REG - Mortgage Adv. Bureau - Final Results for the year ended 31 December 2023
19/03/2024 07:00
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RNS Number : 3457H Mortgage Advice Bureau (Hldgs) PLC 19 March 2024
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
("MAB" or "the Group")
19 March 2024
Final Results for the year ended 31 December 2023
Mortgage Advice Bureau (Holdings) plc (AIM: MAB1.L) is pleased to announce its
final results for the year ended 31 December 2023.
Financial summary
2023 2022 Change
Revenue £239.5m £230.8m +3.8%
Gross profit £70.2m £62.9m +11.5%
Gross profit margin 29.3% 27.3% +2.0pp((1))
Adjusted EBITDA(*) £26.7m £29.1m -8.1%
Adjusted EBITDA margin(*) 11.2% 12.6% -1.4pp
Adjusted profit before tax(*) £23.2m £27.2m -14.8%
Statutory profit before tax £16.2m £17.4m -6.8%
Adjusted profit before tax margin(*) 9.7% 11.8% -2.1pp
Adjusted profit before tax as a percentage of net revenue(*) 24.6% 34.0% -9.4pp
Reported profit before tax margin 6.8% 7.5% -0.7pp
Adjusted fully diluted EPS(*) 29.6p 37.4p -20.9%
Basic EPS 23.6p 21.8p +8.1%
Adjusted cash conversion(*) 119% 105% +14pp
Proposed final dividend 14.7p 14.7p -
Operational highlights
● Market share of new mortgage lending((2)) up 11% to 8.3% (2022: 7.5%)
● Gross mortgage completions((2)) (including product transfers) down 8% to
£25.1bn (2022: £27.3bn)
● Gross new mortgage completions((2)) (excluding product transfers) down 21% to
£18.6bn (2022: £23.6bn)
● Adviser numbers down 4% to 2,158((3)) (2022: 2,254)
● Average number of mainstream advisers((4)) down 2% to 1,940 (2022: 1,988)
● Revenue per mainstream adviser((4)) up 6% following a full year impact of the
acquisition of Fluent
● Proportion of revenue from re-financing at 35% (2022: 32%)
Post period end
● 2,135 advisers at 15 March 2024, including 116 advisers from Fluent
* 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:
"Against a very challenging backdrop in 2023, MAB continued its exceptional
track record of outperformance and market share growth in all market
conditions.
"Despite the severe market downturn, we continued our investment across the
entire business and remained resolutely focused on long-term growth. Our
proposition for growth focused mortgage and protection firms is outstanding,
underpinned by best-in-class technology, lead generation and infrastructure,
and our aim is to continue to further increase MAB's differentiation versus
our competitors and grow market share and profitability.
"2024 has started well, with both purchase and re-financing activity having
picked up significantly. We believe this signals the early stages of a market
recovery that builds towards a catch-up year in 2025, with pent-up demand
continuing to be released as consumer confidence and affordability increase.
"Although we expect organic adviser growth to start building some momentum
again in H2 as our AR firms gain more confidence in the sustainability of the
recovery, recruitment activity in terms of new AR firms is exceptionally
strong, reflecting the significant strides we have made in terms of our
technology and lead generation developments, as well as how we have engaged
with and supported our partner firms with the introduction and integration of
Consumer Duty.
"Following an exceptionally strong year for our most mature investment First
Mortgage, strong progress has been made in terms of efficiencies and lead
sources in all our other AR investments, with adviser productivity in these
firms being significantly higher than our average across the Group. We expect
a record performance from our investments this year and believe the portfolio
will contribute to accelerated Group profit growth over the medium term."
Current Trading and Outlook
Following the modest improvement in trading towards the end of last year, we
have seen a very positive start to 2024 across both purchase and re-financing,
including a long-awaited recovery in Buy-to-Let activity.
We previously reported our expectation that overall market activity would
increase once inflation was under control and the Bank of England base rate
had peaked or started to fall back. Although a first reduction in the base
rate is not expected until later this year, mortgage rates have reduced
notably, the availability of mortgage products has increased, and mortgage
underwriting criteria are starting to signal a more positive outlook.
This has all helped consumer sentiment, resulting in increasing house purchase
activity, some of which will certainly be driven by the pent-up demand that
has built up since the events of September 2022.
Although we expect it will be the second half before we see organic adviser
growth recommence, our AR firms are eager to resume their growth plans and are
preparing to do so now. New AR recruitment activity started picking up
strongly in the latter part of 2023, following an understandable lull in the
previous 12 months. That momentum has built strongly, boosted by the
significant developments in technology and lead generation we have delivered,
as well as further investment in our recruitment resources to ensure we can
capitalise on the opportunity our proposition enhancements will bring.
Although the macroeconomic environment remains difficult to predict, we are
increasingly optimistic about the Group's prospects for this new financial
year, with current trading in line with expectations.
For further information please contact:
Mortgage Advice Bureau (Holdings) Plc +44 (0)1332 525 007
Peter Brodnicki - Chief Executive Officer
Ben Thompson - Deputy Chief Executive Officer
Lucy Tilley - Chief Financial Officer
Nominated Adviser and Joint Broker:
Deutsche Numis +44 (0)20 7260 1000
Stephen Westgate / Giles Rolls
Joint Broker:
Peel Hunt LLP +44 (0)20 7418 8900
Andrew Buchanan / Mike Burke
Media enquiries: investor.relations@mab.org.uk
Analyst presentation
There will be an analyst presentation to discuss the results at 9:30am
today.
Those analysts wishing to attend are asked to contact
investor.relations@mab.org.uk.
Copies of this interim results announcement are available at
www.mortgageadvicebureau.com/investor-relations
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of
the European Union (Withdrawal) Act 2018 ("UK MAR").
((1)) Percentage points.
((2)) Based on first charge mortgage completions, excluding secured personal
loans (second charge mortgages), later life lending mortgages and bridging
finance.
((3)) Includes 117 Fluent advisers as at 31 December 2023 (61 advisers in the
first charge mortgages division, 49 in the secured personal loans division, 2
in the later life division, and 5 in the bridging finance division). Includes
a total of 240 advisers at 31 December 2023 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.
((4)) 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.
Chief Executive's Review
2023 started with much depleted mortgage and protection pipelines, following
the very turbulent and difficult final quarter of 2022 post the mini-budget.
From this very low base, mortgage activity gradually increased through much of
H1, as it seemed that inflation was starting to come under control, and
mortgage rates were appearing to stabilise at manageable levels for borrowers.
However, mid-way through the year, the inflationary backdrop began to
disappoint, which took markets by surprise. Consequently, mortgage rates rose
quickly and to levels sufficiently high enough to markedly reduce house
purchase activity, forcing many borrowers to pause and wait longer before
re-financing their existing mortgages, on the hope that mortgage rates would
subside later in the year.
As expected, these borrowers started to re-finance in greater numbers much
later in the year. We also saw a slight improvement in purchase related
mortgage activity right at the end of the year, as mortgage rates became more
attractive against a backdrop of lower inflation pointing to a more
predictable and better outlook for new business in 2024.
Against this difficult market backdrop where new mortgage lending was down by
29%, MAB grew its market share of new mortgages((1)) to 8.3% from 7.5%, once
again outperforming the market in difficult trading conditions. Much of this
outperformance was a clear reflection of how MAB helped ARs and advisers to
successfully pivot and focus their efforts largely towards re-finance and
protection opportunities, in the absence of an active purchase market. As a
result, adviser productivity remained virtually unchanged despite the
significant drop in purchase transactions. The ability to do this on the rare
occasion of a major downturn strongly underlines the resilience of MAB's
operating model, and of course any drop in property transactions is typically
made up once the housing market recovers.
In terms of MAB's strategy, although conditions were very challenging, we
continued to invest for growth, as opposed to making short-term cost cuts at
the expense of longer-term opportunities. This was to ensure we remain on a
path towards establishing even greater differentiation versus our competitors,
enabling us to carry on growing market share and profitability.
MAB ARs have more employed advisers than the intermediary sector average, and
as a result they understandably reduced adviser numbers quickly in response to
a sharp decline in purchase transactions. The 4% fall overall in adviser
numbers was expected as firms consolidated and focused on efficiency and
productivity rather than growth in such uncertain times. We expect a better
outcome in 2024, as existing ARs gradually become more confident in a
sustainable recovery.
Despite the 29% drop in UK new mortgage lending, Group revenue for the period
was up 4% to £239.5m (2022: £230.8m), with organic revenue (excluding the
Fluent, Auxilium and Vita acquisitions) down 4%, and Group first charge
mortgage completions down 8% to £25.1bn (2022: £27.3bn). Re-financing
transactions accounted for 53% of the Group's first charge mortgage
completions by lending value (2022: 42%), driven by a 75% increase in the
Group's product transfer completions to £6.5bn (2022: £3.7bn).
MAB's first charge mortgage completions are analysed as follows:
2023 2022 Change
£bn £bn
New mortgage lending 18.6 23.6 -21%
Product Transfers 6.5 3.7 +75%
Gross mortgage lending 25.1 27.3 -8%
Adjusted EBITDA was down 8% to £26.7m (2022: £29.1m), primarily due to a
£9.7m or 28.1% increase in administrative expenses, reflecting the planned
further investment in the Group's growth strategy.
Lead generation and lifetime customer value
Our investment and developments in early customer capture and nurture, data
analytics and customer profiling are helping us build a better understanding
of our existing and future customers and how to best service all their likely
requirements to generate a larger lifetime value.
This learning is driving the development of our customer and broker platform,
apps and tools whilst shaping our entire customer engagement strategy. These
optimisations are already delivering early signs of the size of the
opportunity we have, including driving an increasing number of opportunities
from our existing lead channels, supporting the conversion of all leads, and
identifying high propensity for requirements of additional products and
services.
Although we are in the early stages of implementation and the learning this
strategy will bring, we enter an exciting period as we layer additional
opportunities of potential customers and their value to MAB into our existing
environment.
MAB's client bank and related retention opportunities grows year after year,
as MAB and its ARs continue to generate new lead flows.
Our acquisition of Fluent has added Price Comparison Websites ("PCWs") and
other major national lead sources to MAB's market leading position in the
estate agency and new build sectors. These are by far the three largest
sources of new customers for intermediaries. However, with estate agency and
new build in particular, the leads generated have been largely reliant on
human referral, which at best can be inconsistent.
Our development of digital customer engagement and research tools enables MAB
to reduce that reliance and generate additional opportunities from these
existing lead sources, with those potential customers already having had a
positive online experience before engaging with an adviser. We see this
becoming a major growth opportunity over the medium term, with the same
digital engagement and nurture helping MAB to improve retention year-on-year
from an ever-increasing client base.
MAB's success has been built on being the leader in providing an exceptional
service to introducer lead sources and their customers. Our digital customer
engagement and nurture strategy will strengthen our leading position still
further and is already starting to provide opportunities for new introducer
relationships.
Although MAB is the market leader in customer acquisition and fulfilment from
local and national lead sources, we also support our ARs in optimising direct
customer engagement and acquisition through organic website traffic and social
media.
Lead generation - whether that be new customers, retaining customers, or
increasing the lifetime value of a customer - is the major and increasing
differentiator for MAB that drives adviser and AR growth, performance, and
retention. Technology and Artificial Intelligence (AI) are likely to have an
increasing impact on how we acquire, retain, and build extended value for our
customers and for MAB, its ARs and their advisers. Accordingly, continued
investment in these areas remains a priority, regardless of market conditions,
and will continue to underpin our strategy for strong market share and profit
growth.
Leveraging existing invested-in partners
The majority of our subsidiaries and associates had significant growth plans
in 2023, which have been delayed because of the difficult market backdrop,
albeit First Mortgages did deliver an excellent performance, helped partly by
the Scottish property market being less affected than the rest of the UK.
All our subsidiaries and associates strengthened their businesses last year,
are in a good position to capitalise on a recovering market and are expected
to resume some level of adviser growth in 2024. Adviser productivity in this
portfolio is significantly higher than the average across MAB and continues to
build. We expect a record performance from our investments this year, and for
them to increasingly contribute to our plans for accelerated profit growth.
Technology, Automation and AI
Technology remains central to our strategy and our investment in our MIDAS
Platform will continue at the levels required to ensure we are always in the
strongest possible position to optimise operational efficiency and drive
revenue growth from new lead flow, lead nurture, customer retention, adviser
productivity, and customer lifetime value.
We are committed to maintaining our differentiation through technological
advantage, and our roadmap now incorporates enhanced functionality through the
adoption of AI. As with our MIDAS Platform development, automation and AI will
significantly contribute to our growth plans and operational efficiency across
all areas of the business, as well as future proof our business model and
cement our leadership position in the intermediary sector.
Fluent
Fluent had a growing employed salesforce at the time of acquisition. We have
worked very closely with the Fluent management team to re-balance the business
to better suit the much-reduced levels of new business experienced last year.
This process saw significant cost reductions and some key personnel changes.
Although adviser numbers were quickly reduced, other cost savings and
efficiencies continued throughout the year, ensuring the business is in the
best possible shape to capitalise on improving market conditions.
During this period, Fluent also secured a new long-term contract with its
largest provider of mortgage leads, whilst adding new lead sources that will
support new business growth in 2024/25.
With a better-balanced cost base, new lead sources and processes, and a strong
management team, Fluent is well-positioned for a good recovery in revenue and
profits in 2024.
Consumer Duty
In 2023, the deadline for the implementation of the Consumer Duty requirements
came into effect. The Financial Conduct Authority's ("FCA") new rules require
all regulated firms to consider the needs, characteristics, and objectives of
their customers, and to ensure they are always acting to consider and deliver
the right outcome for customers.
The new requirements also include the need to show consideration, flexibility
and attention to customers with characteristics of vulnerability. The Consumer
Duty sets clear standards of consumer protection across financial services and
requires all firms to put the needs of their customers first, and central to
all they do.
The Group's Board closely monitored the preparations for the introduction of
the Consumer Duty and could confirm it was satisfied that the firm was
prepared for the new requirements by the 31 July 2023 deadline.
Since implementation, work has continued to ensure the Consumer Duty
requirements are embedded into all MAB's activities and owned by senior
leaders across the business. This helps us to ensure that good customer
outcomes are considered as a matter of course, and at all times.
Good customer outcomes have always been, and continue to be, central to MAB's
strategy and culture, and so we see the implementation of Consumer Duty as
hugely complementary and supportive of our objectives as a Group.
Board changes
Non-executive chair
Katherine Innes Ker, non-executive chair, will retire from the Board at the
conclusion of the Annual General Meeting on 22 May 2024. Katherine joined us
as Chair at our IPO nearly 10 years ago and has been an integral part of our
success since then. Mike Jones, non-executive director, will succeed Katherine
as chair with effect from his re-election at the AGM. Mike joined the Board in
March 2021 and has chaired the Group Risk Committee since November 2022. His
vision and strategic thinking have made an immediate impact and we look
forward to his continued contribution as Group chair.
Chief Financial Officer
Lucy Tilley, Chief Financial Officer, submitted her resignation to the Board
in January 2024 and is currently serving her six months' notice. The search
for her replacement is well advanced and an update will be provided in due
course.
Non-executive director
A search for an additional independent non-executive director who will
complement the Board in terms of profile, skills and experience is also well
advanced, and we look forward to updating our shareholders in due course.
Summary
It is very rare to see such a severe downturn in UK purchase related mortgages
as the one we have experienced, and it significantly affected what would
otherwise have been an incredibly strong year for MAB. This was clearly a
setback for the business but only one of timing.
The investment in our AR and customer proposition continued as planned, as we
strengthened across all business areas, whilst ensuring we were fully prepared
for implementation of the Consumer Duty.
We also made good progress on our ESG strategy, as we explore how we can
become a real influencer in terms of helping the UK housing stock to become
more carbon efficient, and how we can be at the forefront to set the standard
within the intermediary sector.
The acquisition of Fluent was strategically important, however the timing of
the downturn could not have come at a worse time for the expected growth of
the business. Despite an understandably challenging first 18 months, the work
we have done together will ensure a better performance this year as Fluent
starts to build back towards our original expectations.
We expect a strong contribution from our all our investments this year, and
that they will play an increasingly important part in our plans to deliver
accelerated profit growth.
Although we do not see normal growth in organic adviser numbers resuming until
2025, AR recruitment activity is building very strongly and reflects the
significant technology and lead generation developments seen at MAB over the
last 12 months. We believe our approach and implementation of the Consumer
Duty across the business is also a major consideration for firms looking at
MAB's overall proposition.
Although much of the last quarter of 2023 was challenging in terms of written
activity levels, which will have some impact on this year, purchase and
re-financing activity since then has picked up notably driven by reducing
mortgage rates and inflation. We believe this signals the early stages of a
recovery in 2024 that will build towards a catch-up year in 2025 with pent up
demand continuing to be released as consumer confidence and affordability
increase.
((1)) First charge mortgage completions, excluding secured personal loans
(second charge mortgages), later life lending mortgages and bridging finance.
Market review
The fall in new mortgage approval volumes in the aftermath of the September
2022 mini-budget continued throughout 2023, as the rising costs of living and
higher interest rates created further affordability constraints and reduced
consumer confidence. After a much-depressed Q1 2023, with mortgage approvals
40% down year-on-year, Q2 saw a slight improvement (down 26% year-on-year).
However conditions toughened further in Q3 2023 (down 41% year-on-year) and
this continued into Q4 (down 13% year-on-year despite Q4 2022 being heavily
affected by the mini-budget). Overall, new mortgage approvals were down 32%
for 2023, as summarised in the graph below.
http://www.rns-pdf.londonstockexchange.com/rns/3457H_1-2024-3-19.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3457H_1-2024-3-19.pdf)
Source: UK Finance
This led to gross new mortgage completions((1)) being down 29% to £223.5bn
(2022: £313.2bn((2))). The purchase segment was down 30% and the
re-mortgaging segment down 29%, as illustrated in the table and graph below.
UK Gross new mortgage lending by segment, £bn
2023 2022 %
Residential purchase 121.1 168.2 -28%
Buy-to-let purchase 8.2 17.4 -53%
Purchase segment 129.3 185.6 -30%
Residential re-mortgage 65.2 82.2 -21%
Buy-to-let re-mortgage 19.8 38.0 -48%
Re-mortgage segment 85.0 120.2 -29%
Buy-to-let segment 28.0 55.4 -50%
Source: UK Finance
http://www.rns-pdf.londonstockexchange.com/rns/3457H_2-2024-3-19.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3457H_2-2024-3-19.pdf)
Source: UK Finance
Whilst affordability pressures restricted the external re-mortgaging sector
during the period, Product Transfers saw a 21% increase by value.
Property transactions were down 19% in 2023 compared to 2022, as illustrated
in the graph below. The smaller contraction relative to mortgage lending
volumes indicates an increasing proportion of cash buyers, with higher
interest rates putting cash buyers in an increasingly favourable position to
those taking out a mortgage.
http://www.rns-pdf.londonstockexchange.com/rns/3457H_3-2024-3-19.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3457H_3-2024-3-19.pdf)
Source: UK Finance
The value of mortgage lending was also impacted by average house prices
starting to fall from the peak reached in H2 2022. Average house prices in
2023 were down 2% compared to H2 2022, and flat compared to average prices in
2022 as a whole.
The share of UK residential mortgage transactions via intermediaries
(excluding Buy to Let, where intermediaries have a higher market share, and
Product Transfers where intermediaries have a lower market share) continued to
grow to 87% (2022: 84%), with customers increasingly needing choice, advice
and support in a more complex and uncertain macro environment. We expect this
increased intermediary market share to remain stable.
UK Finance's and the Intermediary Mortgage Lenders Association's latest
estimates of gross new mortgage lending for 2024, published in December 2023,
are £215bn and £205bn, down 4% and 8% respectively compared to 2023.
However, the Group's current trading and the latest market data would indicate
that actual numbers may end up higher than these forecasts. Despite the
continuing headwinds, the underlying level of demand for home ownership and
mortgages remains strong, and we expect activity levels to be notably stronger
this year. We also expect external re-mortgaging to make up a greater share of
re-financing in 2024, even though Product Transfers will remain strong.
((1)) First charge mortgage completions, excluding secured personal loans
(second charge mortgages), later life lending mortgages and bridging finance.
((2)) UK Finance regularly updates its estimate of gross new mortgage lending,
and previously reported £313.9bn at the time of our 2022 results.
Financial review
We measure the development, performance, and position of our business against
several key indicators.
http://www.rns-pdf.londonstockexchange.com/rns/3457H_4-2024-3-19.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3457H_4-2024-3-19.pdf)
Revenue
Group revenue increased by 3.8% to £239.5m (2022: £230.8m) despite the
average number of mainstream((1)) advisers during the year down 2.4% to 1,940
(2022: 1,988). Organic((2)) revenue reduced by 4.3% to £199.6m (2022:
£208.6m) driven by a 5% reduction in the average number of organic((2))
mainstream((1)) advisers to 1,801 (2022: 1,901) and a 1% increase in revenue
per organic mainstream adviser, partly due to a lower proportion of new
advisers in the year. Our existing AR firms paused recruitment and focused on
efficiency following the September 2022 mini-budget and inflationary pressures
causing further increases in interest rates. In addition, we entered 2023 with
a lower-than-expected pipeline of written mortgages and new AR firms.
Fluent, which was acquired on 12 July 2022, had 117 (2022: 182) mainstream
advisers as at 31 December 2023, and contributed £37.5m (2022: £21.9m) of
revenue during the year. Auxilium, which was acquired on 3 November 2022, had
226 (2022: 161) directly authorised advisers to as at 31 December 2023, and
contributed £1.1m (2022: £0.2m) of revenue. 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, as set out
below.
Income source (£m) 2023 2022 Change
Mortgage procuration fees 98.0 106.6 -8.1%
Protection and General Insurance Commission 93.1 82.1 +13.4%
Client Fees 43.4 36.3 +19.7%
Other Income 5.0 5.8 -14.5%
Total 239.5 230.8 +3.8%
MAB's organic((1)) revenue across the three core areas was as follows:
Income source (£m) 2023 2022 Change
Mortgage procuration fees 85.5 99.0 -13.7%
Protection and General Insurance Commission 88.6 80.5 +10.1%
Client Fees 21.3 23.7 -10.1%
Other Income 4.2 5.4 -22.9%
Total 199.6 208.6 -4.3%
As a result of the market downturn in 2023, MAB's organic banked mortgage((3))
mix had a considerably lower proportion of house purchase transactions
compared to the prior year at 45% (2022: 51%), driven by a 19% reduction in UK
property purchase transactions overall, and an even larger reduction of 30% in
mortgage-backed UK property purchase transactions as a result of the fall in
consumer confidence. The proportion of re-financing transactions in MAB's
organic banked mortgage mix increased to 55% (2022: 49%) of completions by
volume, as we saw a further increase in the proportion of product transfer
completions by volume to 28% of MAB's mortgages((3)) (2022: 21%, 2021: 13%).
Product transfers have a lower average procuration fee and typically have
lower protection, general insurance and client fee attachment rates than other
mortgage types.
The Group's organic net mortgage((3)) completions by value reduced by 9%, with
mortgage procuration fees reducing by 14% as a result of the increased
proportion of product transfers. Client fees reduced by 10%. The Group's
organic protection and general insurance commissions however increased by 10%,
reflecting the strong focus of MAB's advisers on protection when volumes in
the mortgage market fall, particularly in our invested businesses, and the
strength of MAB's proposition and support in these areas.
MAB's average first charge mortgage size decreased by 7.1% compared to the
prior year, with average house prices remaining flat year-on-year, reflecting
the increased proportion of re-financing completions where the average
mortgage size is lower than for purchase transactions.
Fluent's revenue contribution across the Group's three core revenue streams
during the year was as follows, with an additional £1.1m (2022: £0.1m) of
revenue synergies realised:
Income source (£m) 2023 12 July 2022 - 31 Dec 2022
Mortgage procuration fees 12.4 7.6
Protection and General Insurance Commission 2.2 1.4
Client Fees 22.1 12.5
Other Income 0.8 0.4
Total 37.5 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
£1.1m (2022: £0.2m). Auxilium's revenues are classified under protection and
general insurance commission and represent the total income received, with
there being no commission payouts to the directly authorised entities serviced
by the business.
