TIDMMAB1
RNS Number : 7119A
Mortgage Advice Bureau (Hldgs) PLC
27 September 2022
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
("MAB" or "the Group")
27 September 2022
Interim Results for the six months ended 30 June 2022
Mortgage Advice Bureau (Holdings) Plc (AIM: MAB1.L) is pleased
to announce its interim results for the six months ended 30 June
2022.
Financial highlights
H1 2022 H1 2021 Change vs
2021
Revenue GBP96.5m GBP92.4m +4%
--------- --------- ----------
Gross profit GBP25.4m GBP24.6m +3%
--------- --------- ----------
Gross profit margin 26.4% 26.7% -0.3pp(1)
--------- --------- ----------
Adjusted overheads ratio(2) 14.7% 14.8% -0.1pp(1)
--------- --------- ----------
Adjusted profit before tax(3) GBP11.5m GBP11.6m -
--------- --------- ----------
Statutory profit before tax GBP10.1m GBP10.8m -6%
--------- --------- ----------
Adjusted profit before tax
margin(3) 12.0% 12.5% -0.5pp(1)
--------- --------- ----------
Adjusted profit before tax
as a percentage of net revenue(4) 39% 41% -2pp(1)
--------- --------- ----------
Reported profit before tax
margin 10.5% 11.7% -1.2pp(1)
--------- --------- ----------
Adjusted(3) EPS 16.4p 17.9p -8%
--------- --------- ----------
Basic EPS 14.0 p 16.5p -15%
--------- --------- ----------
Operating profit to adjusted
cash conversion(5) 124% 120% +4pp(1)
--------- --------- ----------
Interim dividend(6) 13.4p 13.4p -
--------- --------- ----------
Operational highlights
-- Adviser numbers up 8% to 2,034 (7) at 30 June 2022 (31
December 2021: 1,885)
-- Average number of mainstream advisers(8) up 19% to 1,890
(H1 2021: 1,584)
-- Revenue per mainstream adviser down 13%(9) with pipelines
taking longer to convert and against a very strong comparative
in H1 2021 as a result of stamp duty holiday changes
accelerating house purchase mortgage completions in that
year
-- Gross mortgage completions (including product transfers)
up 11% to GBP12.2bn (H1 2021: GBP11.0bn)
-- Gross new mortgage completions (excluding product transfers)
up 7% to GBP10.3bn (H1 2021: GBP9.6bn)
-- Market share of new mortgage lending up 13% to 6.8% (H1
2021: 6.0% (10) )
-- Proportion of revenue from re-financing at 30 % (H1 2021:
24%)
Post period end
-- Completed the acquisition of The Fluent Money Group,
which is transformational for the Group's lead generation
strategy
-- Increased stake in leading protection and general insurance
advice firm Vita Financial Ltd from 49% to 75%
-- 2,160(7) advisers at 23 September 2022, including 156(11)
advisers from The Fluent Money Group
Peter Brodnicki, Chief Executive, commented:
"This is a strong set of results when compared to the
exceptional results reported for the same period last year,
particularly given the increasingly difficult macro environment
that developed during the period. I am especially pleased that we
have delivered a large gain in market share during the first
half.
"The integration of Fluent is progressing very well. Lead flow
has been growing strongly, ahead of our expectations, and we expect
it to continue to do so despite the purchase market starting to
slow. Accordingly, recruiting new advisers to ensure this strong
consumer demand is met remains a high priority for Fluent.
"The well documented congestion of property and mortgage
pipelines has resulted in transactions taking a month longer to
complete than in H1 2021, with the anticipated improvement still to
materialise. A more cautious market outlook typically leads to
broker firms seeking a partner that can help them optimise income
and support continued business growth. Our pipeline of new
appointed representatives ("AR") and adviser recruitment remains
strong, and MAB is well positioned to attract those firms focused
on achieving growth in an increasingly challenging economic
climate."
Current Trading and Outlook
Due to extended completion timeframes, the Group started the
second half with a pipeline of written new business that was over
30% higher than expected, allowing for adviser growth, compared to
the start of the year. Re-financing activity continues to increase,
as advisers, lenders, and customers focus on making the most of
securing new mortgage deals as mortgage rates rise. Whilst consumer
demand has cooled a little, housing transaction levels are expected
to remain steady. It remains clear that those who have built up
strong savings and equity over recent years are sufficiently well
positioned and confident to move home. In addition, mortgage
lenders are well capitalised with ample liquidity, meaning product
availability and price competition for mortgages is very strong
despite the increasing interest rate environment. In this
increasing interest rate environment, advisers have experienced
constant change in mortgage products as well as short notice
withdrawal of those products, and we expect this to continue whilst
interest rate uncertainty continues.
A continuation of slow pipeline conversion, a further softening
of purchase activity, and an increasingly cautious approach to
recruitment by some ARs is likely to lead to a slight reduction in
the Group's financial result for the year against previous
expectations.
We expect the recent mini budget to support the housing and
mortgage markets. The Stamp Duty changes that help aspiring first
time buyers are particularly welcome, demonstrating the
Government's ongoing commitment towards maintaining a healthy and
active housing market.
We were delighted to complete the acquisition of The Fluent
Money Group on 12 July 2022. The acquisition is expected to be
significantly earnings accretive in 2023 and will allow the
enlarged Group to rapidly benefit from a far greater level of
national lead generation. Since Q2 2022, Fluent has delivered
faster than expected lead growth in its mortgage division,
requiring additional investment in the recruitment of new advisers
and associated administrative staff to handle the strong consumer
demand. This reinforces our confidence in the outlook for 2023 and
beyond.
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 today.
Those analysts wishing to attend are asked to contact
investor.relations@mab.org.uk
Copies of this interim results announcement are available at
www.mortgageadvicebureau.com/investor-relations
(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. Adjusted
overheads ratio is stated before GBP1.5m (H1 2021: GBPnil) of costs
relating to the acquisition of The Fluent Money Group, GBP0.4m (H1
2021: GBP0.6m) of costs relating to the First Mortgage option, and
GBP0.2m (H1 2021: GBP0.2m) of amortisation of acquired
intangibles.
(3) Adjusted profit before tax is stated before the items in (2)
above and GBP0.7m of net fair value gains on deferred
considerations (H1 2021: GBPnil), and GBP0.03m (H1 2021: GBPnil) of
net fair value losses on derivative financial instruments. Adjusted
earnings per share is stated on the same basis, net of any
associated tax effects.
(4) Net revenue is revenue less commissions paid.
(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(0.3)m in H1 2022 (H1
2021: GBP(0.9)m), and increases in restricted cash balances of GBP
0.5m in H1 2022 (H1 2021: GBP1.2m), as a percentage of adjusted
operating profit.
(6) Dividend policy based on a minimum payout ratio of 75% of
annual adjusted profit after tax post minority interests.
(7) Includes a total of 67 advisers at 30 June 2022 and 73
advisers at 23 September 2022 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. The 30 June 2022 and 23
September 2022 figures also include 14 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 14 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.
(9) Based on average number of mainstream advisers.
(10) For H1 2021, market share stated for the seven months ended
31 July 2021 due to the distortion effect around 30 June 2021 with
the tapering of the stamp duty holiday thereafter.
(11) Fluent's 156 advisers as at 23 September 2022 include 78
advisers in the first charge mortgages division, 60 in the secured
personal loans division, 13 in the later life division, and 5 in
the bridging finance division.
Chief Executive's Review
Despite a 29% drop in UK housing transactions in the period
compared to H1 2021, when stamp duty holiday changes accelerated
house purchase completions, the Group grew its revenue by 4% to
GBP96.5m (H1 2021: GBP92.4m), its mortgage completions by 11% to
GBP12.2bn (H1 2021: GBP11.0bn), and its market share by 13% to 6.8%
(H1 2021: 6.0%). This once again demonstrates the strength and
resilience of the Group's business model, with adjusted profit
before tax in line with the prior period at GBP11.5m (H1 2021:
GBP11.6m).
Our growth in mortgage completions is analysed as follows:
H1 2022 H1 2021 Increase
GBPbn GBPbn vs 2021
-------- -------- ---------
New mortgage
lending 10.3 9.6 +7%
-------- -------- ---------
Product Transfers 1.9 1.4 +36%
-------- -------- ---------
Gross mortgage
lending 12.2 11.0 +11%
-------- -------- ---------
UK mortgage lending activity returned to more normal levels
during the first half of this year, after the unprecedented surge
seen in H1 2021. In addition, the time taken to complete a property
purchase increased by approximately one month compared to the
equivalent period last year, adversely impacting the number of
mortgage completions. Compared to H1 2021, UK mortgage completions
in the purchase segment saw a 30% drop. UK gross mortgage
completions as a whole were down 10% at GBP151.4bn (H1 2021:
GBP168.5bn(1) ), and up 20% compared to pre-Covid-19 levels in 2019
(H1 2019: GBP126.2bn).
A number of factors are delaying property transactions and
mortgage pipelines, including conveyancing backlogs, local
authority capacity constraints, and also expiring mortgage offers
that need to be reconsidered and reissued by lenders due to the
frequency of UK base rate increases in the period. Consequently,
our pipeline of written but unbanked business has grown to larger
than usual levels.
Delivering our growth strategy
Adviser growth
Adviser growth continues to be a major focus for the Group,
boosted by the need to service new lead flow whilst using
technology to help maximise opportunities from existing customers
and lead sources.
