TIDMMAB1
RNS Number : 3879U
Mortgage Advice Bureau (Hldgs) PLC
28 March 2023
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
("MAB" or "the Group")
28 March 2023
Final Results for the year ended 31 December 2022
Mortgage Advice Bureau (Holdings) plc (AIM: MAB1.L) is pleased
to announce its final results for the year ended 31 December
2022.
Financial highlights
2022 2021 Change
Revenue GBP230.8m GBP188.7m +22%
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Gross profit GBP62.9m GBP51.0m +24%
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Gross profit margin 27.3% 27.0% +0.3pp(1)
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Administrative expenses ratio* 15.6% 14.8% +0.8pp
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Adjusted EBITDA* GBP29.1m GBP25.3m +15%
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Adjusted profit before tax* GBP27.2m GBP24.2m +13%
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Statutory profit before tax GBP17.4m GBP23.2m -25%
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Adjusted profit before tax
margin* 11.8% 12.8% -1.0pp
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Adjusted profit before tax
as a percentage of net revenue* 34.0% 41.0% -7.0pp
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Statutory profit before tax
margin 7.5% 12.3% -4.8pp
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Adjusted EPS* 37.8p 37.1p +2%
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Basic EPS 21.8p 35.2p -38%
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Adjusted cash conversion* 105% 113% -8pp
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Proposed final dividend 14.7p 14.7p -
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Operational highlights
-- Adviser numbers up 20% to 2,254(2) at 31 December 2022
(2021: 1,885), including 2,074 mainstream(3) advisers
(2021: 1,774)
-- Average number of mainstream advisers(3) up 21% to 1,988
(2021: 1,649)
-- Revenue per mainstream adviser(3) up 1% to GBP116.1k
-- Gross mortgage completions(4) (including product transfers)
up 20% to GBP27.3bn (2021: GBP22.8bn)
-- Gross new mortgage completions(4) (excluding product
transfers) up 21% to GBP23.6bn (2021: GBP19.6bn)
-- Strong increase in market share of new mortgage lending
to 7.5 % (2021: 6.4%(5) )
-- Proportion of revenue from refinancing at 32% (2021:
25%)
-- Completed the acquisition of 75.4% of The Fluent Money
Group(6) ("Fluent"), which is transformational for the
Group's lead generation strategy
-- Extended the Group's protection and general insurance
proposition into a wider addressable market, with controlling
stakes acquired in Vita Financial Ltd ("Vita") and Aux
Group Ltd ("Auxilium")
Current trading
-- As expected, adviser numbers at 24 March 2023 had decreased
to 2,129 as our AR firms reacted to the sudden shock
to the mortgage market post the September 2022 mini-budget.
We expect adviser numbers will stabilise in Q2 2023 and
then build gradually as business volumes improve.
-- Current trading in line with expectations
* In addition to statutory reporting, MAB reports alternative
performance measures ("APMs") which are not defined or specified
under the requirements of International Financial Reporting
Standards ("IFRS"). The Group uses these APMs to improve the
comparability of information between reporting periods, by
adjusting for certain items which impact upon IFRS measures, to aid
the user in understanding the activity taking place across the
Group's businesses. APMs are used by the Directors and management
for performance analysis, planning, reporting and incentive
purposes. A summary of APMs used and their closest equivalent
statutory measures is given in the Glossary of Alternative
Performance Measures.
Peter Brodnicki, Chief Executive, commented:
"Despite a challenging year for mortgage intermediaries on
numerous fronts, I am pleased with our 2022 performance and market
share growth, with revenue up 22% and adjusted EBITDA up 15% on the
prior year.
"Prior to the mini-budget in September, the Group was on track
for 2023 to be a record year of growth, despite an expected
softening in housing transactions due to inflationary pressures.
Although mortgage transaction levels have improved since the
collapse post mini-budget, they remain circa 35% down year to date
compared to the same period in 2022.
"MAB is performing considerably better than wider transaction
numbers reflect and our market share is continuing to grow
strongly. Current trading is in line with our expectations and we
expect a second-half weighted financial performance. This is a
strong performance considering the fall in gross mortgage approvals
since October 2022 is of a similar scale to the fall seen during
the Global Financial Crisis ("GFC") , rather than the normal and
more easily managed peaks and troughs we see during fluctuating
housing cycles.
"2022 was a milestone year for the business in terms of
proposition delivery. Following the acquisition of Fluent, MAB is
well-positioned as a leader in the three largest sectors for
mortgage lead generation, comprising estate agency, new build, and
price comparison websites. The acquisition also extends the Group's
customer reach into other specialisms including secured loans,
which alone offers significant mortgage re-financing
opportunities.
"We also delivered the first stage of our centralised lead
generation programme, which is part of our major strategy to drive
new lead flow to our partner firms in all market conditions. We
also delivered meaningful time savings in the advice process, with
excellent progress being made to deliver significant further time
savings over the next 18 months. 2022 also saw the launch of MAB
New Homes and a leading protection proposition for the Directly
Authorised market through the acquisition of Auxilium.
"We continue to invest in our employees, with the significant
capital investment in our Derby head office providing an excellent
working environment to support the accelerated growth expected in
the medium term.
"We expect the housing and mortgage markets to recover as they
always do, and in the meantime, MAB continues to strengthen its
proposition and use the more challenging market to onboard more
high-quality firms and grow market share."
Current Trading and Outlook
Although the volume of new mortgage approvals was down by more
than 40% in the three months ended 31 January 2023 (and Buy to Let
approvals were down by more than 60%), UK Finance forecasts
increased re-finance activity in 2023 as 1.8 million borrowers
reach the end of their existing deals and need to re-finance onto
new ones.
Current activity levels are better than in Q4 2022, however new
mortgage volumes reported in the market remain low. There are early
signs of increasing activity, for instance the volume of mortgage
searches carried out by advisers on leading mortgage sourcing
technology platform Twenty7tec is recovering rapidly, with 10 of
their busiest days ever having occurred in February 2023. Mortgage
searches in the first two months of the year are up 10%
year-on-year.
Once affordability and consumer confidence return, we expect the
market to recover further as lenders reduce mortgage rates and
gradually relax lending criteria. As expected, mortgage rates are
already far cheaper than they were following the peak post the
mini-budget but have now settled at levels that are very different
to rates available a year ago.
Despite the current headwinds the Group is trading in line with
expectations and continues to outperform the market, successfully
growing its market share. Mortgage pipelines are also showing signs
of completing more quickly, having been congested for the last few
years, and we continue to expect a second-half weighted financial
performance.
MAB's long term fundamentals remain strong. We anticipate a
strong year ahead for re-financing, a slow but steady improvement
in consumer confidence and housing transaction levels, combined
with an increase in new appointed representative ("AR") recruitment
and the incremental impact of new lead generation initiatives. We
are confident that we will continue to grow market share in a tough
market this year. MAB is in a very good position to deliver a far
stronger financial performance in 2024.
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
Nominated Adviser and Joint Broker:
Numis Securities Limited
Stephen Westgate / Giles Rolls +44 (0)20 7260 1000
Joint Broker:
Peel Hunt LLP
Andrew Buchanan / Mike Burke +44 (0) 20 7418 8900
Media Enquiries: investor.relations@mab.org.uk
Analyst presentation
There will be an analyst presentation to discuss the results at
9:30am on Tuesday 28 March 2023.
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) Includes 182 Fluent advisers as at 31 December 2022 (105
advisers in the first charge mortgages division, 57 in the secured
personal loans division, 14 in the later life division, and 6 in
the bridging finance division). Includes a total of 180 advisers at
31 December 2022 who are later life advisers or advisers in
directly authorised firms that use MAB's subsidiary, Auxilium, a
specialist protection service provider, for protection. For both
later life and directly authorised advisers the fees received by
MAB represent the net income received by MAB as there are no
commission payouts made by MAB.
(3) Excludes directly authorised advisers, MAB's later life
advisers and advisers from associates in the process of being
onboarded under MAB's AR arrangements. Includes Fluent's second
charge, later life and bridging advisers who have a higher revenue
per adviser than first charge advisers.
(4) First charge mortgage completions, excluding secured
personal loans (second charge mortgages), later life lending
mortgages and bridging finance, and including completions from
associates in the process of being onboarded under MAB's AR
arrangements.
(5) MAB previously reported a 6.3% market share in 2021, but
this figure has slightly increased due to UK Finance updating its
UK mortgage completions estimates.
(6) Acquisition of Project Finland Topco Limited, of which The
Fluent Money Group Ltd is a wholly-owned subsidiary.
Chief Executive's Review
I am very pleased to report the Group delivered another record
performance in 2022, with revenue for the year up 22% to GBP230.8m
(2021: GBP188.7m) and adjusted profit before tax ("PBT") up 13% to
GBP27.2m (2021: GBP24.2m).
The strong increase in revenue was driven by organic(1) growth
of 11%, significantly outperforming the market, and the positive
contribution of The Fluent Money Group ("Fluent") following its
acquisition in July. The 20% increase in the Group's mortgage
completions(2) is summarised as follows:
2022 2021 Increase
GBPbn GBPbn
New mortgage completions 23.6 19.6 +21%
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Product Transfers 3.7 3.2 +16%
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Gross mortgage completions
(2) 27.3 22.8 +20%
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By comparison, UK gross new mortgage lending activity (excluding
Product Transfers) in 2022 rose by just 2% to GBP313.9bn (2021:
GBP308.1bn(3) ). MAB increased its market share of UK new mortgage
lending by 19% to 7.5% (2021: 6.4% (3) ), with our market share in
the second half increasing to 8.2% (H2 2021: 7.1%), and showing
strong momentum carrying into 2023.
The total number of advisers at the year-end was up 20% to
2,254(4) (2021: 1,885), including 182 advisers at Fluent, with the
average number of mainstream(5) advisers during the year up 21% to
1,988 (2021: 1,649), representing organic growth of 15%.
(1) Organic means the Group before the impact of the
acquisitions made in 2022 (Fluent, July 2022; Vita, July 2022; and
Auxilium, November 2022).
(2) First charge mortgage completions, excluding secured
personal loans (second charge mortgages), later life lending
mortgages and bridging finance, and including completions from
associates in the process of being onboarded under MAB's AR
arrangements.
(3) In 2021 we reported GBP313.2bn of UK mortgage completions
based on UK Finance's latest estimates at the time. UK Finance
revised that estimate downwards since then, implying MAB's 2021
market share increased slightly from the previously reported 6.3%
to 6.4%.
(4) Includes 182 Fluent advisers as at 31 December 2022 (105
advisers in the first charge mortgages division, 57 in the secured
personal loans division, 14 in the later life division, and 6 in
the bridging finance division). Includes a total of 180 advisers at
31 December 2022 who are later life advisers or advisers in
directly authorised firms that use MAB's subsidiary, Auxilium, a
specialist protection service provider, for protection. For both
later life and directly authorised advisers the fees received by
MAB represent the net income received by MAB as there are no
commission payouts made by MAB.
(5) Excludes directly authorised advisers, MAB's later life
advisers and advisers from associates in the process of being
onboarded under MAB's AR arrangements. Includes Fluent's second
charge, later life and bridging advisers who have a higher revenue
per adviser than first charge advisers.
Delivering our growth strategy
2022 was a year of significantly delayed transactions and
product withdrawals and repricing. The mini-budget in September
resulted in an immediate and significant knock to economic and
consumer confidence , with the associated leap in mortgage interest
rates having a severe impact on housing transactions, whilst also
delaying existing customers re-fixing their rates when
re-financing.
At the half year we highlighted that an expected softening in
housing transactions would result in some ARs taking a more
cautious view of growth. However, many others that had remained
growth focused, including Fluent, immediately cut their
expectations and adviser base following the mini-budget due to the
negative short-term outlook.
Although the unexpected and extreme market conditions adversely
impacted our short-term growth objectives, MAB made major strides
in further strengthening its customer, adviser, and AR
propositions. Our focus on improving operational efficiency,
realising synergies and reducing costs has ensured that MAB is
well-positioned to build on the significant market share gains made
in 2022 and achieve its growth objectives over the medium to long
term.
Acquisition of Fluent
With MAB already holding a strong market position in estate
agency and new build, we identified that price comparison websites
were attracting an increasing number of customers researching and
seeking mortgage advice. Our acquisition of Fluent has enabled MAB
to enter this sector as a leader, significantly increasing our
customer reach and ability to help more customers at all stages of
their research process.
Fluent also provides access to the large retention market
outside of MAB's existing customer base, whilst adding secured
loans and bridging finance to the services MAB can offer. The
Group's existing equity release expertise and resources have also
been enhanced as a result of the acquisition, with Fluent now
fully, and successfully, integrated into MAB.
Delivering on lead generation strategy
Our strategy is about investing in our future customers as much
as those we are currently advising, supporting our plans to
contribute significantly to the lead flow of our AR firms.
We recognise that securing long-term business success comes from
gaining an in-depth understanding of current and prospective
clients. During the year we launched tools that empower our future
customers to gain a better understanding of financial products and
solutions through our Homebuying and MyMAB apps and website,
simultaneously equipping ourselves with detailed customer insights
to inform future proposition development.
At MAB, innovation is not all about technology. It's also about
human behavioural change and business process change. Our strategy
has been focused on lead generation, business quality, customer and
broker experience, and consumer education. We have focused on early
lead capture to widen the funnel of opportunities for our brokers
in all market conditions, increasing the number of potential buyers
and using educational coaching to get customers mortgage ready.
Data insights captured during this process can significantly
improve the quality of the customer experience, and ultimately
their conversion at point of advice.
We are also releasing a series of post-completion retention
solutions to ensure we always remain at the front of existing
customers' minds. This includes regular mortgage reviews as well as
early re-financing lead generation opportunities for advisers.
Shortening the advice process
Our aim is to reduce the 10-hour average for an adviser to take
a mortgage from enquiry to completion to less than five hours by
eliminating duplication and allowing data to move more freely
across our digital ecosystem. In addition to driving new adviser
growth and increased productivity, the integration of new
technology with our key business partners will enable customers to
auto-disclose and verify their identity, self-serve their
eligibility and affordability, and share data and documents in a
secure environment, with the new technology solutions launched
during the last year already resulting in a time saving of more
than one hour.
Launch of MAB New Homes to builder partners
Following our recent investment in New Homes specialists Evolve
and Heron, we have launched a market-leading panel of specialist
new build firms to meet the future requirements of our major new
build partners nationally. This includes a new technology-led
approach to early capture and nurture, and the financial
qualification process for the MAB New Homes proposition that allows
self-service customer data capture, document capture, and
extraction, which we expect to underpin continued year on year
market share growth.
Immediate benefits of new working environment
We are committed to fostering an inclusive environment where all
our staff can contribute to the innovation and digital
transformation of the business. In October we stripped our existing
head office building in Derby back to its shell, paving the way for
the creation of a new collaborative working environment that caters
for hybrid working and delivers a range of work settings for up to
300 employees.
We understand all our employees and teams have different needs
in terms of their wellbeing and how they work, which is why we have
provided an office space that caters to those needs, levels of
accessibility, and unique work styles. These bespoke working
environments will offer flexibility in how we work and caters to
our diverse colleagues, enabling them to thrive and perform at
their very best. In line with our ESG objectives, one of our key
aims in the refurbishment was to reduce the environmental impact of
the office and provide an outstanding experience for our staff,
customers and ARs. We have successfully delivered this.
The positive impact of the new working environment on staff
performance and collaboration has been immediate, underpinning our
plans for strong market share and profit growth over the medium and
long term.
Optimising our addressable market
Following the acquisition of Fluent, in November MAB acquired a
75% shareholding in Auxilium, a specialist protection service
provider servicing Directly Authorised ("DA") firms. In addition,
the Group increased its stake in leading protection and general
insurance advice firm Vita, from 49% to 75%.
Access to the protection expertise MAB has developed over the
last two decades will greatly benefit the forward-thinking and
ambitious DA firms that the Auxilium proposition is aimed at.
Additionally, to enhance the provision of pension and investment
advice to our mortgage customers that have those requirements, we
have partnered with St James's Place who will provide a highly
complementary support structure for these products and services, to
that offered by MAB to its AR firms for mortgages and
protection.
In Australia, the technology integration with our joint venture
partner, Australian Finance Group Ltd, is expected to complete in
the second half of this year, allowing us to progress our growth
plans there.
Summary
Despite the market downturn, 2022 was a very important year for
MAB. We have continued to invest in our customer and adviser
experience, our environmental agenda, and our people, by creating
an optimal working environment influenced by them. We also continue
to futureproof our business by entering new growth sectors and
investing in prospective customers at the early stages of their
research. We believe this will have a significant medium to
long-term impact on adviser productivity, organic adviser growth,
and AR recruitment, further driving MAB's market share growth and
profitability.
We have taken a proactive and rigorous approach to costs, whilst
progressing with the planned investment in our proposition to
ensure the strongest possible recovery and continued market share
growth. We are recruiting well from a wide range of networks and
increasingly from the DA sector and are using a subdued housing
market to embed new technology solutions and processes, whilst
ensuring all cost efficiencies, synergies and best practices are
implemented at Fluent to deliver optimal performance.
The executive team has been strengthened in marketing and in
risk and compliance to reflect our market share ambitions, and our
invested-in businesses continue to perform strongly in terms of
adviser productivity and will increasingly contribute to market
share and profitability growth.
Despite a slower than expected start to the year for the housing
market, we anticipate an increasingly strong year ahead for
re-financing, with a slow but steady improvement in housing
transaction levels and an increase in new AR recruitment. We expect
organic growth to resume in the second half when we also expect to
see the incremental impact of our new lead generation initiatives.
We will continue to grow our market share strongly this year,
whilst ensuring that MAB will be in an even better position to
deliver a far stronger financial performance in 2024.
Market review 2022
The year started positively after the market had returned to
steadier levels of activity towards the end of 2021. Consumer
demand remained quite strong and fewer properties for sale kept
house price momentum high. Pipelines continued to be highly
congested, with transactions taking more than 140 days to complete,
frustrating the pace of completions.
The Russian invasion of Ukraine in February resulted in a degree
of consumer caution. However, despite the uncertain macroeconomic
outlook and rising inflation, housing demand and activity remained
quite strong.
Overall, UK gross new mortgage lending(1) was up 2% to
GBP313.9bn (2021: GBP308.1bn(2) ). The purchase segment decreased
by 11% as the overall number of housing transactions decreased by
15%, as illustrated below:
http://www.rns-pdf.londonstockexchange.com/rns/3879U_3-2023-3-27.pdf
Source: UK Finance
In September 2022, the mini-budget triggered significant market
uncertainty, an immediate spike in the cost of borrowing, the
withdrawal of many mortgage products by lenders, and a rapid
tightening in underwriting criteria. After a short flurry of
activity where customers rushed to secure low mortgage rates before
they were withdrawn, housing-related activity slowed significantly
throughout Q4. The rate of approvals for new mortgages in the last
two months of the year and in January 2023 was down by more than
40% year-on-year, which will impact completions in the first half
of this new financial year, as illustrated below:
http://www.rns-pdf.londonstockexchange.com/rns/3879U_4-2023-3-27.pdf
Source: UK Finance
In terms of mortgage completions(1) , the re-financing segment
was relatively strong throughout 2022. Re-mortgage completions were
up 29% year-on-year, partly because the 2021 mortgage market was
skewed towards purchase. Product transfer completions increased by
3%, with a stronger second half (9% increase year-on-year in H2
2022). Buy-to-let completions were up 18% compared to 2021,
although the buy-to-let segment has been particularly adversely
impacted since the mini-budget.
The trends in gross new mortgage(1) lending completions are
illustrated in the graph below.
http://www.rns-pdf.londonstockexchange.com/rns/3879U_2-2023-3-27.pdf
Source: UK Finance
Average house prices increased by 10% in 2022, although the
increase slowed in the second half, with the average house price
starting to fall by the end of the year. This negative trend has
continued in early 2023 but we expect house prices will start to
settle once affordability and consumer confidence improve.
As we look further into 2023, a large number of mortgage
products that were withdrawn following the mini-budget have been
recently re-introduced, as illustrated on the graph below. We
expect product availability to continue to catch up throughout
2023, and underwriting criteria should also continue to slowly
ease.
http://www.rns-pdf.londonstockexchange.com/rns/3879U_7-2023-3-27.pdf
Source: Twenty7tec
New mortgage rates are looking more attractive than they were at
the end of 2022, albeit mortgage pricing may have found its floor,
certainly for now. With a 2%+ gap between the price of many new
mortgage deals and the typical Standard Variable Rates, borrowers
are increasingly looking to re-finance in 2023, whereas many chose
to sit on their hands at the end of last year.
Pipelines are now completing more quickly than in 2022. This
reflects the heightened capacity conveyancers now have due to the
market slowdown, and to a lesser degree, a greater level of
property stock available for sale. Re-financing also banks quickly,
and very few of these cases fail to progress to completion.
The volume of mortgage searches carried out by advisers on
leading mortgage sourcing technology platform Twenty7tec is also
recovering rapidly, with ten of their busiest days ever having
occurred in February 2023. Mortgage searches in the first two
months of the year are up 10% year-on-year. This is illustrated in
the graph below.
http://www.rns-pdf.londonstockexchange.com/rns/3879U_1-2023-3-27.pdf
2022 saw intermediaries' share of UK residential mortgage(1)
transactions increase from 80% to 84% (excluding Buy to Let, where
intermediaries have a higher market share, and Product Transfers
where intermediaries have a lower market share), and the
Intermediary Mortgage Lenders Association ("IMLA") expects this
trend to continue in 2023 and 2024.
UK Finance predicts a 12% fall in gross new mortgage(1) lending
in 2023, to GBP275bn, caused by affordability pressures. IMLA's
estimate for 2023 is GBP265bn. For 2024, UK Finance and IMLA
currently forecast further reductions to GBP253bn and GBP250bn
respectively. These estimates were published in December 2022.
For the past 20 years, UK mortgage approval levels have followed
a similar pattern as the proportion of UK housing owned, as
illustrated in the graph below. Both are below long-term averages,
with home ownership having reduced to circa 64% from 70% in the
early 2000's. There is currently considerable political focus on
increasing home ownership across all political parties, which
further supports MAB's long-term fundamentals.
http://www.rns-pdf.londonstockexchange.com/rns/3879U_6-2023-3-27.pdf
Source: UK Finance, Statista
Despite the inflationary environment and continued geopolitical
uncertainty, consumer demand for housing and mortgages remains at a
steady, albeit reduced level. This, combined with the increased
number of mortgage products we have seen re-introduced, means we
remain confident that heightened activity will return to the
housing and mortgage market once affordability improves and
consumer confidence starts to rise.
(1) First charge mortgage completions, excluding secured
personal loans (second charge mortgages), later life lending
mortgages and bridging finance.
(2) We reported GBP313.2bn in 2021, based on UK Finance's latest
estimates at the time.
Progress with regulatory change
Consumer Duty
The Financial Conduct Authority ("FCA") has set out rules that
require all regulated firms to consider the needs, characteristics,
and objectives of their customers, to ensure they are always acting
to consider and deliver optimal customer outcomes. These rules
include the need to show consideration, flexibility, and attention
to customers with characteristics of vulnerability. This new
Consumer Duty sets higher and clearer standards of consumer
protection across financial services and requires firms to put the
needs of their customers first and comes into effect on 31 July
2023.
Good customer outcomes have always been central to MAB's
strategy. In line with the requirements and timeline set out by the
FCA, MAB submitted its 'Consumer Duty Plan' for approval by the
Board prior to the 31 October 2022 deadline. Since then, work has
continued to ensure the requirements of the FCA's new Consumer Duty
are understood and where changes are required, that these are
implemented across the business ahead of the 31 July 2023
implementation date.
ESG (Environmental, Social, Governance)
At MAB, we believe in the need to make a positive contribution
to all our stakeholders. This in turn will help us become a better
company with a more engaged workforce and strengthen our
competitive advantage. In 2022 we accelerated our investment in
this area and made good progress on all our ESG initiatives.