MAB's overall revenue from re-financing (including both re-mortgages and
product transfers) represented circa 35% (35% on an organic basis) of total
revenue (2022: 32%, 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, with 2021
reflecting a particularly high level of purchase transactions.
The proportion of organic revenue derived from each of the Group's core
revenue streams has remained reasonably stable as summarised below, with the
movements reflecting the change in banked mortgage mix during the period, as
well as the focus on protection.
Income source 2023 2022
Mortgage Procuration Fees 43% 47%
Protection and General Insurance Commission 44% 39%
Client Fees 11% 11%
Other Income 2% 3%
Total 100% 100%
The proportion of total revenue derived from each of the Group's core revenue
streams has also changed, due to the dynamics set out above for organic
revenue and a full year effect of the Fluent acquisition. Client fees as a
proportion of Fluent's revenue are higher than for the organic Group, with
protection and general insurance commission being a lower proportion of
Fluent's revenue due to lower attachment rates on second charge mortgages,
with the Group's revenue mix summarised as follows:
Income source 2023 2022
Mortgage Procuration Fees 41% 46%
Protection and General Insurance Commission 39% 36%
Client Fees 18% 16%
Other Income 2% 2%
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 increased to 29.3% (2022: 27.3%) and MAB's
organic gross profit margin also increased to 28.5% (2022: 26.5%). This
increase in gross margin is primarily due to the increased proportion of
protection revenue in the organic Group in 2023.
The network organic business of the Group receives slightly reduced revenue
share as existing ARs grow 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 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 organic gross
margin to be offset by operational leverage reducing the Group's
administrative expenses ratio(*).
Administrative expenses
Group administrative expenses increased by £10.7m (+29.7%) to £46.7m, mainly
reflecting the full year impact of the acquisitions of Fluent and Vita.
Organic adjusted administrative expenses increased by £4.5m (+14.9%) to
£34.6m, reflecting MAB's continued investment in growth through the market
downturn in 2023, and specifically in its technology platform and marketing
team through a mix of employee and third-party costs, which we expect to drive
enhanced lead generation opportunities and future revenue growth. Head
office costs, including those of First Mortgage, and compliance costs also
increased to support the Group's growth strategy. MAB's Head office
refurbishment at the end of 2022 led to a £0.5m increase in the depreciation
charge. All development work on MAB's MIDAS platform continues to be fully
expensed. The Group's administrative expenses ratio was 19.5% (2022: 15.6%),
and the organic administrative expenses ratio(*) increased to 17.3% (2022:
14.4%) reflecting the adverse impact of the market downturn on revenue growth
in a period where the Board originally expected to deliver operational
leverage.
The Group expects to continue 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, with the operational leverage offsetting the expected slight
erosion of MAB's underlying organic gross margin as the business continues to
grow.
Associates and Investments
MAB's share of profits from Associates was £0.8m (2022: £0.7m) with all of
the Group's Associates being adversely impacted by the market downturn.
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 down 8.1% to £26.7m (2022: £29.1m), with the margin
thereon of 11.2% (2022: 12.6%) reflecting the impact of the market downturn
and MAB's continued investment through this period.
Organic adjusted EBITDA(*) was £24.6m (2022: £26.9m), with the margin
thereon of 12.3% (2022: 12.9%).
Adjusted profit before tax(*) was down 14.8% to £23.2m (2022: £27.2m), with
the margin thereon being 9.7% (2022: 11.8%), also reflecting a full year of
interest charges on MABs debt facilities. Organic adjusted profit before
tax(*) was £22.2m (2022: £25.5m), with the margin thereon of 11.1% (2022:
12.2%). Statutory profit before tax was £16.2m (2022: £17.4m) reflecting a
full year impact of Fluent, Vita and Auxilium ongoing acquisition-related
costs, including amortisation of acquired intangibles and non-cash operating
expenses associated with the put and call option agreements relating to the
minority interests on the Fluent and Auxilium acquisitions. As a result, the
margin on statutory profit before tax was 6.8% (2022: 7.5%).
Vita and Auxilium contributed adjusted profit before tax of £0.5m (2022:
£0.05m) and £0.7m (2022: £0.1m) respectively. Fluent made an adjusted loss
before tax of £1.1m, which was due to Fluent's performance in H1 2023, with
an improved performance in H2 2023, and having made an adjusted profit before
tax of £1.5m in the period from acquisition to 31 December 2022. 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 24.6%
(2022: 34.0%) primarily due to the effect of the market downturn and MAB's
continued investment in growth.
Finance revenue
Finance income of £0.3m (2022: £0.1m) reflects the uptick in interest rates
that prevailed for most of the financial year and the interest income accrued
or received on loans to associates and other appointed representatives.
On 28 March 2022 MAB entered into new four-year debt facilities with NatWest,
comprising a £20m Term Loan (the "Term Loan") and a £15m 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 £2.6m (2022: £1.2m) include £1.4m (2022: £0.6m) of
interest and non-utilisation fees payable on MAB's debt facilities, the
interest expense on lease liabilities and a £1.1m charge (2022: £0.6m)
relating to the unwinding of the redemption liability associated with the
Fluent Option and a £0.1m charge (2022: nil) relating to the unwinding of the
redemption liability associated with the Auxilium Option.
A remeasurement of the redemption liability associated with the Fluent and
Auxilium options has been undertaken at the year end. This has resulted in a
£4.5m gain (2022: £nil) recognised in the year, split as a £4.7m gain for
the Fluent Option, predominantly due to further acquisition of share capital
undertaken in the year, and a cost of £0.2m for Auxilium options.
Taxation
The effective tax rate on adjusted profit before tax(*) increased to 21.8%
(2022: 16.8%), primarily due to the increase in the prevailing UK corporation
tax rate from 1 April 2023. The effective rate of tax on reported profit
before tax reduced to 23.0% (2022: 26.4%), primarily due to lower acquisition
related costs, a gain on redemption liabilities in the current year and write
off of the Boomin investment in the prior year, which are all disallowable for
tax purposes. This is offset by a higher prevailing tax rate and higher
disallowable share option costs linked to acquisitions. 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 fully diluted earnings per share(*) was 29.6p (2022: 37.4p). Basic
earnings per share increased to 23.6p (2022: 21.8p) due to £2.6m lower
acquisition-related costs, £4.5m fair value gain on redemption liabilities in
2023 and the £2.8m write off of the Boomin investment in 2022, offset by
£2.6m higher amortisation of acquired intangibles due to a full year of
amortisation on 2022 acquisitions.
The Board is pleased to propose a final dividend of 14.7p per share (2022:
14.7p). This brings the total proposed dividend for the year to 28.1p per
share (2022: 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 £8.4m (2022:
£8.4m). Following payment of the dividend, the Group will continue to
maintain significant surplus regulatory reserves.
The record date for the final dividend will be 26 April 2024 and the payment
date 29 May 2024. The ex-dividend date will be 25 April 2024.
Balance sheet
In connection with the acquisitions of Fluent, Vita and Auxilium in 2022, the
Group recognised separately identifiable intangible assets with a fair value
on acquisition of £55.4m and goodwill totalling £38.7m. The carrying value
of the intangible assets after amortisation at 31 December 2023 was £50.1m
(2022: £55.2m). In addition, redemption liabilities of £2.4m (2022: £7.0m)
and £0.4m (2022: £0.2m) 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 2023.
A clawback liability is recognised on the balance sheet. Life insurance
commissions are paid upfront on an indemnity basis, mainly over a four-year
period. If a policy is cancelled during the indemnity period, part of the
commission received may have to be repaid to the policy provider. The clawback
liability estimates the value and timing of repaying commission received on an
indemnity basis for policies that may lapse in a period of up to four years
following inception.
In 2022, the Group entered into an agreement on 28 March 2022 with NatWest, in
respect of a new term loan for £20m and a revolving credit facility for £15m
(the "Facilities Agreement"), in order to part fund the cash consideration
payable in relation to the Fluent acquisition. As at 31 December 2023, the
Group had drawn down £1.6m (2022: £3.2m) on the revolving credit facility,
in addition to a remaining balance of £16.3m (2022: £20.0m) on the term
loan, and had £0.4m (2022: £0.2m) of accrued interest net of prepaid loan
arrangement fees. Net debt (adjusting only for unrestricted cash balances of
£3.0m (2022: £7.2m)) was £15.2m (2022: £16.2m).
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 £24.3m (2022: £24.3m).
Adjusted cash conversion(*) was:
2023 119%
2022 105%
Other than the £2.8m refurbishment of the Group's head office in Derby in
2022, the Group's operations are typically capital-light, with the most
significant ongoing capital investment being in computer equipment. A further
£0.4m was spent on the final elements of the head office refurbishment
project in early 2023, and only £0.5m of general capital expenditure on
office and computer equipment was required during the year (2022: £0.4m).
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 £5.5m at 31 December 2023 (2022: £5.5m), with the Group
reporting a surplus of £28.0m (2022: £26.8m).
The following table demonstrates how cash generated from operations was
applied:
£m
Unrestricted bank balances at the beginning of the year 7.2
Cash generated from operating activities excluding movements in restricted 28.6
balances and dividends received from associates
Dividends received from associates 0.4
Dividends paid (16.0)
Dividends paid to minority interest (0.8)
Tax paid (5.4)
Investment in associates (including payment of contingent consideration) (0.5)
Repayment of borrowings (5.4)
Net interest paid and principal element of lease payments (1.9)
Acquisition of minority interest in subsidiaries (1.2)
Capital expenditure (2.0)
Unrestricted bank balances at the end of the year 3.0
* 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)) 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.
((2)) Organic means the Group before the impact of the acquisitions made in
2022 (Fluent, July 2022; Vita, July 2022; and Auxilium, November 2022).
(()(3)) First charge mortgage completions, excluding secured personal loans
(second charge mortgages), later life lending mortgages and bridging finance.
Principal Risks and uncertainties
The Board is ultimately responsible for risk management. It regularly
considers the most significant and emerging threats to the Group's strategy,
as well as establishing and maintaining the Group's systems of internal
control and risk management and reviewing the effectiveness of those systems.
The Board and senior management are actively involved in a regular risk
assessment process as part of the risk management framework, supported by
TriLine Governance and Risk and Compliance software (TGRC), to enable
consistency and ownership by risk owners across MAB. The Group's risk
assessment process considers the impact and likelihood of risk events that
could materialise and affect the delivery of the Group's strategic goals. If
and when necessary, risk owners regularly review and update the controls in
place to mitigate the impact of the risks, with the output of these reviews
being reported to the Risk & Compliance Committee (RCC) and Group Risk
Committee (GRC). This is to ensure that appropriate oversight is provided and
that actions are in place to mitigate any areas of concern. Throughout the
Group, all employees have a responsibility for managing risk and adhering to
the control framework.
There are a number of potential risks that could hinder the implementation of
the Group's strategy and have a material impact on its long-term performance.
These arise from internal or external events, acts or omissions that could
pose a threat to the Group. The principal risks identified as having a
potential material impact on the Group are detailed below, together with the
primary means of mitigation. These risks have been assigned a rating based on:
(a) likelihood of the risk materialising to a point where it will impact MAB's
strategic objectives; and (b) perceived impact to MAB that the crystalised
risk may cause. In addition, we show whether the risk has remained the same,
reduced, or increased versus the prior year. The risk factors mentioned do not
purport to be exhaustive as there may be additional risks that materialise
over time that the Group has not yet identified or deemed to have a
potentially material adverse effect on the business.
Risk Title Risk Description Mitigating Factors / Commentary Likelihood Impact Change in Risk
Strategic & Market Risks
Geo-political issues resulting in increasing global conflict. In 2022, the major concerns related to the Russia-Ukraine conflict and the It is anticipated that the conflict in Ukraine and the Middle East will Medium High Increased
deteriorating relationship between the USA and China. continue with the outcome remaining uncertain. Should these conflicts escalate
further it is expected to further reduce household expenditure and consumer
confidence.
However, in the last 12 months there has been an increase in the number of
conflicts arising across the globe. Active conflicts are at their highest
levels in decades. The UK funding markets however continue to be notably liquid, with Lenders
having access to significant resources. The wider capital markets remain open
and active too.
Currently, there are three main conflicts where escalation is considered
possible: Ukraine; the Middle East; and Taiwan.
The Bank Base Rate increases appear to have slowed while the market recovers,
but the impact these conflicts could have on inflation remains unclear.
The recent escalation with the US and UK targeting Houthi rebels in Yemen is
one example of a materialisation of this and the risk of the conflict
expanding outside of Israel across the wider region of the Middle East appears MAB has no presence in the impacted regions, so the conflict does not present
to be increasing. a direct physical risk to the continuity of services. However, it has
outsourced some small technology-related activities within Poland but
continues to monitor the situation with a view to implementing mitigation
measures should this neighbouring country become more directly affected by the
Previous conflicts have had a knock-on negative domestic impact in the UK, in conflict.
particular due to rising energy prices, cost-of-living increases, and
political uncertainty. Specific risk can be felt from the resulting upward
pressure placed upon mortgage rates due to higher inflation.
The impact of the UK's involvement in the Israeli and Palestinian conflict is
uncertain. However, it is possible that this could result in increasing
divides across the population and disruption to supply chains across the
Consumer confidence levels, and consequently the housing and mortgages world.
markets, have been disrupted and this is likely to continue or increase,
should conflicts escalate or persist.
Macroeconomic MAB's performance is subject to macroeconomic conditions surrounding the UK MAB regularly stress tests its forecast and considers this against housing Low High No change
housing market, which impact on property transaction levels. The risk of market changes and movements in Bank Base Rate. It is also notable that MAB
regular and meaningful increases in interest rates is likely to have a has a highly cash generative business model.
detrimental impact on the housing market and customers' financial situations.
Throughout 2023 the impact of the Autumn 2022 mini budget was felt. Rising
costs of living and inflation, resulting in sequential rises in the Bank Base
Rates to levels not seen for several years.
Lenders have much greater levels of liquidity to enable borrowing, albeit at
rates that borrowers may not have been used to in recent years. It is
anticipated that the costs of borrowing will reduce as market competition
intensifies, with lenders aiming to maintain their market shares in 2024.
The mortgage market has seen delays in transactions, and in many instances,
borrowers seeking to remortgage before their rates increased further.
MAB is well positioned to help its customers and maximise new opportunities in
such an environment.
Availability of Mortgage Lending MAB's offering would be at risk in the event of a significant reduction in the The macroeconomic volatility of Autumn 2022 steadied during 2023, with Low Medium Decreased
availability of mortgage lending. inflation continuing its downward trend and the Bank Base Rate consequently
stabilising. There is now and even a chance of a rate reduction at some point
in 2024. Confidence has therefore returned to lenders and customers alike.
Affordability has eased which is providing many customers with good purchase
and remortgage opportunities. Lenders have responded with greater competition
through pricing and less stringent underwriting criteria.
With UK banks remaining very well capitalised and funded, and greater interest
and activity in the securitisation market, the future for lenders is positive.
For 2024, market expectations are that c1.5m existing mortgage borrowers will
be coming off existing fixed rate mortgage deals. With mortgage rates at least
1% lower than at this time last year, customer choice is significantly better.
When taking on new mortgage borrowers, lenders must assess affordability.
Whilst many borrowers are still faced with increasing mortgage rates, more are
able to meet these tests. The result is that fewer borrowers will therefore
rely on Product Transfers this year compared to 2023, which presents an
improved outcome for MAB.
MAB expects mortgage availability to continue to further stabilise, and as a
result ARs and Advisers will be able to provide a highly competitive range of
products for customers, enabling them to re-finance and move home more freely.
Climate Change impact and attitudes of consumers, investors, and other The impact of climate change is at the forefront of the minds of many in terms Whilst MAB's day to day operations are non-energy intensive, it has assessed Low Low No Change
stakeholders of the role businesses have in meeting the challenges set by global leaders to the direct environmental impact of its business and continues to monitor the
drive change and transition to lower carbon economies. Businesses that do not risks identified.
embark on a journey to reduce their emissions are likely to be prejudiced or
penalised.
MAB is further committed to reducing its environmental impact where feasible.
A new post of Head of ESG was created in 2023 and an appointment to the role
was made.
Given the rising frequency in climate change related events, particularly Whilst none of MAB's facilities are located in areas at risk from climate Low Low New Risk
floods, it is paramount for businesses to conduct a thorough assessment of related events, the business has re-evaluated its business continuity and
potential climate events in respect of potential damages to its own premises disaster recovery plans to ensure that even if MABs facilities were to be
and that of critical suppliers. impacted, a seamless continuity of its business operations is ensured.
Given MAB's critical IT infrastructure is now also 100% Cloud hosted, any
potential business disruption resulting from damages to facilities of its IT
supply chain has been minimised.
Investors and consumers are increasingly looking towards sustainability MAB recognises that it has an important part to play in attending to the Low High New Risk
related credentials of the companies they interact with. Businesses failing to issues of climate change through its role as a leading financial services
address rising expectations in this respect are likely to be materially intermediary. MAB continues to invest in its ESG strategy and is currently
prejudiced. developing a new 'Green Mortgage' service via its preferred lenders who
similarly recognise the shift in consumer and investor perspectives, and the
corresponding potential for good outcomes for customers in this area.
MAB has consolidated its efforts in respect to ESG (including community
support, employee relations and governance) under the remit of the
Sustainability Committee, which ensures that progress in this area is
appropriately monitored by the Board of Directors.
Legal & Regulatory Risks
Regulatory compliance Failure to comply with current regulatory requirements, or appropriately MAB maintains open and effective relationships with regulators and relevant Low High No change
anticipate, react to, and embed new legislation, regulation and applicable industry associations, in addition to having relevant and appropriate
standards, could result in reputational and financial damage, as well as governance structures and controls in place across the business. This ensures
sanctioning by the relevant regulators such as the FCA (withdrawal of MAB complies with current regulatory and legislative requirements and
authorisations) and the ICO (imposition of censure and/or financial continually monitors emerging changes. This includes the evolving standards
penalties). relating to the issues of climate change and broader Environmental, Social and
Governance ('ESG') compliance. It is anticipated post-Consumer Duty
implementation there will be increased engagement by the FCA across varying
Firms and Sectors.
MAB operates an enhanced risk-based approach to supervision and governance. It
continues to undertake a programme of investment in the further development of
its 'Risk Profiler System', together with the deployment and integration of
external systems, to ensure MAB can evidence that Advisers are delivering best
advice and outcomes for customers.
Appointed Representative (AR) model MAB has full regulatory responsibility for the actions of its ARs and As Principal, MAB assumes overall regulatory responsibility for its ARs. This Low Medium Decreased
Advisers. is reflected in the policies and procedures comprised in its governance and
supervision framework.
The Appointed Representative Regime requires the relationship between
'Principals' and 'ARs' to continue be the subject of detailed enquiry and
actively monitored. As a consequence, MAB has a control environment and
oversight approach to meet the regulatory standards and expectations. MAB also
continues to proactively engage with the regulator and industry associations
to discuss the dynamics of operational processes and procedures, to ensure
best practice is maintained.
Litigation and complaints MAB could be subject to litigation or complaints not covered by insurance. MAB has comprehensive advice guidance and compliance processes in place for Low High No change
Advisers. These mandate high standards of advice and thorough maintenance of
record-keeping at all times.
Accordingly, upheld complaint levels remain very low compared to transactional
volumes. Furthermore, MAB has not been subject to any actual or threatened
material litigation.
Appropriate Professional Indemnity Insurance is procured and reviewed
regularly.
Fraud There is a risk that MAB is potentially exposed and exploited by fraudulent MAB has robust controls in place to monitor and identify potentially Medium High No Change
activity by any of its Customers, AR firms, Advisers, Employees or unknown fraudulent activity by AR firms, advisers and customers, with the resource
third parties. available to conduct detailed investigations should the need arise. MAB
continues to assess the effectiveness of these controls and identify
opportunities to improve, with oversight by the RCC.
MAB utilises an Electronic Identity Verification solution to mitigate risks
during advisers' engagement with customers, particularly where there is no
face-to-face interaction.
In addition, regular guidance and support is given to ARs and advisers to
ensure awareness of potential risks and trends, with interactive training on
best practices. Robust controls are also in place across MAB systems to limit
the opportunities for employees to commit fraud, particularly where
individuals have access to financial resources.
Operational Risks
Infrastructure and IT systems MAB's performance would be adversely impacted if the availability and security There has been significant and continued investment into MAB's IT Low High Decreased
of its proprietary system, and other IT infrastructure, was compromised. infrastructure. There are two primary line-of-business applications, both of
which are located in the Cloud following the transition completed in 2023.
Cyber and Information Security The negative impact of MAB suffering a deliberate cyber-attack on its systems The landscape of cyber threats MAB faces remains diverse: from state-sponsored Medium High No Change
could be significant. cyber-attacks on UK businesses and infrastructure, to smaller groups or
individual parties attempting to disrupt services and gain financially, and to
the growth in Artificial Intelligence (AI) seen in 2023.
Through investment in dedicated resource in cyber security, MAB is well placed
to prevent ingress, damage, or theft by unauthorised third parties. In the
unlikely event of a system being compromised, it has the ability to gain early
warning and mitigate the effects of such incidents, through active monitoring
of systems and alerts on a continuous basis 24/7.
To combat the growing risks AI represents, governments are beginning to roll
out new and evolving regulations to target both hosts and creators of online
disinformation and illegal content. Regulation of generative AI will likely
complement these efforts.
MAB's 'Information Security Strategic Vision' has been complemented by a
3-year 'Cyber Security Strategy', establishing a formal framework for cyber
security and defining a timetable for ongoing improvements to address known
threats, as well as adopting a flexible approach to counter any new ones
(including AI), through a combination of prevention, detection and responsive
defensive measures.
The Cyber Security Strategy will also facilitate MAB in attaining
industry-recognised accreditation, demonstrating that all reasonable measures
are being taken to prevent cyber incidents, and to protect data.
Technological advancements MAB may fall behind its competitors if it does not keep abreast of Fundamentally, via its ARs and Advisers, MAB provides a comprehensive and Low Low Decreased
expectations in relation to the use of technology, or implement solutions thorough advice journey to its customers. The greatest level of trust and
accordingly, and otherwise drive change at the pace demanded by the market it confidence during this stems from the in-person interactions between adviser
operates in, and its existing and prospective customers. and customer. For this reason, alternative new business models that aim to
make mortgage advice to customers more streamlined through the use of new
technology, have yet to gain any traction in the UK.
However, MAB is aware that newer technologies, such as AI, may significantly
impact the market and is certainly not complacent. MAB is focussed on ensuring
that the preliminary interactions, advice journeys, and continued
relationships with customers are supported through the use of various new
technology solutions that are being implemented (such as The Home Buying App
and My MAB App), with the associated efficiencies and ease of use that these
allow. At the same time, MAB appreciates that demographic groups have subtly
different appetites, expectations and skillsets when choosing whether or not
to utilise such tools.
MAB, is investing heavily in new technologies and continues to monitor such
issues closely and is well positioned to innovate or partner with other
parties as further technological developments occur.
AR Size and Concentration MAB's ARs are spread throughout the UK, a small number of whom have MAB maintains strong relationships with its ARs to ensure it provides Medium Low No Change
significant numbers of Advisers (over 100 per firm). There are possible risks appropriate support for continued growth, whilst being aware of key risks
should such larger ARs fail or where there is a heightened concentration of posed within its AR Model.
ARs in certain locations.
MAB conducts regular monitoring of the ARs, including heightened and close
financial scrutiny of those in which it is directly invested.
To the extent that certain regions, such as Scotland, have historically had a
larger concentration of Advisers than other parts of the UK, this has been
rebalanced following the addition of advisers via the Fluent acquisition in
2022.
Key Employees The impact of MAB losing Key Employees and/or otherwise experiencing a MAB continues to invest in its People & Culture Team and its strategy for Medium Low No Change
substantial number of departures of employees would be significant. pursuit of excellence in this area. This is being effected through increasing
employee engagement, promoting MAB's Diversity, Equity and Inclusion related
policies, and enhancing the implementation of its ESG standards by appointing
a dedicated Head of ESG.
Remuneration continues to be reviewed annually, and takes account of the
National Minimum Wage and the on-going cost-of-living crisis.
MAB continues to successfully retain its senior employees. The recruitment of
further leaders continues, and development of future leaders enhances the
breadth of management experience and span of control.
Succession planning is assessed annually by MAB's Nominations Committee, where
the retention and succession of key personnel is discussed and agreed in
detail.