Adviser numbers grew by 8% to 2,034 during the period. Every
year, MAB helps its ARs replace 300+ advisers, and overall growth
in adviser numbers is derived from organic growth in these existing
firms and also new ARs being onboarded with their existing
advisers. Over the summer months, MAB saw a significant fall in the
number of new advisers onboarded with a far higher than usual
summer holiday slowdown experienced. This is an unfortunate break
in strong momentum in adviser growth this year, which has now
resumed and is expected to remain strong for the remainder of the
year. As a result, adviser numbers were 2,160 as at 23 September
2022, including 156 Fluent advisers.
We have a strong pipeline of new advisers and ARs and, combined
with Fluent's rapidly growing adviser base in the Mortgage
division, we expect to continue to deliver further adviser
growth.
As trading conditions are likely to become more challenging,
some existing firms will take a more cautious view on organic
growth whilst others, including newly onboarded growth-focussed
firms, expect to continue with their plans for adviser and market
share growth.
With increasing expectations and even higher standards expected
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.
Investment strategy
The acquisition of Fluent has further strengthened our portfolio
of invested-in businesses(2) . These businesses are integral to the
future success of the Group as we pursue a greater level of adviser
productivity, primarily based on a clear and strong lead generation
strategy.
The average productivity of advisers in our invested-in
businesses is circa 25% greater than our other ARs' advisers, and
recent investments have increased that differential further. This
includes the acquisition of Fluent, which is a leader in the
provision of centralised telephone-based mortgage advice and is
delivering high levels of adviser performance by combining strong
and reliable lead flow with streamlined technology-driven
processes.
Fluent has formed relationships with leading third-party brands
including aggregators and other national lead sources. Fluent helps
customers to access Mortgages, Secured Personal Loans, Later Life
Lending and Bridging Finance, and broadens the Group's revenue mix
and customer proposition. Since the acquisition, Fluent has
experienced strong growth in lead flow and adviser numbers in its
fast-growing mortgage division, providing a rapid scale-up of the
Group's adviser base and fulfilment capability.
Separately, MAB has also targeted the fast-growing national lead
source sector and has already formed a number of strong
relationships. Combined, MAB and Fluent 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.
If activity in the housing market was to fall from current
levels, this lead supply would further support revenue and profit
growth despite more challenging trading conditions.
Although the contribution from some of our smaller early-stage
investments has taken time to build, these are now starting to
mature. Our investment strategy in the last few years has
increasingly focused on established and profitable firms,
strengthening our new build proposition and market share, in
addition to ensuring we have the expertise and scale to establish a
market leading position in the national lead source sector.
We expect the additional lead flow that MAB can generate for its
invested-in businesses, combined with their existing growth
trajectory, strong protection success, and growing productivity per
adviser, will contribute significant profit growth over the next
five years.
Vita Financial Ltd ("Vita") has performed exceptionally well in
supporting MAB's AR firms who wish to outsource some of their
protection or general insurance leads. As part of MAB's wider
protection strategy, we intend to extend Vita's proposition into a
wider addressable market to fully leverage its expertise.
Accordingly, we have acquired a further 26% stake in Vita,
increasing our overall stake to 75%.
Customer lead generation
In our sector, securing a quality and reliable lead flow
underpins both the growth and stability of every firm, and gives
more predictability and control over trading. This is why MAB has
focused technology developments and prioritised investments in this
area.
MAB is already a leader in local lead generation through estate
agencies and builders, and new technology developments will help us
optimise lead flow in these two key sectors. The addition of
Fluent, which has rapidly achieved a dominant position with
national lead sources, has given the enlarged Group a market
leading proposition in the three largest lead source sectors.
Driven by this acquisition and the fulfilment capacity of the
Group, we are now in an even stronger position to secure additional
national lead generation partners to support further productivity
and adviser growth in 2023 and beyond.
Significant upside can also be achieved through improved
customer retention. This has been a major strategic focus for the
Group and we will be launching new initiatives and technology in Q4
2022 to help optimise these opportunities at a time when consumers
are highly focused on managing their expenditure.
In addition, capturing and nurturing customers who are in the
early research stages of their home buying journey is also a new
and integral part of the Group's strategy. This gives us access to
a new and wider group of lead sources.
Summary
MAB's market share model has delivered year-on-year growth in
all market conditions and is better positioned than ever to keep
doing so.
Our management team has strengthened further this year, and
MAB's technology investments and lead generation strategy have
progressed very well. We continue to onboard recent investments
following FCA approval, and our invested-in businesses are set to
perform strongly, benefitting from lead generation and streamlined
processes.
Our acquisition of Fluent will bring significant earnings
enhancement to the Group, derived in part from the delivery of
commercial synergies. We will also help Fluent to accelerate growth
through sharing best practice, primarily in customer retention and
the provision of protection and general insurance.
2022 has proved to be a difficult year for advisers, due to a
constant withdrawal and re-pricing of mortgage rates at short
notice. Combined with a significant fall in, and delays to housing
transactions and completions compared to H1 2021, productivity has
understandably been affected.
The longer-term fundamentals for the property and mortgage
markets look very strong, and there is also scope for further
growth through setting higher standards and helping firms with the
important new regulatory requirements being introduced by the
FCA.
Our strategy underpins our confidence in the outlook for 2023
and beyond .
(1) MAB previously reported GBP169.9bn of gross new mortgage
completions in H1 2021, in line with UK Finance estimates at the
time. UK Finance regularly updates its estimates.
(2) Invested-in businesses include the Group's associate
companies, First Mortgage, The Fluent Money Group and Vita
Financial.
Market review
During the period, the housing market returned to more normal
levels after an unprecedented surge in house purchase activity last
year driven by the stamp duty holiday. Compared to H1 2021, the
number of property transactions fell by 29%. However, property
transactions still trended above pre-Covid-19 levels, having grown
by 8% compared to H1 2019, as illustrated in the following
graph.
http://www.rns-pdf.londonstockexchange.com/rns/7119A_3-2022-9-26.pdf
Source: HM Revenue and Customs
Gross new mortgage lending activity in the purchase segment
experienced a similar trend during the period, falling by 30%
compared to H1 2021 but increasing by 28% compared to H1 2019. The
drop in home-owner mover activity was the sharpest (-39% compared
to H1 2021, +24% compared to H1 2019) as a result of the
exceptional peak in that segment last year. First-time buyer
activity was down by a more modest 17% compared to the peak in H1
2021, but up 27% compared to pre-Covid-19 levels in H1 2019.
Re-financing activity in H1 2022 showed strong year-on-year
growth. External re-mortgage lending values increased by 37%
compared to H1 2021, reflecting the exceptionally busy housing
market last year, and 7% compared to H1 2019. Whilst product
transfers values decreased by 4% in H1 2022 compared to H1 2021,
they increased by 12% compared to H1 2019. We expect re-financing
activity to continue to be strong, as consumers seek better
mortgages rates in a rising interest rate environment and high
levels of fixed rate mortgages arriving at maturity in the near
term.
Buy-to-let activity was steady during the period largely driven
by buy-to-let re-mortgage activity. Buy-to-let values increased by
9% compared to H1 2021 and 26% compared to H1 2019.
Overall, gross new mortgage lending (excluding product
transfers) in H1 2022 decreased by 10% compared to H1 2021 and
increased by 20% compared to pre-Covid-19 levels in H1 2019.
The trends in gross new mortgage lending are illustrated in the
graph below.
http://www.rns-pdf.londonstockexchange.com/rns/7119A_2-2022-9-26.pdf
Source: UK Finance
During the period, average house prices increased by 10%
year-on-year, similar to the increases seen throughout 2021. This
is likely to start slowing in the coming months due to fears of
recession and the rising cost of living.
The share of UK residential mortgage transactions via
intermediaries (excluding buy to let, where intermediaries have a
higher market share, and product transfers where intermediaries
have a lower market share) grew to 84% (H1 2021: 79%), with the
expected increase reflecting how consumers increasingly want
choice, advice, and support in making major financial decisions.
The increase in intermediary market share also reflects the lower
footfall in bank and building society branches, a change that was
accelerated in part by Covid-19. We expect this increased
intermediary market share to remain stable in the short term.
Despite inflationary pressures and further national and
geopolitical uncertainty, the level of consumer demand for housing
remains strong, supported by UK full employment, high levels of
household savings, and, for those who are subsequent movers, rising
housing equity levels over recent years. Lenders also have strong
liquidity levels, meaning mortgage availability is now close to
pre-pandemic highs, thereby helping market activity to remain
healthy.
Although interest rates have risen and will most likely continue
to rise over the next 12 months, current interest rates remain near
historical lows. We expect this to continue to stimulate
re-financing activity. We are confident that this, coupled with
strong demand for housing, will continue to drive sustained
transaction activity in the mortgage market.
(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/7119A_1-2022-9-26.pdf
Revenue
Group revenue for the six months ended 30 June 2022 increased to
GBP96.5m (H1 2021: GBP92.4m), up 4% on a comparative period in
which house purchase mortgage completions were boosted by the stamp
duty holiday changes at the end of March and June 2021. In
addition, H1 2022 revenue was negatively impacted by delays in the
conversion of pipeline to completions and a change in mortgage mix
with an increase in re-financing compared to the prior period.
The average number of mainstream advisers(1) during the period
increased by 19% to 1,890 (H1 2021: 1,584), with lower average
revenue per mainstream adviser of GBP51,041 (H1 2021: GBP58,451) as
a consequence of the factors set out above.
