TIDMMAB1
RNS Number : 3700A
Mortgage Advice Bureau(Holdings)PLC
29 September 2020
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
("MAB" or "the Group")
29 September 2020
Interim Results for the six months ended 30 June 2020
Mortgage Advice Bureau (Holdings) PLC (AIM: MAB1.L) is pleased
to announce its interim results for the six months ended 30 June
2020.
Financial highlights
-- Revenue up 4% to GBP63.5m (H1 2019: GBP60.9m), including
GBP6.1m of revenue generated by First Mortgage, acquired
in July 2019
-- Gross profit up 22% to GBP17.2m (H1 2019: GBP14.2m)
-- Gross margin of 27.2% (H1 2019: 23.3%)
-- Adjusted overheads ratio(1) of 14.9% (H1 2019: 11.2%)
-- Adjusted profit before tax(2) up 6% to GBP7.9m (H1 2019:
GBP7.4m)
-- Statutory profit before tax down 15% to GBP6.1m (H1 2019:
GBP7.2m)
-- Adjusted profit before tax margin(2) of 12.4% (H1 2019:
12.2%)
-- Reported profit before tax margin of 9.6% (H1 2019: 11.8%)
-- Adjusted(2) EPS up 7% to 13.2p (H1 2019: 12.3p)
-- Basic EPS down 15% to 10.1p (H1 2019: 11.9p)
-- Continued high operating profit to adjusted cash conversion(3)
of 97% (H1 2019: 99%)
Operational highlights
-- Adviser numbers remained stable over the period, with
1,470 Advisers at 30 June 2020 (including 101 furloughed
Advisers) (31 December 2019: 1,457)
-- Average number of active Advisers(4) up 12% to 1,396
(H1 2019: 1,242)
-- Revenue per active Adviser down 7%(5)
-- Gross mortgage completions (including product transfers)
up 8% to GBP7.5bn (H1 2019: GBP6.9bn)
-- Gross mortgage completions with new lenders up 2% to
GBP6.4bn (H1 2019: GBP6.3bn)
-- Market share of new mortgage lending up 17% to 5.9% (H1
2019: 5.0%(6) )
-- Launch of "MAB Later Life", a new proposition in the
specialist later life lending market
Post period end
-- Continued strong trading since the re-opening of the
housing market, with MAB new mortgage applications at
record levels
-- Adviser numbers increased to 1,523 at 25 September 2019
-- Australian Finance Group Ltd (ASX: AFG) becomes our new
joint venture partner in Australia
-- Agreement to acquire a 40% stake in Meridian Holdings
Group Ltd ("Meridian"), our leading new build AR
Peter Brodnicki, Chief Executive, commented:
"These results illustrate the resilience of our operating model
and the quality and dedication of our management team and staff
throughout the Covid-19 pandemic. By reacting quickly and
redeploying our resources to capture all possible opportunities
during the pandemic, we ensured that our H1 performance remained
strong.
"Against an exceptionally challenging market where housing
transactions were 25% lower than in H1 2019, we grew our revenue by
4% to GBP63.5m (H1 2019: GBP60.9m), including GBP6.1m of revenue
generated by our subsidiary First Mortgage, acquired in July 2019.
Gross mortgage completions grew by 8%, and our market share by 17%,
delivering on our strategy to grow market share in all market
conditions whilst maintaining a strong financial position.
"Adjusted earnings per share rose by 7% to 13.2 pence (H1 2019:
12.3 pence), while basic earnings per share decreased by 15% to
10.1 pence (H1 2019: 11.9 pence), with the adverse revenue impact
of the reduction in mortgage completions being partially offset by
the Board and MAB's non-furloughed employees taking a 20% paycut in
Q2 2020 as the pandemic escalated.
"I am very pleased with the progress we have achieved during the
period and as a result of our strong trading since the period end,
the Board has approved the reimbursement of these paycuts, which
will increase staff costs by a total of GBP0.8m in the second half.
Subject to this strong performance continuing throughout the
remainder of the second half, and in the absence of any new
restrictions being imposed that significantly adversely impact the
housing market in the remainder of this year, we also intend to
repay the GBP0.5m of Government grant income the Group has
received.
"The Group is currently trading strongly and, in the absence of
any such new restrictions, we expect adjusted profit before tax for
the full year to be significantly ahead of the market's current
expectations. However, due to the uncertainty arising from the
pandemic, the Board intends to only pay a final dividend in respect
of the year ending 31 December 2020. As previously announced, the
Board remains committed to paying a further 6.4 pence per
share.
"The planned roll out of our new platform has continued and at
pace, with the crisis accelerating our development of new
technology projects in many areas of the business, particularly
those critical to supporting the new ways of working adopted by our
Appointed Representatives ("ARs") during the lockdown.
"We have also launched 'MAB Later Life', a new and unique
proposition in the later life market developed in partnership with
a leading integrated provider of later life lending products. This
is an exciting opportunity to broaden our addressable market in a
highly intermediated segment where specialist advice is a key
differentiator. Entering the later life market with a best in class
proposition will enable MAB to attract the highest quality advisers
in this sector which will help us build market share.
"In addition, Australian Finance Group Ltd ("AFG") becomes our
new joint venture partner to roll out our well established and
successful UK model in Australia. Listed on the Australian Stock
Exchange, AFG is a leading Australian mortgage network with
extensive distribution channels and a strong broker proposition.
This new joint venture is an exciting development and a real step
change for our Australian operations, that will allow us to scale
by attracting the best brokers into our differentiated model.
" Despite the economic challenges that lie ahead, the strong
factors that underpin housing demand, combined with existing and
future Government support, cause us to be optimistic about the
outlook.
"We continue to deliver sustainable long-term growth by
providing the best solutions and outcomes for our ARs and customers
driven by our significant focus on technology developments. We plan
to continue growing our market share and mortgage completions,
whilst leading the evolution of intermediary distribution."
(1) MAB uses adjusted results as key performance indicators as
the Directors believe that these provide a more consistent measure
of operating performance by adjusting for acquisition related
charges and significant one-off or non-cash items. Adjusted
overheads ratio is stated before GBP0.2m amortisation of acquired
intangibles and GBP0.4m of additional non-cash operating expenses
relating to the put and call option agreement to acquire the
remaining 20% of First Mortgage in H1 2020 and one-off costs
associated with the acquisition of First Mortgage of GBP0.2m in H1
2019.
(2) Adjusted profit before tax is stated before the items in (1)
above and the loan write off and loan provision totalling GBP1.7m
and GBP0.5m of Government grant income in H1 2020. Adjusted
earnings per share is stated before the items in (1) above and the
loan write off and loan provision totalling GBP1.7m and GBP0.5m of
Government grant income in H1 2020, net of any associated tax
effects.
(3) Adjusted cash conversion is cash generated from operating
activities adjusted for movements in non-trading items, including
loans to AR firms and associates totalling GBP0.3m in H1 2020 (H1
2019: GBP1.6m), GBP(0.2)m of Government grant income received (H1
2019: nil), and increases in restricted cash balances of GBP0.3m in
H1 2020 (H1 2019: GBP1.0m), as a percentage of adjusted operating
profit.
(4) An active Adviser is an Adviser who has not been furloughed,
and is therefore able to write business.
(5) Based on average number of active Advisers.
(6) UK Finance regularly updates its estimates. MAB previously
reported a 5.1% market share in H1 2019 based on overall gross new
mortgage lending of GBP125.1bn, but that figure has slightly
increased since, causing our actual market share to be 5.0% in H1
2019.
Current Trading and Outlook
Since the re-opening of the housing market (initially in England
on 13 May and then in Scotland, Wales and Northern Ireland at the
end of June), there has been a sharp increase in purchase-related
mortgage activity, despite the highly restricted availability of
higher loan to value mortgages. Advisers continue to engage
remotely with customers, with the number of mortgage applications
across the network reaching record levels.
Recruitment activity has also picked up strongly, both in terms
of organic growth and new ARs. All the Advisers who were furloughed
are now back at work, and as at 25 September 2020 our Adviser
number was 1,523. We believe that until the longer-term picture
becomes more certain, some of our AR firms will remain cautious on
Adviser recruitment, but will look to strengthen their teams where
required in terms of Adviser quality.
The Group is currently trading strongly and, in the absence of
any new restrictions being imposed that significantly adversely
impact the housing market in the remainder of this year, we expect
adjusted profit before tax for the full year to be significantly
ahead of the market's current expectations. However, due to the
uncertainty arising from the pandemic, the Board intends to only
pay a final dividend in respect of the year ending 31 December
2020. As previously announced, the Board remains committed to
paying a further 6.4 pence per share when it considers it prudent
to do so .
For further information please contact:
Mortgage Advice Bureau (Holdings) Plc Tel: +44 (0) 1332 525007
Peter Brodnicki - Chief Executive Officer
Ben Thompson - Deputy Chief Executive Officer
Lucy Tilley - Chief Financial Officer
Numis Securities Limited Tel: +44 (0)20 7260 1000
Stephen Westgate / Hugo Rubinstein / Laura White
Media Enquiries:
investorrelations@mab.org.uk
Analyst presentation
There will be an analyst presentation to discuss the results at
9:30am today.
Those analysts wishing to attend are asked to contact
investorrelations@mab.org.uk
Copies of this interim results announcement are available at
www.mortgageadvicebureau.com/investor-relations
Chief Executive's Review
I am very pleased with MAB's performance in the first half of
this financial year given the exceptionally challenging market
conditions. Once again, we outperformed the wider market and
managed to continue to grow both our revenue and market share in a
market that contracted heavily despite the strong start to the
year.