MAB has succession plans in place for Board members and its Senior Management
Team, aiming to improve the roster of internal candidates for key roles. A new
role of Chief People Officer was created in 2023 and an appointment made at
the beginning of 2024, to oversee and further develop succession planning and
talent management throughout the business.
Supply Chain dependencies Disruption to MAB's supply chain would likely cause operational, financial and MAB continues to be reliant on suppliers to ensure the delivery of its Medium High No Change
reputational harm. services. This is a common trend across all financial services organisation.
The increased use of Cloud-based systems and system integrations is notable,
bringing associated risks should the relevant suppliers fail.
MAB continues to enhance its procurement and supplier management framework.
The new Contract and Procurement Manager was appointed in Autumn 2023 to
oversee and manage the Procurement process within MAB. The output is an
enhanced onboarding and due diligence process and further improved oversight
of MAB's contract repository and supplier records.
To further strengthen its control framework around suppliers, MAB enhanced its
governance structure throughout 2023 with the implementation of the Resilience
and Recovery Committee to oversee the risk supply chains present to
operations.
Financial Risks
Investment & Acquisitions Poor execution of investment and acquisition strategy. This could apply to: MAB has a deliberate and focussed strategy to deliver year on year growth in Medium Medium No Change
market share and positive returns to investors. In part, this is achieved
a. New investments or acquisitions through new acquisitions and investments to support its objectives.
b. Poor trading outcomes of existing investments or acquisitions.
All new investments or acquisitions are subject to an appropriate level of
Increased operational risks could derive from having a broader commercial operational, financial, and legal due diligence, engaging external specialists
offering as a result of such corporate activity. as required.
Investment and acquisition risks are managed through a set of operating
performance metrics and restrictions which are set out in a suite of legal
documents drafted by experienced specialists and approved by the Board.
MAB has a broad portfolio of investments, which as with all businesses are to
some degree impacted by market conditions.
There are innate risks associated with managing a more diverse and larger
group of entities and ensuring strong performance. To mitigate these, MAB
conducts regular performance reviews and financial monitoring, with assistance
and expertise offered in the development of growth plans.
MAB proactively uses its contacts, technology, support infrastructure and
financial expertise to help maximise the performance of its investments. It
also continues to embed its Risk Oversight framework to monitor and mitigate
the operational risks outlined above in the wider group context.
Potential loss of a major partnership or contract (lead sources) MAB has an increasing number of material commercial partnerships with The risk of over-reliance on certain partners across the businesses remains, Medium Low No Change
customer lead sources. with the impact of the loss of a major lead source still being significant.
The loss of one of these contracts, or a reduction in lead volumes could
impact revenues and consequently reduce profitability and strategic
performance. MAB has an experienced relationship management team in place, with
responsibility for key account management and liaison defined at senior
management level and supported by members of MAB's Executive Committee.
Regular reviews are undertaken with partners to ensure continued focus on
performance against service levels and compliance with contractual
requirements.
The broadening of MAB Group should offer a more attractive proposition to such
partners. This also gives MAB the ability to diversify its lead sources,
reducing the scope for 'over-reliance' on a particular lead source type.
Furthermore, the associated margin impact in relation to a single lead source
partner on one part of MAB Group is not anticipated as being critical to MAB's
overall commercial performance.
Reputational Risks
Reputational risk The quality of MAB's proposition, its continued growth, and the credibility of MAB prides itself on maintaining the reputation of its Advisers as offering Low Medium No Change
its ARs and Advisers in meeting the obligations to customers are each material the best support to and ensuring good outcomes for their customers. Following
factors that directly affect its reputation. Any failures in this regard would the implementation of the AR oversight and Consumer Duty, MAB has further
present an immediate risk. enhanced its control framework to ensure customers are receiving the correct
outcomes. MAB also continues to review further opportunities across the Group.
Indirectly, were another large mortgage intermediary to fail to meet its
obligations to consumers there is a risk that this could cause wider MAB is especially mindful of how it responds to customer complaints and
reputational harm to the market, and equivalent intermediaries (such as MAB). interactions with the Financial Ombudsman Service, always seeking to ensure an
objective assessment of matters is undertaken, preserving its integrity in
doing so.
Customer feedback on external portals such as Feefo and Trustpilot is
regularly monitored to enable MAB to have broader visibility of the
experience's customers are having. Where appropriate customers are encouraged
to further interact with MAB if they are concerned or dissatisfied.
The membership of, and significant participation in, the Association of
Mortgage Intermediaries ('AMI') forum allows MAB to voice its concerns and
drive positive change across the market in the interests of all, in particular
consumers.
ESG (Environmental, Social, Governance)
MAB remains committed to the implementation of its integrated ESG strategy and
ensuring that we are a responsible business that grows sustainably and makes a
positive contribution to all stakeholders - our customers, shareholders,
employees, suppliers, and the local communities in which we operate, whilst
minimising our direct environmental impact.
The Group's Mission and Vision Statements reflect how we are integrating
social and environmental considerations in our decision making:
Our Mission: We help people fulfil their aspirations, by making key financial
moments in life a simple, happy and reassuring experience - from home
ownership and beyond.
Our Vision: We want to become the leading financial partner through life's key
moments.
By being an amazing place to work, providing an outstanding experience for our
customers, transforming the industry with the best mortgage journey, having a
positive social and environmental impact.
The ESG section of this report outlines the activities we have progressed
throughout the year to embed and further our integration of core
sustainability themes into our operations, and includes:
· details of how the Group continues to build upon the progress made in
previous years in implementing and advancing its ESG strategy;
· our stakeholder engagement arrangements, including the section 172
statement of the Companies Act 2006;
· our environmental performance and strategy report;
· how the Group assesses and manages climate-related risks and
opportunities, in line with the requirements of Climate-related Financial
Disclosure Regulations 2022; and
· our ESG strategy and progress.
Section 172(1) statement
The Directors of MAB consider that in conducting the business of the Company
over the course of the year they have complied with Section 172(1) of the
Companies Act 2006 (the "Act"), by fulfilling their duty to promote the
success of the Company and act in the way they consider, in good faith, would
be the most likely to promote the success of the Company for the benefit of
its members as a whole, having regard to the matters set out in s172(1)(a-f)
of the Act.
The continued success of our business is dependent on the support of all of
our stakeholders. Building positive relationships with stakeholders that share
our values is essential to us and working together towards shared goals
assists us in delivering long-term sustainable success.
To fulfil their duties, the senior management team and the Directors take care
to have regard to the likely consequences on all stakeholders of the decisions
and actions they take, with a long-term view in mind and with the highest
standards of conduct. Where possible, decisions are carefully discussed with
the groups concerned and are therefore fully understood and supported when
taken.
Reports are regularly made to the Board by the senior management team about
the strategy, performance and key decisions taken, which provides assurance
that proper consideration is given to stakeholder interests in
decision-making, and the Board uses this information to assess the impact of
decisions on each stakeholder group as part of its own decision-making
process.
The Group's governance structure allows the Board and the senior management
team to have due regard to the impact of decisions on the following matters
specified in Section 172(1) of the Act, as set out in the table below.
Section 172 factor Approach taken
Consequences of any decision in the long-term Our core business model and strategy are designed to secure sustainable
long-term growth whilst continuing to deliver strong results in the meantime,
and as such the long-term is firmly within the sights of the Board when making
all material decisions.
The business model and strategy of the Company is set out in the Annual Report
of the Company. Any amendment to that strategy is subject to Board approval.
At least annually, the Board considers a budget for the delivery of its
strategic objectives based on a three-year forecast model. The senior
management team reports financial and non-financial key performance indicators
to the Board each month, including but not limited to the measures set out in
the 'Key performance indicators' section of the Strategic report, which are
used to assess the outcome of decisions made.
The Board's commitment to keeping in mind the long-term consequences of its
decisions underlies its focus on risk, including risks to the long-term
success of the business. Our low financial leverage following our recent
acquisitions ensures that the payment of dividends to shareholders and
remuneration to employees, are balanced. This is especially important given
the ongoing cost-of-living crisis and the heightened geopolitical uncertainty.
Interests of employees Our employees are fundamental to the delivery of our strategy. We are
committed to developing our staff and maintaining the capacity to deliver
sustainable growth. How the Directors have had regard to the interests of the
Group's employees is set out in the Environmental, Social and Governance
section of the Strategic Report.
Fostering business relationships with suppliers, customers and others Engaging with our stakeholders is very much a part of our ethos as it
strengthens our relationships and helps us make better business decisions.
How the business has engaged with suppliers, clients and other counterparties
is set out in the Environmental, Social and Governance section of the
Strategic Report . Suppliers and other counterparties are typically our
appointed representative firms, mortgage and protection product providers,
affinity partners and other professional firms with which the senior
management team often has a longstanding relationship.
Where material counterparties are new to the business, checks are conducted
prior to transacting any business to ensure that no reputational or legal
issues would arise from engaging with that counterparty. The Company pays
suppliers in accordance with pre-agreed terms.
Impact of operations on the community and the environment We are proud to support our local community, building on the success of the
Mortgage Advice Bureau Foundation. More details on our engagement with local
communities and charitable activities during the year can be found in the
Environmental, Social and Governance section of the Strategic Report.
The Group's impact on the environment is limited due to the nature of the
Group's business operations, as set out in the Environmental performance and
strategy section of the Strategic report. However, the Board is committed to
limiting the impact of the business on the environment where possible.
Maintaining high standards of business conduct The Board is committed to achieving and maintaining high standards of business
conduct, corporate governance, integrity and business ethics.
A key to maintaining our reputation for high standards is to treat our
customers, partners and employees fairly at all times, and our approach to
conducting our business is focused on this outcome.
The Group's Risk and Compliance function acts as the second line of defence
within MAB to provide appropriate support, oversight and challenge to the
activity undertaken by MAB and its appointed representative firms to avoid
customer detriment and ensure good outcomes are achieved. Regular reporting is
reviewed by the Risk and Compliance Committee (RCC) and the Board Group Risk
Committee (GRC) to scrutinise activity and provide assurance to the Board that
the Company's strategic and growth objectives can be met within our risk and
compliance framework.
The Group further strengthened its internal governance framework in 2023 by
implementing sub-Committees to RCC. These include the Product & Pricing
Committee and the Resilience and Recovery Committee.
As part of the ongoing enhancements of the governance, risk and compliance
framework MAB is moving away from a solely outsourced internal audit function.
Following the appointment of an Internal Audit Manager in January 2024, MAB
will be moving to a co-source model. The Internal Audit Manager will operate
as MAB's independent assurance function within the third line of defence,
reporting directly into the Chair of the Audit Committee and will challenge
the design and effectiveness of our controls whilst using our co-source
internal audit supplier when necessary. More details on risk and our internal
controls can be found in the Governance section of the Annual Report.
MAB is focussed on maintaining a positive relationship with our regulators.
MAB is a proactive member of the Association of Mortgage Intermediaries (AMI)
and supports the trade associations' interactions with the government,
regulators and policymakers to ensure the mortgage industry meets the needs of
our customers and appointed representative firms.
The Group continuously monitors upcoming changes to regulation and is well
positioned through our membership with AMI and our relationship with the
regulator to understand the implications of and respond to, any changes. More
details on the Company's approach to Consumer Duty can be found in the
Strategic Report.
Acting fairly between members The Board is committed to openly engaging with our shareholders. We recognise
the importance of a continuing effective dialogue, whether with major
institutional investors, private or employee shareholders. Further details on
how we engage with our shareholders can be found in the Governance section of
the Annual Report.
The Board oversees an investor relations programme which involves the
Directors routinely meeting with the Company's institutional shareholders. The
programme is managed by the Company's brokers and the Board receives prompt
feedback on the outcomes of meetings.
The Board aims to be open with shareholders and available to them, subject to
compliance with relevant securities laws. The Independent Non-Executive Chair
of the Company and other Non-Executive Directors make themselves available for
meetings as appropriate and all attend the Company's Annual General Meeting
("AGM").
The investor relations programme is designed to promote formal engagement with
investors and is typically conducted after each half-yearly results
announcement. The Group also has open lines of communication with existing
investors, who may request meetings, and with potential new investors on an ad
hoc basis throughout the year, including where prompted by Company
announcements.
Shareholder presentations are made available on the Company's website. The
Company has a single class of shares in issue with all members of the Company
having equal rights.
Methods used by the Board
The main methods used by the Directors to perform their duties include:
• Board meetings or strategy days to review all aspects of the Group's
business model, performance and strategy and assess the long-term sustainable
success of the Group, as well as its impact on key stakeholders. Regular
senior management team strategy sessions also took place during the year;
• The Board meets regularly throughout the year as well as on an ad hoc
basis, as required by time critical business needs, such as acquisitions or
other investments;
• The Board is responsible for the Company's ESG activities set out in the
Strategic Report. Ben Thompson is the Group's designated executive with
responsibility for ESG;
• Specialist advice from external consultancy firms is sought where
appropriate, for instance with regards to ESG or executive remuneration;
• The Board's risk management procedures set out in the Corporate governance
report identify the potential consequences of decisions in the short, medium
and long term so that mitigation plans can be put in place to prevent, reduce
or eliminate risks to the Company and wider stakeholders;
• The Board sets the Company's purpose, values and strategy, as detailed in
the Strategic Report, and the senior management team ensures they align with
its culture;
• The Board carries out direct shareholder engagement via the AGM and the
Executive Directors attend shareholder meetings on a regular and an ad hoc
basis;
• External assurance is received through internal and external audits and
reports from brokers and advisers; and
• Specific training for existing Directors and induction for new Directors
as set out in the Corporate governance report.
Stakeholders
Engaging with our stakeholders is very much a part of our ethos as it
strengthens our relationships and helps us to make better business decisions
to enable us to deliver on our commitments. The Board is regularly updated on
wider stakeholder engagement feedback to stay abreast of customers, suppliers
and shareholders' insights into the issues that matter most to them and our
business. The below table outlines how we consider these stakeholders and how
we engage with them:
Stakeholder Why we engage How we engage and outcomes
Consumers We aim to be at the forefront of providing the best consumer outcomes. · The quality of consumer outcomes has always been central to MAB's
culture, and the implementation of the Consumer Duty has seen us further
strengthen our focus and processes in this area.
· Our enhanced focus on consumer outcomes encompasses the four
pillars of Consumer Duty: (a) products and services; (b) price and value; (c)
consumer understanding; and (d) consumer support; with an additional important
pillar we decided to add relating to customer vulnerability.
· Our digital solutions continue to improve, thus enhancing
consumers' choice of how they want to transact, whilst giving our ARs the
tools to improve their productivity.
· Customer feedback is a core component in our strategy to ensure
consumers receive a first-class experience. We continue to monitor the
feedback on the service our advisers provide via the online review company
Feefo, which has remained at a strong 4.9 (out of 5) throughout the year.
· Our website has seen a complete overhaul in 2023 and we have
significantly enhanced its content and tools offering with a view to providing
consumers with a host of useful information relating to mortgages, sustainable
living, first time buying and various other related topics.
We engage with customers via various surveys to better understand any concerns
they may have and help shape our strategies, for instance in relation to the
changing buy-to-let landscape and legislation around minimum EPC ratings.
Appointed Representatives Maintaining an active dialogue and supporting our AR partners is key to our · We use a collaborative approach in operational matters such as
business. setting goals and objectives and hold regular review meetings with each AR
firm. We also work with specialist ARs and providers to explore new ideas and
growing markets.
· We have continued to broaden our Learning & Development
offering to support our advisers' professional development. This included the
organisation of specific roadshow events as well as regular adviser "clinics"
at which knowhow and supervision matters are discussed; including the launch
of our new interactive Masterclasses.
· To support the implementation of the FCA's Consumer Duty, we
carried out a review of our processes and policies, to ensure they were
aligned with the new principle. Through our ongoing programme of training and
support, we provide ongoing guidance to AR firms to help them meet their
obligations and to ensure good customer outcomes.
· We strengthened our Academy adviser induction processes to offer
a flexible environment of self-learning with daily trainer interaction
discussion-led webinars, activities and case studies. our onboarding journeys
for advisers have been accredited by the Princess Royal Training Awards for
the content, feedback and results they have garnered.
· We have replaced our communication platform "MABChat" with a more
intuitive and flexible system ("Tribe") which allows us to increase our reach
and better tailor content to multiple audiences across all marketing channels.
· We continued to improve the technology platform at the core of
our business, based on the feedback of our ARs and advisers and trends in the
market.
· Like in the previous year, we issued an advisor-facing green
survey to identify any material changes in consumer attitudes toward green
mortgages and the energy efficiency of properties, whilst also establishing
potential knowledge gaps amongst our advisor community.
Suppliers Strong and sustainable relationships with our suppliers and providers are · We hold regular roundtable events with our product providers and
fundamental to our long-term success. lead partners where topics such as business process improvements are discussed
as a group.
· Building on the implementation of standardised procurement
Similarly, disciplined procurement practices encourage better relationships processes in 2022, we expanded our team in 2023 in order to bring sourcing
and greater efficiencies. under central control, as well as strengthen our supply chain governance.
In 2023 we also enhanced our supplier code of conduct and procurement policies
further with added emphasis on environmental matters when procuring goods and
services.
Shareholders As owners of the Group, we rely on our shareholders' support and their · We have an open dialogue with our shareholders through one-to-one
opinions are important to us. meetings, group meetings and the AGM. Discussions with shareholders cover a
wide range of topics including financial performance, strategy, outlook,
governance, environmental, social and ethical practices.
· Shareholder feedback along with details of movements in our
shareholder base are regularly reported to and discussed by the Board and
their views are considered as part of decision-making.
· We provide detailed financial reports and presentations on the
business at the half year and full year.
Employees Our employees are our most valuable asset. Their immense knowledge, skills and · We focus on creating a working environment in which people thrive
experience are key to our success and are vital to ensuring we maintain the and where our core values are communicated effectively and upheld. We believe
high standards of customer service. that a positively engaged workforce is one that is more productive, happier
and fulfilled, which in turns leads to improved performance, greater customer
satisfaction and reduced employee attrition.
· In 2023 we strengthened our People Team through the onboarding of
a dedicated Head of Employee Engagement and Development, as well as an
Internal Communications Manager.
· We launched a new internal communications platform, Chatter,
which gives us added control over published content and allows us to better
engage with our colleagues via multiple channels. "Chatter" also provides
employees with Health and Wellbeing related content as well as discounts on
numerous products.
· We created and launched our new Performance Excellence Framework,
a standardised methodology to evaluate the performance of our colleagues
taking into account the MABology DNA behaviours.
· 2023 also saw us increase focus on Diversity, Equity and
Inclusion, with a number of employees coming together to form our first ever
DEI affinity group 'U'Nity'.
· We continued to uphold our regular internal communication events
including "MABFest" and "Friday Joy".
· We started to introduce ESG-specific responsibilities and
objectives as part of job descriptions and performance reviews, starting with
the senior management team.
· As in previous years, we surveyed our colleagues twice to capture
any changes in relation to employee satisfaction, sentiment and engagement.
Communities An important component of being a good corporate citizen is to recognise the · We engage with the communities in which we operate to build trust
role we can play in supporting the communities around us and implementing and understand the local issues that are important to them. Key areas of focus
initiatives to do so. include:
- how we can support local causes and issues, create opportunities
to recruit and develop local people; and
- partnering with local charities and organisations at an
individual office level to raise awareness and funds.
· We are proud of the positive impact of our charity, The Mortgage
Advice Bureau Foundation ("Foundation"). The Foundation supports charitable
projects that create awareness amongst MAB stakeholders of the growing needs
of their local communities.
· The impact of decisions on the environment both locally and
nationally is considered, and comprises a notable focus as part of our wider
ESG related activity.
· In 2023, 16% of MAB employees took advantage of our volunteering
policy and gave some of their time to volunteer.
The Government and regulators The evolving regulatory landscape has a direct and material impact on the · We engage with the Government and regulators through a range of
day-to-day operation of our business. industry consultations, forums, meetings and conferences to communicate our
views to policy makers relevant to our business.
· We have dedicated specialist Legal, Compliance and Risk experts
with many decades of combined experience who are focussed on ensuring we meet
our regulatory obligations. Most recent examples include:
- enhancing the policies and process relating to Appointed
Representative oversight, as expected of us by the FCA; and
- Reviewing and strengthening our policies and processes as part
of the implementation of the Consumer Duty.
Climate-related financial disclosure
The Group is now within scope of the Companies (Strategic Report)
(Climate-related Financial Disclosure) Regulations 2022 ("CRFD"). Such
disclosures on how climate change will affect businesses are intended to
assist investors and wider stakeholders in understanding how climate-related
financial risks are managed.
The Board supports the initiatives of the TCFD, and has prepared the Group's
CRFD disclosures to a level of detail that are reflective of the nature of its
business.
The Group's disclosures address the following four pillars:
Governance
The Group views climate related risks and opportunities as growing in
importance. The Board is ultimately responsible for the oversight and
compliance with all applicable laws, together with assessment of the impact of
climate change on risk to the organisation in line with its reporting
obligations.
During 2023 MAB's Sustainability Committee was established to promote all
related activities of the Group and ensure appropriate governance. The
Sustainability Committee has taken a lead role in assessing the climate
related risks the Group faces, as well as implementing strategic initiatives
to mitigate such risks and meet the evolving expectations of our customers and
partners.
The Sustainability Committee members includes the following members:
· Head of ESG (Chair)
· Deputy Chief Executive Officer
· Chief Financial Officer
· Chief Risk Officer
· Head of Legal (Deputy Chair)
· Company Secretary
· Chief People Officer
· Financial Accountant
The Sustainability Committee's scope and responsibilities include:
- Identifying and disseminating MAB's Sustainability Goals across
the Group
- Developing and implementing the Project Plan(s) for achieving
these Goals and related activities ('ESG improvement plan'), including
capturing the actions for reporting on the same
- Documenting the corresponding decision making and governance steps
in pursuit of the Goals
- Ensuring that risks (including climate-related) and
vulnerabilities in achieving the Goals are identified, managed and mitigated
across the Group
- Ensuring the efficient removal of any obstructions throughout the
implementation of goals and actions
- Giving regard to the consequences of any decision in the long term
- Considering in full the need to maintain a reputation for high
standards of business conduct at all times
In terms of CRFD, the Committee reports into: (i) the Group's Audit Committee,
and (ii) the Board, whilst also ensuring that significant risks are
appropriately disseminated as part of the Group's Risk Management Framework
including the Risk and Compliance Committee (RCC) and the Group Risk Committee
(GRC). ESG more generally has now been integrated into board discussions as a
standing agenda item for its meetings.
Sustainability-related risk management and strategy
The Sustainability Committee is kept abreast of all legal and regulatory
developments in connection with ESG and climate-related issues, including
actions and reporting obligations via our dedicated In-House legal function,
and with support of our external advisers and know-how tools. Other key
colleagues also garner intelligence in relation to industry specific political
and economic considerations through active collaboration in relevant external
forums, such as MCAG ('Mortgage Climate Action Group'), an initiative by the
Association of Mortgage Intermediaries which aims to help and shape how
intermediaries can support the transition to a net zero economy.
We have ensured that climate-related risks have been identified, assessed and
quantified in consultation with colleagues from the Operational Risk function,
members of the Sustainability Committee and the Finance team through
continuous interaction as well as dedicated scenario analysis workshops with
all business functions. The tracking of climate-related risks is fully
integrated into the Group's risk management function and processes, supported
by the TriLine Governance, Risk and Compliance software which is used across
the Group. This allow us to monitor the impact and likelihood of risk events
that could materialise and affect the delivery of the Group's strategic goals,
to ensure that mitigation strategies for any risks deemed material are
implemented quickly and consistently.
The output of our climate-related risk assessment incorporates the common
risk methodology of correlating both the likelihood and impact of a risk
materialising that applies to all aspects of the Group's risk protocols.
For MAB, the key climate-related risks and opportunities are predominantly
driven by sector-related considerations, such as climate-related impact on
properties in the UK, government guidelines and legislation regarding the
energy efficiency of housing and considerations relating to the value of such
assets. Furthermore, we recognise that our supply chain plays an important
role in ensuring the seamless operation of our business, including, but not
limited to, our technology partners.
To the extent that certain climate related physical risks could materialise at
the Group's operational locations, appropriate mitigation measures are in
place. All sites are regularly monitored to ensure they are optimally
utilised and increasingly efficient (to the extent possible) from an energy
consumption and waste perspective.
