 2015 there was no balance due
from Capital Private Finance Limited (2014: GBP3,566 included in
trade and other receivables).
At 31 December 2015 there was a loan outstanding from Pinnacle
Surveyors (England & Wales) Limited an associated company, of
GBP16,000 (2014: GBP15,000) included in trade and other
receivables.
At 31 December 2015 there was a loan outstanding from Buildstore
Limited, an associated company, of GBP100,000 (2014: GBP114,000)
included in trade and other receivables.
During the year the Group received introducer commission from
MAB Wealth Management Limited, an associated company of GBP6,147
(2014: GBPnil). There is no balance outstanding with MAB Wealth
Management Limited at 31 December 2015 (2014: GBPnil).
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During the year the Group received introducer commission from
Sort Limited, an associated company of GBP21,004 (2014: GBPnil).
There is no balance outstanding with Sort Limited at 31 December
2015 (2014: GBPnil).
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
26 Related Party Transactions (continued)
During the year the Group made purchases of GBP26,400 from
Twenty7tec Limited (2014: GBPNil). There is no balance outstanding
with Twenty7tec Limited at 31 December 2015 (2014: GBPNil).
Twenty7tec Limited is a company in which Mortgage Advice Bureau
Limited has a 0.05% shareholding and Peter Brodnicki, David Preece,
Paul Robinson and other senior team employees collectively have a
9.9% shareholding.
During the year the Group received dividends from associated
companies as follow:
2015 2014
GBP'000 GBP'000
--------------------------------- --------- ---------
CO2 Commercial Limited 257 191
Capital Private Finance Limited 329 213
--------------------------------- --------- ---------
Total 586 404
--------------------------------- --------- ---------
27 Ultimate Controlling Party
There is no ultimate controlling party.
28 Share based payments
Mortgage Advice Bureau Executive Share Option Plan
The Group operates two equity-settled share based remuneration
schemes for Executive Directors and certain senior management, one
being an approved scheme, the other unapproved, but with similar
terms. Half of the options are subject to a total shareholder
return (TSR) performance condition and the remaining half are
subject to an earnings per share (EPS) performance condition. The
options in both schemes vest as follows:
For options outstanding at 1 January 2015:
-- 25% based on performance to 31 March 2017, exercisable between that date and 11 November 2022,
-- 25% based on performance to 31 March 2018, exercisable between that date and 11 November 2022,
-- 25% based on performance to 31 March 2018, exercisable
between 31 March 2019 and 11 November 2022,
-- 25% based on performance to 31 March 2018, exercisable
between 31 March 2020 and 11 November 2022,
Notes to the consolidated financial statements
for the year ended 31 December 2014 (continued)
28 Share based payments (continued)
For options granted during the year:
-- 25% based on performance to 31 March 2017, exercisable between that date and 19 May 2023,
-- 25% based on performance to 31 March 2018, exercisable between that date and 19 May 2023,
-- 25% based on performance to 31 March 2018, exercisable between 31 March 2019 and 19 May 2023,
-- 25% based on performance to 31 March 2018, exercisable between 31 March 2020 and 19 May 2023,
The number and weighted average exercise prices (WAEP) of, and
movements in, share options during the year for the Mortgage Advice
Bureau Executive Share Option Plan:
2015 2015 2014 2014
WAEP Number WAEP Number
GBP GBP
---------------- ------ ---------- ------ ----------
Outstanding at
1 January 1.60 1,325,000 - -
Granted during
the year 2.19 75,342 1.60 1,325,000
---------------- ------ ---------- ------ ----------
Outstanding at
31 December 1.63 1,400,342 1.60 1,325,000
---------------- ------ ---------- ------ ----------
On 20 May 2015, 75,342 options over ordinary shares of 0.1 pence
each in the Company were granted to Lucy Tilley, Finance Director,
under the Mortgage Advice Bureau Executive Share Option Plan. The
exercise price of the options of 219p is equal to the average of
the last three business days' closing price for the ordinary shares
of the Company at the date of grant. The options are subject to the
achievement of the performance conditions as set out in the
Company's Admission Document dated 11 November 2014.