Minimising our impact on the environment
We completed our major office refurbishment project in 2022,
with all colleagues moving back into head office in early January
this year. Minimising our environmental impact was a central
consideration for this project, as was sourcing products from local
suppliers where practical, repurposing furniture and so on. The
building has been fitted with high efficiency new heating,
ventilation and lighting equipment, and we are pleased that its EPC
rating has dramatically improved as a result.
MAB is at the forefront of Green Mortgages. In 2022, we launched
our Green Hub for consumers and continued to improve our MIDAS
platform to best promote Green Mortgages to our advisers. Our ARs
submitted over GBP1 billion in Green Mortgages to our lending
partners, which was a very substantial increase versus 2021. We
also organised the first industry event exclusively focussed on
Green Mortgages.
The narrative around Green Mortgages is rightly becoming more
prominent and important, with momentum and interest gathering from
advisers, consumers and from lenders. Clear targets have been set
for landlords firstly to make various energy efficiency
improvements to their properties, and then homeowners the same,
over the next decade or so. Our intention is to become a leader in
Green Mortgages. With housing representing circa 20% of carbon
emissions in the UK, we will increase our involvement in this area,
thereby directly contributing to the UK's overall Net Zero targets,
whilst significantly helping many thousands of customers too.
MAB already serves a great social purpose, in-so-much as it
helps customers to buy and re-finance their homes and protects them
as well. With an increasingly environmental focus layered onto
this, MAB can make a significant contribution towards the UK
Government's climate commitments.
Community engagement and charitable activities
2022 also saw the launch of the Mortgage Advice Bureau
Foundation ("Foundation"). The Foundation is a grant-giving charity
that supports community-based projects chosen by our staff, our
customers, and our business partners. It was created to promote
awareness among our stakeholders of the growing need of the
communities they live in or are choosing to move to.
The Foundation supports projects in the following areas:
-- Environment and Conservation - practical and educational
projects to help communities make green choices and reduce their
carbon footprints;
-- Health and Wellbeing - projects to help communities address
health and wellbeing issues so that everybody's quality of life can
be improved; and
-- Preventing and Relieving Poverty - projects to support
communities through financial hardship and social exclusion.
The Foundation launched in September 2022 and to date has
pledged GBP17,000 of funding which has helped charitable projects
raise over GBP30,000 in total. We are delighted with the buy-in and
support the Foundation has received from our business partners and
colleagues.
Employee wellbeing, and diversity, equality and inclusivity
The newly refurbished head office in Derby includes many new
features that foster colleague wellbeing and increase inclusivity
among our employees. In 2022 we launched a number of new training
initiatives, some of which have been specifically designed to
develop women across the business.
We ran an employee wellbeing calendar covering the financial,
emotional and physical aspects, offering support to employees
across a variety of topics through webinars or in person. We now
promote staff volunteering days and have expanded our benefits to
all employees.
In response to the cost-of-living crisis that persisted
throughout 2022, the Board awarded an additional GBP1,000 pay rise
as well as a GBP250 one-off cash bonus to all eligible non-bonused
head office employees. We continued to build our own in-house ESG
team and also appointed a specialist ESG consultancy firm.
Consequently, we now have a very clear plan and timelines under
which we will make further progress on what we have achieved over
the last year. We are excited about the central role we can play in
helping homeowners and landlords to achieve good outcomes with
regards to making their homes more energy efficient.
Financial review
We measure the development, performance and position of our
business against several key indicators.
http://www.rns-pdf.londonstockexchange.com/rns/3879U_5-2023-3-27.pdf
Revenue
Revenue increased by 22% to GBP230.8m (2021: GBP188.7m), with
organic(1) revenue growth of 11% driven by a 15% increase in the
average number of organic(1) mainstream advisers(2) , resulting
from a combination of existing ARs' expansion, the recruitment of
new ARs, and a 4% reduction in revenue per organic mainstream
adviser. As previously reported, both completions and adviser
recruitment in Q4 were adversely impacted following the
mini-budget, with a reduction in the number of organic mainstream
advisers in Q4 as our AR firms began to reduce their headcount in
line with lower expected H1 2023 purchase activity.
Fluent, which was acquired on 12 July 2022, added another 182
mainstream advisers to the Group as at 31 December 2022, and
contributed an additional GBP21.9m of revenue during the year.
Auxilium, which was acquired on 3 November 2022, added another 161
directly authorised advisers to the Group as at 31 December 2022,
and contributed an additional GBP0.2m of revenue. In addition, MAB
increased its stake in Vita from 49% to 75% on 12 July 2022, with
its adviser numbers and revenues already incorporated into the
Group's figures due to it having been an AR of the Group since
2016.
The Group continued to generate revenue from three core areas,
with all key income sources growing strongly as set out below.
Income source (GBPm) 2022 2021 Increase
Mortgage procuration fees 106.6 85.1 +25%
------- ------- ----------
Protection and General Insurance
Commission 82.1 75.3 +9%
------- ------- ----------
Client Fees 36.3 23.2 +56%
------- ------- ----------
Other Income 5.8 5.1 +16%
------- ------- ----------
Total 230.8 188.7 +22%
------- ------- ----------
MAB's organic(1) revenue growth across the three core areas was
as follows:
Income source (GBPm) 2022 2021 Increase
Mortgage procuration fees 99.0 85.1 +16%
------- ------- ----------
Protection and General Insurance
Commission 80.5 75.3 +7%
------- ------- ----------
Client Fees 23.7 23.2 +2%
------- ------- ----------
Other Income 5.4 5.1 +8%
------- ------- ----------
Total 208.6 188.7 +11%
------- ------- ----------
MAB's organic banked mortgage(3) mix had a considerably lower
proportion of house purchase business compared to the prior year.
This was due to an increase in re-financing, especially the
proportion of product transfer completions by volume, which have a
lower average procuration fee and typically have lower protection,
general insurance and client fee attachment rates than other
mortgage types.
Product Transfers in the period increased to 21% of MAB's
mortgages(3) (2021: 13%). Consequently, while the Group's organic
net mortgage(3) completions by value increased by 17%(4) , mortgage
procuration fees increased by 16%, protection and general insurance
commissions increased by 7% and client fees increased by 2%. MAB's
organic average mortgage size increased by 10% compared to the
prior year, in line with average house prices increasing by 10%
year-on-year.
MAB's total revenue from re-financing (including both
re-mortgages and product transfers) represented circa 32% (31% on
an organic basis) of total revenue (2021: 25%) due to the Group's
organic banked mortgage mix having a higher proportion of
re-financing and Fluent having a higher proportion of re-financing
in its first charge mortgage mix and with the prior year reflecting
a particularly high level of purchase transactions.
Fluent's revenue contribution across the Group's three core
business areas in the period following completion of the
acquisition was as follows:
Income source (GBPm) 12 July 2022 - 31 Dec
2022
Mortgage procuration fees 7.6
------------------------
Protection and General Insurance Commission 1.4
------------------------
Client Fees 12.5
------------------------
Other Income 0.4
------------------------
Total 21.9
------------------------
Fluent generates revenue from a wider range of mortgage types
than MAB, including first charge mortgages, secured personal loans
(second charge mortgages), later life lending mortgages and
bridging finance. Fluent earns revenue on first charge mortgages in
the same way as MAB. In its other divisions, Fluent predominantly
earns procuration and client fees, with a smaller proportion of
protection and general insurance commission earned on loans
arranged for its customers.
Auxilium, a specialist protection service provider, contributed
revenue of GBP0.2m for the two months following its acquisition.
Auxilium's revenues represent the total income received and
accordingly are classified under Other Income, with there being no
commission payouts to the directly authorised entities serviced by
the business.
The proportion of organic revenue derived from each of the
Group's core revenue streams has remained relatively stable as
summarised below, with small movements reflecting the change in
banked mortgage mix during the period.
Income source 2022 2021
Mortgage Procuration Fees 47% 45%
------ ------
Protection and General Insurance Commission 39% 40%
------ ------
Client Fees 11% 12%
------ ------
Other Income 3% 3%
------ ------
Total 100% 100%
------ ------
The proportion of total revenue derived from each of the Group's
core revenue streams has changed slightly, with client fees as a
proportion of total revenue increasing following the acquisition of
Fluent, as summarised below.
Income source 2022 2021
Mortgage Procuration Fees 46% 45%
------ ------
Protection and General Insurance Commission 36% 40%
------ ------
Client Fees 16% 12%
------ ------
Other Income 2% 3%
------ ------
Total 100% 100%
------ ------
In first charge mortgages we expect client fees to become
increasingly dependent upon the type and complexity of the mortgage
transaction, as well as the delivery channel, leading to a broader
spread of client fees on mortgage transactions, which represent the
Group's lowest margin revenue stream.
Gross profit margin
Gross profit margin for the year was 27.3% (2021: 27.0%)
reflecting the anticipated increase following the acquisition of
Fluent, which has a slightly higher gross profit margin than MAB.
Excluding the impact of Fluent, Vita and Auxilium, MAB's gross
profit margin was 26.5% (2021: 27.0%) reflecting the increased
proportion of re-financing transactions in 2022, and the slightly
reduced revenue share the Group receives as existing ARs grow
organically by increasing their adviser numbers. In addition,
larger new ARs typically join the Group on lower-than-average
margins due to their existing scale, hence a degree of erosion is
expected in MAB's underlying gross profit margin (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, we expect any further erosion in underlying gross
margin to be offset by economies of scale reducing the Group's
overheads ratio.
Administrative expenses
Group administrative expenses increased by GBP8.2m (+29%) to
GBP36.0m, mainly reflecting the impact of the acquisitions of
Fluent and Vita. Organic adjusted administrative expenses increased
by GBP2.3m (+8%) to GBP30.1m, reflecting MAB's continued investment
in growth, and specifically in its technology platform and
marketing team through a mix of employee and third-party costs,
which will drive enhanced lead generation opportunities. Head
office costs, including those of First Mortgage, and compliance
costs also increased to support the Group's continued growth. All
development work on MAB's MIDAS platform continues to be fully
expensed. Organic adjusted administrative expenses as a percentage
of revenue reduced slightly to 14.4% (2021: 14.8%).
MAB continues to benefit from the relatively fixed cost nature
of much of its cost base, where those costs typically rise at a
slower rate than revenue, which will, in part, counter the expected
slight erosion of MAB's underlying gross margin as the business
continues to grow.
During the year MAB awarded mid-year pay rises as well as a cash
bonus to a number of staff, in addition to their usual annual pay
rise, to help with the increasing costs of living.
Associates and Investments
MAB's share of profits from Associates was GBP0.7m (2021:
GBP1.0m) with the majority of the Group's Associates being
adversely impacted by the fall-out from the mini-budget.
In addition, the Group recognised a GBP2.8m non-cash write off
on its investment in Boomin with the company being put into
liquidation after failing to secure new investors in the
challenging economic climate.
Management believes that the value of a number of its associate
investments exceeds their carrying value recognised using the
equity accounting method under IAS 28.
Adjusted EBITDA, profit before tax and margin thereon
Adjusted EBITDA* was up 15% to GBP29.1m (2021: GBP25.3m), with
the margin thereon of 12.6% (2021: 13.4%) mainly reflecting the
impact of the Fluent acquisition with limited revenue synergies
achieved in the year of acquisition (as expected).
Adjusted profit before tax* was up 13% to GBP27.2m (2021:
GBP24.2m), with the margin thereon of 11.8% (2021: 12.8%).
Statutory profit before tax reduced to GBP17.4m (2021: GBP23.2m)
purely due to acquisition-related costs, amortisation of acquired
intangibles and non-cash operating expenses associated with the put
and call option agreements on recent acquisitions. As a result, the
margin on statutory profit before tax was 7.5% (2021: 12.3%).
Fluent, Vita and Auxilium contributed profit before tax of
GBP1.5m, GBP0.05m and GBP0.1m respectively in the periods since
acquisition. These figures exclude the impact of any non-cash
charges associated with the put and call options for Fluent and
Auxilium.
Adjusted profit before tax* as a percentage of net revenue(*)
was 34.0% (2021: 41.0%) primarily due to the effect of the Fluent
acquisition and the change in banked mortgage mix.
Finance revenue
Finance income of GBP0.1m (2021: GBP0.05m) reflects the low
interest rates that prevailed for most of the financial year and
interest income accrued on loans to associates.
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 revolving credit facility (the "RCF") to be used in
connection with the acquisition of Fluent. The RCF is also
available for general corporate purposes. There is an option to
extend the RCF and the Term Loan for a further year.
Finance expenses of GBP1.2m (2021: GBP0.2m) include GBP0.6m of
interest and non-utilisation fees payable on MAB's previous and new
debt facilities and the interest expense on lease liabilities and a
further GBP0.6m relating to the unwinding of the redemption
liability relating to the Fluent Option
Taxation
The increase in the effective rate of tax on reported profit
before tax to 26.4% (2021: 16.9%) was primarily due to
acquisition-related costs, share-based payment costs relating to
the First Mortgage, Fluent and Auxilium options and the write-off
of the Boomin investment being disallowable for tax purposes, there
being limited share option exercises during the year and a lower
tax credit on research and development expenditure on the continued
development of MAB's proprietary software platform, MIDAS. The
effective tax rate on adjusted profit before tax* increased
slightly to 16.8% (2021:16.2%). We expect the effective tax rate on
adjusted PBT in future years to be in line with the prevailing UK
corporation tax rate.
Earnings per share and dividend
Adjusted earnings per share* increased by 2% to 37.8p (2021:
37.1p). Basic earnings per share fell to 21.8p (2021: 35.2p) due to
acquisition-related costs, amortisation of acquired intangibles and
non-cash operating expenses associated with the put and call option
agreements on recent acquisitions.
The Board is pleased to propose a final dividend of 14.7p per
share (2021: 14.7p). This brings the total proposed dividend for
the year to 28.1p per share (2021: 28.1p), reflecting the Group's
policy to pay dividends reflecting a minimum pay-out ratio of 75%
of the Group's annual adjusted post-tax and minority interest
profits. This represents a cash outlay of GBP8.4m (2021: GBP7.8m).
Following payment of the dividend, the Group will continue to
maintain significant surplus regulatory reserves.
The record date for the final dividend will be 28 April 2023 and
the payment date 31 May 2023. The ex-dividend date will be 27 April
2023.
Balance sheet
In connection with the acquisitions of Fluent, Vita and
Auxilium, the Group recognised separately identifiable intangible
assets with a fair value of GBP55.4m and goodwill totalling
GBP38.7m. In addition, redemption liabilities of GBP7.0m and
GBP0.2m in respect of the put and call options relating to the
Fluent and Auxilium acquisitions respectively, are included in
other payables as at 31 December 2022.
In connection with the acquisition of Fluent, the Group entered
into an agreement on 28 March 2022 with NatWest, in respect of a
new term loan for GBP20m and a revolving credit facility for GBP15m
(the "Facilities Agreement"), in order to part fund the cash
consideration payable in relation to the acquisition. As at 31
December 2022, the Group had drawn down GBP3.2m on the revolving
credit facility, in addition to the GBP20m term loan, and had
GBP0.2m of accrued interest net of prepaid loan arrangement fees.
Net debt (adjusting only for unrestricted cash balances of GBP7.2m)
was GBP16.2m.
Cash flow and cash conversion
The Group's operations produce positive cash flow, which is
reflected in the net cash generated from operating activities of
GBP24.1m (2021: GBP26.9m).
Headline cash conversion(*) was:
2022 110%
-----------------
2021 123%
-----------------
Adjusted cash conversion(*) was:
2022 105%
-----------------
2021 113%
-----------------
Other than the GBP2.8m refurbishment of the Group's head office
in Derby during the year, the Group's operations are typically
capital-light, with the most significant ongoing capital investment
being in computer equipment. Only GBP0.4m of general capital
expenditure on office and computer equipment was required during
the year (2021: GBP0.2m). Group policy is not to provide company
cars and no other significant capital expenditure is foreseen.
The Group's regulatory capital requirement represents 2.5% of
regulated revenue and totalled GBP5.5m at 31 December 2022 (2021:
GBP4.3m), with the Group reporting a surplus of GBP26.8m (2021:
GBP18.9m).
The following table demonstrates how cash generated from
operations 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 26.2
Dividends received from associates 0.9
Dividends paid (16.0)
Dividends paid to minority interest (0.4)
Tax paid (4.1)
Proceeds from sale of non-listed equity investment 0.1
Investment in associates (payment of deferred consideration) (1.3)
Issue of shares (net of expenses) 38.4
Proceeds from borrowings 22.9
Repayment of borrowings (1.5)
Net interest paid and principal element of lease payments (0.5)
Acquisition of subsidiaries, net of cash acquired (49.2)
Settlement of loan notes and accrued interest on acquisition (21.9)
Capital expenditure (3.9)
Unrestricted bank balances at the end of the year 7.2
---------------------------------------------------------------------------------------------------- --------
* In addition to statutory reporting, MAB reports alternative
performance measures ("APMs") which are not defined or specified
under the requirements of International Financial Reporting
Standards ("IFRS"). The Group uses these APMs to improve the
comparability of information between reporting periods, by
adjusting for certain items which impact upon IFRS measures, to aid
the user in understanding the activity taking place across the
Group's businesses. APMs are used by the Directors and management
for performance analysis, planning, reporting and incentive
purposes. A summary of APMs used and their closest equivalent
statutory measures is given in the Glossary of Alternative
Performance Measures.
(1) Organic means the Group before the impact of the
acquisitions made in 2022 (Fluent, July 2022; Vita, July 2022; and
Auxilium, November 2022).
(2) Excludes directly authorised advisers, MAB's later life
advisers and advisers from associates in the process of being
onboarded under MAB's AR arrangements. Includes Fluent's second
charge, later life and bridging advisers who have a higher revenue
per adviser than first charge advisers.
(3) First charge mortgage completions, excluding secured
personal loans (second charge mortgages), later life lending
mortgages and bridging finance.
(4) Stated before completions from associates in the process of
being onboarded under MAB's AR arrangements to produce more
appropriate comparisons against revenue metrics.
Independent auditor's report to the members of Mortgage Advice
Bureau (Holdings) PLC
Opinion on the financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
December 2022 and of the Group's profit for the year then
ended;
-- the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
-- the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Mortgage Advice
Bureau (Holdings) PLC (the 'Parent Company') and its subsidiaries
(the 'Group') for the year ended 31 December 2022 which comprise
the consolidated statement of comprehensive income, consolidated
and company statement of financial position, consolidated and
company statement of changes in equity, consolidated statement of
cash flows, and notes to the financial statements, including a
summary of significant accounting policies
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and
UK adopted international accounting standards. The financial
reporting framework that has been applied in the preparation of the
Parent Company financial statements is applicable law and United
Kingdom Accounting Standards, including Financial Reporting
Standard 102 The Financial Reporting Standard in the United Kingdom
and Republic of Ireland (United Kingdom Generally Accepted
Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those
standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's
Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the Directors' assessment of the Group and the Parent
Company's ability to continue to adopt the going concern basis of
accounting included:
-- We have assessed the reasonableness of the assumptions within
the Directors' forecast for liquidity and profitability for a
period of 12 months from the signing of these accounts
corroborating the inputs to supporting documentary evidence. This
involved considering the base and stress scenarios testing
undertaken by the Directors to support the Going concern assessment
which included assumptions about the potential impact this could
have on revenue (mainly from purchase mortgages) and possible cost
saving measures. We assessed whether the capital and cash positions
are adequate and whether the Group complies with its covenant
requirements in both the base and stress scenarios.
-- We have reviewed publicly available information on the house
market and house price index to assess any impact on going
concern.
-- We assessed how the directors have factored in ongoing
economic pressures such as high inflation, cost of living crisis
and increasing interest rates on the business, checking these had
been appropriately considered as part of the Directors' going
concern assessment.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group's and the Parent Company's ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
99.1% (2021: 100%) of Group profit
Coverage before tax
99.9% (2021: 100%) of Group revenue
99.4% (2021: 100%) of Group total
assets
2022 2021
Revenue Recognition
Clawback Provision
Key audit matters Valuation of deferred consideration
and put/call options
Acquisition of subsidiaries
-------------------------------------------------------
Materiality Group financial statements as a whole
GBP1,006,000 (2021: GBP918,000) based
on 5% (2021: 5%) of adjusted Profit
before tax (2021: 3 year average Profit
before tax).
-------------------------------------------------------
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a
risk of material misstatement.
The Group is made up of the Parent Company and its wholly owned
subsidiaries. The significant components were determined to be MAB
Limited, MAB Derby Limited and Project Finland Topco Limited and
its subsidiaries. These three components were subject to full scope
audits performed by the Group audit team. In respect of the
non-significant components the Group audit team carried out
specific procedures on balances that were identified as material to
the Group.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Key audit matter How the scope of our
audit addressed the key
audit matter
Revenue The Group's revenue We performed the following
Recognition comprises of procedures:
commissions * We assessed whether the Group approved policies are
(including procuration in accordance with the applicable accounting
Management's fees), client fees standards.
associated and other income.
accounting Revenue recognition
policies are is considered to * We tested the operating effectiveness of the
outlined in note be a significant reconciliation controls in place between revenue and
1 and with the audit risk as it cash banked and agreed revenue per the reconciliation
detailed is a key driver to third party reports.
disclosure of the return to
in note 3 to investors and there
the financial is a risk that there * For commission income we obtained the third party
statements. could be manipulation reports supporting the transactions selected for
or omission of amounts testing and traced a sample back to cash receipts.
recorded in the
system.
* Using third party reports, we recalculated the
For these reasons procuration fees to be recognised independently and
we considered this agreed to cash received.
to be a key audit
matter.
* For client fees we agreed a sample to providers'
statements and cash receipts.
* We vouched a sample of other income to third party
reports and cash to check that they have been
accounted for in the correct period.
Key observations:
Based on these procedures
we consider revenue to
have been recognised appropriately
in line with accounting
standards.
------------------------ -----------------------------------------------------------------------
Clawback The clawback provision Our procedures included
provision is an estimate of the following:
the commission * We compared the relevant assumptions e.g. unearned
Management's received commission, likely future lapse rates and lapse rate
associated up front that is history used in the model with third party reports.
accounting repayable on life
policies with assurance policies
detail about that may lapse in * For other assumptions e.g. age profile of the
judgements in a period of up to commission received, the Group's share of any
applying four years following clawback, and the success of the Appointed
accounting inception of the Representatives in preventing lapses and/or
policies and policies. The generating new income at the point of a lapse, we
critical significant validated these to management's supporting analysis
accounting estimates and of the Group's actual experience based on data
estimates are judgements gathered from third party providers' statements.
outlined in note made in determining
2 with the the provision are
detailed set out in note * We tested the arithmetical accuracy of the
disclosure in 2e to the financial spreadsheet model.
note 24 to the statements.
financial
statements. The clawback provision * We agreed inputs into the model for a selected sample
is considered a back to third party supporting documentation.
significant audit
risk due to the
management judgement * We reviewed the historic payback patterns and
and estimation applied performed testing on the historical accuracy of
in calculating the management's provisions by comparing clawbacks during
repayment commission the current financial year to the prior year
and we therefore provision raised.
considered this
to be a key audit
matter.
Key observations:
Based on the procedures
undertaken we consider
the judgments and estimates
made by management in
calculating the clawback
provision to be reasonable.
------------------------ -----------------------------------------------------------------------
Valuation of The Group has a Our procedures included
deferred number of investment the following:
consideration in associates and
and put/call subsidiaries which Deferred Consideration
options either have a deferred * We reviewed all share purchase agreements and traced
consideration all payments to bank statements.
Management's element or put/call
associated options assigned
accounting to them or both. * We reviewed management's deferred consideration
policies with calculation and agreed the inputs back to supporting
the detail about The valuation of documentation.
judgements in these balances
applying comprises
accounting of * We evaluated whether management's deferred
policies and key inherent risks consideration calculation was performed in accordance
critical for the Group with with the applicable accounting standards.
accounting respect to management
estimates are judgements and
outlined in the estimates
notes 2 and with and we therefore Put/Call Options
the detailed considered this * We reviewed all valuation reports prepared by
disclosure in to be a key audit management's expert and all options agreements and
note 15 to the matter. agreed inputs back to supporting documentation. We
financial assessed whether the valuation was appropriate and in
statements. accordance with applicable accounting standards.
