TIDMMAB1
RNS Number : 2931G
Mortgage Advice Bureau(Holdings)PLC
28 March 2022
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
("MAB" or "the Group")
28 March 2022
Final Results for the year ended 31 December 2021
Mortgage Advice Bureau (Holdings) PLC (AIM: MAB1.L) is pleased
to announce its final results for the year ended 31 December
2021.
Financial highlights
2021 2020 2019 Change Change
vs 2020 vs 2019
Revenue GBP188.7m GBP148.3m GBP143.7m +27% +31%
----------- ----------- ----------- ----------- ----------
Gross profit GBP51.0m GBP39.8m GBP36.4m +28% +40%
----------- ----------- ----------- ----------- ----------
Gross profit margin 27.0% 26.9% 25.3% +0.1pp(1) +1.7pp
----------- ----------- ----------- ----------- ----------
Adjusted overheads
ratio(2) 14.8% 14.5% 12.4% +0.3pp +2.4pp
----------- ----------- ----------- ----------- ----------
Adjusted profit before
tax(3) GBP24.2m GBP17.8m GBP18.7m +36% +30%
----------- ----------- ----------- ----------- ----------
Statutory profit before
tax GBP23.2m GBP14.9m GBP17.7m +56% +31%
----------- ----------- ----------- ----------- ----------
Adjusted profit before
tax margin(3) 12.8% 12.0% 13.0% +0.8pp -0.2pp
----------- ----------- ----------- ----------- ----------
Adjusted profit before
tax as a percentage
of net revenue(4) 40.5% 37.9% 44.5% +2.6pp -4.0pp
----------- ----------- ----------- ----------- ----------
Reported profit before
tax margin 12.3% 10.0% 12.3% +2.3pp 0.0 pp
----------- ----------- ----------- ----------- ----------
Adjusted(3) EPS 37.1p 28.6p 30.1p +30% +23%
----------- ----------- ----------- ----------- ----------
Basic EPS 35.2p 23.7p 28.2p +49% +25%
----------- ----------- ----------- ----------- ----------
Operating profit to
adjusted cash conversion(5) 113% 112% 119% +1pp -6pp
----------- ----------- ----------- ----------- ----------
Full year dividend(6) 28.1p 19.2p 23.9p +46% +18%
----------- ----------- ----------- ----------- ----------
Operational highlights
-- Adviser numbers up 19% to 1,885(7) at 31 December 2021
(31 December 2020: 1,580)
-- Average number of mainstream advisers(8) up 13% to 1,649
(2020: 1,455)
-- Revenue per mainstream adviser up 12%(9)
-- Gross mortgage completions (including product transfers)
up 33% to GBP22.8bn (2020: GBP17.1bn)(10)
-- Gross new mortgage completions (excluding product transfers)
up 32% to GBP19.6bn (2020: GBP14.9bn)
-- Market share of new mortgage lending at 6.3% (2020: 6.1%)
with H2 2021 exceeding 7.0%(10)
-- Proportion of revenue from refinancing at 25% (2020:
32%)
-- Acquisition of a 25% stake in mortgage broker M & R FM
Ltd by the Group's subsidiary First Mortgage Direct
-- Strategic investment in Boomin, the next generation property
portal
-- Making significant progress in lead generation and early
customer engagement strategy through commercial agreements
with Boomin, The Nottingham Building Society and Moneybox
-- Acquisition of a 49% stake in Evolve Financial Solutions,
a new build specialist mortgage broker
-- Moneysupermarket.com secured as a major new lead source
in MAB's fast-growing lead generation capability
-- Acquisition of a 49% stake in new build mortgage broker,
Heron Financial Limited
-- Acquisition of 100% of new build specialist Metro Finance
Brokers Ltd by the Group's associate Meridian Holdings
Group Limited
Post period end
-- Adviser numbers further increased to 1,979 at 25 March
2022
-- Acquisition of 75.4% of The Fluent Money Group Limited
("Fluent")(11) , a fast-growing mortgage and specialist
lending intermediary for aggregators and other national
lead sources. The acquisition is subject to FCA approval
of change of control and is expected to complete in H2
2022
Peter Brodnicki, Chief Executive, commented:
"I am delighted to report another strong year where we achieved
revenue growth of 27% to GBP188.7m, and adjusted EPS growth of 30%
to 37.1p. Our mortgage completions increased by 33%, with growth
fuelled by strong consumer demand for housing and mortgage products
as well as the stamp duty holiday. Accordingly, the Board is
pleased to propose the payment of an increased final dividend of
14.7p per share, making a total proposed dividend for the year of
28.1p, up 46% on the prior year(6) .
"We believe the investments made during 2021 are of exceptional
quality and together with those that have been maturing in recent
years, will contribute strongly and significantly enhance MAB's
ability to achieve our accelerated growth plans.
"The addition of Fluent will be transformational for MAB's
national lead generation strategy. Fluent is a market leader in
centralised telephony advice and we are confident that the
competitive advantage from leveraging the reputation of both
businesses, together with combined resources to service rapidly
increasing lead generation, will enable the Enlarged Group to grow
this new market share opportunity quickly and effectively.
"We have started 2022 with a pronounced increase in adviser
numbers and a strong and growing pipeline of new business, ARs,
advisers and customer lead sources supporting our plans to secure
further profitable growth."
Current Trading and Outlook
The Group has started 2022 with a strong pipeline of written
business and adviser recruitment. Refinancing activity remains
positive and demand for housing continues to be very strong, with
an increasing number of property instruction driving greater
activity levels.
Gross new mortgage lending in 2021 increased to GBP313bn (2020:
GBP283bn), driven by a very strong purchase market. UK Finance
currently estimates gross new mortgage lending in 2022 will be
GBP281bn, increasing to GBP313bn in 2023.
Current trading is in line with the Board's expectations, which
were revised upwards in March 2021. The acquisition of Fluent is
expected to be significantly earnings enhancing in the first full
year following completion, and together with MAB's maturing and new
growth drivers will position the enlarged Group to further
accelerate its pace of growth.
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 / Giles Rolls
Media Enquiries: investor.relations@mab.org.uk
Analyst presentation
There will be an analyst presentation to discuss the results at
9:30am on Tuesday 29 March 2022.
Those analysts wishing to attend are asked to contact
investor.relations@mab.org.uk
Copies of this interim results announcement are available at
www.mortgageadvicebureau.com/investor-relations
(1) Percentage points.
(2) 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. The overheads
ratio in 2020 and 2021 is adjusted for GBP0.4m amortisation of
acquired intangibles (2019: GBP0.2m). In 2021, the overheads ratio
is also adjusted for GBP1.0m of additional non-cash operating
expenses relating to the put and call option agreement to acquire
the remaining 20% of First Mortgage (2020: GBP0.9m, 2019: GBP0.4m).
In 2019, adjusted overheads ratio is also stated before GBP0.4m of
costs associated with the acquisition of First Mortgage.
(3) Adjusted profit before tax is stated before the items in (2)
above, GBP0.3m of non-cash fair value gains on financial
instruments in 2021 and the loan write off and loan provision
totalling GBP1.7m in 2020. Adjusted earnings per share is stated on
the same basis, net of any associated tax effects.
(4) Net revenue is revenue less commissions paid. MAB acquired
First Mortgage on 2 July 2019. As the Group retains 100% of revenue
for First Mortgage, this calculation is rebased thereafter.
(5) Adjusted cash conversion is cash generated from operating
activities adjusted for movements in non-trading items, including
loans to AR firms and associates totalling GBP(0.7)m in 2021 (2020:
GBP(1.5)m; 2019: GBP0.9m), and increases in restricted cash
balances of GBP 2.4m in 2021 (2020: GBP0.6m; 2019: GBP2.2m), as a
percentage of adjusted operating profit.
(6) For 2021, proposed final dividend per share of 14.7p. The
2021 interim dividend per share was 13.4p. The 2020 final dividend
included a 6.4 pence per share "catch up" dividend from 2019, which
has been adjusted out of 2020 and in to 2019 to show more
appropriate comparisons. The dividend payout in 2021, 2020 and H2
2019 was circa 75% of profit after tax and minorities adjusting for
the non-cash items set out in (2) and (3) above ; H1 2019 was
90%.
(7) Includes a total of 47 advisers at 31 December 2021 who are
either directly authorised or later life advisers. The directly
authorised advisers are employees of a firm previously authorised
under an Appointed Representative agreement with MAB until 7
December 2020. MAB continues to provide services to this firm,
which is now directly authorised by the FCA. For both later life
and directly authorised advisers the fees received by MAB represent
the net income received by MAB as there are no commission payouts
made by MAB. Also includes 64 advisers from associates, who are in
the process of being onboarded under MAB's AR arrangements. These
advisers will shortly become mainstream advisers. Until these 64
advisers become onboarded fully as mainstream advisers, MAB
currently only recognises its share of profit after tax from these
associates.
(8) Excludes directly authorised advisers, later life advisers,
and advisers from associates in the process of being onboarded
under MAB's AR arrangements. In 2020 advisers on furlough were not
included.
(9) Based on average number of mainstream advisers.
(10) 2021 mortgage completions include completions from
associates in the process of being onboarded under MAB's AR
arrangements. 2020 market share and gross mortgage completions
re-stated to exclude completions from a firm previously authorised
under an Appointed Representative agreement with MAB and that
became directly authorised in December 2020.
(11) Acquisition of Project Finland Topco Limited, of which The
Fluent Money Group Ltd is a wholly-owned subsidiary.
Chief Executive's Review
I am very pleased with MAB's record performance in 2021. The
Group achieved revenue of GBP188.7m for the period, a 27% increase
on 2020 (GBP148.3m), which was impacted by the Covid-19 pandemic,
and a 31% increase compared to 2019 (GBP143.7m). The Group's
adjusted PBT rose 36% to GBP24.2m compared to 2020 (GBP17.8m) and
30% compared to 2019 (GBP18.7m).
The Group's mortgage completions also increased to record
levels, as set out below:
2021 2020 2019 Increase Increase
GBPbn GBPbn GBPbn vs 2020 vs 2019
------- ------- ------- ---------- ----------
New mortgage
completions 19.6 14.9 14.7 +32% +33%
------- ------- ------- ---------- ----------
Product Transfers 3.2 2.2 1.4 +45% +129%
------- ------- ------- ---------- ----------
Gross mortgage
completions
(1) 22.8 17.1 16.1 +33% +42%
------- ------- ------- ---------- ----------
UK gross new mortgage lending activity (excluding product
transfers) in 2021 rose by 27% to GBP313.2bn compared to 2020,
which was affected by the closure of the housing market in Q2 2020,
and by 17% compared to 2019. The increase in home-mover activity
was particularly pronounced, largely driven by changing working and
living patterns and the stamp duty holiday.
The Group's gross mortgage completions (including Product
Transfers) rose to GBP22.8bn, a 33% increase compared to 2020, and
a 42% increase compared to 2019. Our market share of UK new
mortgage lending increased by 3% to 6.3% (2020: 6.1% (1) ), with
our H2 2021 market share exceeding 7.0%.
Recruitment activity was strong during the period, with adviser
numbers up 19% to 1,885, despite the regulatory approval of new AR
firms taking longer than in previous years and hence delaying our
growth in Adviser numbers.
(1) 2021 mortgage completions include completions from
associates in the process of being onboarded under MAB's AR
arrangements. 2020 mortgage completions re-stated to exclude
completions from a firm previously authorised under an Appointed
Representative agreement with MAB that became directly authorised
in December 2020.
Delivering our growth strategy
Investment strategy
Our investments play a key part in our plans for accelerated
growth and are an integral part of our lead generation strategy.
First Mortgage Direct and Fluent, are two exceptional businesses
that provide MAB with specialist expertise, which alongside our key
AR partners, will place MAB in a market leading position to handle
national lead sources of scale.
Our investment in Meridian Holdings Group Limited ("Meridian")
in 2020, followed by investments in Evolve FS Ltd ("Evolve
Financial Solutions") and Heron Financial Limited in 2021 plus the
acquisition of Metro Finance Brokers Ltd by Meridian, have put MAB
in an equally strong position in terms of new build, with these
firms rapidly growing market share. Combined with our existing
specialist firms, MAB now has a standout national new build
proposition, supported by technology that has been built to the
requirements of developers and brokers in this sector.
The average adviser productivity of our invested businesses in
2021 was over 25% higher than our other ARs, and we expect this to
increase further as a result of the high quality investments
completed during the year. Productivity improvements benefit MAB's
overall overheads ratio, and importantly also impact more
significantly the profitability of our AR firms, including those
that MAB has invested in. Strong, guaranteed customer lead flow
supports productivity, profitability and scalability, and our
recent investments have significantly enhanced the Group's ability
to achieve our accelerated growth plans, and further strengthen
MAB's market position.
Fluent is a leader in centralised telephone mortgage advice,
with MAB having also targeted this fast-growing sector, by using
technology to seamlessly link MAB's key AR partners and invested
firms, to deliver a best-in-class telephone advice service able to
scale significantly. Combined, Fluent and MAB can grow this new
market share opportunity quickly and effectively, complementing the
local/regional strategy delivered by the rest of the Group's
growing distribution.
Although the contribution from some of our smaller historic
investments, including our joint venture in Australia, has taken
time to build, these investments are starting to mature. Our
investment strategy in the last few years has focused on further
strengthening our new build proposition and market share, and
ensuring we have the expertise and scale to establish a market
leading position in the national lead source sector, which is a
major new market share opportunity for MAB.
We expect the additional lead flow MAB can generate for its
invested-in business, combined with its existing growth trajectory,
strong protection success, and growing productivity per adviser,
will result in a significant contribution to profit growth over the
next five years.
Customer lead generation
MAB continues to grow in its core markets of estate agency and
new build, with technology developments, such as our Homebuyer App,
enabling MAB to generate additional customer lead opportunities
from data when a referral is not actually made by a builder or an
estate agent.
There is a significant opportunity to generate lead flow
digitally, and really leverage the extensive estate agency and new
build firm partnerships that we have. In addition, our new
technology initiatives will allow us to access new and untapped
opportunities from landlords and tenants.
We have completed our initial pilot studies, and expect this
incremental lead flow from existing lead sources to start being
realised in 2023. We also expect MAB's retention rate of existing
customers to be positively impacted by the launch of our new
platform functionality.
In 2021 MAB secured its first national lead sources, Money
Supermarket, Boomin, and Lifetime ISA provider, Beehive. Technology
integrations and pilot studies have been completed with these
exceptional businesses, and lead flow will start to build this
year, with more high-quality partnerships currently onboarding.
Combined with the rapid growth of Fluent in this sector, we expect
to see this new lead flow for MAB start to come through in H2 2022
and build strongly in 2023.
As part of MAB's wider protection strategy, we intend to extend
Vita Financial Limited's proposition into a wider addressable
market, to fully leverage its expertise which is currently focused
on supporting MAB's ARs.
MAB's policy is not to authorise advisers in Secured Personal
Loans, Commercial, or Bridging Finance, with ARs currently
referring this business to a number third party providers. We plan
to open up these sectors to specialist advisers by the year end,
generating more focus and opportunity on lead flow. This will be
further strengthened by Fluent, which already provides advice and
delivers strong margins in these specialist areas.
New lead initiatives are also being tested in the existing
specialist sectors of Equity Release and Wealth (pension and
investments). We expect these initiatives to increase productivity
and adviser growth in these areas in H2 2022 and into 2023
Adviser growth
Adviser growth will continue to be a major focus, boosted by the
need to service new lead flow, whilst using technology to help
maximise opportunities from existing customers and lead sources.
The addition of new customer lead flow into the ARs we have
invested in, plus our other key AR firms, will further help organic
growth and adviser retention.
Further investments and acquisitions will continue to add to
adviser numbers alongside organic growth and new firm recruitment,
with some of our existing firms making their own strategic
acquisitions to achieve their respective growth ambitions.
With increasing expectations from the regulator, more directly
authorised firms are seeking greater support from a strategic
partner like MAB. We expect the recruitment of growth driven firms
to remain strong, supported by the continued development of our
technology platform.
Summary
With technology now a serious enabler for MAB, the management
team further strengthened, and some strategically important
investments made, the Board expects MAB to build a market leading
position over the next five years, with an uplift in profits that
reflects this.
Our technology and the exceptionally high calibre investments we
have made, are major drivers of our lead generation strategy.
Combined, they support adviser performance and market share growth,
enabling MAB to benefit fully from productivity gains.
Although consumer demand for property and refinancing remains
very high, MAB has historically delivered growth in all market
conditions. The strategy we are now delivering, underpins our
ability to achieve accelerated growth and a market leading
position.
Market review
In 2021, strong consumer demand, coupled with the stamp duty
holiday, generated high levels of purchase activity in the housing
market and stimulated the overall demand for mortgages.
With the stamp duty holiday originally set to end on 31 March
2021, and then extended to 30 June 2021, the housing market saw
particularly high levels of activity in the run up to those dates.
In H1 2021, housing transactions increased by 104% compared to H1
2020, which was affected by the closure of the housing market
during Q2 2020, and 52% compared to H1 2019.
As anticipated, housing market activity softened in H2 2021
following the tapering down of the stamp duty holiday until 30
September 2021 and its removal thereafter. Overall, housing
transactions in 2021 increased by 43% and 26% compared to 2020 and
2019 respectively. This is illustrated in the graph below.
http://www.rns-pdf.londonstockexchange.com/rns/2931G_3-2022-3-28.pdf
Source: HM Revenue and Customs
Gross new mortgage lending activity saw a similar trend in 2021.