For the share options outstanding under the Mortgage Advice
Bureau Executive Share Option Plan as at 31 December 2015, the
weighted average remaining contractual life is 2.75 years (2014:
3.75 years).
The following information is relevant in the determination of
the fair value of options granted during the year under the
equity-settled share based remuneration scheme operated by the
Group.
2015 2014
---------------------------- -------------- --------------
Equity settled
Option pricing model - EPS Black-Scholes Black-Scholes
Option pricing model - TSR Stochastic Stochastic
Exercise price GBP2.19 GBP1.60
Expected volatility 30% 30%
Expected dividend yield 7.2% 5.4%
Risk free interest rate 0.6% - 1.29% 0.81% -
1.58%
---------------------------- -------------- --------------
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
28 Share based payments (continued)
Expected volatility is a measure of an amount by which the share
price is expected to fluctuate during a period. As the Company only
listed in November 2014 there is insufficient historical data. We
have therefore used a proxy volatility figure based on the median
volatilities of dividend paying FTSE AIM 100 companies over each of
the expected terms.
Dividends paid on shares reduce the fair value of an award as a
participant does not receive the dividend income on these shares.
For the share options granted during the year the stub dividend in
respect of the period from Admission to 31 December 2014 has been
annualised and divided by the share price at date of grant to give
a dividend yield of 7.2%.
The Options offer participants the opportunity to benefit from
increasing per share value without risking the current per share
price. The risk-free rate used is the rate of interest obtainable
from UK government securities as at the date of grant over the
expected terms
The options granted this year have vesting periods of 1.86,
2.86, 3.86 or 4.87 years from the date of grant and the calculation
of the share based payment is based on these vesting periods.
MAB AR Option Plan
During the year, the Group also granted 255,000 options over
ordinary shares of 0.1 pence each in the Company on 21 May 2015 to
a number of its Appointed Representatives. The Options were granted
under the MAB AR Option Plan, as set out in the Company's Admission
Document dated 11 November 2014. The exercise price for the Options
is 0.01 pence per ordinary share (or, for any individual AR, not
less than GBP1 on each occasion of exercise). Of the total number
of options outstanding at 31 December 2015, none had vested. There
were no options exercised during the year.
The number and weighted average exercise prices (WAEP) of, and
movements in, share options during the year for the MAB AR Option
Plan:
2015 2015 2014 2014
WAEP Number WAEP Number
GBP GBP
---------------- ------ -------- ------ --------
Outstanding at - - - -
1 January
Granted during
the year 0.01p 255,000 - -
---------------- ------ -------- ------ --------
Outstanding at
31 December 0.01p 255,000 - --
---------------- ------ -------- ------ --------
For the share options outstanding under the MAB AR Option Plan
as at 31 December 2015, the weighted average remaining contractual
life is 4.4 years (2014: nil).
Notes to the consolidated financial statements
for the year ended 31 December 2015 (continued)
28 Share based payments (continued)
The following information is relevant in the determination of
the fair value of options granted during the year under the
equity-settled share based MAB AR Option Plan operated by the
Group.
2015 2014
------------------------ -------------- -----
Equity settled
Option pricing model Black-Scholes -
Exercise price 0.01p -
Expected volatility 30% -
Expected dividend yield 7.1% -
Risk free interest rate 1.33% -
------------------------ -------------- -----
Expected volatility is a measure of an amount by which the share
price is expected to fluctuate during a period. As the Company only
listed in November 2014 there is insufficient historical data. We
have therefore used a proxy volatility figure based on the medium
volatilities, of dividend paying FTSE AIM 100 companies over each
of the expected terms.
Dividends paid on shares reduce the fair value of an award as a
participant does not receive the dividend income on these shares.
For the share options granted during the year the stub dividend in
respect of the period from Admission to 31 December 2014 has been
annualised and divided at the share price at date of grant to give
a dividend yield of 7.1%.
The options offer participants the opportunity to benefit from
increasing per share value without risking the current per share
price. The risk-free rate used is the rate of interest obtainable
from UK government securities as at the date of the grant over the
expected terms.
The options granted this year have a vesting period of 5 years
from the date of grant and calculation of the share based payment
is based on these vesting periods.
Share-based remuneration expense
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