Our growth in mortgage completions arranged is set out
below:
H1 2020 H1 2019 Increase
GBPbn GBPbn
-------- -------- ---------
New mortgage lending 6.4 6.3 +2%
-------- -------- ---------
Product Transfers 1.1 0.6 +65%
-------- -------- ---------
Gross mortgage lending 7.5 6.9 +8%
-------- -------- ---------
In terms of the wider market, Q1 saw a year-on-year improvement
with a 5% increase in UK gross new mortgage lending activity
(excluding product transfers). However, the lockdown led to a
dramatic fall in mortgage activity in Q2, with April and May
housing transactions down 58% and 53% year-on-year and UK gross new
mortgage lending (excluding product transfers) down 33% and 37%
respectively.
Purchase mortgages were the hardest hit, with year-on-year
residential purchase mortgage lending volumes decreasing by 46% in
Q2 and buy-to-let purchase mortgage lending volumes decreasing by
44%. Re-financing activity held up better, partially driven by the
strength in product transfers. Home-owner and buy-to-let
re-mortgage lending volumes decreased by 15% and 21% respectively
in Q2, whilst product transfer lending volumes grew by 4%
year-on-year.
Against this negative backdrop, our total gross mortgage
completions (including product transfers) increased by 8% to GBP7.5
billion (H1 2019: GBP6.9 billion), including GBP0.7 billion of
mortgage completions by First Mortgage. Gross mortgage completions
arranged through new lenders(1) (excluding product transfers)
increased by 2% to GBP6.4 billion (H1 2019: GBP6.3 billion).
Our growth in new mortgage lending combined with the overall
contraction of the mortgage market led to an increase in our share
of UK new mortgage lending by 17% from 5.0%(2) to 5.9%, despite the
housing market in Scotland, where MAB has a particularly strong
presence, remaining closed for seven weeks longer than in
England.
MAB responded quickly and effectively to the pandemic,
prioritising the health and safety of staff and ensuring our
resources were deployed where our Advisers needed them most. We
rolled out more than 40 new campaigns and initiatives to our AR
network in April and May alone, supporting Advisers to optimise the
many re-financing and protection opportunities.
Our decisive response to the pandemic also allowed us to
capitalise on the increase in product transfer numbers, achieving a
65% increase in product transfer completions during the period.
Whilst lenders were facing major operational and capacity
issues, MAB launched a national contact campaign and helpline to
support new and existing customers who were addressing their own
financial challenges brought about by the pandemic. This resulted
in customer relationships being further strengthened, and new
business opportunities being identified.
Our AR firms were quick to adapt their business models and adopt
new ways of working. During the lockdown, the transition to full
telephony advice, already an important and fast-growing area of the
business, was seamless. An increasing number of Advisers continue
to engage remotely with customers and we are working closely with
our AR partners to ensure that the increased levels of existing
customer focus and business efficiency remain, now that purchase
transaction levels have recovered to more normal levels.
Progressing our technology initiatives remained a priority
throughout the period to ensure key projects relating to increased
operational efficiency, lead generation and productivity are
delivered to plan. Additional technology enhancements in support of
the new ways of working adopted by our ARs have also been
accelerated.
Covid-19 has made securing a mortgage more challenging and
complex, as lenders have struggled with significant operational
challenges, including the high number of payment holidays taken up
by borrowers and the need to consistently apply lending policies.
As a result, consumer reliance on mortgage intermediaries has
increased, with intermediary market share strengthening as a
result. In addition, execution-only sales by lenders have not
progressed during the period.
Overall, Adviser numbers remained stable during the period. As
at 20 March 2020, Adviser numbers had grown to 1,484 (31 December
2019: 1,457) despite a noticeable pandemic-related slowdown in the
run-up to that date. During the lockdown, we understandably saw
normal levels of attrition in Adviser numbers and very limited
recruitment of new Advisers. At 30 June 2020, Adviser count stood
at 1,470 (including 101 Advisers remaining furloughed). Since the
re-opening of the housing market and the relaxing of social
distancing, our pipeline of new AR firms has grown substantially.
Our existing firms have now started to strengthen their teams where
required in terms of Adviser quality, with those who planned
organic growth in 2020 recommencing those plans.
(1) 'Gross mortgage lending arranged with new lenders' means
either a new mortgage in connection with a house purchase or a
re-mortgage with a different lender to the customer's existing
lender.
(2) UK Finance regularly updates its estimates. MAB previously
reported a 5.1% market share in H1 2019 based on overall gross new
mortgage lending of GBP125.1bn, but that figure has slightly
increased since, causing our actual market share to be 5.0% in H1
2019.
Delivering our strategy
Recruitment of Advisers
During Q2 2020, we saw normal levels of attrition in Adviser
numbers with our AR firms also placing around 245 Advisers on
furlough at the height of the crisis. Recruitment of new Advisers
was however very limited, and although discussions with potential
new ARs continued, no new firms were added over this quarter.
Subsequently, recruitment activity has picked up strongly, both
in terms of organic growth and new ARs. As at 30 June 2020, our
Adviser number was 1,470 including 101 furloughed Advisers. All the
Advisers who were furloughed are now back at work, and as at 25
September 2020, our Adviser number was 1,523. We believe that until
the longer-term picture becomes more certain, some AR firms will
remain cautious about Adviser recruitment, but will look to
strengthen their teams where required in terms of Adviser
quality.
The speed, level and quality of support delivered to our ARs and
their Advisers during such unprecedented times was exceptional,
bringing us even closer together and more aligned than ever.
However, the lack of meaningful support received during the
pandemic by many AR firms outside of MAB has led these firms to
review their existing network relationships. This is creating
opportunities that MAB is already capitalising on, with AR
recruitment activity building very strongly.
Technology
Following the successful conclusion of our testing and pilot
periods we are now rolling out our new technology platform to all
ARs, with the aim of having this concluded by the end of Q1
2021.
The first release of our platform has focused on lead generation
and client retention, which are both key drivers in terms of
Adviser growth and our plans to increase productivity.
Further developments will quickly follow, delivering greater
Adviser efficiency and simplifying mortgage application processes,
as well as providing better tools for customers in terms of how
they research, receive advice and transact.
Throughout the period we accelerated the development of many
technology projects critical to supporting the new ways of working
adopted as a result of the pandemic. This included bringing forward
our commitment to strengthen our compliance proposition to ARs.
Recognising the impact of remote working, we have built and rolled
out a new compliance platform which will bring about significant
efficiencies in our operations and risk management.
Lead Generation
Customer lead generation is a key area of focus for MAB, which
combined with technology developments will drive Adviser growth and
productivity. Consequently, we have widened our focus on additional
ways of acquiring customers cost effectively and at scale.
Our ARs generate their own leads primarily from builders, estate
agents and their existing customer base and this continues to be a
major focus for them. In addition, MAB is combining significant
technology developments, data profiling and marketing initiatives
to engage with customers online and capture missed opportunities
across these three primary lead sources, whilst also widening reach
through digital lead generation from a far greater and diverse
audience. This includes courting potential customers a great deal
earlier than they are currently, such as those starting to research
their first home or next purchase, and then nurturing them through
the process and helping them become "purchase ready".
We are very pleased with the progress we have made and expect
this initiative to gain real momentum in 2021, building to become a
major contributor to our future growth.
Broadening our addressable market
During the period we launched the first phase of "MAB Later
Life", a new initiative in partnership with a leading, specialist
provider of later life lending. Broadening our addressable market
to include products for over 55s is an important part of our
strategy to extend our proposition.
The later life market is an important growth segment which is
highly intermediated, with customers needing comprehensive
financial advice and appropriate solutions to release equity, often
to supplement inadequate pension provision or provide
inter-generational assistance to their family.
The first phase of this strategic alliance has seen the
distribution of later life mortgage products through a group of
existing specialist MAB advisers working under the MAB Later Life
brand. We are now extending this new opportunity to firms currently
outside of MAB that are looking for a best in class proposition to
capitalise on their specialism in this sector.
Investment strategy
We continue to make strategic investments in new and existing
distribution partners. Earlier this month we agreed to acquire a
40% investment in Meridian, our leading new build AR. Meridian will
have a key role to play in our plans to achieve even stronger
market share growth in this specialist sector.
As announced today, AFG becomes our new joint venture partner to
roll out our model in Australia. AFG is a leading mortgage network
in Australia with extensive distribution channels and a strong
broker proposition. This new joint venture is an exciting
development and a real step change for our Australian operations,
that will allow us to attract the best brokers into our
differentiated model.
Summary
This period has again proved how MAB can weather adverse market
conditions and perform strongly. MAB consistently outperforms the
market, and our response to the Covid-19 pandemic could not have
been more decisive and effective.
Despite the significant disruption to the housing market and to
mortgage lending, we are capitalising on the opportunities that
have arisen from these challenging times to achieve our growth and
performance objectives.
The immediate and comprehensive support MAB provided to our AR
firms in response to the pandemic stood out relative to some other
operators in our sector. This further differentiation has
positively contributed to our pipeline of potential new AR firms,
which has been building rapidly since certain social distancing
measures have been relaxed.
There have been no delays to our planned technology developments
as a result of Covid-19. In addition, our team successfully
re-prioritised developments to respond to an overnight change in
how Advisers needed to engage with customers and support the
heightened focus required to maximise the opportunities outside of
house purchase transactions.