In the first half of the year, gross new mortgage lending
(excluding product transfers) increased by 60% and 37% compared to
H1 2020 and H1 2019 respectively. Home-mover lending values grew by
132% and 70% compared to H1 2020 and H1 2019 respectively, largely
driven by changing working and living patterns. Buy-to-let purchase
lending values also saw significant growth of 121% and 81% compared
to H1 2020 and H1 2019 respectively, with the stamp duty holiday
providing a compelling stimulus in that segment. The demand from
first time buyers was also strong, with mortgage lending increasing
by 75% and 29% compared to H1 2020 and H1 2019 respectively in that
segment.
The gross new mortgage lending market softened in H2 2021.
Residential and buy-to-let purchase values decreased by 4% compared
to H2 2020 (increase of 5% compared to H2 2019). External
re-mortgage lending values increased by 16% compared to H2 2020 and
decreased by 13% compared to H2 2019.
Overall, gross new mortgage lending activity (excluding Product
Transfers) in 2021 rose by 27% to GBP313.2bn compared to 2020 and
17% compared to 2019. This was driven by a strong purchase market,
with residential and buy-to-let purchase lending values increasing
by 47% and 40% compared to 2020 and 2019 respectively.
Re-financing activity remained steady, driven by Product
Transfers. Product Transfer lending values increased by 10% and 11%
compared to 2020 and 2019 respectively. External Re-mortgage
lending values decreased by 1% and 17% compared to 2020 and 2019,
as lenders and intermediaries applied maximum focus towards the
exceptionally busy housing market. New refinancing activity
increased in H2 as expected, but much of this activity won't
complete until 2022.
The trends in gross new mortgage lending are illustrated in the
graph below.
http://www.rns-pdf.londonstockexchange.com/rns/2931G_2-2022-3-28.pdf
Source: UK Finance
The increase in average house prices in 2021 was 10% compared to
2020 and 13% compared to 2019, but these house price increases did
not fully feed through to higher average new mortgage values due to
the lack of availability of high loan to value mortgages through
much of the year.
Approximately 80% 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 2021 (2020: 79%). MAB
expects this position to remain broadly stable in the near
term.
UK Finance's current estimate of gross new mortgage lending in
2022 is GBP281bn, representing a 10% reduction versus 2021 and with
higher levels of refinancing forecast. For 2023, UK Finance
currently estimates that gross new mortgage lending will increase
back to GBP313bn.
Despite an increasing inflation environment and geopolitical
uncertainty, consumer demand for housing and mortgages remains
strong. We are confident that this, coupled with lenders' high
liquidity levels and a return of higher loan to value products to
near pre-pandemic levels, will continue to drive sustained
transaction activity in the mortgage market in the short and medium
term.
(1) Land Registry House Price Index
Financial review
We measure the development, performance, and position of our
business against several key indicators.
http://www.rns-pdf.londonstockexchange.com/rns/2931G_1-2022-3-28.pdf
Revenue
The Group achieved revenue of GBP188.7m for the year ended 31
December 2021. This represents a 27% increase on 2020 (GBP148.3m),
and a 31% increase compared to 2019. The increase in revenue since
2020, which was impacted by the pandemic, is driven by the
combination of a 13% increase in the average number of active
mainstream advisers(1) to 1,649 (2020: 1,455) and a 12% increase in
revenue per active mainstream adviser.
The increase in revenue since 2019 is driven by the combination
of a 23% increase in the average number of mainstream advisers(1)
to 1,649 over the two-year period (2019: 1,341) and a 7% increase
in revenue per mainstream adviser.
The Group continued to generate revenue from three core areas,
with all key income sources continuing to grow strongly. These are
summarised as follows:
Group
Change Change
Income source 2021 2020 2019 vs 2020 vs 2019
------- ------- ------- ---------- ----------
GBPm GBPm GBPm % %
------- ------- ------- ---------- ----------
Mortgage Procuration Fees 85.1 67.2 64.3 +27 +32
------- ------- ------- ---------- ----------
Protection and General Insurance
Commission 75.3 58.8 56.2 +28 +34
------- ------- ------- ---------- ----------
Client Fees 23.2 19.0 20.2 +22 +15
------- ------- ------- ---------- ----------
Other Income 5.1 3.3 3.0 +55 +70
------- ------- ------- ---------- ----------
Total 188.7 148.3 143.7 +27 +31
------- ------- ------- ---------- ----------
In the first half of the year, MAB's banked mortgage mix saw a
higher proportion of purchase business compared to the prior year,
and versus H1 2019. Strong underlying demand, combined with the
various stamp duty incentives, were in marked contrast to the prior
year, when the first national lockdown severely restricted the
completion of purchase transactions.
In the second half of the year, and with the final element of
stamp duty relief coming to an end on 30 September 2021, MAB's
banked mortgage mix saw an increased proportion of re-financing
transactions compared to the first half of the year, in part driven
by a high level of fixed interest rates on consumers' current
mortgages coming to an end and also by the prospect of rising
interest rates. Banking for purchase related mortgages was again
slower than historical averages, as lenders operated with reduced
and stretched operations, and significantly increased new business
volumes. Additionally, an overall lack of property stock for sale
meant that housing chains took longer to complete.
Mortgage procuration fees increased by 27% with gross mortgage
completions increasing by 29%(2) , with an increased proportion of
product transfers. MAB's average mortgage size increased by 4%
compared to prior year, driven by the increase in house prices in
the period. The average mortgage size in the year however did not
rise at an equivalent level to house price growth due to the lack
of availability of high loan to value mortgages throughout much of
the year.
With mortgage completions increasing by 29%(2) , protection and
general insurance commission increased by 28% and client fees
increased by 22% for the year.
MAB's overall revenue from refinancing (including both
Re-mortgages and Product Transfers) represented circa 25% (2020:
32%, 2019: 31%) of total revenue for the year with a particularly
high level of purchase transactions during the year.
The proportion of revenue derived from each of the Group's core
revenue streams has remained relatively stable, despite the
short-term impact of the stamp duty changes during the year, as
summarised below.
Income source 2021 2020 2019
Mortgage Procuration Fees 45% 45% 45%
------ ------ ------
Protection and General Insurance
Commission 40% 40% 39%
------ ------ ------
Client Fees 12% 13% 14%
------ ------ ------
Other Income 3% 2% 2%
------ ------ ------
Total 100% 100% 100%
------ ------ ------
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 are our lowest margin revenue
stream.
Gross profit margin
Gross profit margin remained stable at 27.0% (2020: 26.9%). The
Group typically receives a slightly reduced margin (revenue share)
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 a slight degree of
erosion of our underlying gross profit margin due to the continued
growth of our existing ARs and the addition of new larger ARs. MAB
expects the slight erosion in its underlying gross margin to be
countered by the reduction in its overheads ratio.
MAB continues to provide services to a firm previously
authorised under an Appointed Representative agreement until 7
December 2020 but now directly authorised by the FCA. As a result,
going forward, the fees received by MAB represent the total income
in respect of this arrangement. No commission will be paid out by
MAB to this firm as it receives its income direct. The effect of
this is to slightly increase the gross profit margin.
Overheads
Overheads increased by GBP6.4m to GBP29.2m, reflecting MAB's
continued investment in growth, and specifically in its technology
platform and its marketing team through a mix of employee and third
party costs, which drives lead generation opportunities. Head
office costs, including those of First Mortgage, also increased to
support the Group's continued growth. All development work on MAB's
MIDAS Pro platform is expensed. Adjusted(3) overheads as a
percentage of revenue were 14.8% (2020: 14.5%).
Our FCA and FSCS regulatory fees and charges are usually closely
correlated to growth in revenue. MAB had expected its FSCS levy
cost for the period from 1 April 2021 to 31 March 2022 to be
significantly higher than in the prior year, due to increased
business failures caused by the pandemic, an increase in complex
pension advice claims and further failures of SIPP operators. The
reaction of other mortgage intermediaries to this unfair allocation
of levies was widely reported in trade media and MAB supported the
challenge made by the Association of Mortgage Intermediaries (AMI),
the trade association that represents the views and interests of UK
mortgage brokers, so that future levies could become better
signposted and fairer. In November 2021, FSCS confirmed that the
levy costs that firms in the Home Finance category would bear would
not be significantly higher than in the prior year.
MAB continues to benefit from the scalable nature of most of its
cost base, where those costs typically rise at a slower rate than
revenue, which will, in part, counter the expected slight erosion
of MAB's underlying gross margin as the business continues to
grow.
Associates and Investments
MAB's share of profits from Associates was GBP1.0m (2020:
GBP0.04m) with the majority of the Group's Associates performing
strongly during the year. In addition, we realised our minority
investment in the sales progression platform Yourkeys Technology
Ltd, making a profit of GBP0.3m, and further impaired the value of
the investment in The Mortgage Broker Group Limited by GBP0.4m.
MAB made a number of key investments during the year with
GBP5.0m invested in Associates and GBP2.5m in a minority interest
in Boomin, and has also accounted for GBP2.2m in deferred
consideration in respect of the investments made in Associates
during the year.
MAB considers that the value of a number of these investments
exceeds their balance sheet value as accounted for using the equity
accounting method under IAS 28.
Profit before tax and margin thereon
Adjusted(3) profit before tax rose by 36% to GBP24.2m (2020:
GBP17.8m), with the margin thereon increasing to 12.8% (2020:
12.0%). Statutory profit before tax rose by 56% to GBP23.2m (2020:
GBP14.9m) with the margin thereon increasing to 12.3% (2020:
10.0%).
Adjusted(3) profit before tax as a percentage of net revenue(4)
was 40.5% (2020: 37.9%).
Finance revenue
Finance income of GBP0.05m (2020: GBP0.1m) reflects continued
low interest rates and interest income accrued on loans to
associates. Finance expense of GBP0.2m (2020: GBP0.2m) reflects the
interest expense on lease liabilities and the non-utilisation fee
payable on MAB's previous Revolving Credit Facility of GBP12m. MAB
did not draw down its GBP12m Revolving Credit Facility during the
year having repaid it in full on 23 December 2020.
Taxation
The effective rate of tax increased to 16.9% (2020: 14.0%),
principally due to the deduction arising from the exercise of
employee and Appointed Representative share options being greater
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 the MIDAS Platform, 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(4) earnings per share increased by 30% to 37.1 pence
(2020: 28.6 pence). Basic earnings per share increased by 49% to
35.2 pence (2020: 23.7 pence).
The Board is pleased to propose a final dividend of 14.7 per
share (2020: 19.2 pence), which represents a cash outlay of GBP7.8m
on the existing issued share capital prior to the placing.
Following payment of the dividend, the Group will retain
significant surplus regulatory reserves. The proposed final
dividend represents circa 75% of the Group's adjusted(5) post-tax
and minority interest profits for H2 2021 and reflects our ongoing
intention to distribute excess capital in line with our previously
announced dividend policy. The final dividend for 2020 represented
circa 75% of the Group's adjusted(5) post-tax and minority interest
profits for the whole of 2020 as no interim dividend was paid in
respect of the post-tax and minority interest profits generated in
H1 2020.
The record date for the final dividend will be 29 April 2022 and
the payment date 30 May 2022. The ex-dividend date will be 28 April
2022.
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
GBP26.9m (2020: GBP17.8m).
Headline cash conversion(6) was:
2021 123%
-----------------
2020 115%
-----------------
Adjusted cash conversion(7) was:
2021 113%
-----------------
2020 112%
-----------------
The Group's operations are capital-light, with the most
significant ongoing capital investment being in computer equipment.
Only GBP0.2m of capital expenditure on office and computer
equipment was required during the year (2020: GBP0.3m). Group
policy is not to provide company cars, and no other significant
capital expenditure is foreseen in the coming year other than with
regards to MAB's head office facilities in Derby.
The Group had no bank borrowings on 31 December 2021 (2020:
GBPnil). The Group had unrestricted bank balances of GBP17.5m on 31
December 2021 (31 December 2020: GBP18.6m).
The Group has a regulatory capital requirement amounting to 2.5%
of regulated revenue. On 31 December 2021 this regulatory capital
requirement was GBP4.3m (31 December 2020: GBP3.4m), with the Group
having a surplus of GBP18.9m (31 December 2020: GBP17.1m).
The following table demonstrates how cash generated from
operations was applied:
GBPm
Unrestricted bank balances at the beginning of the year 18.6
Cash generated from operating activities excluding movements in restricted balances and dividends
received from associates 27.6
Dividends received from associates 0.2
Dividends paid (17.3)
Dividends paid to minority interest (0.3)
Tax paid (3.4)
Proceeds from sale of non-listed equity investment 0.3
Investment in associates (5.0)
Investment in non-listed equity shares (2.5)
Net interest paid and principal element of lease payments (0.5)
Capital expenditure (0.2)
Unrestricted net bank balances at the end of the year 17.5
---------------------------------------------------------------------------------------------------- --------
(1) Excludes directly authorised advisers, later life advisers,
and advisers from associates in the process of being onboarded
under MAB's AR arrangements. In 2020 advisers on furlough were not
included.
(2) Stated before completions from associates in the process of
being onboarded under MAB's AR arrangements to produce more
appropriate comparisons against revenue metrics.
(3) In 2021 and 2020 adjusted for GBP0.4m amortisation of
acquired intangibles. In 2021, adjusted for GBP1.0m of additional
non-cash operating expenses relating to the put and call option
agreement to acquire the remaining 20% of First Mortgage (2020:
GBP0.9m), GBP0.3m of non-cash fair value gains on financial
instruments in 2021 and
the loan write off and loan provision totalling GBP1.7m in 2020.
(4) Net revenue is revenue less commissions paid. MAB acquired
First Mortgage on 2 July 2019. As the Group retains 100% of revenue
for First Mortgage, this calculation is rebased thereafter.
(5) Adjusted for the items in (2), net of any associated tax
effects.
(6) Headline cash conversion is cash generated from operating
activities adjusted for movements in non-trading items, including
loans to AR firms and associates totalling GBP(0.7)m in 2021 (2020:
GBP(1.5)m), as a percentage of adjusted operating profit.
(7) Adjusted cash conversion is headline cash conversion
adjusted for increases in restricted cash balances of GBP2.4m in
2021 (2020: GBP0.6m) as a percentage of adjusted operating
profit.
Independent auditor's report to the members of Mortgage Advice
Bureau (Holdings) PLC
Opinion on the financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
December 2021 and of the Group's profit for the year then
ended;
-- the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
-- the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Mortgage Advice
Bureau (Holdings) PLC (the 'Parent Company') and its subsidiaries
(the 'Group') for the year ended 31 December 2021 which comprise
the consolidated statement of comprehensive income, consolidated
and company statement of financial position, consolidated and
company statement of changes in equity, consolidated statement of
cash flows, and notes to the financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and
UK adopted international accounting standards. The financial
reporting framework that has been applied in the preparation of the
Parent Company financial statements is applicable law and United
Kingdom Accounting Standards, including Financial Reporting
Standard 102 The Financial Reporting Standard in the United Kingdom
and Republic of Ireland (United Kingdom Generally Accepted
Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion. Our audit opinion is consistent with the
additional report to the audit committee.
Independence
Following the recommendation of the Audit Committee we were
appointed by the Board to audit the financial statements for the
year ended 31 December 2014 and subsequent financial periods. In
respect of the year ended we were appointed at the Annual General
Meeting on 25 May 2021 to audit the financial statements for the
year ended 31 December 2021. The period of total uninterrupted
engagement is 8 years, covering the years ended 31 December 2014 to
31 December 2021.
We remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's
Ethical Standard as applied to public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements. The non-audit services prohibited by that
standard were not provided to the Group or the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the Directors' assessment of the Group's and the
Parent Company's ability to continue to adopt the going concern
basis of accounting included:
-- In evaluating whether the Group is a going-concern, we have
assessed the reasonableness of the assumptions within the
Directors' forecast for liquidity and profitability for a period of
12 months from the signing of these accounts, agreeing back to
supporting evidence. This involved considering the base and stress
scenarios testing undertaken by management to support the Going
concern assessment which included assumptions about the potential
impact this could have on revenue (mainly from purchase mortgages)
and possible cost saving measures. We focused on the cash and
capital position during this period.
-- We have also searched publicly available information on the
housing market and house price index to assess any impact on the
Group's business.
-- We assessed how the Directors have factored in inflationary
pressures and the potential impact of the Ukraine/Russia conflict
on the business, checking these had been appropriately considered
as part of the Directors' going concern assessment.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group's and the Parent Company's ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
Coverage 100% (2020: 100%) of Group profit before tax
100% (2020: 100%) of Group revenue
100% (2020: 100%) of Group total assets
Key audit matters 2021 2020
Revenue Recognition P P
Clawback Provision P P
Carrying value O P
of loans to associates
and joint ventures
Investment in associates P O
Carrying value of loans to associates and
joint ventures is no longer considered
a key audit matter due to the size of the
balance this year
---------------------------------------------------
Materiality Group financial statements as a whole
GBP918,000 (2020: GBP804,000) based on 5%
(2020: 5%) of Profit before tax, over a 3
year average (2020: 3 year average)
---------------------------------------------------
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a
risk of material misstatement.
The Group is made up of the parent company and its wholly owned
subsidiaries. The significant components are the parent company,
MAB Limited and MAB Derby Limited. These three components were
subject to full scope audits performed by the Group audit team. In
respect of the non-significant components the Group audit team
carried out specific procedures on balances that we identified as
material to the Group.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Key audit matter How the scope of our audit
addressed the key audit matter
Revenue Recognition The Group's revenue We responded to this risk by
comprises of commissions performing the following procedures:
See accounting (including procuration * We assessed that revenue is recognised in line with
policies fees), client fees Group approved policies that are in accordance with
in note 1 and other income. accounting standards. This included assessment of how
to the financial Revenue recognition revenue is being recognised versus the requirements
statements. is considered to be of the applicable financial reporting standard.
a significant audit
risk as it is a key
driver of return to * We tested the operating effectiveness of the
investors and there reconciliation controls in place between revenue and
is a risk that there cash banked and agreed this to third party reports.
could be manipulation
or omission of amounts
recorded in the system. * For commission income we obtained the third party
reports and tested a sample back to cash receipts.
