REG - Mortgage Adv. Bureau - Interim Results
27/09/2022 07:00
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RNS Number : 7119A Mortgage Advice Bureau (Hldgs) PLC 27 September 2022
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
("MAB" or "the Group")
27 September 2022
Interim Results for the six months ended 30 June 2022
Mortgage Advice Bureau (Holdings) Plc (AIM: MAB1.L) is pleased to announce its
interim results for the six months ended 30 June 2022.
Financial highlights
H1 2022 H1 2021 Change vs 2021
Revenue £96.5m £92.4m +4%
Gross profit £25.4m £24.6m +3%
Gross profit margin 26.4% 26.7% -0.3pp((1))
Adjusted overheads ratio((2)) 14.7% 14.8% -0.1pp((1))
Adjusted profit before tax((3)) £11.5m £11.6m -
Statutory profit before tax £10.1m £10.8m -6%
Adjusted profit before tax margin((3)) 12.0% 12.5% -0.5pp((1))
Adjusted profit before tax as a percentage of net revenue((4)) 39% 41% -2pp((1))
Reported profit before tax margin 10.5% 11.7% -1.2pp((1))
Adjusted((3)) EPS 16.4p 17.9p -8%
Basic EPS 14.0p 16.5p -15%
Operating profit to adjusted cash conversion((5)) 124% 120% +4pp((1))
Interim dividend((6)) 13.4p 13.4p -
Operational highlights
● Adviser numbers up 8% to 2,034 ((7)) at 30 June 2022 (31 December 2021: 1,885)
● Average number of mainstream advisers((8)) up 19% to 1,890 (H1 2021: 1,584)
● Revenue per mainstream adviser down 13%((9)) with pipelines taking longer to
convert and against a very strong comparative in H1 2021 as a result of
stamp duty holiday changes accelerating house purchase mortgage completions in
that year
● Gross mortgage completions (including product transfers) up 11% to £12.2bn
(H1 2021: £11.0bn)
● Gross new mortgage completions (excluding product transfers) up 7% to £10.3bn
(H1 2021: £9.6bn)
● Market share of new mortgage lending up 13% to 6.8% (H1 2021: 6.0%((10)))
● Proportion of revenue from re-financing at 30% (H1 2021: 24%)
Post period end
● Completed the acquisition of The Fluent Money Group, which is transformational
for the Group's lead generation strategy
● Increased stake in leading protection and general insurance advice firm Vita
Financial Ltd from 49% to 75%
● 2,160((7)) advisers at 23 September 2022, including 156((11)) advisers from
The Fluent Money Group
Peter Brodnicki, Chief Executive, commented:
"This is a strong set of results when compared to the exceptional results
reported for the same period last year, particularly given the increasingly
difficult macro environment that developed during the period. I am especially
pleased that we have delivered a large gain in market share during the first
half.
"The integration of Fluent is progressing very well. Lead flow has been
growing strongly, ahead of our expectations, and we expect it to continue to
do so despite the purchase market starting to slow. Accordingly, recruiting
new advisers to ensure this strong consumer demand is met remains a high
priority for Fluent.
"The well documented congestion of property and mortgage pipelines has
resulted in transactions taking a month longer to complete than in H1 2021,
with the anticipated improvement still to materialise. A more cautious market
outlook typically leads to broker firms seeking a partner that can help them
optimise income and support continued business growth. Our pipeline of new
appointed representatives ("AR") and adviser recruitment remains strong, and
MAB is well positioned to attract those firms focused on achieving growth in
an increasingly challenging economic climate."
Current Trading and Outlook
Due to extended completion timeframes, the Group started the second half with
a pipeline of written new business that was over 30% higher than expected,
allowing for adviser growth, compared to the start of the year. Re-financing
activity continues to increase, as advisers, lenders, and customers focus on
making the most of securing new mortgage deals as mortgage rates rise. Whilst
consumer demand has cooled a little, housing transaction levels are expected
to remain steady. It remains clear that those who have built up strong savings
and equity over recent years are sufficiently well positioned and confident to
move home. In addition, mortgage lenders are well capitalised with ample
liquidity, meaning product availability and price competition for mortgages is
very strong despite the increasing interest rate environment. In this
increasing interest rate environment, advisers have experienced constant
change in mortgage products as well as short notice withdrawal of those
products, and we expect this to continue whilst interest rate uncertainty
continues.
A continuation of slow pipeline conversion, a further softening of purchase
activity, and an increasingly cautious approach to recruitment by some ARs is
likely to lead to a slight reduction in the Group's financial result for the
year against previous expectations.
We expect the recent mini budget to support the housing and mortgage markets.
The Stamp Duty changes that help aspiring first time buyers are particularly
welcome, demonstrating the Government's ongoing commitment towards maintaining
a healthy and active housing market.
We were delighted to complete the acquisition of The Fluent Money Group on 12
July 2022. The acquisition is expected to be significantly earnings
accretive in 2023 and will allow the enlarged Group to rapidly benefit from a
far greater level of national lead generation. Since Q2 2022, Fluent has
delivered faster than expected lead growth in its mortgage division, requiring
additional investment in the recruitment of new advisers and associated
administrative staff to handle the strong consumer demand. This reinforces our
confidence in the outlook for 2023 and beyond.
For further information please contact:
Mortgage Advice Bureau (Holdings) Plc Tel: +44 (0) 1332 525007
Peter Brodnicki - Chief Executive Officer
Ben Thompson - Deputy Chief Executive Officer
Lucy Tilley - Chief Financial Officer
Numis Securities
Limited
Tel: +44 (0)20 7260 1000
Stephen Westgate / Giles Rolls
Media enquiries: investor.relations@mab.org.uk
Analyst presentation
There will be an analyst presentation to discuss the results at 9:30am
today.
Those analysts wishing to attend are asked to contact
investor.relations@mab.org.uk
Copies of this interim results announcement are available at
www.mortgageadvicebureau.com/investor-relations
(1) Percentage points.
(2) MAB uses adjusted results as key performance indicators as the Directors
believe that these provide a more consistent measure of operating performance
by adjusting for acquisition related charges and significant one-off or
non-cash items. Adjusted overheads ratio is stated before £1.5m (H1 2021:
£nil) of costs relating to the acquisition of The Fluent Money Group, £0.4m
(H1 2021: £0.6m) of costs relating to the First Mortgage option, and £0.2m
(H1 2021: £0.2m) of amortisation of acquired intangibles.
(3) Adjusted profit before tax is stated before the items in (2) above and
£0.7m of net fair value gains on deferred considerations (H1 2021: £nil),
and £0.03m (H1 2021: £nil) of net fair value losses on derivative financial
instruments. Adjusted earnings per share is stated on the same basis, net of
any associated tax effects.
(4) Net revenue is revenue less commissions paid.
(5) Adjusted cash conversion is cash generated from operating activities
adjusted for movements in non-trading items, including loans to AR firms and
associates totalling £(0.3)m in H1 2022 (H1 2021: £(0.9)m), and increases in
restricted cash balances of £0.5m in H1 2022 (H1 2021: £1.2m), as a
percentage of adjusted operating profit.
(6) Dividend policy based on a minimum payout ratio of 75% of annual adjusted
profit after tax post minority interests.
(7) Includes a total of 67 advisers at 30 June 2022 and 73 advisers at 23
September 2022 who are either directly authorised or later life advisers. The
directly authorised advisers are employees of a firm previously authorised
under an Appointed Representative agreement with MAB until 7 December 2020.
MAB continues to provide services to this firm, which is now directly
authorised by the FCA. For both later life and directly authorised advisers
the fees received by MAB represent the net income received by MAB as there are
no commission payouts made by MAB. The 30 June 2022 and 23 September 2022
figures also include 14 advisers from associates, who are in the process of
being onboarded under MAB's AR arrangements. These advisers will shortly
become mainstream advisers. Until these 14 advisers become onboarded fully as
mainstream advisers, MAB currently only recognises its share of profit after
tax from these associates.
(8) Excludes directly authorised advisers, later life advisers, and advisers
from associates in the process of being onboarded under MAB's AR arrangements.
(9) Based on average number of mainstream advisers.
(10) For H1 2021, market share stated for the seven months ended 31 July 2021
due to the distortion effect around 30 June 2021 with the tapering of the
stamp duty holiday thereafter.
(11) Fluent's 156 advisers as at 23 September 2022 include 78 advisers in the
first charge mortgages division, 60 in the secured personal loans division, 13
in the later life division, and 5 in the bridging finance division.
Chief Executive's Review
Despite a 29% drop in UK housing transactions in the period compared to H1
2021, when stamp duty holiday changes accelerated house purchase completions,
the Group grew its revenue by 4% to £96.5m (H1 2021: £92.4m), its mortgage
completions by 11% to £12.2bn (H1 2021: £11.0bn), and its market share by
13% to 6.8% (H1 2021: 6.0%). This once again demonstrates the strength and
resilience of the Group's business model, with adjusted profit before tax in
line with the prior period at £11.5m (H1 2021: £11.6m).