We also strengthened the management team during the period with
the addition of a Head of Partnerships, a Chief Commercial Officer
and a new Chief Information Officer. These are all key new roles
focused on lead generation, the performance of our investments, and
the delivery of our technology developments.
Our new MAB Later Life initiative provides MAB with a unique,
best in class proposition to broaden our addressable market and
drive additional adviser growth. In addition, our new joint venture
with AFG provides the optimal platform for growth in Australia,
with our UK model now adapted, tested and proven in this
market.
Our investment in Meridian will be an important part of our
plans to increase market share in the specialist new build sector.
We continue to consider investments that will enhance our
proposition and deliver strong additional profit growth.
Despite a turbulent year to date and the continued uncertainty
arising from the pandemic, we have continued to strengthen MAB's
proposition and our ability to deliver continued year-on-year
market share growth, increased efficiency and profitability. We
remain very positive about what we can achieve in 2021 and
beyond.
Business Review of the year
I am pleased to report further growth in revenue of 4% to
GBP63.5m, including GBP6.1m from our First Mortgage subsidiary
acquired in July 2019. MAB's gross mortgage completions (including
product transfers) increased by 8% to GBP7.4bn (H1 2019: GBP6.9bn).
Excluding product transfers, our gross new mortgage completions
increased by 2% and this, together with a 13% contraction of the
overall new mortgage lending market, led to a 17% increase in our
share of UK gross new mortgage lending to 5.9% (H1 2019: 5.0% (1)
).
Market environment
In Q1 2020, gross new mortgage lending activity (excluding
product transfers) increased by 5%, as consumer confidence
strengthened post the December 2019 UK General Election. UK housing
transaction volumes were relatively flat over this quarter, with a
1% decrease year-on-year.
In Q2 2020, the closure of the housing market during lockdown
led to a dramatic 30% fall in gross new mortgage lending compared
to Q2 2019, with housing transactions down 47% over the same
period.
Overall, gross new mortgage lending activity in H1 2020 fell by
13% to GBP109.7bn (H1 2019: GBP126.0bn(1) ), excluding product
transfers. UK housing transactions fell by 25% over the reporting
period versus the comparative period in 2019 as illustrated in the
graph below.
Due to the current uncertainty, UK Finance has not updated its
estimates of gross new mortgage lending for the full year.
http://www.rns-pdf.londonstockexchange.com/rns/3700A_3-2020-9-28.pdf
Source: HM Revenue and Customs
In terms of segmental breakdown, residential purchase lending
volumes increased by 6% in Q1 2020, whilst home-owner re-mortgage
lending volumes increased by 3%. In Q2 2020, purchase transactions
were the hardest hit as a result of the lockdown, with year-on-year
residential and buy-to-let purchase lending volumes falling by 46%
and 44% respectively. Re-financing activity was less adversely
impacted, with a shift towards product transfers due to the ease
with which they can be transacted even in lockdown conditions and
the reduced availability of re-financing products. Product transfer
lending volumes grew by 4% year-on-year in Q2 2020, partially
offsetting more significant declines in other types of
re-financing, with home-owner and buy-to-let re-mortgage lending
volumes decreasing by 15% and 21% respectively.
As illustrated in the graph below, for the first six months of
the year residential and buy-to-let purchase lending volumes fell
by 22% and 13% respectively. Re-mortgage lending volumes were less
affected, with home-owner and buy-to-let re-mortgage lending
volumes decreasing by 6% and 7% respectively. Product transfers
lending volumes increased by 4% in the period.
http://www.rns-pdf.londonstockexchange.com/rns/3700A_2-2020-9-28.pdf
Source: UK Finance
Approximately 79% of UK residential mortgage transactions
(excluding buy to let, where intermediaries have a higher market
share, and product transfers where intermediaries have a lower
market share) were via intermediaries in H1 2020 (H1 2019: 77%).
MAB expects this position to remain broadly stable in the near
term.
In response to the crisis, the Government and the Bank of
England announced a strong package of temporary measures in support
of both mortgage lenders and borrowers, including reduced capital
buffer requirements for banks, in addition to helping them cut
lending rates by setting the Bank of England base rate at a record
low of 0.1%. The increase in the stamp duty threshold is likely to
further support the housing market recovery in the short term, as
will wider Government measures including increased housing
investment and the continued availability of the Help to Buy Equity
Loan and Shared Ownership schemes.
(1) UK Finance regularly updates its estimates. MAB previously
reported GBP125.1bn for H1 2019 but this figure has slightly
increased to GBP126.0bn since, causing our actual market share to
be 5.0% in H1 2019.
Financial review
We measure the development, performance and position of our
business against a number of key indicators.
http://www.rns-pdf.londonstockexchange.com/rns/3700A_1-2020-9-28.pdf
Revenue
Group revenue increased by 4% to GBP63.5m (H1 2019: GBP60.9m),
including GBP6.1m of revenue generated by First Mortgage, with
strong growth in Q1 2020 offset by the adverse impact of the
national lockdown in Q2 2020. Normally, a key driver of revenue is
the average number of Advisers during the period. However, in Q2
2020 a number of Advisers were furloughed by ARs and the
productivity of active Advisers(1) was adversely impacted by the
closure of the housing market during lockdown, resulting in a
GBP3.5m (6%) reduction in organic revenue for the first half.
In Q1 2020, revenue was up 25% on the prior year (14% excluding
First Mortgage), with average Adviser numbers up 19% (13% excluding
First Mortgage) and average revenue per Adviser up 5% (1% excluding
First Mortgage), reflecting the start of the impact of improving
market conditions and change in customer sentiment post the UK
General Election, as well as the success of our growth
strategy.
This trend was reversed in Q2 2020 as the adverse impact of
lockdown on mortgage completions started to bite, with revenue down
14% (22% excluding First Mortgage) compared to the prior year.
Average active Adviser(1) numbers were up 7% (1% excluding First
Mortgage) and average revenue per active Adviser(1) decreased by
19% (23% excluding First Mortgage).
The Group continued to generate revenue from three core areas,
summarised as follows:
Group Excluding First
Mortgage
Income source H1 H1 Change H1 H1 Change
2020 2019 % 2020 2019 %
------ ------ ------- ------ ------ -------
GBPm GBPm GBPm GBPm
------ ------ ------- ------ ------ -------
Mortgage Procuration Fees 27.6 26.7 +3 25.1 26.7 -6
------ ------ ------- ------ ------ -------
Protection and General Insurance
Commission 26.3 23.6 +11 22.9 23.6 -3
------ ------ ------- ------ ------ -------
Client Fees 8.1 9.7 -16 8.1 9.7 -16
------ ------ ------- ------ ------ -------
Other Income 1.5 0.9 +63 1.2 0.9 +37
------ ------ ------- ------ ------ -------
Total 63.5 60.9 +4 57.4 60.9 -6
------ ------ ------- ------ ------ -------
Despite the adverse impact of the pandemic in Q2 2020, all key
income sources, other than client fees, continued to grow as a
result of the positive contribution from First Mortgage.
During the period, MAB's mortgage mix saw a higher proportion of
re-mortgage and product transfer business as lockdown severely
restricted the completion of purchase transactions. Product
transfers generate a lower procuration fee than re-mortgages and
purchase mortgages. As a result of the change in mix and delays in
the progression of housing transactions, mortgage procuration fees
increased by only 3% despite gross mortgage completions (including
product transfers) increasing by 8%.
Excluding First Mortgage, gross mortgage completions (including
product transfers) decreased by 3% with mortgage procuration fees
reducing by 6% as a result of the change in mix.
Client fees reduced by 16% in the period resulting from a
considerable reduction in the attachment rate of client fees and
the change in the mortgage mix in Q2 2020 for MAB excluding First
Mortgage, which does not charge client fees.
The increase of 11% in protection and general insurance
commission for the Group reflects both the impact of the First
Mortgage acquisition and the increase in protection attachment
rates and freestanding protection sales in Q2 2020 after the Group
prioritised resources in this area. For the Group excluding First
Mortgage, protection and general insurance commission decreased by
3% with improved attachment rates and freestanding protection sales
in Q2 2020 mitigating in part the 6% reduction in mortgage
procuration fees.
MAB's revenue, in terms of proportion, is split as follows:
Income source H1 2020 H1 2019
Mortgage Procuration Fees 44% 44%
-------- --------
Protection and General Insurance
Commission 41% 39%
-------- --------
Client Fees 13% 16%
-------- --------
Other Income 2% 1%
-------- --------
Total 100% 100%
-------- --------
The slight increase in the proportion of protection and general
insurance commission reflects the increase in protection attachment
rates and in freestanding protection sales in Q2 2020. As
anticipated, the proportion of client fees fell following the
acquisition of First Mortgage, but this change in revenue mix was
made more pronounced by the considerable reduction in the
attachment rate of client fees and the change of mortgage mix in Q2
2020 for MAB excluding First Mortgage. We expect client fees to
become increasingly dependent upon the type and complexity of the
mortgage transaction, as well as the delivery channel. This will
lead to a broader spread of client fees on mortgage transactions,
which, by their nature, are our lowest margin revenue stream.
Government grant income
Government grant income of GBP0.5m was received due to some
employees being placed on furlough during the months of April, May
and June 2020.