* Using third party reports, we recalculated all the
procuration fees independently.
* For other income we agreed a sample to providers'
statements and cash receipts.
* We agreed a sample of other income to third party
support.
* We vouched a sample of revenue to third party reports
and cash to check that they have been accounted for
in the correct period.
Key observations:
Based on these procedures we
consider revenue to have been
recognised appropriately in
line with accounting standards.
------------------------------ --------------------------------------------------------------
Clawback The clawback provision We responded to this risk by
provision relates to the estimated performing the following procedures:
value of repaying * We compared the relevant assumptions e.g. unearned
Management's commission received commission, likely future lapse rates and lapse rate
associated up front on life assurance history used in the model with third party reports.
accounting policies that may
policies lapse in a period
with detail of up to four years * For other assumptions e.g. age profile of the
about judgements following inception commission received, the Group's share of any
in applying of the policies. clawback, and the success of the Appointed
accounting The clawback provision Representatives in preventing lapses and/or
policies is considered a significant generating new income at the point of a lapse, we
and critical audit risk due to validated these to management's supporting analysis
accounting the management judgement of the Group's actual experience based on data
estimates and estimation applied gathered from providers' statements.
are outlined in calculating the
in the notes repayment commission
to the financial and we therefore considered * We tested the arithmetical accuracy of the
statements. this to a key audit spreadsheet model.
matter.
* We agreed inputs back to supporting documentation.
Key observations:
Based on the procedures undertaken
we consider the judgments and
estimates made by management
in calculating the clawback
provision to be reasonable.
------------------------------ --------------------------------------------------------------
Investments During 2021, the Group We responded to this risk by
in associates made various investments performing the following procedures:
Management's in associates with
associated consideration for * We tested that the accounting treatment of the
accounting certain investments investments in associates was in accordance with IAS
policies including both cash 28 and for relevant options and commitments for
with the and deferred payments. future commitments to be in accordance with IFRS 9.
detail about The Group has also
judgements entered into option
in applying agreements or commitments * We obtained and vouched the key terms in the Share
accounting for future increases purchase agreements.
policies in stakes or full
and critical acquisitions on a
accounting number of the investments. * We agreed the terms of the options to signed
estimates agreements.
are outlined
in the notes
to the financial * We engaged our internal valuation expert to review
statements. the valuation of the options.
* We agreed the cash consideration to bank statements.
* We have tested management's deferred consideration
calculation by agreeing the inputs back to supporting
documentation.
* We have tested that deferred consideration has been
accounted for at the date of acquisition in line with
IAS 28 and IFRS 3.
Key observations:
As a result of our procedures
we considered that investment
in associates and the options
to have been accounted in line
with accounting standards and
the judgements and estimates
made around the deferred consideration
and valuation of options to
be reasonable.
------------------------------ --------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Group financial statements Parent company financial
statements
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
-------------- -------------- -------------- ---------------
Materiality GBP918,000 GBP804,000 GBP214,000 GBP223,000
-------------- -------------- -------------- ---------------
Basis for determining 5% of 3 year average 5% of net assets
materiality profit before tax
------------------------------ -------------------------------
Rationale for Selected as our benchmark Given that the entity
the benchmark as the entity is listed is a holding company,
applied with profitability seen it is appropriate to
as the main interest determine materiality
of investors. based off of net assets.
------------------------------ -------------------------------
Performance GBP688,000 GBP603,000 GBP160,000 GBP167,000
materiality
-------------- -------------- ---------------- -------------
Basis for determining 75% of materiality based on our risk assessment
performance and our assessment of expected total value of
materiality known and likely misstatements.
---------------------------------------------------------------
Component materiality
We set materiality for each component of the Group based on a
percentage of 75% of Group materiality dependent on the size and
our assessment of the risk of material misstatement of that
component. Component materiality is set at GBP689,000 (2020:
GBP603,000).
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of GBP18,000 (2020:
GBP16,000) for the Group and GBP4,000 (2020: GBP4,000) for the
parent company. We also agreed to report differences below this
threshold that, in our view, warranted reporting on qualitative
grounds.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the annual
report other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and
matters as described below.
Strategic In our opinion, based on the work undertaken
report and in the course of the audit:
Directors' * the information given in the Strategic report and the
report Directors' report for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
* the Strategic report and the Directors' report have
been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding
of the Group and Parent Company and its environment
obtained in the course of the audit, we have
not identified material misstatements in the
strategic report or the Directors' report.
Matters on We have nothing to report in respect of the following
which we matters in relation to which the Companies Act
are required 2006 requires us to report to you if, in our
to report opinion:
by exception
* adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
* the Parent Company financial statements are not in
agreement with the accounting records and returns; or
* certain disclosures of Directors' remuneration
specified by law are not made; or
* we have not received all the information and
explanations we require for our audit.
--------------------------------------------------------------
Responsibilities of Directors
As explained more fully in the Directors' responsibilities
statement , the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
We gained an understanding of the legal and regulatory framework
applicable to the Group and the industry in which it operates and
considered the risk of acts by the Group which would be contrary to
applicable laws and regulations, including fraud. These included
but were not limited to compliance with the Financial Conduct
Authority ("FCA") regulations, FCA Mortgage Advice and Selling
Standards and tax legislation.
We assessed the susceptibility of the financial statements to
material misstatement, including fraud and considered the fraud
risk areas to be management override of controls and in relation to
accounting estimates
such as revenue recognition and the clawback provision. See Key Audit Matters above.
We focused on laws and regulations that could give rise to a
material misstatement in the company financial statements. Our
tests included, but were not limited to:
-- reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with relevant laws
and regulations discussed above;
-- enquiring of management and the audit committee;
-- performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
-- reading minutes of meetings of those charged with governance
and correspondence with the Financial Conduct Authority;
-- in addressing the risk of fraud through management override
of controls, testing the appropriateness of journal entries and
other adjustments;
-- assessing whether the judgements made in making accounting
estimates are indicative of a potential bias; and
-- evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of
business.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members including
internal specialists and remained alert to any indications of fraud
or non-compliance with laws and regulations throughout the
audit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Ariel Grosberg (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
Consolidated statement of comprehensive income
for the year ended 31 December 2021
Note
2021 2020
GBP'000 GBP'000
------------------------------------------------ ------ ----------- -----------
Revenue 3 188,663 148,298
Cost of sales 4 (137,697) (108,466)
------------------------------------------------ ------ ----------- -----------
Gross profit 50,966 39,832
Administrative expenses (29,178) (22,742)
Impairment of loans to related parties 18 (16) (1,680)
Share of profit of associates, net of
tax 15 1,011 36
Impairment and amount written off associates 15 (408) (473)
Profit on sale of non-listed equity
investment 16 311 -
Gain on fair value measurement of non-listed
equity investment 16 283 -
Gains on fair value measurement of derivative
financial instruments 15 328 -
------------------------------------------------ ------ ----------- -----------
Operating profit 6 23,297 14,973
------------------------------------------------ -----------
Finance income 8 45 120
Finance expense 8 (160) (234)
------------------------------------------------ ------ ----------- -----------
Profit before tax 23,182 14,859
Tax expense 9 (3,910) (2,081)
------------------------------------------------ ------ ----------- -----------
Profit for the year 19,272 12,778
------------------------------------------------ ------ ----------- -----------
Total comprehensive income 19,272 12,778
------------------------------------------------ ------ ----------- -----------
Profit is attributable to:
Equity owners of Parent Company 18,722 12,379
Non-controlling interests 550 399
------------------------------------- ---- ---------- --------
19,272 12,778
------------------------------------- ---- ---------- --------
Earnings per share attributable to the owners of
the Parent Company
Basic 10 35.2p 23.7p
------------------------------------- ---- ---------- --------
Diluted 10 35.0p 23.6p
------------------------------------- ---- ---------- --------
All amounts shown relate to continuing activities.
The notes that follow form part of these financial
statements.
Consolidated statement of financial position
as at 31 December 2021
2021 2020
Note GBP'000 GBP'000
----------------------------------- ------- ---------- ----------
Assets
Non-current assets
Property, plant and equipment 12 2,667 2,847
Right of use assets 13 2,457 2,590
Goodwill 14 15,155 15,155
Other intangible assets 14 2,704 3,262
Investments in associates and
joint venture 15 12,433 4,883
Investments in non-listed equity
shares 16 2,783 75
Derivative financial instruments 15 220 -
Other receivables 18 1,098 806
Deferred tax asset 23 1,871 822
----------------------------------- ------- ---------- ----------
Total non-current assets 41,388 30,440
----------------------------------- ------- ---------- ----------
Current assets
Trade and other receivables 18 6,341 5,603
Derivative financial instruments 15 142 -
Cash and cash equivalents 19 34,411 32,981
----------------------------------- ------- ---------- ----------
Total current assets 40,894 38,584
----------------------------------- ------- ---------- ----------
Total assets 82,282 69,024
----------------------------------- ------- ---------- ----------
Equity and liabilities
Share capital 24 53 53
Share premium 9,778 9,778
Capital redemption reserve 20 20
Share option reserve 3,523 1,807
Retained earnings 25,408 23,882
----------------------------------- ------- ---------- ----------
Equity attributable to owners
of the Parent Company 38,782 35,540
Non-controlling interests 2,205 1,908
Total equity 40,987 37,448
----------------------------------- ------- ---------- ----------
Liabilities
Non-current liabilities
Provisions 22 5,716 4,576
Lease liabilities 13 2,202 2,352
Derivative financial instruments 15 34 -
Deferred tax liability 23 757 643
----------------------------------- ------- ---------- ----------
Total non-current liabilities 8,709 7,571
----------------------------------- ------- ---------- ----------
Current liabilities
Trade and other payables 20 31,925 23,662
Lease liabilities 13 394 343
Corporation tax liability 267 -
----------------------------------- ------- ---------- ----------
Total current liabilities 32,586 24,005
----------------------------------- ------- ---------- ----------
Total liabilities 41,295 31,576
----------------------------------- ------- ---------- ----------
Total equity and liabilities 82,282 69,024
----------------------------------- ------- ---------- ----------
The notes that follow form part of these financial
statements.
The financial statements were approved by the Board of Directors
on 28 March 2022.
P Brodnicki L Tilley
Director Director
Consolidated statement of changes in equity
for the year ended 31 December 2021
Attributable to the holders
of the Parent Company
---------- ---------- ------------------------------------------------- ----------
Capital Share Non-controlling
Share Share redemption option Retained interests
capital premium reserve reserve earnings Total GBP'000 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Equity
GBP'000
---------------- ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Balance at 1
January
2020 52 5,451 20 2,799 17,272 25,594 1,595 27,189
Profit for the
year - - - - 12,379 12,379 399 12,778
---------------- ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Total
comprehensive
income - - - - 12,379 12,379 399 12,778
---------------- ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Transactions
with owners
Issue of
shares 1 4,327 - - - 4,328 - 4,328
Share based
payment
transactions - - - 625 - 625 - 625
Deferred tax
asset
recognised in
equity - - - (674) - (674) - (674)
Reserve
transfer - - - (943) 943 - - -
Dividends paid - - - - (6,712) (6,712) (86) (6,798)
---------------- ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Transactions
with owners 1 4,327 - (992) (5,769) (2,433) (86) (2,519)
---------------- ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Balance as at
31 December
2020 and 1
January
2021 53 9,778 20 1,807 23,882 35,540 1,908 37,448
Profit for the
year - - - - 18,722 18,722 550 19,272
Total
comprehensive
income - - - - 18,722 18,722 550 19,272
---------------- ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Transactions
with owners
Share based
payment
transactions - - - 1,210 - 1,210 - 1,210
Deferred tax
asset
recognised in
equity - - - 649 - 649 - 649
Reserve
transfer - - - (143) 143 - - -
Dividends paid - - - - (17,339) (17,339) (253) (17,592)
Transactions
with owners - 1,716 (17,196) (15,480) (253) (15,733)
---------------- ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Balance as at
31 December
2021 53 9,778 20 3,523 25,408 38,782 2,205 40,987
---------------- ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Consolidated statement of cash flows
for the year ended 31 December 2021
Notes 2021 2020
GBP'000 GBP'000
-------------------------------------------- ---------- -------------- -------------
Cash flows from operating activities
Profit for the year before tax 23,182 14,859
Adjustments for:
Depreciation of property, plant
and equipment 12 385 383
Depreciation of right of use assets 13 383 381
Amortisation of intangibles 14 558 601
(Profit) from sale of non-listed (311) -
equity investment
Share based payments 1,210 625
Share of profit from associates 15 (1,011) (36)
Impairment and amount written off
associates 15 408 473
Gains on fair value movements taken (611) -
to profit and loss
Dividends received from associates 15 275 158
Finance income 8 (45) (120)
Finance expense 8 160 234
-------------------------------------------- ---------- -------------- -------------
24,583 17,558
Changes in working capital
(Increase) / Decrease in trade and
other receivables 18 (1,475) 2,361
Increase in trade and other payables 20 6,053 1,291
Increase in provisions 22 1,140 841
Cash generated from operating activities 30,301 22, 051
Interest received 8 47 139
Income taxes paid (3,433) (4,372)
-------------------------------------------- ---------- -------------- -------------
Net cash generated from operating
activities 26,915 17,818
-------------------------------------------- ---------- -------------- -------------
Cash flows from investing activities
Purchase of property, plant and
equipment 12 (205) (306)
Purchase of intangibles 14 - (1)
Proceeds from sale of non-listed 331 -
equity investment
Investments in associates 15 (5,010) (2,345)
Investment in non-listed equity
shares 16 (2,500) -
Net cash used in investing activities (7,384) (2,652)
-------------------------------------------- ---------- -------------- -------------
Cash flows from financing activities
Proceeds from borrowings 8 - 12,000
Repayment of borrowings 8 - (12,000)
Interest paid 8 (160) (234)
Principal element of lease payments 13 (349) (348)
Issue of shares 24 - 4,328
Dividends paid 11 (17,339) (6,712)
Dividends paid to minority interest (253) (86)
-------------------------------------------- ---------- -------------- -------------
Net cash used in financing activities (18,101) (3,052)
-------------------------------------------- ---------- -------------- -------------
Net increase in cash and
cash equivalents 1,430 12,114
Cash and cash equivalents
at the beginning of year 32,981 20,867
-------------------------------------------- -------------------------- -----------
Cash and cash equivalents
at the end of the year 34,411 32,981
-------------------------------------------- -------------------------- -----------
The notes that follow form part of these financial
statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
1 Accounting policies
Basis of preparation
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out below. The
policies have been consistently applied to all the years
presented.
The consolidated financial statements are presented in Great
British Pounds and all amounts are rounded to the relevant
thousands, unless otherwise stated.
These financial statements have been prepared in accordance with
UK adopted International Accounting Standards that are applicable
to companies that prepare financial statements in accordance with
IFRSs.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement
in applying the Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing
the financial statements and their effect are disclosed in note
2.
The financial statements have been prepared on a historical cost
basis, except for investments in non-listed equities and derivative
financial instruments relating to investments in associates that
have been measured at fair value.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report as set out earlier in these
financial statements. The financial position of the Group, its cash
flows and liquidity position are described in these financial
statements.
The Group made an operating profit of GBP23.3m during 2021
(2020: GBP15.0m) and had net current assets of GBP8.3m as at 31
December 2021 (31 December 2020: GBP14.6m) and equity attributable
to owners of the Group of GBP38.8m (31 December 2020:
GBP35.6m).
Going concern
The Directors have assessed the Enlarged Group's prospects until
31 December 2023, taking into consideration the current operating
environment, including the impact of recently increased
geopolitical and macroeconomic uncertainty and inflationary
pressures on property and lending markets. The Directors' financial
modelling considers the Enlarged Group's profit, cash flows,
regulatory capital requirements, borrowing covenants and other key
financial metrics over the period.
These metrics are subject to sensitivity analysis, which
involves flexing a number of key assumptions underlying the
projections, including the effect of recently increased
geopolitical and macroeconomic uncertainty and inflationary
pressures and their impact on the UK property and lending markets
and the Group's revenue mix, which the Directors consider to be
severe but plausible stress tests on the Enlarged Group's cash
position, banking covenants and regulatory capital adequacy. The
Group's financial modelling shows that the Enlarged 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 Enlarged Group will be able to continue in
operation and meet its liabilities as they fall due over the 12
months from the approval of the financial statements. Accordingly,
the Directors continue to adopt the going concern basis for the
preparation of the financial statements.
Changes in accounting policies
New standards, interpretations and amendments effective for the
year ended 31 December 2021
New standards, interpretations and amendments applied for the
first time
The Group applied a number of standards and interpretations for
the first time in 2021 but these did not have an impact on the
consolidated financial statements of the Group. The Group has not
early adopted any standards, interpretations or amendments that
have been issued but are not yet effective.
New standards with no impact on the Group
-- Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate
Benchmark Reform - Phase 2. Under the detailed rules of IFRS 9
Financial Instruments, modifying a financial contract can require
recognition of a significant gain or loss in the consolidated
statement of comprehensive income. However, the amendments
introduce a practical expedient if a change results directly from
IBOR reform and occurs on an 'economically equivalent' basis. In
these cases, changes will be accounted for by updating the
effective interest rate. The Group does not have any interest rate
hedge relationships.