* We assessed the reasonableness of the valuation
methodology used by management with the assistance of
our internal valuation experts.
Key observations:
Based on the procedures
undertaken we consider
the judgments and estimates
made by management on
the valuation of deferred
consideration and put/call
options to be reasonable.
------------------------ -----------------------------------------------------------------------
Acquisition During 2022, the We reviewed the Sale and
of subsidiaries Group completed Purchase Agreements to
the acquisitions understand the structure
of subsidiaries of the Transactions and
The accounting ("the Transactions") to confirm the consideration
policies and as set out in Note paid. We also assessed
critical 18. whether the Group exercised
judgements control on those subsidiaries
and estimates The accounting for upon completion of the
applied are the acquisition Transactions in accordance
disclosed balance sheet and with IFRS 10 and checked
within the the subsequent the effective dates of
Group's Purchase the Transactions.
accounting Price Allocation
policies ("PPA") assessment, Our detailed procedures
in note 2 to involved the alignment included the following:
the financial of material accounting
statements with policies, * We reviewed the reports prepared by management's
the detailed determination experts and documentation from management on the
disclosure in of the fair value accounting treatment of the Transactions and held
note 18 to the of consideration, various discussions with management to assess and
financial identification and check whether the accounting treatment of the
statement. valuation of business combination, put/call option and related
intangible accounting matters were in line with the applicable
assets at acquisition accounting standards.
date and the
subsequent
goodwill as well * With the assistance of our internal valuation experts
as put/call options. we reviewed and assessed the valuation methodology
Management engaged and significant assumptions, including the
an external expert identification of amounts related to customer
to undertake the relationships, and other intangibles, included in the
PPA assessment and PPA.
assist with the
assessment of
corporation * We evaluated the capabilities, competence,
tax and deferred objectivity and independence of the valuation experts
tax balances engaged by management for the PPA assessment.
associated
with the transaction.
* We have checked the completeness and reasonability of
These acquisitions intangible assets identified and capitalised by
are material, management by understanding the business through
non-routine discussions with management, reviewing prior years
transactions for accounts and obtaining an understanding of material
the Group and the business cycles.
accounting
considerations
and disclosures * We reviewed the cashflow forecasts prepared by
are complex and management including inputs and assumptions used to
include significant assess the fair value of intangible assets acquired
management estimates by comparing to actual and historical results and
and judgements. industry data and the reasonableness of the
We have therefore underlying information used.
determined this
to be a key audit
matter. * For the remaining balances, we performed audit
procedures and obtained supporting documentation, on
a sample basis, to confirm the completeness, accuracy
and carrying value of the amounts included on the
acquisition balance sheet.
* We checked the alignment of the subsidiaries'
accounting policies to group accounting policies and
tested management's assessment and adjustments as a
result of the first time adoption of IFRS on those
acquired subsidiaries against the requirements of the
applicable accounting standards.
* We confirmed the acquisition accounting entries in
the group statements and the calculation of goodwill
against requirements of the applicable financial
reporting standard.
* With the assistance of our internal tax specialists,
we reviewed the corporation and deferred tax entries
associated with the Transactions and the
recoverability of the deferred tax asset recognised.
* We reviewed the adequacy of the disclosure notes in
the financial statements in relation to the
Transactions to assess compliance with the
requirements of the applicable accounting standards.
Key observations:
Based on the procedures
performed, we considered
the methodology and assumptions
used in the accounting
for the Transactions to
be appropriate.
------------------------ -----------------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Group financial statements Parent company financial
statements
2022 2021 2022 2021
--------------------- ---------------- --------------- -----------------
Materiality GBP1,006,000 GBP918,000 GBP268,000 GBP214,000
--------------------- ---------------- --------------- -----------------
Basis 5% of profit 5% of 5% of Total investments
for determining before tax, 3 year
materiality excluding write average
off of investment profit
in non-listed before
equity shares tax
--------------------- ---------------- ----------------------------------
Rationale Profit before Profit As the Parent Company is
for the tax was determined before a holding company, it was
benchmark to be the most tax was considered appropriate to
applied appropriate determined determine materiality based
benchmark as to be on Total investments.
the Group is the most
listed with appropriate
profitability benchmark
seen as the as the
main interest Group
of investors. is listed
with
The write off profitability
of investment seen
in non-listed as the
equity shares main
has been excluded interest
as this is a of investors.
non-routine
event.
--------------------- ---------------- ----------------------------------
Performance GBP754,000 GBP688,000 GBP201,000 GBP160,000
materiality
--------------------- ---------------- ----------------- ---------------
Basis 75% of materiality based on our risk assessment
for determining and our assessment of expected total value of known
performance and likely misstatements.
materiality
---------------------------------------------------------------------------
Component materiality
We set materiality for each significant component of the Group,
including the parent company, based on a percentage of between 43%
and 79% (2021: 78% and 99%) of Group materiality dependent on the
size and our assessment of the risk of material misstatement of
that component. Component materiality ranged from GBP436,515 to
GBP792,000 (2021: GBP712,000 to GBP905,000). In the audit of each
significant component, we further applied performance materiality
levels ranging from 65% to 75% (2021: 75%) of the component
materiality to our testing to ensure that the risk of errors
exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of GBP20,000 (2021:
GBP18,000). We also agreed to report differences below this
threshold that, in our view, warranted reporting on qualitative
grounds.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the Report
and Financial Statements other than the financial statements and
our auditor's report thereon. Our opinion on the financial
statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon. Our responsibility is to
read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and
matters as described below.
Strategic In our opinion, based on the work undertaken
report and in the course of the audit:
Directors' * the information given in the Strategic report and the
report Directors' report for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
* the Strategic report and the Directors' report have
been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding
of the Group and Parent Company and its environment
obtained in the course of the audit, we have
not identified material misstatements in the
strategic report or the Directors' report.
Matters We have nothing to report in respect of the following
on which matters in relation to which the Companies Act
we are required 2006 requires us to report to you if, in our
to report opinion:
by exception
* adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
* the Parent Company financial statements are not in
agreement with the accounting records and returns; or
* certain disclosures of Directors' remuneration
specified by law are not made; or
* we have not received all the information and
explanations we require for our audit.
--------------------------------------------------------------
Responsibilities of Directors
As explained more fully in the Directors' responsibilities
statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
We gained an understanding of the legal and regulatory framework
applicable to the Group and Parent Company and the industry in
which it operates and considered the risk of acts by the Group and
Parent Company which would be contrary to applicable laws and
regulations, including fraud. These included but were not limited
to compliance with the Financial Conduct Authority ("FCA")
regulations, FCA Mortgage Advice and Selling Standards, the
applicable accounting standards and tax legislation.
We assessed the susceptibility of the financial statements to
material misstatement, including fraud and considered the fraud
risk areas to be management override of controls, the risk of fraud
in revenue recognition and in relation to accounting estimates such
as the clawback provision and intangible assets recognition and
measurement.
Our procedures in response to the above included:
-- reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with relevant laws
and regulations discussed above;
-- enquiring of management and the audit committee for any
instances of non- compliance with laws and regulation and any known
or suspected instances of fraud;
-- performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
-- reading minutes of meetings of those charged with governance
and correspondence with the Financial Conduct Authority to check
for any instances of non-compliance with applicable laws and
regulations;
-- in addressing the risk of fraud through management override
of controls, testing the appropriateness of journal entries and
other adjustments on a sample basis to supporting
documentation;
-- in respect of the risk of fraud in relation to revenue
recognitions and in accounting estimates such as the clawback
provision and intangible assets recognition and measurement,
performing the procedures as set out in the Key Audit Matters
section of our report; and
-- evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of
business.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members and
remained alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Ariel Grosberg (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
27 March 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
for the year ended 31 December 2022
Note
2022 2021
GBP'000 GBP'000
------------------------------------------------- ------ ----------- -----------
Revenue 3 230,820 188,663
Cost of sales 4 (167,873) (137,697)
,
------------------------------------------------- ------ ----------- -----------
Gross profit 62,947 50,966
Administrative expenses (36,000) (27,844)
Impairment of loans to related parties 19 - (16)
Share of profit of associates 15 712 1,011
Costs relating to First Mortgage, Fluent
and Auxilium options 5 (1,999) (967)
Amortisation of acquired intangibles 5 (2,582) (367)
Acquisition costs 5 (2,755) -
Impairment of associate 15 - (408)
Non-listed equity investment written off 16 (2,783) -
Profit on disposal of associate 15 19 -
Profit on sale of non-listed equity investment 16 58 311
Gain on fair value measurement of deferred
consideration 15 884 -
Gain on fair value measurement of non-listed
equity investment 16 - 283
(Loss)/gain on fair value measurement
of derivative financial instruments 15 (18) 328
------------------------------------------------- ------ ----------- -----------
Operating profit 6 18,483 23,297
------------------------------------------------- -----------
Finance income 8 108 45
Finance expense 8 (1,238) (160)
------------------------------------------------- ------ ----------- -----------
Profit before tax 17,353 23,182
Tax expense 9 (4,574) (3,910)
------------------------------------------------- ------ ----------- -----------
Profit for the year 12,779 19,272
------------------------------------------------- ------ ----------- -----------
Total comprehensive income 12,779 19,272
------------------------------------------------- ------ ----------- -----------
Profit is attributable to:
Equity owners of Parent Company 12,237 18,722
Non-controlling interests 542 550
--------------------------------------------------- -------- ----------------------
12,779 19,272
--------------------------------------------------- -------- ----------------------
Earnings per share attributable to the owners of
the Parent Company
Basic 10 21.8p 35.2p
--------------------------------------------------- -------- ----------- ---------
Diluted 10 21.6p 35.0p
--------------------------------------------------- -------- ----------- ---------
All amounts shown relate to continuing activities.
The notes that follow form part of these financial
statements.
Consolidated statement of financial position
as at 31 December 2022
2022 2021
Note GBP'000 GBP'000
----------------------------------- ------- ---------- ----------
Assets
Non-current assets
Property, plant and equipment 12 6,128 2,667
Right of use assets 13 3,872 2,457
Goodwill 14 53,885 15,155
Other intangible assets 14 55,823 2,704
Investments in associates and
joint venture 15 11,387 12,433
Investments in non-listed equity
shares 16 - 2,783
Derivative financial instruments 15 320 220
Other receivables 19 831 1,098
Deferred tax asset 25 1,797 1,871
----------------------------------- ------- ---------- ----------
Total non-current assets 134,043 41,388
----------------------------------- ------- ---------- ----------
Current assets
Trade and other receivables 19 10,288 6,341
Derivative financial instruments 15 - 142
Cash and cash equivalents 20 25,462 34,411
----------------------------------- ------- ---------- ----------
Total current assets 35,750 40,894
----------------------------------- ------- ---------- ----------
Total assets 169,793 82,282
----------------------------------- ------- ---------- ----------
2022 2021
Note GBP'000 GBP'000
----------------------------------- ------- ---------- ----------
Equity and liabilities
Share capital 26 57 53
Share premium 26 48,155 9,778
Capital redemption reserve 27 20 20
Share option reserve 27 4,511 3,523
Retained earnings 27 15,154 25,408
----------------------------------- ------- ---------- ----------
Equity attributable to owners
of the Parent Company 67,897 38,782
Non-controlling interests 7,548 2,205
Total equity 75,445 40,987
----------------------------------- ------- ---------- ----------
Liabilities
Non-current liabilities
Trade and other payables 21 9,438 2,583
Provisions 24 8,038 5,716
Lease liabilities 13 3,014 2,202
Derivative financial instruments 15 10 34
Loans and other borrowings 22 16,598 -
Deferred tax liability 25 14,659 757
----------------------------------- ------- ---------- ----------
Total non-current liabilities 51,757 11,292
----------------------------------- ------- ---------- ----------
Current liabilities
Trade and other payables 21 34,397 29,342
Lease liabilities 13 933 394
Loans and other borrowings 22 6,809 -
Corporation tax liability 452 267
----------------------------------- ------- ---------- ----------
Total current liabilities 42,591 30,003
----------------------------------- ------- ---------- ----------
Total liabilities 94,348 41,295
----------------------------------- ------- ---------- ----------
Total equity and liabilities 169,793 82,282
----------------------------------- ------- ---------- ----------
The notes that follow form part of these financial
statements.
The financial statements were approved by the Board of Directors
on 27 March 2023.
P Brodnicki L Tilley
Director Director
Consolidated statement of changes in equity
for the year ended 31 December 2022
Attributable to the holders
of the Parent Company
---------- ---------- ------------------------------------------------- ----------
Capital Share Non-controlling
Share Share redemption option Retained interests
capital premium reserve reserve earnings Total GBP'000 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Equity
GBP'000
------------------ ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Balance as at 1
January
2021 53 9,778 20 1,807 23,882 35,540 1,908 37,448
Profit for the
year - - - - 18,722 18,722 550 19,272
------------------ ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Total
comprehensive
income - - - - 18,722 18,722 550 19,272
------------------ ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Transactions
with
owners
Issue of shares - - - - - - - -
Share-based
payment
transactions - - - 1,210 - 1,210 - 1,210
Deferred tax
asset
recognised in
equity - - - 649 - 649 - 649
Reserve transfer - - - (143) 143 - - -
Dividends paid - - - - (17,339) (17,339) (253) (17,592)
------------------ ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Transactions
with
owners - - - 1,716 (17,196) (15,480) (253) (15,733)
------------------ ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Balance as at 31
December
2021 and 1
January
2022 53 9,778 20 3,523 25,408 38,782 2,205 40,987
Profit for the
year - - - - 12,237 12,237 542 12,779
Total
comprehensive
income - - - - 12,237 12,237 542 12,779
------------------ ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Transactions
with
owners
Issue of shares 4 38,377 - - - 38,381 - 38,381
Non-controlling
interests
on acquisition
of subsidiaries - - - - - - 5,216 5,216
Acquisition of
subsidiaries - - - - (6,540) (6,540) - (6,540)
Share-based
payment
transactions - - - 1,827 - 1,827 - 1,827
Deferred tax
asset
recognised in
equity - - - (767) - (767) - (767)
Reserve transfer - - - (72) 72 - - -
Dividends paid - - - - (16,023) (16,023) (415) (16,438)
Transactions
with
owners 4 38,377 - 988 (22,491) 16,878 4,801 21,679
------------------ ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Balance as at 31
December
2022 57 48,155 20 4,511 15,154 67,897 7,548 75,445
------------------ ---------- ---------- ------------------------ --------- ------------ ---------- ----------------- ----------
Consolidated statement of cash flows
for the year ended 31 December 2022
Notes 2022 2021
GBP'000 GBP'000
----------------------------------------------- ------------ -------------- ------------
Cash flows from operating activities
Profit for the year before tax 17,353 23,182
Adjustments for:
Depreciation of property, plant
and equipment 12 591 385
Depreciation of right of use assets 13 563 383
Amortisation of intangibles 14 2,866 558
Profit from sale of non-listed equity
investment 16 (58) (311)
Profit from disposal of associate 15 (19) -
Loss from disposal of fixed assets 12 38 -
Share-based payments 31 2,983 1,210
Share of profit from associates 15 (712) (1,011)
Impairment and amount written off
of associates 15 - 408
Amount written off of non-listed
equity investment 16 2,783 -
Gains on fair value movements taken
to profit and loss (866) (611)
Dividends received from associates 15 910 275
Finance income 8 (108) (45)
Finance expense 8 1,238 160
----------------------------------------------- ------------ -------------- ------------
27,562 24,583
Changes in working capital
Increase in trade and other receivables 19 (1,317) (1,475)
Increase in trade and other payables 21 833 6,053
Increase in provisions 24 1,387 1,140
Cash generated from operating activities 28,465 30,301
Income taxes paid (4,124) (3,433)
----------------------------------------------- ------------ -------------- ------------
Net cash generated from operating
activities 24,341 26,868
----------------------------------------------- ------------ -------------- ------------
Cash flows from investing activities
Purchase of property, plant and
equipment 12 (3,229) (205)
Purchase of intangibles 14 (615) -
Proceeds from sale of non-listed
equity investment 16 115 331
Net cashflow on acquisition of subsidiaries 18 (49,157) -
Acquisition of associates and deferred
consideration for associates 15 (1,327) (5,010)
Acquisition of non-listed equity
shares 16 - (2,500)
Net cash used in investing activities (54,213) (7,384)
----------------------------------------------- ------------ -------------- ------------
Cash flows from financing activities
Proceeds from borrowings 22, 35 22,918 -
Settlement of loan notes and accrued
interest on acquisition 18, 35 (21,891) -
Repayment of borrowings 22, 35 (1,500) -
Interest received 8 102 47
Interest paid (102) (160)
Principal element of lease payments 13 (547) (349)
Issue of shares 26 40,000 -
Costs relating to issue of shares 26 (1,619) -
Dividends paid 11 (16,023) (17,339)
Dividends paid to minority interest (415) (253)
----------------------------------------------- ------------ -------------- ------------
Net cash used in financing activities 20,923 (18,054)
----------------------------------------------- ------------ -------------- ------------
Net (decrease)/increase
in cash and cash equivalents (8,949) 1,430
Cash and cash equivalents
at the beginning of year 34,411 32,981
----------------------------------------------- ---------------------------- ----------
Cash and cash equivalents
at the end of the year 25,462 34,411
----------------------------------------------- ---------------------------- ----------
The notes that follow form part of these financial
statements.
Notes to the consolidated financial statements
for the year ended 31 December 2022
1 Accounting policies
Basis of preparation
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out below. The
policies have been consistently applied to all the years
presented.
The consolidated financial statements are presented in Great
British Pounds and all amounts are rounded to the relevant
thousands, unless otherwise stated.
These financial statements have been prepared in accordance with
UK-adopted International Accounting Standards in conformity with
the requirements of the Companies Act 2006 that are applicable to
companies that prepare financial statements in accordance with
IFRSs.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement
in applying the Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing
the financial statements and their effect are disclosed in note
2.
The financial statements have been prepared on a historical cost
basis, except for investments in non-listed equities and derivative
financial instruments relating to investments in associates that
have been measured at fair value.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report as set out earlier in these
financial statements. The financial position of the Group, its cash
flows and liquidity position are described in these financial
statements.
The Group made an operating profit of GBP18.5m during 2022
(2021: GBP23.3m) and had net current liabilities of GBP6.8m as at
31 December 2022 (31 December 2021: GBP11.0m assets) and equity
attributable to owners of the Group of GBP67.9m (31 December 2021:
GBP38.8m).
Going concern
The Directors have assessed the Group's prospects until 31
December 2024, taking into consideration the current operating
environment, including the impact of geopolitical and macroeconomic
uncertainty and inflationary pressures on property and lending
markets. The Directors' financial modelling considers the Group's
profit, cash flows, regulatory capital requirements, borrowing
covenants and other key financial metrics over the period.
These metrics are subject to sensitivity analysis, which
involves flexing a number of key assumptions underlying the
projections, including the effect of geopolitical and macroeconomic
uncertainty and inflationary pressures and their impact on the UK
property and lending markets and the Group's business volumes and
revenue mix, which the Directors consider to be severe but
plausible stress tests on the Group's cash position, banking
covenants and regulatory capital adequacy. The Group's financial
modelling shows that the Group should continue to be cash
generative, maintain a surplus on its regulatory capital
requirements and be able to operate within its current financing
arrangements.
Based on the results of the financial modelling, the Directors
expect that the Group will be able to continue in operation and
meet its liabilities as they fall due over this period.
Accordingly, the Directors continue to adopt the going concern
basis for the preparation of the financial statements.
Changes in accounting policies
New standards, interpretations and amendments effective for the
year ended 31 December 2022
New standards, interpretations and amendments applied for the
first time
The Group applied a number of standards and interpretations for
the first time in 2022 but these did not have an impact on the
consolidated financial statements of the Group. The Group has not
early adopted any standards, interpretations or amendments that
have been issued but are not yet effective.
New standards with no impact on the Group
-- Annual improvements to IFRS standards 2018 - 2020 (Effective 1 January 2022)
The improvements impact IFRS 1, IFRS 9, IFRS 16 and IAS 41. The
Group is not a first-time adopter of IFRS standards (IFRS 1) and
does not engage in agricultural activities (IAS 41) so the
improvements to those standards do not impact the Group. The
improvement to IFRS 16 removed illustrations of accounting for
lease incentives which are not relevant to the Group's leasing
activities. Amendments to IFRS 9 clarified the 10% test for
derecognition of financial liabilities when considering payment of
net fees. The Group has not identified any material impact of the
amendment on the derecognition of its financial liabilities.
-- Amendments to IAS 37 Onerous contracts - Cost of fulfilling a
contract (Effective 1 January 2022)
The amendments further clarify the costs of fulfilling a
contract that are to be assessed in relation to the requirements of
contracts being classified as onerous. The Group has not identified
any material provisions required for onerous contracts after
considering the clarified cost assessments.
-- Amendments to IAS 16 Property, plant and equipment - Proceeds
before intended use (Effective 1 January 2022)
Under the amendments, proceeds from selling items before the
related item of PP&E is available for use should be recognised
in profit or loss, together with the costs of producing those
items. IAS 2 Inventories should be applied in identifying and
measuring these production costs. The Group has not sold any items
of PP&E before they became available for use and so this
amendment has no impact on the Group's financial statements.
-- Amendments to IFRS 3 - Reference to the conceptual framework (Effective 1 January 2022)
The amendments change references from the 1989 framework to the
2018 conceptual framework. In addition to this, the amendment added
clarified that IAS 37 provisions or IFRIC 21 are applicable for
identify liabilities assumed in business combinations. The
amendments also added disclosure requirements for not recognising
contingent assets acquired on business combinations. The Group has
updated its disclosure in respect of business combinations and
there has not been any further impact on the Group's financial
statements from these amendments.
New standards, interpretations, and amendments not yet
effective
Future new standards and interpretations
A number of new standards and amendments to standards and
interpretations will be effective for future years and, therefore,
have not been applied in preparing these consolidated Financial
Statements. At the date of authorisation of these Financial
Statements, the following standards and interpretations were in
issue but have not been applied in these Financial Statements as
they were not yet effective:
Standard or Interpretation Periods commencing
on or after
IFRS 17 - Insurance contracts 1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 1 January 2023
2 - Disclosure of accounting policies
Amendments to IAS 8 - Definition of accounting 1 January 2023
estimates
Amendments to IAS 12 - Deferred tax related 1 January 2023
to assets and liabilities arising from a single
transaction
Amendments to IAS 1 Presentation of financial 1 January 2023
statements - On classification of liabilities
IFRS 17 does not apply to the Group and therefore has no impact
on the Financial Statements of the Group in future periods. Other
than to expand certain disclosures within the Financial Statements,
the Directors do not expect the adoption of the amendments to these
other standards listed above to have a material impact on the
Financial Statements of the Group in future periods.
Current versus non-current classification
The Group presents assets and liabilities in the consolidated
statement of financial position based on current/non-current
classification. An asset is current when it is:
-- Expected to be realised or intended to be sold or consumed in the normal operating cycle.
-- Held primarily for the purpose of trading.
-- Expected to be realised within twelve months after the reporting date.
All other assets are classified as non-current.
Assets included in current assets are expected to be realised
within twelve months after the reporting date. Due to their
short-term nature, the carrying value of cash and cash equivalents,
trade and other receivables approximates their fair value.
Basis of consolidation
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
consolidate statement of financial position, the acquiree's
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Associates
Where the Group has the power to participate in, but not control
the financial and operating policy decisions of another entity, it
is classified as an associate. Associates are initially recognised
in the consolidated statement of financial position at cost.
Subsequently, associates are accounted for using the equity method,
where the Group's share of post-acquisition profits and losses and
other comprehensive income is recognised in the consolidated
statement of comprehensive income (except for losses in excess of
the Group's investment in the associate unless there is an
obligation to make good those losses).