The Group continued to generate revenue from three core areas,
summarised as follows:
Group
Income source H1 2022 H1 2021 Change vs
2021
-------- -------- ----------
GBPm GBPm %
-------- -------- ----------
Mortgage Procuration Fees 44.9 42.7 +5
-------- -------- ----------
Protection and General Insurance
Commission 37.2 35.8 +4
-------- -------- ----------
Client Fees 11.8 11.6 +2
-------- -------- ----------
Other Income 2.6 2.3 +13
-------- -------- ----------
Total 96.5 92.4 +4
-------- -------- ----------
MAB's banked mortgage mix saw a lower proportion of house
purchase business compared to the prior year with an increase in
re-financing. In particular, the proportion of product transfer
completions, which have a lower average procuration fee and see
lower protection, general insurance and client fee attachment
rates, increased to 18% (H1 2021: 14%). Consequently, while the
Group's gross mortgage completions increased by 6%(2) , mortgage
procuration fees increased by 5%, protection and general insurance
commissions increased by 4% and client fees increased by 2%.
MAB's average mortgage size increased by 2% compared to the
prior period, with average house prices increasing by 10%
year-on-year, reflecting the increased proportion of re-financing
completions where the average mortgage size is lower than for
purchase transactions.
MAB's overall revenue from re-financing (including both
re-mortgages and product transfers) represented circa 30% of total
revenue (H1 2021: 24%, H1 2019: 32%), with the prior period
reflecting a particularly high level of purchase transactions in H1
2021.
The proportion of revenue derived from each of the Group's core
revenue streams has remained relatively stable, with small
movements reflecting the change in banked mortgage mix during the
period illustrated as follows:
Income source H1 2022 H1 2021
Mortgage Procuration Fees 47% 46%
-------- --------
Protection and General Insurance Commission 38% 39%
-------- --------
Client Fees 12% 13%
-------- --------
Other Income 3% 2%
-------- --------
Total 100% 100%
-------- --------
Gross profit margin
Gross profit margin was 26.4% (H1 2021: 26.7%), with the slight
fall during the period reflecting the increased proportion of
re-financing transactions and the slightly reduced margin received
by the Group (revenue share) as existing ARs grow their revenue
organically by increasing their adviser numbers. In addition,
larger new ARs typically join the Group on lower-than-average
margins due to their existing scale, hence we expect to see a
degree of erosion of our underlying gross profit margin (prior to
the impact of the Fluent acquisition) due to the continued growth
of our existing ARs and the addition of new larger ARs.
Looking ahead, before the impact of the Fluent acquisition (as
set out below), we expect any further erosion in underlying gross
margin to be offset by a reduction in the Group's overheads ratio
through economies of scale.
Administrative expenses
Administrative expenses in the period increased by GBP0.5m (+4%)
to GBP14.2m. MAB has continued to invest in its technology platform
and marketing team to drive lead generation opportunities. All
development work on our technology platform is expensed.
Administrative expenses as a percentage of revenue remained
stable at 14.7% (H1 2021: 14.8%). This excludes GBP1.5m (H1 2021:
GBPnil) of costs associated with the acquisition of The Fluent
Money Group, GBP0.2m (H1 2021: GBP0.2m) of amortisation of acquired
intangibles and GBP0.4m (H1 2021: GBP0.6m) of additional non-cash
operating expenses relating to the put and call option agreement to
acquire the remaining 20% of First Mortgage.
Prior to the impact of the acquisition of Fluent as set out
below, 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 erosion of
MAB's underlying gross margin as the business continues to grow. In
recognition of the current inflationary environment MAB awarded pay
rises effective from 1 July 2022 to a number of staff to help with
the increasing costs of living.
Associates and investments
MAB's share of profits from associates was GBP0.3m (H1 2021:
GBP0.7m) with a slower start to the year for a number of the
Group's associates resulting primarily from delays in conversion of
pipeline to completion. MAB also realised a further GBP0.1m profit
on the sale of its minority investment in the sales progression
platform Yourkeys Technology Ltd .
MAB considers the value of a number of these investments exceeds
their balance sheet value as accounted for using the equity
accounting method under IAS 28.
Profit before tax and margin thereon
Adjusted(3) profit before tax as a percentage of net revenue(4)
reduced to 39% (H1 2021: 41%), primarily due to the change in
banked mortgage mix.
Adjusted(3) profit before tax was GBP11.5m (H1 2021: GBP11.6m),
with the margin thereon being 12.0% (H1 2021: 12.5%). Statutory
profit before tax was GBP10.1m (H1 2021: GBP10.8m) with the margin
thereon being 10.5% (H1 2021: 11.7%).
Finance income and expense
Finance income of GBP0.04m (H1 2021: GBP0.03m) reflects
continued low interest rates and interest income accrued or
received on loans to associates. Finance expense of GBP0.1m (H1
2021: GBP0.1m) reflects the non-utilisation fee payable on a
Revolving Credit Facility ("RCF") of GBP12m repaid in December
2020, interest expense on lease liabilities and commitment fees on
the new debt facilities as set out below.
On 28 March 2022 MAB entered into new four-year debt facilities
with NatWest, comprising a GBP20m Term Loan (the "Term Loan") and a
GBP15m RCF (the "New RCF") to be used in connection with the
acquisition of Fluent. The New RCF is also available for general
corporate purposes. There is an option to extend the New RCF and
the Term Loan for a further year.
Taxation
The effective rate of tax increased to 21.9% (H1 2021: 16.8%),
primarily due to costs associated with the acquisition of Fluent
being disallowable for tax purposes, no share option exercises in
the period and a lower tax credit on research and development
expenditure on the continued development of MAB's proprietary
software platform, MIDAS. We expect the effective tax rate in
future years to be materially in line with the prevailing UK
corporation tax rate.
Issue of new ordinary shares, earnings per share and
dividend
On 28 March 2022 the Group placed 3,809,524 new ordinary shares
with investors, raising GBP40m to part fund the acquisition of The
Fluent Money Group (the "Placing"), representing a 7% increase in
the Group's issued share capital. The new ordinary shares were
issued at GBP10.50 per ordinary share. The share premium recognised
was GBP38.4m after deduction of GBP1.6m of costs directly
associated with the Placing.
Adjusted(3) earnings per share was 16.4 pence (H1 2021: 17.9
pence) reflecting the dilutive impact of the Placing throughout Q2
2022 while the acquisition did not complete until after the period
end, so that no earnings from Fluent were recognised in H1 2022.
Basic earnings per share was 14.0 pence (H1 2021: 16.5 pence).
The Board is pleased to confirm an interim dividend for the year
ending 31 December 2022 of 13.4 pence per share (H1 2021: 13.4
pence per share), reflecting the Group's dividend policy based on a
minimum payout ratio of 75% of the Group's annual adjusted(3)
post-tax and minority interest profits. This represents a cash
outlay of GBP7.6m (H1 2021: GBP7.1m). MAB requires circa 10% of its
profit after tax to fund increased regulatory capital and other
regular capital expenditure. Following payment of the dividend, the
Group will continue to maintain significant surplus regulatory
reserves.
The record date for the interim dividend is 7 October 2022 and
the payment date is 4 November 2022. The ex-dividend date will be 6
October 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
GBP11.5m (H1 2021: GBP14.7m).
Headline cash conversion(5) was:
H1 2022 128%
H1 2021 130%
------------
Adjusted cash conversion(6) was:
H1 2022 124%
------------
H1 2021 120%
------------
The Group's operations are typically capital-light, with the
most significant ongoing capital investment being in computer
equipment. Only GBP0.1m of capital expenditure on office and
computer equipment was required during the period (H1 2021:
GBP0.1m). Group policy is not to provide company cars. The Group is
currently undertaking a refurbishment of its head office in Derby,
which it anticipates will cost c. GBP3m. No other significant
capital expenditure is foreseen in the coming year.
The Group had no bank borrowings at 30 June 2022 (31 December
2021: GBPnil). The Group had adjusted unrestricted bank balances(7)
of GBP19.0m at 30 June 2022 (31 December 2021: GBP17.5m).
On 11 July 2022 MAB drew down the GBP20m Term Loan and GBP5.3m
under the New RCF to part-fund the acquisition of Fluent.
The Group has a regulatory capital requirement amounting to 2.5%
of regulated revenue. At 30 June 2022 this regulatory capital
requirement was GBP4.3m (31 December 2021: GBP4.3m), with the Group
having a surplus of GBP20.1m (31 December 2021: GBP18.9m).
The following table demonstrates how cash generated by the Group
was applied:
GBPm
Unrestricted bank balances at the beginning of the year 17.5
Cash generated from operating activities excluding movements in restricted balances and dividends
received from associates 12.6
Dividends received from associates 0.6
Dividends paid (8.8)
Tax paid (2.1)
Investment in associates (0.5)
Disposal of unlisted investment 0.1
Issue of shares (net of expenses) 38.4
Net interest paid and principal element of lease payments (0.2)
Capital expenditure (0.2)
Unrestricted bank balances at the end of the period 57.4
-------------------------------------------------------------------------------------------------- -----
Financial effects of the acquisition of The Fluent Money
Group
Fluent has a higher gross margin than MAB of c.35% because it
directly employs its advisers. However, overheads as a proportion
of revenue are also higher than MAB's, resulting in Fluent's profit
before tax margin being slightly above that of MAB's. The effect of
Fluent's operating model on the enlarged Group will be to slightly
increase gross profit margin, which will be partially offset by an
increase in overheads as a proportion of revenue.