In terms of transitional risks, the Group has dedicated teams focused on
interacting with key lenders and other stakeholders with a common interest in
evolving financial services to support consumers as they, and their homes,
face the challenges that climate events may cause.
The Board has not identified any climate-related scenarios that are expected
to materially impact the financial position, or resilience, of the Group. Via
the Sustainability Committee, the Group will continue to monitor all relevant
risks and scenarios.
Metrics and targets
Given the nature of the business, we consider that there are very limited
metrics or targets that reflect the climate-related risks that the Group may
face, other than physical risks in connection with its footprint from an
operating locations perspective. Those risks are appropriately tracked, and
the extent of the Group's emissions are set out in this report.
It is, however, anticipated that the Group may start to monitor the emissions
and energy performance of the properties of customers it has advised with a
view to understanding the extent of this collective impact more fully, and
informing the Group's strategy in supporting such customers in the future.
Climate risk assessment - scenario analysis
During 2023 we carefully scrutinised our practices across the Group, as well
as reflected on our interactions with customers, lenders, providers and other
parties we engage with, to assess the potential impacts of certain
climate-related scenarios occurring.
This Group-wide initiative was undertaken in conjunction with our Risk team,
the Sustainability Committee, and key colleagues from our Finance, Operations,
Sales, and Technology teams.
Our analysis (as summarised in the matrix below) has factored in those
tangible 'physical' aspects as well as strategic 'transition' elements - all
of which may present certain risks or opportunities.
Primarily, we have considered the scenario of global temperatures rising by up
to 2 degrees, as well as the potential resulting events, and the Government
strategies and policies towards carbon neutrality that may derive from this,
e.g.:
- Changes to frequency and severity of extreme weather events,
including (but not limited to) droughts and storms;
- Certain geographic locations being compromised, e.g., via
sea-levels rising, coastal erosion, fluvial floods;
- Government, market, and technology shifts; and
- Other changes to expectations of us as a business.
MAB Climate Risk Matrix
http://www.rns-pdf.londonstockexchange.com/rns/3457H_5-2024-3-19.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3457H_5-2024-3-19.pdf)
Physical Risks
Physical climate risk describes the potential for physical damage and
financial losses because of increased exposure to climate hazards.
Given the geographic locations of the Group's operations, acute risks of
climate change (flooding, storms etc.) have to date had no impact on financial
performance. No chronic (longer term) risks are considered to be relevant.
Given the locations of the offices of our subsidiaries, there is limited risk
that these will be exposed to climate-related incidents, such as flooding or
subsidence issues. We did assess the impact of possible damage to our physical
operations (both owned and leased premises) due to the climate, and whilst it
could be costly to repair any damage to our offices, appropriate insurance
policies are in place.
A business continuity plan is in place, including a switch to remote working
for office-based staff, should our physical infrastructure be compromised.
Having completed the cloud migration of our most critical IT infrastructure
throughout 2023, we have effectively reduced the risk of an adverse impact
resulting from climate-related events to our day-to-day operations further.
In terms of the harm that customers and their properties may face, we do not
believe that this will have a direct material impact on the Group's financial
position in the short or medium term. However, we are, of course, extremely
sensitive to the difficulties such events could cause, and are working on
strategies to help mitigate the impact of the UK housing stock on the
environment.
Transition Risks
Transition risks result from the relative uncertainty created by the global
shift towards a more sustainable, net-zero economy. Transition risks are very
broad in nature and can be difficult to quantify or model. Regulatory,
geopolitical, and even social pressures may create material impacts on the
operations of a business, its reputation, and the value of its assets, amongst
other things.
UK homes are responsible for a notable proportion (up to 26%) of emissions. We
therefore believe it is imperative for organisations in our industry to
actively promote the decarbonisation of the UK housing stock to contribute to
achieving the government's 2050 net zero ambitions.
It is critical that our advisers are fully aware and equipped to provide our
customers with financial advice that enables them to implement appropriate
solutions. We continue to develop our Learning & Development resources
with this in mind and work closely with a variety of industry partners in
raising awareness of the essential role the housing sector can have in
achieving net zero targets.
It is too early to have a view on the impact on the Group of any possible
material lenders' responses to climate-related risks to their assets and
operations, but it is anticipated that this could have a marginal impact on
the Group's finances, for instance where there may be a failure to evolve an
adequate product and service offering for those assets that may be most at
risk.
We are fully aware of the need to consider the goals that lenders and other
providers are setting for themselves and keep closely in touch with them in
order to allow us to respond to changing expectations. In 2023 we commissioned
further work with our ESG consultants to gain a more detailed understanding of
our carbon footprint to guide us in setting credible carbon reduction targets.
With regards to transition risk, we currently do not perceive there to be
expectations to change our current business model. Furthermore, we recognise
that with rising temperatures causing potential damage to insured customer
assets, we may be presented with additional commercial opportunities for our
insurance related businesses.
Summary
To date, no climate-related risks have been identified as potentially having a
material financial impact on the Group in the short to medium-term (i.e., up
to 5 years).
In our role as an intermediary, we believe that it is premature to try and
assess further impacts to the Group in the longer term, as they will primarily
be a consequence of the decisions by lenders and other providers in the
context of evolving government policy, technological advancements, and the
wider socio-economic changes.
In the longer term, given our close working relationships with lenders and
providers, we believe that the Group is well placed to align with such
partners in developing products and solutions that can support customers in
tackling any effect that climate change may have on their homes.
Furthermore, we are committed to the decarbonisation of UK housing stock and
this may be another critical factor that will help us retain a competitive
advantage.
No significant climate-related transactions have occurred during 2023. We
confirm that neither MAB nor any member of the Group, has been subject to any
corruption or ESG-related controversies, or enforcement action/sanctioning (or
equivalent scrutiny), in connection with its operating practices.
Environmental performance and strategy
The Companies (Directors' Report) and Limited Liability Partnerships (Energy
and Carbon Report) Regulations 2018 implement the government's policy on
Streamlined Energy and Carbon Reporting, requiring disclosure of the
environmental performance of the Group's assets through calculating the
Group's greenhouse gas ("GHG") emissions and subsequently, setting strategies
to minimise these emissions. The following information summarises the Group's
environmental performance over the year.
Methodology
GHG emissions are quantified and reported according to the Greenhouse Gas
Protocol. Consumption data has been collated and converted into CO(2)
equivalent. To collect consumption data, the Group has reviewed utility
invoicing and its staff expense software to track business mileage in employee
vehicles. We have used the UK Government's 2023 GHG Conversion Factors for
Company Reporting in order to calculate emissions from corresponding activity
data.
Our analysis includes the data collected for MAB and other Group subsidiaries:
First Mortgage, Fluent and Vita. Auxilium only has two employees and is
considered to have minimal impact. As at 31 December 2023, MAB owned 80% of
First Mortgage, 84% of Fluent, and 75% of Vita, but we have factored in 100%
of the Scope 1, Scope 2, and Scope 3 emissions for these subsidiaries.
We have calculated energy intensity in tCO2(e) per employee per year using the
average number of employees during the year. We consider this to be a good
indicator of the scale of the business and our energy intensity.
As part of the data collection, a materiality assessment was applied to
determine which indicators were relevant to the Group. We have assessed each
indicator in terms of its impact on the Group and its perceived importance to
stakeholders.
This year, we have reported our scope 2 electricity emissions both using a
location-based approach, i.e. based on grid average emissions factors, and a
market-based approach. Market-based emissions allow for a reduced emission
figure where, for example, a renewable energy tariff is used. At MAB we took
action to switch electricity suppliers to be powered by 100% renewable
electricity at our head office as well as all the First Mortgage offices. We
intend for Fluent to follow suit as soon as its existing energy contract ends.
As part of the overall refurbishment of our Head Office in 2022, we also moved
from dual fuel to a new single fuel high-efficiency Variable Refrigerant
system. This significant investment ensures we can best leverage our switch to
100% renewable electricity as well as provide a more consistent and controlled
temperature throughout the building. As such, we believe that a market-based
approach is a more relevant indicator of the Group's carbon intensity.
Reporting boundaries and limitations
The GHG sources that constitute our operational boundary for the reporting
period are:
· Scope 1: Natural gas combustion within boilers. MAB does not
provide any company cars;
· Scope 2: Purchased electricity consumption for our own use; and
· Scope 3: Fuel consumption from employee-owned cars for business
use.
Fuel connected with employee train and plane travel for business use has been
excluded as amounts are likely to be immaterial and we consider it impractical
to make estimations. Water usage has also been excluded as amounts are also
likely to be immaterial. Fugitive gases from office air conditioning are also
considered immaterial. We have estimated Scope 3 emissions based on the split
of Diesel vs. Petrol cars in the UK.
Performance
The table below shows our Scope 1, 2 and 3 emissions for 2023 and 2022 on both
a market basis and location basis.
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(http://www.rns-pdf.londonstockexchange.com/rns/3457H_6-2024-3-19.pdf)
Overall, our Scope 1 and Scope 2 emissions in kWh reduced by 5%, which is due
to efficiency measures implemented at Head Office as part of the major
refurbishment that took place in Q4 2022, including upgrading to a new highly
efficient single high efficiency heating and ventilation system. In equivalent
tonnes of CO(2), our location-based emissions were flat year-on-year due to a
7% adverse movement in the UK Government's 2023 GHG Conversion Factor for UK
electricity. Taking into account the supply of 100% renewable electricity at
Head Office and First Mortgage, our market-based Scope 1 and Scope 2 emissions
in tCO(2)e decreased by 9%, and by 11% on a per employee basis. This follows a
17% reduction year-on-year in 2022.
In terms of fuel consumption for business use, our emissions increased by 18%
compared to 2022, or 16% on a per employee basis. This is due to our
employees increasingly returning to more face-to-face meetings and
pre-coronavirus pandemic ways of working.
Sustainability is embedded into our core values and we have taken a number of
steps to reduce our impact on the environment. These are detailed later in the
Environmental, Social and Governance section.
We continue to investigate new strategies to make our business more
sustainable and through collaboration with all our stakeholders we expect to
make further positive steps in this regard in 2024.
ESG strategy and progress
The Board recognises the need to ensure that we are a responsible business
that grows sustainably and makes a positive contribution to all its
stakeholders - our customers, shareholders, employees, suppliers, and the
local communities in which we operate.
At MAB we firmly believe that strengthening our positive impact on society
will also help us become a better company, with a more engaged workforce and
sustainable competitive advantage. ESG remains a priority for MAB and in 2023
we continued to increase our investment in this area. We appointed a new Head
of ESG to drive the implementation of our improvement plan across all business
functions and continued to work with our ESG consultants to ensure ESG is an
integral part of what we do and is embedded within our broader Group strategy.
In 2022, we elected to base our roadmap for ESG improvements on the B-Corp
framework. B Corp is a widely recognised framework to assess a company's
social and environmental performance. Whilst we do not seek to achieve B Corp
certification at present, the B-Corp framework delivers best practices with
regards to demonstrating accountability for an organisation's impact on the
environment, the economy and people, and we aim to leverage it to improve our
performance across five impact areas:
- Employees;
- Community engagement;
- Environment;
- Customers; and,
- Governance.
Our ESG roadmap set out 71 individual improvement actions, a number of which
are described in detail in the following pages under the headings (i) Employee
wellbeing, diversity, equity and inclusion ("DEI"); (b) Community engagement
and charitable activities; and (iii) Minimising our impact on the environment.
The table below sets out a summary of some of the key areas we have progressed
throughout the year under ESG.
Employees · Significantly strengthened our internal Learning and Development
offering
· Improved our employee engagement methods by hiring an Internal
Communications Manager and introducing a new engagement platform
· Strengthened our internal policies including maternity leave,
flexible working, and in relation to menopause, neurodiversity and bereavement
· Launched an Employee DEI group to help us devise our long-term
strategy in this area, MAB U'Nity
· Introduced PEx, a new Performance Excellence and review process
Community · Improved our volunteering policy
· Formalised our financial commitment to the MAB Foundation
· Established a process that allows us to donate our decommissioned
IT equipment to charity
Environment · Introduced new supplier policies and enhanced our supplier code
of conduct to ensure environmental stewardship throughout the supply chain
· Further reduced our carbon intensity due to the installation of a
highly efficient single fuel heating and ventilation system and Head Office in
late 2022
· Actively promoted the role of retrofit in helping to decarbonise
the UK housing stock
Governance · Incorporated social and environmental impact in our mission
statement and vision
· Created a Sustainability Committee which reports into the Audit
Committee, and feeds into the Group Risk Committee.
· Successfully implemented the Consumer Duty into our operations
· Added ESG as a standing agenda item to Board meetings
· Introduced ESG related objectives to senior management roles
· Linked senior management renumeration to ESG performance
Customers · Strengthened the content on our Green Hub in relation to
sustainable living and the role of housing in climate change
· Continued to achieve outstanding customer satisfaction ratings of
4.9 (out of 5) on Feefo, resulting in us being awarded with the "Platinum
Trusted Service" and "Exceptional Service" awards
· Introduced a new communications platform "Tribe" to enhance the
way we communicate with our ARs and advisers
We progressed the majority of the identified 71 actions, with a broad spread
across all categories.
Employee wellbeing, diversity, equality and inclusivity
Our employees are our most valuable asset. Their immense knowledge, skills and
experience are key to our success in delivering our business plan and are
vital to ensuring we maintain the high standards of customer service and
satisfaction which underpin the provision of quality advice. We focus on
creating a working environment in which our diverse team can thrive and where
our core values are communicated effectively and upheld. We believe that a
positively engaged workforce is one that is more productive, happier and
fulfilled, which in turns leads to improved performance, greater customer
satisfaction and reduced employee attrition.
Employee wellbeing (Financial, Emotional and Physical)
In January 2023 we were delighted to re-open our newly refurbished
headquarters. Employee wellbeing and Diversity, Equity and Inclusion were key
considerations during the design phase of this project. We gathered extensive
feedback from our employees to understand their diverse requirements. We now
have a state-of-the-art office space that caters for hybrid working and offers
a wide range of working environments with collaborative spaces, pods and
booths, and quiet zones, as well as fixed desking and agile seating so all
employees have the option to work in an environment that suits their needs.
This has proved an enormous success.
We have now added a designated wellbeing room, which is available for
employees to use when they require a moment away from their work or for
employees to participate in prayer. The room is also stocked with a range of
items to support employees - yoga mats, fans, cold water and a resource
library containing information from various health and wellbeing
organisations, as well as books on a range of relevant wellbeing topics.
As in previous years, we ran a comprehensive programme of events and awareness
campaigns throughout the year to promote a healthy lifestyle, incorporating
physical, mental and financial wellbeing. We offered support to our employees
on a wide range of topics, via both online and in-person events. We celebrated
Employee Appreciation Day with an early finish and letter box brownies in
recognition of everyone's hard work.
Once again, we partnered with a number of charities to bring their expertise
inhouse, marking occasions such as Mind's 'Time to Talk Day' in the Hub;
hosting a cardiopulmonary resuscitation (CPR) training session with British
Heart Foundation; raising awareness during Men's Health Week with Prostate
Cancer UK, and of course, everyone's favourite the Great MAB Bake Off for
MacMillan Cancer Care.
In October, we celebrated Menopause Awareness Month with the publication of a
Menopause Support Policy, for those experiencing peri-menopausal or menopausal
symptoms. We ran an internal awareness campaign and organised training for ten
Menopause Champions, who are now available to support and signpost employees
that need help.
The mental health of our workforce continued to be a key focus for us this
year. As well as the internal awareness campaigns, our team of Mental Health
First Aiders held a number of drop-in sessions in our wellbeing room, and we
rolled out our Employee Assistance Programme, which includes a 24/7 telephone
and text helpline, to our Appointed Representative network.
In addition to this, we introduced a policy offering support to those with
additional learning needs, alongside a Neurodiversity Policy to support our
neurodivergent colleagues and offer guidance to their managers. We also
updated our Bereavement and Compassionate Leave Policy, to offer employees a
minimum of ten days paid leave, to ensure they are taking the time they need
to grieve and process events.
2023 was a difficult year financially for many, so we ran sessions to support
our employees, including a financial education webinar with AAG Wealth
Management; a first-time buyer's clinic; a mortgage advice surgery; and
internal benefits webinars.
We also brought forward the December and January pay dates to help employees
manage their expenses around the end of year season.
One important project in 2023 was the introduction of our new intranet
platform, Chatter. As well as a tool for engaging and communicating with
employees, the site contains a discounts platform to help with the cost of
living and a dedicated wellbeing area that offers online exercise classes,
healthy recipes and general wellbeing advice.
To best leverage the new platform, our People team also recruited an Internal
Communicatrions Manager who is responsible for all communications across the
business, ensuring a coherent approach to how we communicate and maximum
employee engagement. The introduction of Chatter has been a great success and
has made a significant difference to how we communicate as a business.
Recognising the importance of maintaining a healthy work life balance, we
continued to offer a hybrid working approach in 2023, and updated our Flexible
Working Policy to introduce the concept of "core hours", which enables
employees to flex their start and finish times to suit their personal
preferences and priorities.
Diversity, Equity and Inclusion (DEI)
MAB is committed to the principle of equal opportunity in employment,
regardless of a person's race, creed, colour, nationality, gender, age,
marital status, sexual orientation, religion or disability. Employment
policies are written in gender neutral language and are fair, equitable and
consistent with the skills and abilities of employees and the needs of the
business. All of our job advertisements have been updated to reflect this
approach to DEI, and we encourage applicants from a diverse talent pool to
apply.
Following the launch of our "MABology" in April 2021, we have been working
hard to embed the Mission, Vision and DNA behaviours into everything we do at
MAB. This has helped us create the foundations of a diverse and inclusive
working environment, by encouraging employees to take pride in who they are,
celebrate the uniqueness of others and to be open and honest. In 2023 we
continued to promote the MABology values through our Team Based Embedding
initiative, a series of events which provided the opportunity for MAB teams to
fully immerse themselves into the MAB DNA and underpinning behaviours - all
aimed at breaking down silos and creating high performing teams. Over 180
colleagues attended a Team Based Embedding event in 2023, with further
sessions planned for 2024.
Throughout 2023 we continued to seek regular feedback from our workforce and
conduct regular Employee Engagement Surveys. For the first time, we included
DEI specific questions in our most recent survey. 88% of respondents agreed
that they had a good understanding of DEI and 73% believed that MAB was
committed to promoting it.
Over the last 12 months we focused on reviewing our policies, processes and
initiatives through a DEI lens. To support working parents, we increased our
paid Maternity, Paternity, Adoption and Shared Parental Leave offering by two
weeks. We also introduced two paid "guilt free days" for parents returning
from Family Leave, to enable them to better manage the transition back to
work.
We continue to advertise all our vacancies internally, making use of the
additional communication tools now available to us and have simplified the
internal application process to encourage more internal applicants. We are
pleased with the impact this is having and last year we saw 20% of new Head
Office roles filled via internal applicants.
In 2023 we also set up a new initiative, MAB U'nity, which encompasses a
diverse group of 20 with the objective of furthering MAB's DEI agenda, and
fostering a workplace culture that celebrates diversity, ensures equality and
promotes inclusion. This will be achieved by breaking down barriers,
championing fair treatment for all and embracing diversity.
Based on feedback from our employees, we continued to offer a mixture of
virtual and in person social events, to ensure that everyone feels included.
We continued to foster employee connections through a range of social events
such as Coffee Roulette, online quizzes and onsite events at our head office.
As MAB continues to grow, and particularly in a hybrid/remote set up, it is
paramount to maintain an environment where employees are encouraged to meet,
interact and share ideas and knowledge with each other.
Learning and Development ("L&D")
The Group is committed to developing its employees to enhance our capacity to
deliver sustainable growth and maximise workforce engagement and employee
retention.
In 2023, our new L&D initiatives included a new approach to our induction
programme for new starters or those employees that are returning from
long-term leave. Our new Induction Day kicks off with a tour of our head
office, followed by a series of briefings including on the Group's history,
its Mission, Vision and DNA, and our wellbeing programme. It also includes an
interactive quiz as well as an introduction to our ESG programme. 60 new
colleagues attended the Induction Day throughout 2023, with the initiative
achieving an overall satisfaction rate of 4.7 / 5.0.
2023 saw the launch of the "Mentoring Gang", a group created to provide the
opportunity for colleagues to grow and develop their career goals. We
currently have 16 mentors within MAB from a variety of roles and intend to
extend this further in 2024 to include professional coaching too.
Developing our internal talent remains a priority, and we pride ourselves for
providing a culture that encourages both personal and professional growth.
Throughout 2023 there were 43 internal promotions at MAB. Our Learn to Lead
programme remains popular. Consisting of a wide range of topics from effective
communication to conflict resolution and emotional intelligence to DEI, this
internally designed programme is an important means for us to develop talent.
Nine aspiring leaders graduated in 2023.
We also have a growing number of colleagues undertaking professional
qualifications through taking advantage of the Apprenticeship Levy, and have
seven colleagues completing the bespoke Level 3 and Level 5 Women in
Leadership Apprenticeship. These are tailored programmes which aim to enable
career progression and nurture women into leadership roles and senior
positions, and forms part of our strategy to empower women within MAB.
Overall, we won four awards in 2023 for our initiatives in DEI and L&D:
· Barclays D&I Awards - Best Inclusive Culture;
· MoneyAge Mortgage Awards - Diversity Initiative of the Year;
· Women's Leadership Association Awards - Woman in Management; and
· Money Marketing Awards - Diversity & Inclusivity Champion.
Community engagement and charitable activities
Corporate Social Responsibility is very important to the Group, and we strive
to maximise our positive impact on the communities in which we operate.
Throughout 2023, MAB continued to fund and provide staffing resources to the
Mortgage Advice Bureau Foundation, our grant-giving charity. Established to
coordinate MAB charitable activity, the Foundation aims to create sustainable,
positive change within the local communities of our staff and customers.
Issuing grants from £500 to £5,000 to local community projects the
Foundation engages with MAB's employees, customers and business partners to
put forward projects for consideration.
The grant giving purposes remain unchanged as the Foundation looks to support
charitable activities in the three following areas:
1. Health and Wellbeing - projects that help communities address health
and wellbeing issues so that everybody's quality of life can be improved.
2. Preventing and relieving poverty - projects to support communities
through financial hardship and social exclusion.
3. Environmental and conservation - practical and educational projects to
help communities make green choices and reduce their carbon footprint.
Funding applications are only accepted when nominated by a MAB employee, a
business partner or one of our customers.
During 2023:
- the Foundation received 68 nominations for funding, completing on
13 applications which received funding from the Foundation of £47,405, and
- the Foundation helped these 13 projects raise a total of £139,149
through its partnership with Crowdfunder.
This meant that for every £1 donated by the Foundation a further £2 was
raised. This is a great outcome which was achieved in part by encouraging
other grant funders to support these projects, including British Airways,
M&S, Sport England and Aviva.
Trustees
The Trustees responsible for the management and administering of the trust
according to its purpose are:-
Andy Frankish CEO Trustee
Lucy Tilley Chair Trustee Chief
Financial Officer at Mortgage Advice Bureau
Peter Brodnicki
Trustee Chief Executive Officer at Mortgage Advice
Bureau
Ali Crossley Trustee
Managing Director, Distribution at Legal and General
Esther Dijkstra Trustee
Managing Director, Intermediaries at Lloyds Banking Group
Fabien Holler Trustee
Company Secretary at Mortgage Advice Bureau
Ben Thompson
Trustee Deputy Chief Executive Office at Mortgage
Advice Bureau
Tranche Funding
Throughout 2023 the Foundation reviewed its funding model and in December 2023
it moved to a tranche funding model. By making a tranche of money available
for charities to apply for by a fixed end date, the Foundation Committee will
be able to review a larger number of applications for funding at the same
time, thus ensuring that it can apply its robust scoring criteria consistently
to select the most appropriate projects, maximise funding for the best
projects, and better control the funds available to the Foundation.
Award Winning
We are delighted that in November 2023 the Mortgage Advice Bureau Foundation
received an industry award in recognition of its Excellence in Philanthropy
and Community Service. The judges commented on how MAB had set standards for
other businesses to follow in demonstrating a commitment to Corporate Social
Responsibility.