Profits and losses arising on transactions between the Group and
its associates are recognised only to the extent of unrelated
investors' interests in the associate. The investor's share in the
associate's profits and losses resulting from these transactions is
eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the
Group's share of the identifiable assets, liabilities and
contingent liabilities acquired is capitalised and included in the
carrying amount of the associate. Where there is objective evidence
that the investment in an associate has been impaired the carrying
amount of the investment is tested for impairment. More information
on the impairment of associates is included in note 2.
Joint ventures
The Group accounts for its interests in joint ventures in the
same manner as investments in associates (i.e. using the equity
method).
Any premium paid for an investment in a joint venture above the
fair value of the Group's share of the identifiable assets,
liabilities and contingent liabilities acquired is capitalised and
included in the carrying amount of the investment in the joint
venture. Where there is objective evidence that the investment in a
joint venture has been impaired the carrying amount of the
investment is tested for impairment in the same way as other
non-financial assets.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs.
Depreciation is provided on all items of property, plant and
equipment at rates calculated to write off the cost of each asset
on a straight-line basis over their expected useful lives, as
follows :
Freehold land not depreciated
Freehold buildings 36 years
Fixtures and fittings 5 years
Computer equipment 3 years
Gains and losses on disposal are determined by comparing the
proceeds with the carrying amount and are recognised in the income
statement. The Directors reassess the useful economic life of the
assets annually.
Goodwill
Goodwill represents the excess of a cost of a business
combination over the Group's interest in the fair value of
identifiable assets under IFRS 3 Business Combinations .
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date .
Other intangible assets
Intangible assets other than goodwill acquired by the Group
comprise licences, the website software, acquired technology,
customer and member relationships, lender and introducer
relationships, and trademarks and brands and are stated at cost
less accumulated amortisation and impairment losses. Amortisation
is charged to the consolidated statement of comprehensive income
within administrative expenses on a straight-line basis over the
period of the licence agreements or expected useful life of the
asset and is charged once the asset is in use.
Amortisation, which is reviewed annually, is provided on
intangible assets to write off the cost of each asset on a
straight-line basis over its expected useful life as follows:
Licences 6 years
Website 3 years
Software development 3 years
Acquired technology 10 years
Customer relationships 5 to 9 years
Trademarks and brands 3, 10 and 11 years
Lender and introducer relationships 14 years
Member relationships 3 years
Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end or whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Other
intangible assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. Where the carrying value of the asset exceeds its
recoverable amount (i.e. the higher of value in use and fair value
less costs to sell), the asset is written down accordingly .
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows, its cash generating units
('CGUs'). Goodwill is allocated on initial recognition to each of
the Group's CGUs that are expected to benefit from the synergies of
the combination giving rise to the goodwill.
Impairment charges are included in profit or loss except to the
extent that they reverse gains previously recognised in other
comprehensive income. An impairment loss for goodwill is not
reversed.
Financial assets
In the consolidated statement of financial position, the Group
classifies its financial assets into one of the following
categories dependent on the purpose for which the financial asset
was acquired.
-- Fair value through profit or loss
-- Amortised cost
Loans and trade receivables
Loans and trade receivables are non-derivative financial assets
with fixed or determinable payments which arise principally through
the Group's trading activities, and these assets arise principally
to collect contractual cash flows and the contractual cash flows
are solely payments of principal and interest. They are initially
recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently
carried at amortised cost using the effective interest rate method,
less provision for impairment.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within cost of sales in the consolidated
statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
Impairment provisions for loans to associates and other parties
are recognised based on a forward-looking expected credit loss
model. The methodology used to determine the amount of the
provision is based on whether there has been a significant increase
in credit risk since initial recognition of the financial asset.
For those where the credit risk has not increased significantly
since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased
significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be
credit impaired, lifetime expected credit losses along with
interest income on a net basis are recognised.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
at call with banks with an original maturity of three months or
less.
Investments in non-listed equity shares
Investments in non-listed shares are non-derivative financial
assets, and are carried at fair value, with gains and losses
arising from changes in fair value taken directly to the
consolidated statement of comprehensive income.
Derivative financial instruments
Derivative financial instruments comprise option contracts to
acquire additional ordinary share capital of associates of the
Group. Derivative financial assets are carried at fair value, with
gains and losses arising from changes in fair value taken directly
to the statement of comprehensive income. Fair values of
derivatives are determined using valuation techniques, including
option pricing models.
Financial liabilities
Trade and other payables are recognised initially at fair value
and subsequently carried at amortised cost.
Loans and other borrowings
Loans and other borrowings comprise the Group's bank loans
including any bank overdrafts. Loans and other borrowings are
recognised initially at fair value net of any directly attributable
transaction costs. After initial recognition, Loans and other
borrowings are subsequently carried at amortised cost using the
effective interest calculation method.
Leases
The Group's leasing activities and how they are accounted
for
The Group leases a number of properties from which it operates
and office equipment. Rental contracts are typically made for fixed
periods of five to ten years, with break clauses negotiated for
some of the properties.
Contracts may contain both lease and non-lease components. The
Group allocates the consideration in the contract to the lease and
non-lease components based on their relative stand-alone
prices.
The Group adopted the modified transition approach and from 1
January 2019, all leases are accounted for by recognising a right
of use asset and a corresponding liability at the date at which the
leased asset is available for use by the Group, except for:
-- leases of low value assets; and
-- leases with a duration of 12 months or less
Payments associated with short-term leases and leases of low
value assets will continue to be recognised on a straight-line
basis as an expense in the statement of comprehensive income. Low
value assets within the Group comprise of IT equipment.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payments that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date; and
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability. The
lease payments are discounted using the interest rate implicit in
the lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the Group's incremental
borrowing rate is used, being the rate that the Group would have to
pay to borrow the funds necessary to obtain an asset of similar
value to the right of use asset in a similar economic environment
with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
-- where possible, uses recent third-party financing received by
the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third party financing was
received;
-- where it does not have recent third-party financing, the
Group uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk for leases held by the
Group; and
-- makes adjustments specific to the lease, e.g. term, country and security.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
Right of use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability,
-- any lease payments made at or before the commencement date
less any lease incentives received, and
-- any initial direct costs.
Right of use assets are depreciated over the shorter of the
asset's useful life and the lease term on a straight-line basis.
The Group does not revalue its land and buildings that are
presented within property, plant and equipment, and has chosen not
to do so for the right of use buildings held by the Group.
Variable lease payments
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right of use
asset.
Extension and termination options
Termination options are included in a number of the leases
across the Group. These are used to maximise operational
flexibility in terms of managing the assets used in the Group's
operations. The majority of termination options held are
exercisable only by the Group and not by the respective lessor.
In determining the lease term, management considers all facts
and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in
the lease term if the lease is reasonably certain to be extended
(or not terminated).
For leases of property, the following factors are normally the
most relevant:
-- If there are significant penalties to terminate, the Group is
typically reasonably certain not to terminate.
-- If any leasehold improvements are expected to have a
significant remaining value, the Group is typically reasonably
certain to not terminate.
-- Otherwise, the Group considers other factors including
historical lease durations and the costs and business disruption
required to replace the leased asset. Most extension options in
offices have not been included in the lease liability, because the
Group could replace the assets without significant cost or business
disruption.
Business combinations and goodwill
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, which is measured at acquisition
date fair value, and the amount of any non-controlling interests in
the acquiree. For each business combination, the Group elects
whether to measure the non-controlling interests in the acquiree at
fair value or at the proportionate share of the acquiree's
identifiable net assets. Acquisition-related costs are expensed as
incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date.
This includes the separation of embedded derivatives in host
contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date.
Contingent consideration classified as equity is not remeasured and
its subsequent settlement is accounted for within equity.
Contingent consideration classified as a liability that is a
financial instrument and within the scope of IFRS 9 Financial
Instruments, is measured at fair value with the changes in fair
value recognised in the statement of profit or loss in accordance
with IFRS 9. Other contingent consideration that is not within the
scope of IFRS 9 is measured at fair value at each reporting date
with changes in fair value recognised in profit or loss.
Goodwill is initially measured at cost (being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interests and any previous interest
held over the net identifiable assets acquired and liabilities
assumed). If the fair value of the net assets acquired is in excess
of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to
measure the amounts to be recognised at the acquisition date. If
the reassessment still results in an excess of the fair value of
net assets acquired over the aggregate consideration transferred,
then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units).
Where goodwill has been allocated to the Group's cash-generating
units (CGUs) and part of the operation within the unit is disposed
of, the goodwill associated with the disposed operation is included
in the carrying amount of the operation when determining the gain
or loss on disposal. Goodwill disposed in these circumstances is
measured based on the relative values of the disposed operation and
the portion of the cash generating unit retained.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value at the
subsequent acquisition date. Any gains or losses arising from such
remeasurement are recognised in profit or loss.
Where a business combination is for less than the entire issued
share capital of the acquiree and there is an option for the
acquirer to purchase the remainder of the issued share capital of
the business and/or for the vendor to sell the rest of the entire
issued share capital of the business to the acquirer, then the
acquirer will assess whether a non-controlling interest exists and
also whether the instrument(s) fall within the scope of IFRS 9
Financial Instruments and is/are measured at fair value with the
changes in fair value recognised in the statement of profit or loss
in accordance with IFRS 9.
Options that are not within the scope of IFRS 9 and are linked
to service will be accounted for under IAS 19 Employee Benefits
and/or IFRS 2 Share-based Payments as appropriate.
IFRS 3 prohibits the recognition of contingent assets acquired
in a business combination. No contingent assets are recognised by
the Group in business combinations even if it is virtually certain
that they will become unconditional or non-contingent.
Retirement benefits: Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated statement of comprehensive income in
the year to which they relate .
Provisions
A provision is recognised in the statement of financial position
when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation (see
note 2c).
Share capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Company's ordinary shares are classified
as equity instruments. Incremental costs directly attributable to
the issue of new shares are shown in share premium as a deduction
from the proceeds.
Revenue
The Group recognises revenue from the following main
sources:
-- Mortgage procuration fees paid to the Group by lenders either
via the L&G Mortgage Club or directly
-- Insurance commissions from advised sales of protection and general insurance policies
-- Client fees paid by the underlying customer for the provision
of advice on mortgages, other loans and protection
-- Other Income comprising income from services provided to
directly authorised entities, fees in relation to Later Life
lending and Wealth and ancillary services such as conveyancing and
surveying
Mortgage procuration fees, insurance commissions and client fees
are included at the gross amounts receivable by the Group in
respect of all services provided. The Group operates a revenue
share model with its trading partners and therefore commissions are
paid in line with the Group revenue recognition policy and are
included in cost of sales.
Mortgage procuration fees, insurance commissions and client fees
earned are accounted for when received or guaranteed to be
received, as until received it is not possible to be certain that
the transaction will be completed. When mortgage procuration fees,
insurance commissions and client fees are received this confirms
that the performance obligation has been satisfied. In the case of
life insurance commissions there is a possibility for a four-year
period after the inception of the policy that part of the
commission earned may have to be repaid if the policy is cancelled
during this period. A clawback provision is made for the expected
level of commissions repayable. More information on the clawback
provision is included in note 2.
Other income is credited to the statement of comprehensive
income when received or guaranteed to be received.
Finance income
Finance income comprises interest receivable on cash at bank and
interest recognised on loans to associates and other Appointed
Representative firms. Interest income is recognised in the
statement of comprehensive income as it accrues.
Foreign exchange
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
reporting date. Exchange differences arising on the retranslation
of unsettled monetary assets and liabilities are recognised
immediately in profit or loss.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates at
the dates of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. The
gain or loss arising on translation of non-monetary items measured
at fair value is treated in line with the recognition of the gain
or loss on the change in fair value of the item (i.e. translation
differences on items whose fair value gain or loss is recognised in
OCI or profit or loss are also recognised in OCI or profit or loss,
respectively).
Taxation
Income tax comprises current and deferred tax. Income tax is
recognised in profit or loss other than if it relates to items
recognised in other comprehensive income in which case it is
recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year using tax rates enacted or substantively enacted by
the statement of financial position date and any adjustment to tax
payable in respect of previous years.
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the
reporting date.
Deferred tax assets and liabilities are recognised for all
taxable temporary differences, except for when:
-- The difference arises from the initial recognition of
goodwill or an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.
-- In respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in joint
arrangements, deferred tax assets are recognised only to the extent
that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that enough taxable profit will be available to allow all
or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax relating to items recognised outside profit or loss
is recognised outside profit or loss. Deferred tax items are
recognised in correlation to the underlying transaction either in
OCI or directly in equity.
Tax benefits acquired as part of a business combination, but not
satisfying the criteria for separate recognition at that date, are
recognised subsequently if new information about facts and
circumstances change. The adjustment is either treated as a
reduction in goodwill (as long as it does not exceed goodwill) if
it was incurred during the measurement period or recognised in
profit or loss.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company or;
-- different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
Sales taxes
Where sales tax is incurred on expenses and assets, expenses and
assets are recognised net of the amount of sales tax, except:
-- When the sales tax incurred on a purchase of assets or
services is not recoverable from the taxation authority, in which
case, the sales tax is recognised as part of the cost of
acquisition of the asset or as part of the expense item, as
applicable.
-- When receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or payables
in the statement of financial position.
Segment reporting
An operating segment is a distinguishable segment of an entity
that engages in business activities from which it may earn revenues
and incur expenses and whose operating results are reviewed
regularly by the entity's chief operating decision maker (CODM).
The Board reviews the Group's operations and financial position as
a whole and therefore considers that it has only one operating
segment, being the provision of financial services operating solely
within the UK. The information presented to the CODM directly
reflects that presented in the financial statements and they review
the performance of the Group by reference to the results of the
operating segment against budget.
Operating profit is the profit measure, as disclosed on the face
of the consolidated statement of comprehensive income that is
reviewed by the CODM.
Dividends
Dividends are recognised when they become legally payable. In
the case of interim
dividends to equity shareholders, this is when they are paid. In
the case of final dividends, this is when they are approved by the
shareholders.
Share-based payments
Where equity-settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
statement of comprehensive income over the vesting period.
Non-market vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at each reporting
date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Non-vesting conditions and market vesting conditions are
factored into the fair value of the options granted. As long as all
other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition or where a non-vesting condition
is not satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the statement of comprehensive income over the remaining vesting
period.
Where options are granted to persons other than employees, the
statement of comprehensive income is charged with the fair value of
the options at the date of the grant over the vesting period.
2 Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The Directors consider that the
estimates and judgements that have the most significant effect on
the carrying amounts of assets and liabilities within the financial
statements are set out below.
(a) Acquisitions and business combinations
When an acquisition arises, the Group is required under
UK-adopted International Accounting Standards to calculate the
Purchase Price Allocation ("PPA"). The PPA requires companies to
report the fair value of assets and liabilities acquired and it
establishes useful lives for identified assets. The identification
and the valuation of the assets and liabilities acquired involves
estimation and judgement when determining whether the recognition
criteria are met.
Subjectivity is also involved in the PPA with the estimation of
the future value of relationships, technology, brand and goodwill.
The fair value of separately identifiable intangible assets
acquired during the year was GBP55.4m (2021: GBPnil), with the key
assumptions used to calculate these fair values being those around
the estimated useful lives of the acquired introducer relationships
and technology, the estimated future cash flows expected to arise
from these relationships and technology and the appropriate
discount rate to be used to discount these cash flows to their
present value. Residual goodwill totalling GBP38.7m (2021: GBPnil)
has been accounted for during the year.
(b) Fair value of put and call options in connection with acquisitions
When the Group makes an acquisition of less than 100% of the
entire issued share capital of an entity, in certain cases it has
entered into a put and call option agreement to acquire the
remaining share capital of that entity after a certain amount of
time. The fair value of the put and call option will need to be
determined in accounting for the instrument which involves certain
estimates regarding the future financial performance of the entity,
including EBITDA or profit before tax, as well as the use of an
appropriate discount rate.
(c) Impairment of intangible assets
For the purposes of impairment testing, acquired relationships,
technology, brands and goodwill are allocated to the group of
cash-generating units ("CGUs") that are expected to benefit from
the business combination.
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end or whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Other
intangible assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable.
Value in use calculations are utilised to calculate recoverable
amounts of a CGU. Value in use is calculated as the net present
value of the projected pre-tax cash flows of the CGU in which the
relationships, technology and brand is contained. The net present
value of cash flows is calculated by applying a pre-tax discount
rate that reflects current market assessments of the time value of
money and the risks specific to that asset.
The key assumptions used in respect of value in use calculations
are those regarding growth rates and anticipated changes to
revenues and expenses during the period covered by the
calculations. Changes to revenue and expenses are based upon
management's expectation and actual outcomes may vary. Forecast
cash flows are derived from the Group's forecast model,
extrapolated for future years, and assume a terminal growth rate of
5.0% (2021: 5.0%), which management considers reasonable given the
Group's historic growth rates and its market share growth
model.
The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment. The recoverable amount is
determined based on value in use calculations. The use of this
method requires the estimation of future cash flows and the choice
of a discount rate in order to calculate the present value of the
cash flows. Actual outcomes may vary. More information including
carrying values is included in note 14.
(d) Impairment of trade and other receivables
Judgement is required when determining if there is any
impairment to the trade and other receivable balances , and the
Group uses the simplified approach for trade receivables within
IFRS 9 using the lifetime expected credit losses. During this
process judgements about the probability of the non-payment of the
trade receivables are made.
In considering impairment provisions for loans to associates the
forward-looking expected credit loss model is used. In determining
the lifetime expected credit losses for loans to associates, the
Group has had to consider different scenarios for repayments of
these loans and have also estimated percentage probabilities
assigned to each scenario for each associate where applicable. More
information is included in note 19.
(e) Clawback provision
The provision relates to the estimated value of repaying
commission received up front on protection policies that may lapse
in a period of up to four years following inception. The provision
is calculated using a model that has been developed over several
years. The model uses a number of factors including the total
unearned commission at the point of calculation, the age profile of
the commission received, the Group's proportion of any clawback,
estimates of future lapse rates, and the success of the Appointed
Representatives in preventing lapses and/or generating new income
at the point of a lapse.
The key uncertainties in the calculation are driven by lapse
rates and recovery rates. A 0.5% change (absolute) in lapse rates
causes a GBP0.4m change in the provision. A 2% change (absolute) in
the recoveries rate causes a GBP 0.2m change in the provision. More
information is included in note 24.
(f) Investments in associates
The Group is required to consider whether any investments in
associates have suffered any impairment.
The Group uses two methods to test for impairment,
-- Net Present Value of the next 5 year's projected free cash flow and terminal value.
-- Valuation of business on a multiple basis.
The use of both methods requires the estimation of future cash
flows, future profit before tax and choice of discount rate. Actual
outcomes may vary. Where the carrying amount in the consolidated
statement of financial position is in excess of the estimated
value, the Group will make an impairment charge against the
investment value and charge this amount to the consolidated
statement of comprehensive income under impairment and amount
written off associates.
The Group continues to make investments in associates, with
elements of deferred consideration in some cases, as well as enter
into commitments or option agreements to increase its stake or
fully acquire certain associates. In accounting for these, the
Group has had to make certain estimates on the amounts of deferred
consideration likely to be payable and also the future performance
and value of these businesses in determining the fair value of the
options.
(g) Share options, employer's National Insurance Contributions and Deferred Tax
Under the Group's equity-settled share-based remuneration
schemes (see note 31), estimates are made in assessing the fair
value of options granted. The fair value is spread over the vesting
period in accordance with IFRS 2. The Group engages an external
expert in assessing fair value, both Black-Scholes and Stochastic
models are used, and estimates are made as to the Group's expected
dividend yield and the expected volatility of the Group's share
price.
In addition, the Group estimates the employer's National
Insurance Contributions that will fall due on exercise of options
and provides for this over the vesting period. In doing so,
estimates as to the share price at vesting and the proportion of
options from each grant that will vest are made with reference to
the Group's prospects.
Deferred tax assets include temporary timing differences related
to the issue and exercise of share options. Recognition of the
deferred tax assets assigns an estimate of the proportion of
options likely to vest and an estimate of share price at vesting.
The carrying amount of deferred tax assets relating to share
options as at 31 December 2022 was GBP1.0m (2021: GBP1.8m).
3 Revenue
The Group operates in one segment being that of the provision of
financial services in the UK. Revenue is derived as follows:
2022 2021
GBP'000 GBP'000
Mortgage procuration fees 106,615 85,108
Protection and general insurance commission 82,095 75,280
Client fees 36,257 23,230
Other income 5,853 5,045
----------------------------------------------- ---------- ----------
230,820 188,663
---------------------------------------------- ---------- ----------
4 Cost of sales
Costs of sales are as follows:
2022 2021
GBP'000 GBP'000
Commissions paid 142,769 129,639
Fluent affinity partner payments 8,000 -
Impairment of trade receivables 102 (5)
Other cost of sales 601 -
Wages and salary costs 16,401 8,063
------------------------------------ --------- ---------
167,873 137,697
----------------------------------- --------- ---------
2022 2021
Wages and salary costs GBP'000 GBP'000
------------------------------------- ----------- ----------
Gross wages 14,001 6,642
Employers' national insurance 1,530 752
Defined contribution pension costs 570 437
Other direct costs 300 232
16,401 8,063
------------------------------------- ----------- ----------
5 Acquisition costs
First Mortgage Direct
On 2 July 2019 Mortgage Advice Bureau (Holdings) plc acquired 80
% of the entire issued share capital of First Mortgage Direct
Limited ("First Mortgage").
Costs relating to the amortisation of acquired intangibles
amounted to GBP367,000 (2021: GBP367,000) in the year ended 31
December 2022. 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, GBP435,871
(2021: GBP424,606) has been included within the consolidated
statement of comprehensive income within costs relating to
Acquisition Options and, in accordance with IFRS 2, a further
GBP409,452 (2021: GBP542,844) has been included in the consolidated
statement of comprehensive income within costs relating to
Acquisition Options (see note 31).
Project Finland Topco
On 28 March 2022 Mortgage Advice Bureau (Holdings) plc acquired
75.4 % of the entire issued share capital of Project Finland Topco
Limited which indirectly owns 100% of the Fluent Money Group
Limited ("Fluent").
Costs relating to the amortisation of acquired intangibles
amounted to GBP2,127,643 in the year ended 31 December 2022. In
addition to this, the Group incurred GBP2,610,156 of costs in the
year ended 31 December 2022 which related to the acquisition of
Project Finland Topco Limited.
There is a put and call option over the remaining 24.6% of the
issued share capital of Fluent has been accounted for under IAS 32
and IFRS 2 Share-based Payments, as respectively a proportion is
treated as consideration under IAS 32, with the balance treated as
remuneration under IFRS 2, because the amount payable on exercise
of the option consists of a non-contingent element, and an element
that is contingent upon continued employment of the option holders
within the Group. In accordance with IFRS 2, a further GBP798,413
has been included in the consolidated statement of comprehensive
income (see note 31). The put and call option over certain growth
shares that have been issued to Fluent's wider management team has
been accounted for under IFRS 2 Share-based Payments as exercise is
solely contingent upon continued employment. In accordance with
IFRS 2, a further GBP347,903 has been included in the consolidated
statement of comprehensive income (see note 31).
Vita Financial Limited
On 12 July 2022 Mortgage Advice Bureau (Holdings) plc increased
its stake in Vita Financial Limited ("Vita") from 49% to 75% of the
entire issued share capital.
Costs relating to the amortisation of acquired intangibles
amounted to GBP32,700 in the year ended 31 December 2022. In
addition to this, the Group incurred GBP14,400 of costs in the year
ended 31 December 2022 which related to the acquisition of Vita
Financial Limited.
Aux Group Limited
On 3 November 2022 Mortgage Advice Bureau (Holdings) plc
acquired 75% of the entire issued share capital of Aux Group
Limited ("Auxilium").
Costs relating to the amortisation of acquired intangibles
amounted to GBP54,846 in the year ended 31 December 2022. In
addition to this, the Group incurred GBP130,063 of costs in the
year ended 31 December 2022 which related to the acquisition of Aux
Group Limited.