MAB entered into the Term Loan and New RCF in part to fund the
acquisition of Fluent. MAB plans to repay approximately half of the
Term Loan over the next four years with the remainder repayable at
maturity. There is an option to extend the New RCF and the Term
Loan for a further year. There will be no change to MAB's dividend
policy.
(1) Excludes directly authorised advisers, later life advisers,
and advisers from associates in the process of being onboarded
under MAB's AR arrangements.
(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) Adjusted profit before tax is stated before GBP0.6m (H1
2021: GBP0.7m) of costs associated with the acquisition of First
Mortgage, GBP1.5m (H1 2021: GBPnil) of costs relating to the
acquisition of The Fluent Money Group, GBP0.4m (H1 2021: GBP0.6m)
of costs relating to the First Mortgage option, GBP0.2m (H1 2021:
GBP0.2m) of amortisation of acquired intangibles, GBP0.7m of net
fair value gains on deferred considerations (H1 2021: GBPnil), and
GBP0.03m (H1 2021: GBPnil) of net fair value losses on derivative
financial instruments. Adjusted earnings per share is stated on the
same basis, net of any associated tax effects.
(4) Net revenue is revenue less commissions paid.
(5) 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(0.3) in H1 2022 (H1
2021: GBP(0.9)m), as a percentage of adjusted operating profit.
(6) Adjusted cash conversion is headline cash conversion
adjusted for increases in restricted cash balances of GBP 0.5m in
H1 2022 (H1 2021: GBP1.2m) as a percentage of adjusted operating
profit.
(7) Unrestricted cash balance at 30 June 22 excludes net
proceeds from the GBP40m equity placing (GBP38.4m net of expenses)
to part fund the acquisition of The Fluent Money Group that
completed 12 July 2022.
INDEPENT REVIEW REPORT TO MORTGAGE ADVICE BUREAU (HOLDINGS)
PLC
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the London
Stock Exchange AIM Rules for Companies.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the interim condensed
consolidated statement of financial position, interim condensed
consolidated statement of comprehensive income, interim condensed
consolidated statement of changes in equity and interim condensed
consolidated statement of cash flows.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with
the London Stock Exchange AIM Rules for Companies which require
that the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange AIM Rules for Companies for no
other purpose. No person is entitled to rely on this report unless
such a person is a person entitled to rely upon this report by
virtue of and for the purpose of our terms of engagement or has
been expressly authorised to do so by our prior written consent.
Save as above, we do not accept responsibility for this report to
any other person or for any other purpose and we hereby expressly
disclaim any and all such liability.
BDO LLP
Chartered Accountants
London
United Kingdom
26 September 2022
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Interim condensed consolidated statement of comprehensive income
for the six months ended 30 June 2022
Six months ended
30 June
Note 2022 2021
Unaudited Unaudited
GBP'000 GBP'000
-------------------------------------- ----- ----------- -----------
Revenue 2 96,468 92,432
Cost of sales 3 (71,032) (67,783)
-------------------------------------- ----- ----------- -----------
Gross profit 25,436 24,649
Administrative expenses (14,214) (13,659)
Costs relating to the First Mortgage
option 4 (423) (550)
Amortisation of acquired intangibles 4 (183) (183)
Costs relating to the acquisition
of The Fluent Money Group 4 (1,453) -
Impairment of loans to related
parties - (14)
Net fair value gains on deferred
consideration 10 650 -
Net fair value losses on derivative
financial instruments 10 (25) -
Share of profit from associates,
net of tax 10 314 723
Profit on sale of non-listed
equity investment 11 59 309
Impairment of associate 10 - (400)
-------------------------------------- ----- ----------- -----------
Operating profit 10,161 10,875
-------------------------------------- ----- ----------- -----------
Finance income 5 42 27
Finance expense 5 (96) (67)
Profit before tax 10,107 10,835
Tax expense 6 (2,214) (1,820)
-------------------------------------- ----- ----------- -----------
Profit for the period 7,893 9,015
-------------------------------------- ----- ----------- -----------
Total comprehensive income 7,893 9,015
-------------------------------------- ----- ----------- -----------
Profit is attributable to:
Equity owners of Parent Company 7,698 8,763
Non-controlling interests 195 252
-------------------------------------- ----- ----------- -----------
7,893 9,015
-------------------------------------- ----- ----------- -----------
Earnings per share attributable
to the owners of the Parent Company
Basic 7 14.0p 16.5p
Diluted 7 13.8p 16.4p
Interim condensed consolidated statement of financial
position
as at 30 June 2022 and 31 December 2021
30 June 2022 31 Dec
Note Unaudited 2021
GBP'000 Audited
GBP'000
---------------------------------- ------ ------------- ---------
Assets
Non-current assets
Property, plant and equipment 2,569 2,667
Right of use assets 2,259 2,457
Goodwill 9 15,155 15,155
Other intangible assets 2,573 2,704
Investments in associates and
joint venture 10 12,147 12,433
Investments in non-listed equity
shares 11 2,783 2,783
Derivative financial instruments 170 220
Other receivables 12 1,197 1,098
Deferred tax asset 1,726 1,871
---------------------------------- ------ ------------- ---------
Total non-current assets 40,579 41,388
---------------------------------- ------ ------------- ---------
Current assets
Trade and other receivables 12 7,284 6,341
Derivative financial instruments 134 142
Cash and cash equivalents 13 74,743 34,411
---------------------------------- ------ ------------- ---------
Total current assets 82,161 40,894
---------------------------------- ------ ------------- ---------
Total assets 122,740 82,282
---------------------------------- ------ ------------- ---------
Interim condensed consolidated statement of financial
position
as at 30 June 2022 and 31 December 2021 (continued)
Note 30 June 2022 31 Dec
Unaudited 2021
GBP'000 Audited
GBP'000
---------------------------------- ----- ------------- ---------
Equity and liabilities
Share capital 17 57 53
Share premium 48,155 9,778
Capital redemption reserve 20 20
Share option reserve 4,080 3,523
Retained earnings 24,724 25,408
---------------------------------- ----- ------------- ---------
Equity attributable to owners
of Parent Company 77,036 38,782
Non-controlling interests 1,985 2,205
---------------------------------- ----- ------------- ---------
Total equity 79,021 40,987
---------------------------------- ----- ------------- ---------
Liabilities
Non-current liabilities
Provisions 6,403 5,716
Lease liabilities 1,997 2,202
Derivative financial instruments 1 34
Deferred tax liability 672 757
---------------------------------- ----- ------------- ---------
Total non-current liabilities 9,073 8,709
---------------------------------- ----- ------------- ---------
Current liabilities
Trade and other payables 14 33,986 31,925
Lease liabilities 403 394
Corporation tax liability 257 267
---------------------------------- ----- ------------- ---------
Total current liabilities 34,646 32,586
---------------------------------- ----- ------------- ---------
Total liabilities 43,719 41,295
---------------------------------- ----- ------------- ---------
Total equity and liabilities 122,740 82,282
---------------------------------- ----- ------------- ---------
Interim condensed consolidated statement of changes in equity
for the six months ended 30 June 2022
Attributable to the holders of the
Parent Company
----------------------------------------------------------------------
Share
Capital option Non-controlling
Share Share redemption reserve Retained Interest Total
capital premium reserve GBP'000 earnings Total GBP'000 equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- --------- ------------ --------- ----------- ---------- ----------------- ----------
Balance at
1 January
2021 53 9,778 20 1,807 23,882 35,540 1,908 37,448
Profit for the
period - - - - 8,763 8,763 252 9,015
Total
comprehensive
income - - - - 8,763 8,763 252 9,015
--------------- --------- --------- ------------ --------- ----------- ---------- ----------------- ----------
Transactions
with owners
Issue of
shares - - - - - - - -
Share based
payment
transactions - - - 693 - 693 - 693
Deferred tax
assets
recognised
in equity - - - 717 - 717 - 717
Reserve
transfer - - - (143) 143 - - -
Dividends paid - - - - (10,210) (10,210) (253) (10,463)
--------------- --------- --------- ------------ --------- ----------- ---------- ----------------- ----------
Total
transactions
with owners - - - 1,267 (10,067) (8,800) (253 ) (9,053)
--------------- --------- --------- ------------ --------- ----------- ---------- ----------------- ----------
Balance at
30 June 2021
(unaudited) 53 9,778 20 3,074 22,578 35,503 1,907 37,410
--------------- --------- --------- ------------ --------- ----------- ---------- ----------------- ----------
Balance at
1 January
2022 53 9,778 20 3,523 25,408 38,782 2,205 40,987
Profit for the
period - - - - 7,698 7,698 195 7,893
--------------- --------- --------- ------------ --------- ----------- ---------- ----------------- ----------
Total
comprehensive
income - - - - 7,698 7,698 195 7,893
--------------- --------- --------- ------------ --------- ----------- ---------- ----------------- ----------
Transactions
with owners
Issue of
shares 4 38,377 - - - 38,381 - 38,381
Share based
payment
transactions - - - 532 - 532 - 532
Deferred tax
asset
recognised
in equity - - - 25 - 25 - 25
Reserve - - - - - - -
transfer -
Dividends paid - - - - (8,382) (8,382) (415) (8,797)
--------------- --------- --------- ------------ --------- ----------- ---------- ----------------- ----------
Total
transactions
with owners 4 38,377 - 557 (8,382) 30,556 (415) 30,141
Balance at
30 June 2022
(unaudited) 57 48,155 20 4,080 24,724 77,036 1,985 79,021
--------------- --------- --------- ------------ --------- ----------- ---------- ----------------- ----------
Interim condensed consolidated statement of cash flows for the
six months ended 30 June 2022
Six months ended
30 June
Note 2022 2021
Unaudited Unaudited
GBP'000 GBP'000
------------------------------------------- ----- ------------ -----------
Cash flows from operating activities
Profit for the period before tax 10,107 10,835
Adjustments for
Depreciation of property, plant
and equipment 175 185
Depreciation of rights of use assets 198 191
Amortisation of intangibles 282 279
Profit on sale of non-listed equity
investment 11 (59) (309)
Share based payments 532 693
Share of profit from associates,
net of tax 10 (314) (723)
Impairment of associate 10 - 400
Dividends received from associates 10 600 88
Net fair value gains on deferred
consideration 10 (650) -