Our growth in mortgage completions is analysed as follows:
H1 2022 H1 2021 Increase
£bn £bn vs 2021
New mortgage lending 10.3 9.6 +7%
Product Transfers 1.9 1.4 +36%
Gross mortgage lending 12.2 11.0 +11%
UK mortgage lending activity returned to more normal levels during the first
half of this year, after the unprecedented surge seen in H1 2021. In addition,
the time taken to complete a property purchase increased by approximately one
month compared to the equivalent period last year, adversely impacting the
number of mortgage completions. Compared to H1 2021, UK mortgage completions
in the purchase segment saw a 30% drop. UK gross mortgage completions as a
whole were down 10% at £151.4bn (H1 2021: £168.5bn((1))), and up 20%
compared to pre-Covid-19 levels in 2019 (H1 2019: £126.2bn).
A number of factors are delaying property transactions and mortgage pipelines,
including conveyancing backlogs, local authority capacity constraints, and
also expiring mortgage offers that need to be reconsidered and reissued by
lenders due to the frequency of UK base rate increases in the period.
Consequently, our pipeline of written but unbanked business has grown to
larger than usual levels.
Delivering our growth strategy
Adviser growth
Adviser growth continues to be a major focus for the Group, boosted by the
need to service new lead flow whilst using technology to help maximise
opportunities from existing customers and lead sources.
Adviser numbers grew by 8% to 2,034 during the period. Every year, MAB helps
its ARs replace 300+ advisers, and overall growth in adviser numbers is
derived from organic growth in these existing firms and also new ARs being
onboarded with their existing advisers. Over the summer months, MAB saw a
significant fall in the number of new advisers onboarded with a far higher
than usual summer holiday slowdown experienced. This is an unfortunate break
in strong momentum in adviser growth this year, which has now resumed and is
expected to remain strong for the remainder of the year. As a result, adviser
numbers were 2,160 as at 23 September 2022, including 156 Fluent advisers.
We have a strong pipeline of new advisers and ARs and, combined with Fluent's
rapidly growing adviser base in the Mortgage division, we expect to continue
to deliver further adviser growth.
As trading conditions are likely to become more challenging, some existing
firms will take a more cautious view on organic growth whilst others,
including newly onboarded growth-focussed firms, expect to continue with their
plans for adviser and market share growth.
With increasing expectations and even higher standards expected from the
regulator, more directly authorised firms are seeking greater support from a
strategic partner like MAB. We expect the recruitment of growth-driven firms
to remain strong, supported by the continued development of our technology
platform.
Investment strategy
The acquisition of Fluent has further strengthened our portfolio of
invested-in businesses((2)). These businesses are integral to the future
success of the Group as we pursue a greater level of adviser productivity,
primarily based on a clear and strong lead generation strategy.
The average productivity of advisers in our invested-in businesses is circa
25% greater than our other ARs' advisers, and recent investments have
increased that differential further. This includes the acquisition of Fluent,
which is a leader in the provision of centralised telephone-based mortgage
advice and is delivering high levels of adviser performance by combining
strong and reliable lead flow with streamlined technology-driven processes.
Fluent has formed relationships with leading third-party brands including
aggregators and other national lead sources. Fluent helps customers to access
Mortgages, Secured Personal Loans, Later Life Lending and Bridging Finance,
and broadens the Group's revenue mix and customer proposition. Since the
acquisition, Fluent has experienced strong growth in lead flow and adviser
numbers in its fast-growing mortgage division, providing a rapid scale-up of
the Group's adviser base and fulfilment capability.
Separately, MAB has also targeted the fast-growing national lead source sector
and has already formed a number of strong relationships. Combined, MAB and
Fluent can grow this new market share opportunity quickly and effectively,
complementing the local/regional strategy delivered by the rest of the Group's
growing distribution.
If activity in the housing market was to fall from current levels, this lead
supply would further support revenue and profit growth despite more
challenging trading conditions.
Although the contribution from some of our smaller early-stage investments has
taken time to build, these are now starting to mature. Our investment strategy
in the last few years has increasingly focused on established and profitable
firms, strengthening our new build proposition and market share, in addition
to ensuring we have the expertise and scale to establish a market leading
position in the national lead source sector.
We expect the additional lead flow that MAB can generate for its invested-in
businesses, combined with their existing growth trajectory, strong protection
success, and growing productivity per adviser, will contribute significant
profit growth over the next five years.
Vita Financial Ltd ("Vita") has performed exceptionally well in supporting
MAB's AR firms who wish to outsource some of their protection or general
insurance leads. As part of MAB's wider protection strategy, we intend to
extend Vita's proposition into a wider addressable market to fully leverage
its expertise. Accordingly, we have acquired a further 26% stake in Vita,
increasing our overall stake to 75%.
Customer lead generation
In our sector, securing a quality and reliable lead flow underpins both the
growth and stability of every firm, and gives more predictability and control
over trading. This is why MAB has focused technology developments and
prioritised investments in this area.
MAB is already a leader in local lead generation through estate agencies and
builders, and new technology developments will help us optimise lead flow in
these two key sectors. The addition of Fluent, which has rapidly achieved a
dominant position with national lead sources, has given the enlarged Group a
market leading proposition in the three largest lead source sectors. Driven by
this acquisition and the fulfilment capacity of the Group, we are now in an
even stronger position to secure additional national lead generation partners
to support further productivity and adviser growth in 2023 and beyond.
Significant upside can also be achieved through improved customer retention.
This has been a major strategic focus for the Group and we will be launching
new initiatives and technology in Q4 2022 to help optimise these opportunities
at a time when consumers are highly focused on managing their expenditure.
In addition, capturing and nurturing customers who are in the early research
stages of their home buying journey is also a new and integral part of the
Group's strategy. This gives us access to a new and wider group of lead
sources.
Summary
MAB's market share model has delivered year-on-year growth in all market
conditions and is better positioned than ever to keep doing so.
Our management team has strengthened further this year, and MAB's technology
investments and lead generation strategy have progressed very well. We
continue to onboard recent investments following FCA approval, and our
invested-in businesses are set to perform strongly, benefitting from lead
generation and streamlined processes.
Our acquisition of Fluent will bring significant earnings enhancement to the
Group, derived in part from the delivery of commercial synergies. We will also
help Fluent to accelerate growth through sharing best practice, primarily in
customer retention and the provision of protection and general insurance.
2022 has proved to be a difficult year for advisers, due to a constant
withdrawal and re-pricing of mortgage rates at short notice. Combined with a
significant fall in, and delays to housing transactions and completions
compared to H1 2021, productivity has understandably been affected.
The longer-term fundamentals for the property and mortgage markets look very
strong, and there is also scope for further growth through setting higher
standards and helping firms with the important new regulatory requirements
being introduced by the FCA.
Our strategy underpins our confidence in the outlook for 2023 and beyond.
(1) MAB previously reported £169.9bn of gross new mortgage completions in H1
2021, in line with UK Finance estimates at the time. UK Finance regularly
updates its estimates.
(2) Invested-in businesses include the Group's associate companies, First
Mortgage, The Fluent Money Group and Vita Financial.
Market review
During the period, the housing market returned to more normal levels after an
unprecedented surge in house purchase activity last year driven by the stamp
duty holiday. Compared to H1 2021, the number of property transactions fell by
29%. However, property transactions still trended above pre-Covid-19 levels,
having grown by 8% compared to H1 2019, as illustrated in the following graph.
http://www.rns-pdf.londonstockexchange.com/rns/7119A_3-2022-9-26.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/7119A_3-2022-9-26.pdf)
Source: HM Revenue and Customs
Gross new mortgage lending activity in the purchase segment experienced a
similar trend during the period, falling by 30% compared to H1 2021 but
increasing by 28% compared to H1 2019. The drop in home-owner mover activity
was the sharpest (-39% compared to H1 2021, +24% compared to H1 2019) as a
result of the exceptional peak in that segment last year. First-time buyer
activity was down by a more modest 17% compared to the peak in H1 2021, but up
27% compared to pre-Covid-19 levels in H1 2019.
Re-financing activity in H1 2022 showed strong year-on-year growth. External
re-mortgage lending values increased by 37% compared to H1 2021, reflecting
the exceptionally busy housing market last year, and 7% compared to H1 2019.
Whilst product transfers values decreased by 4% in H1 2022 compared to H1
2021, they increased by 12% compared to H1 2019. We expect re-financing
activity to continue to be strong, as consumers seek better mortgages rates in
a rising interest rate environment and high levels of fixed rate mortgages
arriving at maturity in the near term.
Buy-to-let activity was steady during the period largely driven by buy-to-let
re-mortgage activity. Buy-to-let values increased by 9% compared to H1 2021
and 26% compared to H1 2019.
Overall, gross new mortgage lending (excluding product transfers) in H1 2022
decreased by 10% compared to H1 2021 and increased by 20% compared to
pre-Covid-19 levels in H1 2019.
The trends in gross new mortgage lending are illustrated in the graph below.
http://www.rns-pdf.londonstockexchange.com/rns/7119A_2-2022-9-26.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/7119A_2-2022-9-26.pdf)
Source: UK Finance
During the period, average house prices increased by 10% year-on-year, similar
to the increases seen throughout 2021. This is likely to start slowing in the
coming months due to fears of recession and the rising cost of living.