Gross profit margin
As anticipated, gross profit margin increased to 27.2% (H1 2019:
23.3%) due to the acquisition of First Mortgage, which naturally
has a higher gross margin of c.65% as its advisers are directly
employed. Excluding First Mortgage, gross profit margin was 23.3%
(H1 2019: 23.3%). The Group typically receives a slightly reduced
margin as its existing ARs grow their revenue organically through
increasing their Adviser numbers. In addition, larger new ARs
typically join the Group on lower than average margins due to their
existing scale and hence we expect to see some further erosion of
our underlying gross profit margin due to the continued growth of
our existing ARs and the addition of new larger ARs.
Overheads
Overheads as a percentage of revenue before GBP0.2m of
amortisation of acquired intangibles and GBP0.4m of additional
non-cash operating expenses relating to the put and call option
agreement to acquire the remaining 20% of First Mortgage in H1 2020
and one-off costs associated with the acquisition of First Mortgage
of GBP0.2m in H1 2019 were 14.9% (H1 2019: 11.2%).
This increase in overheads as a percentage of revenue was
anticipated and results from First Mortgage naturally having a
higher overheads ratio than that of MAB due to its operating model.
Excluding FMD, overheads as a percentage of revenue were 11.6% (H1
2019: 11.2%), with the reduction in completions not quite being
offset by the salary cuts of 20% taken by the Board and MAB's
non-furloughed employees, and 50% by the Chief Executive Officer in
Q2 2020, as the pandemic escalated. On 1 July, MAB's staff that
were still furloughed returned to work, with the exception of some
of those within First Mortgage due to the timing of the Scottish
property market reopening.
MAB continues to benefit from the scalable nature of the
majority of its cost base. Certain costs, primarily those relating
to compliance personnel, are closely correlated to growth in the
number of Advisers, due to the high standards we demand and the
requirement to maintain regulatory spans of control. The balance of
our compliance costs mainly relate to FCA and FSCS regulatory fees
and charges. The remainder of MAB's costs typically rise at a
slower rate than revenue which will, in part, counter the expected
erosion of MAB's underlying gross margin as the business continues
to grow.
As a result of MAB's IT plans and capital expenditure, as
previously indicated, we expect our IT costs and our amortisation
on IT capital expenditure to increase by a modest amount. All
development work on MIDAS Pro and our new platform technology are
treated as revenue expenditure.
Associates
MAB's share of profits from associates was GBP0.1m (H1 2019:
loss of GBP0.04m). During the period MAB wrote off the GBP1.1m loan
balance due from Freedom 365 Mortgage Solutions Limited due to the
adverse impact of the pandemic on its business model. MAB has also
made a provision of GBP0.6m against the full balance of the loan
due from Eagle & Lion Limited. The remainder of the Group's
associates have performed well during the pandemic and whilst
profit levels within these businesses will be impacted this year
they are in a strong position to contribute positively to the
Group's results as we move into 2021.
Profit before tax and margin thereon
Adjusted(2) profit before tax rose by 6% to GBP7.9m (H1 2019:
GBP7.4m), with the margin thereon increasing to 12.4% (H1 2019:
12.2%). Statutory profit before tax reduced to GBP6.1m (H1 2019:
GBP7.2m) with the margin thereon being 9.6% (H1 2019: 11.8%).
Finance revenue
Finance income of GBP0.08m (H1 2019: GBP0.08m) reflects
continued low interest rates and interest income accrued on loans
to associates. Finance expense of GBP0.12m reflects the interest
payable on MAB's Revolving Credit Facility of GBP12m which was
drawn down in full at the end of March and interest expenses on
lease liabilities.
Taxation
The effective rate of tax reduced to 12.4% (H1 2019: 15.3%),
principally due to the write off of the balance of the loan due
from Freedom 365 Mortgage Solutions Limited and the provision made
against the loan due from Eagle and Lion Limited, as well as the
tax deduction arising from the exercise of employee and Appointed
Representative share options being higher than in the prior year.
We expect our effective tax rate to continue to be marginally below
the prevailing UK corporation tax rate, subject to tax credits for
MAB's research and development expenditure on the continued
development of MIDAS Pro, MAB's proprietary software, still being
available and further tax deductions arising from the exercise of
employee share options.
Earnings per share and dividend
Adjusted(2) earnings per share rose by 7% to 13.2 pence (H1
2019: 12.3 pence). Basic earnings per share decreased by 15% to
10.1 pence (H1 2019: 11.9 pence).
The Group is currently trading strongly, however due to the
uncertainty arising from the pandemic, the Board intends to only
pay a final dividend in respect of the year ending 31 December
2020. As previously announced, the Board remains committed to
paying a further 6.4 pence per share when it considers it prudent
to do so.
Cash flow and cash conversion
The Group's operations produce positive cash flow. This is
reflected in the net cash generated from operating activities of
GBP5.9m (H1 2019: GBP5.4m).
Headline cash conversion(3) was:
H1 2020 101%
H1 2019 113%
------------
Adjusted cash conversion(4) was:
H1 2020 97%
------------
H1 2019 99%
------------
The Group's operations are capital light with our most
significant ongoing capital investment being in computer equipment.
Only GBP0.2m of capital expenditure on office and computer
equipment was required during the period (H1 2019: GBP0.1m). Group
policy is not to provide company cars, and no other significant
capital expenditure is foreseen in the coming year. All development
work on MIDAS Pro is treated as revenue expenditure.
The Group had bank borrowings of GBP12m at 30 June 2020 (30 June
2019: GBPnil) having drawn down the Group's revolving credit
facility in full in March. The Group had unrestricted bank balances
of GBP21.5m at 30 June 2020, including the GBP12m drawn down under
the RCF (31 December 2019: GBP7.0m).
The Group has a regulatory capital requirement amounting to 2.5%
of regulated revenue. At 30 June 2020 this regulatory capital
requirement was GBP2.9m (31 December 2019: GBP3.1m), with the Group
having a surplus of GBP15.6m.
The following table demonstrates how cash generated from
operations was applied:
GBPm
Unrestricted bank balances at the beginning of the year 7.0
Cash generated from operating activities excluding movements in restricted balances and dividends
received from associates 7.5
Issue of shares 0.6
Dividends received from associates 0.1
Dividends paid (3.4)
Tax paid (2.0)
Net interest paid and principal element of lease payments (0.2)
Capital expenditure (0.2)
Unrestricted net bank balances and cash held in escrow at the end of the period 9.4
-------------------------------------------------------------------------------------------------- -----
The Group's treasury strategy is to reduce risk by spreading
deposits over a number of institutions rather than to seek marginal
improvements in returns.
(1) An active Adviser is an Adviser who has not been furloughed,
and is therefore able to write business.
(2) In H1 2020 adjusted for GBP0.2m amortisation of acquired
intangibles and GBP0.4m of additional non-cash operating expenses
relating to the put and call option agreement to acquire the
remaining 20% of First Mortgage, the loan write off and loan
provision totalling GBP1.7m, and GBP0.5m of Government grant income
(resulting in a GBP1.8m net adjustment in H1 2020). In H1 2019
adjusted for one-off costs associated with the acquisition of First
Mortgage of GBP0.2m.
(3) Headline cash conversion is cash generated from operating
activities adjusted for movements in non-trading items, including
loans to AR firms and associates totalling GBP0.3m in H1 2020 (H1
2019: GBP1.6m), and GBP(0.2)m of government grant income received
(H1 2019: nil), resulting in a GBP(0.2)m net adjustment, as a
percentage of adjusted operating profit.
(4) Adjusted cash conversion is headline cash conversion
adjusted for increases in restricted cash balances of GBP0.3m in H1
2020 (H1 2019: GBP1.0m) as a percentage of adjusted operating
profit.