Net fair value losses on derivative
financial instruments 10 25 -
Finance income 5 (42) (27)
Finance expense 5 96 67
10,950 11,679
Changes in working capital
(Increase) in trade and other receivables 12 (1,086) (6,730)
Increase in trade and other payables 14 3,120 9,986
Increase in provisions 687 694
Cash generated from operating activities 13,671 15,629
Income taxes paid (2,141) (893)
------------------------------------------- ----- ------------ -----------
Net cash generated from operating
activities 11,530 14,736
------------------------------------------- ----- ------------ -----------
Cash flows from investing activities
Purchase of property, plant and
equipment (77) (109)
Purchase of Intangibles (151) -
Acquisition of associates 10 (457) (822)
Disposal of non-listed equity investment 11 114 329
Acquisition of non-listed equity
investment - (2,500)
------------------------------------------- ----- ------------ -----------
Net cash used in investing activities (571) (3,102)
------------------------------------------- ----- ------------ -----------
Cash flows from financing activities
Interest received 5 32 41
Interest paid 5 (48) (67)
Principal element of lease payments (195) (177)
Issue of shares 17 40,000 -
Costs relating to the issue of shares 17 (1,619) -
Dividends paid 8 (8,382) (10,210)
Dividends paid to minority interest (415) (253)
------------------------------------------- ----- ------------ -----------
Net cash generated/(used) in financing
activities 29,373 (10,666)
------------------------------------------- ----- ------------ -----------
Net Increase in cash and cash equivalents 40,332 968
Cash and cash equivalents at the
beginning of the period 34,411 32,981
------------------------------------------- ----- ------------ -----------
Cash and cash equivalents at the
end of the period 74,743 33,949
------------------------------------------- ----- ------------ -----------
Notes to the interim condensed consolidated financial statements
for the six months ended 30 June 2022
1 Accounting policies
Corporate information
The interim condensed consolidated financial statements of
Mortgage Advice Bureau (Holdings) plc and its subsidiaries
(collectively, "the Group") for the six months ended 30 June 2022
were authorised for issue in accordance with a resolution of the
directors on 26 September 2022.
Mortgage Advice Bureau (Holdings) plc ("the Company") is a
limited company incorporated and domiciled in England whose shares
are publicly traded on the Alternative Investment Market ("AIM").
The registered office is located at Capital House, Pride Place,
Pride Park, Derby, DE24 8QR. The Group's principal activity is the
provision of financial services.
Basis of preparation
These condensed consolidated interim financial statements for
the six months ended 30 June 2022 have been prepared in accordance
with IAS 34 'Interim financial reporting' and also in accordance
with the measurement and recognition principles of UK adopted
international accounting standards. They do not include all of the
information required for full annual financial statements and
should be read in conjunction with the 2021 Annual Report and
Accounts, which were prepared in accordance with UK - adopted
international accounting standards.
The comparative figures for the six months ended 30 June 2021
are not the Group's statutory accounts for that financial period.
The accounts for the year ended 31 December 2021 have been reported
on by the Group's auditors and delivered to the registrar of
companies. The report of the auditor was (i) unqualified, (ii) did
not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
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 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 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.
Significant estimates and judgements
Other than as set out below, the judgements, estimates and
assumptions applied in the interim financial statements, including
the key sources of estimation uncertainty, were the same as those
applied in the Group's last annual financial statements for the
year ended 31 December 2021. There have been no material revisions
to the nature and amount of estimates of amounts reported in prior
periods.
Significant accounting policies
The accounting policies applied are consistent with those
described in the Annual Report and Group financial statements for
the year ended 31 December 2021. New or amended standards effective
in the period have not had a material impact on the condensed
consolidated interim financial statements.
The Group has not early adopted any standards, interpretations
or amendments that have been issued but are not yet effective.
New standards with no impact on the Group
-- Annual improvements 18-20 cycle amending IFRS 1, IFRS 9, IAS
41. In May 2020, the IASB made minor amendments to IFRS 1, IFRS 9
and IAS 41 as part of their annual improvement cycle. The amendment
to IFRS 1 permits first time adopting subsidiaries to measure
cumulative translation differences using amounts reported by its
parent. The amendment to IFRS 9 clarifies the fees that an entity
includes when assessing whether the terms of a new or modified
financial liability are substantially different from the original
financial liability. Amendments to IAS 41 removed a requirement to
exclude cashflows for taxation when measuring the fair value of
biological assets. These amendments were applicable for annual
reporting periods beginning on or after 1 January 2022, with early
application permitted.
-- Amendments to IAS 37 Onerous contracts - Cost of fulfilling a
contract. In May 2020, the IASB amended IAS 37 Onerous contracts to
further specify the costs that are considered to be directly
related to a contract when assessing for onerous or loss-making
contracts. This amendment is applicable for annual reporting
periods beginning on or after 1 January 2022, with early
application permitted.
-- Amendments to IAS 16 Property, plant and equipment - Proceeds
before intended use. In May 2020, the IASB amended IAS 16 Property,
plant and equipment, to prohibit entities from deducting from the
cost of an item of property, plant and equipment any proceeds of
the sale of items produced while bringing that asset to the
location and condition necessary for it to be capable of operating
in the manner intended by management. This amendment is applicable
for annual reporting periods beginning on or after 1 January 2022,
with early application permitted.
-- Amendments to IFRS 3 - Reference to the conceptual framework.
In May 2020, the IASB amended IFRS 3 Business combinations to
update references to the current IASB conceptual framework, as well
as add an exception to the recognition principle for gains or
losses on acquired liabilities and contingent liabilities in a
business combination. The amendment also clarified the recognition
criteria of contingent assets on acquisition under IFRS 3. This
amendment is applicable for annual reporting periods beginning on
or after 1 January 2022, with early application permitted.
Future new standards and interpretations
A number of new standards and amendments to standards and
interpretations will be effective for future annual and interim
periods, and therefore have not been applied in preparing these
condensed consolidated interim financial statements. At the date of
authorisation of these financial statements, the following
standards and interpretations which have not been applied in these
financial statements were in issue but not yet effective:
Standard or Interpretation Periods commencing
on or after
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 to 1 January 2023
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.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Entities that are not subsidiaries but where the Group has
significant influence (i.e. the power to participate in the
financial and operating policy decisions) are accounted for as
associates. The results and assets and liabilities of the
associates are included in the consolidated accounts using the
equity method of accounting.
Segment reporting
An operating segment is a distinguishable segment of an entity
that engages in business activities from which it may earn revenues
and incur expenses and whose operating results are reviewed
regularly by the entity's chief operating decision maker ("CODM").
The Board reviews the Group's operations and financial position as
a whole and therefore considers that it has only one operating
segment, being the provision of financial services operating solely
within the UK. The information presented to the CODM directly
reflects that presented in the financial statements and they review
the performance of the Group by reference to the results of the
operating segment against budget.
Operating profit is the profit measure, as disclosed on the face
of the consolidated statement of comprehensive income, that is
reviewed by the CODM.
During the six month period to 30 June 2022, there have been no
changes from the prior periods in the measurement methods used to
determine operating segments and reported segment profit or
loss.
2 Revenue
The Group operates in one segment being that of the provision of
financial services in the UK.
Revenue is derived as follows:
Six months ended 30
June
2022 2021
Unaudited Unaudited
GBP'000 GBP'000
Mortgage procuration fees 44,928 42,721
Protection and general insurance commission 37,197 35,803
Client fees 11,766 11,624
Other income 2,577 2,284
--------------------------------------------- ----------- -----------
96,468 92,432
--------------------------------------------- ----------- -----------
3 Cost of sales
Costs of sales are as follows:
2022 2021
Unaudited Unaudited
GBP'000 GBP'000
Commission paid 66,573 63,924
Impairment of trade receivables 9 (5)
Wages and salary costs 4,450 3,864
--------------------------------- ------------ ------------
71,032 67,783
--------------------------------- ------------ ------------
There is no significant seasonality to income which arises
fairly evenly throughout the year and therefore profits also arise
fairly evenly throughout the financial year.
4 Acquisition costs
Costs relating to current year acquisitions
The Fluent Money Group Limited
On 28 March 2022 Mortgage Advice Bureau (Holdings) plc announced
that it had agreed to acquire 75.4% of Project Finland Topco
Limited, which indirectly owns 100% of The Fluent Money Group
Limited ("Fluent" or the "Business"), from its shareholders
including Beech Tree Private Equity and founders for a total cash
consideration of GBP72.7 million (the "Acquisition"). The
Acquisition completed on 12 July 2022 and the cash consideration
was funded from the Company's existing cash resources, a drawdown
on new debt facilities of GBP25 million and the proceeds of a
proposed placing of new ordinary shares in the Company, conducted
on 28 March 2022, which raised GBP40 million gross, and GBP38.4
million net of expenses directly associated with the placing.