The share of UK residential mortgage transactions via intermediaries
(excluding buy to let, where intermediaries have a higher market share, and
product transfers where intermediaries have a lower market share) grew to 84%
(H1 2021: 79%), with the expected increase reflecting how consumers
increasingly want choice, advice, and support in making major financial
decisions. The increase in intermediary market share also reflects the lower
footfall in bank and building society branches, a change that was accelerated
in part by Covid-19. We expect this increased intermediary market share to
remain stable in the short term.
Despite inflationary pressures and further national and geopolitical
uncertainty, the level of consumer demand for housing remains strong,
supported by UK full employment, high levels of household savings, and, for
those who are subsequent movers, rising housing equity levels over recent
years. Lenders also have strong liquidity levels, meaning mortgage
availability is now close to pre-pandemic highs, thereby helping market
activity to remain healthy.
Although interest rates have risen and will most likely continue to rise over
the next 12 months, current interest rates remain near historical lows. We
expect this to continue to stimulate re-financing activity. We are confident
that this, coupled with strong demand for housing, will continue to drive
sustained transaction activity in the mortgage market.
(1) Land Registry House Price Index
Financial review
We measure the development, performance, and position of our business against
several key indicators.
http://www.rns-pdf.londonstockexchange.com/rns/7119A_1-2022-9-26.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/7119A_1-2022-9-26.pdf)
Revenue
Group revenue for the six months ended 30 June 2022 increased to £96.5m (H1
2021: £92.4m), up 4% on a comparative period in which house purchase mortgage
completions were boosted by the stamp duty holiday changes at the end of March
and June 2021. In addition, H1 2022 revenue was negatively impacted by delays
in the conversion of pipeline to completions and a change in mortgage mix with
an increase in re-financing compared to the prior period.
The average number of mainstream advisers((1)) during the period increased by
19% to 1,890 (H1 2021: 1,584), with lower average revenue per mainstream
adviser of £51,041 (H1 2021: £58,451) as a consequence of the factors set
out above.
The Group continued to generate revenue from three core areas, summarised as
follows:
Group
Income source H1 2022 H1 2021 Change vs 2021
£m £m %
Mortgage Procuration Fees 44.9 42.7 +5
Protection and General Insurance Commission 37.2 35.8 +4
Client Fees 11.8 11.6 +2
Other Income 2.6 2.3 +13
Total 96.5 92.4 +4
MAB's banked mortgage mix saw a lower proportion of house purchase business
compared to the prior year with an increase in re-financing. In particular,
the proportion of product transfer completions, which have a lower average
procuration fee and see lower protection, general insurance and client fee
attachment rates, increased to 18% (H1 2021: 14%). Consequently, while the
Group's gross mortgage completions increased by 6%((2)), mortgage procuration
fees increased by 5%, protection and general insurance commissions increased
by 4% and client fees increased by 2%.
MAB's average mortgage size increased by 2% compared to the prior period, with
average house prices increasing by 10% year-on-year, reflecting the increased
proportion of re-financing completions where the average mortgage size is
lower than for purchase transactions.
MAB's overall revenue from re-financing (including both re-mortgages and
product transfers) represented circa 30% of total revenue (H1 2021: 24%, H1
2019: 32%), with the prior period reflecting a particularly high level of
purchase transactions in H1 2021.
The proportion of revenue derived from each of the Group's core revenue
streams has remained relatively stable, with small movements reflecting the
change in banked mortgage mix during the period illustrated as follows:
Income source H1 2022 H1 2021
Mortgage Procuration Fees 47% 46%
Protection and General Insurance Commission 38% 39%
Client Fees 12% 13%
Other Income 3% 2%
Total 100% 100%
Gross profit margin
Gross profit margin was 26.4% (H1 2021: 26.7%), with the slight fall during
the period reflecting the increased proportion of re-financing transactions
and the slightly reduced margin received by the Group (revenue share) as
existing ARs grow their revenue organically by increasing their adviser
numbers. In addition, larger new ARs typically join the Group on
lower-than-average margins due to their existing scale, hence we expect to see
a degree of erosion of our underlying gross profit margin (prior to the impact
of the Fluent acquisition) due to the continued growth of our existing ARs and
the addition of new larger ARs.
Looking ahead, before the impact of the Fluent acquisition (as set out below),
we expect any further erosion in underlying gross margin to be offset by a
reduction in the Group's overheads ratio through economies of scale.
Administrative expenses
Administrative expenses in the period increased by £0.5m (+4%) to £14.2m.
MAB has continued to invest in its technology platform and marketing team to
drive lead generation opportunities. All development work on our technology
platform is expensed.
Administrative expenses as a percentage of revenue remained stable at 14.7%
(H1 2021: 14.8%). This excludes £1.5m (H1 2021: £nil) of costs associated
with the acquisition of The Fluent Money Group, £0.2m (H1 2021: £0.2m) of
amortisation of acquired intangibles and £0.4m (H1 2021: £0.6m) of
additional non-cash operating expenses relating to the put and call option
agreement to acquire the remaining 20% of First Mortgage.
Prior to the impact of the acquisition of Fluent as set out below, MAB
continues to benefit from the scalable nature of most of its cost base, where
those costs typically rise at a slower rate than revenue, which will, in part,
counter the expected erosion of MAB's underlying gross margin as the business
continues to grow. In recognition of the current inflationary environment
MAB awarded pay rises effective from 1 July 2022 to a number of staff to help
with the increasing costs of living.
Associates and investments
MAB's share of profits from associates was £0.3m (H1 2021: £0.7m) with a
slower start to the year for a number of the Group's associates resulting
primarily from delays in conversion of pipeline to completion. MAB also
realised a further £0.1m profit on the sale of its minority investment in the
sales progression platform Yourkeys Technology Ltd.
MAB considers the value of a number of these investments exceeds their balance
sheet value as accounted for using the equity accounting method under IAS 28.
Profit before tax and margin thereon
Adjusted((3)) profit before tax as a percentage of net revenue((4)) reduced to
39% (H1 2021: 41%), primarily due to the change in banked mortgage mix.
Adjusted((3)) profit before tax was £11.5m (H1 2021: £11.6m), with the
margin thereon being 12.0% (H1 2021: 12.5%). Statutory profit before tax was
£10.1m (H1 2021: £10.8m) with the margin thereon being 10.5% (H1 2021:
11.7%).
Finance income and expense
Finance income of £0.04m (H1 2021: £0.03m) reflects continued low interest
rates and interest income accrued or received on loans to associates. Finance
expense of £0.1m (H1 2021: £0.1m) reflects the non-utilisation fee payable
on a Revolving Credit Facility ("RCF") of £12m repaid in December 2020,
interest expense on lease liabilities and commitment fees on the new debt
facilities as set out below.
On 28 March 2022 MAB entered into new four-year debt facilities with NatWest,
comprising a £20m Term Loan (the "Term Loan") and a £15m RCF (the "New RCF")
to be used in connection with the acquisition of Fluent. The New RCF is also
available for general corporate purposes. There is an option to extend the New
RCF and the Term Loan for a further year.
Taxation
The effective rate of tax increased to 21.9% (H1 2021: 16.8%), primarily due
to costs associated with the acquisition of Fluent being disallowable for tax
purposes, no share option exercises in the period and a lower tax credit on
research and development expenditure on the continued development of MAB's
proprietary software platform, MIDAS. We expect the effective tax rate in
future years to be materially in line with the prevailing UK corporation tax
rate.
Issue of new ordinary shares, earnings per share and dividend
On 28 March 2022 the Group placed 3,809,524 new ordinary shares with
investors, raising £40m to part fund the acquisition of The Fluent Money
Group (the "Placing"), representing a 7% increase in the Group's issued share
capital. The new ordinary shares were issued at £10.50 per ordinary
share. The share premium recognised was £38.4m after deduction of £1.6m of
costs directly associated with the Placing.
Adjusted((3)) earnings per share was 16.4 pence (H1 2021: 17.9 pence)
reflecting the dilutive impact of the Placing throughout Q2 2022 while the
acquisition did not complete until after the period end, so that no earnings
from Fluent were recognised in H1 2022. Basic earnings per share was 14.0
pence (H1 2021: 16.5 pence).
The Board is pleased to confirm an interim dividend for the year ending 31
December 2022 of 13.4 pence per share (H1 2021: 13.4 pence per share),
reflecting the Group's dividend policy based on a minimum payout ratio of 75%
of the Group's annual adjusted((3)) post-tax and minority interest profits.
This represents a cash outlay of £7.6m (H1 2021: £7.1m). MAB requires
circa 10% of its profit after tax to fund increased regulatory capital and
other regular capital expenditure. Following payment of the dividend, the
Group will continue to maintain significant surplus regulatory reserves.
The record date for the interim dividend is 7 October 2022 and the payment
date is 4 November 2022. The ex-dividend date will be 6 October 2022.
Cash flow and cash conversion
The Group's operations produce positive cash flow. This is reflected in the
net cash generated from operating activities of £11.5m (H1 2021: £14.7m).