INDEPENT REVIEW REPORT TO MORTGAGE ADVICE BUREAU (HOLDINGS)
PLC
Introduction
We have been engaged by the Company to review the half year
report for the six months ended 30 June 2020 which comprises the
interim condensed consolidated statement of comprehensive income,
interim condensed consolidated statement of financial position,
interim condensed consolidated statement of changes in equity and
interim condensed consolidated statement of cash flows and notes to
the interim condensed consolidated financial statements.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half year report including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
half year report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half year report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half year financial report for the six months ended 30 June
2020 is not prepared, in all material respects, in accordance with
the rules of the London Stock Exchange for companies trading
securities on AIM.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London
United Kingdom
Date
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Interim condensed consolidated statement of comprehensive income
for the six months ended 30 June 2020
Six months ended
30 June
Note 2020 2019
Unaudited Unaudited
GBP'000 GBP'000
-------------------------------------- ----- ----------- -----------
Revenue 2 63,464 60,893
Cost of sales 2 (46,220) (46,730)
-------------------------------------- ----- ----------- -----------
Gross profit 17,244 14,163
Government grant income 1 513 -
Administrative expenses (10,033) (6,993)
Impairment of loans to related
parties 11 (1,656) -
Share of profit from associates,
net of tax 88 112
Amount written off associates - (155)
-------------------------------------- ----- ----------- -----------
Operating profit 6,156 7,127
-------------------------------------- ----- ----------- -----------
Analysed as:
Operating profit before: 7,898 7,330
Government grant income 1 513 -
Amortisation of acquired intangibles 3 (183) -
Costs relating to the First Mortgage
option 3 (416) -
Acquisition costs 3 - (203)
Impairment of loans to related
parties 11 (1,656) -
Operating profit 6,156 7,127
-------------------------------------- ----- ----------- -----------
Finance income 4 75 77
Finance expense 4 (117) -
-------------------------------------- ----- ----------- -----------
Profit before tax 6,114 7,204
Tax expense 5 (759) (1,100)
-------------------------------------- ----- ----------- -----------
Profit for the period 5,355 6,104
-------------------------------------- ----- ----------- -----------
Total comprehensive income 5,355 6,104
-------------------------------------- ----- ----------- -----------
Profit is attributable to:
Equity owners of Parent Company 5,244 6,104
Non-controlling interests 111 -
-------------------------------------- ----- ----------- -----------
5,355 6,104
-------------------------------------- ----- ----------- -----------
Earnings per share attributable
to the owners of the Parent Company 6
Basic 10.1p 11.9p
Diluted 10.0p 11.7p
Interim condensed consolidated statement of financial
position
as at 30 June 2020 and 31 December 2019
30 June 2020 31 Dec
Note Unaudited 2019
GBP'000 Audited
GBP'000
--------------------------------- ------ ------------- ---------
Assets
Non-current assets
Property, plant and equipment 2,923 2,924
Right of use assets 2,722 2,907
Goodwill 8 15,155 15,155
Other intangible assets 3,561 3,862
Investments in associates and
joint venture 9 3,163 3,133
Investment in non-listed equity
shares
nvestments 10 75 75
Trade and other receivables 11 2,044 3,330
Deferred tax asset 1,201 1,517
--------------------------------- ------ ------------- ---------
Total non-current assets 30,844 32,903
--------------------------------- ------ ------------- ---------
Current assets
Trade and other receivables 11 5,126 4,959
Cash and cash equivalents 15 35,635 20,867
--------------------------------- ------ ------------- ---------
Total current assets 40,761 25,826
--------------------------------- ------ ------------- ---------
Total assets 71,605 58,729
--------------------------------- ------ ------------- ---------
Interim condensed consolidated statement of financial
position
as at 30 June 2020 and 31 December 2019 (continued)
Note 30 June 2020 31 Dec
Unaudited 2019
GBP'000 Audited
GBP'000
------------------------------- ----- ------------- ---------
AEquity and liabilities
Equity and liabilities
Share capital 16 52 52
Share premium 16 6,052 5,451
Capital redemption reserve 20 20
Share option reserve 2,368 2,799
Retained earnings 19,643 17,272
------------------------------- ----- ------------- ---------
Equity attributable to owners
of Parent Company 28,135 25,594
Non-controlling interests 1,620 1,595
------------------------------- ----- ------------- ---------
Total equity 29,755 27,189
------------------------------- ----- ------------- ---------
Liabilities
Non-current liabilities
Provisions 3,977 3,735
Lease liabilities 2,477 2,645
Deferred tax liability 692 651
------------------------------- ----- ------------- ---------
Total non-current liabilities 7,146 7,031
------------------------------- ----- ------------- ---------
Current liabilities
Trade and other payables 12 21,668 22,371
Loans and borrowings 13 12,083 -
Lease liabilities 317 334
Corporation tax liability 636 1,804
------------------------------- ----- ------------- ---------
Total current liabilities 34,704 24,509
------------------------------- ----- ------------- ---------
Total liabilities 41,850 31,540
------------------------------- ----- ------------- ---------
Total equity and liabilities 71,605 58,729
------------------------------- ----- ------------- ---------
Interim condensed consolidated statement of changes in equity
for the six months ended 30 June 2020
Attributable to the holders of the
Parent Company
---------------------------------------------------------------------
Capital Share Non-controlling
Share Share redemption option Retained Interest Total
capital premium reserve reserve earnings Total GBP'000 equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- --------- ------------ --------- ---------- ---------- ------------------ ----------
Balance at
1 January
2019 51 4,094 20 1,675 14,829 20,669 - 20,669
Profit for the
period - - - - 6,104 6,104 - 6,104
Total
comprehensive
income - - - - 6,104 6,104 - 6,104
--------------- --------- --------- ------------ --------- ---------- ---------- ------------------ ----------
Transactions
with owners
Issue of
shares - 994 - - - 994 - 994
Share based
payment
transactions - - - 253 - 253 - 253
Deferred tax
assets
recognised
in equity - - - 76 - 76 - 76
Reserve
transfer - - - (132) 132 - - -
Dividends paid - - - - (6,506) (6,506) - (6,506)
--------------- --------- --------- ------------ --------- ---------- ---------- ------------------ ----------
Total
transactions
with owners - 994 - 197 (6,374) (5,183) - (5,183)
--------------- --------- --------- ------------ --------- ---------- ---------- ------------------ ----------
Balance at 30
June 2019
(unaudited) 51 5,088 20 1,872 14,559 21,590 - 21,590
--------------- --------- --------- ------------ --------- ---------- ---------- ------------------ ----------
Balance at 1
January 2020 52 5,451 20 2,799 17,272 25,594 1,595 27,189
Profit for the
period - - - - 5,244 5,244 111 5,355
--------------- --------- --------- ------------ --------- ---------- ---------- ------------------ ----------
Total
comprehensive
income - - - - 5,244 5,244 111 5,355
--------------- --------- --------- ------------ --------- ---------- ---------- ------------------ ----------
Transactions
with owners
Issue of
shares - 601 - - - 601 - 601
Share based
payment
transactions - - - 430 - 430 - 430
Deferred tax
asset
recognised
in equity - - - (423) - (423) - (423)
Reserve
transfer - - - (438) 438 - - -
Dividends paid - - - - (3,311) (3,311) (86) (3,397)
--------------- --------- --------- ------------ --------- ---------- ---------- ------------------ ----------
Total (2,
transactions 703
with owners - 601 - (431) (2,873) ) (86) (2,789)
Balance at 30
June 2020
(unaudited) 52 6,052 20 2,368 19,643 28,135 1,620 29,755
--------------- --------- --------- ------------ --------- ---------- ---------- ------------------ ----------
Interim condensed consolidated statement of cash flows for the
six months ended 30 June 2020
Six months ended
30 June
2020 2019
Unaudited Unaudited
GBP'000 GBP'000
------------------------------------------ ------------ -----------
Cash flows from operating activities
Profit for the period before tax 6,114 7,204
Adjustments for
Depreciation of property, plant
and equipment 189 104
Depreciation of right of use assets 185 -
Amortisation of intangibles 302 24
Share based payments 430 253
Share of profit from associates (88) (112)
Dividends received from associates 58 243
Finance income (75) (77)
Finance expense 117 -
7,232 7,639
Changes in working capital
Decrease/(Increase) in trade and
other receivables (other than accrued
interest income) 1,148 (979)
Increase/(Decrease) in trade and
other payables (703) (147)
Increase in clawback provisions 242 106
Cash generated from operating activities 7,919 6,619
Income taxes paid (1,993) (1,248)
------------------------------------------- ------------ -----------
Net cash generated from operating
activities 5,926 5,371
------------------------------------------- ------------ -----------
Cash flows from investing activities
Purchase of property, plant and
equipment (188) (80)
Purchase of Intangibles (1) -
Acquisitions of associates - (1,256)
Acquisition of unlisted investment - (75)
------------------------------------------- ------------ -----------
Net cash used in investing activities (189) (1,411)
------------------------------------------- ------------ -----------
Cash flows from financing activities
Proceeds from borrowings 12,000 -
Interest received 46 31
Interest paid (34) -
Principal element of lease payments (185) -
Issue of shares 601 994
Dividends paid (3,311) (6,506)
Dividends paid to minority interest (86) -
------------------------------------------ ------------ -----------
Net cash generated/(used) in financing
activities 9,031 (5,481)
------------------------------------------- ------------ -----------
Net Increase/(Decrease) in cash
and cash equivalents 14,768 (1,521)
Cash and cash equivalents at the
beginning of the period 20,867 25,589
------------------------------------------- ------------ -----------
Cash and cash equivalents at the
end of the period 35,635 24,068
------------------------------------------- ------------ -----------
Notes to the interim condensed consolidated financial statements
for the six months ended 30 June 2020
1 Accounting policies
Corporate information
The interim condensed consolidated financial statements of
Mortgage Advice Bureau (Holdings) Plc and its subsidiaries
(collectively, "the Group") for the six months ended 30 June 2020
were authorised for issue in accordance with a resolution of the
directors on 28 September 2020.
Mortgage Advice Bureau (Holdings) Plc ("the Company") is a
limited company incorporated and domiciled in England whose shares
are publicly traded on the Alternative Investment Market ("AIM").
The registered office is located at Capital House, Pride Place,
Pride Park, Derby, DE24 8QR. The Group's principal activity is the
provision of financial services.
Basis of preparation
The interim condensed consolidated financial statements for the
six months ended 30 June 2020 have been prepared in accordance with
IAS 34 Interim Financial Reporting. The Group has applied the same
accounting policies and methods of computation in its interim
consolidated financial statements as in its 2019 annual financial
statements, other than as noted below.
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's IFRS financial information as at 31 December 2019.
The information relating to the six months ended 30 June 2020
and the six months ended 30 June 2019 is unaudited and does not
constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006. The Group's statutory
financial statements for the year ended 31 December 2019 have been
reported on by its auditor and delivered to the Registrar of
Companies. The report of the auditor was unqualified and did not
draw attention to any matters by way of emphasis, or contain a
statement under section 498(2) or (3) of the Companies Act
2006.