There is a put and call option over the remaining 25% of the
issued share capital of Auxilium has been accounted for under IAS
32 and IFRS 2 Share-based Payments, as respectively a proportion is
treated as consideration under IAS 32, with the balance treated as
remuneration under IFRS- 2 because the amount payable on exercise
of the option consists of a non-contingent element, and an element
that is contingent upon continued employment of the option holder
within the Group. In accordance with IFRS 2, a further GBP7,497 has
been included in the consolidated statement of comprehensive income
(see note 31).
6 Operating profit
Operating profit is stated after the following items:
Note 2022 2021
GBP'000 GBP'000
------------------------------------------------------ ------ ----------- -----------
Depreciation of property, plant and equipment 12 591 385
Depreciation of right of use assets 12 563 383
Amortisation of acquired intangibles 5 2,582 367
Amortisation of other intangibles 14 284 191
Costs related to Acquisition Options 5 1,999 967
Costs related to acquisitions 5 2,755 -
Impairment and amounts written off non-listed
equity investments 16 2,783 -
Impairment of loans to related parties 19 - 16
Gain on fair value measurement of deferred
consideration 15 (884) -
Gain on fair value measurement of non-listed
equity investments 16 - (283)
Loss/(gain) on fair value measurement of derivative
financial instruments 15 18 (328)
------------------------------------------------------ ------ ----------- -----------
Profits from associates are disclosed as part of the operating
profit as this is the operational nature of the Group.
2022 2021
GBP'000 GBP'000
-------------------------------------------------- ----------- -----------
Auditor remuneration:
Fees payable to the Group's auditor for
the audit of the Group's financial statements. 312 172
Fees payable to the Group's auditor and
its associates for other services:
Audit of the accounts of subsidiaries 288 10
Audit-related assurance services 55 25
7 Staff costs
Staff costs, including executive and non-executive Directors'
remuneration, are as follows:
2022 2021
GBP'000 GBP'000
------------------------------------- ----------- ----------
Wages and salaries 32,204 20,564
Share-based payments (see note 31) 2,983 1,932
Social security costs 3,608 2,242
Defined contribution pension costs 1,373 1,454
Other employee benefits 730 542
------------------------------------- ----------- ----------
40,898 26,734
------------------------------------- ----------- ----------
Staff costs are included in the consolidated statement of
comprehensive income as follows:
2022 2021
GBP'000 GBP'000
Cost of sales (see note 4) 16,401 8,063
Administrative expenses 24,497 18,671
------------------------------ --------- ---------
40,898 26,734
----------------------------- --------- ---------
The average number of people employed 2022 2021
by the Group during the year was: Number Number
---------------------------------------- --------- ---------
Executive Directors 3 3
Advisers 216 103
Compliance 98 76
Sales and marketing 106 92
Operations 367 171
---------------------------------------- --------- ---------
Total 790 445
---------------------------------------- --------- ---------
Key management compensation
Key management are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group, which are the Directors of Mortgage Advice
Bureau (Holdings) plc.
2022 2021
GBP'000 GBP'000
------------------------------------- ---------- ----------
Wages and salaries 2,047 2,424
Share-based payments 441 428
Social security costs 280 373
Defined contribution pension costs 2 9
Other employment benefits 4 7
------------------------------------- ---------- ----------
2,774 3,241
------------------------------------- ---------- ----------
During the year retirement benefits were accruing to 2 Directors
(2021: 2) in respect of defined contribution pension schemes.
The total amount payable to the highest paid Director in respect
of emoluments was GBP858,176 (2021: GBP830,796). The value of the
Group's contributions paid to a defined contribution pension scheme
in respect of the highest paid Director amounted to GBPnil (2021:
GBPnil).
8 Finance income and expense
2022 2021
Finance income GBP'000 GBP'000
------------------------------------------------- ----------- ----------
Interest income 102 23
Interest income accrued on loans to associates 6 22
------------------------------------------------- ----------- ----------
108 45
------------------------------------------------- ----------- ----------
2022 2021
Finance expense GBP'000 GBP'000
--------------------------------------- ----------- ----------
Interest expense 515 102
Interest expense on lease liabilities 77 58
Unwinding of redemption liability 646 -
--------------------------------------- ----------- ----------
1,238 160
--------------------------------------- ----------- ----------
During the year, interest accrued in previous years of GBPnil
was paid (2021: GBP23,602).
The interest expense during the year mainly relates to a new
term loan and revolving credit facility entered into during the
year (see note 22).
9 Income tax
2022 2021
GBP'000 GBP'000
------------------------------------------------- ----------- ----------
Current tax expense
UK corporation tax charge on profit for
the year 4,184 4,196
Total current tax 4,184 4,196
------------------------------------------------- ----------- ----------
Deferred tax expense
Origination and reversal of timing differences 291 (33)
Temporary difference on share-based payments 128 (342)
Effect of changes in tax rates (29) 89
Total deferred tax (see note 25) 390 (286)
------------------------------------------------- ----------- ----------
Total tax expense 4,574 3,910
------------------------------------------------- ----------- ----------
The reasons for the difference between the actual charge for
the year and the standard rate of corporation tax in the United
Kingdom of 19% (2021: 19%) applied to profit for the year
is as follows:
2022 2021
GBP'000 GBP'000
---------------------------------------------- ----------- ----------
Profit for the year before tax 17,353 23,182
---------------------------------------------- ----------- ----------
Expected tax charge based on corporation
tax rate 3,297 4,405
Expenses not deductible for tax purposes
amortisation and impairment 618 160
Research & Development (139) (439)
Tax on share options exercised (27) (119)
Other share option differences 652 -
Adjustment to deferred tax charge due
to change in tax rate 25 89
Other differences (5) -
Fair value loss/(gain) on derivative
financial instruments (70) (62)
Fair value gain on deferred consideration (168) -
Profits from associates (135) (192)
Amounts written off investments 529 78
Fixed asset differences 55 (9)
Short term timing differences at different (54) -
tax rates
Chargeable gains (4) -
Utilisation of brought forward tax losses - (1)
Total tax expense 4,574 3,910
---------------------------------------------- ----------- ----------
For the year ended 31 December 2022 the deferred tax credit
relating to unexercised share options recognised in equity was
GBP783,556 (2021: GBP558,869 - charge). A charge of GBP16,568
(2021: GBP89,639) was recognised in deferred tax in equity as a
result of remeasurements arising from changes to UK corporation tax
rates.
10 Earnings per share
Basic earnings per share are calculated by dividing net profit
for the year attributable to ordinary equity holders of the Company
by the weighted average number of ordinary shares outstanding
during the year.
2022 2021
Basic earnings per share GBP'000 GBP'000
----------------------------------------- ------------ ----------------
Profit for the year attributable
to the owners of the parent 12,237 18,722
----------------------------------------- ------------ ----------------
Weighted average number of shares
in issue 56,081,853 53,184,872
----------------------------------------- ------------ ----------------
Basic earnings per share (in pence
per share) 21.8p 35.2p
----------------------------------------- ------------ ----------------
For diluted earnings per share, the weighted average number
of ordinary shares in existence is adjusted to include potential
ordinary shares arising from share options.
2022 2021
Diluted earnings per share GBP'000 GBP'000
----------------------------------------- ------------ ----------------
Profit for the year attributable
to the owners of the parent 12,237 18,722
----------------------------------------- ------------ ----------------
Weighted average number of shares
in issue 56,528,515 53,552,928
----------------------------------------- ------------ ----------------
Diluted earnings per share (in pence
per share) 21.6p 35.0p
----------------------------------------- ------------ ----------------
The share data used in the basic and diluted earnings per share
computations are as follows:
Weighted average number of ordinary 2022 2021
shares
-------------------------------------- ------------ ------------
Issued ordinary shares at
start of year 53,204,620 53,153,187
Effect of shares issued during
year 2,877,233 31,685
-------------------------------------- ------------ ------------
Basic weighted average number
of shares 56,081,853 53,184,872
Potential ordinary shares arising
from options 446,662 368,056
-------------------------------------- ------------ ------------
Diluted weighted average number
of shares 56,528,515 53,552,928
-------------------------------------- ------------ ------------
The reconciliation between the basic and adjusted figures is as
follows:
2022 2021 2022 2021 2022 2021
GBP'000 GBP'000 Basic Basic Diluted Diluted
earnings earnings earnings earnings
per per share per per share
share pence share pence
pence pence
Profit for the year 12,237 18,722 21.8 35.2 21.6 35.0
Adjustments:
Amortisation of acquired
intangibles 2,582 367 4.6 0.7 4.6 0.7
Costs relating to the
First Mortgage, Fluent
and Auxilium options 1,715 967 3.1 1.8 3.0 1.8
Costs relating to Fluent
and Auxilium acquisitions 2,755 - 4.9 - 4.9 -
Gain on deferred consideration (891) - (1.6) - (1.6) -
(Gain)/loss on derivative
financial instruments 18 (328) - (0.6) - (0.6)
Amount written off non-listed
equity investment 2,783 - 5.0 - 4.9 -
Impairment of loans to - 16 - - - -
related parties
Unwinding of redemption
liability 646 - 1.1 - 1.1 -
Profit on sale of assets (19) - - - - -
Tax effect of adjustments (609) (3) (1.1) - (1.1) -
--------------------------------- ---------- ---------- ----------- ------------ ----------- ------------
Adjusted earnings 21,217 19,741 37.8 37.1 37.4 36.9
--------------------------------- ---------- ---------- ----------- ------------ ----------- ------------
The Group uses adjusted results as key performance indicators,
as the Directors believe that these provide a more consistent
measure of operating performance. Adjusted profit is therefore
stated before one-off acquisition costs, ongoing non-cash items
relating to the acquisitions of First Mortgage, Fluent and
Auxilium, fair value gains on financial instruments relating to
options to increase shareholding in Associate businesses and
impairment of loans to related parties, net of tax.
11 Dividends
2022 2021
GBP'000 GBP'000
---------
Dividends paid and declared on ordinary
shares during the year:
Final dividend for 2021: 14.7 p per
share (2020: 19.2p) 8,381 10,210
Interim dividend for 2022: 13.4 p per
share (2021: 13.4p) 7,642 7,129
------------------------------------------------ -------- ---------
16,023 17,339
----------------------------------------------- -------- ---------
2022 2021
Equity dividends on ordinary shares: GBP'000 GBP'000
----------------------------------------- ---------- ---------
Proposed for approval by shareholders
at the AGM:
Final dividend for 2022: 14.7p per
share (2021: 14.7p) 8,384 7,821
------------------------------------------ --------- -----------
8,384 7,821
----------------------------------------- --------- -----------
The record date for the final dividend is 28 April 2023 and the
payment date is 31 May 2023. The ex-dividend date will be 27 April
2023. The Company statement of changes in equity shows that the
Company had positive reserves as at 31 December 2022 of
GBP2,470,000. There are sufficient distributable reserves in
subsidiary companies to pass up to Mortgage Advice Bureau
(Holdings) plc in order to pay the proposed final dividend. The
proposed final dividend for 2022 has not been provided for in these
financial statements, as it has not yet been approved for payment
by shareholders.
The final dividends paid and declared can differ from the
proposed total dividends for approval due to (1) additional shares
issued after the publication of these accounts but before the
record date and (2) the number of unallocated shares within the
Group's Share Incentive Plan that do not receive a dividend.
12 Property, plant and equipment
Freehold
land Fixtures Computer
and building & fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ --------------- -------------- ------------- -----------
Cost
As at 1 January
2022 2,536 1,050 1,417 5,003
Additions - 2,903 326 3,229
Acquisition of subsidiaries - 348 513 861
Disposals - (620) (741) (1,361)
As at 31 December
2022 2,536 3,681 1,515 7,732
------------------------------ --------------- -------------- ------------- -----------
Depreciation
As at 1 January
2022 349 823 1,164 2,336
Charge for the year 58 164 369 591
Eliminated on disposal - (583) (740) (1,323)
As at 31 December
2022 407 404 793 1,604
------------------------------ --------------- -------------- ------------- -----------
Net Book Value
As at 31 December
2022 2,129 3,277 722 6,128
------------------------------ --------------- -------------- ------------- -----------
Freehold
land and Fixtures Computer
building & fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----------- -------------- ------------ ----------
Cost
As at 1 January 2021 2,536 1,015 1,247 4,798
Additions - 35 170 205
As at 31 December
2021 2,536 1,050 1,417 5,003
----------------------- ----------- -------------- ------------ ----------
Depreciation
As at 1 January 2021 292 672 987 1,951
Charge for the year 57 151 177 385
As at 31 December
2021 349 823 1,164 2,336
----------------------- ----------- -------------- ------------ ----------
Net Book Value
As at 31 December
2021 2,187 227 253 2,667
----------------------- ----------- -------------- ------------ ----------
Office refurbishment
During the year, the Group undertook a refurbishment project of
its head office premises located in Derby costing GBP2.8m, which is
included within Fixtures and fittings. As a result of this project,
the Group disposed of assets with an original cost of GBP1.4m and a
net book value of GBP0.04m for nil consideration.
13 Right of use assets
Leases
This note provides information for leases where the Group is a
lessee. The consolidated statement of financial position shows the
following amounts on leases:
Right of use assets Land and Office
Buildings equipment Total
GBP'000 GBP'000 GBP'000
---------------------------- ----- ------------ ------------ -----------
As at 1 January
2022 2,457 - 2,457
Additions 950 - 950
Acquisition of subsidiary 919 142 1,061
Depreciation (546) (17) (563)
Disposals (33) - (33)
----------------------------------- ------------ ------------ -----------
As at 31 December
2022 3,747 125 3,872
----------------------------------- ------------ ------------ -----------
Lease liabilities Land and Office
Buildings equipment Total
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ -----------
As at 1 January 2022 2,596 - 2,596
Additions 919 - 919
Acquisition of subsidiary 874 142 1,016
Interest expense 74 3 77
Lease payments (604) (20) (624)
Disposals (37) - (37)
----------------------------- ------------ ------------ -----------
As at 31 December 2022 3,822 125 3,947
----------------------------- ------------ ------------ -----------
Right of use assets Land and Office
Buildings equipment Total
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ -----------
As at 1 January 2021 2,590 - 2,590
Additions 250 - 250
Depreciation (383) - (383)
----------------------------- ------------ ------------ -----------
As at 31 December 2021 2,457 - 2,457
----------------------------- ------------ ------------ -----------
Lease liabilities Land and Office
Buildings equipment Total
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ -----------
As at 1 January 2021 2,695 - 2,695
Additions 250 - 250
Interest expense 58 - 58
Lease payments (407) - (407)
----------------------------- ------------ ------------ -----------
As at 31 December 2021 2,596 - 2,596
----------------------------- ------------ ------------ -----------
The present value of the lease liabilities is as follows:
31 December 2022 Within 1 - 2 -5 After Total
1 year 2 years years 5 years
-------------------------------- --------- ---------- -------- ---------- -------
Lease payments (undiscounted) 1,048 994 1,857 345 4,244
Finance charges (115) (83) (94) (5) (297)
--------------------------------- --------- ---------- -------- ---------- -------
Net present values 933 911 1,763 340 3,947
--------------------------------- --------- ---------- -------- ---------- -------
31 December 2021 Within 1 - 2 -5 After Total
1 year 2 years years 5 years
-------------------------------- --------- ---------- -------- ---------- -------
Lease payments (undiscounted) 449 454 1,228 665 2,796
Finance charges (55) (46) (83) (16) (200)
--------------------------------- --------- ---------- -------- ---------- -------
Net present values 394 408 1,145 649 2,596
--------------------------------- --------- ---------- -------- ---------- -------
Leases
The consolidated statement of comprehensive income shows the
following amounts relating to leases:
2022 2021
GBP'000 GBP'000
--------------------------------------------- ---------- ----------
Depreciation charge of right of use assets 563 383
Interest expense 77 58
Short term lease expense 40 5
Low value lease expense 3 2
---------------------------------------------- ---------- ----------
The total cash flow for leases during the period was GBP665,543
(GBP2021: GBP409,275)
Variable lease payments
One property lease contains variable lease payments linked to
current market rental from January 2023, August 2023 and December
2024. A 1% fluctuation in market rent would impact total annual
lease payments by approximately GBP 16,000.
Extension and termination options
As at 31 December 2022, the carrying amounts of lease
liabilities are not reduced by the amount of payments that would be
avoided from exercising a break clause because it was considered
reasonably certain that the Group would not exercise its right to
break the lease. Total lease payments of GBP 1.0m are potentially
avoidable were the Group to exercise break clauses at the earliest
opportunity.
14 Intangible assets
Goodwill and identified intangible assets arising on
acquisitions are allocated to the cash-generating unit of that
acquisition. The Board considers that the Group has only one
operating segment and now has five cash-generating units (CGUs).
The goodwill relates to the following acquisitions:
- Talk Limited in 2012, and in particular its main operating
subsidiary Mortgage Talk Limited ("Mortgage Talk")
- First Mortgage Direct Limited ("First Mortgage") in 2019
- Project Finland Topco Limited ("Fluent") in 2022
- Vita Financial Limited ("Vita") in 2022
- Auxilium Partnership Limited (Auxilium") in 2022
Goodwill 2022 2021
GBP'000 GBP'000
---------------------------------- ---------- ----------
Cost
As at 1 January 15,308 15,308
Acquisition of subsidiaries 38,730 -
---------------------------------- ---------- ----------
As at 31 December 54,038 15,308
------------------------------------ ---------- ----------
Accumulated impairment
As at 1 January and 31 December (153) (153)
Net book value
As at 31 December 53,885 15,155
------------------------------------ ---------- ----------
Where the goodwill allocated to the CGU is significant in
comparison with the entity's total carrying amount of goodwill this
is set out below:
Goodwill Mortgage First Fluent Other(1) Total
Talk Mortgage
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ----------- --------- ---------- ---------
Cost
As at 1 January 2022 4,267 11,041 - - 15,308
Acquisition of subsidiary(2) - - 36,974 1,757 38,730
------------------------------- ---------- ----------- --------- ---------- ---------
At 31 December 2022 4,267 11,041 36,974 1,757 54,038
------------------------------- ---------- ----------- --------- ---------- ---------
Accumulated impairment
As at 1 January and 31
December 2022 153 - - - 153
Net book value
At 31 December 2022 4,114 11,041 36,974 1,757 53,885
------------------------------- ---------- ----------- --------- ---------- ---------
(1) 'Other' comprises Vita and Auxilium.
(2) Further details can be found in the business combinations
note 18.
The goodwill is deemed to have an indefinite useful life. Under
IAS 36, "Impairment of assets", the Group is required to review and
test its goodwill for impairment annually or in the event of a
significant change in circumstances. The impairment reviews
conducted at the end of 2022 concluded that there had been no
impairment of goodwill.
The key assumptions set out below and used in respect of value
in use calculations are those regarding growth rates and
anticipated changes to revenues and costs during the period covered
by the calculations, based upon management's expectations, with the
discount rates reflecting current market assessments of the time
value of money and the risks specific to these assets, based on the
Group's WACC. Revenue growth is based on past performance and
management's expectation of growth rates in the markets in which it
operates, and forecast costs are based on management's expectations
of changes to the current structure of each CGU. The terminal value
growth rate of 5% reflects the Group's market share growth model
.
Goodwill arose on the acquisition of Mortgage Talk Limited and
has since been allocated to the CGU of the Group as it existed
prior to the impact of the subsequent four acquisitions listed
above. Impairment testing for this CGU is carried out by
determining recoverable amount on the basis of value in use, which
is then compared to the carrying value of the assets of the CGU
including goodwill. The value in use that has been determined
exceeds the GBP4.1m (2021: GBP4.1m) carrying value of goodwill for
this CGU and therefore no impairment of goodwill is required.
Management has estimated future cash flows over a five-year period
and applied a discount rate of 11.3% (2021: 11.2%) and then applied
a terminal value calculation, which assumes a growth rate of 5%
(2021: 5%) in future cashflows, in order to estimate the present
value of those cash flows in determining the value in use.
Management believes that any reasonably possible changes to any of
the key assumptions applied in determining the value in use would
not cause the carrying amount of goodwill to exceed the present
value of the estimated future cashflows.
Goodwill arose on the acquisition of First Mortgage and has
since been allocated to this CGU of the Group. Impairment testing
for this CGU is carried out by determining recoverable amount on
the basis of value in use, which is then compared to the carrying
value of the assets of the CGU including goodwill. The value in use
that has been determined exceeds the GBP11.0m (2021: GBP11.0m)
carrying value of goodwill for this CGU and therefore no impairment
of goodwill is required. Management has estimated future cash flows
over a five-year period and applied a discount rate of 20.7% (2021:
20.7%) and then applied a terminal value calculation, which assumes
a growth rate of 5% (2021: 5%) in future cashflows, in order to
estimate the present value of those cash flows in determining the
value in use. Management believes that any reasonably possible
changes to any of the key assumptions applied in determining the
value in use would not cause the carrying amount of goodwill to
exceed the present value of the estimated future cashflows.
Goodwill arose on the acquisition of Fluent and has since been
allocated to this CGU of the Group. Impairment testing for this CGU
is carried out by determining recoverable amount on the basis of
value in use, which is then compared to the carrying value of the
assets of the CGU including goodwill. The value in use that has
been determined exceeds the GBP37.0m carrying value of goodwill for
this CGU and therefore no impairment of goodwill is required.
Management has estimated future cash flows over a six-year period
and applied a discount rate of 22.4% and then applied a terminal
value calculation, which assumes a growth rate of 5 % in future
cashflows, in order to estimate the present value of those cash
flows in determining the value in use. Management believes that any
reasonably possible changes to any of the key assumptions applied
in determining the value in use would not cause the carrying amount
of goodwill to exceed the present value of the estimated future
cashflows.
The sensitivity of the value in use for all acquisitions to
changes in the key assumptions are as follows:
Assumption Base assumption Change in assumption Increase/(decrease)
in value in use,
GBPm
------------------- ----------------- ---------------------- ---------------------
Discount rate Various +1.0% (28.0)
Years 1-5 cash
flows Various -5.0% (30.7)
Long-term growth
rate 5.0% -2.0% (36.1)
------------------- ----------------- ---------------------- ---------------------
Other Licences Website Technology Customer Trademarks Other
intangible /Software contracts and brands relationships Total
assets GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
----------------- ---------- ---------- ------------ ------------ -------------- ---------------- -----------
Cost
As at 1 January
2022 108 140 571 1,980 1,470 - 4,269
Additions - 83 534 - - - 615
Acquisition
of
subsidiaries - - 16,824 357 3,619 34,568 55,368
Disposals - - - - - - -
----------------- ---------- ---------- ------------ ------------ -------------- ---------------- -----------
As at 31
December
2022 108 223 17,929 2,337 5,089 34,568 60,254
----------------- ---------- ---------- ------------ ------------ -------------- ---------------- -----------
Accumulated
Amortisation
As at 1 January
2022 108 140 399 550 368 - 1,565
Charge for the
year - - 1,053 247 312 1,254 2,866
Disposals - - - - - - -
----------------- ---------- ---------- ------------ ------------ -------------- ---------------- -----------
As at 31
December 4,
2022 108 140 1,452 797 680 1,254 431
----------------- ---------- ---------- ------------ ------------ -------------- ---------------- -----------
Net book value
As at 31
December 55,
2022 - 83 16,477 1,540 4,409 33, 314 823
----------------- ---------- ---------- ------------ ------------ -------------- ---------------- -----------
Other intangible Licences Website Technology Customer Trademarks Other Total
assets /software contracts and brands relationships
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
------------------- ---------- ---------- ------------ ------------ -------------- ----------------- ----------
Cost
As at 1 January
2021 108 140 571 1,980 1,470 - 4,269
Additions - - - - - - -
------------------- ---------- ---------- ------------ ------------ -------------- ----------------- ----------
As at 31 December
2021 108 140 571 1,980 1,470 - 4,269
------------------- ---------- ---------- ------------ ------------ -------------- ----------------- ----------
Accumulated
Amortisation
As at 1 January
2021 108 140 208 330 221 - 1,007
Charge for the
year - - 191 220 147 - 558
As at 31 December
2021 108 140 399 550 368 - 1,565
------------------- ---------- ---------- ------------ ------------ -------------- ----------------- ----------
Net book value
As at 31 December
2021 - - 172 1,430 1,102 - 2,704
------------------- ---------- ---------- ------------ ------------ -------------- ----------------- ----------
Technology/software includes software development and acquired
technology assets. Other relationships include lender and
introducer relationships and member relationships assets.