Headline cash conversion((5)) was:
H1 2022 128%
H1 2021 130%
Adjusted cash conversion((6)) was:
H1 2022 124%
H1 2021 120%
The Group's operations are typically capital-light, with the most significant
ongoing capital investment being in computer equipment. Only £0.1m of
capital expenditure on office and computer equipment was required during the
period (H1 2021: £0.1m). Group policy is not to provide company cars. The
Group is currently undertaking a refurbishment of its head office in Derby,
which it anticipates will cost c. £3m. No other significant capital
expenditure is foreseen in the coming year.
The Group had no bank borrowings at 30 June 2022 (31 December 2021: £nil).
The Group had adjusted unrestricted bank balances((7)) of £19.0m at 30 June
2022 (31 December 2021: £17.5m).
On 11 July 2022 MAB drew down the £20m Term Loan and £5.3m under the New RCF
to part-fund the acquisition of Fluent.
The Group has a regulatory capital requirement amounting to 2.5% of regulated
revenue. At 30 June 2022 this regulatory capital requirement was £4.3m (31
December 2021: £4.3m), with the Group having a surplus of £20.1m (31
December 2021: £18.9m).
The following table demonstrates how cash generated by the Group was applied:
£m
Unrestricted bank balances at the beginning of the year 17.5
Cash generated from operating activities excluding movements in restricted 12.6
balances and dividends received from associates
Dividends received from associates 0.6
Dividends paid (8.8)
Tax paid (2.1)
Investment in associates (0.5)
Disposal of unlisted investment 0.1
Issue of shares (net of expenses) 38.4
Net interest paid and principal element of lease payments (0.2)
Capital expenditure (0.2)
Unrestricted bank balances at the end of the period 57.4
Financial effects of the acquisition of The Fluent Money Group
Fluent has a higher gross margin than MAB of c.35% because it directly employs
its advisers. However, overheads as a proportion of revenue are also higher
than MAB's, resulting in Fluent's profit before tax margin being slightly
above that of MAB's. The effect of Fluent's operating model on the enlarged
Group will be to slightly increase gross profit margin, which will be
partially offset by an increase in overheads as a proportion of revenue.
MAB entered into the Term Loan and New RCF in part to fund the acquisition of
Fluent. MAB plans to repay approximately half of the Term Loan over the next
four years with the remainder repayable at maturity. There is an option to
extend the New RCF and the Term Loan for a further year. There will be no
change to MAB's dividend policy.
(1) Excludes directly authorised advisers, later life advisers, and advisers
from associates in the process of being onboarded under MAB's AR arrangements.
(2) Stated before completions from associates in the process of being
onboarded under MAB's AR arrangements to produce more appropriate comparisons
against revenue metrics.
(3) Adjusted profit before tax is stated before £0.6m (H1 2021: £0.7m) of
costs associated with the acquisition of First Mortgage, £1.5m (H1 2021:
£nil) of costs relating to the acquisition of The Fluent Money Group,
£0.4m (H1 2021: £0.6m) of costs relating to the First Mortgage option,
£0.2m (H1 2021: £0.2m) of amortisation of acquired intangibles, £0.7m of
net fair value gains on deferred considerations (H1 2021: £nil), and £0.03m
(H1 2021: £nil) of net fair value losses on derivative financial instruments.
Adjusted earnings per share is stated on the same basis, net of any associated
tax effects.
(4) Net revenue is revenue less commissions paid.
(5) Headline cash conversion is cash generated from operating activities
adjusted for movements in non-trading items, including loans to AR firms and
associates totalling £(0.3) in H1 2022 (H1 2021: £(0.9)m), as a percentage
of adjusted operating profit.
(6) Adjusted cash conversion is headline cash conversion adjusted for
increases in restricted cash balances of £0.5m in H1 2022 (H1 2021: £1.2m)
as a percentage of adjusted operating profit.
(7) Unrestricted cash balance at 30 June 22 excludes net proceeds from the
£40m equity placing (£38.4m net of expenses) to part fund the acquisition of
The Fluent Money Group that completed 12 July 2022.
INDEPENDENT REVIEW REPORT TO MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the London Stock Exchange AIM Rules for Companies.
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2022 which comprises the interim condensed consolidated statement of
financial position, interim condensed consolidated statement of comprehensive
income, interim condensed consolidated statement of changes in equity and
interim condensed consolidated statement of cash flows.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with
the London Stock Exchange AIM Rules for Companies which require that the
half-yearly report be presented and prepared in a form consistent with that
which will be adopted in the Company's annual accounts having regard to the
accounting standards applicable to such annual accounts.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the rules of the London
Stock Exchange AIM Rules for Companies for no other purpose. No person is
entitled to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior written
consent. Save as above, we do not accept responsibility for this report to
any other person or for any other purpose and we hereby expressly disclaim any
and all such liability.
BDO LLP
Chartered Accountants
London
United Kingdom
26 September 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Interim condensed consolidated statement of comprehensive income for the six
months ended 30 June 2022
Six months ended 30 June
Note 2022 2021
Unaudited Unaudited
£'000
£'000
Revenue 2 96,468 92,432
Cost of sales 3 (71,032) (67,783)
Gross profit 25,436 24,649
Administrative expenses (14,214) (13,659)
Costs relating to the First Mortgage option 4 (423) (550)
Amortisation of acquired intangibles 4 (183) (183)
Costs relating to the acquisition of The Fluent Money Group 4 (1,453) -
Impairment of loans to related parties - (14)
Net fair value gains on deferred consideration 10 650 -
Net fair value losses on derivative financial instruments 10 (25) -
Share of profit from associates, net of tax 10 314 723
Profit on sale of non-listed equity investment 11 59 309
Impairment of associate 10 - (400)
Operating profit 10,161 10,875
Finance income 5 42 27
Finance expense 5 (96) (67)
Profit before tax 10,107 10,835
Tax expense 6 (2,214) (1,820)
Profit for the period 7,893 9,015
Total comprehensive income 7,893 9,015
Profit is attributable to:
Equity owners of Parent Company 7,698 8,763
Non-controlling interests 195 252
7,893 9,015
Earnings per share attributable to the owners of the Parent Company
Basic 7 14.0p 16.5p
Diluted 7 13.8p 16.4p
Interim condensed consolidated statement of financial position
as at 30 June 2022 and 31 December 2021
Note 30 June 2022 31 Dec 2021
Unaudited Audited
£'000
£'000
Assets
Non-current assets
Property, plant and equipment 2,569 2,667
Right of use assets 2,259 2,457
Goodwill 9 15,155 15,155
Other intangible assets 2,573 2,704
Investments in associates and joint venture 10 12,147 12,433
Investments in non-listed equity shares 11 2,783 2,783
Derivative financial instruments 170 220
Other receivables 12 1,197 1,098
Deferred tax asset 1,726 1,871
Total non-current assets 40,579 41,388
Current assets
Trade and other receivables 12 7,284 6,341
Derivative financial instruments 134 142
Cash and cash equivalents 13 74,743 34,411
Total current assets 82,161 40,894
Total assets 122,740 82,282
Interim condensed consolidated statement of financial position
as at 30 June 2022 and 31 December 2021 (continued)
Note 30 June 2022 Unaudited 31 Dec 2021
£'000
Audited
£'000
Equity and liabilities
Share capital 17 57 53
Share premium 48,155 9,778
Capital redemption reserve 20 20
Share option reserve 4,080 3,523
Retained earnings 24,724 25,408
Equity attributable to owners of Parent Company 77,036 38,782
Non-controlling interests 1,985 2,205
Total equity 79,021 40,987
Liabilities
Non-current liabilities
Provisions 6,403 5,716
Lease liabilities 1,997 2,202
Derivative financial instruments 1 34
Deferred tax liability 672 757
Total non-current liabilities 9,073 8,709
Current liabilities
Trade and other payables 14 33,986 31,925
Lease liabilities 403 394
Corporation tax liability 257 267
Total current liabilities 34,646 32,586
Total liabilities 43,719 41,295
Total equity and liabilities 122,740 82,282
Interim condensed consolidated statement of changes in equity for the six
months ended 30 June 2022
Attributable to the holders of the Parent Company
Share option reserve
Share capital Capital redemption reserve £'000 Non-controlling Interest £'000
£'000
£'000 Share Retained earnings Total equity £'000
£'000
premium Total
£'000
£'000
Balance at 1 January 2021 53 9,778 20 1,807 23,882 35,540 1,908 37,448
Profit for the period - - - - 8,763 8,763 252 9,015
Total comprehensive income - - - - 8,763 8,763 252 9,015
Transactions with owners
Issue of shares - - - - - - - -
Share based payment transactions - - - 693 - 693 - 693
Deferred tax assets recognised in equity - - - 717 - 717 - 717
Reserve transfer - - - (143) 143 - - -
Dividends paid - - - - (10,210) (10,210) (253) (10,463)
Total transactions with owners
- - - 1,267 (10,067) (8,800) (253) (9,053)
Balance at 30 June 2021 (unaudited) 53 9,778 20 3,074 22,578 35,503
1,907 37,410
Balance at 1 January 2022 53 9,778 20 3,523 25,408 38,782 2,205 40,987
Profit for the period - - - - 7,698 7,698 195 7,893
Total comprehensive income - - - - 7,698 7,698 195 7,893
Transactions with owners
Issue of shares 4 38,377 - - - 38,381 - 38,381
Share based payment transactions - - - 532 - 532 - 532
Deferred tax asset recognised in equity - - - 25 - 25 - 25
Reserve transfer - - - - - - - -
Dividends paid - - - - (8,382) (8,382) (415) (8,797)
Total transactions with owners 4 38,377 - 557 (8,382) 30,556 (415)
30,141
Balance at 30 June 2022 (unaudited) 57 48,155 20 4,080 24,724 77,036 1,985 79,021
Interim condensed consolidated statement of cash flows for the six months
ended 30 June 2022
Six months ended 30 June
Note 2022 2021
Unaudited Unaudited
£'000
£'000
Cash flows from operating activities
Profit for the period before tax 10,107 10,835
Adjustments for