Other costs incurred in the period in relation to the
Acquisition amounted to GBP1,452,721.
Costs relating to prior year acquisitions
First Mortgage Direct Limited
On 2 July 2019 Mortgage Advice Bureau (Holdings) Plc acquired 80
per cent of the entire issued share capital of First Mortgage
Direct Limited ("First Mortgage" or the "Business").
Costs relating to the amortisation of acquired intangibles
amounted to GBP183,000 in the six months ended 30 June 2022 and
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, GBP217,936 (2021:
GBP212,303) has been included within costs relating to the First
Mortgage Option, and in accordance with IFRS 2, GBP204,726 (2021 -
GBP338,118) of share-based payments costs has also been included
within costs relating to the First Mortgage Option (see note
19).
5 Finance income and expense
Six months ended 30
June
2022 2021
Unaudited Unaudited
Finance income GBP'000 GBP'000
------------------------------------------------ ------------ -----------
Interest income 32 18
Interest income accrued on loans to associates 10 9
------------------------------------------------ ------------ -----------
42 27
------------------------------------------------ ------------ -----------
Finance expenses
--------------------------------------- --- ---
Interest expense 68 37
Interest expense on lease liabilities 28 30
--------------------------------------- --- ---
96 67
--------------------------------------- --- ---
Included within interest expense is interest accrued on the
Group's Revolving Credit Facility (which has been replaced by the
Group's new facilities (see note 15)) of GBP48,000 (2021: GBPnil).
During the period, interest accrued on loans to associates in
previous years of GBPnil was received (2021: GBP23,602).
6 Income tax
The Group calculates the period income tax expense using the tax
rate that would be applicable to the expected total annual
earnings. The major components of income tax expense in the interim
condensed statements of comprehensive income are:
Six months ended 30
June
2022 2021
Unaudited Unaudited
GBP'000 GBP'000
------------------------------------------------ ------------ -----------
Current tax expense
UK corporation tax charge on profit for
the period 2,129 1,937
Total current tax 2,129 1,937
------------------------------------------------ ------------ -----------
Deferred tax expense
Origination and reversal of timing differences (95) (30)
Temporary difference on share based payments 180 (170)
Adjustment due to rate change - 83
Total deferred tax 85 (117)
------------------------------------------------ ------------ -----------
Total tax expenses 2,214 1,820
------------------------------------------------ ------------ -----------
For the period ended 30 June 2022, the deferred tax recognised
in equity was GBP24,513 (2021: GBP717,160). A change to the
corporation tax rate was substantively enacted on 24 May 2021 to
increase it to 25% from 1 April 2023 rather than the previously
enacted 19%.
The deferred tax asset is recognised after being assessed as
recoverable on the basis of available evidence including projected
profits, capital and liquidity position. The deferred tax asset is
only recognised to the extent that it is probable that future
taxable profits will be available against which the asset can be
utilised. The deferred tax asset is reviewed at each reporting date
and reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
7 Earnings per share
Both the basic and diluted earnings per share have been
calculated using the profit attributable to shareholders of the
Parent Company, Mortgage Advice Bureau (Holdings) plc, as the
numerator.
The weighted average number of shares for the purposes of the
calculation of diluted earnings per share can be reconciled to the
weighted average number of ordinary shares used in the calculation
of basic earnings per share as follows:
Six months ended 30 June
2022 2021
Unaudited Unaudited
---------------------------------------- ------------- ------------
Weighted average number of shares used
in basic earnings per share 55,140,943 53,165,081
Potential ordinary shares arising from
options 456,243 349,327
---------------------------------------- ------------- ------------
Weighted average number of shares used
in diluted earnings per share 55,597,186 53,514,408
---------------------------------------- ------------- ------------
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 relating to the acquisition
of The Fluent Money Group, ongoing non-cash items relating to the
option in connection with the acquisition of First Mortgage Direct
Limited and amortisation of acquired intangibles. Adjusted profit
is also stated before net fair value gains on deferred
consideration paid and estimated to be paid to Associate
businesses, net fair value losses on financial instruments relating
to options to increase shareholdings in Associate businesses, and
impairment of loans to related parties, net of tax.
The reconciliation between the basic and adjusted figures is as
follows:
Six months ended 30 June Six months ended 30 June
2022 2021 2022 2021 2022 2021
Unaudited Unaudited Basic Basic Diluted Diluted
GBP'000 GBP'000 earnings earnings earnings earnings
per share per share per share per share
pence pence pence pence
Profit for the period 7,698 8,763 14.0 16.5 13.8 16.4
Adjustments:
Amortisation of acquired
intangibles 183 183 0.3 0.4 0.3 0.4
Costs relating
to the First Mortgage
option 423 550 0.8 1.0 0.8 1.0
Costs relating
acquisition of
The Fluent Money
Group 1,453 - 2.6 - 2.6 -
Impairment of loans
to related parties - 14 - 0.0 - 0.0
Net fair value
gains on deferred
consideration (657) - (1.2) - (1.2) -
Net fair value
losses on derivative
financial instruments 25 - 0.0 - 0.0 -
Tax effect of adjustments (70) (3) (0.1) 0.0 (0.1) 0.0
---------------------------- ----------- ----------- ----------- ----------- ----------- -------------
Adjusted earnings 9,055 9,507 16.4 17.9 16.2 17.8
---------------------------- ----------- ----------- ----------- ----------- ----------- -------------
Net fair value gains on deferred consideration of GBP656,794
represents amounts attributable to the equity owner of the parent
company and excludes GBP6,581 attributable to non-controlling
interests included in the amounts shown in the consolidated
statement of comprehensive income.
8 Dividends
Six months Six months Year ended
ended 30 ended 30 31 December
June June 2021
2022 2021 Audited
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Dividends paid and declared during
the period:
On ordinary shares at 14.7p per share
(2021: 19.2p) 8,382 10,210 10,210
Interim dividend for 2021: 13.4p per
share - - 7,129
8,382 10,210 17,339
--------------------------------------- ----------- ----------- -------------
Equity dividends on ordinary shares:
Declared:
Interim dividend for 2022: 13.4p per
share (2021: 13.4p) 7,642 7,129 -
Proposed for approval:
Final dividend for 2021: 14.7p per
share - - 7,821
--------------------------------------- ------ ------ ------
7,642 7,129 7,821
-------------------------------------- ------ ------ ------
On 28 March 2022 the Group issued 3,809,524 new ordinary shares
in an equity placing in connection with the acquisition of The
Fluent Money Group which completed on 12 July 2022.
9 Goodwill
The goodwill relates to the acquisition of Talk Limited in 2012,
and in particular its main operating subsidiary Mortgage Talk
Limited, and the acquisition of First Mortgage Direct Limited
("FMD") in 2019. The goodwill is deemed to have an indefinite
useful life. It is currently carried at cost and is reviewed
annually for impairment.
Under IAS 36, "Impairment of assets", the Group is required to
review and test its goodwill annually each year or in the event of
a significant change in circumstances. The impairment reviews
conducted at the end of 2021 concluded that there had been no
impairment of goodwill.
The key basis for determining that there was no impairment to
the carrying value of goodwill was disclosed in the annual
consolidated financial statements for the year ended 31 December
2021. There are no matters which have arisen in the period to 30
June 2022 which indicated that an impairment was required at that
date.
10 Investments in associates and joint ventures
The investment in associates and a joint venture at the
reporting date is as follows:
30 June 31 December
2022 2021
Unaudited Audited
GBP'000 GBP'000
------------------------------------------------- ----------- ------------
At start of the period 12,433 4,883
Additions - 7,222
Credit / (charge) to statement of comprehensive
income
Share of profit 314 1,011
Impairment - (408)
------------------------------------------------- ----------- ------------
314 603
Dividends received (600) (275)
------------------------------------------------- ----------- ------------
At period end 12,147 12,433
------------------------------------------------- ----------- ------------
Acquisitions and disposals
2022
Following the finalisation of Vita Financial Limited's ("Vita")
2021 audited accounts, a deferred consideration of GBP179,252 was
paid in relation to the 29% interest that was acquired on 28 May
2021. The actual deferred consideration paid in respect of Vita was
GBP7,572 lower than the original amount estimated.
During the period, the fair value of deferred consideration
payable upon finalisation of Vita's 31 December 2022 audited
accounts was revalued to GBPnil which was GBP201,007 lower than the
original amount estimated.
Following the finalisation of Heron Financial Limited's
("Heron") 2021 audited accounts, a deferred consideration of
GBP277,600 was paid in relation to the 49% interest that was
acquired on 30 November 2021. The actual deferred consideration
paid in respect of Heron was GBP130,512 lower than originally
estimated.
During the period, the fair value of deferred consideration
payable upon finalisation of Heron's 31 December 2022 audited
accounts was revalued to GBP234,428 which was GBP293,878 lower than
the original amount estimated.
Following the finalisation of M & R FM Ltd's ("M&R FM")
2021 audited accounts, a deferred consideration of GBP244,858 was
paid on 15 July 2022 in relation to the 25% interest that was
acquired by First Mortgage Direct Limited on 12 January 2021. The
actual deferred consideration paid in respect of M&R FM was
GBP32,906 higher than originally estimated.