15 Investments in associates and joint venture
The Group holds investments in associates and a joint venture,
all of which are accounted for under the equity method, as
follows:
Percentage
of ordinary
Registered office shares
Company name held Description
--------------------- ---------------------------- -------------- ------------------------
CO2 Commercial Profile House, Stores 49 Property surveyors
Limited Road, Derby DE21
4BD
Sort Group Limited Burdsall House, London 43.25 Conveyancing services
Road, Derby DE24
8UX
Buildstore Limited NSB & RC Lydiard 25 Provision of financial
Fields, Great Western services
Way, Swindon SN5
8UB
Clear Mortgage 114 Centrum House, 49 Provision of financial
Solutions Limited Dundas Street, Edinburgh services
EH3 5DQ
MAB Broker Services Level 7, 68 Alfred 48.05 Provision of financial
PTY Limited Street, Milsons Point, services
NSW 2061
Eagle and Lion 22 West Mall, Clifton, 49 Provision of financial
Limited(1) Bristol, BS8 4BQ services
The Mortgage Broker The Granary, Crowhill 25 Provision of financial
Group Limited Farm, Ravensden Road, services
MK44 2QS
Meridian Holdings 68 Pullman Road, 40 Provision of financial
Group Limited Wigston, Leicester, services
LE18 2DB
Evolve FS Ltd Unit 26-28 Brightwell 49 Provision of financial
Barns, Waldringfield services
Road, Brightwell,
Ipswich, Suffolk,
IP10 0BJ
Heron Financial Moor Park Golf Club, 49 Insurance agent
Limited Moor Park, Rickmansworth, and broker
Hertfordshire, England,
WD3 1QN
M & R FM Ltd(2) 14 Kensington Terrace, 25 Provision of financial
Gateshead, NE11 9SL services
--------------------- ---------------------------- -------------- ------------------------
The reporting date for the Group's associates, as listed in the
table above, other than Clear Mortgage Solutions Limited, is 31
December and their country of incorporation is England and Wales.
The reporting date for Clear Mortgage Solutions Limited is 30
December and its country of incorporation is England and Wales. The
reporting date for the Group's joint venture, MAB Broker Services
PTY Limited, is 30 June and its country of incorporation is
Australia.
(1) On 2 September 2021, Eagle and Lion Limited passed a special
resolution to enter into voluntary liquidation. On 6 January 2023,
Eagle and Lion Limited was dissolved.
(2) 25% of the ordinary share capital of M & R FM Ltd is
held by First Mortgage Direct Ltd.
The investment in associates and the joint venture at the
reporting date is as follows:
2022 2021
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
As at 1 January 12,433 4,883
Additions - 7,222
Disposals (848) -
Credit/(charge) to the statement of comprehensive
income:
Share of profit 712 1,011
Impairment and amount written off - (408)
---------------------------------------------------- ---------- ----------
712 603
Dividends received (910) (275)
---------------------------------------------------- ---------- ----------
As at 31 December 11,387 12,433
---------------------------------------------------- ---------- ----------
The Group is entitled to the results of its Associates in equal
proportion to its equity stakes.
The carrying value of the Group's joint venture, MAB Broker
Services PTY Limited, as at 31 December 2022 is GBPnil (2021:
GBPnil). In the year ended 30 June 2022, MAB Broker Services PTY
Limited reported a loss of AUD0.38m (2021: loss of AUD0.01m).
There were no additions during the year. 2021 additions included
GBP5.0m of initial cash consideration and GBP2.2m of estimated
deferred consideration.
Acquisitions and disposals
2022
On 14 April 2022, Mortgage Advice Bureau Limited paid a further
GBP277,600 in deferred consideration in respect of its acquisition
of a 49% stake in Heron Financial Limited in November 2021. A
further estimated deferred consideration of GBP0.2m is payable
following finalisation of Heron's audit for the year ending 31
December 2022.
On 27 April 2022, Mortgage Advice Bureau Limited paid a further
GBP179,252 in deferred consideration in respect of its acquisition
of a further 29% interest in Vita Financial Limited in May 2021. No
further deferred consideration is estimated to be payable following
finalisation of Vita's audit for the year ending 31 December
2022.
On 21 July 2022, Mortgage Advice Bureau Limited paid a further
GBP625,567 in deferred consideration in respect of its acquisition
of a 49% stake in Evolve FS Limited in July 2021.
On 12 July 2022, Mortgage Advice Bureau Limited acquired a
further 26% of Vita Financial Limited having previously held 49% of
the share capital of Vita Financial Limited. As a result, the Group
now exercises control over Vita Financial Limited and so the
investment is considered a subsidiary of the Group. The carrying
value of the 49% holding in Vita Financial Limited was GBP848,022.
The fair value of the previously held equity interest was
established to be GBP867,500, therefore a gain of GBP19,478 is
recognised in the consolidated statement of comprehensive income as
this previously held interest is treated as though it has been
disposed of.
On 15 July 2022, First Mortgage Direct Limited, an 80% owned
subsidiary of the Group, paid a further GBP244,858 in deferred
consideration in respect of its acquisition of a 25% stake in M
& R FM Limited in January 2021.
On 19 October 2022, Mortgage Advice Bureau Limited disposed of
its 49% stake in Lifetime FS Limited for nil consideration.
2021
On 12 January 2021, First Mortgage Direct Limited, an 80% owned
subsidiary of the Group, acquired a 25% stake in M & R FM Ltd,
for an initial cash consideration of GBP663,400. Deferred
consideration was payable following finalisation of M & R FM
Ltd's audit for the year ended 31 December 2021 and this was
estimated to be GBP0.2m at 31 December 2021.
On 13 January 2021, Mortgage Advice Bureau Limited ceased to
have an investment in Freedom 365 Mortgage Solutions Limited,
having entered into a deed of termination.
Mortgage Advice Bureau Limited acquired a further 29% interest
in Vita Financial Limited ("Vita") on 28 May 2021 at an initial
cash consideration of GBP159,081. Deferred consideration was
payable following the finalisation of Vita's audits for the year
ended 31 December 2021 and 31 December 2022 respectively and this
was estimated to be GBP0.2m and GBP0.2m respectively at 31 December
2021.
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 Mortgage Advice Bureau Limited 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.
Mortgage Advice Bureau Limited 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. Deferred consideration was payable
following finalisation of Evolve's audit for the year ended 31
December 2021 and this was estimated to be GBP0.7m at 31 December
2021.
Mortgage Advice Bureau Limited acquired a 49% stake in Heron
Financial Limited ("Heron") plus an option over the remaining
ordinary share capital of Heron on 30 November 2021 at an initial
cash consideration of GBP1,600,000. Deferred consideration was
payable following finalisation of Heron's audit for the year ended
31 December 2021 and 31 December 2022 and this was estimated to be
GBP0.4m and GBP0.5m respectively at 31 December 2021.
On 30 September 2021, Mortgage Advice Bureau Limited 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.
In accordance with IAS 28 the Group impaired further the value
of the investment in The Mortgage Broker Group Limited by
GBP400,000 (2020: GBP472,850) due to its performance. The
investment in The Mortgage Broker Group Limited is classified as
Level 3 for the purposes of disclosure in the fair value hierarchy.
The recoverable amount of the asset is its fair value less costs of
disposal and the market approach has been determined as the most
appropriate method of estimating the fair value of this
investment.
Summarised financial information for associates
The tables below provide summarised financial information for
those associates and joint ventures that are material to the Group.
The information disclosed reflects the amounts presented in the
unaudited financial statements or management accounts of the
relevant associates and joint ventures and not the Group's share of
those amounts:
Pinnacle
Meridian Surveyors
Heron Holdings Sort (England
Evolve Financial Group Group & Wales)
2022 FS Ltd Ltd ltd Limited Limited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ------------- ------------ ----------- ------------
Non-current assets 45 183 1,927 592 30
Cash balances 502 409 1,700 2,003 316
Current assets (excluding
cash balances) 356 266 166 605 708
Current liabilities (493) (150) (868) (1,134) (569)
Non-current liabilities
and provisions (7) (161) (740) (93) (49)
Revenue 4,792 2,576 6,873 12,042 5,838
Profit/(loss) before
taxation (26) 275 (78) 976 424
Total comprehensive
income (PAT) (26) 209 (78) 820 345
Carrying value of
investments
As at 1 January 2022 3,143 2,536 1,541 1,628 464
Profit attributable
to Group (16) 102 (44) 438 165
Dividends received (245) - - (130) (348)*
As at 31 December
2022 2,882 2,638 1,497 1,936 281
----------------------- ------- ------- ------- ------- --------
Pinnacle
Heron Meridian Surveyors
Financial Holdings Sort (England
Evolve Ltd Group Group & Wales)
2021 FS Ltd GBP'000 ltd Limited Limited
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ------------- ------------ ----------- ------------
Non-current assets 53 259 1,948 350 26
Cash balances 1,433 351 1,648 1,598 602
Current assets (excluding
cash balances) 206 122 1,179 749 1,332
Current liabilities (747) (115) (1,496) (1,129) (751)
Non-current liabilities
and provisions - (268) (878) (236) (300)
Revenue 5,395 2,822 7,957 10,487 5,723
Profit before taxation 857 602 535 772 850
Total comprehensive
income (PAT) 691 505 433 591 695
Carrying value
of investments
As at 1 January
2021 - - 1,363 1,282 348
Acquisition 2,992 2,536 - - -
Profit attributable
to Group 151 - 178 346 341
Dividends received - - - - (225)*
As at 31 December
2021 3,143 2,536 1,541 1,628 464
---------------------- ------- ------- ------- ------- --------
* These dividends are received from CO2 Commercial Limited, the
parent undertaking of Pinnacle Surveyors (England & Wales)
Limited. All other information disclosed above relates to Pinnacle
Surveyors (England & Wales) Limited.
Individually immaterial associates and joint ventures
In addition to the interests in associates disclosed above, the
group also has interests in a number of individually immaterial
associates and a joint venture that are accounted for using the
equity method. The aggregate of the summarised financial
information for these associates is shown below, along with the
summarised financial information for the joint venture. The
information disclosed reflects the amounts presented in the
unaudited financial statements or management accounts of the
relevant associates and the joint venture and not the Group's share
of those amounts:
2022 2021
2022 Associates 2021 Associates Joint Venture Joint Venture
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----------------- ----------------- ---------------- ----------------
Non-current assets 413 439 42 79
Cash balances 3,287 2,832 25 384
Current assets (excluding
cash balances) 1,561 1,718 1,167 1,018
Current liabilities (2,155) (1,489) (74) (178)
Non-current liabilities
and provisions (1,366) (1,131) (109) (98)
Revenue 14,470 15,147 486 478
Profit/(loss) before
taxation 424 711 (267) (541)
Total comprehensive
income (PAT) 146 513 (213) 5
Profit attributable
to Group 67 (5) - -
---------------------------- ----------------- ----------------- ---------------- ----------------
Dividends received 188 50 - -
---------------------------- ----------------- ----------------- ---------------- ----------------
All associates and joint venture prepare their financial
statements in accordance with FRS 102 other than MAB Broker
Services PTY Limited who prepare their financial statements in
accordance with the Australian Accounting Standards. There would be
no material difference to the profit attributable to the Group if
the accounts of any of the associates were prepared in accordance
with IFRS.
Unrecognised losses
The Group has discontinued recognising its share of losses from
its joint venture as these exceed the carrying amount of the
investment. The Group had unrecognised losses in the year of
GBP75,948 (2021: GBPnil) and cumulative unrecognised losses of
GBP801,644 (2021: 725,696).
Derivative financial instruments
The fair value of the call option at 31 December 2022 for Evolve
is GBP255,994 (2021: GBP124,055). The fair value of the call option
and put option at 31 December 2022 for Heron is GBP64,114 (2021:
GBP95,455) and GBP10,280 (2021: GBP34,235) respectively.
The put and call option in respect of Meridian was not exercised
during the year, consequently it has no value at 31 December
2022.
The fair values of the option contracts have been calculated
using an option valuation model. The key assumptions used to value
the options in the model are the value of shares in the associate,
the anticipated growth of the business, the option exercise price,
the expected life of the option, the expected share price
volatility of similar businesses, forecast dividends and the
risk-free interest rate. The gains and losses relating to the
derivative financial instruments is included within 'operating
profit'. These financial instruments are categorised as Level 3
within the fair value hierarchy.
Deferred Consideration
The fair value of deferred consideration at 31 December 2022 was
GBPnil (2021: GBP2.2m). During the year, GBP1.3m of deferred
consideration was paid (2021: GBP0.3m) and a gain of GBP0.9m (2021:
GBPnil), resulting from the actual deferred consideration paid
being lower than the original amounts estimated, has been
recognised in the consolidated statement of comprehensive
income.
16 Investments in non-listed equity shares
2022 2021
GBP'000 GBP'000
-------------------------- ---------- ----------
As at 1 January 2,783 75
Additions - 2,500
Revaluation - 283
Write-off of investment (2,783) -
Disposals - (75)
-------------------------- ---------- ----------
As at 31 December - 2,783
-------------------------- ---------- ----------
The investment at the start of the year represented a
shareholding of 2.92% in PD Innovations Limited, trading as Boomin,
at a value of GBP2,783,000. This investment is classified as Level
3 for the purpose of disclosure in the fair value hierarchy, with
any fair value movements taken to the consolidated statement of
comprehensive income. Boomin was put into liquidation in October
2022, having not been able to secure new investors in the
challenging economic climate, which leads to a GBP2.8m non-cash
write-off of the investment. The Group originally paid cash
consideration of GBP2.5m on 9 April 2021 for a 3.17% stake in PD
Innovations Limited.
On 23(rd) April 2021, the investment in Yourkeys Technology Ltd
was sold for initial consideration of GBP329,000 with estimated
deferred consideration of GBP57,000. This resulted in a gain
recognised in the consolidated statement of comprehensive income of
311,000.
During the year, deferred consideration of GBP115,000 was
received relating to the sale of Yourkeys Technology Limited. This
was GBP58,000 higher than estimated, resulting in a gain recognised
in the consolidated statement of comprehensive income.
17 Subsidiaries
The subsidiaries of Mortgage Advice Bureau (Holdings) plc at the
reporting date have been included in the consolidated financial
statements. The trading subsidiaries are as follows:
Percentage
Country of of ordinary
Company name Incorporation shares Nature of business
held (effective
holding)
--------------------------- ----------------- ------------------ ---------------------------
Mortgage Advice Bureau England and 100 Provision of financial
Limited Wales services
Mortgage Advice Bureau England and 100 Provision of financial
(Derby) Limited Wales services
Capital Protect Limited England and 100 Provision of financial
Wales services
Mortgage Talk Limited England and 100 Provision of financial
Wales services
MABWM Limited England and 100 Provision of financial
Wales services
First Mortgage Direct Scotland 80 Provision of financial
Limited services
First Mortgage Limited Scotland 80 Provision of financial
services
Property Law Centre Scotland 80 Provision of financial
Limited services
Talk Limited England and 100 Intermediate holding
Wales company
Mortgage Advice Bureau Australia 100 Intermediate holding
Australia (Holdings) company
PTY Limited
Mortgage Advice Bureau Australia 100 Holding of intellectual
PTY Limited property
Vita Financial Limited England and 75 Provision of financial
Wales services
BPR Protect Limited England and 75 Provision of financial
Wales services
AUX Group Limited England and 75 Provision of financial
Wales services
Auxilium Partnership England and 75 Provision of financial
Limited Wales services
Project Finland Topco England and 75.4 Intermediate holding
Limited Wales company
Project Finland Bidco England and 75.4 Intermediate holding
Limited Wales company
The Fluent Money Group England and 75.4 Intermediate holding
Limited Wales company
Fluent Mortgages Holdings England and 75.4 Intermediate holding
Limited Wales company
Fluent Mortgages Limited England and 75.4 Provision of financial
Wales services
Fluent Mortgages Horwich England and 75.4 Provision of financial
Limited Wales services
Fluent Lifetime Limited England and 75.4 Provision of financial
Wales services
Fluent Money Limited England and 75.4 Provision of financial
Wales services
Fluent Loans Limited England and 75.4 Provision of financial
Wales services
Fluent Bridging Limited England and 75.4 Provision of financial
Wales services
--------------------------- ----------------- ------------------ ---------------------------
Mortgage Advice Bureau (Holdings) plc also holds a number of
dormant subsidiaries which at the reporting date have been included
in the consolidated financial statements. The dormant subsidiaries
are as follows:
Percentage
Country of of ordinary
Company name Incorporation shares Nature of business
held
----------------------------- ----------------- -------------- ----------------------
Mortgage Advice Bureau England and 100 Dormant
(UK) Limited Wales
Mortgage Advice Bureau England and 100 Dormant
(Bristol) Limited Wales
MAB (Derby) Limited England and 100 Dormant
Wales
L&P 137 Limited England and 100 Dormant
Wales
Mortgage Talk (Partnership) England and 100 Dormant
Limited Wales
Financial Talk Limited England and 100 Dormant
Wales
Survey Talk Limited England and 100 Dormant
Wales
L&P 134 Limited England and 100 Dormant
Wales
Loan Talk Limited England and 100 Dormant
Wales
MAB1 Limited England and 100 Dormant
Wales
MAB Private Finance England and 100 Dormant
Limited Wales
MAB Financial Planning England and 100 Dormant
Limited Wales
First Mortgage Shop Scotland 80 Dormant
Limited
First Mortgages Limited Scotland 80 Dormant
Fresh Start Finance Scotland 80 Dormant
Limited
----------------------------- ----------------- -------------- ----------------------
The registered office for Vita Financial Limited and its
subsidiary is 1st Floor Tudor House, 16 Cathedral Road, Cardiff
CF11 9LJ. The registered office of Mortgage Advice Bureau Australia
(Holdings) PTY Limited and Mortgage Advice Bureau PTY Limited is
Norton Rose Fulbright, Level 18, 225 George Street, Sydney, NSW
2000, Australia. The registered office for First Mortgage Direct
Limited and its subsidiaries which are incorporated in Scotland is
30 Walker Street, Edinburgh, EH3 7HR. The registered office for
Project Finland Topco Limited and its subsidiaries is 102 Rivington
House Chorley New Road, Horwich, Bolton, England, BL6 5UE.
The registered office for all other subsidiaries of Mortgage
Advice Bureau (Holdings) plc is Capital House, Pride Place, Pride
Park, Derby, DE24 8QR, United Kingdom.
Mortgage Advice Bureau (Holdings) plc holds 100% of the ordinary
share capital of Mortgage Advice Bureau Limited and Talk
Limited.
Mortgage Advice Bureau Limited holds 100% of the ordinary share
capital of Mortgage Advice Bureau (Derby) Limited, Capital Protect
Limited, MABWM Limited and Mortgage Advice Bureau Australia
(Holdings) PTY Limited.
Mortgage Advice Bureau Australia (Holdings) PTY Limited has a
100% equity stake in Mortgage Advice Bureau PTY Limited and a
48.05% equity stake in MAB Broker Services PTY Limited.
On 2 July 2019, Mortgage Advice Bureau Limited acquired 80% of
the ordinary share capital of First Mortgage Direct Limited. First
Mortgage Direct Limited holds 100% of the ordinary share capital of
First Mortgage Limited, Property Law Centre Limited, First
Mortgages Limited, First Mortgage Shop Limited, and Fresh Start
Finance Limited.
On 12 July 2022 Mortgage Advice Bureau Limited acquired 75.4% of
the ordinary share capital of Project Finland Topco Limited.
Project Finland Topco Limited holds 100% of the ordinary share
capital of Project Finland Bidco Limited, which in turn holds 100%
of the ordinary share capital of The Fluent Money Group Limited.
The Fluent Money Group Limited holds 100% of the issued share
capital of Fluent Mortgage Holdings Limited, Fluent Lifetime
Limited, Fluent Money Limited, Fluent Loans Limited and Fluent
Bridging Limited. Fluent Mortgage Holdings Limited owns 100% of the
ordinary share capital of Fluent Mortgages Limited and Fluent
Mortgages Horwich Limited.
On 12 July 2022 Mortgage Advice Bureau Limited increased its
stake in Vita Financial Limited to 75% . Vita Financial Limited
holds 100% of the ordinary share capital of BPR Protect
Limited.
On 3 November 2022 Mortgage Advice Bureau Limited acquired 75%
of the ordinary share capital of Aux Group Limited . Aux Group
Limited holds 100% of the ordinary share capital of Auxilium
Partnership Limited.
Talk Limited holds 100% of the ordinary share capital of
Mortgage Talk Limited, L&P 137 Limited, Mortgage Talk
(Partnership) Limited, Financial Talk Limited, and Survey Talk
Limited.
Mortgage Talk Limited holds 100% of the ordinary share capital
of Loan Talk Limited.
L&P 137 Limited holds 100% of the ordinary share capital of
L&P 134 Limited.
Three of the Group's subsidiaries, First Mortgage Limited
(SC177681), Property Law Centre Limited (SC348791) and Fluent
Mortgages Horwich Limited (14127588) are exempt from the audit of
individual accounts under section 479A of the Companies Act
2006.
There are no restrictions regarding the utilisation of cash or
other resources held by any subsidiary.
18 Business combinations
Project Finland Topco Limited
On 28 March 2022, Mortgage Advice Bureau Limited, a subsidiary
of Mortgage Advice Bureau (Holdings) plc, entered into a sale and
purchase agreement to acquire 75.4% of the issued share capital of
Project Finland Topco Limited ("Fluent"). Fluent is a
technology-enabled telephone advice mortgage and specialist lending
intermediary that has developed an end-to-end digital customer
journey, across Mortgages (first charge mortgages), Secured
Personal Loans (second charge mortgages), Later Life lending and
Bridging Finance. Fluent has formed relationships with a range of
third-party brands, including aggregators and other national lead
sources operating across all of its product areas. The acquisition
of Fluent is transformational for MAB's national lead generation
strategy and should accelerate the Group's growth and broaden
revenue mix and customer proposition. The transaction received
approval from the Financial Conduct Authority ("FCA") on 5 July
2022 and was completed on 12 July 2022.
The remaining 24.6% equity stake is subject to a put and call
option. The call option provides MAB with the opportunity to
acquire the remaining equity after 5.5 years from the date of
acquisition at a valuation based upon a multiple of 2027 Earnings
Before Interest, Tax, Depreciation, and Amortisation ("EBITDA"). As
a result, the group controls Project Finland Topco Limited and its
subsidiary undertakings (together referred to as the "Project
Finland Topco Limited Group"). On acquisition MAB also issued
Growth Shares to former founders and key management of the Fluent
Group which are subject to put and call options. The total
consideration for the above put and call option and the put and
call options over the growth shares is capped at c.GBP118m 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.
The cost of the acquisition comprised cash consideration of
GBP49.8m. On the same date, the non-controlling interests in the
Project Finland Topco Limited group were acquired for consideration
totalling GBP1.5m. The put and call option over the ordinary shares
has been measured at the present value redemption amount at
GBP17.0m. An initial redemption liability valued at GBP6.4m
relating to the put and call option over the ordinary shares has
been classified as accounting consideration under IAS 32 and
recognised as a deduction in parent equity. GBP0.6m has been
included within finance expenses relating to the unwinding of the
redemption liability from the date of acquisition to the end of the
year, giving a value for the redemption liability of GBP7.0m at the
end of the year. The remaining present value redemption amount of
GBP10.6m is treated as remuneration and is accounted for as a
share-based payment arrangement under IFRS 2, with 50% treated as
cash-settled and 50% treated as equity-settled. In accordance with
IFRS 2, GBP0.8m has been included as an expense relating to
share-based payments (see note 31). The put and call option has
been accounted for respectively under IAS 32 and IFRS 2 Share-based
Payments, as the redemption liability element is treated as
consideration under IAS 32, with the balance treated as
remuneration under IFRS 2, because the amount payable on exercise
of the option consists of a
non-contingent element, and an element that is contingent upon
continued employment of the option holders within the Group. The
put and call options over the growth shares have been fair valued
at GBP4.6m. The put and call options over the growth shares are
treated as remuneration and are accounted for as a share-based
payment arrangement under IFRS 2 as exercise is solely contingent
upon continued employment, with 50% treated as cash-settled and 50%
treated as equity-settled. In accordance with IFRS 2, GBP0.3m has
been included as an expense relating to share-based payments (see
note 31).