Case Study - Printed by Us
Part of The Archer Project, which has a proven history of transforming the
lives of the vulnerable and homeless in Sheffield and the wider region,
Printed by Us is a social enterprise that employs people, in a supported
environment, who have experienced homelessness or similar adversities and most
need help and understanding. Printed by Us uses the craft of screen-printing
to give these vulnerable people the opportunity to learn new skills, build
confidence and thrive.
The Project was nominated by one of the MAB business owners in Sheffield who
has long worked with The Archer Project, volunteering in their soup kitchen.
The project needed new equipment to further develop the programme and set a
target of £10,000 which they achieved with the help of a £5,000 grant from
the Foundation.
Case Study - Flamingo Chicks
Flamingo Chicks is a multi-award-winning charity and an inclusive community,
giving disabled or ill children the opportunity to explore movement through
dance. Since the coronavirus pandemic, they have experienced a surge in demand
for their support.
Flamingo Chicks delivers ground-breaking, inclusive programmes designed to
support disabled children and families through five core pillars:
- inclusive dance classes;
- peer-to-peer support;
- intergenerational volunteering;
- youth-led advocacy; and
- global outreach.
Flamingo Chicks was looking to raise £20,000 to increase its programme's
outreach to more children and shine a spotlight on the importance of
supporting disabled children's mental and physical health.
Nominated by the MAB business owners in Bristol, the project secured a £5,000
grant from the Foundation and through the Crowdfunder platform it vastly
exceeded its fundraising target, raising over £34,000. This included joint
grant funding from the British Airways Foundation.
Employee volunteering
In addition to grant funding the Foundation also assists in organising
volunteering days with the projects it supports. MAB gives its employees two
fully paid days per year to work with charities of their choice, and the
Foundation helps link up the projects that need support with employees. As
well as onsite work, the Foundation also coordinates specialist support that
MAB staff can carry out from their desks including help with IT, project
management, content writing, marketing and social media. This helps deliver
support faster and across a greater number of staff.
In 2023, we greatly increased the number of organised volunteering events,
enjoying good team participation rates and great feedback from all volunteers.
These events included:
- a mock interview day at a school with Making the Leap, a
London-based charity that seeks to improve social mobility by raising the
aspirations of, and increasing opportunities for, young people;
- helping Derby Kid's Camp turn an empty field into a huge summer
camp. Derby Kid's Camp is a children's charity that provides free holidays to
Derbyshire-based young people most in need of a break; and
- supporting a local children's mental health charity, Bridge the
Gap, with its social media strategy and content creation.
In November 2023, a group of MAB employees spent a day volunteering at
Treetops Hospice, a charity that provides nursing care and emotional support
for adults and their families in Derbyshire and Nottinghamshire.
Our group of volunteers spent the day at the Treetops Hospice grounds,
clearing leaves from the outdoor spaces and redecorating the internal
corridors. Their hard work was rewarded with homemade cake and a tour of the
brand new building used for counselling and support activities for young
people and children that was recently constructed as part of DIY SOS for
Children in Need.
As in previous years, one of the highlights of our volunteering calendar is
helping Derby City Mission with their Christmas Gift Appeal, helping to
provide Christmas presents to Derby's most vulnerable children.
Overall, 16% of MAB employees volunteered throughout the year.
Other charitable activities
In 2023, in addition to its commitment to the Mortgage Advice Bureau
Foundation in excess of £40,000, MAB helped raise the following amounts for
charitable donations:
- £16,334 as part of the MAB Golf Day;
- £8,429 as part of the MAB Awards; and
- £1,792 as part of the Derby Marathon.
Fluent also made charitable donations over the year totaling £40,271 which
included £33,205 to the Education for Children Foundation, whose mission is
to break the cycle of poverty through education, empowerment and enterprise at
the heart of the community. Education for Children Foundation works in
partnership with disadvantaged families, children and young adults in
Guatemala and Central America.
Finally, MAB now donates its decommissioned mobile phones and laptops to help
the local community. Once the devices have been thoroughly wiped and factory
reset, they are donated to Derbyshire Refugee Solidarity, where they are
redistributed to people who otherwise may not be able to take advantage of
modern technology.
Minimising our impact on the environment
Reducing our environmental footprint remains an important priority for MAB,
despite our overall footprint being limited due to the nature of our
operations as a mortgage intermediary business.
In January 2023 we re-opened our head office after carrying out a major
refurbishment project. Minimising our environmental impact was a central
consideration for this project, as was sourcing products from local suppliers
where practical, and repurposing furniture.
As part of this refurbishment, we installed a new single fuel high efficiency
heating and ventilation system, as well as new high efficiency LED lighting
operating 'on motion' sensor activation throughout the building. These
measures contributed to reducing the Group's Scope 1 and Scope 2 emissions
intensity by a further 11%.
We no longer use a gas supply in our head office, and 100% of our electricity
at our head office and First Mortgage offices comes from renewable sources. We
commissioned two EPC reports, before and after the refurbishment, with our
energy performance rating having improved from 84 (D rating) to 39 (B rating).
We will continue to work with specialist consultants throughout 2024 to
improve further our carbon reporting framework based on science-based targets
and drive the Group's sustainability agenda.
In 2023, we created a supplier code of conduct which outlines our expectations
in terms of our suppliers' commitments to environmental and ethical standards.
All new suppliers are asked to commit to adhering to our code of conduct and
we are working with our already established supply chain to do the same
retrospectively.
Where possible, we endeavour to work with local (<50 miles) suppliers in
order to minimise the impact of transport-related emissions.
We continue to operate a hybrid working model that allows our colleagues to
work from home up to two days per week, and the use of electric vehicles is
encouraged through our Electric Vehicle chargers at head office.
Waste reduction
MAB continues to monitor the production of waste from its facilities and our
waste management supplier only works with "Zero waste to Landfill" partners in
its own supply chain. Effectively this means that 95% of our general waste is
used for energy production, with the remaining 5% being recycled
appropriately. This includes paper, ink and cardboard and we also have
recycling stations where our colleagues can discard used batteries.
The adoption of new technology and processes can be an important waste
minimisation factor, and improvements to our MIDAS technology platform and to
the structure of our compliance function have meant ARs, advisers and their
clients are required to print fewer documents. Our focus on reducing the level
of printing undertaken by the Group continues.
We no longer use plastic mineral water bottles or single use plastic drinking
cups.
Promoting energy efficient homes
With an estimated 20%+ of carbon emissions in the UK being attributed to the
housing sector and given the UK Government's Net Zero strategy by 2050, we
recognise that we are uniquely positioned to influence change and have a
significant positive impact on the UK's overall carbon footprint.
In 2023 we continued our work with our adviser community to ensure that all
our advisers are kept abreast of legislation changes and industry concerns,
whilst working with our lending partners to collaborate on what the future
product landscape might look like in this respect. We are currently in the
process of building a new proposition that addresses the financing needs of
customers who wish to explore energy efficiency retrofit options, and also
helps them to navigate the complexities of sourcing and installing the right
equipment by having a nationwide solution under which customers can make the
desired environmentally-friendly changes to their homes.
Our Head of ESG joined the Mortgage Climate Action Group's steering committee
in July 2023, an initiative by the Association of Mortgage Intermediaries
designed to help raise awareness of this area. We also continued to enhance
the content of our Green Hub to promote cost effective ways to reduce utility
bills and educate consumers on the subject of "Green Mortgages".
.
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 2023 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 2023 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 material and significant accounting policy information.
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 examined the existing agreement of the Revolving Credit Facility
and reviewed the nature of the facility, repayment terms, covenants and
attached conditions. We assessed its continued availability to the Group
through the going concern period and checked the completeness of management's
covenant assessment;
· We verified the mathematical accuracy of the going concern model for
the period to 31 December 2025;
· We considered whether there were any indicators of other sources of
finance not considered by Directors in their assessment;
· 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 assessed the appropriateness of the duration of the going concern
assessment period to 31 December 2025 and considered the existence of any
significant events or conditions beyond this period based on our procedures on
the Group's cash flow forecasts and from knowledge arising from other areas of
the audit;
· We have reviewed publicly available information on the housing 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.
· We reviewed the disclosures made relating to going concern included
in the financial statements in order to assess the appropriateness of the
disclosures and conformity with reporting standards.
The Directors' assessment forecasts that the Group will maintain sufficient
liquidity throughout the going concern assessment period in the base case
scenario and will not breach banking covenants. Under the Group severe but
plausible scenario, which includes a significant reduction in performance
throughout the going concern period, liquidity remains and there is no breach
of covenants.
We have not identified any climate related risks that would materially impact
the Group's forecasts to 31 December 2025.
Controllable mitigating actions available to management over the going concern
assessment period include reductions to non-declared dividend payments.
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% (2022: 99.1%) of Group profit before tax
Coverage 100% (2022: 99.9%) of Group revenue
99.8% (2022: 99.4%) of Group total assets
2023 2022
Revenue Recognition ✔ ✔
Clawback Liability ✔ ✔
Valuation of put/call options over the purchase of minority interests in ✔ ✔
subsidiaries
Acquisition of subsidiaries ✖ ✔
Goodwill Impairment assessment in relation to Fluent CGU ✔ ✖
Acquisition of subsidiaries is no longer considered a KAM because there were
Key audit matters no subsidiary acquisitions made during the year.
Materiality Group financial statements as a whole
£1,036,000 (2022: £1,006,000) based on 5% of average profit before tax for
the last three years (2022: 5% Profit before tax).
Materiality
Group financial statements as a whole
£1,036,000 (2022: £1,006,000) based on 5% of average profit before tax for
the last three years (2022: 5% 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 subsidiaries. The
significant components were determined to be MAB Limited and MAB Derby Limited
together '(MAB Core'), First Mortgage Direct Limited ('FMD') and Project
Finland Topco Limited and its subsidiaries ('Fluent Group'). 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.
Climate change
Our work on the assessment of potential impacts of climate-related risks on
the Group's operations and financial statements included:
· Enquiries and challenge of management to understand the actions
they have taken to identify climate-related risks and their potential impacts
on the financial statements and adequately disclose climate-related risks
within the annual report;
· Our own qualitative risk assessment taking into consideration the
sector in which the Group operates and how climate change affects this
particular sector;
· Review of the minutes of Board and Audit Committee meeting and any
other relevant party and other papers related to climate change and performed
a risk assessment as to how the impact of the Group's commitment as set out in
the Strategic report may affect the financial statements and our audit.
The Group has explained in the Strategic report how they have reflected the
impact of climate change in their financial statements. The Group did not
identify any climate risk that would materially impact the carrying values of
the group's assets or have any other impact on the financial statements. These
disclosures also explain where governmental and societal responses to climate
change risks are still developing, and where the degree of certainty of these
changes means that they cannot be taken into account when determining asset
and liability valuations under the requirements of UK adopted international
accounting standards. Our audit effort in considering the impact of climate
change on the financial statements was focused on evaluating management's
assessment of the impact of climate risk, physical and transition, and their
climate commitments. As part of this evaluation, we performed our own risk
assessment to determine the risks of material misstatement in the financial
statements from climate change which needed to be considered in our audit. We
also challenged the Directors' considerations of climate change risks in their
assessment of going concern and viability and associated disclosures. Where
considerations of climate change were relevant to our assessment of going
concern, these are described above
Based on our risk assessment procedures, we did not identify there to be any
Key Audit Matters materially impacted by climate-related risks.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matter How the scope of our audit addressed the key audit matter
Revenue recognition The Group's revenue comprises of commissions (including procuration fees), We performed the following procedures:
client fees, protection and general insurance and other income.
Management's associated accounting policies are outlined in note 1 and with
• We assessed whether the Group's revenue recognition policies are
the detailed disclosure in note 3 to the financial statements. Group total revenue £240m (2022: £231m). in accordance with the applicable accounting standards.
Revenue recognition is a significant audit risk as it is a key driver of the
return to investors and there is a risk that there could be manipulation,
fraud or omission of amounts recorded in the system. This risk is applicable • We performed walkthroughs of each significant stream of revenue
for all revenue streams across the group as detailed above. and confirmed the existence of key controls around the recognition of revenue.
For these reasons we considered revenue a key audit matter.
• For a sample of transactions, we independently obtained direct
confirmations of the revenue and transactions amounts from third party
providers.
• For a sample of commission income, we obtained the third-party
reports supporting the transactions and traced back to cash receipts.
• We recalculated a sample of the procuration fees using third party
reports obtained independently and agreed to cash received.
• We agreed a sample of client fees to providers' statements and
cash receipts.
• We performed cut-off testing for the period before and after the
year end with reference to underlying documents such as rebate reports,
reclaims files and evidence of management's assessment of the point of revenue
recognition.
• We performed full and specific scope audit procedures over this
risk area in components which have revenue
Key observations:
Based on the procedures performed, we have not identified any material
misstatements in the revenue recognised in the year.
Clawback liability The clawback liability is an estimate of the commission received up front that Our procedures included the following:
is repayable on life assurance policies that may lapse in a period of up to
Management's associated accounting policies with detail about judgements in four years following inception of the policies. • We assessed whether the accounting treatment adopted for the
applying accounting policies and critical accounting estimates are outlined in
clawback liability was in line with the applicable accounting standard
note 2 with the detailed disclosure in note 23 to the financial statements. The Group has recognised a clawback liability of £10.3m (2022: £8.0m). requirements.
There is significant risk of material misstatement due to fraud or error as • We evaluated the design and implementation of the financial
result of the estimation uncertainty inherent in the valuation of the clawback reporting process relevant for the determination of the clawback liability.
liability.
• We tested the appropriateness of the model and its logical
The valuation of clawback liability is subject to significant judgements and application and then independently recalculated the results.
estimates with specific reference to the determination of the Lapse and
Recovery rate applied. • We compared the data relating to unearned commission and
assumptions such as future lapse rates and lapse rate history to third party
The risk is over the clawback liability recorded in the three significant reports.
components: MAB Core, FMD and Fluent.
• For other inputs and assumptions such as age profile of the
commission received, the success of the Appointed Representatives in
preventing lapses and/or generating new income at the point of a lapse, we
validated these to management's supporting analysis of the Group's actual
experience based on data gathered from third party providers' statements.
• We reviewed the historic payback patterns and performed testing on
the historical accuracy of management's estimate by comparing clawbacks during
the current financial year to the prior year provision raised.
Key observations:
Based on the work performed we have not identified any material misstatement
in the clawback liability.
Valuation of put/call options over the purchase of minority interests in The acquisition of Fluent in 2022 had put and call options attached to the Our procedures included the following:
subsidiaries purchase of the minority interests exercisable at a future date. The valuation
of the put and call is driven by inputs that are subject to management's • We evaluated the design and implementation of the financial
Refer to note 5 to the financial statements. judgement and estimation uncertainty. reporting process relevant for the Valuation of put/call options.
We have identified a significant risk of material misstatement due to error • We tested that the valuation methodology is appropriate.
over the remeasurement of the redemption liability.
• With the assistance from our valuation experts, we assessed the
The cash flow projections (including the EBITDA projections) used in the appropriateness of the assumptions being cash flow projections and discount
remeasurement of the redemption liability are subject to management's rate against the ones adopted by management as part of the impairment of
judgements. goodwill assessment where relevant.
The Group had a redemption liability fair value gain of £4.5m (2022:£nil) of • We assessed the reasonableness of cashflow forecasts and its
which £4.7m relates to Fluent (loss of £0.2m relates to Auxilium put and assumptions by reviewing the governance process in light of the potential
call options). impact of macro-economic factors.
• We reviewed the accounting treatment to check that it is in line
with accounting standards (IFRS 2/IAS 19 and IFRS 9).
Key observations:
Based on the work performed we have not identified any material misstatement
in the redemption liability.
Goodwill impairment assessment in relation to Fluent CGU The Carrying value of Goodwill is £53.9m (2022: 53.9m). Of this amount, We performed the following procedures:
£37.0m relates to the Fluent cash generating unit ('CGU').
Refer to note 2 with the detailed disclosure in note 14 to the financial
• With the involvement of our valuation experts, we assessed the
statements. We identified a significant risk of fraud and error on the recoverability of appropriateness of the valuation methodology applied and key assumptions.
the goodwill relating to Fluent CGU because it's trading performance was
significantly below budget.
In determining the recoverable amount, the value in use calculation is subject • We inspected the Group's approved strategic plans.
to estimation uncertainty due to the significant estimates and judgements
involved in determining the discount rate, Long-term growth rates ('LTGR'),
and the future cashflows (including EBITDA projections).
• We compared the Group's key assumptions to externally derived data
As a result, we concluded this was a key audit matter. and other macro-economic factors such as interest rates and inflation rates.
• We performed a sensitivity analysis which considered reasonably
possible changes in the key assumptions and their impact on the valuation.
• We independently developed our own estimate of a range of
reasonably possible discount rate, EBITDA projections and revenue growth rate
for the CGU, based on external market data and our understanding of the
business, and compared this to what was used in the model.
Key observations:
We have not identified any indicator that would suggest the assumptions and
judgements applied in the valuation model are unreasonable.
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 based on 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
2023 2022 2023 2022
£m £m £m £m
Materiality £1,036,000 £1,006,000 £332,000 £268,000
Basis for determining materiality 5% of average profit before tax for the last three years 5% of profit before tax, excluding write off of investment in non-listed 5% of Total investments
equity shares
Rationale for the benchmark applied Average profit before tax was determined to be the most appropriate benchmark Profit before tax was determined to be the most appropriate benchmark as the As the Parent Company is a holding company, it was considered appropriate to
as the Group is listed with profitability seen as the main interest of Group is listed with profitability seen as the main interest of investors. determine materiality based on Total investments.
investors.
Performance materiality 2023 2022 2023 2022
£777,000 £754,000 £249,000 £201,000
Basis for determining performance materiality 75% of materiality based on our risk assessment and our assessment of expected
total value of known and likely misstatements.
Component materiality
We set materiality for each significant component of the Group, including the
parent company, based on a percentage of between 31% and 95% (2022: 43% and
79%) of Group materiality dependent on the size and our assessment of the risk
of material misstatement of that component. Component materiality ranged from
£237,000 to £738,000 (2022: £436,515 to £792,000). In the audit of each
significant component, we further applied performance materiality levels at
75% (2022: 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 £51,000 (2022: £20,000). 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 Annual 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.
Independent auditor's report to the members of Mortgage Advice Bureau
(Holdings) plc
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 report and Directors' report In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic report and the Directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the Strategic report and the Directors' report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent
Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic report or the Directors'
report.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the Parent Company,
or returns adequate for our audit have not been received from components 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
based on 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:
Non-compliance with laws and regulations
Based on:
• Our understanding of the Group and the industry in which it
operates;
• Discussion with management and those charged with governance,
legal counsel and Audit Committee;
• Obtaining and understanding of the Group's policies and procedures
regarding compliance with laws and regulations.
We considered the significant laws and regulations to be IFRS as adopted by
the UK, UK tax legislation, Companies Act 2006 and the AIM Listing Rules.
The Group is also subject to laws and regulations where the consequence of
non-compliance could have a material effect on the amount or disclosures in
the financial statements, for example through the imposition of fines or
litigations.
We identified such laws and regulations to be the health and safety
legislation and the Anti-Bribery Act including fraud, corruption and bribery.
Our procedures in respect of the above included:
· Review of minutes of meetings of those charged with governance for
any instances of non-compliance with laws and regulations;
· Review of correspondence with regulatory and tax authorities for any
instances of non-compliance with laws and regulations;
· Review of financial statement disclosures and agreeing to supporting
documentation;
· Involvement of tax specialists in the audit;
· Review of legal expenditure accounts to understand the nature of
expenditure incurred.
Fraud
We assessed the susceptibility of the financial statements to material
misstatement, including fraud. Our risk assessment procedures included:
· Enquiry with management and those charged with governance also
considered Audit Committee regarding any known or suspected instances of
fraud;
· Obtaining an understanding of the Group's policies and procedures
relating to:
o Detecting and responding to the risks of fraud; and
o Internal controls established to mitigate risks related to fraud.
· Review of minutes of meetings of those charged with governance for
any known or suspected instances of fraud;
· Discussion amongst the engagement team as to how and where fraud
might occur in the financial statements;
· Performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material misstatement due
to fraud;
· Considering remuneration incentive schemes and performance targets
and the related financial statement areas impacted by these;
Based on our risk assessment, we considered the areas most susceptible to
fraud to be revenue, management override of controls and clawback liability.
Our procedures in respect of the above included:
· Testing a sample of journal entries throughout the year, which met a
defined risk criteria, by agreeing to supporting documentation;
· Assessing significant estimates made by management for bias;
· 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 recognition
and in accounting estimates such as the clawback liability and goodwill
impairment assessment 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.
· At a component level, our full and specific scope component audit
team's procedures included inquiries of component management, journal entry
testing and focused testing, including in respect of the key audit matter of
revenue recognition.
We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members who were all deemed to have
appropriate competence and capabilities 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
(http://insite.bdo.co.uk/sites/audit/Documents/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.
David Gonnelli (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
19 March 2024
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 2023
Note
2023 2022
£'000
£'000
Revenue 3 239,533 230,820
Cost of sales 4 (169,371) (167,873)
Gross profit 70,162 62,947
Administrative expenses (46,674) (36,000)
Share of profit of associates 15 848 712
Costs relating to First Mortgage, Fluent and Auxilium options 5 (4,277) (1,999)
Amortisation of acquired intangibles 5 (5,160) (2,582)
Acquisition costs 5 (159) (2,755)
Restructuring costs (539) -
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
Gain on fair value measurement of contingent consideration 15 - 884
Loss on fair value measurement of derivative financial instruments 15 (190) (18)
Operating profit 6 14,011 18,483
Finance income 8 291 108
Finance expenses 8 (2,610) (1,238)
Gain on remeasurement of redemption liability 5 4,486 -
Profit before tax 16,178 17,353
Tax expense 9 (3,719) (4,574)
Profit for the year 12,459 12,779
Total comprehensive income 12,459 12,779
Profit is attributable to:
Equity owners of Parent Company 13,467 12,237
Non
Non-controlling interests (1,008) 542
12,459 12,779
Earnings per share attributable to the owners of the Parent Company
Basic 10 23.6p 21.8p
Diluted 10 23.5p 21.6p
All amounts shown relate to continuing activities.
The notes that follow form part of these financial statements.
Consolidated statement of financial position
as at 31 December 2023
Note 2023 2022
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 12 5,799 6,128
Right of use assets 13 2,283 3,872
Goodwill 14 53,885 53,885
Other intangible assets 14 51,474 55,823
Investments in associates and joint venture 15 12,301 11,387
Derivative financial instruments 15 302 320
Trade and other receivables 18 353 831
Deferred tax asset 24 719 1,797
Total non-current assets 127,116 134,043
Current assets
Trade and other receivables 18 9,321 10,288
Cash and cash equivalents 19 21,940 25,462
Total current assets 31,261 35,750
Total assets 158,377 169,793
Consolidated statement of financial position
as at 31 December 2023 (continued)
Note 2023 2022
£'000 £'000
Equity and liabilities
Share capital 25 57 57
Share premium 26 48,155 48,155
Capital redemption reserve 26 20 20
Share option reserve 26 6,045 4,511
Retained earnings 26 15,921 15,154
Equity attributable to owners of the Parent Company 70,198 67,897
Non-controlling interests 4,211 7,548
Total equity 74,409 75,445
Liabilities
Non-current liabilities
Trade and other payables 20 2,642 2,252
Redemption liability 5 2,793 7,186
Lease liabilities 13 1,805 3,014
Derivative financial instruments 15 183 10
Loans and other borrowings 21 12,426 16,598
Deferred tax liability 24 11,417 14,659
Total non-current liabilities 31,266 43,719
Current liabilities
Trade and other payables 20 35,225 34,397
Clawback liability 23 10,331 8,038
Lease liabilities 13 931 933
Loans and other borrowings 21 5,824 6,809
Corporation tax 391 452
Total current liabilities 52,702 50,629
Total liabilities 83,968 94,348
Total equity and liabilities 158,377 169,793
The notes that follow form part of these financial statements.
The financial statements were approved by the Board of Directors on 19 March
2024.