Depreciation of property, plant and equipment 175 185
Depreciation of rights of use assets 198 191
Amortisation of intangibles 282 279
Profit on sale of non-listed equity investment 11 (59) (309)
Share based payments 532 693
Share of profit from associates, net of tax 10 (314) (723)
Impairment of associate 10 - 400
Dividends received from associates 10 600 88
Net fair value gains on deferred consideration 10 (650) -
Net fair value losses on derivative financial instruments 10 25 -
Finance income 5 (42) (27)
Finance expense 5 96 67
10,950 11,679
Changes in working capital
(Increase) in trade and other receivables 12 (1,086) (6,730)
Increase in trade and other payables 14 3,120 9,986
Increase in provisions 687 694
Cash generated from operating activities 13,671 15,629
Income taxes paid (2,141) (893)
Net cash generated from operating activities 11,530 14,736
Cash flows from investing activities
Purchase of property, plant and equipment (77) (109)
Purchase of Intangibles (151) -
Acquisition of associates 10 (457) (822)
Disposal of non-listed equity investment 11 114 329
Acquisition of non-listed equity investment - (2,500)
Net cash used in investing activities (571) (3,102)
Cash flows from financing activities
Interest received 5 32 41
Interest paid 5 (48) (67)
Principal element of lease payments (195) (177)
Issue of shares 17 40,000 -
Costs relating to the issue of shares 17 (1,619) -
Dividends paid 8 (8,382) (10,210)
Dividends paid to minority interest (415) (253)
Net cash generated/(used) in financing activities 29,373 (10,666)
Net Increase in cash and cash equivalents 40,332 968
Cash and cash equivalents at the beginning of the period 34,411 32,981
Cash and cash equivalents at the end of the period 74,743 33,949
Notes to the interim condensed consolidated financial statements for the six
months ended 30 June 2022
1 Accounting policies
Corporate information
The interim condensed consolidated financial statements of Mortgage Advice
Bureau (Holdings) plc and its subsidiaries (collectively, "the Group") for the
six months ended 30 June 2022 were authorised for issue in accordance with a
resolution of the directors on 26 September 2022.
Mortgage Advice Bureau (Holdings) plc ("the Company") is a limited company
incorporated and domiciled in England whose shares are publicly traded on the
Alternative Investment Market ("AIM"). The registered office is located at
Capital House, Pride Place, Pride Park, Derby, DE24 8QR. The Group's principal
activity is the provision of financial services.
Basis of preparation
These condensed consolidated interim financial statements for the six months
ended 30 June 2022 have been prepared in accordance with IAS 34 'Interim
financial reporting' and also in accordance with the measurement and
recognition principles of UK adopted international accounting standards. They
do not include all of the information required for full annual financial
statements and should be read in conjunction with the 2021 Annual Report and
Accounts, which were prepared in accordance with UK - adopted international
accounting standards.
The comparative figures for the six months ended 30 June 2021 are not the
Group's statutory accounts for that financial period. The accounts for the
year ended 31 December 2021 have been reported on by the Group's auditors and
delivered to the registrar of companies. The report of the auditor was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
Going concern
The Directors have assessed the Enlarged Group's prospects until 31 December
2023, taking into consideration the current operating environment, including
the impact of geopolitical and macroeconomic uncertainty and inflationary
pressures on property and lending markets. The Directors' financial modelling
considers the Enlarged Group's profit, cash flows, regulatory capital
requirements, borrowing covenants and other key financial metrics over the
period.
These metrics are subject to sensitivity analysis, which involves flexing a
number of key assumptions underlying the projections, including the effect of
geopolitical and macroeconomic uncertainty and inflationary pressures and
their impact on the UK property and lending markets and the Group's revenue
mix, which the Directors consider to be severe but plausible stress tests on
the Enlarged Group's cash position, banking covenants and regulatory capital
adequacy. The Group's financial modelling shows that the Enlarged Group should
continue to be cash generative, maintain a surplus on its regulatory capital
requirements and be able to operate within its current financing arrangements.
Based on the results of the financial modelling, the Directors expect that the
Enlarged Group will be able to continue in operation and meet its liabilities
as they fall due over the 12 months from the approval of the financial
statements. Accordingly, the Directors continue to adopt the going concern
basis for the preparation of the financial statements.
Significant estimates and judgements
Other than as set out below, the judgements, estimates and assumptions applied
in the interim financial statements, including the key sources of estimation
uncertainty, were the same as those applied in the Group's last annual
financial statements for the year ended 31 December 2021. There have been no
material revisions to the nature and amount of estimates of amounts reported
in prior periods.
Significant accounting policies
The accounting policies applied are consistent with those described in the
Annual Report and Group financial statements for the year ended 31 December
2021. New or amended standards effective in the period have not had a material
impact on the condensed consolidated interim financial statements.
The Group has not early adopted any standards, interpretations or amendments
that have been issued but are not yet effective.
New standards with no impact on the Group
· Annual improvements 18-20 cycle amending IFRS 1, IFRS 9, IAS 41. In
May 2020, the IASB made minor amendments to IFRS 1, IFRS 9 and IAS 41 as part
of their annual improvement cycle. The amendment to IFRS 1 permits first time
adopting subsidiaries to measure cumulative translation differences using
amounts reported by its parent. The amendment to IFRS 9 clarifies the fees
that an entity includes when assessing whether the terms of a new or modified
financial liability are substantially different from the original financial
liability. Amendments to IAS 41 removed a requirement to exclude cashflows for
taxation when measuring the fair value of biological assets. These amendments
were applicable for annual reporting periods beginning on or after 1 January
2022, with early application permitted.
· Amendments to IAS 37 Onerous contracts - Cost of fulfilling a
contract. In May 2020, the IASB amended IAS 37 Onerous contracts to further
specify the costs that are considered to be directly related to a contract
when assessing for onerous or loss-making contracts. This amendment is
applicable for annual reporting periods beginning on or after 1 January 2022,
with early application permitted.
· Amendments to IAS 16 Property, plant and equipment - Proceeds before
intended use. In May 2020, the IASB amended IAS 16 Property, plant and
equipment, to prohibit entities from deducting from the cost of an item of
property, plant and equipment any proceeds of the sale of items produced while
bringing that asset to the location and condition necessary for it to be
capable of operating in the manner intended by management. This amendment is
applicable for annual reporting periods beginning on or after 1 January 2022,
with early application permitted.
· Amendments to IFRS 3 - Reference to the conceptual framework. In May
2020, the IASB amended IFRS 3 Business combinations to update references to
the current IASB conceptual framework, as well as add an exception to the
recognition principle for gains or losses on acquired liabilities and
contingent liabilities in a business combination. The amendment also clarified
the recognition criteria of contingent assets on acquisition under IFRS 3.
This amendment is applicable for annual reporting periods beginning on or
after 1 January 2022, with early application permitted.
Future new standards and interpretations
A number of new standards and amendments to standards and interpretations will
be effective for future annual and interim periods, and therefore have not
been applied in preparing these condensed consolidated interim financial
statements. At the date of authorisation of these financial statements, the
following standards and interpretations which have not been applied in these
financial statements were in issue but not yet effective:
Standard or Interpretation Periods commencing on or after
IFRS 17 - Insurance contracts 1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of accounting 1 January 2023
policies
Amendments to IAS 8 - Definition of accounting estimates 1 January 2023
Amendments to IAS 12 - Deferred tax related to assets and liabilities arising 1 January 2023
from a single transaction
Amendments to IAS 1 Presentation of financial statements - On classification 1 January 2023
of liabilities
Other than to expand certain disclosures within the Financial Statements, the
Directors do not expect the adoption of these standards and interpretations
listed above to have a material impact on the Financial Statements of the
Group in future periods.
Basis of consolidation
Where the Company has control over an investee, it is classified as a
subsidiary. The Company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and
its subsidiaries ("the Group") as if they formed a single entity. Intercompany
transactions and balances between group companies are therefore eliminated in
full.
The consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the statement of financial
position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is obtained.
They are deconsolidated from the date on which control ceases.
Entities that are not subsidiaries but where the Group has significant
influence (i.e. the power to participate in the financial and operating policy
decisions) are accounted for as associates. The results and assets and
liabilities of the associates are included in the consolidated accounts using
the equity method of accounting.