The results contributed by Project Finland Topco Limited and its
subsidiary undertakings between the completion of the acquisition
date and 31 December 2022 are as follows:
GBP'000
Revenue 21,883
Profit after tax* 1,139
* This excludes GBP1.1m of acquisition option costs recognised
under IFRS2 that arose as part of the acquisition.
If the acquisition had occurred on 1 January 2022, the
consolidated pro-forma revenue and profit before tax for the year
ended 31 December 2022 would have been GBP253.6m and GBP13.9
respectively. These amounts have been calculated using the
subsidiary's results and adjusting them for
-- differences in accounting policies between the Group and the subsidiary,
-- the additional amortisation that would have been charged
assuming the fair value adjustments to intangible assets had
applied from 1 January 2022,
-- the additional IFRS 2 charges relating to the acquisition options costs, and
-- costs linked to Private Equity ownership that would not have been incurred.
The goodwill arising on acquisition of GBP37.0m is reviewed
annually for impairment.
The business combination has been accounted for using the
purchase method of accounting. At 12 July 2022 (" date of
acquisition"), the assets and liabilities of the Project Finland
Topco Limited Group were consolidated at their fair value to the
Group, as set out below:
Fair value
Initial book Fair value at date of
value adjustment acquisition
GBP'000 GBP'000 GBP'000
Intangible fixed assets 437 53,465 53,902
Right of use assets 1,061 - 1,061
Property, plant and equipment 822 - 822
Trade receivables 1,151 - 1,151
Other receivables 390 - 390
Prepayments and accrued income 632 - 632
Cash at bank 3,451 - 3,451
--------------------------------- ---------------- -------------- --------------
Total assets 7,944 53,465 61,409
Loans and other borrowings (23,391) - (23,391)
Trade payables (1,127) - (1,127)
Accruals (3,972) - (3,972)
Lease liabilities (1,016) - (1,016)
Provisions (460) - (460)
Corporation tax (30) - (41)
Deferred tax 751 (13,212) (12,461)
--------------------------------- ---------------- -------------- --------------
Total liabilities (29,245) (13,212) (42,427)
Net assets acquired 18,952
--------------------------------- ---------------- -------------- --------------
Non-controlling interests (4,657)
Goodwill 36,974
--------------------------------- ---------------- -------------- --------------
Total Consideration 51,269
Satisfied by: GBP'000
Cash 51,269
--------------------------------- ---------------- -------------- --------------
51,269
--------------------------------- ---------------- -------------- --------------
The goodwill is attributable to the value of the acquired
workforce, deferred tax and economic goodwill which includes the
opportunity to grow both new and existing introducer and lender
relationships.
After the acquisition, the subsidiary company Mortgage Advice
Bureau Limited repaid loan notes and accrued interest on those loan
notes totalling GBP21.9m.
The acquisition was financed by: GBP'000
------------------------------------------------------ ---------
Issue of share capital 38,423
Loans and other borrowings 25,300
Cash held within the Group 9,437
------------------------------------------------------ ---------
73,160
------------------------------------------------------ ---------
Cash used in:
Acquisition of 75.4% of the issued share capital
of Project Finland Topco Limited 49,765
Acquisition of non-controlling interests in Fluent
Mortgage Holdings Limited, Fluent Lifetime Limited
and Fluent Bridging Limited 1,504
------------------------------------------------------ ---------
51,269
Settlement of loan notes and accrued interest 21,891
------------------------------------------------------ ---------
73,160
------------------------------------------------------ ---------
Cashflow on Acquisition of Subsidiary undertaking: GBP'000
----------------------------------------------------- ---------
Cash consideration 51,269
Cash at bank acquired (3,451)
----------------------------------------------------- ---------
47,818
----------------------------------------------------- ---------
AUX Group Limited
On 3 November 2022, Mortgage Advice Bureau Limited, a subsidiary
of Mortgage Advice Bureau (Holdings) plc, acquired 75% of Aux Group
Limited and its subsidiary undertaking (together referred to as the
"Aux Group"). Aux Group is a specialist protection service provider
servicing directly authorised firms and the acquisition gives the
Group the platform to extend its expertise in protection across
directly authorised firms.
The remaining 25% equity stake is subject to a put and call
option. The call option provides Mortgage Advice Bureau Limited
with the opportunity to acquire the remaining equity within 7
years, but not before the accounts for the year ended 31 December
2026 are filed.
The cost of the acquisition comprised cash consideration of
GBP2,106,515. The put and call option over the ordinary shares has
been valued at the present value redemption amount at GBP337,144. A
redemption liability valued at GBP168,572 relating to the put and
call option over the ordinary shares has been classified as
accounting consideration under IAS 32 and recognised as a deduction
in parent equity. The remaining present value redemption amount of
GBP168,572 is treated as remuneration and is accounted for as a
cash-settled share-based payment arrangement under IFRS 2. In
accordance with IFRS 2, GBP7,497 has been included as an expense
relating to share-based payments (see note 31). The put and call
option has been accounted for respectively under IAS 32 and IFRS 2
Share-based Payments, as the redemption liability element is
treated as consideration under IAS 32, with the balance treated as
remuneration under IFRS 2, because the amount payable on exercise
of the option consists of a non-contingent element, and an element
that is contingent upon continued employment of the option holder
within the Group.
The results contributed by Aux Group Limited and its subsidiary
undertakings between the acquisition date and the 31 December 2022
are as follows:
GBP'000
Revenue 210
Profit after tax 118
* This excludes GBP0.1m of acquisition option costs recognised
under IFRS2 that arose as part of the acquisition
If the acquisition had occurred on 1 January 2022, the
consolidated pro-forma revenue and profit before tax for the year
ended 31 December 2022 would have been GBP231.5m and GBP17.6m
respectively. These amounts have been calculated using the
subsidiary's results and adjusting them for
-- differences in accounting policies between the Group and the subsidiary,
-- the additional amortisation that would have been charged
assuming the fair value adjustments to intangible assets had
applied from 1 January 2022, and
-- the additional IFRS 2 charges relating to the acquisition options costs.
The goodwill arising on acquisition of GBP1.0m is reviewed
annually for impairment. The goodwill is attributable to the value
of the acquired workforce and deferred tax.
The business combination has been accounted for using the
purchase method of accounting. At 3 November 2022 ("date of
acquisition"), the assets and liabilities of the Aux Group were
consolidated at their fair value to the Group, as set out
below:
Fair value
Initial book Fair value at date of
value adjustment acquisition
GBP'000 GBP'000 GBP'000
Intangible fixed assets - 987 987
Property, plant and equipment 2 - 2
Other receivables 40 - 40
Prepayments and accrued income 45 - 45
Cash at bank 850 - 850
--------------------------------- ---------------- -------------- --------------
Total assets 937 987 1,924
Accruals (21) - (21)
Clawback provision (143) - (143)
Corporation tax (84) - (84)
Deferred tax - (237) (237)
--------------------------------- ---------------- -------------- --------------
Total liabilities (248) (237) (485)
Net assets acquired 1,439
--------------------------------- ---------------- -------------- --------------
Non-controlling interests (360)
Goodwill 1,027
--------------------------------- ---------------- -------------- --------------
Total Consideration 2,106
Satisfied by: GBP'000
Cash 2,106
--------------------------------- ---------------- -------------- --------------
2,106
--------------------------------- ---------------- -------------- --------------
Cashflow on Acquisition of Subsidiary undertaking: GBP'000
----------------------------------------------------- ---------
Cash consideration 2,106
Cash at bank acquired (850)
----------------------------------------------------- ---------
1,256
----------------------------------------------------- ---------
Vita Financial Limited
On 12 July 2022, Mortgage Advice Bureau Limited, a subsidiary of
Mortgage Advice Bureau (Holdings) plc, acquired 26% of Vita
Financial Limited ("Vita") for a consideration of GBP460,306. 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, the acquisition
will enable the Group to extend Vita's proposition into a wider
addressable market to fully leverage its expertise. Mortgage Advice
Bureau Limited had previously held 49% of share capital of Vita
Financial Limited, of which the fair value at the date of
acquisition was GBP867,500.
The results contributed by Vita Financial Limited between the
acquisition date and the 31 December 2022 are as follows:
GBP'000
Revenue 1,114
Profit after tax 39
If the acquisition had occurred on 1 January 2022, the
consolidated pro-forma revenue and profit before tax for the year
ended 31 December 2022 would have been GBP230.8m and GBP17.4m
respectively. These amounts have been calculated using the
subsidiary's results and adjusting them for
-- differences in accounting policies between the Group and the subsidiary,
-- the additional amortisation that would have been charged
assuming the fair value adjustments to intangible assets had
applied from 1 January 2022, and
-- Intercompany eliminations arising on consolidation.
The goodwill arising on acquisition of GBP0.7m is reviewed
annually for impairment. The goodwill is attributable to the value
of the acquired workforce and deferred tax.
The business combination has been accounted for using the
purchase method of accounting. At 12 July 2022 ("date of
acquisition"), the assets and liabilities of Vita Financial Limited
were consolidated at their fair value, as set out below:
Fair value
Initial book Fair value at date of
value adjustment acquisition
GBP'000 GBP'000 GBP'000
Intangible fixed assets - 479 479
Property, plant and equipment 36 - 36
Trade receivables 453 - 453
Cash at bank 377 - 377
-------------------------------- ---------------- -------------- --------------
Total assets 866 479 1,345
Other payables (72) - (72)
Corporation tax (21) - (21)
Clawback provision (331) - (331)
Deferred tax (6) (117) (123)
-------------------------------- ---------------- -------------- --------------
Total liabilities (430) (117) (547)
Net assets acquired 798
-------------------------------- ---------------- -------------- --------------
Non-controlling interests (199)
Fair value of previously held
equity interest (868)
Goodwill 729
-------------------------------- ---------------- -------------- --------------
Total Consideration 460
Satisfied by: GBP'000
Cash 460
460
---------------- ---------
Cashflow on Acquisition of Subsidiary undertaking: GBP'000
----------------------------------------------------- ---------
Cash consideration 460
Cash at bank acquired (377)
----------------------------------------------------- ---------
83
----------------------------------------------------- ---------
Reconciliation of net cash flow on acquisition of
subsidiaries
GBP'000
------------------------------------------ ---------
Net cashflow on acquisition of Fluent 47,818
Net cashflow on acquisition of Auxilium 1,256
Net cashflow on acquisition of Vita 83
------------------------------------------ ---------
49,157
------------------------------------------ ---------
19 Trade and other receivables
2022 2021
GBP'000 GBP'000
----------------------------------------- --------- ---------
Trade receivables 3,029 1,741
Less provision for impairment of trade
receivables (476) (374)
----------------------------------------- --------- ---------
Trade receivables - net 2,553 1,367
Receivables from related parties 29 -
Other receivables 962 448
Loans to related parties 559 1,398
Less provision for impairment of loans
to related parties (2) (2)
Less amounts written off loans to
related parties - (628)
----------------------------------------- --------- ---------
Total non-derivative financial assets
other than cash and cash equivalents
classified at amortised costs 4,101 2,583
Prepayments and accrued income 7,018 4,856
Corporation tax - -
----------------------------------------- --------- ---------
Total trade and other receivables 11,119 7,439
----------------------------------------- --------- ---------
Less: non-current portion - Loans
to related parties (305) (541)
Less: non-current - Trade receivables (526) (557)
----------------------------------------- --------- ---------
Current portion 10,288 6,341
----------------------------------------- --------- ---------
2022 2021
Reconciliation of movement in trade receivables GBP'000 GBP'000
to cash flow
-------------------------------------------------- --------- ---------
Movement per trade receivables 3,679 1,030
Corporation tax - 499
Accrued interest movement (6) 16
Accrued interest write off - (15)
Accrual of deferred consideration for
Yourkeys disposal 55 (55)
Acquired trade and other receivables (2,710) -
Intercompany arising on acquisitions 299 -
Total movement per cash flow 1,317 1,475
-------------------------------------------------- --------- ---------
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
Included within trade receivables are operational business
development loans to Appointed Representatives. The non-current
trade receivables balance is comprised of loans to Appointed
Representatives.
Also included in trade receivables are amounts due from
Appointed Representatives relating to commissions that are
refundable to the Group when policy lapses or other reclaims exceed
new business. As these balances have no credit terms, the Board of
Directors consider these to be past due if they are not received
within seven days. In the management of these balances, the
Directors can recover them from subsequent new business entered
into with the Appointed Representative or utilise payables that are
owed to the same counterparties and included within payables as the
Group has the legally enforceable right of set off in such
circumstances. These payables are considered sufficient by the
Directors to recover receivable balances should they default, and,
accordingly, credit risk in this respect is minimal.
In light of the above, the Directors do not consider that
disclosure of an aging analysis of trade and other receivables
would provide useful additional information. Further information on
the credit quality of financial assets is set out in note 23.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within cost of sales in the consolidated
statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision. As at 31
December 2022 the lifetime expected loss provision for trade
receivables is GBP0.5m (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.
A summary of the movement in the provision for the impairment of
receivables is as follows:
2022 2021
GBP'000 GBP'000
------------------------------------------- --------- ---------
As at 1 January 374 379
New provisions for impairment losses 106 4
Increases in existing provisions for
impairment losses - 5
Impairment provisions no longer required (4) (14)
------------------------------------------- --------- ---------
As at 31 December 476 374
------------------------------------------- --------- ---------
A summary of the movement in the provision for the impairment of
loans to related parties is as follows:
2022 2021
GBP'000 GBP'000
------------------------------------------- --------- ---------
As at 1 January 2 614
Increases in existing provisions for - -
impairment losses
Impairment provisions no longer required - (612)
------------------------------------------- --------- ---------
As at 31 December 2 2
------------------------------------------- --------- ---------
During the prior year, a principal loan balance of GBP0.6m was
written off in respect of Eagle and Lion Limited which represents
the principal loan balance write-off and release of GBP0.6m of
expected credit losses already recognised. The movement in the
impairment allowance for receivables for loans to associates has
been included in impairment of loans to related parties in the
consolidated statement of comprehensive income in year ended 31
December 2021. As at 31 December 2022 the lifetime expected loss
provision for loans to associates is GBP0.0m (2021: GBP0.0m), with
12 month expected credit losses recognised for remaining
associates.
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivables mentioned above less
collateral held as security. Details of security held are given in
note 23.
20 Cash and cash equivalents
2022 2021
GBP'000 GBP'000
---------------------------------------------- ---------- --- ----------
Unrestricted cash and bank balances 7,219 17,548
Bank balances held in relation to retained
commissions 18,243 16,863
---------------------------------------------- ---------- --- ----------
Cash and cash equivalents 25,462 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 commissions.
Operationally the Group does not treat these balances as available
funds. An equal and opposite liability is shown within Trade and
other payables (note 21).
21 Trade and other payables
2022 2021
GBP'000 GBP'000
------------------------------------- ---------- -----------------
Appointed Representatives retained
commission 18,243 16,863
Other trade payables 8,658 6,255
------------------------------------- ---------- -----------------
Trade payables 26,901 23,118
Social security and other taxes 2,190 1,305
Other payables 208 70
Redemption liability (see note 7,186 -
18)
Deferred consideration (see note
15) - 2,212
Accruals 7,350 5,220
------------------------------------- ---------- -----------------
43,835 31,925
2022 2021
GBP'000 GBP'000
Restated*
------------------------------------- ---------- --- ------------
Current 34,397 29,342
Non-current 9,438 2,583
------------------------------------- ---------- -----------------
43,835 31,925
------------------------------------- ---------- -----------------
* In prior year, all trade and other payables were incorrectly
presented as current. This resulted in an overstatement of current
liabilities and an understatement of non-current liabilities by
GBP2.6m as at 31 December 2021 and by GBP1.2m as at 31 December
2020.
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, with the Group making
its own provision for its share of any such repayment as set out in
note 24. 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 20.
Redemption liabilities of GBP7.0m and GBP0.2m in respect of the
put and call options relating to the Fluent and Auxilium
acquisitions respectively, as set out in note 18, have been
included in other payables as at 31 December 2022.
As at 31 December 2022 and 31 December 2021, the carrying value
of trade and other payables classified as financial liabilities
measured at amortised cost approximates fair value.
2022 2021
Reconciliation of movement in trade payables GBP'000 GBP'000
to cash flow
--------------------------------------------------- --------- -----------
Movement per trade payables 11,909 8,263
Deferred consideration on associates 1,327 (2,210)
Fair value measurement of deferred consideration 884 -
Share-based payment accruals (656) -
Redemption liability (7,186) -
Acquired trade and other payables (5,192) -
Intercompany arising on acquisition (253) -
Total movement per cash flow 833 6,053
--------------------------------------------------- --------- -----------
22 Loans and borrowings
2022 2021
GBP'000 GBP'000
---------------------------------------- ---------- ---------
Bank loans 23,407 -
---------------------------------------- ---------- ---------
Total loans and borrowings 23,407 -
Less: non-current portion - Bank loans (16,598) -
Current portion 6,809 -
---------------------------------------- ---------- ---------
A summary of the maturity of loans and borrowings is as
follows:
2022 2021
Bank loans GBP'000 GBP'000
---------------------- --------- ---------
Payable in 1 year 6,809 -
Payable in 1-2 years 3,750 -
Payable in 2-5 years 12,848 -
Total bank loans 23,407 -
---------------------- --------- ---------
In connection with the acquisition of Fluent, the Group entered
into an agreement on 28 March 2022 with NatWest, in respect of a
new term loan for GBP20m and a revolving credit facility for GBP15m
(the "Facilities Agreement"), in order to part fund the cash
consideration payable in relation to the acquisition. It is MAB's
intention to repay the drawn down proportion of the revolving
element of this debt facility as soon as practicable. In respect of
the new facilities, the Group has given security to NatWest in the
form of fixed and floating charges over the assets of Mortgage
Advice Bureau Limited, Mortgage Advice Bureau (Derby) Limited,
Mortgage Advice Bureau (Holdings) plc, First Mortgage Direct
Limited, First Mortgage Limited, Project Finland Bidco Limited,
Fluent Money Limited and Fluent Mortgages Limited.
Loan covenants
Under the terms of the Facilities Agreement , the Group is
required to comply with the following financial covenants:
-- Interest cover shall not be less than 5:1
-- Adjusted leverage shall not exceed 2:1
The Group has complied with these covenants since the Facilities
Agreement was entered into.
23 Financial instruments - risk management
The Group is exposed through its operations to the following
financial risks:
-- Credit risk
-- Liquidity risk
-- Interest rate risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
Principal financial instruments
-- Trade and other receivables
-- Investments in non-listed equity shares
-- Derivative financial instruments
-- Cash and cash equivalents
-- Trade and other payables
A summary of financial instruments held by category is provided
below:
Financial assets 2022 2021
GBP'000 GBP'000
------------------------------------------- --------- ---------
Cash and cash equivalents 25,462 34,411
Investments in non-listed equity shares
(FVTPL) - 2,783
Trade and other receivables (amortised
cost) 4,101 2,583
Derivative financial instruments (FVTPL) 320 362
Total financial assets 29,883 40,139
------------------------------------------- --------- ---------
Financial liabilities 2022 2021
GBP'000 GBP'000
Restated*
----------------------------------- --------- ------------
Trade and other payables 29,299 23,189
Loans and borrowings 23,407 -
Deferred consideration - 2,212
Accruals 7,350 5,220
Redemption liability 7,186 -
Lease liabilities 3,947 2,596
Derivative financial instruments 10 34
Total financial liabilities 71,199 33,251
----------------------------------- --------- ------------
* The disclosure of financial liabilities incorrectly included
GBP1.3m of social security and other taxes, which are not financial
instruments. The disclosure is therefore restated to make this
correction. The correction has no other impact on these financial
statements.
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies, and designs
and operates processes that ensure the effective implementation of
the objectives and policies to the Group's finance function. The
Board sets guidelines to the finance team and monitors adherence to
its guidelines on a monthly basis.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below.
Credit risk
Credit risk is the risk of financial loss to the Group if a
trading partner or counterparty to a financial instrument fails to
meet its contractual obligations. The Group is mainly exposed to
credit risk from loans to its trading partners. It is Group policy
to assess the credit risk of trading partners before advancing
loans or other credit facilities. Assessment of credit risk
utilises external credit rating agencies. Personal guarantees are
generally obtained from the Directors of its trading partners.
Quantitative disclosures of the credit risk exposure in relation
to financial assets are set out below. Further disclosures
regarding trade and other receivables are given in note 19.
Financial assets - maximum exposure 2022 2021
GBP'000 GBP'000
Restated*
------------------------------------------ --------- ------------
Cash and cash equivalents 25,462 34,411
Trade and other receivables (Amortised
cost) 4,101 2,583
Derivative financial instruments (FVTPL) 320 362
------------------------------------------ --------- ------------
Total financial assets 29,883 37,356
------------------------------------------ --------- ------------
* The disclosure of financial assets with exposure to credit
risk incorrectly included investment in non-listed equity shares of
GBP2.8m however these do not have credit risk exposure. The
disclosure is therefore restated to make this correction. The
correction has no other impact on these financial statements.
The carrying amounts stated above represent the Group's maximum
exposure to credit risk for trade and other receivables. An element
of this risk is mitigated by collateral held by the Group for
amounts due to them.
Trade receivables consist of a large number of unrelated trading
partners and therefore credit risk is not concentrated. Due to the
large volume of trading partners the Group does not consider that
there is any significant credit risk as a result of the impact of
external market factors on their trading partners. Additionally,
within trade payables are amounts due to the same trading partners
that are included in trade receivables; this collateral of
GBP716,680 (2021: GBP822,382) reduces the credit risk.
The Group's credit risk on cash and cash equivalents is limited
because the Group places funds on deposit with National Westminster
Bank plc (rated A+), The Royal Bank of Scotland plc (rated A+),
Barclays plc (rated A), HSBC Bank plc (rated AA-) and Bank of
Scotland plc (rated A+).
Interest rate risks
The Group's interest rate risk arises from cash on deposit. The
Group aims to maximise its return on cash on deposit whilst
ensuring that cash is available to meet liabilities as they fall
due. Current market deposit interest rates are minimal and
therefore any fall in these rates is unlikely to have a significant
impact on the results of the Group.
Foreign exchange risk
As the Group does not operate outside of the United Kingdom and
has only one investment outside the UK, it is not exposed to any
material foreign exchange risk.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The Group's trade and other payables are repayable
within one year from the reporting date and the contractual
undiscounted cash flow analysis for the Group's trade and other
payables is the same as their carrying value. The contractual
maturities of financial liabilities are as follows:
31 December 2022 (GBP000) Within 1 - 2 -5 After Total
1 year 2 years years 5 years
------------------------------------ --------- ---------- -------- ---------- --------
Trade and other payables 8,866 - - - 8,866
Loans and borrowings 6,809 3,750 12,848 - 23,407
Accruals 5,644 168 1,538 - 7,350
Redemption liability - - 169 7,017 7,186
Lease liabilities 1,048 994 1,857 345 4,244
Derivative financial instruments - 10 - - 10
Appointed representative retained
commission 17,697 30 440 76 18,243
------------------------------------- --------- ---------- -------- ---------- --------
Total 40,064 4,952 16,852 7,438 69,306
------------------------------------- --------- ---------- -------- ---------- --------
31 December 2021 (GBP000) Within 1 - 2 -5 After Total
1 year 2 years years 5 years
(Restated*)
--------------------------------------- --------- ---------- -------- ---------- --------
Trade and other payables 6,325 - - - 6,325
Deferred consideration 1,483 729 - - 2,212
Accruals 3,942 183 1,095 - 5,220
Lease liabilities 449 454 1,228 665 2,796
Derivative financial instruments - 34 - - 34
Appointed representative retained
commission 16,287 28 478 70 16,863
--------------------------------------- --------- ---------- -------- ---------- --------
Total 28,486 1,428 2,801 735 33,450
--------------------------------------- --------- ---------- -------- ---------- --------
* The disclosure incorrectly included GBP1.3m of social security
and other taxes, which are not financial instruments, and Appointed
Representatives retained commission has been included in the
maturity analysis as at 31 December 2022, with comparatives
restated for 31 December 2021 as it was incorrectly excluded. The
disclosure is therefore restated to make this correction. The
correction has no other impact on these financial statements.