Going Concern
The Directors have assessed the Group's prospects until the end
of 2021, taking into consideration the current operating
environment, including the impact of the coronavirus pandemic on
property and lending markets. To give the Group additional
flexibility to react quickly in this environment and capitalise on
potential opportunities the Group drew down its Revolving Credit
Facility of GBP12m in full in March 2020. The Directors' financial
modelling considers the Group's profit, cash flows, regulatory
capital requirements, borrowing covenants and other key financial
metrics over the period.
These metrics are subject to sensitivity analysis, which
involves flexing a number of key assumptions underlying the
projections, including further potential localised lockdowns and
their impact on the UK property market and the Group's revenue mix,
which the Directors consider to be severe but plausible stress
tests on the Group's cash position, banking covenants and
regulatory capital adequacy. The Group's financial modelling shows
that the Group should continue to be cash generative, maintain a
surplus on its regulatory capital requirements and be able to
operate within its current financing arrangements.
Based on the results of the financial modelling, the Directors
expect that the Group will be able to continue in operation and
meet its liabilities as they fall due over this period.
Accordingly, the Directors continue to adopt the going concern
basis for the preparation of the financial statements.
Significant estimates and judgements
The judgements, estimates and assumptions applied in the interim
financial statements, including the key sources of estimation
uncertainty, were the same as those applied in the Group's last
annual
financial statements for the year ended 31 December 2019, except
where further judgements and estimates have been made due to the
effects of Covid-19. These include:
a. Assessing whether the Group has reasonable assurance as to
whether it will comply with the conditions attached to Government
grants; and
b. Assessing recoverability of loan balances outstanding to associates.
Significant accounting policies
The accounting policies applied are consistent with those
described in the Annual Report and Group financial statements for
the year ended 31 December 2019. New or amended standards effective
in the period have not had a material impact on the condensed
consolidated interim financial statements.
The Group has not early adopted any standards, interpretations
or amendments that have been issued but are not yet effective.
Future new standards and interpretations
A number of new standards and amendments to standards and
interpretations will be effective for future annual and interim
periods and, therefore, have not been applied in preparing these
condensed consolidated interim financial statements. At the date of
authorisation of these financial statements, the following
standards and interpretations which have not been applied in these
financial statements were in issue but not yet effective:
Standard or interpretation Periods commencing
on or after
Amendments to Sale or contribution of This has been deferred
IFRS 10 and IAS assets between an Investor indefinitely
28 and its Associates or Joint
Ventures
---------------------------------- -----------------------
IFRS 16 Covid-19 Related Rent Concessions 1 June 2020 (not
yet endorsed for
use in EU)
---------------------------------- -----------------------
Amendments to IFRS 10 and IAS 28: Sale or contribution of Assets
between an Investor and its Associate or Joint Venture. The
amendments address the conflict between IFRS 10, Consolidated
Financial Statements and IAS 28 in dealing with the loss of control
of a subsidiary that is sold or contributed to an associate or
joint venture. The amendments clarify that the gain or loss
resulting from the sale or contribution of assets that constitute a
business, as defined in IFRS 3, between an investor and its
associate or joint venture, is recognised in full. Any gain or loss
resulting from the sale or contribution of assets that do not
constitute a business, however, is recognised only to the extent of
unrelated investors' interests in the associate or joint venture.
The IASB has deferred the effective date of these amendments
indefinitely, but an entity that early adopts the amendments must
apply them prospectively. The Group will apply these amendments
when they become effective.
IFRS16: Covid-19 Related Rent Concessions. IFRS 16 was amended
to provide a practical expedient for lessees accounting for rent
concessions that arise as a direct consequence of the Covid-19
pandemic and satisfy the following criteria:
-- The change in lease payments results in revised consideration
for the lease that is substantially the same as, or less than, the
consideration for the lease immediately preceding the change;
-- the reduction in lease payments affects only payments
originally due on or before 30 June 2021; and
-- there are is no substantive change to other terms and conditions of the lease.
Rent concessions that satisfy these criteria may be accounted
for in accordance with the practical expedient, which means the
lessee does not need to assess whether the rent concession meets
the definition of a lease modification. Lessees apply other
requirements in IFRS 16 in accounting for the concession.
The amendment is effective 1 June 2020, however has not yet been
endorsed for adoption in the EU. The Group will apply this
amendment retrospectively when it is both effective and endorsed
for use in the EU.
Significant events and transactions
The World Health Organisation declared coronavirus and Covid-19
a global health emergency on 30 January 2020. Since then, the Group
has experienced disruption to its operations with the effects on
the Group's interim consolidated financial statements for the six
months ended June 2020 summarised as follows:
a. Reduced growth in sales and cash flows
The Group's revenue (see note 2) has been adversely impacted by
the Government lockdown in March, albeit written business started
to recover from mid-May as the housing market in England reopened
followed by Scotland, Wales and Northern Ireland at the end of
June. This has reduced the revenue growth of the Group in the
period to 30 June 2020.
b. Impairment of loans to related parties
The Government lockdown has impacted the performance of some of
the Group's investments.
As disclosed in Note 11, an amount of GBP1.1m has been written
off in respect of the loan to Freedom 365 Mortgage Solutions
Limited and an increase in expected credit losses of GBP0.6m has
been made in respect of the loan to Eagle and Lion Limited.
c. Government grant income
The Group utilised the Coronavirus Job Retention Scheme ("CJRS")
due to the Government imposed lockdown causing the closure of the
housing market for a period of time and a number of employees being
put on furlough as a result.
Included within the Statement of Comprehensive Income is GBP0.5m
relating to the CJRS grants and this is presented within Government
grant income, rather than reducing the related expense.
Current versus non-current classification
The Group presents assets and liabilities in the statement of
financial position based on current/non-current classification. An
asset is current when it is:
-- expected to be realised or intended to be sold or consumed in
the normal operating cycle; and
-- held primarily for the purpose of trading; and
-- expected to be realised within twelve months after the reporting date.
All other assets are classified as non-current.
Assets included in current assets which are expected to be
realised within twelve months after the reporting date are measured
at fair value which is their book value. Fair value for investments
in unquoted equity shares is the net proceeds that would be
received for the sale of the asset where this can be reasonably
determined.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Entities that are not subsidiaries but where the Group has
significant influence (i.e. the power to participate in the
financial and operating policy decisions) are accounted for as
associates. The results and assets and liabilities of the
associates are included in the consolidated accounts using the
equity method of accounting.
Segment Reporting
An operating segment is a distinguishable segment of an entity
that engages in business activities from which it may earn revenues
and incur expenses and whose operating results are reviewed
regularly by the entity's chief operating decision maker ("CODM").
The Board of Directors (the CODM) reviews the Group's operations
and financial position as a whole and therefore considers that it
has only one operating segment, being the provision of financial
services operating solely within the UK. The information presented
to the CODM directly reflects that presented in the financial
statements and they review the performance of the Group by
reference to the results of the operating segment against
budget.
Operating profit is the profit measure, as disclosed on the face
of the consolidated statement of comprehensive income that is
reviewed by the CODM.
During the six month period to 30 June 2020, there have been no
changes from the prior periods in the measurement methods used to
determine operating segments and reported segment profit or
loss.
2 Revenue
The Group operates in one segment being that of the provision of
financial services in the UK.
Revenue is derived as follows:
Six months ended 30
June
2020 2019
Unaudited Unaudited
GBP'000 GBP'000
Mortgage related products 35,728 36,385
Insurance and other protection products 26,271 23,612
Other income 1,465 896
------------------------------------------ ------------ ------------
63,464 60,893
------------------------------------------ ------------ ------------
Costs of sales are as follows:
2020 2019
Unaudited Unaudited
GBP'000 GBP'000
Commissions paid 43,355 45,874
Impairment of trade receivables 4 (127)
Wages and salary costs 2,861 983
----------------------------------------- ------------ ------------
46,220 46,730
----------------------------------------- ------------ ------------
There is no significant seasonality to income which arises
fairly evenly throughout the year and therefore profits also arise
fairly evenly throughout the financial year.
3 Acquisition costs
On 2 July 2019 Mortgage Advice Bureau (Holdings) Plc acquired 80
per cent of the entire issued share capital of First Mortgage
Direct Limited ("First Mortgage" or the "Business").
Costs relating to the amortisation of acquired intangibles
amounted to GBP183,000 in the six months ended 30 June 2020. The
option (comprising the put and the call option) over the remaining
20% of the issued share capital of First Mortgage has been
accounted for under IAS 19 Employee Benefits and IFRS 2 Share Based
Payments due to its link to the service of First Mortgage's
Managing Director. In accordance with IAS 19, GBP188,000 has been
included within administrative expenses under staff costs, and in
accordance with IFRS 2, a further GBP227,968 has been included
within administrative expenses under share based payments (see note
18).
Costs incurred in the six months ended 30 June 2019 in relation
to the acquisition of First Mortgage amounted to GBP202,772 and
have been included within administrative expenses.