Segment reporting
An operating segment is a distinguishable segment of an entity that engages in
business activities from which it may earn revenues and incur expenses and
whose operating results are reviewed regularly by the entity's chief operating
decision maker ("CODM"). The Board reviews the Group's operations and
financial position as a whole and therefore considers that it has only one
operating segment, being the provision of financial services operating solely
within the UK. The information presented to the CODM directly reflects that
presented in the financial statements and they review the performance of the
Group by reference to the results of the operating segment against budget.
Operating profit is the profit measure, as disclosed on the face of the
consolidated statement of comprehensive income, that is reviewed by the CODM.
During the six month period to 30 June 2022, there have been no changes from
the prior periods in the measurement methods used to determine operating
segments and reported segment profit or loss.
2 Revenue
The Group operates in one segment being that of the provision of financial
services in the UK.
Revenue is derived as follows:
Six months ended 30 June
2022 2021
Unaudited Unaudited
£'000 £'000
Mortgage procuration fees 44,928 42,721
Protection and general insurance commission 37,197 35,803
Client fees 11,766 11,624
Other income 2,577 2,284
96,468 92,432
3 Cost of sales
Costs of sales are as follows:
2022 2021
Unaudited
Unaudited
£'000 £'000
Commission paid 66,573 63,924
Impairment of trade receivables 9 (5)
Wages and salary costs 4,450 3,864
71,032 67,783
There is no significant seasonality to income which arises fairly evenly
throughout the year and therefore profits also arise fairly evenly throughout
the financial year.
4 Acquisition costs
Costs relating to current year acquisitions
The Fluent Money Group Limited
On 28 March 2022 Mortgage Advice Bureau (Holdings) plc announced that it had
agreed to acquire 75.4% of Project Finland Topco Limited, which indirectly
owns 100% of The Fluent Money Group Limited ("Fluent" or the "Business"), from
its shareholders including Beech Tree Private Equity and founders for a total
cash consideration of £72.7 million (the "Acquisition"). The Acquisition
completed on 12 July 2022 and the cash consideration was funded from the
Company's existing cash resources, a drawdown on new debt facilities of £25
million and the proceeds of a proposed placing of new ordinary shares in the
Company, conducted on 28 March 2022, which raised £40 million gross, and
£38.4 million net of expenses directly associated with the placing.
Other costs incurred in the period in relation to the Acquisition amounted to
£1,452,721.
Costs relating to prior year acquisitions
First Mortgage Direct Limited
On 2 July 2019 Mortgage Advice Bureau (Holdings) Plc acquired 80 per cent of
the entire issued share capital of First Mortgage Direct Limited ("First
Mortgage" or the "Business").
Costs relating to the amortisation of acquired intangibles amounted to
£183,000 in the six months ended 30 June 2022 and 2021. The option
(comprising the put and the call option) over the remaining 20% of the issued
share capital of First Mortgage has been accounted for under IAS 19 Employee
Benefits and IFRS 2 Share Based Payments due to its link to the service of
First Mortgage's Managing Director. In accordance with IAS 19, £217,936
(2021: £212,303) has been included within costs relating to the First
Mortgage Option, and in accordance with IFRS 2, £204,726 (2021 - £338,118)
of share-based payments costs has also been included within costs relating to
the First Mortgage Option (see note 19).
5 Finance income and expense
Six months ended 30 June
2022 2021
Unaudited Unaudited
£'000
£'000
Finance income
Interest income 32 18
Interest income accrued on loans to associates 10 9
42 27
Finance expenses
Interest expense 68 37
Interest expense on lease liabilities 28 30
96 67
Included within interest expense is interest accrued on the Group's Revolving
Credit Facility (which has been replaced by the Group's new facilities (see
note 15)) of £48,000 (2021: £nil). During the period, interest accrued on
loans to associates in previous years of £nil was received (2021: £23,602).
6 Income tax
The Group calculates the period income tax expense using the tax rate that
would be applicable to the expected total annual earnings. The major
components of income tax expense in the interim condensed statements of
comprehensive income are:
Six months ended 30 June
2022 2021
Unaudited Unaudited
£'000 £'000
Current tax expense
UK corporation tax charge on profit for the period 2,129 1,937
Total current tax 2,129 1,937
Deferred tax expense
Origination and reversal of timing differences (95) (30)
Temporary difference on share based payments 180 (170)
Adjustment due to rate change - 83
Total deferred tax 85 (117)
Total tax expenses 2,214 1,820
For the period ended 30 June 2022, the deferred tax recognised in equity was
£24,513 (2021: £717,160). A change to the corporation tax rate was
substantively enacted on 24 May 2021 to increase it to 25% from 1 April 2023
rather than the previously enacted 19%.
The deferred tax asset is recognised after being assessed as recoverable on
the basis of available evidence including projected profits, capital and
liquidity position. The deferred tax asset is only recognised to the extent
that it is probable that future taxable profits will be available against
which the asset can be utilised. The deferred tax asset is reviewed at each
reporting date and reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
7 Earnings per share
Both the basic and diluted earnings per share have been calculated using the
profit attributable to shareholders of the Parent Company, Mortgage Advice
Bureau (Holdings) plc, as the numerator.
The weighted average number of shares for the purposes of the calculation of
diluted earnings per share can be reconciled to the weighted average number of
ordinary shares used in the calculation of basic earnings per share as
follows:
Six months ended 30 June
2022 2021
Unaudited Unaudited
Weighted average number of shares used in basic earnings per share 55,140,943 53,165,081
Potential ordinary shares arising from options 456,243 349,327
Weighted average number of shares used in diluted earnings per share 55,597,186 53,514,408
The Group uses adjusted results as key performance indicators, as the
Directors believe that these provide a more consistent measure of operating
performance. Adjusted profit is therefore stated before one-off acquisition
costs relating to the acquisition of The Fluent Money Group, ongoing non-cash
items relating to the option in connection with the acquisition of First
Mortgage Direct Limited and amortisation of acquired intangibles. Adjusted
profit is also stated before net fair value gains on deferred consideration
paid and estimated to be paid to Associate businesses, net fair value losses
on financial instruments relating to options to increase shareholdings in
Associate businesses, and impairment of loans to related parties, net of tax.
The reconciliation between the basic and adjusted figures is as follows:
Six months ended 30 June Six months ended 30 June
2022 2021 2022 2021 2022 2021
Unaudited Unaudited Basic Basic Diluted Diluted
£'000 £'000 earnings earnings earnings earnings
per share per share per share per share
pence pence pence pence
Profit for the period 7,698 8,763 14.0 16.5 13.8 16.4
Adjustments:
Amortisation of acquired intangibles 183 183 0.3 0.4 0.3 0.4
Costs relating to the First Mortgage option 423 550 0.8 1.0 0.8 1.0
Costs relating acquisition of The Fluent Money Group 1,453 - 2.6 - 2.6 -
Impairment of loans to related parties - - -
14 0.0 0.0
Net fair value gains on deferred consideration (657) - (1.2) - (1.2) -
Net fair value losses on derivative financial instruments 25 - 0.0 - 0.0 -
Tax effect of adjustments (70) (3) (0.1) 0.0 (0.1) 0.0
Adjusted earnings 9,055 9,507 16.4 17.9 16.2 17.8
Net fair value gains on deferred consideration of £656,794 represents amounts
attributable to the equity owner of the parent company and excludes £6,581
attributable to non-controlling interests included in the amounts shown in the
consolidated statement of comprehensive income.
8 Dividends
Six months ended 30 June Six months ended 30 June Year ended 31 December
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Dividends paid and declared during the period:
On ordinary shares at 14.7p per share (2021: 19.2p) 8,382 10,210 10,210
Interim dividend for 2021: 13.4p per share - - 7,129
8,382 10,210 17,339
Equity dividends on ordinary shares:
Declared:
Interim dividend for 2022: 13.4p per share (2021: 13.4p) 7,642 7,129 -
Proposed for approval:
Final dividend for 2021: 14.7p per share - - 7,821
7,642 7,129 7,821
On 28 March 2022 the Group issued 3,809,524 new ordinary shares in an equity
placing in connection with the acquisition of The Fluent Money Group which
completed on 12 July 2022.
9 Goodwill
The goodwill relates to the acquisition of Talk Limited in 2012, and in
particular its main operating subsidiary Mortgage Talk Limited, and the
acquisition of First Mortgage Direct Limited ("FMD") in 2019. The goodwill
is deemed to have an indefinite useful life. It is currently carried at cost
and is reviewed annually for impairment.
Under IAS 36, "Impairment of assets", the Group is required to review and test
its goodwill annually each year or in the event of a significant change in
circumstances. The impairment reviews conducted at the end of 2021 concluded
that there had been no impairment of goodwill.
The key basis for determining that there was no impairment to the carrying
value of goodwill was disclosed in the annual consolidated financial
statements for the year ended 31 December 2021. There are no matters which
have arisen in the period to 30 June 2022 which indicated that an impairment
was required at that date.