P
Brodnicki
L Tilley
Director
Director
Attributable to the holders of the Parent Company
Capital redemption reserve Share option reserve Total Non-controlling interests
£'000
£'000
Share capital Share premium Retained earnings £'000 £'000
£'000
£'000
£'000 Total Equity
£'000
Note
Balance as at 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
Current and deferred tax recognised in equity - - - (767) - (767) - (767)
Reserve transfer 30 - - - (72) 72 - - -
Dividends paid 11, 31 - - - - (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 and 1 January 2023 57 48,155 20 4,511 15,154 67,897 7,548 75,445
Profit for the year - - - - 13,467 13,467 (1,008) 12,459
Total comprehensive income - - - - 13,467 13,467 (1,008) 12,459
Transactions with owners
Issue of shares - - - - - - - -
Acquisition of minority interests 5 - - - - 942 942 (1,487) (545)
Share-based payment transactions 30 - - - 3,380 - 3,380 - 3,380
Current and deferred tax recognised in equity 9, 24 - - - 449 101 550 - 550
Reserve transfer 30 - - - (2,295) 2,295 - - -
Dividends paid 11, 31 - - - - (16,038) (16,038) (842) (16,880)
Transactions with owners - - - 1,534 (12,700) (11,166) (2,329) (13,495)
Balance as at 31 December 2023 57 48,155 20 6,045 15,921 70,198 4,211 74,409
Consolidated statement of changes in equity
for the year ended 31 December 2023
Consolidated statement of cash flows
for the year ended 31 December 2023
Notes 2023 2022
£'000 £'000
Cash flows from operating activities
Profit for the year before tax 16,178 17,353
Adjustments for:
Depreciation of property, plant and equipment 12 1,225 591
Depreciation of right of use assets 13 857 563
Impairment of right of use assets 13 428 -
Amortisation of intangibles 14 5,470 2,866
Unwinding of loan arrangement fees 34 77 -
Profit from sale of non-listed equity investment 16 - (58)
Profit from disposal of associate 15 - (19)
Loss from disposal of fixed assets 12 36 38
Share-based payments 30 4,429 2,983
Share of profit from associates 15 (848) (712)
Gain on remeasurement of redemption liability 5 (4,486) -
Non-listed equity investment, amount written off 16 - 2,783
Loss/(gains) on fair value movements taken to profit and loss 15 190 (866)
Dividends received from associates 15 403 910
Finance income 8 (291) (108)
Finance expense 8 2,610 1,238
26,278 27,562
Changes in working capital
Decrease/(increase) in trade and other receivables 18 1,432 (1,317)
(Decrease)/increase in trade and other payables 20 (283) 833
Increase in clawback liability 23 2,293 1,387
Cash generated from operating activities 29,720 28,465
Income taxes paid (5,390) (4,124)
Acquisition of minority interests 5 (592) -
Net cash generated from operating activities 23,738 24,341
Cash flows from investing activities
Purchase of property, plant and equipment 12 (932) (3,229)
Purchase of intangibles 14 (1,121) (615)
Proceeds from sale of non-listed equity investment 16 - 115
Net cashflow on acquisition of subsidiaries 18 - (49,157)
Acquisition of associates and contingent consideration for associates 15 (469) (1,327)
Net cash used in investing activities (2,522) (54,213)
Cash flows from financing activities
Proceeds from borrowings 21, 34 - 22,918
Settlement of loan notes and accrued interest on acquisition 17, 34 - (21,891)
Repayment of borrowings 21, 34 (5,350) (1,500)
Interest received 304 102
Interest paid (1,312) (102)
Principal element of lease payments 34 (907) (547)
Issue of shares 25 - 40,000
Costs relating to issue of shares 25 - (1,619)
Acquisition of minority interests 5 (593) -
Dividends paid to Company's shareholders 11 (16,038) (16,023)
Dividends paid to minority interest (842) (415)
Net cash used in financing activities (24,738) 20,923
Net (decrease) in cash and cash equivalents (3,522) (8,949)
Cash and cash equivalents at the beginning of year 25,462 34,411
Cash and cash equivalents at the end of the year 21,940 25,462
The notes that follow form part of these financial statements.
Notes to the consolidated financial statements
for the year ended 31 December 2023
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 also set out
in the Strategic Report as set out earlier in these financial statements.
The Group made an operating profit of £14.0m during 2023 (2022: £18.5m) and
had net current liabilities of £21.4m as at 31 December 2023 (31 December
2022: £14.9m) and equity attributable to owners of the Group of £70.2m (31
December 2022: £67.9m).
Going concern
The Directors have assessed the Group's prospects until 31 December 2025,
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.
The impact of climate risk on accounting estimates
In preparing the Financial Statements, the Directors have considered the
impact of climate change, taking into account the relevant disclosures in the
Strategic Report, including those made in accordance with the framework of the
Taskforce on Climate-Related Financial Disclosures (TCFD).
The Group has assessed climate-related risks, covering both physical risks and
transition risks.
Many of the effects arising from climate change will be longer term in nature
with an inherent level of uncertainty and have limited impact on accounting
estimates for the current period.
Climate change may also have an impact on the carrying value of goodwill but
the potential impact of climate related risks on the Group's impairment
assessment is considered sufficiently remote at this point in time and
therefore no sensitivity analysis has been performed.
Changes in accounting policies
New standards, interpretations and amendments effective for the year ended 31
December 2023
New standards, interpretations and amendments applied for the first time
The Group applied a number of standards and interpretations for the first time
in 2023 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 an impact on the Group
· Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of
accounting policies (Effective 1 January 2023)
The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality
Judgements provide guidance and examples to help entities apply materiality
judgements to accounting policy disclosures. The Group has ensured that
material accounting policy disclosures have been made in the financial
statements in line with the amendments to IAS 1 & IFRS Practice statement
2.
New standards with no impact on the Group
· IFRS 17 Insurance contracts (Effective 1 January 2023)
· Amendments to IAS 8 - Definition of accounting estimates
(Effective 1 January 2023)
· Amendments to IAS 12 - Deferred tax related to assets and
liabilities arising from a single transaction (Effective 1 January 2023)
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. These standards are not
expected to have a material impact on the Group in the current or future
reporting periods, on foreseeable future transactions or disclosures other
than as identified below:
Standard or Interpretation Periods commencing on or after
IFRS S1 - General Requirements for Disclosure of Sustainability-related 1 January 2024
Financial Information
IFRS S2 - Climate-related Disclosures 1 January 2024
IFRS S1 and IFRS S2 are not expected to have a material impact on the results
of the Group other than to expand on climate related disclosures within the
Financial Statements. It is anticipated that transition reliefs for
comparative information prior to the first year of adoption will be utilised.
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.
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
Subsidiaries
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 as if they formed a single entity. Intercompany transactions
and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the consolidated statement of
financial position, the acquiree's identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the
consolidated statement of comprehensive income from the date on which control
is obtained. They are deconsolidated from the date on which control ceases.
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.
There are no other non-controlling interests. See note 1 for the Group's
accounting policies for business combinations.
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 where the group holds between 20% and 49% of the voting rights.
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).
Accounting policies for equity-accounted investees have been adjusted to
conform the accounting policies of the associate to the Group's accounting
policies. 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, except
freehold land 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 and 10 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 estimated residual values and useful economic lives of the assets
at least 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 allocated to cash-generating units for the purpose of impairment
testing. The allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the business
combination in which the goodwill arose. The units or groups of units are
identified at the lowest level at which goodwill is monitored for internal
management purposes.
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.
Software development can include both third party costs and internally
generated costs. Internally generated costs are only capitalised once
development of the intangible has commenced, where technical feasibility of
the project has been confirmed, and where it is probable the asset will
generate future economic benefits. All costs prior to this are expensed in the
period. Software development assets that are not in use are tested for
impairment on an annual basis.
Amortisation is charged to the consolidated statement of comprehensive income
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. The Group
reviews the expected useful lives of assets with a finite life at least
annually.
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 to 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 as at amortised cost only if both of the following criteria
are met:
· the asset is held within a business model whose objective is to
collect the contractual cash flows; and
· the contractual terms give rise to cash flows that are solely
payments of principal and interest.
All other financial assets are classified as fair value through profit or
loss.
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 on an individual receivable balance. 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.
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.
Remeasurement
The Group will remeasure a lease when there has been a contractual variation
that amends the scope or length of the lease or in cases where there is a
change in the Group's intention to exercise a break option or clause that
exists in the contract. The lease liability will be remeasured using the new
interest rate implicit in the lease or a revised incremental borrowing rate if
the interest rate implicit in the lease isn't readily determined.
When the lease liability is remeasured, an equivalent adjustment is made to
the right of use asset unless its carrying amount is reduced to nil, in which
case any remaining amount is recognised within administrative expenses within
the consolidated statement of comprehensive income.
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.
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 the
consolidated statement of comprehensive income.
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.
Provisions
A provision is recognised in the statement of financial position when the
Group has a present legal or constructive obligation as a result of a past
event, and it is probable that an outflow of economic benefits will be
required to settle the obligation.
Share capital
Financial instruments issued by the Group are treated as equity only to the
extent that they do not meet the definition of a financial liability. The
Company's ordinary shares are classified as equity instruments. Incremental
costs directly attributable to the issue of new shares are shown in share
premium as a deduction from the proceeds.
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 amounts received 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 are recognised at a point in time when commission is
approved for payment by the L&G Mortgage Club or direct from the lender,
which is the point at which all performance obligations have been met.
Insurance commissions are recognised at a point in time when the policy is
accepted by the insurer. Life insurance commissions are paid on an indemnity
basis, mainly over a four year period. If a policy is cancelled during the
indemnity period, part of the commission received may have to be repaid to the
provider. A clawback liability is recognised for the expected level of
commissions repayable with the liability movement recognised as an offset
against revenue recognised in the period. More information on the clawback
liability is included in note 2(e).
Client fees and Other income is recognised at a point in time when payment is
received or guaranteed to be received, as until this point it is not possible
to be certain that the performance obligation has been satisfied.
Taxation
Income tax comprises current and deferred tax. Income tax is recognised in the
consolidated statement of comprehensive income. Other than if it relates to
items recognised directly in equity in which case it is also recognised
directly in equity.
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.
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
a) Equity-settled transactions
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.
b) Acquisition related Cash-settled transactions
A liability is recognised for the fair value of cash-settled transactions. The
fair value is measured initially at the date of the grant and is subsequently
remeasured at each reporting date up to and including the settlement date. The
fair value is expensed over the period until the vesting date with a
corresponding increase in liabilities. The fair value is determined using a
discounted net present value model, with estimates over service and
performance conditions updated to reflect management's best estimate of the
awards expected to vest at each reporting date.
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 £nil
(2022: £55.4m), 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 £nil (2022: £38.7m) 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. The fair value of the options are recognised as either a Redemption
Liability in Note 5 or within accruals in Note 20.
The carrying value of the liabilities relating to acquisition options,
recorded within Note 20 under accruals, are as follows:
2023 2022
IAS19 Service Charge Accrual IFRS 2 Option Charge Accrual IAS19 Service Charge Accrual IFRS 2 Option Charge Accrual
(£'000) (£'000) (£'000) (£'000)
First Mortgage Direct Ltd 1,925 - 1,477 -
Project Finland Topco Ltd - 441 - 491
Aux Group Ltd - 138 - 7
Total 1,925 579 1,477 498
(c) Impairment of intangible assets
For the purposes of impairment testing, acquired relationships, technology,
brands, goodwill and other intangibles 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).
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. The recoverable amount of the assets
is the higher of an asset's or CGU's fair value less cost of disposal and its
value in use.
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 3.5% (2022: 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 taken
into account the effect of geopolitical and macroeconomic uncertainty and
inflationary pressures and their impact on the UK property and lending
markets, and considered different scenarios for repayments of these loans and
have also estimated percentage probabilities assigned to each scenario for
each associate where applicable. More information is included in note 18.
(e) Clawback liability
The liability relates to the estimated value and timing of repaying commission
received up front on protection policies that may lapse in a period of up to
four years following inception. The liability balance is calculated using a
model that has been developed over several years. The model uses a number of
factors including the total 'unearned' commission (i.e. that could still be
subject to clawback) at the point of calculation, the age profile of the
commission received, 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 £0.5m change
in the liability. A 2% change (absolute) in the recoveries rate causes a
£0.2m change in the liability. More information is included in note 23.
(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
contingent 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 contingent 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
30), 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 2023 was £1.4m (2022: £1.0m). This has been
presented net of other Group deferred tax liabilities in the consolidated
statement of financial position.
3 Revenue
The Group operates in one segment being that of the provision of financial
services in the UK. Revenue is derived as follows:
2023 2022
£'000 £'000
Mortgage procuration fees 98,033 106,615
Protection and general insurance commission 93,144 82,095
Client fees 43,325 36,257
Other income 5,031 5,853
239,533 230,820
4 Cost of sales
Costs of sales are as follows:
2023 2022
£'000 £'000
Commissions paid 130,934 142,769
Fluent affinity partner payments 14,481 8,000
Impairment of trade receivables (22) 102
Other cost of sales 1,214 601
Wages and salary costs 22,764 16,401
169,371 167,873
Wages and salary costs 2023 2022
£'000
£'000
Gross wages 19,633 14,001
Employers' national insurance 2,046 1,530
Defined contribution pension costs 734 570
Other direct costs 351 300
22,764 16,401
5 Acquisition related costs, acquisition of minority
interests and redemption liability
Acquisition related costs
First Mortgage Direct Limited
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
£367,000 (2022: £367,000) in the year ended 31 December 2023. There is a put
and call option over the remaining 20% of the issued share capital of First
Mortgage which 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.
The costs relating to this acquisition for the year are made up as follow:
2023 2022
£'000 £'000
Amortisation of acquired intangibles 367 367
Option costs (IAS 19) 448 436
Option costs (IFRS 2) 409 409
Total costs 1,224 1,212
The Fluent Money Group Limited
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").
Further acquisitions of minority interests
April 2023
On 11 April 2023, Mortgage Advice Bureau Ltd acquired a further 0.8% of the
ordinary share capital of Project Finland Topco Limited for £188,967 taking
its shareholding to 76.2%. This resulted in a reduction in the redemption
liability of £94,484 relating to the consideration element of the
transaction. The equity settled remuneration element resulted in an
acceleration of equity settled option costs of £151,674 and reduction in
parent equity of £47,242. The cash settled remuneration element resulted in
additional option costs of £36,549. Further to this, £140,067 of accumulated
non-controlling interest was transferred to retained earnings representing the
relevant proportion of non-controlling interest at the purchase date.
December 2023
On 19 December 2023, Mortgage Advice Bureau Ltd acquired a further 8.1% of the
ordinary share capital of Project Finland Topco Limited for £1,991,616 taking
its shareholding to 84.3%. Half of the payment was made in 2023, with the
balance deferred, split equally and payable in December 2024 and December
2025. This resulted in a reduction in the redemption liability of £995,808
relating to the consideration element of the transaction. The equity settled
remuneration element resulted in an acceleration of equity settled option
costs of £1,598,566 and reduction in parent equity of £497,904. The cash
settled remuneration element resulted in additional option costs of £385,205.
Further to this, £1,346,893 of accumulated non-controlling interest was
transferred to retained earnings representing the relevant proportion of
non-controlling interest at the purchase date.
A summary of the cash flows and deferred elements relating to the acquisition
of minority interests in the year is as follows:
Paid in cash Deferred Total
£'000 £'000 £'000
Consideration - financing activities 593 498 1,091
Remuneration - operating activities 592 498 1,090
Total costs 1,185 996 2,181
The deferred amounts are recognised in accruals within trade and other
payables
Put and call options
There is a put and call option over the remaining 15.7% of the issued share
capital of Fluent which has been accounted for under IAS 32 Financial
Instruments 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. There is
also a put and call option over certain growth shares that have been issued to
Fluent's wider management team that has been accounted for under IFRS 2
Share-based Payments as exercise is solely contingent upon continued
employment.
The costs relating to this acquisition for the period are made up as follow:
2023 2022
£'000 £'000
Amortisation of acquired intangibles 4,399 2,127
Option costs (IFRS 2) 3,289 1,147
Acquisition related costs 159 2,610
Total costs 7,847 5,883
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.
The costs relating to this acquisition for the period are made up as follow:
2023 2022
£'000 £'000
Amortisation of acquired intangibles 65 33
Acquisition related costs - 15
Total costs 65 48
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").
There is a put and call option over the remaining 25% of the issued share
capital of Aux Group Limited which has been accounted for under IAS 32
Financial Instruments 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.
The costs relating to this acquisition for the period are made up as follow:
2023 2022
£'000 £'000
Amortisation of acquired intangibles 329 55
Option costs (IFRS 2) 131 7
Acquisition related costs - 130
Total costs 460 192
Remeasurement of redemption liability
At 31 December 2023, the expected cash flows relating to the redemption
liability were remeasured resulting in gain of £4.5m included within the
consolidated statement of comprehensive income. £1.2m has been included
within finance expenses relating to the unwinding of the redemption liability
from the end of the prior year.
Carrying value of redemption liability
2023 2022
£'000 £'000
Balance as at 1 Jan 7,186 -
Redemption liability arising on acquisition - 6,540
Purchase of additional minority interest in Fluent (1,090) -
Gain on remeasurement (4,486) -
Unwinding of redemption liability 1,183 646
Balance as at 31 Dec 2,793 7,186
Redemption liabilities are in respect of the put and call options relating to
the Fluent and Auxilium acquisitions and are £2.4m (2022: £7.0m) and £0.4m
(2022: £0.2m) respectively.
The total costs relating to the four acquisitions above that are included in
the consolidated statement of comprehensive income are as follows:
2023 2022
£'000 £'000
Amortisation of acquired intangibles 5,160 2,582
Option costs (IFRS 2 and IAS 19) 4,277 1,999
Acquisition related costs 159 2,755
Total costs 9,596 7,336
The Fluent minority interest purchase during the year resulted in £1.8m
accelerated equity settled option costs and £0.4m additional cash settled
option costs.
6 Operating profit
Operating profit is stated after the following items:
Note 2023 2022
£'000
£'000
Depreciation of property, plant and equipment 12 1,225 591
Depreciation of right of use assets 13 857 563
Impairment of right of use assets 13 428 -
Amortisation of acquired intangibles 5, 14 5,160 2,582
Amortisation of other intangibles 14 310 284
Costs related to acquisition options 5 4,277 1,999
Costs related to acquisitions 5 159 2,755
Costs related to restructuring 539 -
Impairment and amounts written off non-listed equity investments 16 - 2,783
Gain on fair value measurement of contingent consideration 15 - (884)
Loss on fair value measurement of derivative financial instruments 15 190 18
Profits from associates are disclosed as part of the operating profit as this
is the operational nature of the Group.
2023 2022
£'000
£'000
Auditor remuneration:
Fees payable to the Group's auditor for the audit of the Group's financial 571 312
statements.
Fees payable to the Group's auditor and its associates for other services:
Audit of the accounts of subsidiaries 66 288
Audit-related assurance services 133 55
7 Staff costs
Staff costs, including executive and non-executive Directors' remuneration,
are as follows:
2023 2022
£'000
£'000
Wages and salaries 42,753 32,204
Share-based payments (see note 30) 4,429 2,983
Social security costs 4,585 3,608
Defined contribution pension costs 1,736 1,373
Other employee benefits 738 730
54,241 40,898
Staff costs are included in the consolidated statement of comprehensive income
as follows:
2023 2022
£'000 £'000
Cost of sales (see note 4) 22,764 16,401
Administrative expenses 31,477 24,497
54,241 40,898
The average number of people employed by the Group during the year was: 2023 2022
Number Number
Executive Directors 3 3
Advisers 285 216
Compliance 106 98
Sales and marketing 110 106
Operations 497 367
Total 1,001 790
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.
2023 2022
£'000
£'000
Wages and salaries 1,387 2,047
Share-based payments 159 441
Social security costs 181 280
Defined contribution pension costs 11 2
Other employment benefits 4 4
1,742 2,774
During the year retirement benefits were accruing to 2 Directors (2022: 2) in
respect of defined contribution pension schemes.
The total amount payable to the highest paid Director in respect of emoluments
was £580,161 (2022: £858,176). The value of the Group's contributions paid
to a defined contribution pension scheme in respect of the highest paid
Director amounted to £nil (2022: £nil).
8 Finance income and expenses
Finance income 2023 2022
£'000
£'000
Interest income 291 102
Interest income accrued on loans to associates - 6
291 108
Finance expenses 2023 2022
£'000
£'000
Interest expense 1,320 515
Interest expense on lease liabilities 107 77
Unwinding of redemption liability 1,183 646
2,610 1,238
During the year, interest accrued in previous years of £426,000 was paid
(2022: £nil).
The interest expense mainly relates to the term loan and the revolving credit
facility (see note 21).
9 Income tax
2023 2022
£'000
£'000
Current tax expense
UK corporation tax charge on profit for the year 5,434 4,184
Total current tax 5,434 4,184
Deferred tax expense
Origination and reversal of timing differences (1,766) 291
Temporary difference on share-based payments 51 128
Effect of changes in tax rates - (29)
Total deferred tax (see note 24) (1,715) 390
Total tax expense 3,719 4,574
The reasons for the difference between the actual charge for the year and the
standard rate of corporation tax in the United Kingdom of 23.52% (2022:
19.00%) applied to profit for the year is as follows:
2023 2022
£'000
£'000
Profit for the year before tax 16,178 17,353
Expected tax charge based on corporation tax rate 3,805 3,297
Expenses not deductible for tax purposes 115 495
amortisation and impairment
Research & Development (48) (139)
Tax on share options exercised (89) (27)
Other share option differences 1,099 652
Adjustment to deferred tax charge due to change in tax rate - 25
Other differences 12 (5)
Fair value loss/(gain) on derivative financial instruments 45 (70)
Fair value gain on contingent consideration - (168)
Redemption liability movements (777) 123
Profits from associates (199) (135)
Amounts written off investments - 529
Fixed asset differences (207) 55
Short term timing differences at different tax rates (22) (54)
Chargeable gains - (4)
Utilisation of brought forward tax losses (22) -
Adjustments to prior years 7 -
Total tax expense 3,719 4,574
Options exercised during the period resulted in a current tax credit of £0.1m
(2022: nil) recognised directly in equity relating to the current tax
deduction in excess of the cumulative share-based payment expense relating to
these options.
For the year ended 31 December 2023 the deferred tax credit relating to
unexercised share options recognised in equity was £448,826 (2022: £783,556
- charge). A charge of £nil (2022: £16,568) 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.
2023 2022
Basic earnings per share £'000 £'000
Profit for the year attributable to the owners of the parent 13,467 12,237
Weighted average number of shares in issue 57,090,793 56,081,853
Basic earnings per share (in pence per share) 23.6p 21.8p
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.