-- Amendments to IFR16 - Covid 19 related rent concessions
beyond 30 June 2021. In March 2021, the IASB amended IFRS 16
Leases, extending the practical expedient to permit lessees to
apply it to rent concessions for which reductions in lease payments
affect payments originally due on or before 30 June 2022. This
amendment is applicable for annual reporting periods beginning on
or after 1 April 2021, with early application permitted. The Group
did not receive any rent concessions beyond 30 June 2021.
New standards, interpretations and amendments not yet
effective
The standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Group's financial
statements are disclosed below. The Group intends to adopt these
standards, if applicable, when they become effective.
Future new standards and interpretations
A number of new standards and amendments to standards and
interpretations will be effective for future years and, therefore,
have not been applied in preparing these consolidated financial
statements. At the date of authorisation of these Financial
Statements, the following standards and interpretations were in
issue but have not been applied in these Financial Statements as
they were not yet effective:
Standard or Interpretation Periods commencing
on or after
Amendments to IFRS 3, IAS 16, IAS 17 and annual 1 January 2022
improvements on IFRS 1, IFRS 9, IAS 41 and
IFRS 1
--------------------
Amendments to IAS 37 Onerous contracts - Cost 1 January 2022
of fulfilling a contract
--------------------
Amendments to IAS 16 Property, plant and equipment 1 January 2022
- Proceeds before intended use
--------------------
Amendments to IFRS 3 - Reference to the conceptual 1 January 2022
framework
--------------------
IFRS 17 - Insurance contracts 1 January 2023
--------------------
Amendments to IAS 1 and IFRS Practice Statement 1 January 2023
2 - Disclosure of accounting policies
--------------------
Amendments to IAS 8 - Definition of accounting 1 January 2023
estimates
--------------------
Amendments to IAS 12 - Deferred tax related 1 January 2023
to assets and liabilities arising from a single
transaction
--------------------
Amendments to IAS 1 Presentation of financial 1 January 2023
statements - On classification of liabilities
--------------------
Other than to expand certain disclosures within the Financial
Statements, the Directors do not expect the adoption of these
standards and interpretations listed above to have a material
impact on the Financial Statements of the Group in future
periods.
Current versus non-current classification
The Group presents assets and liabilities in the consolidated
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.
-- Held primarily for the purpose of trading.
-- Expected to be realised within twelve months after the reporting date.
All other assets are classified as non-current.
Assets included in current assets are expected to be realised
within twelve months after the reporting date. Due to their
short-term nature, the carrying value of cash and cash equivalents,
trade and other receivables approximates their fair value.
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
consolidated 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.
Associates
Where the Group has the power to participate in, but not control
the financial and operating policy decisions of another entity, it
is classified as an associate. Associates are initially recognised
in the consolidated statement of financial position at cost.
Subsequently associates are accounted for using the equity method,
where the Group's share of post-acquisition profits and losses and
other comprehensive income is recognised in the consolidated
statement of comprehensive income (except for losses in excess of
the Group's investment in the associate unless there is an
obligation to make good those losses).
Profits and losses arising on transactions between the Group and
its associates are recognised only to the extent of unrelated
investors' interests in the associate. The investor's share in the
associate's profits and losses resulting from these transactions is
eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the
Group's share of the identifiable assets, liabilities and
contingent liabilities acquired is capitalised and included in the
carrying amount of the associate. Where there is objective evidence
that the investment in an associate has been impaired the carrying
amount of the investment is tested for impairment. More information
on the impairment of associates is included in note 2.
Joint ventures
The Group accounts for its interests in joint ventures in the
same manner as investments in associates (i.e. using the equity
method).
Any premium paid for an investment in a joint venture above the
fair value of the Group's share of the identifiable assets,
liabilities and contingent liabilities acquired is capitalised and
included in the carrying amount of the investment in the joint
venture. Where there is objective evidence that the investment in a
joint venture has been impaired the carrying amount of the
investment is tested for impairment in the same way as other
non-financial assets.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs.
Depreciation is provided on all items of property, plant and
equipment at rates calculated to write off the cost of each asset
on a straight line basis over their expected useful lives, as
follows :
Freehold land not depreciated
Freehold buildings 36 years
Fixtures and fittings 5 years
Computer equipment 3 years
Gains and losses on disposal are determined by comparing the
proceeds with the carrying amount and are recognised in the income
statement. The Directors reassess the useful economic life of the
assets annually.
Goodwill
Goodwill represents the excess of a cost of a business
combination over the Group's interest in the fair value of
identifiable assets under IFRS 3 Business Combinations .
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date .
Other intangible assets
Intangible assets other than goodwill acquired by the Group
comprise licences, the website software, customer contracts and
trademarks and are stated at cost less accumulated amortisation and
impairment losses. Amortisation is charged to the consolidated
statement of comprehensive income within administrative expenses on
a straight line basis over the period of the licence agreements or
expected useful life of the asset and is charged once the asset is
in use. Assets are tested annually for impairment or more
frequently if events or circumstances indicate potential
impairment.
Amortisation, which is reviewed annually, is provided on
intangible assets to write off the cost of each asset on a straight
line basis over its expected useful life as follows:
Licences 6 years
Website and Software 3 years
Customer contracts 9 years
Trademarks 10 years
Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are tested annually
for impairment or whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of the asset exceeds its recoverable amount
(i.e. the higher of value in use and fair value less costs to
sell), the asset is written down accordingly .
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows, its cash generating units
('CGUs'). Goodwill is allocated on initial recognition to each of
the Group's CGUs that are expected to benefit from the synergies of
the combination giving rise to the goodwill.
Impairment charges are included in profit or loss except to the
extent that they reverse gains previously recognised in other
comprehensive income. An impairment loss for goodwill is not
reversed.
Financial assets
In the consolidated statement of financial position, the Group
classifies its financial assets into one of the following
categories dependent on the purpose for which the financial asset
was acquired.
-- Fair value through profit or loss
-- Amortised cost
Loans and trade receivables
Loans and trade receivables are non-derivative financial assets
with fixed or determinable payments which arise principally through
the Group's trading activities, and these assets arise principally
to collect contractual cash flows and the contractual cash flows
are solely payments of principal and interest. They are initially
recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently
carried at amortised cost using the effective interest rate method,
less provision for impairment.
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.
Impairment provisions for loans to associates and other 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.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
at call with banks with an original maturity of three months or
less.
Investments in non-listed equity shares
Investments in non-listed shares are non-derivative financial
assets, and are carried at fair value, with gains and losses
arising from changes in fair value taken directly to the
consolidated statement of comprehensive income.
Derivative financial instruments
Derivative financial instruments comprise option contracts to
acquire additional ordinary share capital of associates of the
Group. Derivative financial instruments are carried at fair value,
with gains and losses arising from changes in fair value taken
directly to the consolidated statement of comprehensive income.
Fair values of derivatives are determined using valuation
techniques, including option pricing models.
Financial liabilities
Trade and other payables are recognised initially at fair value
and subsequently carried at amortised cost.
Leases
The Group's leasing activities and how they are accounted
for
The Group leases a number of properties from which it operates.
Rental contracts are typically made for fixed periods of five to
ten years, with break clauses negotiated for some of these.
Contracts may contain both lease and non-lease components. The
Group allocates the consideration in the contract to the lease and
non-lease components based on their relative stand-alone
prices.
The Group adopted the modified transition approach and from 1
January 2019, all leases are accounted for by recognising a right
of use asset and a corresponding liability at the date at which the
leased asset is available for use by the Group, except for:
-- leases of low value assets; and
-- leases with a duration of 12 months or less
Payments associated with short-term leases and leases of low
value assets will continue to be recognised on a straight line
basis as an expense in the consolidated statement of comprehensive
income. Low value assets within the Group comprise of IT
equipment.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payments that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date; and
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability. The
lease payments are discounted using the interest rate implicit in
the lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the Group's incremental
borrowing rate is used, being the rate that the Group would have to
pay to borrow the funds necessary to obtain an asset of similar
value to the right of use asset in a similar economic environment
with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
-- where possible, uses recent third-party financing received by
the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third party financing was
received;
-- where it does not have recent third party financing, the Group uses a build-up approach that
starts with a risk-free interest rate adjusted for credit risk
for leases held by the Group; and
-- makes adjustments specific to the lease, e.g. term, country and security.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
Right of use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability,
-- any lease payments made at or before the commencement date less any lease incentives
received, and
-- any initial direct costs.
Right of use assets are depreciated over the shorter of the
asset's useful life and the lease term on a straight-line basis.
The Group does not revalue its land and buildings that are
presented within property, plant and equipment, and has chosen not
to do so for the right of use buildings held by the Group.
Variable lease payments
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right of use
asset.
Three property leases contain variable lease payments linked to
current market rental from January 2023, August 2023 and December
2024. A 1% fluctuation in market rent would impact total annual
lease payments by approximately GBP16,000.
Extension and termination options
Termination options are included in a number of the leases
across the Group. These are used to maximise operational
flexibility in terms of managing the assets used in the Group's
operations. The majority of termination options held are
exercisable only by the Group and not by the respective lessor.
In determining the lease term, management considers all facts
and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in
the lease term if the lease is reasonably certain to be extended
(or not terminated).
For leases of property, the following factors are normally the
most relevant:
-- If there are significant penalties to terminate, the Group is
typically reasonably certain not to terminate.
-- If any leasehold improvements are expected to have a
significant remaining value, the Group is typically reasonably
certain not to terminate.
-- Otherwise, the Group considers other factors including
historical lease durations and the costs and business disruption
required to replace the leased asset. Most extension options in
offices have not been included in the lease liability, because the
Group could replace the assets without significant cost or business
disruption.
As at 31 December 2021, the carrying amounts of lease
liabilities are not reduced by the amount of payments that would be
avoided from exercising a break clause because it was considered
reasonably certain that the Group would not exercise its right to
break the lease. Total lease payments of GBP0.7m are potentially
avoidable were the Group to exercise break clauses at the earliest
opportunity.
Business combinations and goodwill
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, which is measured at acquisition
date fair value, and the amount of any non-controlling interests in
the acquiree. For each business combination, the Group elects
whether to measure the non-controlling interests in the acquiree at
fair value or at the proportionate share of the acquiree's
identifiable net assets. Acquisition-related costs are expensed as
incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date.
This includes the separation of embedded derivatives in host
contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date.
Contingent consideration classified as equity is not remeasured and
its subsequent settlement is accounted for within equity.
Contingent consideration classified as an asset or liability that
is a financial instrument and within the scope of IFRS 9 Financial
Instruments, is measured at fair value with the changes in fair
value recognised in the statement of profit or loss in accordance
with IFRS 9. Other contingent consideration that is not within the
scope of IFRS 9 is measured at fair value at each reporting date
with changes in fair value recognised in profit or loss.
Goodwill is initially measured at cost (being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interests and any previous interest
held over the net identifiable assets acquired and liabilities
assumed). If the fair value of the net assets acquired is in excess
of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to
measure the amounts to be recognised at the acquisition date. If
the reassessment still results in an excess of the fair value of
net assets acquired over the aggregate consideration transferred,
then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units).
Where goodwill has been allocated to the Group's cash-generating
units (CGUs) and part of the operation within the unit is disposed
of, the goodwill associated with the disposed operation is included
in the carrying amount of the operation when determining the gain
or loss on disposal. Goodwill disposed in these circumstances is
measured based on the relative values of the disposed operation and
the portion of the cash generating unit retained.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value at the
subsequent acquisition date. Any gains or losses arising from such
remeasurement are recognised in profit or loss.
Where a business combination is for less than the entire issued
share capital of the acquiree and there is an option for the
acquirer to purchase the remainder of the issued share capital of
the business and/or for the vendor to sell the rest of the entire
issued share capital of the business to the acquirer, then the
acquirer will assess whether a non-controlling interest exists and
also whether the instrument(s) fall within the scope of IFRS 9
Financial Instruments and is/are measured at fair value with the
changes in fair value recognised in the statement of profit or loss
in accordance with IFRS 9.
Options that are not within the scope of IFRS 9 and are linked
to service will be accounted for under IAS 19 Employee Benefits
and/or IFRS 2 Share Based Payments as appropriate.
Retirement benefits: Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated statement of comprehensive income in
the year to which they relate .
Provisions
A provision is recognised in the consolidated statement of
financial position when the Group has a present legal or
constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to
settle the obligation (see note 2c).
Share capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Company's ordinary shares are classified
as equity instruments. Incremental costs directly attributable to
the issue of new shares are shown in share premium as a deduction
from the proceeds.
Revenue
The Group recognises revenue from the following main
sources:
-- Mortgage procuration fees paid to MAB by lenders via the L&G Mortgage Club.
-- Insurance commissions from advised sales of protection and general insurance policies
-- Client fees paid by the underlying customer for the provision
of mortgage and protection advice
-- Other Income comprising income from services provided to
directly authorised entities, fees in relation to Later Life
lending and Wealth and ancillary services such as conveyancing and
surveying
Mortgage procuration fees, insurance commissions and client fees
are included at the gross amounts receivable by the Group in
respect of all services provided. The Group operates a revenue
share model with its trading partners and therefore commissions are
paid in line with the Group revenue recognition policy and are
included in cost of sales.
Mortgage procuration fees, insurance commissions and client fees
earned are accounted for when received or guaranteed to be
received, as until received it is not possible to be certain that
the transaction will be completed. When mortgage procuration fees,
insurance commissions and client fees are received this confirms
that the performance obligation has been satisfied. In the case of
life insurance commissions there is a possibility for a four year
period after the inception of the policy that part of the
commission earned may have to be repaid if the policy is cancelled
during this period. A clawback provision is made for the expected
level of commissions repayable. More information on the clawback
provision is included in note 2.
Other income is credited to the consolidated statement of
comprehensive income when received or guaranteed to be
received.
Finance income
Finance income comprises interest receivable on cash at bank and
interest recognised on loans to associates and other Appointed
Representative firms. Interest income is recognised in the
statement of comprehensive income as it accrues.
Foreign exchange
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
reporting date. Exchange differences arising on the retranslation
of unsettled monetary assets and liabilities are recognised
immediately in the consolidated statement of comprehensive
income.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates at
the dates of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. The
gain or loss arising on translation of non-monetary items measured
at fair value is treated in line with the recognition of the gain
or loss on the change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is recognised in
OCI or profit or loss are also recognised in OCI or profit or loss,
respectively).
Taxation
Income tax comprises current and deferred tax. Income tax is
recognised in profit or loss other than if it relates to items
recognised in other comprehensive income in which case it is
recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year using tax rates enacted or substantively enacted by
the consolidated statement of financial position date and any
adjustment to tax payable in respect of previous years.
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the
reporting date.
Deferred tax assets and liabilities are recognised for all
taxable temporary differences, except for when:
-- The difference arises from the initial recognition of
goodwill or an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.
-- In respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in joint
arrangements, deferred tax assets are recognised only to the extent
that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that enough taxable profit will be available to allow all
or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax relating to items recognised outside profit or loss
is recognised outside profit or loss. Deferred tax items are
recognised in correlation to the underlying transaction either in
OCI or directly in equity.
Tax benefits acquired as part of a business combination, but not
satisfying the criteria for separate recognition at that date, are
recognised subsequently if new information about facts and
circumstances change. The adjustment is either treated as a
reduction in goodwill (as long as it does not exceed goodwill) if
it was incurred during the measurement period or recognised in
profit or loss.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company or;
-- different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
Sales taxes
Where sales tax is incurred on expenses and assets, expenses and
assets are recognised net of the amount of sales tax, except:
-- When the sales tax incurred on a purchase of assets or
services is not recoverable from the taxation authority, in which
case, the sales tax is recognised as part of the cost of
acquisition of the asset or as part of the expense item, as
applicable.
-- When receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or payables
in the consolidated statement of financial position.
Segment Reporting
An operating segment is a distinguishable segment of an entity
that engages in business activities from which it may earn revenues
and incur expenses and whose operating results are reviewed
regularly by the entity's chief operating decision maker (CODM).
The Board reviews the Group's operations and financial position as
a whole and therefore considers that it has only one operating
segment, being the provision of financial services operating solely
within the UK. The information presented to the CODM directly
reflects that presented in the financial statements and they review
the performance of the Group by reference to the results of the
operating segment against budget.
Operating profit is the profit measure, as disclosed on the face
of the consolidated statement of comprehensive income that is
reviewed by the CODM.
Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends to equity shareholders, this is when
they are paid. In the case of final dividends, this is when they
are approved by the shareholders.
Share-based payments
Where equity-settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting
period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated statement of comprehensive income over the
remaining vesting period.
Where options are granted to persons other than employees, the
consolidated statement of comprehensive income is charged with the
fair value of the options at the date of the grant over the vesting
period.
2 Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The Directors consider that the
estimates and judgements that have the most significant effect on
the carrying amounts of assets and liabilities within the financial
statements are set out below.
(a) Impairment of goodwill
The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment. The recoverable amount is
determined based on value in use calculations. The use of this
method requires the estimation of future cash flows and the choice
of a discount rate in order to calculate the present value of the
cash flows. Actual outcomes may vary. More information including
carrying values is included in note 14.
(b) Impairment of trade and other receivables
Judgement is required when determining if there is any
impairment to the trade and other receivable balances , and the
Group uses the simplified approach for trade receivables within
IFRS 9 using the lifetime expected credit losses. During this
process judgements about the probability of the non-payment of the
trade receivables are made.
In considering impairment provisions for loans to associates the
forward-looking expected credit loss model is used. In determining
the lifetime expected credit losses for loans to associates, the
Group has had to consider different scenarios for repayments of
these loans and have also estimated percentage probabilities
assigned to each scenario for each associate where applicable. More
information is included in note 18.