10 Investments in associates and joint ventures
The investment in associates and a joint venture at the reporting date is as
follows:
30 June 2022 31 December 2021
Unaudited
Audited
£'000
£'000
At start of the period 12,433 4,883
Additions - 7,222
Credit / (charge) to statement of comprehensive income
Share of profit 314 1,011
Impairment - (408)
314 603
Dividends received (600) (275)
At period end 12,147 12,433
Acquisitions and disposals
2022
Following the finalisation of Vita Financial Limited's ("Vita") 2021 audited
accounts, a deferred consideration of £179,252 was paid in relation to the
29% interest that was acquired on 28 May 2021. The actual deferred
consideration paid in respect of Vita was £7,572 lower than the original
amount estimated.
During the period, the fair value of deferred consideration payable upon
finalisation of Vita's 31 December 2022 audited accounts was revalued to £nil
which was £201,007 lower than the original amount estimated.
Following the finalisation of Heron Financial Limited's ("Heron") 2021 audited
accounts, a deferred consideration of £277,600 was paid in relation to the
49% interest that was acquired on 30 November 2021. The actual deferred
consideration paid in respect of Heron was £130,512 lower than originally
estimated.
During the period, the fair value of deferred consideration payable upon
finalisation of Heron's 31 December 2022 audited accounts was revalued to
£234,428 which was £293,878 lower than the original amount estimated.
Following the finalisation of M & R FM Ltd's ("M&R FM") 2021 audited
accounts, a deferred consideration of £244,858 was paid on 15 July 2022 in
relation to the 25% interest that was acquired by First Mortgage Direct
Limited on 12 January 2021. The actual deferred consideration paid in respect
of M&R FM was £32,906 higher than originally estimated.
Following the finalisation of Evolve FS Ltd's ("Evolve") 2021 audited
accounts, a deferred consideration of £625,567 was paid on 21 July 2022 in
relation to the 49% interest that was acquired on 20 July 2021. The actual
deferred consideration paid in respect of Evolve was £50,150 lower than
originally estimated.
A total net gain of £650,213 has been recognised in the consolidated
statement of comprehensive income in respect of the actual deferred
consideration paid or expected to be paid on the above associate businesses.
2021
On 12 January 2021, First Mortgage Direct Limited, an 80% owned subsidiary of
the Group acquired a 25% stake in M & R FM Ltd ("M&R FM"), for an
initial cash consideration of £663,400. Estimated deferred consideration of
£0.2m is payable following finalisation of M&R FM's audit for the year
ended 31 December 2021.
On 13 January 2021, the Group ceased to have an investment in Freedom 365
Mortgage Solutions Limited, having entered into a deed of termination.
The Group acquired a further 29% interest in Vita Financial Limited ("Vita")
on 28 May 2021 at an initial cash consideration of £159,081. Estimated
deferred consideration of £0.2m and £0.2m is payable following the
finalisation of Vita's audits for the year ended 31 December 2021 and 31
December 2022 respectively.
The Group acquired a 49% stake in Evolve FS Ltd ("Evolve") plus an option over
a further 31% of the ordinary share capital of Evolve on 20 July 2021 at an
initial cash consideration of £2,316,290. Estimated consideration of £0.7m
is payable following finalisation of Evolve's audit for the year ended 31
December 2021.
The Group acquired a 49% stake in Heron Financial Limited ("Heron") plus an
option over the remaining ordinary share capital of Heron on 30 November 2021
for an initial cash consideration of £1,600,000. Estimated deferred
consideration of £0.4m is payable following finalisation of Heron's audit for
the year ended 31 December 2021 with further estimated deferred consideration
of £0.5m payable following finalisation of Heron's audit for the year ending
31 December 2022.
In accordance with IAS28 the Group impaired further the value of the investment in The Mortgage Broker Group Limited by £400,000 due to its performance. The investment in The Mortgage Broker Group Limited is classified as Level 3 for the purposes of disclosure in the fair value hierarchy. The recoverable amount of the asset is its fair value less costs of disposal and the market approach has been determined as the most appropriate method of estimating the fair value of this investment.
On 30 September 2021, the Group paid a further £271,183 in deferred
consideration in respect of its acquisition of a further 24% interest in Clear
Mortgage Solutions Limited in December 2020.
On 16 July 2021, as part of a shareholding restructure in Sort Group Limited,
in which Sort Group Limited increased its stake in Sort Limited to 100%
(previously 75.68%), the Group disposed of its 10.52% shareholding in Sort
Limited for £nil cash consideration. The Group now holds 43.25% of Sort Group
Limited which is equal to the previous effective interest prior to the
shareholding restructure held through separate investments in Sort Group
Limited, Sort Limited and Sort Technology Limited. With no change in effective
interest, the carrying value of the investment in Sort Limited has been
transferred to Sort Group Ltd.
Derivative financial instruments
The fair value of the call option at 30 June 2022 for Evolve is £67,746 (31
December 2021: £124,055). The fair value of the call option and put option at
30 June 2022 for Heron is £102,620 (31 December 2021: £95,455) and £1,358
(31 December 2021: £34,235) respectively. The fair value of the call option
and put option at 30 June 2022 for Meridian are £134,035 (31 December 2021:
£142,895) and £nil (31 December 2021 2021: £7) respectively.
Derivative financial instruments (continued)
A total net loss of £25,120 has been recognised in the consolidated statement
of comprehensive income in respect of fair value movements on derivative
financial instruments since 31 December 2021.
The fair values of the option contracts have been calculated using either
stochastic or Black Scholes models as appropriate in the option valuations.
The key assumptions used to value the options in the model are the value of
shares in the associate, the anticipated growth of the business, the option
exercise price, the expected life of the option, the expected share price
volatility of similar businesses, forecast dividends and the risk-free
interest rate. The gain relating to the derivative financial instruments is
included within 'operating profit'. These financial instruments are
categorised as Level 3 within the fair value hierarchy.
11 Investments in non-listed equity shares
30 June 31 December 2021
Audited
2022
£'000
Unaudited
£'000
At start of the period 2,783 75
Additions 2,500
Revaluation - 283
Disposals - (75)
At period end 2,783 2,783
2022
At 30 June 2022, the Group had a shareholding of 2.92% in PD Innovations
Limited, trading as Boomin, at a value of £2,783,000. In determining the fair
value at 30 June 2022, the market approach was used with reference to recent
transactions, and there was no change in value since there had been no
material change in circumstances. This investment continues to be classified
as Level 3 for the purpose of disclosure in the fair value hierarchy.
2021
The investment at the start of 2021 represented a 2.23% interest in Yourkeys
Technology Ltd. This was sold on 23 April 2021 for initial consideration of
£329,000 with estimated further consideration of £55,000. Final
consideration of £113,541 was received on 1 April 2022 leading to a further
profit on disposal of £58,541.
On 9 April 2021, the Group acquired a 3.17% stake in PD Innovations Limited,
trading as the property portal Boomin for a cash consideration of £2,500,000.
The increase in value of £283,000 since investment was recognised in the
consolidated statement of comprehensive income during 2021. This investment is
classified as Level 3 for the purpose of disclosure in the fair value
hierarchy, with any fair value movements taken to the consolidated statement
of comprehensive income. The Group has determined that using the market
approach is an appropriate method of estimating the fair value of this
financial instrument.
12 Trade and other receivables
30 June 31 December
2022 2021
Unaudited Audited
£'000 £'000
Trade receivables 1,586 1,741
Less provision for impairment of trade receivables (383) (374)
Trade receivables - net 1,203 1,367
Other receivables 450 448
Loans to related parties 678 1,398
Less provision for impairment of loans to related parties (2) (2)
Less amounts written off loans to related parties - (628)
Total financial assets other than cash and cash equivalents classified at 2,329 2,583
amortised costs
Prepayments and accrued income 6,152 4,856
Total trade and other receivables 8,481 7,439
Less: non-current portion - Loans to related parties (436) (541)
Less: non-current - Trade receivables (761) (557)
Current portion 7,284 6,341
30 June 30 June
2022 2021
Reconciliation of movement in trade and other receivables to cash flow Unaudited Unaudited
£'000 £'000
Movement per trade and other receivables (current and non-current) 1,042 6,272
Corporation tax - 499
Accrual of deferred consideration for Yourkeys disposal 55 (55)
Accrued interest movement (11) 14
Total movement per cash flow 1,086 6,730
The carrying value of trade and other receivables classified at amortised cost
approximates fair value.
Included within trade receivables are £1.2m (2021: £1.4m) of operational
business development loans to the Group's Appointed Representatives. The
non-current trade receivables balance is comprised solely of a proportion of
these loans.
Also included in trade receivables are amounts due from Appointed
Representatives relating to commissions that are refundable to the Group when
policy lapses or other reclaims exceed new business. As these balances have no
credit terms, the Board of Directors consider these to be past due if they are
not received within seven days. In the management of these balances, the
Directors can recover them from subsequent new business entered into with the
Appointed Representative or utilise payables that are owed to the same
counterparties and included within payables as the Group has the legally
enforceable right of set off in such circumstances. These payables are
considered sufficient by the Directors to recover receivable balances should
they default, and accordingly, credit risk in this respect is minimal.
In light of the above, the Directors do not consider that disclosure of an
aging analysis of trade and other receivables would provide useful additional
information. Further information on the credit quality of financial assets is
set out in note 16.
Impairment provisions for trade receivables are recognised based on the
simplified approach within IFRS 9 using the lifetime expected credit losses.