2023 2022
Diluted earnings per share £'000 £'000
Profit for the year attributable to the owners of the parent 13,467 12,237
Weighted average number of shares in issue 57,434,053 56,528,515
Diluted earnings per share (in pence per share) 23.5p 21.6p
The share data used in the basic and diluted earnings per share computations
are as follows:
Weighted average number of ordinary shares 2023 2022
Issued ordinary shares at start of year 57,030,995 53,204,620
Effect of shares issued during year 59,798 2,877,233
Basic weighted average number of shares 57,090,793 56,081,853
Potential ordinary shares arising from options 343,260 446,662
Diluted weighted average number of shares 57,434,053 56,528,515
The reconciliation between the basic and adjusted figures is as follows:
2023 2022 2023 2022 2023 2022
£'000 £'000 Basic Basic Diluted Diluted
earnings earnings earnings earnings
per share per share per share per share
pence pence pence pence
Profit for the year 13,467 12,237 23.6 21.8 23.5 21.6
Adjustments:
Amortisation of acquired intangibles 3,575 2,582 6.3 4.6 6.2 4.6
Costs relating to the First Mortgage, Fluent and Auxilium options 3,477 1,715 6.1 3.1 6.1 3.0
Costs relating to Fluent and Auxilium acquisitions 159 2,755 0.3 4.9 0.3 4.9
Gain on contingent consideration - (891) - (1.6) - (1.6)
Loss on derivative financial instruments 190 18 0.3 - 0.3 -
Amount written off non-listed equity investment - 2,783 - 5.0 - 4.9
Restructuring costs 412 - 0.7 - 0.7 -
Unwinding of redemption liability (3,303) 646 (5.8) 1.1 (5.8) 1.1
Profit on sale of assets - (19) - - - -
Tax effect of adjustments (966) (609) (1.7) (1.1) (1.7) (1.1)
Adjusted earnings 17,012 21,217 29.8 37.8 29.6 37.4
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 and one-off restructuring 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
2023 2022
£'000 £'000
Dividends paid and declared on ordinary shares during the year:
Final dividend for 2022: 14.7p per share (2021: 14.7p) 8,384 8,381
Interim dividend for 2023: 13.4p per share (2022: 13.4p) 7,654 7,642
16,038 16,023
2023 2022
Equity dividends on ordinary shares: £'000 £'000
Proposed for approval by shareholders at the AGM:
Final dividend for 2023: 14.7p per share (2022: 14.7p) 8,398 8,384
8,398 8,384
The record date for the final dividend is 26 April 2024 and the payment date
is 29 May 2024. The ex-dividend date will be 25 April 2024. The Company
statement of changes in equity shows that the Company had positive reserves as
at 31 December 2023 of £5.7m. 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 2023
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 and building
£'000 Fixtures & fittings Computer equipment
£'000
£'000
Total
£'000
Cost
As at 1 January 2023 2,536 3,681 1,515 7,732
Additions - 535 397 932
Disposals - (55) (262) (317)
As at 31 December 2023 2,536 4,161 1,650 8,347
Depreciation
As at 1 January 2023 407 404 793 1,604
Charge for the year 54 666 505 1,225
Eliminated on disposal - (20) (261) (281)
As at 31 December 2023 461 1,050 1,037 2,548
Freehold land and building
£'000 Fixtures & fittings Computer equipment
£'000
£'000
Total
£'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 2023 2,075 3,111 613 5,799
As at 31 December 2022 2,129 3,277 722 6,128
As at 31 December 2021 2,187 227 253 2,667
Office refurbishment
During the prior year, the Group undertook a refurbishment project of its head
office premises located in Derby costing £2.8m, which is included within
Fixtures and fittings. As a result of this project, the Group disposed of
assets with an original cost of £1.4m and a net book value of £0.04m 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 Buildings Office
£'000
equipment Total
£'000 £'000
As at 1 January 2023 3,747 125 3,872
Additions - 13 13
Remeasurement (317) - (317)
Impairment (423) (5) (428)
Depreciation (821) (36) (857)
As at 31 December 2023 2,186 97 2,283
Lease liabilities Land and Buildings Office
£'000 equipment Total
£'000 £'000
As at 1 January 2023 3,822 125 3,947
Additions - 13 13
Remeasurement (317) (317)
Interest expense 102 5 107
Lease payments (973) (41) (1,014)
As at 31 December 2023 2,634 102 2,736
Right of use assets Land and Buildings Office
£'000
equipment Total
£'000 £'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 Buildings Office
£'000 equipment Total
£'000 £'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
The present value of the lease liabilities is as follows:
31 December 2023 Within 1 year 1 - 2 years 2 -5 years After 5 years Total
Lease payments (undiscounted) 997 792 1,005 81 2,875
Finance charges (66) (37) (36) - (139)
Net present values 931 755 969 81 2,736
31 December 2022 Within 1 year 1 - 2 years 2 -5 years After 5 years Total
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
Leases
The consolidated statement of comprehensive income shows the following amounts
relating to leases:
2023 2022
£'000
£'000
Depreciation of right of use assets 857 563
Impairment of right of use assets 428 -
Interest expense 107 77
Short term lease expense 79 40
Low value lease expense 2 3
The total cash flow for leases during the period was £1.1m (2022: £0.7m)
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 £1,000.
Extension and termination options
During the year, a break clause was exercised on one property. This resulted
in a remeasurement of the associated lease liability of £317,000. An
impairment assessment of the impacted right of use asset resulted in an
impairment of £428,000 recognised in the consolidated statement of
comprehensive income.
As at 31 December 2023, the carrying amounts of all other 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 £85,320 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 2023 2022
£'000
£'000
Cost
As at 1 January 54,038 15,308
Acquisition of subsidiaries - 38,730
As at 31 December 54,038 54,038
Accumulated impairment
As at 1 January and 31 December 153 153
Net book value
As at 31 December 53,885 53,885
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 Talk First Mortgage Fluent Other(1) Total
£'000 £'000 £'000 £'000 £'000
Cost
As at 1 January and 31 December 2023 4,267 11,041 36,974 1,756 54,038
Accumulated impairment
As at 1 January and 31 December 2023 153 - - - 153
Net book value
At 31 December 2023 4,114 11,041 36,974 1,756 53,885
(1) 'Other' comprises Vita and Auxilium.
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 2023 concluded
that there had been no further 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 3.5% 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
£4.1m (2022: £4.1m) 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, which are based on extrapolated budget models which
have been approved by the Board, and applied a discount rate of 13.2% (2022:
11.3%) and then applied a terminal value calculation, which assumes a growth
rate of 3.5% (2022: 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 £11.0m
(2022: £11.0m) 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, which are based on extrapolated budget models which
have been approved by the Board, and applied a discount rate of 13.2% (2022:
20.7%) and then applied a terminal value calculation, which assumes a growth
rate of 3.5% (2022: 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 £37.0m 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, which are
based on extrapolated budget models which have been approved by the Board, and
applied a discount rate of 13.2% and then applied a terminal value
calculation, which assumes a growth rate of 3.5% 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 base assumption (Decrease) in value in use, £m
Discount rate 13.2% +1.0% (absolute) (26.8)
Years 1-5 cash flows Various -5.0% (proportionate) (42.3)
Long-term growth rate 3.5% -1.0% (absolute) (19.9)
Other intangible assets
Internally Generated Technology/Software
£'000 Technology/Software Customer contracts Trademarks and brands Other relationships Total
Licences Website
£'000 £'000 £'000 £'000 £'000
£'000 £'000
Cost
As at 1 January 2023 108 223 1,105 16,824 2,337 5,089 34,568 60,254
Additions - 133 988 - - - - 1,121
Disposals - (140) (554) - - - - (694)
As at 31 December 2023 108 216 1,539 16,824 2,337 5,089 34,568 60,681
Accumulated Amortisation
As at 1 January 2023 108 140 610 842 797 680 1,254 4,431
Charge for the year - 51 258 1,683 273 483 2,722 5,470
Disposals - (140) (554) - - - - (694)
As at 31 December 2023 108 51 314 2,525 1,070 1,163 3,976 9,207
Other intangible assets Internally Generated Technology/Software
£'000 Technology Customer contracts Trademarks and brands Other relationships
Licences Website /Software £'000 Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
As at 1 January 2022 108 140 571 - 1,980 1,470 - 4,269
Additions - 83 534 - - - - 617
Acquisition of subsidiaries - - - 16,824 357 3,619 34,568 55,368
Disposals - - - - - - - -
As at 31 December 2022 108 223 1,105 16,824 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 - - 211 842 247 312 1,254 2,866
Disposals - - - - - - - -
As at 31 December 2022 108 140 610 842 797 680 1,254 4,431
Net book value
As at 31 December 2023 - 165 1,225 14,299 1,267 3,926 30,592 51,474
As at 31 December 2022 - 83 495 15,982 1,540 4,409 33,314 55,823
As at 31 December 2021 - - 172 - 1,430 1,102 - 2,704
Assets which are internally generated are solely within asset categories;
Website and Internally Generated Technology/Software. Technology/software
contains only acquired technology assets. Other relationships include lender
and introducer relationships and member relationships assets.
Individually Material Intangible Assets
Asset Description Asset Category NBV as at 31 December 2023 NBV as at 31 December 2022 Amortisation End Date
£'000 £'000
Fluent Money Limited - Technology Technology/Software 14,305 15,988 July 2032
Fluent Mortgages Limited - Introducer Relationships Other relationships 11,149 12,041 July 2036
Fluent Lifetime Limited - Introducer Relationships Other relationships 6,985 7,543 July 2036
Fluent Money Limited - Lender Relationships Other relationships 6,254 6,754 July 2036
Fluent Bridging Limited - Introducer relationships Other relationships 5,614 6,063 July 2036
Fluent Money Limited - Brand Trademarks and brands 2,997 3,313 July 2033
First Mortgage Direct Limited - Customer relationships Customer Contracts 990 1,210 July 2028
First Mortgage Direct Limited - Brand Trademarks and brands 809 956 July 2029
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:
Company name Registered office Percentage of ordinary shares held Description
CO2 Commercial Limited Profile House, Stores Road, Derby DE21 4BD 49 Property surveyors
Sort Group Limited Burdsall House, London Road, Derby DE24 8UX 43.25 Conveyancing services
Buildstore Limited NSB & RC Lydiard Fields, Great Western Way, Swindon SN5 8UB 25 Provision of financial services
Clear Mortgage Solutions Limited 114 Centrum House, Dundas Street, Edinburgh EH3 5DQ 49 Provision of financial services
MAB Broker Services PTY Limited Level 5, 2 Elizabeth Plaza, North Sydney, NSW 2060 48.05 Provision of financial services
The Mortgage Broker Group Limited Prospect House 1, Prospect Place, Derby, DE24 8HG 25 Provision of financial
services
Meridian Holdings Group Limited 68 Pullman Road, Wigston, Leicester, LE18 2DB 40 Provision of financial services
Evolve FS Ltd Unit 26-28 Brightwell Barns, Waldringfield Road, Brightwell, Ipswich, Suffolk, 49 Provision of financial services
IP10 0BJ
Heron Financial Limited Moor Park Golf Club, Moor Park, Rickmansworth, Hertfordshire, England, WD3 1QN 49 Insurance agent and broker
M & R FM Ltd((1)) 14 Kensington Terrace, Gateshead, NE11 9SL 37 Provision of financial services
( )
The reporting date for the Group's associates, as listed in the table above,
other than Clear Mortgage Solutions Limited and MAB Broker Services PTY Ltd,
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)) 37% 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:
2023 2022
£'000
£'000
As at 1 January 11,387 12,433
Additions 469 -
Disposals - (848)
Credit to the consolidated statement of comprehensive income:
Share of profit 848 712
848 712
Dividends received (403) (910)
As at 31 December 12,301 11,387
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 2023 is £nil (2022: £nil). In the year ended 30
June 2023, MAB Broker Services PTY Limited reported a profit of AUD0.01m
(2022: loss of AUD0.38m).
Acquisitions and disposals
2023
On 26 May 2023, First Mortgage Direct Limited, an 80% owned subsidiary of the
Group, acquired a further 12% of M & R FM Limited for a consideration of
£469,454, bringing its total stake to 37%.
2022
On 14 April 2022, Mortgage Advice Bureau Limited paid a further £277,600 in
contingent consideration in respect of its acquisition of a 49% stake in Heron
Financial Limited in November 2021.
On 27 April 2022, Mortgage Advice Bureau Limited paid a further £179,252 in
contingent consideration in respect of its acquisition of a further 29%
interest in Vita Financial Limited in May 2021.
On 21 July 2022, Mortgage Advice Bureau Limited paid a further £625,567 in
contingent 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
£848,022. The fair value of the previously held equity interest was
established to be £867,500, therefore a gain of £19,478 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 £244,858 in contingent 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.
A total net gain of £884,000 was recognised in the consolidated statement of
comprehensive income in respect of the actual contingent consideration paid or
expected to be paid on the above associate businesses in 2022.
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:
2023 Evolve FS Ltd Clear Mortgage Solutions Ltd
£'000 Sort Group Limited £'000
£'000
Meridian Holdings Group Ltd
£'000
Heron Financial Ltd
£'000 M & R FM
Limited £'000
Non-current assets 29 221 1,974 649 24 53
Cash balances 420 522 1,076 2,295 1,097 1,073
Current assets (excluding cash balances) 349 873 675 567 384 485
Current liabilities (614) (455) (652) (642) (404) (377)
Non-current liabilities and provisions (8) (419) (380) (84) (600) (410)
Revenue 4,237 2,409 7,129 11,794 4,974 3,874
Profit before taxation 60 600 385 788 507 1,000
Total comprehensive income 48 497 289 673 416 802
Carrying value of investment
As at 1 January 2023 2,882 2,638 1,497 1,936 864 906
Increase in investment - - - - - 469
-
Profit attributable to Group 23 244 69 259 213 249
Dividends received - (125) - - (56) (222)
As at 31 December 2023 2,905 2,757 1,566 2,195 1,021 1,402
2022 Evolve FS Ltd Pinnacle Surveyors (England & Wales) Limited
£'000 £'000
Meridian Holdings Group ltd Sort Group Limited
£'000
£'000
Heron Financial Ltd
£'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
(Loss)/profit before taxation (26) 275 (78) 976 424
Total comprehensive (loss)/income (26) 209 (78) 820 345
Carrying value of investments
As at 1 January 2022 3,143 2,536 1,541 1,628 464
(Loss)/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
* 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:
2023 Associates 2022 Associates 2023 2022
£'000
£'000
Joint Venture Joint Venture
£'000
£'000
Non-current assets 991 413 5 42
Cash balances 680 3,287 26 25
Current assets (excluding cash balances) 1,295 1,561 1,127 1,167
Current liabilities (1,202) (2,155) (53) (74)
Non-current liabilities and provisions (794) (1,366) (111) (109)
Revenue 8,893 14,470 406 486
(Loss)/profit before taxation (645) 424 11 (267)
Total comprehensive (loss)/ income (675) 146 11 (213)
(Loss)/profit attributable to Group (210) 67 - -
Dividends received 0 188 - -
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 profits in the year of £44,186 (2022: losses of £75,948) and
cumulative unrecognised losses of £757,458 (2022: 801,644).
Derivative financial instruments
The put and call options are carried at fair value through profit or loss. The
carrying values for the call options at 31 December 2023 have resulted in a
financial asset of £302,319 (2022: £255,994) for Evolve and £112 (2022:
£64,114) for Heron. The carrying value for the put option has resulted in a
financial liability of £182,984 (2022: £10,280) for Heron at 31 December
2023.
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.
Contingent Consideration
The fair value of contingent consideration at 31 December 2023 was £nil
(2022: £nil). During the year, no contingent consideration was paid (2022:
£1.3m) and a gain of £nil (2022: £0.9m) has been recognised in the
consolidated statement of comprehensive income.
16 Investments in non-listed equity shares
2023 2022
£'000
£'000
As at 1 January - 2,783
Additions - -
Revaluation - -
Write-off of investment - (2,783)
Disposals - -
As at 31 December - -
The investment at the start of the prior year represented a shareholding of
2.92% in PD Innovations Limited, trading as Boomin, at a value of £2.8m. This
investment was 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 lead to a £2.8m non-cash write-off of the investment. The
Group originally paid cash consideration of £2.5m on 9 April 2021 for a 3.17%
stake in PD Innovations Limited.
In 2022, contingent consideration of £115,000 was received relating to the
sale of Yourkeys Technology Limited on 23(rd) April 2021. This was £58,000
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 of ordinary shares held (effective holding)
Country of Incorporation
Company name Nature of business
Mortgage Advice Bureau Limited England and Wales 100 Provision of financial services
Mortgage Advice Bureau (Derby) Limited England and Wales 100 Provision of financial services
Capital Protect Limited England and Wales 100 Provision of financial services
Mortgage Talk Limited England and Wales 100 Provision of financial services
MABWM Limited England and Wales 100 Provision of financial services
First Mortgage Direct Limited Scotland 80 Provision of financial services
First Mortgage Limited Scotland 80 Provision of financial services
Property Law Centre Limited Scotland 80 Provision of financial services
Talk Limited England and Wales 100 Intermediate holding company
Mortgage Advice Bureau Australia (Holdings) PTY Limited Australia 100 Intermediate holding company
Mortgage Advice Bureau PTY Limited Australia 100 Holding of intellectual property
Vita Financial Limited England and Wales 75 Provision of financial services
BPR Protect Limited England and Wales 75 Provision of financial services
Company Protection Limited England and Wales 56.3 Provision of financial services
Aux Group Limited England and Wales 75 Provision of financial services
Auxilium Partnership Limited England and Wales 75 Provision of financial services
Project Finland Topco Limited England and Wales 84.3 Intermediate holding company
Project Finland Bidco Limited England and Wales 84.3 Intermediate holding company
The Fluent Money Group Limited England and Wales 84.3 Intermediate holding company
Fluent Mortgages Holdings Limited England and Wales 84.3 Intermediate holding company
Fluent Mortgages Limited England and Wales 84.3 Provision of financial services
Fluent Mortgages Horwich Limited England and Wales 84.3 Provision of financial services
Fluent Lifetime Limited England and Wales 84.3 Provision of financial services
Fluent Money Limited England and Wales 84.3 Provision of financial services
Fluent Loans Limited England and Wales 84.3 Provision of financial services
Fluent Bridging Limited England and Wales 84.3 Provision of financial 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 of ordinary shares held
Country of Incorporation
Company name Nature of business
Mortgage Advice Bureau (UK) Limited England and Wales 100 Dormant
Mortgage Advice Bureau (Bristol) Limited England and Wales 100 Dormant
MAB (Derby) Limited England and Wales 100 Dormant
L&P 137 Limited England and Wales 100 Dormant
Mortgage Talk (Partnership) Limited England and Wales 100 Dormant
Financial Talk Limited England and Wales 100 Dormant
Survey Talk Limited England and Wales 100 Dormant
L&P 134 Limited England and Wales 100 Dormant
Loan Talk Limited England and Wales 100 Dormant
MAB1 Limited England and Wales 100 Dormant
MAB Private Finance Limited England and Wales 100 Dormant
MAB Financial Planning Limited England and Wales 100 Dormant
First Mortgage Shop Limited Scotland 80 Dormant
First Mortgages Limited Scotland 80 Dormant
Fresh Start Finance Limited Scotland 80 Dormant
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. On 11 April 2023 Mortgage
Advice Bureau Limited increased its stake in Project Finland Topco Limited to
76.2% and further increased its stake on 19 December 2023 to 84.3% (see note
5). 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 and 75% of the ordinary share capital of
Company Protection 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 Trade and other receivables
2023 2022
£'000 £'000
Trade receivables 2,028 3,029
Less provision for impairment of trade receivables (454) (476)
Trade receivables - net 1,574 2,553
Receivables from related parties - 29
Other receivables 924 962
Loans to related parties 201 559
Less provision for impairment of loans to related parties (18) (2)
Total non-derivative financial assets other than cash and cash equivalents 2,681 4,101
classified at amortised costs
Prepayments and accrued income 6,993 7,018
Total trade and other receivables 9,674 11,119
Less: non-current portion - Loans to related parties (77) (305)
Less: non-current - Trade receivables (276) (526)
Current portion 9,321 10,288
2023 2022
Reconciliation of movement in trade receivables to cashflow £'000 £'000
Movement per trade receivables (1,445) 3,679
Accrued interest movement 13 (6)
Accrual of contingent consideration for Yourkeys disposal - 55
Acquired trade and other receivables - (2,710)
Intercompany arising on acquisitions - 299
Total movement per cash flow (1,432) 1,317
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 22.
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 2023 the lifetime expected
loss provision for trade receivables is £0.5m (2022: £0.5m). 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:
2023 2022
£'000 £'000
As at 1 January 476 374
New provisions for impairment losses - 106
Increases in existing provisions for impairment losses - -
Impairment provisions no longer required (22) (4)
As at 31 December 454 476
A summary of the movement in the provision for the impairment of loans to
related parties is as follows:
2023 2022
£'000 £'000
As at 1 January 2 2
Increases in existing provisions for impairment losses 16 -
Impairment provisions no longer required - -
As at 31 December 18 2
As at 31 December 2023 the lifetime expected loss provision for loans to
associates is £0.0m (2022: £0.0m), 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 22.
19 Cash and cash equivalents
2023 2022
£'000
£'000
Unrestricted cash and bank balances 3,022 7,219
Bank balances held in relation to retained commissions 18,918 18,243
Cash and cash equivalents 21,940 25,462
Bank balances held in relation to retained commissions earned on an indemnity
basis from protection policies are held to cover potential future lapses in
Appointed Representatives commissions. Operationally the Group does not treat
these balances as available funds. An equal and opposite liability is shown
within Trade and other payables (note 20).
20 Trade and other payables
2023 2022
£'000
£'000
Appointed Representatives retained commission 18,918 18,243
Other trade payables 7,644 8,658
Trade payables 26,562 26,901
Social security and other taxes 2,116 2,190
Other payables 169 208
Accruals 9,020 7,350
37,867 36,649
2023 2022
£'000 £'000
Current 35,225 34,397
Non-current 2,642 2,252
37,867 36,649
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 liability for its share of any
such repayment as set out in note 23. It is the Group's policy to retain a
proportion of commission payable to the Appointed Representative to cover such
potential future lapses; these sums remain a liability of the Group. This
commission is held in a separate ring-fenced bank account as described in note
19.
The non-current portion of trade and other payables relates to Appointed
Representative retained commission and accruals (See note 22).
As at 31 December 2023 and 31 December 2022, the carrying value of trade and
other payables classified as financial liabilities measured at amortised cost
approximates fair value.
2023 2022
Reconciliation of movement in trade payables to cash flow £'000 £'000
Movement per trade payables 1,218 4,723
Contingent consideration on associates - 1,327
Fair value measurement of contingent consideration - 884
Share-based payment accruals (656)
(505)
Accrued amounts relating to minority interest purchase (996) -
Acquired trade and other payables - (5,192)
Intercompany arising on acquisition - (253)
Total movement per cash flow (283) 833
21 Loans and borrowings
2023 2022
£'000 £'000
Bank loans 18,250 23,407
Total loans and borrowings 18,250 23,407
Less: non-current portion - Bank loans (12,426) (16,598)
Current portion 5,824 6,809
A summary of the maturity of loans and borrowings is as follows:
2023 2022
Bank loans £'000 £'000
Payable in 1 year 5,824 6,809
Payable in 1-2 years 3,750 3,750
Payable in 2-5 years 8,676 12,848
Total bank loans 18,250 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
£20m and a revolving credit facility for £15m (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.
22 Financial instruments - risk management
The Group is exposed through its operations to the following financial risks:
· Credit risk
· Liquidity risk
· Market 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
· Loans and other borrowings
A summary of financial instruments held by category is provided below:
Financial assets 2023 2022
£'000 £'000
Cash and cash equivalents 21,940 25,462
Trade and other receivables (amortised cost) 2,681 4,101
Derivative financial instruments (FVTPL) 302 320
Total financial assets 24,923 29,883
Financial liabilities 2023 2022
£'000 £'000
(restated)*
Trade and other payables (amortised cost) 7,812 8,866
Loans and borrowings (amortised cost) 18,250 23,407
Accruals (amortised cost) 9,020 7,350
Redemption liability (FVTPL) 2,793 7,186
Clawback liability (FVTPL) 10,331 8,038
Lease liabilities (amortised cost) 2,736 3,947
Derivative financial instruments (FVTPL) 183 10
Appointed representative retained commission 18,918 18,243
Total financial liabilities 70,043 77,047
*The disclosure of financial liabilities incorrectly excluded the clawback
liability, which is a financial instrument, and included £2.2m 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 18.
Financial assets - maximum exposure 2023 2022
£'000 £'000
Cash and cash equivalents 21,940 25,462
Trade and other receivables (Amortised cost) 2,681 4,101
Derivative financial instruments (FVTPL) 302 320
Total financial assets 24,923 29,883
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 Appointed
Representative retained commission amounts due to the same trading partners
that are included in trade receivables; this collateral of £0.2m (2022:
£0.7m) 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+).
Market risk
Interest rate risks
The Group's main interest rate risk arises from borrowings, both short term
facilities and long-term debt, with floating interest rates that are linked to
SONIA. The Group manages the risk by continually reviewing expected future
volatility in UK interest rates and will consider entering into hedges as
deemed appropriate to fix the floating interest rate. A maturity analysis of
loans and borrowings is set out in Note 21.