Appointed representative retained commission does not have a
definite maturity date and it is not possible to accurately
estimate the repayment profile, other than when Appointed
Representative firms are in the initial term of their contract. The
Directors consider that the disclosed maturity profile is the most
appropriate.
The Board receives annual 12-month cash flow projections based
on working capital modelling as well as information regarding cash
balances monthly. At the end of the financial year, these
projections indicated that the Group expected to have sufficient
liquid resources to meet its obligations under all reasonably
expected circumstances. Additionally, the Group has financial
resource requirements set by its regulator, the Financial Conduct
Authority. The Board has set a policy to ensure that adequate
capital is maintained to ensure that these externally set financial
resource requirements are exceeded at all times. Quarterly reports
are made to the Financial Conduct Authority and submission is
authorised by the Chief Financial Officer, at which time capital
adequacy is re-assessed.
Capital management
The Group monitors its capital which consists of all components
of equity (i.e. share capital, share premium, capital redemption
reserve, share option reserve and retained earnings).
The Group's objectives when maintaining capital are:
-- To safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders,
-- To ensure that capital is maintained at all times to ensure
that financial resource requirements set by its regulator, the
Financial Conduct Authority, are exceeded at all times, and
-- To ensure the Group has the cash available to develop the
services provided by the Group to provide an adequate return to
shareholders.
24 Provisions
Clawback provision 2022 2021
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
As at 1 January 5,716 4,576
Acquisition of subsidiary 935 -
Charged to the statement of comprehensive
income 1,387 1,140
---------- ----------
As at 31 December 8,038 5,716
---------- ----------
The provision relates to refund liabilities for the estimated
cost of repaying the Group's share of commission income received
upfront on protection policies that may lapse in the four years
following issue. Under the Group's revenue contracts with
protection providers, if the policy is cancelled by the customer
within a four-year period after the inception of the policy, then a
proportion of the commission received upfront has to be repaid to
the protection provider. Provisions are held in the financial
statements of nine of the Group's subsidiaries: Mortgage Advice
Bureau Limited, Mortgage Advice Bureau (Derby) Limited, First
Mortgage Direct Limited, First Mortgage Limited, Fluent Mortgages
Limited, Fluent Mortgages Horwich Limited, Vita Financial Limited,
BPR Protect Limited and Auxilium Partnership Limited. The exact
timing of any future repayments (termed 'clawbacks') within the
four-year period is uncertain and the provision was based on the
Directors' best estimate, using industry data where available, of
the probability of clawbacks to be made.
25 Deferred tax
Deferred tax is calculated in full on temporary differences
using tax rates of 19% and 25% depending on when the temporary
differences are expected to unwind (2021: 19% and 25%).
The movement in deferred tax is shown below:
2022 2021
GBP'000 GBP'000
----------
Net deferred tax asset - opening
balance 1,114 179
Acquisition of subsidiary (12,820) -
Recognised in the statement of
comprehensive income (389) 286
Deferred tax movement recognised
in equity (767) 649
----------
Net deferred tax (liability)/asset
- closing balance (12,862) 1,114
----------
The deferred tax balance is made up as follows:
2022 2021
GBP'000 GBP'000
Fixed asset differences (14,659) (686)
Other timing differences 312 108
Tax losses 659 -
Share-based payments 826 1,692
Net deferred tax (liability)/asset (12,862) 1,114
Reflected in the statement of 2022 2021
financial position as follows: GBP'000 GBP'000
Deferred tax liability (14,659) (757)
Deferred tax asset 1,797 1,871
Net deferred tax (liability)/asset (12,862) 1,114
Deferred tax liabilities have arisen due to capital allowances
which have been received ahead of the depreciation charged in the
accounts and the recognition of the fair value of acquired assets
in business combinations.
26 Share capital
Issued and fully paid 2022 2021
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 GBP40.0m 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 GBP38.4m after deduction of GBP1.6m of costs directly
associated with the equity placing. In addition, during the year
16,851 ordinary shares of 0.1p each were issued following partial
exercise of options issued in July 2019 at no premium. As at 31
December 2022, there were 57,030,995 ordinary shares of 0.1p in
issue (2020: 53,204,620). See also note 31.
27 Reserves
The Group's policy is to maintain an appropriate capital base
and comply with its externally imposed capital requirements whilst
providing maximum shareholder value.
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share premium Amount subscribed for share capital
in excess of nominal value.
Capital redemption The capital redemption reserve represents
reserve the cancellation of part of the original
share capital premium of the company
at par value of any shares repurchased.
Share option reserve The fair value of equity instruments
granted by the Company in respect
of share-based payment transactions
and deferred tax recognised in equity.
Retained earnings All other net gains and losses and
transactions with owners (e.g. dividends)
not recognised elsewhere.
There is no restriction on the distribution of retained
earnings.
28 Retirement benefits
The Group operates defined contribution pension schemes for the
benefit of its employees and also makes contributions to a
self-invested personal pension ("SIPP"). The assets of the schemes
and the SIPP are held separately from those of the Group in
independently administered funds. The pension cost charge
represents contributions payable by the Group to the SIPP and
amounted to GBP1,373,209 (2021: GBP1,454,025). There were
contributions payable to the SIPP as at 31 December 2022 of
GBP238,987 (2021: GBP130,792).
29 Related party transactions
The following details provide the total amount of transactions
that have been entered into with related parties during the twelve
months ended 31 December 2022 and 2021, as well as balances with
related parties as at 31 December 2022 and 31 December 2021.
During the year the Group paid commission of GBP926,956 (2021:
GBP906,073) to Buildstore Limited, an associated company. At 31
December 2022 there was a balance of GBP13,559 (2021: GBP10,443) of
retained commission to cover future lapses.
During the year the Group received introducer commission from
Sort Limited, a subsidiary of an associated company of GBP1,491,978
(2021: GBP1,159,360). At 31 December 2022, there was a net loan
outstanding from Sort Group Limited of GBP218,369 (2021:
GBP218,369).
During the year the Group paid commission of GBP4,549,994 (2021:
GBP5,001,507) to Clear Mortgage Solutions Limited, an associated
company. At 31 December 2022 there was a balance of GBP652,466
(2021: GBP542,290) of retained commission to cover future
lapses.
During the year the Group paid commission of GBP2,948,580 (2021:
GBPnil) to Evolve FS Ltd, an associated company. At 31 December
2022 there was a balance of GBP75,766 (2021: GBPnil) of retained
commission to cover future lapses.
During the year the Group paid commission of GBP4,459 (2021:
GBPnil) to Heron Financial Limited, an associated company. At 31
December 2022 there was a balance of GBP19 (2021: GBPnil) of
retained commission to cover future lapses.
Vita Financial Limited was an associated company of the Group
until it became a subsidiary on 12 July 2022, after which it was no
longer a related party. During the period in which it was a related
party, the Group paid commission of GBP716,861 (2021: GBP1,309,270)
to the company. There was a balance at 31 December 2021 of
GBP171,539 of retained commission to cover future lapses.
BPR Protect Limited was a subsidiary of an associated company of
the Group until Vita Financial Limited became a subsidiary on 12
July 2022, after which it was no longer a related party. During the
period in which it was a related party, the Group paid commission
of GBP222,509 (2021: GBP521,314) to the company. There was a
balance at 31 December 2021 of GBP82,409 of retained commission to
cover future lapses.
During the year the Group paid commission of GBP1,791,391 (2021:
GBP1,634,833) to The Mortgage Broker Limited, an associated
company. At 31 December 2022 there was a balance of GBP66,858
(2021: GBP66,785) of retained commission to cover future lapses. At
31 December 2022, there was a loan outstanding from The Mortgage
Broker Limited of GBP19,556 (2021: GBPnil).
During the year the Group paid commission of GBP4,480,696 (2021:
GBP3,990,911) to Meridian Holdings Group Ltd, an associated
company. At 31 December 2022 there was a balance of GBP546,203
(2021: GBP545,605) of retained commission to cover future lapses.
At 31 December 2022, there was a loan outstanding from Meridian
Holdings Group Ltd of GBP 319,414 (2021: GBP550,069).
During the year the Group paid commission of GBP2,826,184 (2021:
GBP1,352,455) to M & R FM Ltd, an associated company. At 31
December 2022 there was a balance of GBP107,094 (2021: GBP34,598)
of retained commission to cover future lapses. M & R FM Ltd
purchased leads from First Mortgage at a total of GBP39,869 (2021:
GBP18,606).
During the year the Group received dividends from associated
companies as follows:
2022 2021
GBP'000 GBP'000
CO2 Commercial Limited 348 225
Evolve FS Ltd 245 -
Sort Group Limited 130 -
M & R FM Ltd 187 -
Lifetime FS Limited - 50
Total dividends received 910 275
30 Ultimate controlling party
There is no ultimate controlling party.
31 Share-based payments
Mortgage Advice Bureau Executive Share Option Plan
The Group operates two equity-settled share-based remuneration
schemes for Executive Directors and certain senior management, one
being an approved scheme, the other unapproved, but with similar
terms. Half of the options are subject to a total shareholder
return (TSR) performance condition and the remaining half are
subject to an earnings per share (EPS) performance condition. The
outstanding options in the unapproved scheme vest and are
exercisable as follows:
For options granted during 2018 and outstanding as at 1 January
2022:
-- 100% based on performance to 31 March 2021, exercisable
between 11 April 2021 and 9 April 2026.
For options granted during 2019 and outstanding as at 1 January
2022:
-- 100% based on performance to 31 March 2022, exercisable between 1 July 2022 and 1 July 2027.
For options granted during 2020 and outstanding as at 1 January
2022:
-- 100% based on performance to 31 March 2023, exercisable
between 22 April 2023 and 21 July 2028.
For options granted during 2021 and outstanding as at 1 January
2022:
-- 100% based on performance to 31 March 2024, exercisable
between 1 April 2024 and 31 March 2029.
For options granted during the year:
-- 100% based on performance to 31 March 2025, exercisable between 6 April 2025 and 6 June 2030.
The number and weighted average exercise prices (WAEP) of, and
movements in, share options during the year for the Mortgage Advice
Bureau Executive Share Option Plan:
2022 2022 2021 2021
WAEP Number WAEP Number
GBP GBP
------- ---------- -----------
Outstanding as at
1 January 0.001 460,380 0.001 504,462
Granted during the
year 0.001 154,850 0.001 115,502
Exercised 0.001 (16,851) 0.001 (51,433)
Lapsed * - (22,376) - (108,151)
---------- -----------
Outstanding as at
31 December 0.001 576,003 0.001 460,380
----------
*Due to not fully vesting, retirement or leaving the Group.
As at 31 December 2022, 576,003 options over ordinary shares of
0.1 pence each in the Company were exercisable with a weighted
average exercise price of GBP0.001.
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") with a
weighted average fair value of GBP7.07 per option. Exercise of the
Options is subject to the service conditions and achievement of
performance conditions based on total shareholder return and
earnings per share criteria. Subject to achievement of the
performance conditions, the Options will be exercisable 3 years
from the date of grant. The exercise price for the Options is 0.1
pence, being the nominal cost of the Ordinary Shares.
Options exercised on 14 and 15 July 2022 resulted in
respectively 12,357 and 1,498 ordinary shares being issued at an
exercise price of 0.1p per share. The price of the ordinary shares
at the time of exercise was respectively GBP8.64 and GBP8.72 per
share.
Options exercised on 30 September 2022 resulted in 1,498
ordinary shares being issued at an exercise price of 0.1p per
share. The price of the ordinary shares at the time of exercise was
GBP6.22 per share.
Options exercised on 8 November 2022 resulted in 1,498 ordinary
shares being issued at an exercise price of 0.1p per share. The
price of the ordinary shares at the time of exercise was GBP7.00
per share.
For the Options outstanding under the Mortgage Advice Bureau
Executive Share Option Plan as at 31 December 2022, the weighted
average remaining contractual life is 5.9 years (2021: 6.3 years).
This is now calculated on the basis of the final date that the
options can be exercised, whereas previously it was disclosed on
the basis of the first date the options could be exercised, as it
is currently the more relevant figure.
The following information is relevant in the determination of
the fair value of options granted during the year under the
equity-settled share-based remuneration scheme operated by the
Group.
2022 2021
Equity-settled
Option pricing model - EPS Black-Scholes Black-Scholes
Option pricing model - TSR Stochastic Stochastic
Exercise price GBP0.001 GBP0.001
Expected volatility 41.66% 39.41%
Expected dividend yield 2.70% 2.23%
Risk free interest rate 1.78% 0.18%
Expected volatility is a measure of an amount by which the share
price is expected to fluctuate during a period. Dividends paid on
shares reduce the fair value of an award as a participant does not
receive the dividend income on these shares.
The Options offer participants the opportunity to benefit from
increasing per share value without risking the current per share
price. The risk-free rate used is the rate of interest obtainable
from UK government securities as at the date of grant over the
expected term.
The options granted this year have vesting periods of 2 years
and 10 months from the date of grant and the calculation of the
share-based payment is based on these vesting periods.
MAB AR Option Plan
The Group operates an equity-settled share plan, the AR Option
Plan, to reward selected ARs of the Group. The AR Option Plan
provides for options which have a nominal exercise price of 0.01
pence per share (or, for any individual AR, not less than GBP1 on
each occasion of exercise) to acquire Ordinary Shares subject to
performance conditions. Certain criteria must be met in order for
ARs to be eligible, including using the Mortgage Advice Bureau
brand and being party to an AR Agreement which provides for an
initial contract term of at least five years at the date of grant.
The AR Options will normally become exercisable following the fifth
anniversary of grant subject to the satisfaction of performance
conditions based on financial and other targets, including quality
of consumer outcomes, compliance standards and continued use of the
Mortgage Advice Bureau brand.
There were no options outstanding under the AR Option Plan at 1
January 2022 and there have been no grants of options during the
year.
Share-based remuneration expense
The share-based remuneration costs for the year are made up as
follows:
2022 2021
GBP000 GBP000
Charge for equity settled schemes 763 667
National Insurance on equity settled
schemes 324 393
Share incentive plan costs 147 107
Free shares awarded to employees 186 222
Acquisition option costs 1,563 543
Total costs 2,983 1,932
Options exercised during the period resulted in a transfer from
the Share option reserve to Retained earnings of GBP 71,574 (2021:
GBP143,000) reflected in the consolidated statement of changes in
equity.
32 Non-controlling interests (NCI)
Accounting policy choice for non-controlling interests
The Group recognises non-controlling interests in an acquired
entity either at fair value or at the non-controlling interest's
proportionate share of the acquired entity's net identifiable
assets. This decision is made on an acquisition-by-acquisition
basis. For the non-controlling interests in First Mortgage Direct
Limited, Project Finland Topco Limited, Vita Financial Limited and
Aux Group Limited, the Group elected to recognise the
non-controlling interests at its proportionate share of the
acquired net identifiable assets. See note 1 for the Group's
accounting policies for business combinations.
Set out below is summarised financial information for each
subsidiary that has a non-controlling interest that is material to
the Group. The amounts disclosed for each subsidiary are their
consolidated financial information before inter-company
eliminations with Mortgage Advice Bureau Limited.
2022 Project
Summarised balance sheet First Finland
Mortgage Topco Limited
Direct ("Fluent")
Limited 2022 Total
2022 GBP'000 2022
GBP'000 GBP'000
-----------
Current assets 12,443 3,721 16,164
Current liabilities (2,788) (26,950) (29,738)
Current net assets/(liabilities) 9,655 (23,229) (13,574)
Non-current assets 3,213 19,094 22,307
Non-current liabilities (4,263) (1,209) (5,472)
Non-current net assets/(liabilities) (1,050) 17,885 16,835
Net assets/(liabilities) 8,605 (5,344) 3,261
Accumulated NCI 2,297 4,654 6,951
Summarised statement of comprehensive GBP'000 GBP'000 GBP'000
income
Revenue 18,220 21,883 40,103
Profit/(loss) for the period and
total comprehensive income 2,534 (8) 2,526
Profit/(loss) allocated to NCI 507 (2) 505
Dividends paid to NCI 415 - 415
-----------
Summarised cash flows GBP'000 GBP'000 GBP'000
-----------
Cash flows from operating activities 6,201 1,261 7,462
Cash flows from investing activities (730) (1,319) (2,049)
Cash flows from financing activities (1,659) (1,725) (3,384)
Net increase in cash & cash equivalents 3,811 (1,783) 2,028
-----------
2021 First Mortgage
Summarised balance sheet Direct Limited Total
2021 2021
GBP'000 GBP'000
Current assets 11,198 11,198
Current liabilities (2,428) (2,428)
Current net assets 8,770 8,770
Non-current assets 3,447 3,447
Non-current liabilities (4,093) (4,093)
Non-current net liabilities (646) (646)
Net assets 8,124 8,124
Accumulated NCI 2,205 2,205
Summarised statement of comprehensive GBP'000 GBP'000
income
Revenue 16,587 16,587
Profit for the period and total
comprehensive income 2,752 2,752
Profit allocated to NCI 550 550
Dividends paid to NCI 253 253
Summarised cash flows GBP'000 GBP'000
Cash flows from operating activities 6,200 6,200
Cash flows from investing activities (730) (730)
Cash flows from financing activities (1,659) (1,659)
Net increase in cash & cash equivalents 3,811 3,811
33 Contingent liabilities
The Group had no contingent liabilities as at 31 December 2022
or 31 December 2021.
34 Events after the reporting date
There were no material events after the reporting period, which
have a bearing on the understanding of these consolidated financial
statements.
35 Notes supporting statement of cash flows
Cash and cash equivalents for purposes of the statement of cash
flows comprises:
2022 2021
GBP'000 GBP'000
---------
Cash at bank available on demand 7,219 17,548
Bank balances held in relation to retained
commissions 18,243 16,863
Total cash and cash equivalents 25,462 34,411
A reconciliation of liabilities from financing transactions is
set out as follows:
Loans
and borrowings Leases Total
GBP'000 GBP'000 GBP'000
Balance as at 1 January 2021 - 2,695 2,695
Cash flows
Principal lease payments (349) (349)
Non-cash flows
New leases - 250 250
Balance as at 31 December 2021
and 1 January 2022 - 2,596 2,596
Cash flows
Principal loan amounts 23,200 - 23,200
Loan arrangement fees (282) - (282)
Settlement of loan notes and accrued
interest on acquisition (21,891) - (21,891)
Repayment of borrowings (1,500) - (1,500)
Principal lease payments - (547) (547)
Non-cash flows
Acquisition of subsidiaries 23,391 1,016 24,407
New leases - 919 919
Accrued interest 426 - 426
Unwinding of loan arrangement fees 63 - 63
Disposals - (37) (37)
Balance as at 31 December 2022 23,407 3,947 27,354
-----------
Glossary of Alternative Performance Measures ("APMs") for the
Group report and financial statements
Certain numerical information and other amounts and percentages
presented have been subject to rounding adjustments. Accordingly,
in certain instances, the sum of the numbers in a column or a row
in tables may not conform exactly to the total figure given for
that column or row or the sum of certain numbers presented as a
percentage may not conform exactly to the total percentage
given.
APM Closest Definition and purpose
equivalent
statutory
measure
Income statement measures
Net revenue Gross profit Net revenue is revenue less commissions
paid to Appointed Representative firms
and payments to Fluent affinity partners.
GBPm 2022 2021
Revenue 230.8 188.7
Commissions paid (142.8) (129.6)
Payments to Fluent (8.0) -
affinity partners
Net revenue 80.1 59.0
Administrative None Calculated as administrative expenses
expenses ratio (which exclude amortisation of acquired
intangibles, acquisition costs incurred
in the year and non-cash operating
expenses relating to put and call option
agreements) divided by revenue.
Adjusted EBITDA None Calculated as EBITDA before charges
associated with acquisition and investments,
and other adjusting items that the
Group deems, by their nature, require
adjustment in order to show more accurately
the underlying business performance
of the Group from period to period
in a consistent manner.
Charges associated with acquisition
or investments in businesses include:
* non-cash charges such as amortisation of acquired
intangibles and the effect of fair valuation of
acquired assets,
* non-cash operating expenses relating to put and call
option agreements and cash charges including
transaction costs,
* fair value movements on deferred consideration, and
* fair value movements on derivative financial
instruments.
GBPm 2022 2021
Adjusted profit before
tax 27.2 24.2
Depreciation 1.1 0.8
Amortisation of other
intangibles 0.3 0.2
Net interest expense 0.5 0.1
Adjusted EBITDA 29.1 25.3
Adjusted operating Operating Calculated as operating profit before
profit profit charges associated with acquisition
and investments, and other adjusting
items that the Group deems, by their
nature, require adjustment in order
to show more accurately the underlying
business performance of the Group from
period to period in a consistent manner.
Charges associated with acquisition
or investments in businesses include:
* non-cash charges such as amortisation of acquired
intangibles and the effect of fair valuation of
acquired assets,
* non-cash operating expenses relating to put and call
option agreements and cash charges including
transaction costs,
* fair value movements on deferred consideration, and
* fair value movements on derivative financial
instruments.
GBPm 2022 2021
Operating profit 18.5 23.3
Acquisition of acquired
intangibles 2.6 0.4
Acquisition costs 2.8 -
Non-cash operating expenses
relating to put and
call option agreements 2.0 1.0
Impairment losses 2.8 -
Non-cash fair value
gains on financial instruments (0.9) (0.3)
Adjusted operating
profit 27.7 24.3
Adjusted profit Profit before Calculated as profit before tax before
before tax tax charges associated with acquisition
and investments, and other adjusting
items that the Group deems, by their
nature, require adjustment in order
to show more accurately the underlying
business performance of the Group from
period to period in a consistent manner.
Charges associated with acquisition
or investments in businesses include:
* non-cash charges such as amortisation of acquired
intangibles and the effect of fair valuation of
acquired assets,
* non-cash operating expenses relating to put and call
option agreements and cash charges including
transaction costs,
* fair value movements on deferred consideration, and
* fair value movements on derivative financial
instruments.
GBPm 2022 2021
Profit before tax 17.4 23.2
Amortisation of acquired
intangibles 2.6 0.4
Acquisition costs 2.8 -
Non-cash operating expenses
relating to put and
call option agreements 2.0 1.0
Impairment losses 2.8 -
Non-cash fair value
gains on financial instruments (0.9) (0.3)
Unwinding of redemption 0.6 -
liability
Adjusted profit before
tax 27.2 24.2
Adjusted profit None Calculated as adjusted profit before
before tax tax divided by revenue.
margin
Adjusted earnings Basic earnings Calculated as basic earnings per share
per share per share before charges (net of tax) associated
with acquisition and investments, and
other adjusting items that the Group
deems, by their nature, require adjustment
in order to show more accurately the
underlying business performance of
the Group from period to period in
a consistent manner.
Cash flow measures
Headline cash None Headline cash conversion is cash generated
conversion from operating activities adjusted
for movements in non-trading items,
including loans to AR firms and associates
and cash transaction costs as a percentage
of adjusted operating profit.
GBPm 2022 2021
Cash generated from
operating activities 28.5 30.3
Acquisition costs 2.8 -
Decrease in loans to
AR firms and associates (0.8) (0.7)
Headline cash generated 30.5 29.6
Adjusted cash None Adjusted cash conversion is headline
conversion cash conversion adjusted for increases
in restricted cash balances as a percentage
of adjusted operating profit.
GBPm 2022 2021
Headline cash generated 30.5 29.6
Increase in restricted
cash balances (1.4) (2.4)
Adjusted cash generated 29.1 27.2
Balance sheet measures
Net debt None Loans and borrowings less unrestricted
cash balances.
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