(c) Clawback provision
The provision relates to the estimated value of repaying
commission received up front on protection policies that may lapse
in a period of up to four years following inception. The provision
is calculated using a model that has been developed over several
years. The model uses a number of factors including the total
unearned commission at the point of calculation, the age profile of
the commission received, the Group's proportion of any clawback,
likely future lapse rates, and the success of the Appointed
Representatives in preventing lapses and/or generating new income
at the point of a lapse. A 0.5% change (absolute) in lapse rates
causes a GBP0.3m change in the provision. A 2% change (absolute) in
the recoveries rate causes a GBP0.1m change in the provision. More
information is included in note 22.
(d) Investments in associates
The Group is required to test, on an annual basis, whether any
investments in associates have suffered any impairment.
The Group uses two methods to test for impairment,
-- Net Present Value of the next 5 years projected free cash flow and terminal value.
-- Valuation of business on a multiple basis.
The use of both methods requires the estimation of future cash
flows, future profit before tax and choice of discount rate. Actual
outcomes may vary. Where the carrying amount in the consolidated
statement of financial position is in excess of the estimated
value, the Group will make an impairment charge against the
investment value and charge this amount to the consolidated
statement of comprehensive income under impairment and amount
written off associates.
The Group continues to make investments in associates, with
elements of deferred consideration in some cases, as well as enter
into commitments or option agreements to increase its stake or
fully acquire certain associates. In accounting for these, the
Group has had to make certain estimates on the amounts of deferred
consideration likely to be payable and also the future performance
and value of these businesses in determining the fair value of the
options.
(e) Share options, Employer's National Insurance Contributions and Deferred tax
Under the Group's equity-settled share based remuneration
schemes (see note 29), estimates are made in assessing the fair
value of options granted. The fair value is spread over the vesting
period in accordance with IFRS 2. The Group engages an external
expert in assessing fair value, both Black-Scholes and Stochastic
models are used, and estimates are made as to the Group's expected
dividend yield and the expected volatility of the Group's share
price.
In addition, the Group estimates the employer's National
Insurance Contributions that will fall due on exercise of options,
and provides for this over the vesting period. In doing so,
estimates as to the share price at vesting and the proportion of
options from each grant that will vest are made with reference to
the Group's prospects.
Deferred tax assets include temporary timing differences related
to the issue and exercise of share options. Recognition of the
deferred tax assets assigns an estimate of the proportion of
options likely to vest and an estimate of share price at vesting.
The carrying amount of deferred tax assets relating to share
options as at 31 December 2021 was GBP1.8m (2020: GBP0.8m).
3 Revenue
The Group operates in one segment being that of the provision of
financial services in the UK. Revenue is derived as follows:
2021 2020
GBP'000 GBP'000
Mortgage procuration fees 85,108 67,232
Protection and general insurance commission 75,280 58,826
Client fees 23,230 18,975
Other income 5,045 3,265
----------------------------------------------- ---------- ----------
188,663 148,298
---------------------------------------------- ---------- ----------
4 Cost of sales
Costs of sales are as follows:
2021 2020
GBP'000 GBP'000
Commissions paid 129,639 101,885
Impairment of trade receivables (5) 16
Wages and salary costs 8,063 6,565
----------------------------------- --------- ---------
137,697 108,466
---------------------------------- --------- ---------
2021 2020
Wages and salary costs GBP'000 GBP'000
------------------------------------- ----------- ----------
Gross 6,642 5,446
Employer's National Insurance 752 593
Defined contribution pension costs 437 350
Other direct costs 232 176
8,063 6,565
------------------------------------- ----------- ----------
5 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 GBP367,000 (2020: GBP367,000) in the year ended 31
December 2021. 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, GBP424,606
(2020: GBP414,674) has been included within administrative expenses
under staff costs, and in accordance with IFRS 2, a further
GBP542,844 (2020: GBP442,428) has been included within
administrative expenses under share based payments (see note
29).
6 Profit from operations
Profit from operations is stated after charging the
following:
2021 2020
GBP'000 GBP'000
-------------------------------------------------- ----------- -----------
Depreciation of property, plant and equipment 385 383
Depreciation of right of use assets 383 381
Amortisation of acquired intangibles 367 367
Amortisation of other intangibles 191 234
Costs related to First Mortgage Option 967 857
Impairment of loans to related parties 16 1,680
Auditor remuneration:
Fees payable to the Group's auditor for
the audit of the Group's financial statements. 172 122
Fees payable to the Group's auditor and
its associates for other services:
Audit of the accounts of subsidiaries 10 10
Audit related assurance services 25 25
Tax advisory services - 3
-------------------------------------------------- ----------- -----------
Profits from associates are disclosed as part of the operating
profit as this is the operational nature of the Group.
7 Staff costs
Staff costs, including executive and non-executive Directors'
remuneration, are as follows:
2021 2020
GBP'000 GBP'000
------------------------------------- ----------- ----------
Wages and salaries 20,564 16,910
Share based payments (see note 29) 1,932 967
Social security costs 2,242 1,763
Defined contribution pension costs 1,454 1,199
Other employee benefits 542 537
------------------------------------- ----------- ----------
26,734 21,376
------------------------------------- ----------- ----------
Staff costs are included in the consolidated statement of
comprehensive income as follows:
2021 2020
GBP'000 GBP'000
Cost of sales (see note 4) 8,063 6,565
Administrative expenses 18,671 14,811
------------------------------ --------- ---------
26,734 21,376
----------------------------- --------- ---------
The average number of people employed 2021 2020
by the Group during the year was: Number Number
---------------------------------------- --------- ---------
Executive Directors 3 3
Advisers 103 89
Compliance 76 74
Sales and marketing 92 71
Operations 171 154
---------------------------------------- --------- ---------
Total 445 391
---------------------------------------- --------- ---------
Key management compensation
Key management are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group. These are the Directors of Mortgage Advice
Bureau (Holdings) plc.
2021 2020
GBP'000 GBP'000
------------------------------------- ---------- ----------
Wages and salaries 2,424 1,380
Share based payments 428 101
Social security costs 373 633
Defined contribution pension costs 9 6
Other employment benefits 7 9
------------------------------------- ---------- ----------
3,241 2,129
------------------------------------- ---------- ----------
During the year retirement benefits were accruing to 2 Directors
(2020: 2) in respect of defined contribution pension schemes.
The total amount payable to the highest paid Director in respect
of emoluments was GBP830,796 (2020: GBP393,112). The value of the
Group's contributions paid to a defined contribution pension scheme
in respect of the highest paid Director amounted to GBPnil (2020:
GBPnil).
8 Finance income and expense
Finance income 2021 2020
GBP'000 GBP'000
------------------------------------------------- ----------- ----------
Interest income 23 105
Interest income accrued on loans to associates 22 15
------------------------------------------------- ----------- ----------
45 120
------------------------------------------------- ----------- ----------
Finance expense 2021 2020
GBP'000 GBP'000
--------------------------------------- ----------- ----------
Interest expense 102 171
Interest expense on lease liabilities 58 63
--------------------------------------- ----------- ----------
160 234
--------------------------------------- ----------- ----------
During the year, interest accrued in previous years of GBP23,602
was paid (2020: GBP34,039).
The Group has had an agreement with NatWest in respect of a
revolving credit facility for GBP12m. The Group did not drawn down
on this facility in the year and no liabilities are owed as at 31
December 2021. In respect of the Group's revolving credit facility
for GBP12m, 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. In connection with the acquisition of
Project Finland Topco Limited which indirectly owns 100% of The
Fluent Money Group Limited ("Fluent") the Group has entered into
new debt facilities with NatWest as set out in note 32.
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
year.
9 Income tax
2021 2020
GBP'000 GBP'000
------------------------------------------------- ----------- ----------
Current tax expense
UK corporation tax charge on profit for
the year 4,196 2,068
Adjustment to charge in respect of prior - -
periods
Total current tax 4,196 2,068
------------------------------------------------- ----------- ----------
Deferred tax expense
Origination and reversal of timing differences (33) (23)
Temporary difference on share based payments (342) (9)
Adjustment due to change in tax rates 89 45
Adjustment to deferred tax charge in - -
respect of prior periods
Total deferred tax (see note 23) (286) 13
------------------------------------------------- ----------- ----------
Total tax expense 3,910 2,081
------------------------------------------------- ----------- ----------
The reasons for the difference between the actual charge for
the year and the standard rate of corporation tax in the United
Kingdom of 19% (2020: 19%) applied to profit for the year
is as follows:
2021 2020
GBP'000 GBP'000
---------------------------------------------- ----------- ----------
Profit for the year before tax 23,182 14,859
---------------------------------------------- ----------- ----------
Expected tax charge based on corporation
tax rate 4,405 2,823
Expenses not deductible for tax purposes
amortisation and impairment 160 120
Research & Development allowances (439) (230)
Tax on share options exercised (119) (760)
Adjustment to deferred tax charge in - -
respect of prior periods
Adjustment to corporation tax charge - -
in respect of prior periods
Adjustment to deferred tax charge due
to change in tax rate 89 45
Fair value gain on derivative financial (62) -
instruments
Profits from associates (192) (7)
Amounts written off investments 78 90
Capital allowance super deductions (9) -
Utilisation of brought forward tax losses (1) -
---------------------------------------------- ----------- ----------
Total tax expense 3,910 2,081
---------------------------------------------- ----------- ----------
For the year ended 31 December 2021 the deferred tax charge
relating to unexercised share options, recognised in equity was
GBP558,869 (2020: -GBP674,337). An additional GBP89,639 (2020:
GBPnil) deferred tax charge was recognised in equity as a result of
changes to tax rates.
10 Earnings per share
Basic earnings per share are calculated by dividing net profit
for the year attributable to ordinary equity holders of the Company
by the weighted average number of ordinary shares outstanding
during the year.
2021 2020
Basic earnings per share GBP'000 GBP'000
------------------------------------------- ------------- ------------
Profit for the year attributable
to the owners of the parent 18,722 12,379
------------------------------------------- ------------- ------------
Weighted average number of shares
in issue 53,184,872 52,134,684
------------------------------------------- ------------- ------------
Basic earnings per share (in pence
per share) 35.2p 23.7p
------------------------------------------- ------------- ------------
For diluted earnings per share, the weighted average number
of ordinary shares in existence is adjusted to include potential
ordinary shares arising from share options.
2021 2020
Diluted earnings per share GBP'000 GBP'000
------------------------------------------- ------------- ------------
Profit for the year attributable
to the owners of the parent 18,722 12,379
------------------------------------------- ------------- ------------
Weighted average number of shares
in issue 53,552,928 52,478,416
------------------------------------------- ------------- ------------
Diluted earnings per share (in pence
per share) 35.0p 23.6p
------------------------------------------- ------------- ------------
The share data used in the basic and diluted earnings per share
computations are as follows:
Weighted average number of ordinary 2021 2020
shares
-------------------------------------- ------------ ------------
Issued ordinary shares at
start of year 53,153,187 51,612,207
Effect of shares issued during
year 31,685 522,477
-------------------------------------- ------------ ------------
Basic weighted average number
of shares 53,184,872 52,134,684
Potential ordinary shares arising
from options 368,056 343,732
-------------------------------------- ------------ ------------
Diluted weighted average number
of shares 53,552,928 52,478,416
-------------------------------------- ------------ ------------
The reconciliation between the basic and adjusted figures is as
follows:
2021 2020 2021 2020 2021 2020
GBP'000 GBP'000 Basic Basic Diluted Diluted
earnings earnings earnings earnings
per share per share per share per share
pence pence pence pence
Profit for the
year 18,722 12,379 35.2 23.7 35.0 23.6
Adjustments:
Amortisation of
acquired intangibles 367 367 0.7 0.7 0.7 0.7
Costs relating
to the First Mortgage
Direct option 967 857 1.8 1.6 1.8 1.6
Gain on derivative
financial instruments (328) - (0.6) - (0.6) -
Impairment of loans
to related parties 16 1,680 - 3.2 - 3.2
Tax effect of adjustments (3) (319) - (0.6) - (0.6)
---------------------------- ---------- ---------- ------------ ------------ ------------ ------------
Adjusted earnings 19,741 14,964 37.1 28.6 36.9 28.5
---------------------------- ---------- ---------- ------------ ------------ ------------ ------------
The Group uses adjusted results as key performance indicators,
as the Directors believe that these provide a more consistent
measure of operating performance. Adjusted profit is therefore
stated before one-off acquisition costs, ongoing non-cash items
relating to the acquisition of First Mortgage Direct Limited, fair
value gains on financial instruments relating to options to
increase shareholding in Associate businesses and impairment of
loans to related parties, net of tax.
11 Dividends
2021 2020
GBP'000 GBP'000
---------
Dividends paid and declared during the
year:
Final dividend for 2020: 19.2p per share
(2019: 6.4p) 10,210 3,311
Interim dividend for 2021: 13.4p per
share (2020: 6.4p) 7,129 3,401
-------------------------------------------------- -------- ---------
17,339 6,712
------------------------------------------------- -------- ---------
Equity dividends on ordinary shares:
Proposed for approval by shareholders
at the AGM:
Final dividend for 2021: 14.7p per
share (2020: 19.2p) 7,821 10,205
----------------------------------------- ------- --------
7,821 10,205
---------------------------------------- ------- --------
The record date for the final dividend is 29 April 2022 and the
payment date is 30 May 2022. The ex-dividend date will be 28 April
2022. The company statement of changes in equity shows that the
Company has positive reserves as at 31 December 2021 of
GBP1,406,000. There are sufficient distributable reserves in
subsidiary companies to pass up to Mortgage Advice Bureau
(Holdings) plc in order to pay the proposed final dividend. The
proposed final dividend for 2021 has not been provided for in these
financial statements, as it has not yet been approved for payment
by shareholders.
The final dividends paid and declared can differ from the
proposed total dividends for approval due to (1) additional shares
issued after the publication of these accounts in connection with
share options exercised and/or the placing of new shares in
connection with the acquisition of Fluent but before the record
date and (2) the number of unallocated shares within the Group's
Share Incentive Plan that do not receive a dividend.
12 Property, plant and equipment
Freehold
land Fixtures Computer
and building & fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------------- -------------- ------------- -----------
Cost
As at 1 January 2021 2,536 1,015 1,247 4,798
Additions - 35 170 205
As at 31 December
2021 2,536 1,050 1,417 5,003
----------------------- --------------- -------------- ------------- -----------
Depreciation
As at 1 January 2021 292 672 987 1,951
Charge for the year 57 151 177 385
As at 31 December
2021 349 823 1,164 2,336
----------------------- --------------- -------------- ------------- -----------
Net Book Value
As at 31 December
2021 2,187 227 253 2,667
----------------------- --------------- -------------- ------------- -----------
Freehold
land and Fixtures Computer
building & fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----------- -------------- ------------ ----------
Cost
As at 1 January 2020 2,536 919 1,037 4,492
Additions - 96 210 306
Aa at 31 December
2020 2,536 1,015 1,247 4,798
----------------------- ----------- -------------- ------------ ----------
Depreciation
As at 1 January 2020 234 503 831 1,568
Charge for the year 58 169 156 383
As at 31 December
2020 292 672 987 1,951
----------------------- ----------- -------------- ------------ ----------
Net Book Value
As at 31 December
2020 2,244 343 260 2,847
13 Right of use assets
Leases
This note provides information for leases where the Group is a
lessee.
The consolidated statement of financial position shows the
following amounts on leases:
Right of use assets Land and Buildings Total
GBP'000 GBP'000
------------------------- -------------------- ----------
As at 1 January 2021 2,590 2,590
Additions 250 250
Depreciation (383) (383)
-------------------------- -------------------- ----------
As at 31 December 2021 2,457 2,457
-------------------------- -------------------- ----------
Lease liabilities Land and Buildings Total
GBP'000 GBP'000
------------------------- -------------------- ----------
As at 1 January 2021 2,695 2,695
Additions 250 250
Interest expense 58 58
Lease payments (407) (407)
-------------------------- -------------------- ----------
As at 31 December 2021 2,596 2,596
-------------------------- -------------------- ----------
Right of use assets Land and Buildings Total
GBP'000 GBP'000
------------------------- -------------------- ----------
As at 1 January 2020 2,907 2,907
Additions 64 64
Depreciation (381) (381)
-------------------------- -------------------- ----------
As at 31 December 2020 2,590 2,590
-------------------------- -------------------- ----------
Lease liabilities Land and Buildings Total
GBP'000 GBP'000
------------------------- -------------------- ----------
As at 1 January 2020 2,979 2,979
Additions 64 64
Interest expense 63 63
Lease payments (411) (411)
-------------------------- -------------------- ----------
As at 31 December 2020 2,695 2,695
-------------------------- -------------------- ----------
The present value of the lease liabilities is as follows:
31 December 2021 Within 1 - 2 -5 After Total
1 year 2 years years 5 years
-------------------------------- --------- ---------- -------- ---------- -------
Lease payments (undiscounted) 449 454 1,228 665 2,796
Finance charges (55) (46) (83) (16) (200)
--------------------------------- --------- ---------- -------- ---------- -------
Net present values 394 408 1,145 649 2,596
--------------------------------- --------- ---------- -------- ---------- -------
31 December 2020 Within 1 - 2 -5 After Total
1 year 2 years years 5 years
-------------------------------- --------- ---------- -------- ---------- -------
Lease payments (undiscounted) 401 390 1,142 1,006 2,939
Finance charges (58) (50) (101) (35) (244)
--------------------------------- --------- ---------- -------- ---------- -------
Net present values 343 340 1,041 971 2,695
--------------------------------- --------- ---------- -------- ---------- -------
Leases
The consolidated statement of comprehensive income shows the
following amounts relating to leases:
2021 2020
GBP'000 GBP'000
--------------------------------------------- ---------- ----------
Depreciation charge of right of use assets 383 381
Interest expense 58 63
Short term lease expense 5 -
Low value lease expense 2 3
---------------------------------------------- ---------- ----------
14 Intangible assets
Goodwill 2021 2020
GBP'000 GBP'000
---------------------------------- ---------- ----------
Cost
As at 1 January 15,308 15,308
Additions - -
---------------------------------- ---------- ----------
As at 31 December 15,308 15,308
------------------------------------ ---------- ----------
Accumulated impairment
As at 1 January and 31 December (153) (153)
Net book value
As at 31 December 15,155 15,155
------------------------------------ ---------- ----------
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 or in the event of a
significant change in circumstances. The impairment reviews
conducted at the end of 2021 concluded that there had been no
impairment of goodwill.