4 Finance income and expense
Six months ended 30
June
2020 2019
Unaudited Unaudited
Finance income GBP'000 GBP'000
------------------------------------------------ ------------ -----------
Interest income 46 31
Interest income accrued on loans to associates 29 46
------------------------------------------------ ------------ -----------
75 77
------------------------------------------------ ------------ -----------
Finance expense
-------------------------------------- ----
Interest expense - paid 1 -
Interest expense - accrued 83 -
Interest expense on lease liabilities 33 -
-------------------------------------- ----
117 -
-------------------------------------- ----
5 Income tax
The Group calculates the period income tax expense using the tax
rate that would be applicable to the expected total annual
earnings. The major components of income tax expense in the interim
condensed statements of comprehensive income are:
Six months ended 30
June
2020 2019
Unaudited Unaudited
GBP'000 GBP'000
------------------------------------------------ ------------ -----------
Current tax expense
UK corporation tax charge on profit for
the period 826 1,119
Total current tax 826 1,119
------------------------------------------------ ------------ -----------
Deferred tax expense
Origination and reversal of timing differences (62) (7)
Temporary difference on share based payments (44) (12)
Adjustment due to rate change 39 -
Total deferred tax (67) (19)
------------------------------------------------ ------------ -----------
Total tax expenses 759 1,100
------------------------------------------------ ------------ -----------
For the period ended 30 June 2020, the deferred tax recognised
in equity was (GBP423,000).
6 Earnings per share
Both the basic and diluted earnings per share have been
calculated using the profit attributable to shareholders of the
Parent Company, Mortgage Advice Bureau (Holdings) plc, as the
numerator.
The weighted average number of shares for the purposes of the
calculation of diluted earnings per share can be reconciled to the
weighted average number of ordinary shares used in the calculation
of basic earnings per share as follows:
Six months ended 30 June
2020 2019
Unaudited Unaudited
---------------------------------------- ------------- ------------
Weighted average number of shares used
in basic earnings per share 51,896,090 51,223,905
Potential ordinary shares arising from
options 701,335 992,609
---------------------------------------- ------------- ------------
Weighted average number of shares used
in diluted earnings per share 52,597,425 52,216,514
---------------------------------------- ------------- ------------
The Group uses adjusted results as a key performance indicator,
as the Directors believe that these provide a more consistent
measure of operating performance. Adjusted profit is therefore
stated before Government grant income, amortisation of acquired
intangibles, costs relating to the option to acquire the remaining
20% of First Mortgage, impairment of loans to related parties for
H1 2020 and acquisition costs for H1 2019. This presentation shows
the trend in earnings per ordinary share that is attributable to
the underlying trading activities of the Group.
The reconciliation between the basic and adjusted figures is as
follows:
Six months ended Six months ended 30 June
30 June
2020 2019 2020 2019 2020 2019
Unaudited Unaudited Basic Basic Diluted Diluted
GBP'000 GBP'000 earnings earnings earnings earnings
per share per share per share per share
pence pence pence pence
Profit for the period 5,244 6,104 10.1 11.9 10.0 11.7
Adjustments:
Government grant
income (447) - (0.9) - (0.9) -
Amortisation of acquired
intangibles 183 - 0.4 - 0.3 -
Costs relating to
the First Mortgage
option 416 - 0.8 - 0.8 -
Acquisition costs - 203 - 0.4 - 0.4
Impairment of loans
to related parties 1,656 - 3.2 - 3.1 -
Tax effect of adjustments (230) - (0.4) - (0.4) -
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Adjusted earnings 6,822 6,307 13.2 12.3 12.9 12.1
--------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Government grant income of GBP447,414 represents amounts
attributable to the equity owner of the parent company and excludes
GBP65,735 attributable to non-controlling interests included in the
amounts shown in the consolidated statement of comprehensive
income.
7 Dividends
Six months Six months Year ended
ended 30 ended 30 31 December
June June 2019
2020 2019 Audited
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Dividends paid and declared during
the period:
On ordinary shares at 6.4p per share
(2019: 12.7p) 3,311 6,506 6,507
Interim dividend for 2019: 11.1p per
share - - 5,729
3,311 6,506 12,236
-------------------------------------- ----------- ----------- -------------
Equity dividends on ordinary shares:
Declared:
Interim dividend for 2020: nil p per - 5,711 -
share (2019: 11.1p)
Proposed for approval:
Final dividend for 2019: 6.4p per
share - - 3,305
--------------------------------------- --- ------ ------
- 5,711 3,305
------------------------------------------ ------ ------
8 Goodwill
The goodwill relates to the acquisition of Talk Limited in 2012,
and in particular its main operating subsidiary Mortgage Talk
Limited, and the acquisition of First Mortgage Direct Limited
("FMD") in 2019. 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 2019 concluded that there had been no
impairment of goodwill.
The key basis for determining that there was no impairment to
the carrying value of goodwill was disclosed in the annual
consolidated financial statements for the year ended 31 December
2019. Due to the Covid-19 pandemic, an impairment review was also
carried out at 30 June 2020 and this concluded that there had been
no impairment of goodwill at that date
9 Investments in associates and joint ventures
The investment in associates and joint ventures at the reporting
date is as follows:
30 June 2020 31 December
Unaudited 2019
GBP'000 Audited
GBP'000
-------------------------------------- ------------- ------------
At start of the period 3,133 1,573
Additions - 1,783
Credit to statement of comprehensive
income
Share of profit 88 280
Amount written off - (192)
-------------------------------------- ------------- ------------
88 88
Dividends received (58) (311)
-------------------------------------- ------------- ------------
At period end 3,163 3,133
-------------------------------------- ------------- ------------
10 Investment in non-listed equity shares
30 June 31 December
2020 2019
Unaudited Audited
GBP'000 GBP'000
------------------------ ----------- ------------
At start of the period 75 -
Additions - 75
At period end 75 75
------------------------ ----------- ------------
The investment represents a 2.23% interest in Yourkeys.
11 Trade and other receivables
30 June 31 December
2020 2019
Unaudited Audited
GBP'000 GBP'000
----------------------------------------------- ----------- ------------
Trade receivables 1,630 1,936
Less provision for impairment of trade
receivables (379) (363)
----------------------------------------------- ----------- ------------
Trade receivables - net 1,251 1,573
Receivables from related parties 15 15
Other receivables 468 -
Loans to related parties 3,525 3,124
Less provision for impairment of loans
to related parties (589) (171)
Less amounts written off loans to related (1,067) -
parties
----------------------------------------------- ----------- ------------
Total financial assets other than cash
and cash equivalents classified at amortised
costs 3,603 4,541
Prepayments and accrued income 3,567 3,748
----------------------------------------------- ----------- ------------
Total trade and other receivables 7,170 8,289
----------------------------------------------- ----------- ------------
Less: non-current element - Loans to
related parties (1,801) (2,832)
Less: non-current element - Trade and
other receivables (243) (498)
----------------------------------------------- ----------- ------------
Current element 5,126 4,959
----------------------------------------------- ----------- ------------
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within cost of sales in the consolidated
statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision. At 30 June
2020 the lifetime expected loss provision for trade receivables is
GBP0.4m. The movement in the impairment allowance for trade
receivables has been included in cost of sales in the consolidated
statement of comprehensive income.
Impairment provisions for loans to related parties are
recognised based on a forward looking expected credit loss model.
The methodology used to determine the amount of the provision is
based on whether there has been a significant increase in credit
risk since initial recognition of the financial asset. For those
where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those
for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised. In determining the lifetime expected credit
losses for loans to associates, the Directors have considered
different scenarios for repayments of these loans and have applied
percentage probabilities to each scenario for each associate where
applicable.
At 30 June 2020 the lifetime expected loss provision for loans
to associates is GBP0.6m. One associate, Eagle and Lion Limited,
has been subject to a significant increase in credit risk since
initial recognition and, consequently lifetime expected credit
losses of GBP0.6m have been recognised and this accounts for the
vast majority of the lifetime expected loss provision for loans to
associates. For the remainder, 12 month expected credit losses have
been recognised. In addition, during the period, GBP1.1m has been
written off in respect to a loan to Freedom 365 Mortgage Solutions
Limited which represents the principal loan balance write off and
release of expected credit losses already recognised.
The movement in the impairment allowance for receivables for
loans to associates has been included in impairment of loans to
related parties in the consolidated statement of comprehensive
income.
Also included in trade receivables are amounts due from
Appointed Representatives relating to commissions that are
refundable to the Group when policy lapses or other reclaims exceed
new business. As these balances have no credit terms, the Board of
Directors consider these to be past due if they are not received
within seven days. In the management of these balances, the
Directors can recover them from subsequent new business entered
into with the Appointed Representative or utilise payables that are
owed to the same counterparties and included within payables as the
Group has the legally enforceable right of set off in such
circumstances. These payables are considered sufficient by the
Directors to recover receivable balances should they default, and,
accordingly, credit risk in this respect is minimal.
In light of the above, the Directors do not consider that
disclosure of an aging analysis of trade and other receivables
would provide useful additional information.
12 Trade and other payables
30 June 31 December
2020 2019
Unaudited Audited
GBP'000 GBP'000
----------------------------------------------- ----------- ------------
Appointed Representatives retained commission 14,185 13,880
Other trade payables 4,412 4,542
----------------------------------------------- ----------- ------------
Trade payables 18,597 18,422
Social security and other taxes 1,039 642
Other payables 102 203
Accruals and deferred income 1,930 3,104
----------------------------------------------- ----------- ------------
21,668 22,371
----------------------------------------------- ----------- ------------
As at 30 June 2020 and 31 December 2019, the carrying value of
trade and other payables classified as financial liabilities
measured at amortised cost approximates fair value.
Appointed Representative retained commission is expected to be
payable after more than one year. Other trade payables normally
fall due within 30 - 60 days.