Following the finalisation of Evolve FS Ltd's ("Evolve") 2021
audited accounts, a deferred consideration of GBP625,567 was paid
on 21 July 2022 in relation to the 49% interest that was acquired
on 20 July 2021. The actual deferred consideration paid in respect
of Evolve was GBP50,150 lower than originally estimated.
A total net gain of GBP650,213 has been recognised in the
consolidated statement of comprehensive income in respect of the
actual deferred consideration paid or expected to be paid on the
above associate businesses.
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
("M&R FM") , for an initial cash consideration of GBP663,400.
Estimated deferred consideration of GBP0.2m is payable following
finalisation of M&R FM'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 for 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
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.
Derivative financial instruments
The fair value of the call option at 30 June 2022 for Evolve is
GBP67,746 (31 December 2021: GBP124,055). The fair value of the
call option and put option at 30 June 2022 for Heron is GBP102,620
(31 December 2021: GBP95,455) and GBP1,358 (31 December 2021:
GBP34,235) respectively. The fair value of the call option and put
option at 30 June 2022 for Meridian are GBP134,035 (31 December
2021: GBP142,895) and GBPnil (31 December 2021 2021: GBP7)
respectively.
Derivative financial instruments (continued)
A total net loss of GBP25,120 has been recognised in the
consolidated statement of comprehensive income in respect of fair
value movements on derivative financial instruments since 31
December 2021.
The fair values of the option contracts have been calculated
using either stochastic or Black Scholes models as appropriate in
the option valuations. 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.
11 Investments in non-listed equity shares
30 June 31 December
2022 2021
Unaudited Audited
GBP'000 GBP'000
------------------------ ----------- ------------
At start of the period 2,783 75
Additions 2,500
Revaluation - 283
Disposals - (75)
At period end 2,783 2,783
------------------------ ----------- ------------
2022
At 30 June 2022, the Group had a shareholding of 2.92% in PD
Innovations Limited, trading as Boomin, at a value of GBP2,783,000.
In determining the fair value at 30 June 2022, the market approach
was used with reference to recent transactions, and there was no
change in value since there had been no material change in
circumstances. This investment continues to be classified as Level
3 for the purpose of disclosure in the fair value hierarchy.
2021
The investment at the start of 2021 represented a 2.23% interest
in Yourkeys Technology Ltd. This was sold on 23 April 2021 for
initial consideration of GBP329,000 with estimated further
consideration of GBP55,000. Final consideration of GBP113,541 was
received on 1 April 2022 leading to a further profit on disposal of
GBP58,541.
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. The increase in value of
GBP283,000 since investment was recognised in the consolidated
statement of comprehensive income during 2021. 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.
12 Trade and other receivables
30 June 31 December
2022 2021
Unaudited Audited
GBP'000 GBP'000
----------------------------------------------- ----------- ------------
Trade receivables 1,586 1,741
Less provision for impairment of trade
receivables (383) (374)
----------------------------------------------- ----------- ------------
Trade receivables - net 1,203 1,367
Other receivables 450 448
Loans to related parties 678 1,398
Less provision for impairment of loans
to related parties (2) (2)
Less amounts written off loans to related
parties - (628)
----------------------------------------------- ----------- ------------
Total financial assets other than cash
and cash equivalents classified at amortised
costs 2,329 2,583
Prepayments and accrued income 6,152 4,856
Total trade and other receivables 8,481 7,439
----------------------------------------------- ----------- ------------
Less: non-current portion - Loans to
related parties (436) (541)
Less: non-current - Trade receivables (761) (557)
----------------------------------------------- ----------- ------------
Current portion 7,284 6,341
----------------------------------------------- ----------- ------------
30 June 30 June
2022 2021
Reconciliation of movement in trade Unaudited Unaudited
and other receivables to cash flow GBP'000 GBP'000
------------------------------------------ ---------- ----------
Movement per trade and other receivables
(current and non-current) 1,042 6,272
Corporation tax - 499
Accrual of deferred consideration for
Yourkeys disposal 55 (55)
Accrued interest movement (11) 14
------------------------------------------ ---------- ----------
Total movement per cash flow 1,086 6,730
------------------------------------------ ---------- ----------
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
Included within trade receivables are GBP1.2m (2021: GBP1.4m) of
operational business development loans to the Group's Appointed
Representatives. The non-current trade receivables balance is
comprised solely of a proportion of these loans.
Also included in trade receivables are amounts due from
Appointed Representatives relating to commissions that are
refundable to the Group when policy lapses or other reclaims exceed
new business. As these balances have no credit terms, the Board of
Directors consider these to be past due if they are not received
within seven days. In the management of these balances, the
Directors can recover them from subsequent new business entered
into with the Appointed Representative or utilise payables that are
owed to the same counterparties and included within payables as the
Group has the legally enforceable right of set off in such
circumstances. These payables are considered sufficient by the
Directors to recover receivable balances should they default, and
accordingly, credit risk in this respect is minimal .
In light of the above, the Directors do not consider that
disclosure of an aging analysis of trade and other receivables
would provide useful additional information. Further information on
the credit quality of financial assets is set out in note 16.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within cost of sales in the consolidated
statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision. At 30 June
2022 the lifetime expected loss provision for trade receivables is
GBP0.4m (2021: GBP0.4m) The movement in the impairment allowance
for trade receivables has been included in cost of sales in the
consolidated statement of comprehensive income.
Impairment provisions for loans to associates are recognised
based on a forward looking expected credit loss model. The
methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk
since initial recognition of the financial asset. For those where
the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those
for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised. In determining the lifetime expected credit
losses for loans to associates, the Directors have considered
different scenarios for repayments of these loans and have applied
percentage probabilities to each scenario for each associate where
applicable.
13 Cash and cash equivalents
For the purpose of the interim condensed statement of cash
flows, cash and cash equivalents are comprised of:
30 June 31 December
2022 2021
Unaudited Audited
GBP'000 GBP'000
-------------------------------------------- ----------- ------------
Unrestricted cash and bank balances 57,397 17,548
Bank balances held in relation to retained
commissions 17,346 16,863
Cash and cash equivalents 74,743 34,411
-------------------------------------------- ----------- ------------
Bank balances held in relation to retained commissions earned on
an indemnity basis from protection policies are held to cover
potential future lapses in Appointed Representatives commission.
Operationally, the Group does not treat these balances as available
funds. An equal and opposite liability is shown within trade and
other payables (note 14).
Unrestricted cash and bank balances increased considerably
during the period as the Group undertook an equity placing of new
shares on 28 March 2022 that raised GBP40 million prior to expenses
in order to part fund the acquisition of Fluent Money Group that
completed on 12 July 2022, this being the date on which the
consideration was paid.
14 Trade and other payables
30 June 31 December
2022 2021
Unaudited Audited
GBP'000 GBP'000
----------------------------------------------- ----------- ------------
Appointed Representatives retained commission 17,346 16,863
Other trade payables 9,971 6,255
----------------------------------------------- ----------- ------------
Trade payables 27,317 23,118
Social security and other taxes 1,408 1,305
Other payables 55 70
Deferred consideration 1,105 2,212
Accruals and deferred income 4,101 5,220
----------------------------------------------- ----------- ------------
Total trade and other payables 33,986 31,925
----------------------------------------------- ----------- ------------
30 June 30 June
2022 2021
Reconciliation of movement in trade Unaudited Unaudited
and other payables to cash flow GBP'000 GBP'000
------------------------------------------ ---------- ----------
Movement per trade and other payables 2,061 9,986
Deferred consideration cash payment 457 -
Deferred consideration non-cash movement 650 -
RCF interest accrual (48) -
Total movement per cash flow 3,120 9,986
------------------------------------------ ---------- ----------
Should a protection policy be cancelled within four years of
inception, a proportion of the original commission will be clawed
back by the insurance provider. The majority of any such repayment
is payable by the Appointed Representative. It is the Group's
policy to retain a proportion of commission payable to the
Appointed Representative to cover such potential future lapses;
these sums remain a liability of the Group. This commission is held
in a separate ring fenced bank account as described in note 13.
As at 30 June 2022 and 31 December 2021, the carrying value of
trade and other payables classified as financial liabilities
measured at amortised cost approximates fair value.
Appointed Representative retained commission is expected to be
payable after more than one year. Other trade payables normally
fall due within 30 - 60 days.
15 Loans and borrowings
MAB entered into a new facilities agreement with NatWest on 28
March 2022 (the "Facilities Agreement") 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 of The Fluent Money Group announced on the same
day. MAB drew down on the new facilities post period end as the
acquisition competed on 12 July 2022. It is MAB's intention to
repay the drawn down proportion of the revolving element 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. In respect of the new facilities, the
Group has given security to NatWest in the form of fixed and
floating charges over the assets of Mortgage Advice Bureau Limited,
Mortgage Advice Bureau (Derby) Limited, Mortgage Advice Bureau
(Holdings) plc, First Mortgage Direct Limited, First Mortgage
Limited, Project Finland Bidco Limited, Fluent Money Limited and
Fluent Mortgages Limited.
Loan covenants
Under the terms of the Facilities Agreement, the Group is
required to comply with the following financial covenants:
-- Interest cover shall not be less than 5:1
-- Adjusted leverage shall not exceed 2:1
The Group has complied with these covenants throughout the
reporting period.
16 Financial instruments - risk management activities
Credit risk
Credit risk is the risk of financial loss to the Group if a
trading partner or counterparty to a financial instrument fails to
meet its contractual obligations. The Group is mainly exposed to
credit risk from loans to its trading partners. It is Group policy
to assess the credit risk of trading partners before advancing
loans or other credit facilities. Assessment of credit risk
utilises external credit rating agencies. Personal guarantees are
generally obtained from the Directors of its trading partners.