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 2023 (£'000) Within 1 year 1 - 2 years 2 -5 years After 5 years Total
Trade and other payables (amortised cost) 7,812 - - - 7,812
Loans and borrowings (amortised cost) 5,825 3,817 8,608 - 18,250
Accruals (amortised cost) 7,305 1,046 669 - 9,020
Redemption liability (FVTPL) - - 2,793 - 2,793
Clawback liability (FVTPL) 10,331 - - - 10,331
Lease liabilities (amortised cost) 997 792 1,005 81 2,875
Derivative financial instruments (FVTPL) - 183 - - 183
Appointed representative retained commission (amortised cost) 17,991 49 700 178 18,918
Total 50,261 5,887 13,775 259 70,182
31 December 2022 (£'000) (restated)* Within 1 year 1 - 2 years 2 -5 years After 5 years Total
Trade and other payables (amortised cost) 8,866 - - - 8,866
Loans and borrowings (amortised cost) 6,809 3,750 12,848 - 23,407
Accruals (amortised cost) 5,644 168 1,538 - 7,350
Redemption liability (FVTPL) - - 169 7,017 7,186
Clawback liability (FVTPL) 8,038 - - - 8,038
Lease liabilities (amortised cost) 1,048 994 1,857 345 4,244
Derivative financial instruments (FVTPL) - 10 - - 10
Appointed representative retained commission (amortised cost) 17,697 30 440 76 18,243
Total 48,102 4,952 16,852 7,438 77,344
*The disclosure incorrectly excluded the clawback liability, which is a
financial instrument, and its maturity analysis as at 31 December 2022. 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.
23 Clawback liability
2023 2022
£'000 £'000
As at 1 January 8,038 5,716
Acquisition of subsidiary - 935
Charged to the consolidated statement of comprehensive income 2,293 1,387
As at 31 December 10,331 8,038
The balance relates to refund liabilities for the estimated cost of repaying
commission income received upfront on protection policies that may lapse in
the four years following issue. Under the Group's revenue contracts with
protection providers, if the policy is cancelled by the customer within a
four-year period after the inception of the policy, then a proportion of the
commission received upfront has to be repaid to the protection provider. While
the exact timing of any future repayments (termed 'clawbacks') within the
four-year period is uncertain, it has been estimated based on both data from
protection providers and internal commission data that £4.4m (2022: £3.4m)
of the liability would be payable after more than one year. The liability is
based on the Directors' best estimate, using industry data where available, of
the probability of clawbacks to be made.
A liability is recognised in the financial statements of nine of the Group's
subsidiaries: Mortgage Advice Bureau Limited, Mortgage Advice Bureau (Derby)
Limited, Capital Protect Limited, First Mortgage Limited, Fluent Mortgages
Limited, Fluent Mortgages Horwich Limited, Vita Financial Limited, BPR Protect
Limited and Auxilium Partnership Limited.
The clawback liability was incorrectly presented as a non-current liability in
the prior year. This has been restated in the consolidated statement of
financial position as a current liability. The correction has no other impact
on these financial statements.
24 Deferred tax
Deferred tax is calculated in full on temporary differences using tax rates of
25% based on when the temporary differences are expected to unwind (2022: 19%
and 25%).
The movement in deferred tax is shown below:
2023 2022
£'000
£'000
Net deferred tax (liability)/asset - opening balance (12,862) 1,114
Acquisition of subsidiary - (12,820)
Recognised in the consolidated statement of comprehensive income 1,715 (389)
Deferred tax movement recognised in equity 449 (767)
Net deferred tax (liability) - closing balance (10,698) (12,862)
The deferred tax balance is made up as follows:
2023 2022
£'000
£'000
Fixed asset differences (13,355) (14,659)
Other timing differences 295 312
Tax losses 1,138 659
Share-based payments 1,224 826
Net deferred tax (liability) (10,698) (12,862)
Reflected in the statement of financial position as follows: 2023 2022
£'000
£'000
Deferred tax liability (11,417) (14,659)
Deferred tax asset 719 1,797
Net deferred tax (liability) (10,698) (12,862)
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.
25 Share capital
Issued and fully paid 2023 2022
£'000 £'000
Ordinary shares of 0.1p each 57 57
Total share capital 57 57
During the year 96,039 ordinary shares of 0.1p each were issued following
partial exercise of options issued in 2019 and 2020 at no premium. As at 31
December 2023, there were 57,127,034 ordinary shares of 0.1p in issue (2022:
57,030,995). See also note 30.
26 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 reserve The capital redemption reserve represents the cancellation of part of the
original share capital premium of the company at par value of any shares
repurchased.
The fair value of equity instruments granted by the Company in respect of
share-based payment transactions and deferred tax recognised in equity.
Share option reserve
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.
27 Retirement benefits
The Group operates several defined contribution pension schemes for the
benefit of its employees and also makes contributions to self-invested
personal pensions ("SIPP"). The assets of the schemes and the SIPP are held
separately from those of the Group in independently administered funds. The
pension expense represents contributions payable by the Group to the SIPP and
amounted to £1.7m (2022: £1.4m). There were contributions payable to the
SIPP as at 31 December 2023 of £0.3m (2022: £0.2m).
28 Related party transactions
The following table shows the total amount of transactions that have been
entered into with related parties during year ended 31 December 2023 and 2022,
as well as balances with related parties as at 31 December 2023 and 31
December 2022.
Relationship Commission received/(paid) Balance of retained commissions* Loans owed to MAB
31 December 2023 31 December 2022 31 December 2023 31 December 2022 31 December 2023 31 December 2022
£'000 £'000 £'000 £'000 £'000 £'000
Buildstore Limited Associate (830) (927) 23 14 - -
Sort Limited Associate 1,512 1,492 - - - 218
Clear Mortgage Solutions Limited Associate (5,227) (4,550) 595 652 - -
Evolve FS Ltd Associate (3,976) (2,949) 178 76 - -
The Mortgage Broker Limited Associate (1,555) (1,791) 67 67 5 20
Meridian Holdings Group Ltd Associate (3,541) (4,481) 550 546 81 319
M & R FM Ltd Associate (3,332) (2,826) 184 107 - -
Heron Financial Limited Associate (1,776) (4) 41 - - -
Pinnacle Surveyors (England & Wales) Ltd Associate - - - - 100 -
BPR Protect Limited** Associate - (223) - - - -
Vita Financial Limited** Associate - (717) - - - -
MAB Broker Services PTY Limited Joint venture - - - - 15 -
* Balances in relation to retained commissions are to cover future lapses
** Vita Financial Limited and BPR Protect Limited were associated companies of
the Group until they became subsidiaries on 12 July 2022 following Mortgage
Advice Bureau Limited's acquisition of Vita Financial Limited.
During the year the Group received dividends from associated companies as
follows:
2023 2022
£'000
£'000
M & R FM Ltd 222 187
Heron Financial Limited 125 -
Clear Mortgage Solutions Limited 56 -
CO2 Commercial Limited - 348
Evolve FS Ltd - 245
Sort Group Limited - 130
Total dividends received 403 910
29 Ultimate controlling party
There is no ultimate controlling party.
30 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. For options granted
before 2023, 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. For options granted during 2023, the
options 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 2023:
· 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 2023:
· 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 2023:
· 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 2023:
· 100% based on performance to 31 March 2024, exercisable between 1 April
2024 and 31 March 2029.
For options granted during 2022 and outstanding as at 1 January 2023:
· 100% based on performance to 31 March 2025, exercisable between 6 April
2025 and 6 June 2030.
For options granted during the year:
· 100% based on performance to 31 December 2025, exercisable between 1
April 2026 and 30 May 2031.
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:
2023 2023 2022 2022
WAEP Number WAEP Number
£
£
Outstanding as at 1 January 0.001 576,003 0.001 460,380
Granted during the year 0.001 296,375 0.001 154,850
Exercised 0.001 (96,039) 0.001 (16,851)
Lapsed * - (20,310) - (22,376)
Outstanding as at 31 December 0.001 756,029 0.001 576,003
*Due to not fully vesting, retirement or leaving the Group.
As at 31 December 2023, 756,029 options over ordinary shares of 0.1 pence each
in the Company were exercisable with a weighted average exercise price of
£0.001.
On 31 May 2023, 296,375 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 fair value of £6.31 per option. Exercise of the
Options is subject to the service conditions and achievement of the
performance condition based on earnings per share criteria. Subject to
achievement of the performance condition, the Options will be exercisable 2
years and 10 months 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 6 and 11 April 2023 resulted in respectively 1,498 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
£6.80 and £7.05 per share.
Options exercised on 19 May 2023 resulted in 93,043 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 £8.50 per share.
For the Options outstanding under the Mortgage Advice Bureau Executive Share
Option Plan as at 31 December 2023, the weighted average remaining contractual
life is 5.9 years (2022: 5.9 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.
2023 2022
Equity-settled
Option pricing model - EPS Black-Scholes Black-Scholes
Option pricing model - TSR - Stochastic
Exercise price £0.001 £0.001
Expected volatility n/a((1)) 41.66%
Expected dividend yield 3.98% 2.70%
Risk-free interest rate n/a((1)) 1.78%
((1)) For option awards that are not subject to market conditions, expected
volatility and the risk-free interest rate have no impact on the valuation
The options granted during 2023 are subject to performance criteria based
solely on earnings per share performance. They have a vesting period of 2
years and 10 months from the date of grant and the calculation of the
share-based payment is based on this vesting period.
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.
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 £1 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 2023
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:
2023 2022
£'000 £'000
Charge for equity settled schemes 177 763
National Insurance on equity settled schemes (13) 324
Share incentive plan costs 143 147
Free shares awarded to employees 293 186
Charge for equity settled acquisition options 3,203 1,064
Charge for cash settled acquisition options 626 499
Total costs 4,429 2,983
As a result of Fluent minority interest purchases during the period,
accelerated equity settled charges of £1.8m and additional cash settled
charges of £0.4m relating to the acquisition options were recognised in the
consolidated statement of comprehensive income.
Options exercised during the period resulted in a transfer from the Share
option reserve to Retained earnings of £0.4m (2022: £0.1m) reflected in the
consolidated statement of changes in equity. In addition, £1.9m was
transferred from the Share option reserve to Retained earnings for the
cancelled acquisition options as a result of the Fluent minority interest
purchase
31 Non-controlling interests (NCI)
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.
2023 Project Finland Topco Limited ("Fluent")
Summarised balance sheet 2023
First Mortgage Direct Limited ("First Mortgage") £'000
2023
£'000 Total
2023
£'000
Current assets 14,585 2,278 16,863
Current liabilities (7,125) (3,605) (10,730)
Current net assets/(liabilities) 7,460 (1,327) 6,133
Non-current assets 3,281 11,021 14,302
Non-current liabilities (1,410) (1,805) (3,215)
Non-current net assets 1,871 9,216 11,087
Net Group assets on consolidation 1,349 35,218 36,567
Net assets 10,680 43,107 53,787
Accumulated NCI 2,386 1,289 3,675
Summarised statement of comprehensive income £'000 £'000 £'000
Revenue 22,602 37,521 60,123
Profit/(loss) for the period and total comprehensive income 3,731 (7,772) (4,041)
Profit/(loss) allocated to NCI 781 (1,345) (564)
Dividends paid to NCI 692 - 692
Summarised cash flows £'000 £'000 £'000
Cash flows from operating activities 3,251 550 3,801
Cash flows used in investing activities (516) (594) (1,110)
Cash flows used in financing activities (3,909) (875) (4,784)
Net (decrease) in cash & cash equivalents (1,174) (919) (2,092)
Net Group assets on consolidation included above relate to acquired intangible
assets and associated deferred tax liabilities. The profit/(loss) for the
period and total comprehensive income includes the amortisation of these
acquired intangible assets and the associated movements in deferred tax.
2022 Project Finland Topco Limited ("Fluent")
Summarised balance sheet (restated*) First Mortgage Direct Limited 2022
2022 £'000
£'000
Total
2022
£'000
Current assets 12,443 3,721 16,164
Current liabilities (5,213) (27,395) (32,608)
Current net assets/(liabilities) 7,230 (23,674) (16,444)
Non-current assets 3,213 19,094 22,307
Non-current liabilities (1,838) (764) (2,602)
Non-current net assets/(liabilities) 1,375 18,330 19,705
Net Group assets on consolidation 1,630 38,478 40,108
Net assets/(liabilities) 10,235 33,134 43,369
Accumulated NCI 2,297 4,654 6,951
Summarised statement of comprehensive income £'000 £'000 £'000
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 £'000 £'000 £'000
Cash flows from operating activities 6,201 1,261 7,462
Cash flows used in investing activities (730) (1,319) (2,049)
Cash flows used in financing activities (1,659) (1,725) (3,384)
Net increase in cash & cash equivalents 3,812 (1,783) 2,029
*The disclosure has been restated to disclose clawback liabilities within
current liabilities, which were incorrectly included within non-current
liabilities. The correction has no other impact on these financial statements.
32 Contingent liabilities
The Group had no contingent liabilities as at 31 December 2023 or 31 December
2022.
33 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.
34 Notes supporting statement of cash flows
Cash and cash equivalents for purposes of the statement of cash flows
comprises:
2023 2022
£'000 £'000
Cash at bank available on demand 3,022 7,219
Bank balances held in relation to retained commissions 18,918 18,243
Total cash and cash equivalents 21,940 25,462
A reconciliation of liabilities from financing transactions is set out as
follows:
Loans and borrowings
£'000 Leases Total
£'000
£'000
Balance as at 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 and 1 January 2023 23,407 3,947 27,354
Cash Flows
Repayment of borrowings (5,350) - (5,350)
Principal lease payments - (907) (907)
Non-cash flows
New leases - 13 13
Accrued Interest 116 - 116
Unwinding of loan arrangement fees 77 - 77
Lease remeasurement - (317) (317)
Balance as at 31 December 2023 18,250 2,736 20,986
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 equivalent statutory measure Definition and purpose
Income statement measures
Net revenue Gross profit Net revenue is revenue less commissions paid to Appointed Representative firms
and payments to Fluent affinity partners.
£m 2023 2022
Revenue 239.5 230.8
Commissions paid (130.9) (142.8)
Payments to Fluent affinity partners (14.5) (8.0)
Net revenue 94.1 80.0
Administrative expenses ratio None Calculated as administrative expenses (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 depreciation and 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.
£m 2023 2022
Gross Profit 70.2 62.9
Administrative Expenses (46.7) (36.0)
Depreciation 2.1 1.2
Amortisation 0.3 0.3
Share of profit from associates 0.8 0.7
Rounding difference - -
Adjusted EBITDA 26.7 29.1
Adjusted EBITDA margin None Calculated as Adjusted EBITDA divided by revenue.
Adjusted operating profit Operating profit Calculated as operating profit 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.
£m 2023 2022
Operating profit 14.0 18.5
Amortisation of acquired intangibles 5.2 2.6
Acquisition costs 0.2 2.8
Non-cash operating expenses relating to put and call option agreements 4.3 2.0
Impairment losses - 2.8
Non-cash fair value losses / (gains) on financial instruments 0.2 (0.9)
Restructuring costs 0.5 -
Rounding difference - (0.1)
Adjusted operating profit 24.4 27.7
Adjusted profit before tax Profit before tax Calculated as profit before tax 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.
£m 2023 2022
Profit before tax 16.2 17.4
Amortisation of acquired intangibles 5.2 2.6
Acquisition costs 0.2 2.8
Non-cash operating expenses relating to put and call option agreements 4.3 2.0
Impairment losses - 2.8
Non-cash fair value losses / (gains) on financial instruments 0.2 (0.9)
Restructuring costs 0.5 -
Unwinding of redemption liability (3.3) 0.6
Rounding difference (0.1) (0.1)
Adjusted profit before tax 23.2 27.2
Adjusted profit before tax margin None Calculated as Adjusted profit before tax divided by revenue.
Adjusted earnings per share Basic earnings per share Calculated as basic earnings 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.
Adjusted fully diluted earnings per share Diluted earnings per share Calculated as diluted earnings per share (basic EPS, adjusting for the effects
of potentially dilutive share options) 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.
Adjusted profit before tax as a percentage of net revenue None Calculated as Adjusted profit before tax divided by Net revenue
Administrative expenses ratio
None
Calculated as administrative expenses (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 depreciation and 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.
£m 2023 2022
Gross Profit 70.2 62.9
Administrative Expenses (46.7) (36.0)
Depreciation 2.1 1.2
Amortisation 0.3 0.3
Share of profit from associates 0.8 0.7
Rounding difference - -
Adjusted EBITDA 26.7 29.1
Adjusted EBITDA margin
None
Calculated as Adjusted EBITDA divided by revenue.
Adjusted operating profit
Operating profit
Calculated as operating profit 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.
£m 2023 2022
Operating profit 14.0 18.5
Amortisation of acquired intangibles 5.2 2.6
Acquisition costs 0.2 2.8
Non-cash operating expenses relating to put and call option agreements 4.3 2.0
Impairment losses - 2.8
Non-cash fair value losses / (gains) on financial instruments 0.2 (0.9)
Restructuring costs 0.5 -
Rounding difference - (0.1)
Adjusted operating profit 24.4 27.7
Adjusted profit before tax
Profit before tax
Calculated as profit before tax 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.
£m 2023 2022
Profit before tax 16.2 17.4
Amortisation of acquired intangibles 5.2 2.6
Acquisition costs 0.2 2.8
Non-cash operating expenses relating to put and call option agreements 4.3 2.0
Impairment losses - 2.8
Non-cash fair value losses / (gains) on financial instruments 0.2 (0.9)
Restructuring costs 0.5 -
Unwinding of redemption liability (3.3) 0.6
Rounding difference (0.1) (0.1)
Adjusted profit before tax 23.2 27.2
Adjusted profit before tax margin
None
Calculated as Adjusted profit before tax divided by revenue.
Adjusted earnings per share
Basic earnings per share
Calculated as basic earnings 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.
Adjusted fully diluted earnings per share
Diluted earnings per share
Calculated as diluted earnings per share (basic EPS, adjusting for the effects
of potentially dilutive share options) 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.
Adjusted profit before tax as a percentage of net revenue
None
Calculated as Adjusted profit before tax divided by Net revenue
Cash flow measures
Adjusted cash conversion None Adjusted cash conversion is cash generated from operating activities adjusted
for movements in non-trading items, including loans to AR firms and associates
and cash transaction costs, and for increases in restricted cash balances, as
a percentage of adjusted operating profit.
£m 2023 2022
Cash generated from operating activities 29.7 28.5
Acquisition costs 0.2 2.8
Restructuring costs 0.5 -
Decrease in loans to AR firms and associates (0.8) (0.8)
Increase in restricted cash balances (0.7) (1.4)
Rounding difference 0.1 -
Adjusted cash generated 29.0 29.1
Balance sheet measures
Net debt None Loans and borrowings less unrestricted cash balances.
Balance sheet measures
Net debt
None
Loans and borrowings less unrestricted cash balances.
Glossary of terms
AI Artificial Intelligence
Appointed Representative, AR, or AR firm An intermediary firm or person who is party to an agreement with a FCA
regulated firm permitting them to carry out certain regulated activities
AR Agreement Agreement governing the terms of the commercial relationship between MAB and
an AR firm, and setting out how income from products sold by Advisers of the
AR is split between MAB and the AR
Adviser A person employed or engaged by an AR firm, carrying out mortgage and/or
general or protection insurance advisory services to customers
Base Rate The Bank of England base rate is the interest rate that the Bank of England
charges banks for secured overnight lending. It is the UK Government's key
interest rate for enacting its monetary policy
Bridging Finance Short-term borrowing used to bridge a gap in funding until a property
transaction completes
Clawbacks The right of insurers to reclaim some or all of the commission paid to an
intermediary in the event premiums are not paid by the policy holder in the
period during which the policy holder pays monthly premiums, typically 48
months for protection products for MAB
Client fee A fee paid by the consumer to the intermediary who has arranged the consumer's
mortgage with a lender
Consumer Duty The policy statement published by the FCA in July 2022, which aims to set
higher and clearer standards of consumer protection
Corporate Social Responsibility A type of business self-regulation that aims to contribute to societal goals
by engaging in or supporting ethically-oriented practices (e.g. fundraising
for charity)
Directly Authorised An entity that is directly authorised by the FCA to carry out regulated
activities
ESG Environmental, Social and Governance
Execution only Refers to a customer entering into a regulated mortgage contract without being
given advice, or where the advice given by a firm has been rejected. This is
effectively a self-service process
FCA Financial Conduct Authority
FSCS The Financial Services Compensation Scheme is the UK's statutory deposit
insurance and investors compensation scheme for customers of authorised
financial services firms
FTB First Time Buyer
GDPR The General Data Protection Regulation, a regulation in EU law on data
protection and privacy
General insurance Buildings and contents insurance and certain other non-life insurance products
but excluding protection
Gross mortgage lending New mortgage lending and product transfers
Help-to-Buy UK Government incentives that aim to help first time buyers and those looking
to move homes purchase a residential property. Help-to-Buy schemes include
Equity Loans and Shared Ownership schemes
Intermediary, intermediary firm, or mortgage intermediary A firm or individual who arranges mortgages with lenders on behalf of
customers, (as opposed to a lender that the customer approaches directly). An
intermediary is either directly authorised by the FCA or is an appointed
representative of a directly authorised firm
IMLA The Intermediary Mortgage Lenders Association is a trade association that
represents the views and interests of UK mortgage lenders who are involved in
the generation of mortgage business via professional financial intermediaries
Insurance or insurance products Includes protection and general insurance
IR35 The UK's anti-avoidance tax legislation designed to tax disguised employment
at a rate similar to employment
Later Life Lending Refers to mortgage products aimed at those approaching or already in
retirement, who are looking to release some of the equity in their home for a
variety of reasons
Lifetime Mortgage A type of Later Life Lending whereby no capital or interest repayments are
made. Compounded interest is added to the capital throughout the term of the
loan, which is then repaid by selling the property when the borrower dies or
moves out
Mortgage Advice and Selling Standards Policy statement issued by the FCA in February 2020 which sets out a package
of remedies aiming to help consumers make better informed choices with regard
to mortgages
Mortgages Market Study Market study conducted by the FCA in 2019 as a precursor to the Mortgage
Advice and Selling Standards policy statement
Mortgage panel or lender panel A panel of mortgage lenders used by intermediaries
New build Encompasses properties built by developers, custom build, self-build and
affordable housing
New mortgage lending Lending resulting from a mortgage completion in connection with a house
purchase or a re-mortgage with a different lender to the customer's existing
lender
PCW Price Comparison Website
PPC Pay-Per-Click
Procuration fee, or Mortgage procuration fee A fee paid by a lender to the intermediary who has arranged a mortgage with
the lender
Product transfer The process of switching an existing mortgage product to a new one with the
same lender
Protection insurance Life insurance (including critical illness), family income protection and
certain other insurance products (but excluding general insurance)
Secured Personal Loan A loan that uses a property as security, also known as second charge mortgage
Service centres or telephone centres MAB's regional telephone service centres operated by certain AR firms. The
services provided by these centres include reviews of mortgage and related
insurance products on an on-going basis with replacement or new products
offered to customers, as appropriate
SM&CR The Senior Manager and Certification Regime, a regime that aims to raise
standards of governance, increase individual accountability and help restore
confidence in the financial
services sector
Cautionary Statement
Certain statements included or incorporated by reference within this
announcement may constitute "forward-looking statements" in respect of the
Group's operations, performance, prospects and/or financial condition.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words and words of similar meaning as
"aims", "anticipates", "believes", "continues", "could", "due", "estimates",
"expects", "goal", "intends", "may", "objectives", "outlook", "plans",
"potential", "probably", "project", "seeks", "should", "targets", or "will"
or, in each case, their negative or other variations or comparable
terminology.
By their nature, forward-looking statements involve a number of risks,
uncertainties and assumptions and actual results or events may differ
materially from those expressed or implied by those statements. Accordingly,
no assurance can be given that any particular expectation will be met and
reliance should not be placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities should not be
taken as a representation that such trends or activities will continue in the
future. Except as required by applicable law or regulation, no responsibility
or obligation is accepted to update or revise any forward-looking statement
resulting from new information, future events or otherwise. Nothing in this
announcement should be construed as a profit forecast.
This announcement does not constitute or form part of any offer or invitation
to sell, or any solicitation of any offer to purchase any shares or other
securities in the Company, nor shall it or any part of it or the fact of its
distribution form the basis of, or be relied on in connection with, any
contract or commitment or investment decisions relating thereto, nor does it
constitute a recommendation regarding the shares or other securities of the
Company. Past performance cannot be relied upon as a guide to future
performance and persons needing advice should consult an independent financial
adviser authorised under the Financial Services and Markets Act 2000 (as
amended). Statements in this announcement reflect the knowledge and
information available at the time of its preparation. Liability arising from
anything in this announcement shall be governed by English law. Nothing in
this announcement shall exclude any liability under applicable laws that
cannot be excluded in accordance with such laws.
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