13 Loans and borrowings
30 June 2020 31 December 2019
Unaudited Audited
Non-current Non-current
Current Total Current Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Secured
-------------------------- --------- ------------ -------- --------- ------------ --------
Bank loans 12,083 - 12,083 - - -
-------------------------- --------- ------------ -------- --------- ------------ --------
Total secured borrowings 12,083 - 12,083 - - -
-------------------------- --------- ------------ -------- --------- ------------ --------
On 18 June 2019, in connection with the acquisition of First
Mortgage, the Group entered into an agreement with NatWest in
respect of a new revolving credit facility for GBP12m. To give the
Group additional flexibility to react quickly and capitalise on
potential opportunities, the Group drew down its Revolving Credit
Facility in full in March 2020. This is shown as a current
liability within the Consolidated Statement of Financial Position
as it is due to be fully repaid in March 2021. The balance as at 30
June 2020 is made up of GBP12m principal loan balance and GBP83,000
accrued interest. In respect of the Group's Revolving Credit
Facility for GBP12 million, the Group has given security to NatWest
in the form of fixed and floating charges over the assets of
Mortgage Advice Bureau Limited, Mortgage Advice Bureau (Derby)
Limited and Mortgage Advice Bureau (Holdings) Plc.
Loan covenants
Under the terms of the Revolving Credit Facility, the Group is
required to comply with the following financial covenants:
-- Interest cover shall not be less than 5:1
-- Debt to EBITDA ratio shall not exceed 2:1
The Group has complied with these covenants throughout the
reporting period.
14 Financial instruments - risk management activities
Credit risk
Credit risk is the risk of financial loss to the Group if a
trading partner or counterparty to a financial instrument fails to
meet its contractual obligations. The Group is mainly exposed to
credit risk from advanced loans to its trading partners which are
classified as trade receivables. 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. Further disclosures
regarding trade and other receivables are given in note 11.
Financial assets - maximum exposure
30 June 31 December
2020 2019
Unaudited Audited
GBP'000 GBP'000
----------------------------- ----------- ------------
Cash and cash equivalents 35,635 20,867
Trade and other receivables 3,603 4,541
----------------------------- ----------- ------------
Total financial assets 39,238 25,408
----------------------------- ----------- ------------
Financial liabilities
30 June 31 December
2020 2019
Unaudited Audited
GBP'000 GBP'000
----------------------------- ----------- ------------
Trade and other payables 18,699 18,625
Loans and borrowings 12,083 -
Accruals 1,930 3,104
Lease liabilities 2,794 3,235
----------------------------- ----------- ------------
Total financial liabilities 35,506 24,964
----------------------------- ----------- ------------
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
as those included in trade receivables; this collateral
significantly reduces the credit risk.
The Group's credit risk on cash and cash equivalents is limited
because the Group places funds on deposit with National Westminster
Bank Plc and Bank of Scotland Plc which are A/A+ and A+ rated
respectively.
15 Cash and cash equivalents
For the purpose of the interim condensed statement of cash
flows, cash and cash equivalents are comprised of:
30 June 2020 31 December
Unaudited 2019
Audited
GBP'000 GBP'000
-------------------------------------------- ------------- ------------
Unrestricted cash and bank balances 21,450 6,987
Bank balances held in relation to retained
commissions 14,185 13,880
Cash and cash equivalents 35,635 20,867
-------------------------------------------- ------------- ------------
Bank balances held in relation to retained commissions earned on
an indemnity basis in relation to life policies 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 and
other payables (note 12).
16 Share capital
Issued and fully paid
30 June 31 December
2020 2019
Unaudited Audited
GBP'000 GBP'000
------------------------------- -------- ------------
Ordinary shares of 0.1p each 52 52
Total share capital 52 52
------------------------------- -------- ------------
During the period 451,554 ordinary shares of 0.1p each were
issued following partial exercise of the fourth tranche of options
issued at the time of the Initial Public Offering of the Company,
partial exercise of options issued in May 2016 and May 2017 and
exercise of the options issued to Appointed Representatives in May
2015 at a total premium of GBP0.6m. See also note 18.
17 Related Party Transactions
The following details provide the total amount of transactions
that have been entered into with related parties during the six
months ended 30 June 2020 and 2019, as well as balances with
related parties as at 30 June 2020 and 31 December 2019.
During the period the Group paid commission of GBP530,102 (2019:
GBP227,575) to Buildstore Limited, an associate company. There was
a balance of GBP21,212 (2019: GBP47,932) of retained commission to
cover future lapses. At 30 June 2020, there was a loan outstanding
from Buildstore Limited of GBP26,391 (2019: GBP36,565) included in
trade and other receivables.
During the period the Group received introducer commission from
Sort Limited, a subsidiary of an associate company of GBP422,997
(2019: GBP389,157). There was an amount of GBP218,369 outstanding
from Sort Group Limited at 30 June 2020 (2019: GBP218,369) included
in trade and other receivables.
During the period the Group paid commission of GBP1,864,044
(2019: GBP1,980,876) to Clear Mortgage Solutions Limited, an
associate company. There was a balance of GBP311,683 (2019:
GBP265,992) of retained commission to cover future lapses. At 30
June 2020, there was no loan outstanding from Clear Mortgage
Solutions Limited (2019: GBPnil).
During the period the Group paid commission of GBP138,252 (2019:
GBP297,349) to Freedom 365 Mortgage Solutions Limited, an associate
company. There was a balance of GBP138,394 (2019: GBP133,090) of
retained commission to cover future lapses. At 30 June 2020,
following the write off of the loan balance, there was no loan
outstanding from Freedom 365 Mortgage Solutions Limited (2019: GBP1,202,453).
During the period the Group paid commission of GBP590,787 (2019:
GBP426,730) to Vita Financial Limited, an associate company. There
was a balance of GBP121,571 (2019: GBP125,229) of retained
commission to cover future lapses. At 30 June 2020, there was no
loan outstanding from Vita Financial Limited (2019: GBPnil).
At 30 June 2020 there was a loan outstanding from MAB Broker
Services PTY Limited, an associate company, of GBP 1,495,139
(AUD2,685,000) (2019: GBP1,014,535, (AUD1,900,000)) included in
trade and other receivables.
During the period the Group paid commission of GBP182,083 (2019:
GBP106,138) to Eagle & Lion Limited, an associate company.
There was a balance of GBP13,206 (2019: GBP10,982) of retained
commission to cover future lapses. At 30 June 2020, there was a
loan outstanding from Eagle & Lion Limited of GBP587,181 which
has been fully impaired due to a significant increase in expected
credit losses leaving a net balance of GBPnil (2019:
GBP565,000).
During the period the Group paid commission of GBP678,928 (2019:
GBP126,209) to The Mortgage Broker Limited, an associate company.
There was a balance of GBP91,777 (2019: GBP72,081) of retained
commission to cover future lapses. At 30 June 2020, there was a
loan outstanding from The Mortgage Broker Limited of GBP42,351
(2019: GBP84,705) included in trade and other receivables.
During the period the Group purchased services from Twenty7tec
Group Limited, a company in which the Group holds an investment, of
GBPnil (2019: GBP7,200).
During the period the Group received dividends from associate
companies as follow:
Six months ended 30 June
2020 2019
Unaudited Unaudited
GBP'000 GBP'000
------------------------ ----------- -----------
CO2 Commercial Limited 58 243
------------------------ ----------- -----------
18 Share based payments
No options were granted during the period.
Options exercised in February 2020 resulted in 13,933 ordinary
shares being issued at an exercise price of GBP3.58. The price of
the ordinary shares at the time of exercise was GBP7.56 per share.
Further options exercised in February 2020 resulted in 17,733
ordinary shares being issued at an exercise price of GBP3.58. The
price of the ordinary shares at the time of exercise was GBP7.60
per share.
Options exercised in April 2020 resulted in 85,643 ordinary
shares being issued at an exercise price of GBP1.60 and GBP4.31.
The price of the ordinary shares at the time of exercise was
GBP5.10 per share.
Options exercised in May 2020 resulted in 103,485 ordinary
shares being issued at an exercise price of GBP1.60 and GBP4.31.
The price of the ordinary shares at the time of exercise was
GBP5.80 per share.
Options exercised in June 2020 resulted in 230,760 ordinary
shares being issued at an exercise price at nominal value. The
price of the ordinary shares at the time of exercise was GBP5.95
per share.
For the six months ended 30 June 2020, the Group recognised
GBP603,189 of share based remuneration expense in the statement of
comprehensive income (2019: GBP442,490) which includes the charge
for equity-settled schemes, including Employer's National Insurance
of GBP212,690 (2019: GBP371,717 ) and the matching element of the
Group's Share Incentive Plan for all employees of GBP28,281 (2019:
GBP37,037). This also includes GBP227,968 relating to the IFRS2
charge of the First Mortgage option (2019: GBPnil).
19 Events after the reporting date
On 23 September 2020, the Group agreed to acquire a 40% interest
in Meridian Holdings Group Ltd, an appointed representative of the
Group, at a cost of GBP1.3 million.
On 25 September 2020, the Group agreed that Australian Finance
Group Ltd ("AFG") is to become the Group's new joint venture
partner for MAB Broker Services Pty Ltd ("MAB Broker Services") in
Australia. This will result in the Group's loan to MAB Broker
Services of AUD2,685,000 outstanding as at 30 June 2020 being
repaid and the Group investing AUD1,000,000 in MAB Broker
Services.
On 28 September 2020, the Board approved the reimbursement of
paycuts applied to the Group's non-furloughed employees, increasing
staff costs by GBP0.8m for the full year.
There were no other material events after the reporting period,
which have a bearing on the understanding of the consolidated
interim financial statements.
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END
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