Quantitative disclosures of the credit risk exposure in relation
to financial assets are set out below. Further disclosures
regarding trade and other receivables are given in note 12.
Financial assets - maximum exposure
30 June 31 December
2022 2021
Unaudited Audited
GBP'000 GBP'000
------------------------------------------ ----------- ------------
Cash and cash equivalents 74,743 34,411
Investments in non-listed equity shares
(FVTPL) 2,783 2,783
Trade and other receivables (Amortised
cost) 2,329 2,583
Derivative financial instruments (FVTPL) 304 362
------------------------------------------ ----------- ------------
Total financial assets 80,159 40,139
------------------------------------------ ----------- ------------
Financial liabilities
30 June 31 December
2022 2021
Unaudited Audited
GBP'000 GBP'000
---------------------------------- ----------- ------------
Trade and other payables 28,780 24,493
Deferred consideration 1,105 2,212
Accruals 4,101 5,220
Lease liabilities 2,400 2,596
Derivative financial instruments 1 34
---------------------------------- ----------- ------------
Total financial liabilities 36,387 34,555
---------------------------------- ----------- ------------
The carrying amounts stated above represent the Group's maximum
exposure to credit risk for trade and other receivables. An element
of this risk is mitigated by collateral held by the Group for
amounts due to them.
Trade receivables consist of a large number of unrelated trading
partners and therefore credit risk is limited. Due to the large
volume of trading partners the Group does not consider that there
is any significant credit risk as a result of the impact of
external market factors on their trading partners. Additionally,
within trade payables are amounts due to the same trading partners
as those included in trade receivables; this collateral
significantly reduces the credit risk.
The Group's credit risk on cash and cash equivalents is limited
because the Group places funds on deposit with National Westminster
Bank plc and Bank of Scotland plc which are A/A+ and A+ rated
respectively.
17 Share capital
Issued and fully paid
30 June 31 December
2022 2021
Unaudited Audited
GBP'000 GBP'000
------------------------------- -------- ------------
Ordinary shares of 0.1p each 57 53
Total share capital 57 53
------------------------------- -------- ------------
In connection with the acquisition of Fluent Money Group, the
Group issued 3,809,524 new ordinary shares in an equity placing on
28 March 2022 to raise GBP40 million gross to part fund the
consideration for the acquisition. The new ordinary shares were
issued at GBP10.50 per ordinary share. The share premium recognised
was GBP38.4 million after deduction of GBP1.6 million of costs
directly associated with the equity placing.
18 Related Party Transactions
The following details provide the total amount of transactions
that have been entered into with related parties during the six
months ended 30 June 2022 and 2021, as well as balances with
related parties as at 30 June 2022 and 31 December 2021.
During the period the Group paid commission of GBP467,573 (2021:
GBP400,942) to Buildstore Limited, an associated company. There was
a balance of GBP13,136 (2021: GBP10,443) of retained commission to
cover future lapses.
During the period the Group received introducer commission from
Sort Limited, a subsidiary of an associated company of GBP747,598
(2021: GBP587,958). At 30 June 2022, there was a net loan
outstanding from Sort Group Limited of GBP218,369 (2021:
GBP218,369).
During the period the Group paid commission of GBP2,228,815
(2021: GBP2,392,199) to Clear Mortgage Solutions Limited, an
associated company. There was a balance of GBP599,088 (2021:
GBP542,290) of retained commission to cover future lapses.
During the period the Group paid commission of GBP783,150 (2021:
GBPnil) to Evolve FS Ltd, an associated company. There was a
balance of GBP20,144 (2021: GBPnil) of retained commission to cover
future lapses.
During the period the Group paid commission of GBP869,886 (2021:
GBP870,209) to Vita Financial Limited, an associated company. There
was a balance of GBP298,725 (2021: GBP253,948) of retained
commission to cover future lapses.
During the period the Group paid commission of GBP820,042 (2021:
GBP795,434) to The Mortgage Broker Limited, an associated company.
There was a balance of GBP66,791 (2021: GBP66,785) of retained
commission to cover future lapses. At 30 June 2022, there was a
loan outstanding from The Mortgage Broker Limited of GBP22,000
(2021: GBPnil).
During the period the Group paid commission of GBP1,982,972
(2021: GBP1,981,588) to Meridian Holdings Group Ltd, an associated
company. There was a balance of GBP545,656 (2021: GBP545,605) of
retained commission to cover future lapses. At 30 June 2022, there
was a loan outstanding from Meridian Holdings Group Ltd of
GBP435,461 (2021: GBP550,069).
During the period the Group paid commission of GBP1,166,714
(2021: GBP156,524) to M & R FM Ltd, an associated company.
There was a balance of GBP64,416 (2021: GBP34,598) of retained
commission to cover future lapses.
During the period the Group received dividends from associate
companies as follow:
Six months ended 30 June
2022 2021
Unaudited Unaudited
GBP'000 GBP'000
------------------------ ----------- -----------
CO2 Commercial Limited 167 88
------------------------ ----------- -----------
Evolve FS Ltd 245 -
------------------------ ----------- -----------
M & R FM Ltd 188 -
------------------------ ----------- -----------
Total dividends 600 88
------------------------ ----------- -----------
19 Share based payments
On 6 June 2022, 154,850 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"). Exercise
of the Options is subject to the service conditions and achievement
of performance conditions based on total shareholder return and
earnings per share criteria. Subject to achievement of the
performance conditions, the Options will be exercisable 34 months
from the date of grant. The exercise price for the Options is 0.1
pence, being the nominal cost of the Ordinary Shares.
Included in administrative expenses are share-based remuneration
expenses of GBP601,865 (2021: GBP695,795) which comprises the
charge for the equity-settled schemes of GBP327,057 (2021:
GBP355,255) and related employer's National Insurance Contributions
of GBP168,986 (2021: GBP185,221). Also included are the matching
element of the Group's Share Incentive Plan for all employees of
GBP58,889 (2021: GBP63,624) and costs for free shares awarded to
employees of GBP46,933 (2021: GBP91,695). Further share-based
payments costs of GBP204,726 (2021: GBP338,118) in respect of the
option relating to First Mortgage Direct Limited are shown
separately (note 4).
20 Events after the reporting date
The Fluent Money Group Limited
On 28 March 2022 Mortgage Advice Bureau (Holdings) plc announced
that it had agreed to acquire 75.4% of Project Finland Topco
Limited, which indirectly owns 100% of The Fluent Money Group
Limited ("Fluent" or the "Business") from its shareholders
including Beech Tree Private Equity and founders for a total cash
consideration of GBP72.7 million (the "Acquisition"). The
Acquisition completed on 12 July 2022 and the cash consideration
was funded from the Company's existing cash resources, a drawdown
on new debt facilities of GBP25 million and the proceeds of the
placing of new ordinary shares in the Company, conducted on 28
March 2022 which raised GBP40 million gross, and GBP38.4 million
net of expenses directly associated with the placing.
MAB also entered into a shareholders' agreement with Fluent's
founders and senior management who have retained 24.6% of the
issued share capital of Fluent. This sets out the terms of the put
and call option for MAB to acquire this remaining stake after six
years at a valuation subject to performance criteria relating to
future growth and profitability to align with MAB's growth
objectives. The total consideration for the above put and call
option and a put and call option over certain growth shares that
have been issued to Fluent's wider management team is capped at
GBP118 million and will be determined on the basis of future
financial performance. MAB will, at its discretion, be able to
satisfy up to 50% of the exercise consideration for the above put
and call options in ordinary shares and such shares will be subject
to a 12 month orderly market undertaking upon issue.
Fluent is a fast-growing telephone advice mortgage and
specialist lending intermediary that has formed relationships with
a range of third party brands, including aggregators and other
national lead sources operating across first charge, second charge,
lifetime mortgages and bridging loan product areas. MAB has also
targeted this fast-growing sector. Combined, MAB and Fluent 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.
At the date of authorisation of these interim financial
statements it has not yet been possible to complete a detailed
assessment of the fair value of the identifiable net assets.
Fair value of consideration paid GBP'000
Cash 72,691
Vita Financial Limited
On 12 July 2022 the Group increased its stake from 49% to 75% in
Vita Financial Limited, a leading protection and general insurance
advice firm. This is a strategically important step for the Group
as we look to achieve an even stronger market presence in this
area.
At the date of authorisation of these interim financial
statements a detailed assessment of the fair value of the
identifiable net assets has not been completed.
Fair value of consideration paid
GBP'000
Cash 460
There were no other material events after the reporting period,
which have a bearing on the understanding of the consolidated
interim financial statements.
Investment in non-listed equity shares
PD Innovations Limited, trading as Boomin, is in the process of
raising capital and an update as to the implications for the
valuation of MAB's shareholding will be provided in due course.
Head Office refurbishment project
In September 2022, the Group made a capital commitment for
c.GBP3 million to refurbish its head office premises located in
Derby.
There were no other material events after the reporting period,
which have a bearing on the understanding of the consolidated
interim financial statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR VQLFLLKLZBBF
(END) Dow Jones Newswires
September 27, 2022 02:01 ET (06:01 GMT)
Mortgage Advice Bureau (... (LSE:MAB1)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024
Mortgage Advice Bureau (... (LSE:MAB1)
Graphique Historique de l'Action
De Juil 2023 à Juil 2024