The Board considers that it has only one operating segment and
following the acquisition of FMD, now has two cash-generating units
(CGUs). Goodwill arose on the acquisition of Mortgage Talk Limited
and has since been allocated to the CGU of the Group excluding FMD.
Impairment testing for this CGU is carried out by determining
recoverable amount on the basis of a value in use, which is then
compared to the carrying value of the assets of the CGU including
goodwill. The value in use that has been determined exceeds the
GBP4.1m (2020: GBP4.1m) carrying value of this CGU and therefore no
impairment of goodwill is required. Management has estimated future
cash flows over a five year period and applied a discount rate of
11% and then applied a terminal value calculation, which assumes a
growth rate of 5% in future cashflows, in order to estimate the
present value of those cash flows in determining the value in use.
Management believes that any possible changes to any of the key
assumptions applied in determining the value in use would not cause
the carrying amount of goodwill to exceed the present value of the
estimated future cashflows.
Goodwill arose on the acquisition of FMD and has since been
allocated to this CGU of the Group. Impairment testing for this CGU
is carried out by determining recoverable amount on the basis of a
value in use, which is then compared to the carrying value of the
assets of the CGU including goodwill. The value in use that has
been determined exceeds the GBP11.0m (2020: GBP11.0m) carrying
value of this CGU and therefore no impairment of goodwill is
required. Management has estimated future cash flows over a five
year period and applied a discount rate of 21% and then applied a
terminal value calculation, which assumes a growth rate of 5% in
future cashflows, in order to estimate the present value of those
cash flows in determining the value in use. Management believes
that any possible changes to any of the key assumptions applied in
determining the value in use would not cause the carrying amount of
goodwill to exceed the present value of the estimated future
cashflows.
Other intangible Licences Website Software Customer Trademarks Total
assets contracts
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----------- ---------- ---------- ------------ ------------- ----------
Cost
As at 1 January 2021 108 140 571 1,980 1,470 4,269
Additions - - - - - -
---------------------------- ---------- ---------- ---------- ------------ ------------- ----------
As at 31 December
2021 108 140 571 1,980 1,470 4,269
---------------------------- ---------- ---------- ---------- ------------ ------------- ----------
Accumulated Amortisation
As at 1 January 2021 108 140 208 330 221 1,007
Charge for the year - - 191 220 147 558
As at 31 December
2021 108 140 399 550 368 1,565
---------------------------- ---------- ---------- ---------- ------------ ------------- ----------
Net book value
As at 31 December
2021 - - 172 1,430 1,102 2,704
---------------------------- ---------- ---------- ---------- ------------ ------------- ----------
Other intangible Licences Website Software Customer Trademarks Total
assets contracts
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----------- ---------- ---------- ------------ ------------- ----------
Cost
As at 1 January 2020 108 140 570 1,980 1,470 4,268
Additions - - 1 - - 1
---------------------------- ---------- ---------- ---------- ------------ ------------- ----------
As at 31 December
2020 108 140 571 1,980 1,470 4,269
---------------------------- ---------- ---------- ---------- ------------ ------------- ----------
Accumulated Amortisation
As at 1 January 2020 108 96 18 110 74 406
Charge for the year - 44 190 220 147 601
As at 31 December
2020 108 140 208 330 221 1,007
---------------------------- ---------- ---------- ---------- ------------ ------------- ----------
Net book value
As at 31 December
2020 - - 363 1,650 1,249 3,262
---------------------------- ---------- ---------- ---------- ------------ ------------- ----------
15 Investments in associates and joint venture
The Group holds investments in associates and a joint venture,
all of which are accounted for under the equity method, as
follows:
Percentage
of ordinary
Company name Registered office shares Description
held
----------------------- ---------------------------- -------------- ------------------------
CO2 Commercial Profile House, Stores 49 Property surveyors
Limited Road, Derby DE21
4BD
Lifetime FS Limited Capital House, Pride 49 Provision of financial
Place, Derby DE24 services
8QR
Freedom 365 Mortgage Gresley House, Ten 35 Provision of financial
Solutions Limited(1) Pound Walk, Doncaster services
DN4 5HX
Sort Group Limited Burdsall House, London 43.25 Conveyancing services
Road, Derby DE24
8UX
Buildstore Limited Nsb & Rc Lydiard 25 Provision of financial
Fields, Great Western services
Way, Swindon SN5
8UB
Clear Mortgage 114 Centrum House, 49 Provision of financial
Solutions Limited Dundas Street, Edinburgh services
EH3 5DQ
Vita Financial 1(st) Floor Tudor 49 Provision of financial
Limited House, 16 Cathedral services
Road, Cardiff CF11
9LJ
MAB Broker Services Level 7, 68 Alfred 48.05 Provision of financial
PTY Limited Street, Milsons Point, services
NSW 2061
Eagle and Lion 22 West Mall, Clifton, 49 Provision of financial
Limited(2) Bristol, BS8 4BQ services
The Mortgage Broker The Granary, Crowhill 25 Provision of financial
Group Limited Farm, Ravensden Road, services
MK44 2QS
Meridian Holdings 68 Pullman Road, 40 Provision of financial
Group Limited Wigston, Leicester, services
LE18 2DB
Evolve FS Ltd Unit 26-28 Brightwell 49 Provision of financial
Barns, Waldringfield services
Road, Brightwell,
Ipswich, Suffolk,
IP10 0BJ
Heron Financial Moor Park Golf Club, 49 Insurance agent
Limited Moor Park, Rickmansworth, and broker
Hertfordshire, England,
WD3 1QN
M & R FM Ltd(3) 14 Kensington Terrace, 25 Provision of financial
Gateshead, NE11 9SL services
----------------------- ---------------------------- -------------- ------------------------
(1) On 13 January 2021 the Group ceased to have an investment in
this entity, having entered into a deed of termination.
(2) On 29 September 2021, Eagle and Lion Limited passed a
special resolution to enter into voluntary liquidation.
(3) 25% of the ordinary share capital of M & R FM Ltd is
held by First Mortgage Direct Ltd.
The reporting date for the Group's associates, as listed in the
table above, other than Clear Mortgage Solutions Limited, is 31
December and their country of incorporation is England and Wales.
The reporting date for Clear Mortgage Solutions Limited is 30
December and its country of incorporation is England and Wales. The
reporting date for the Group's joint venture, MAB Broker Services
PTY Limited, is 30 June and its country of incorporation is
Australia.
The investment in associates and the joint venture at the
reporting date is as follows:
2021 2020
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
As at 1 January 4,883 3,133
Additions 7,222 2,345
Credit/(charge) to the statement of comprehensive
income:
Share of profit 1,011 36
Impairment and amount written off (408) (473)
---------------------------------------------------- ---------- ----------
603 (437)
Dividends received (275) (158)
---------------------------------------------------- ---------- ----------
As at 31 December 12,433 4,883
---------------------------------------------------- ---------- ----------
The Group is entitled to 49% of the results of CO2 Commercial
Limited and Lifetime FS Limited by virtue of its 49% equity stakes.
CO2 Commercial Limited is a dormant holding company, and trades
through its wholly owned subsidiary, Pinnacle Surveyors (England
& Wales) Limited. The Group is entitled to 49% of the results
of Clear Mortgage Solutions Limited, Vita Financial Limited, Heron
Financial Limited, Evolve FS Ltd and Eagle and Lion Limited by
virtue of its 49% equity stakes. The Group is entitled to 48.05% of
the results of MAB Broker Services PTY Limited by virtue of its
48.05% equity stake, 43.25% of the results of Sort Group Limited by
virtue of its 43.25% equity stake, 40% of the results of Meridian
Holdings Group Limited by virtue of its 40% equity stake, and 25%
of the results of Buildstore Limited and The Mortgage Broker Group
Limited by virtue of its 25% equity stakes.
The carrying value of the Group's joint venture, MAB Broker
Services PTY Limited, as at 31 December 2021 is GBPnil (2020:
GBPnil). In the year ended 30 June 2021, MAB Broker Services PTY
Limited reported a profit of AUD0.04m (2020: Loss of AUD0.9m).
First Mortgage Direct Ltd is entitled to 25% of the results of M
& R FM Ltd by virtue of its 25% equity stake.
Additions during the year include GBP5.0m of initial cash
consideration (2020: GBP2.3m) and GBP2.2m of estimated deferred
consideration (2020: GBPnil)
Acquisitions and disposals
2021
On 12 January 2021, First Mortgage Direct Limited, an 80% owned
subsidiary of the Group acquired a 25% stake in M & R FM Ltd,
for an initial cash consideration of GBP663,400, estimated deferred
consideration of GBP0.2m is payable following finalisation of
M&R FM Ltd's audit for the year ended 31 December 2021.
On 13 January 2021, the Group ceased to have an investment in
Freedom 365 Mortgage Solutions Limited, having entered into a deed
of termination.
The Group acquired a further 29% interest in Vita Financial
Limited ("Vita") on 28 May 2021 at an initial cash consideration of
GBP159,081, estimated deferred consideration of GBP0.2m and GBP0.2m
is payable following the finalisation of Vita's audits for the year
ended 31 December 2021 and 31 December 2022 respectively.
The Group acquired a 49% stake in Evolve FS Ltd ("Evolve") plus
an option over a further 31% of the ordinary share capital of
Evolve on 20 July 2021 at an initial cash consideration of
GBP2,316,290, estimated consideration of GBP0.7m is payable
following finalisation of Evolve's audit for the year ended 31
December 2021.
The Group acquired a 49% stake in Heron Financial Limited
("Heron") plus an option over the remaining ordinary share capital
of Heron on 30 November 2021 at an initial cash consideration of
GBP1,600,000. Estimated deferred consideration of GBP0.4m is
payable following finalisation of Heron's audit for the year ended
31 December 2021 with further estimated deferred consideration of
GBP0.5m payable following finalisation of Heron's audit for the
year ending 31 December 2022.
In accordance with IAS28 the Group impaired further the value of
the investment in The Mortgage Broker Group Limited by GBP400,000
(2020: GBP472,850) due to its performance. The investment in The
Mortgage Broker Group Limited is classified as Level 3 for the
purposes of disclosure in the fair value hierarchy. The recoverable
amount of the asset is its fair value less costs of disposal and
the market approach has been determined as the most appropriate
method of estimating the fair value of this investment.
On 30 September 2021, the Group paid a further GBP271,183 in
deferred consideration in respect of its acquisition of a further
24% interest in Clear Mortgage Solutions Limited in December 2020
.
On 16 July 2021, as part of a shareholding restructure in Sort
Group Limited, in which Sort Group Limited increased its stake in
Sort Limited to 100% (previously 75.68%), the Group disposed of its
10.52% shareholding in Sort Limited for GBPnil cash consideration.
The Group now holds 43.25% of Sort Group Limited which is equal to
the previous effective interest prior to the shareholding
restructure held through separate investments in Sort Group
Limited, Sort Limited and Sort Technology Limited. With no change
in effective interest, the carrying value of the investment in Sort
Limited has been transferred to Sort Group Ltd.
2020
The Group acquired a 40% interest in Meridian Holdings Group
Limited on 12 October 2020 at a cost of GBP1,340,000.
The Group acquired a further 24% interest in Clear Mortgage
Solutions Limited on 17 December 2020 at an initial consideration
of GBP461,593.
In connection with Australian Finance Group Ltd becoming the
Group's new joint venture partner for MAB Broker Services PTY Ltd,
the Group increased its investment in MAB Broker Services PTY
Limited by 3.05% on 30 October 2020 at a cost of GBP543,095
(AUD1,000,000).
In accordance with IAS28 the Group reduced the value of the
investment in The Mortgage Broker Group Limited by GBP472,850 due
to its performance, reflecting the fair value carrying amount of
the investment.
As the associates are private companies, published share prices
are not available.
Summarised financial information for associates
The tables below provide summarised financial information for
those associates and joint ventures that are material to the Group.
The information disclosed reflects the amounts presented in the
financial statements of the relevant associates and joint ventures
and not the Group's share of those amounts:
Pinnacle
Meridian Surveyors
Heron Holdings (England
Evolve Financial Group Sort Group & Wales)
2021 FS Ltd Ltd ltd Limited Limited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ------------- ------------ -------------- ------------
Non-current assets 53 259 1,948 350 26
Cash balances 1,433 351 1,648 1,598 602
Current assets (excluding
cash balances) 206 122 1,179 749 1,332
Current liabilities (747) (115) (1,496) (1,129) (751)
Non-current liabilities
and provisions - (268) (878) (236) (300)
Revenue 5,395 2,822 7,957 10,487 5,723
Profit/(loss) before
taxation 857 602 535 772 850
Total comprehensive
income (PAT) 691 505 433 591 695
Profit attributable
to Group 151 - 178 346 341
---------------------------- ---------- ------------- ------------ -------------- ------------
Dividends received - - - - 225*
---------------------------- ---------- ------------- ------------ -------------- ------------
Pinnacle
Clear Surveyors
Mortgage (England
Buildstore Solutions Sort Group & Wales)
2020 Ltd Ltd Limited Limited
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------------- ------------- -------------- ------------
Non-current assets 188 94 386 25
Cash balances 764 1,067 1,409 575
Current assets (excluding
cash balances) 612 158 453 1,101
Current liabilities (856) (419) (1,327) (789)
Non-current liabilities
and provisions (60) (272) (171) (359)
Revenue 3,271 5,280 7,787 3,918
Profit/(loss) before
taxation 201 781 790 459
Total comprehensive
income (PAT) 163 470 557 375
Profit attributable
to Group 34 131 213 184
---------------------------- -------------- ------------- -------------- ------------
Dividends received - - - 108*
---------------------------- -------------- ------------- -------------- ------------
Individually immaterial associates and joint ventures
In addition to the interests in associates disclosed above, the
Group also has interests in a number of individually immaterial
associates and a joint venture that are accounted for using the
equity method. The aggregate of the summarised financial
information for these associates is shown below, along with the
summarised financial information for the joint venture. The
information disclosed reflects the amounts presented in the
financial statements of the relevant associates and the joint
venture and not the Group's share of those amounts:
2021 2020
2021 Associates 2020 Associates Joint Venture Joint Venture
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----------------- ----------------- ---------------- ----------------
Non-current assets 439 351 38 41
Cash balances 2,832 2,275 715 1,537
Current assets (excluding
cash balances) 1,718 1,067 1,934 502
Current liabilities (1,489) (1,441) (444) (338)
Non-current liabilities
and provisions (1,131) (674) - -
Revenue 15,147 11,846 939 833
Profit/(loss) before
taxation 711 1,199 (887) (857)
Total comprehensive
income (PAT) 513 761 40 (857)
Profit attributable
to Group (5) 20 - (546)
---------------------------- ----------------- ----------------- ---------------- ----------------
Dividends received 50 50 - -
---------------------------- ----------------- ----------------- ---------------- ----------------
* These dividends are received from CO2 Commercial Limited, the
parent undertaking of Pinnacle Surveyors (England & Wales)
Limited. All other information disclosed above relates to Pinnacle
Surveyors (England & Wales) Limited.
All associates prepare their financial statements in accordance
with FRS 102 other than MAB Broker Services PTY Limited who prepare
their financial statements in accordance with the Australian
Accounting Standards. There would be no material difference to the
profit attributable to the Group if the accounts of any of the
associates were prepared in accordance with IFRS.
Derivative financial instruments
The fair value of the call option at 31 December 2021 for Evolve
is GBP124,055. The fair value of the call option and put option at
31 December 2021 for Heron is GBP95,455 and GBP34,235 respectively.
The fair value of the call option and put option at 31 December
2021 for Meridian are GBP142,895 and GBP7 respectively
The fair values of the option contracts have been calculated
using an option valuation model. The key assumptions used to value
the options in the model are the value of shares in the associate,
the anticipated growth of the business, the option exercise price,
the expected life of the option, the expected share price
volatility of similar businesses, forecast dividends and the
risk-free interest rate. The gain relating to the derivative
financial instruments is included within 'operating profit'. These
financial instruments are categorised as Level 3 within the fair
value hierarchy.
16 Investments in non-listed equity shares
2021 2020
GBP'000 GBP'000
-------------------- ---------- ----------
As at 1 January 75 75
Additions 2,500 -
Revaluation 283
Disposals (75) -
-------------------- ---------- ----------
As at 31 December 2,783 75
-------------------- ---------- ----------
The investment at the start of the year represented a 2.23%
interest in Yourkeys Technology Ltd. This was sold on 23 April 2021
for initial consideration of GBP329,000 with estimated total
proceeds (including deferred consideration) of GBP386,000.
On 9 April 2021, the Group acquired a 3.17% stake in PD
Innovations Limited, trading as the property portal Boomin for a
cash consideration of GBP2,500,000. This investment is classified
as Level 3 for the purpose of disclosure in the fair value
hierarchy, with any fair value movements taken to the consolidated
statement of comprehensive income. The Group has determined that
using the market approach is an appropriate method of estimating
the fair value of this financial instrument.
At 31 December 2021, the Group had a shareholding of 2.92% in PD
Innovations Limited, trading as Boomin, at a value of GBP2,783,000
with an increase in value of GBP283,000 recognised in the
consolidated statement of comprehensive income during the year. In
determining the fair value, the market approach was used with
reference to recent transactions. This investment continues to be
classified as Level 3 for the purpose of disclosure in the fair
value hierarchy.
17 Subsidiaries
The subsidiaries of Mortgage Advice Bureau (Holdings) plc at the
reporting date have been included in the consolidated financial
statements. The subsidiaries are as follows:
Country of Percentage
Company name Incorporation of ordinary Nature of business
shares held
----------------------------- ---------------- -------------- ----------------------
Provision of
Mortgage Advice Bureau England and 100 financial services
Limited Wales
Provision of
Mortgage Advice Bureau England and 100 financial services
(Derby) Limited Wales
Provision of
Capital Protect Limited England and 100 financial services
Wales
Provision of
Mortgage Talk Limited England and 100 financial services
Wales
Provision of
MABWM Limited England and 100 financial services
Wales
Provision of
First Mortgage Direct Scotland 80 financial services
Limited
Provision of
First Mortgage Limited Scotland 80 financial services
Provision of
Property Law Centre Scotland 80 financial services
Limited
Intermediate
Talk Limited England and 100 holding company
Wales
Mortgage Advice Bureau Intermediate
Australia (Holdings) Australia 100 holding company
PTY Limited
Holding of
Mortgage Advice Bureau Australia 100 intellectual
PTY Limited property
Mortgage Advice Bureau England and 100 Dormant
(UK) Limited Wales
Mortgage Advice Bureau England and 100 Dormant
(Bristol) Limited Wales
MAB (Derby) Limited England and 100 Dormant
Wales
L&P 137 Limited England and 100 Dormant
Wales
Mortgage Talk (Partnership) England and 100 Dormant
Limited Wales
Financial Talk Limited England and 100 Dormant
Wales
Survey Talk Limited England and 100 Dormant
Wales
L&P 134 Limited England and 100 Dormant
Wales
Loan Talk Limited England and 100 Dormant
Wales
MAB1 Limited England and 100 Dormant
Wales
MAB Private Finance England and 100 Dormant
Limited Wales
MAB Financial Planning England and 100 Dormant
Limited Wales
First Mortgage Shop Scotland 80 Dormant
Limited
First Mortgages Limited Scotland 80 Dormant
Fresh Start Finance Scotland 80 Dormant
Limited
----------------------------- ---------------- -------------- ----------------------
The registered office for all of the subsidiaries of Mortgage
Advice Bureau (Holdings) plc, as listed in the table above, is
Capital House, Pride Place, Pride Park, Derby, DE24 8QR, United
Kingdom, other than for the two subsidiaries incorporated in
Australia for which the registered office is Norton Rose Fulbright,
Level 18, 225 George Street, Sydney, NSW 2000, Australia and First
Mortgage Direct Limited and its subsidiaries for which the
registered office is 30 Walker Street, Edinburgh, EH3 7HR.
Mortgage Advice Bureau Australia (Holdings) PTY Limited has a
100% equity stake in Mortgage Advice Bureau PTY
Limited and also a 48.05% equity stake in MAB Broker Services PTY Limited.
Mortgage Advice Bureau (Holdings) plc holds 100% of the ordinary
share capital of Mortgage Advice Bureau Limited and Talk
Limited.
Mortgage Advice Bureau Limited holds 100% of the ordinary share
capital of Mortgage Advice Bureau (Derby) Limited, Capital Protect
Limited, MABWM Limited and Mortgage Advice Bureau Australia
(Holdings) PTY Limited. On 2 July 2019, Mortgage Advice Bureau
Limited acquired 80% of the ordinary share capital of First
Mortgage Direct Limited.
First Mortgage Direct Limited holds 100% of the ordinary share
capital of First Mortgage Limited, Property Law Centre Limited,
First Mortgages Limited, First Mortgage Shop Limited and Fresh
Start Finance Limited.
Talk Limited holds 100% of the ordinary share capital of
Mortgage Talk Limited, L&P 137 Limited, Mortgage Talk
(Partnership) Limited, Financial Talk Limited and Survey Talk
Limited.
Mortgage Talk Limited holds 100% of the ordinary share capital
of Loan Talk Limited.
L&P 137 Limited holds 100% of the ordinary share capital of
L&P 134 Limited.
Two of the Group's subsidiaries, First Mortgage Limited
(SC177681) and Property Law Centre Limited (SC348791) are exempt
from the audit of individual accounts under section 479A of the
Companies Act 2006.
There are no restrictions regarding the utilisation of cash or
other resources held by any subsidiary.
18 Trade and other receivables
2021 2020
GBP'000 GBP'000
----------------------------------------- --------- ---------
Trade receivables 1,741 1,460
Less provision for impairment of trade
receivables (374) (379)
----------------------------------------- --------- ---------
Trade receivables - net 1,367 1,081
Receivables from related parties - 12
Other receivables 448 468
Loans to related parties 1,398 1,919
Less provision for impairment of loans
to related parties (2) (614)
Less amounts written off loans to
related parties (628) (1,069)
----------------------------------------- --------- ---------
Total non derivative financial assets
other than cash and cash equivalents
classified at amortised costs 2,583 1,797
Prepayments and accrued income 4,856 4,113
Corporation tax - 499
----------------------------------------- --------- ---------
Total trade and other receivables 7,439 6,409
----------------------------------------- --------- ---------
Less: non-current portion - Loans
to related parties (541) (220)
Less: non-current - Trade receivables (557) (586)
----------------------------------------- --------- ---------
Current portion 6,341 5,603
----------------------------------------- --------- ---------
2021 2020
Reconciliation of movement in trade and GBP'000 GBP'000
other receivables to cash flow
------------------------------------------- --------- ---------
Movement per trade and other receivables 1,030 (1,880)
Corporation tax 499 (499)
Accrued interest movement 16 18
Accrued interest write off (15) -
Accrual of deferred consideration for (55) -
Yourkeys disposal
Total movement per cash flow 1,475 (2,361)
------------------------------------------- --------- ---------
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
Included within trade receivables are operational business
development loans to Appointed Representatives. The non-current
trade receivables balance is comprised of loans to Appointed
Representatives.
Also included in trade receivables are amounts due from
Appointed Representatives relating to commissions that are
refundable to the Group when policy lapses or other reclaims exceed
new business. As these balances have no credit terms, the Board of
Directors consider these to be past due if they are not received
within seven days. In the management of these balances, the
Directors can recover them from subsequent new business entered
into with the Appointed Representative or utilise payables that are
owed to the same counterparties and included within payables as the
Group has the legally enforceable right of set off in such
circumstances. These payables are considered sufficient by the
Directors to recover receivable balances should they default, and,
accordingly, credit risk in this respect is minimal.
In light of the above, the Directors do not consider that
disclosure of an aging analysis of trade and other receivables
would provide useful additional information. Further information on
the credit quality of financial assets is set out in note 21.
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. As at 31
December 2021 the lifetime expected loss provision for trade
receivables is GBP0.4m (2020: GBP0.4m) The movement in the
impairment allowance for trade receivables has been included in
cost of sales in the consolidated statement of comprehensive
income.
Impairment provisions for loans to associates are recognised
based on a forward looking expected credit loss model. The
methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk
since initial recognition of the financial asset. For those where
the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those
for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised. In determining the lifetime expected credit
losses for loans to associates, the Directors have considered
different scenarios for repayments of these loans and have applied
percentage probabilities to each scenario for each associate where
applicable.
A summary of the movement in the provision for the impairment of
receivables is as follows:
2021 2020
GBP'000 GBP'000
------------------------------------------- --------- ---------
As at 1 January 379 363
New provisions for impairment losses 4 81
Increases in existing provisions for
impairment losses 5 5
Impairment provisions no longer required (14) (70)
------------------------------------------- --------- ---------
As at 31 December 374 379
------------------------------------------- --------- ---------
A summary of the movement in the provision for the impairment of
loans to related parties is as follows:
2021 2020
GBP'000 GBP'000
------------------------------------------- --------- ---------
As at 1 January 614 171
Increases in existing provisions for
impairment losses - 611
Impairment provisions no longer required (612) (168)
------------------------------------------- --------- ---------
As at 31 December 2 614
------------------------------------------- --------- ---------
During the year, a principal loan balance of GBP0.6m has been
written off in respect of Eagle and Lion Limited which represents
the principal loan balance write off and release of GBP0.6m of
expected credit losses already recognised in the prior year. 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. As
at 31 December 2021 the lifetime expected loss provision for loans
to associates is GBP0.0m (2020: GBP0.6m), with 12 month expected
credit losses recognised for remaining associates.
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivables mentioned above less
collateral held as security. Details of security held are given in
note 21.
19 Cash and cash equivalents
2021 2020
GBP'000 GBP'000
---------------------------------------------- ---------- --- ----------
Unrestricted cash and bank balances 17,548 18,550
Bank balances held in relation to retained
commissions 16,863 14,431
---------------------------------------------- ---------- --- ----------
Cash and cash equivalents 34,411 32,981
---------------------------------------------- ---------- --- ----------
Bank balances held in relation to retained commissions earned on
an indemnity basis from protection policies are held to cover
potential future lapses in Appointed Representatives 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 20).
20 Trade and other payables
2021 2020
GBP'000 GBP'000
------------------------------------------------ ---------- ----------
Appointed Representatives retained commission 16,863 14,431
Other trade payables 6,255 5,447
------------------------------------------------ ---------- ----------
Trade payables 23,118 19,878
Social security and other taxes 1,305 1,289
Other payables 70 154
Deferred consideration (see note 15) 2,212 -
Accruals 5,220 2,341
------------------------------------------------ ---------- ----------
Total trade and other payables 31,925 23,662
------------------------------------------------ ---------- ----------
Should a protection policy be cancelled within four years of
inception, a proportion of the original commission will be clawed
back by the insurance provider. The majority of any such repayment
is payable by the Appointed Representative. It is the Group's
policy to retain a proportion of commission payable to the
Appointed Representative to cover such potential future lapses;
these sums remain a liability of the Group. This commission is held
in a separate ring fenced bank account as described in note 19.
As at 31 December 2021 and 31 December 2020, the carrying value
of trade and other payables classified as financial liabilities
measured at amortised cost approximates fair value.
Appointed Representatives retained commission is expected to be
payable after more than one year. Other trade payables normally
fall due within 30 to 60 days.
21 Financial instruments - risk management
The Group is exposed through its operations to the following
financial risks:
-- Credit risk
-- Liquidity risk
-- Interest rate risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
Principal financial instruments
-- Trade and other receivables
-- Investments in non-listed equity shares
-- Derivative financial instruments
-- Cash and cash equivalents
-- Trade and other payables
A summary of financial instruments held by category is provided
below:
Financial assets 2021 2020
GBP'000 GBP'000
------------------------------------------- --------- ---------
Cash and cash equivalents 34,411 32,981
Investments in non-listed equity shares
(FVTPL) 2,783 75
Trade and other receivables (Amortised
cost) 2,583 1,797
Derivative financial instruments (FVTPL) 362 -
Total financial assets 40,139 34,853
------------------------------------------- --------- ---------
2021 2020
Financial liabilities
GBP'000 GBP'000
----------------------------------- --------- ---------
Trade and other payables 24,493 21,321
Deferred consideration 2,212 -
Accruals 5,220 2,341
Lease liabilities 2,596 2,695
Derivative financial instruments 34 -
Total financial liabilities 34,555 26,357
----------------------------------- --------- ---------
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies, and designs
and operates processes that ensure the effective implementation of
the objectives and policies to the Group's finance function. The
Board sets guidelines to the finance team and monitors adherence to
its guidelines on a monthly basis.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below.
Credit risk
Credit risk is the risk of financial loss to the Group if a
trading partner or counterparty to a financial instrument fails to
meet its contractual obligations. The Group is mainly exposed to
credit risk from loans to its trading partners. It is Group policy
to assess the credit risk of trading partners before advancing
loans or other credit facilities. Assessment of credit risk
utilises external credit rating agencies. Personal guarantees are
generally obtained from the Directors of its trading partners.
Quantitative disclosures of the credit risk exposure in relation
to financial assets are set out below. Further disclosures
regarding trade and other receivables are given in note 18.
Financial assets - maximum exposure 2021 2020
GBP'000 GBP'000
------------------------------------------ --------- ---------
Cash and cash equivalents 34,411 32,981
Investments in non-listed equity shares
(FVTPL) 2,783 75
Trade and other receivables (Amortised
cost) 2,583 1,797
Derivative financial instruments (FVTPL) 362 -
------------------------------------------ --------- ---------
Total financial assets 40,139 34,853
------------------------------------------ --------- ---------
The carrying amounts stated above represent the Group's maximum
exposure to credit risk for trade and other receivables. An element
of this risk is mitigated by collateral held by the Group for
amounts due to them.
Trade receivables consist of a large number of unrelated trading
partners and therefore credit risk is not concentrated. Due to the
large volume of trading partners the Group does not consider that
there is any significant credit risk as a result of the impact of
external market factors on their trading partners. Additionally,
within trade payables are amounts due to the same trading partners
that are included in trade receivables; this collateral of
GBP822,382 (2020: GBP325,538) 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.
Interest rate risks
The Group's interest rate risk arises from cash on deposit. The
Group aims to maximise its return on cash on deposit whilst
ensuring that cash is available to meet liabilities as they fall
due. Current market deposit interest rates are minimal and
therefore any fall in these rates is unlikely to have a significant
impact on the results of the Group.
Foreign exchange risk
As the Group does not operate outside of the United Kingdom and
has only one investment outside the UK, it is not exposed to any
material foreign exchange risk.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The Group's trade and other payables are repayable
within one year from the reporting date and the contractual
undiscounted cash flow analysis for the Group's trade and other
payables is the same as their carrying value. The contractual
maturities of financial liabilities are as follows:
31 December 2021 Within 1 - 2 2 -5 After Total
1 year years years 5 years
----------------------------------- --------- -------- -------- ---------- --------
Trade and other payables 7,630 - - - 7,630
Deferred consideration 1,483 729 - - 2,212
Accruals 3,942 183 1,095 - 5,220
Lease liabilities 449 454 1,228 665 2,796
Derivative financial instruments - 34 - - 34
------------------------------------ --------- -------- -------- ---------- --------
Total 13,504 1,400 2,323 665 17,892
------------------------------------ --------- -------- -------- ---------- --------
31 December 2020 Within 1 - 2 -5 After Total
1 year 2 years years 5 years
--------------------------- --------- ---------- -------- ---------- --------
Trade and other payables 6,890 - - - 6,890
Accruals 1,620 67 654 - 2,341
Lease liabilities 401 390 1,142 1,006 2,939
---------------------------- --------- ---------- -------- ---------- --------
Total 8,911 457 1,796 1,006 12,170
---------------------------- --------- ---------- -------- ---------- --------
The appointed representatives retained commissions balance of
GBP16.9m has been excluded from the maturity analysis due to there
being an equal cash balance held within cash and cash equivalents.
There is therefore no liquidity risk relating to this balance.
The Board receives annual 12 month cash flow projections based
on working capital modelling as well as information regarding cash
balances monthly. At the end of the financial year, these
projections indicated that the Group expected to have sufficient
liquid resources to meet its obligations under all reasonably
expected circumstances. Additionally, the Group has financial
resource requirements set by its regulator, the Financial Conduct
Authority. The Board has set a policy to ensure that adequate
capital is maintained to ensure that these externally set financial
resource requirements are exceeded at all times. Quarterly reports
are made to the Financial Conduct Authority and submission is
authorised by the Chief Financial Officer, at which time capital
adequacy is re-assessed.
Capital management
The Group monitors its capital which consists of all components
of equity (i.e. share capital, share premium, capital redemption
reserve, share option reserve and retained earnings).
The Group's objectives when maintaining capital are:
-- To safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders
-- To ensure that capital is maintained at all times to ensure
that financial resource requirements set by its regulator, the
Financial Conduct Authority, are exceeded at all times
-- To ensure the Group has the cash available to develop the
services provided by the Group to provide an adequate return to
shareholders.
22 Provisions
Clawback provision 2021 2020
GBP'000 GBP'000
---------------------------------------- ---------- ----------
As at 1 January 4,576 3,735
Charged to the consolidated statement
of comprehensive income 1,140 841
---------------------------------------- ---------- ----------
As at 31 December 5,716 4,576
---------------------------------------- ---------- ----------
The provision relates to refund liabilities for the estimated
cost of repaying commission income received upfront on protection
policies that may lapse in the four years following issue. Under
the Group's revenue contracts with protection providers, if the
policy is cancelled by the customer within a four year period after
the inception of the policy then a proportion of the commission
received upfront has to be repaid to the protection provider.
Provisions are held in the financial statements of four of the
Group's subsidiaries: Mortgage Advice Bureau Limited, Mortgage
Advice Bureau (Derby) Limited, First Mortgage Direct Limited and
First Mortgage Limited. The exact timing of any future repayments
(termed 'clawbacks') within the four year period is uncertain and
the provision was based on the Directors' best estimate, using
industry data where available, of the probability of clawbacks to
be made.
23 Deferred tax
Deferred tax is calculated in full on temporary differences
using tax rates of 19% and 25% depending on when the temporary
differences are expected to unwind (2020: 19%).
The movement in deferred tax is shown below:
2021 2020
GBP'000 GBP'000
------------------------------------- ---------- ----------
Net deferred tax asset - opening
balance 179 866
Recognised in the consolidated
statement of comprehensive income 286 (13)
Deferred tax movement recognised
in equity 649 (674)
------------------------------------- ---------- ----------
Net deferred tax asset - closing
balance 1,114 179
------------------------------------- ---------- ----------
The deferred tax balance is made up as follows:
2021 2020
GBP'000 GBP'000
Accelerated capital allowances (686) (643)
Other timing differences 108 91
Share-based payment 1,692 731
--------------------------------- ---------- ----------
Net deferred tax asset 1,114 179
--------------------------------- ---------- ----------
Reflected in the consolidated statement 2021 2020
of financial position as follows: GBP'000 GBP'000
Deferred tax liability (757) (643)
Deferred tax asset 1,871 822
------------------------------------------ ---------- ----------
Net deferred tax asset net 1,114 179
------------------------------------------ ---------- ----------
Deferred tax liabilities have arisen due to capital allowances
which have been received ahead of the depreciation charged in the
accounts and due to derivative financial assets.
A change to the corporation tax rate was substantively enacted
on 24 May 2021 to increase to 25% with effect from 1 April 2023.
The impact of this in the year has been to increase the tax charge
by GBP88,750.
24 Share capital
Issued and fully paid 2021 2020
GBP'000 GBP'000
------------------------------- ---------- ----------
Ordinary shares of 0.1p each 53 53
------------------------------- ---------- ----------
Total share capital 53 53
------------------------------- ---------- ----------
During the year 51,433 ordinary shares of 0.1p each were issued
following partial exercise of options issued in April 2018 at no
premium. As at 31 December 2021, there were 53,204,620 ordinary
shares of 0.1p in issue (2020: 53,153,187). See also note 29.
25 Reserves
The Group's policy is to maintain an appropriate capital base
and comply with its externally imposed capital requirements whilst
providing maximum shareholder value.
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share premium Amount subscribed for share capital
in excess of nominal value.
Capital redemption The capital redemption reserve represents
reserve the cancellation of part of the original
share capital premium of the company
at par value of any shares repurchased.
Share option reserve The fair value of equity instruments
granted by the Company in respect
of share based payment transactions
and deferred tax recognised in equity.
Retained earnings All other net gains and losses and
transactions with owners (e.g. dividends)
not recognised elsewhere.
There is no restriction on the distribution of retained
earnings.
26 Retirement benefits
The Group operates defined contribution pension schemes for the
benefit of its employees and also makes contributions to a
self-invested personal pension ("SIPP"). The assets of the schemes
and the SIPP are held separately from those of the Group in
independently administered funds. The pension cost charge
represents contributions payable by the Group to the SIPP and
amounted to GBP1,454,025 (2020: GBP1,199,044). There were
contributions payable to the SIPP as at 31 December 2021 of
GBP130,792 (2020: GBP36,128).
27 Related party transactions
The following details provide the total amount of transactions
that have been entered into with related parties during the twelve
months ended 31 December 2021 and 2020, as well as balances with
related parties as at 31 December 2021 and 31 December 2020.
During the period the Group paid commission of GBP906,073 (2020:
GBP960,289) to Buildstore Limited, an associated company. There was
a balance of GBP10,443 (2020: GBP21,213) of retained commission to
cover future lapses. As at 31 December 2021, there was no loan
outstanding from Buildstore Limited (2020: GBP17,757).
During the period the Group received introducer commission from
Sort Limited, a subsidiary of an associated company of GBP1,391,232
(2020: GBP988,674). As at 31 December 2021, there was a net loan of
GBP218,369 outstanding with Sort Group Limited (2020:
GBP218,369).
During the period the Group paid commission of GBP5,001,507
(2020: GBP4,960,645) to Clear Mortgage Solutions Limited, an
associated company. There was a balance of GBP542,290 (2020:
GBP414,563) of retained commission to cover future lapses.
During the period up to and including 13th January 2021 when the
Group ceased to have an investment in Freedom 365 Mortgage
Solutions Limited, the Group paid commissions of GBP2,069 (2020:
GBP297,545) to Freedom 365 Mortgage Solutions Limited. There was a
balance of GBP78,402 (2020: GBP78,402) of retained commission to
cover future lapses. At the point of termination on 13th January
2021, there was no loan outstanding from Freedom 365 Mortgage
Solutions Limited (2020: GBPnil).
During the period the Group paid commission of GBP1,830,584
(2020: GBP1,315,108) to Vita Financial Limited, an associated
company. There was a balance of GBP253,948 (2020: GBP159,113) of
retained commission to cover future lapses.
During the period the Group paid commission of GBP nil (2020:
GBP222,730) to Eagle & Lion Limited, an associated company.
There was a balance of GBP nil (2020: GBPnil) of retained
commission to cover future lapses . As at 31 December 2021, there
was no loan outstanding from Eagle & Lion Limited (2020:
GBP611,385).
During the period the Group paid commission of GBP1,634,833
(2020: GBP1,572,282) to The Mortgage Broker Group Limited, an
associated company. There was a balance of GBP66,785 (2020:
GBP66,781) of retained commission to cover future lapses.
During the period the Group paid commission of GBP3,990,911
(2020: GBP954,995l) to Meridian Holdings Group Limited, an
associated company. There was a balance of GBP545,605 (2020:
GBP545,578) of retained commission to cover future lapses. As at 31
December 2021, there was a loan outstanding from Meridian Holdings
Group Limited of GBP550,069 (2020: GBPnil).
During the period the Group paid commission of GBP1,352,455
(2020: GBPnil) to M&R FM Ltd, an associated company. There was
a balance of GBP34,598 (2020: GBPnil) of retained commission to
cover future lapses.
During the year the Group received dividends from associated
companies as follow:
2021 2020
GBP'000 GBP'000
--------------------------- ---------- ----------
CO2 Commercial Limited 225 108
Lifetime FS Limited 50 50
--------------------------- ---------- ----------
Total dividends received 275 158
--------------------------- ---------- ----------
28 Ultimate controlling party
There is no ultimate controlling party.
29 Share based payments
Mortgage Advice Bureau Executive Share Option Plan
The Group operates two equity-settled share based remuneration
schemes for Executive Directors and certain senior management, one
being an approved scheme, the other unapproved, but with similar
terms. Half of the options are subject to a total shareholder
return (TSR) performance condition and the remaining half are
subject to an earnings per share (EPS) performance condition. The
outstanding options in the unapproved scheme vest as follows:
For options granted during 2018 and outstanding as at 1 January
2021:
-- 100% based on performance to 31 March 2021, exercisable
between 11 April 2021 and 9 April 2026.
For options granted during 2019 and outstanding as at 1 January
2021:
-- 100% based on performance to 31 March 2022, exercisable between 1 July 2022 and 1 July 2027.
For options granted during 2020 and outstanding as at 1 January
2021:
-- 100% based on performance to 31 March 2023, exercisable
between 22 April 2023 and 21 July 2028.
For options granted during the year:
-- 100% based on performance to 31 March 2024, exercisable
between 1 April 2024 and 31 March 2029.
The number and weighted average exercise prices (WAEP) of, and
movements in, share options during the year for the Mortgage Advice
Bureau Executive Share Option Plan:
2021 2021 2020 2020
WAEP Number WAEP Number
GBP GBP
--------------------- ------- ----------- ---------- -------------
Outstanding as at
1 January 0.001 504,462 2.74 1,707,868
Granted during the
year 0.001 115,502 0.001 203,668
Exercised 0.001 (51,433) 3.30 (1,310,220)
Lapsed * - (108,151) - (96,854)
----------- -------------
Outstanding as at
31 December 0.001 460,380 0.001 504,462
----------- -------------
*Due to not fully vesting, retirement or leaving the Group.
As at 31 December 2021, 460,380 options over ordinary shares of
0.1 pence each in the Company were exercisable with a weighted
average exercise price of GBP0.001.
On 1 April 2021, 115,502 options over ordinary shares of 0.1
pence each in the Company were granted to the Executive Directors
and senior executives of MAB under the equity-settled Mortgage
Advice Bureau Executive Share Option Plan (the "Options") with a
weighted average fair value of GBP8.14 per option. Exercise of the
Options is subject to the service conditions and achievement of
performance conditions based on total shareholder return and
earnings per share criteria. Subject to achievement of the
performance conditions, the Options will be exercisable 3 years
from the date of grant. The exercise price for the Options is 0.1
pence, being the nominal cost of the Ordinary Shares.
Options exercised in April 2021 resulted in 21,802 ordinary
shares being issued at an exercise price of 0.1p per share. The
price of the ordinary shares at the time of exercise was GBP12.40
per share.
Options exercised in June 2021 resulted in 29,631 ordinary
shares being issued at an exercise price of 0.1p per share. The
price of the ordinary shares at the time of exercise was GBP12.05
per share.
For the share options outstanding under the Mortgage Advice
Bureau Executive Share Option Plan as at 31 December 2021, the
weighted average remaining contractual life is 1.2 years (2020: 1.5
years).
The following information is relevant in the determination of
the fair value of options granted during the year under the
equity-settled share based remuneration scheme operated by the
Group.
2021 2020
----------------------------- --------------- ---------------
Equity-settled
Option pricing model - EPS Black-Scholes Black-Scholes
Option pricing model - TSR Stochastic Stochastic
Exercise price GBP0.001 GBP0.001
Expected volatility 39.41% 39.53%
Expected dividend yield 2.23% 3.98%
Risk free interest rate 0.18% 0.00%
----------------------------- --------------- ---------------
Expected volatility is a measure of an amount by which the share
price is expected to fluctuate during a period. Dividends paid on
shares reduce the fair value of an award as a participant does not
receive the dividend income on these shares. For the share options
granted during the year the historic dividend yield has been used,
calculated as dividends announced in the 12 months prior to grant
(excluding special dividends) calculated as a percentage of the
share price on the date of grant to give a dividend yield of
2.23%.
The Options offer participants the opportunity to benefit from
increasing per share value without risking the current per share
price. The risk-free rate used is the rate of interest obtainable
from UK government securities as at the date of grant over the
expected terms.
The options granted this year have vesting periods of 3 years
from the date of grant and the calculation of the share based
payment is based on these vesting periods.
MAB AR Option Plan
The Group operates an equity-settled share plan, the AR Option
Plan, to reward selected ARs of the Group. The AR Option Plan
provides for options which have a nominal exercise price of 0.01
pence per share (or, for any individual AR, not less than GBP1 on
each occasion of exercise) to acquire Ordinary Shares subject to
performance conditions. Certain criteria must be met in order for
ARs to be eligible, including using the Mortgage Advice Bureau
brand and being party to an AR Agreement which provides for an
initial contract term of at least five years at the date of grant.
The AR Options will normally become exercisable following the fifth
anniversary of grant subject to the satisfaction of performance
conditions based on financial and other targets, including quality
of consumer outcomes, compliance standards and continued use of the
Mortgage Advice Bureau brand.
The number and weighted average exercise prices (WAEP) of, and
movements in, share options during the year for the MAB AR Option
Plan:
2021 2021 2020 2020
WAEP Number WAEP Number
----------------------- -------- ---------- ------- -----------
Outstanding as at
1 January - - 0.01p 255,000
Granted during the - - - -
year
Exercised during the
year - - 0.01p (230,760)
Lapsed during the
year - - 0.01p (24,240)
----------------------- -------- ---------- ------- -----------
Outstanding as at - - - -
31 December
----------------------- -------- ---------- ------- -----------
Share-based remuneration expense
The share-based remuneration expense of GBP1,932,375 (2020:
GBP967,438) includes the charge for the equity-settled schemes of
GBP667,261 (2020: GBP182,979) and related employer's National
Insurance Contributions of GBP392,664 (2020: GBP185,815). In 2020,
the charge for the equity-settled scheme included gross charges of
GBP610,413 and the reversal of GBP427,434 of charges for the
non-vesting proportions of the 2017 and 2018 grants of options
subject to EPS performance criteria (with 2018 options vesting
affected by the pandemic being the majority of this) and the
non-vesting proportion of AR options. Also included are the
matching element of the Group's Share Incentive Plan for all
employees of GBP107,039 (2020: GBP85,465), costs for free shares
awarded to employees of GBP222,567 (2020: GBP70,750) and GBP542,844
(2020: GBP442,428) in respect of the option relating to First
Mortgage Direct Limited. IFRS 2 charges relating to the non-vesting
of proportions of the 2017 and 2018 grants of options subject to
EPS performance criteria have been reversed during the year.
Options exercised during the period resulted in a transfer from
the Share option reserve to Retained earnings of GBP143,000 (2020:
GBP943,000) reflected in the consolidated statement of changes in
equity.
The Group did not enter into any share-based payment
transactions with parties other than employees during the current
or previous year.
30 Non-controlling interests (NCI)
Accounting policy choice for non-controlling interests
The Group recognises non-controlling interests in an acquired
entity either at fair value or at the non-controlling interest's
proportionate share of the acquired entity's net identifiable
assets. This decision is made on an acquisition-by-acquisition
basis. For the non-controlling interests in First Mortgage Direct
Limited, the Group elected to recognise the non-controlling
interests at its proportionate share of the acquired net
identifiable assets. See note 1 for the Group's accounting policies
for business combinations.
Set out below is summarised financial information for each
subsidiary that has a non-controlling interest that is material to
the Group. The amounts disclosed for each subsidiary are before
inter-company eliminations.
Summarised balance sheet First Mortgage First Mortgage
Direct Limited Direct Limited
2021 2020
GBP'000 GBP'000
------------------------------------------------ ----------------- -----------------
Current assets 11,198 9,193
Current liabilities (2,428) (1,625)
------------------------------------------------ ----------------- -----------------
Current net assets 8,770 7,568
------------------------------------------------ ----------------- -----------------
Non-current assets 3,447 2,870
Non-current liabilities (4,093) (3,802)
------------------------------------------------ ----------------- -----------------
Non-current net liabilities (646) (932)
------------------------------------------------ ----------------- -----------------
Net assets 8,124 6,636
------------------------------------------------ ----------------- -----------------
Accumulated NCI 2,205 1,908
------------------------------------------------ ----------------- -----------------
Summarised statement of comprehensive GBP'000 GBP'000
income
------------------------------------------------ ----------------- -----------------
Revenue 16,587 13,257
Profit for the period and total comprehensive
income 2,752 1,996
Profit allocated to NCI 550 399
Dividends paid to NCI 253 86
Summarised cash flows GBP'000's GBP'000's
------------------------------------------------ ----------------- -----------------
Cash flows from operating activities 6,200 2,490
Cash flows from investing activities (730) (80)
Cash flows from financing activities (1,659) (432)
Net increase in cash & cash equivalents 3,811 1,978
31 Contingent liabilities
The Group had no contingent liabilities as at 31 December 2021
or 31 December 2020.
32 Events after the reporting date
On 28 March 2022 Mortgage Advice Bureau (Holdings) plc announced
that it had agreed to acquire 75.4% of Project Finland Topco
Limited, which indirectly owns 100% of The Fluent Money Group
Limited ("Fluent" or the "Business") from its current shareholders
including Beech Tree Private Equity and founders for an enterprise
value of GBP95 million on a debt free, cash free basis (the
"Acquisition"). Fluent is a technology enabled telephony mortgage
broking platform that has developed a leading end to end digital
customer journey with approximately 420 employees including c.125
advisers across Mortgages (first charge mortgages), Secured
Personal Loans (second charge mortgages), Later Life lending and
Bridging Finance. The Acquisition will be funded from the Company's
existing cash resources, new debt facilities up to GBP35m and the
proceeds of a proposed placing of new ordinary shares in the
Company, raising up to GBP40 million.
The founder shareholders will retain a 24.6% ownership stake at
completion. Total consideration at completion will comprise c.GBP73
million paid in cash, subject to adjustment to reflect the daily
cash generation of Fluent if completion takes place before or after
30 June 2022. MAB will have the right to acquire the outstanding
24.6% after six years at a valuation subject to certain performance
criteria under a mutual put / call arrangement. Total consideration
for the put/call arrangement will be capped at GBP120 million and
MAB can, at its discretion, satisfy up to 50% of the consideration
through the issue of new ordinary shares in MAB.
MAB and Fluent will be able to leverage their respective unique
selling points and leading technology capabilities to be the
leading player in the rapidly expanding national customer lead
source market.
MAB also entered into an agreement on 28 March 2022 with
NatWest, in respect of a new term loan for GBP20m and a new
revolving credit facility for GBP15m, in order to part fund the
cash consideration payable in relation to the Acquisition. It is
MAB's intention to repay the drawn down proportion of this debt
facility as soon as practicable. MAB's practice over recent years
has been to pay out approximately 75% of its adjusted profit after
tax and minority interests as dividends and MAB intends to keep
that level of pay out.
The terrible atrocities currently unfolding in Ukraine increase
the economic uncertainty, and the longer-term financial
consequences are unknown. Energy prices are already impacted, as
are businesses with trade both to and from Russia. MAB has no
interests which are directly impacted by the conflict.
There were no other material events after the reporting period,
which have a bearing on the understanding of these consolidated
financial statements.
33 Notes supporting statement of cash flows
Cash and cash equivalents for purposes of the consolidated
statement of cash flows comprises:
2021 2020
GBP'000 GBP'000
---------
Cash at bank available on demand 17,548 18,550
Bank balances held in relation to retained
commissions 16,863 14,431
Total cash and cash equivalents 34,411 32,981
---------
Financing activities for the purposes of the consolidated
statement of cash flows comprises:
2021 2020
GBP'000 GBP'000
---------
Lease liabilities 2,596 2,695
Loans and borrowings - -
Total financing activities 2,596 2,695
---------
A reconciliation of lease liabilities has been presented
separately in note 13. In 2020, 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 was fully repaid in 2020 including accrued
interest of GBP0.2m. No drawdown of the facility was made in
2021.
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