During this process the probability of the non-payment of the trade
receivables is assessed. This probability is then multiplied by the amount of
the expected loss arising from default to determine the lifetime expected
credit loss for the trade receivables. For trade receivables, which are
reported net, such provisions are recorded in a separate provision account
with the loss being recognised within cost of sales in the consolidated
statement of comprehensive income. On confirmation that the trade receivable
will not be collectable, the gross carrying value of the asset is written off
against the associated provision. At 30 June 2022 the lifetime expected loss
provision for trade receivables is £0.4m (2021: £0.4m) The movement in the
impairment allowance for trade receivables has been included in cost of sales
in the consolidated statement of comprehensive income.
Impairment provisions for loans to associates are recognised based on a
forward looking expected credit loss model. The methodology used to determine
the amount of the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial asset. For
those where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit losses along
with gross interest income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be credit
impaired, lifetime expected credit losses along with interest income on a net
basis are recognised. In determining the lifetime expected credit losses for
loans to associates, the Directors have considered different scenarios for
repayments of these loans and have applied percentage probabilities to each
scenario for each associate where applicable.
13 Cash and cash equivalents
For the purpose of the interim condensed statement of cash flows, cash and
cash equivalents are comprised of:
30 June 2022 31 December 2021
Audited
Unaudited
£'000 £'000
Unrestricted cash and bank balances 57,397 17,548
Bank balances held in relation to retained commissions 17,346 16,863
Cash and cash equivalents 74,743 34,411
Bank balances held in relation to retained commissions earned on an indemnity
basis from protection policies are held to cover potential future lapses in
Appointed Representatives commission. Operationally, the Group does not treat
these balances as available funds. An equal and opposite liability is shown
within trade and other payables (note 14).
Unrestricted cash and bank balances increased considerably during the period
as the Group undertook an equity placing of new shares on 28 March 2022 that
raised £40 million prior to expenses in order to part fund the acquisition of
Fluent Money Group that completed on 12 July 2022, this being the date on
which the consideration was paid.
14 Trade and other payables
30 June 31 December 2021
2022
Audited
Unaudited
£'000 £'000
Appointed Representatives retained commission 17,346 16,863
Other trade payables 9,971 6,255
Trade payables 27,317 23,118
Social security and other taxes 1,408 1,305
Other payables 55 70
Deferred consideration 1,105 2,212
Accruals and deferred income 4,101 5,220
Total trade and other payables 33,986 31,925
30 June 30 June
2022 2021
Reconciliation of movement in trade and other payables to cash flow Unaudited Unaudited
£'000 £'000
Movement per trade and other payables 2,061 9,986
Deferred consideration cash payment 457 -
Deferred consideration non-cash movement 650 -
RCF interest accrual (48) -
Total movement per cash flow 3,120 9,986
Should a protection policy be cancelled within four years of inception, a
proportion of the original commission will be clawed back by the insurance
provider. The majority of any such repayment is payable by the Appointed
Representative. It is the Group's policy to retain a proportion of
commission payable to the Appointed Representative to cover such potential
future lapses; these sums remain a liability of the Group. This commission
is held in a separate ring fenced bank account as described in note 13.
As at 30 June 2022 and 31 December 2021, the carrying value of trade and other
payables classified as financial liabilities measured at amortised cost
approximates fair value.
Appointed Representative retained commission is expected to be payable after
more than one year. Other trade payables normally fall due within 30 - 60
days.
15 Loans and borrowings
MAB entered into a new facilities agreement with NatWest on 28 March 2022 (the
"Facilities Agreement") in respect of a new term loan for £20m and a new
revolving credit facility for £15m, in order to part fund the cash
consideration payable in relation to the acquisition of The Fluent Money Group
announced on the same day. MAB drew down on the new facilities post period
end as the acquisition competed on 12 July 2022. It is MAB's intention to
repay the drawn down proportion of the revolving element of this debt facility
as soon as practicable. MAB's practice over recent years has been to pay out
approximately 75% of its adjusted profit after tax and minority interests as
dividends and MAB intends to keep that level of pay out. In respect of the
new facilities, the Group has given security to NatWest in the form of fixed
and floating charges over the assets of Mortgage Advice Bureau Limited,
Mortgage Advice Bureau (Derby) Limited, Mortgage Advice Bureau (Holdings) plc,
First Mortgage Direct Limited, First Mortgage Limited, Project Finland Bidco
Limited, Fluent Money Limited and Fluent Mortgages Limited.
Loan covenants
Under the terms of the Facilities Agreement, the Group is required to comply
with the following financial covenants:
· Interest cover shall not be less than 5:1
· Adjusted leverage shall not exceed 2:1
The Group has complied with these covenants throughout the reporting period.
16 Financial instruments - risk management activities
Credit risk
Credit risk is the risk of financial loss to the Group if a trading partner or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit risk from loans to its
trading partners. It is Group policy to assess the credit risk of trading
partners before advancing loans or other credit facilities. Assessment of
credit risk utilises external credit rating agencies. Personal guarantees are
generally obtained from the Directors of its trading partners.
Quantitative disclosures of the credit risk exposure in relation to financial
assets are set out below. Further disclosures regarding trade and other
receivables are given in note 12.
Financial assets - maximum exposure
30 June 31 December 2021
2022
Audited
Unaudited
£'000 £'000
Cash and cash equivalents 74,743 34,411
Investments in non-listed equity shares (FVTPL) 2,783 2,783
Trade and other receivables (Amortised cost) 2,329 2,583
Derivative financial instruments (FVTPL) 304 362
Total financial assets 80,159 40,139
Financial liabilities
30 June 31 December 2021
2022
Audited
Unaudited
£'000 £'000
Trade and other payables 28,780 24,493
Deferred consideration 1,105 2,212
Accruals 4,101 5,220
Lease liabilities 2,400 2,596
Derivative financial instruments 1 34
Total financial liabilities 36,387 34,555
The carrying amounts stated above represent the Group's maximum exposure to
credit risk for trade and other receivables. An element of this risk is
mitigated by collateral held by the Group for amounts due to them.
Trade receivables consist of a large number of unrelated trading partners and
therefore credit risk is limited. Due to the large volume of trading partners
the Group does not consider that there is any significant credit risk as a
result of the impact of external market factors on their trading partners.
Additionally, within trade payables are amounts due to the same trading
partners as those included in trade receivables; this collateral significantly
reduces the credit risk.
The Group's credit risk on cash and cash equivalents is limited because the
Group places funds on deposit with National Westminster Bank plc and Bank of
Scotland plc which are A/A+ and A+ rated respectively.
17 Share capital
Issued and fully paid
30 June 31 December 2021
2022 Audited
Unaudited
£'000 £'000
Ordinary shares of 0.1p each 57 53
Total share capital 57 53
In connection with the acquisition of Fluent Money Group, the Group issued
3,809,524 new ordinary shares in an equity placing on 28 March 2022 to raise
£40 million gross to part fund the consideration for the acquisition. The
new ordinary shares were issued at £10.50 per ordinary share. The share
premium recognised was £38.4 million after deduction of £1.6 million of
costs directly associated with the equity placing.
18 Related Party Transactions
The following details provide the total amount of transactions that have been
entered into with related parties during the six months ended 30 June 2022 and
2021, as well as balances with related parties as at 30 June 2022 and 31
December 2021.
During the period the Group paid commission of £467,573 (2021: £400,942) to
Buildstore Limited, an associated company. There was a balance of £13,136
(2021: £10,443) of retained commission to cover future lapses.
During the period the Group received introducer commission from Sort Limited,
a subsidiary of an associated company of £747,598 (2021: £587,958). At 30
June 2022, there was a net loan outstanding from Sort Group Limited of
£218,369 (2021: £218,369).
During the period the Group paid commission of £2,228,815 (2021: £2,392,199)
to Clear Mortgage Solutions Limited, an associated company. There was a
balance of £599,088 (2021: £542,290) of retained commission to cover future
lapses.
During the period the Group paid commission of £783,150 (2021: £nil) to
Evolve FS Ltd, an associated company. There was a balance of £20,144 (2021:
£nil) of retained commission to cover future lapses.
During the period the Group paid commission of £869,886 (2021: £870,209) to
Vita Financial Limited, an associated company. There was a balance of
£298,725 (2021: £253,948) of retained commission to cover future lapses.
During the period the Group paid commission of £820,042 (2021: £795,434) to
The Mortgage Broker Limited, an associated company. There was a balance of
£66,791 (2021: £66,785) of retained commission to cover future lapses. At 30
June 2022, there was a loan outstanding from The Mortgage Broker Limited of
£22,000 (2021: £nil).
During the period the Group paid commission of £1,982,972 (2021: £1,981,588)
to Meridian Holdings Group Ltd, an associated company. There was a balance of
£545,656 (2021: £545,605) of retained commission to cover future lapses. At
30 June 2022, there was a loan outstanding from Meridian Holdings Group Ltd of
£435,461 (2021: £550,069).
During the period the Group paid commission of £1,166,714 (2021: £156,524)
to M & R FM Ltd, an associated company. There was a balance of £64,416
(2021: £34,598) of retained commission to cover future lapses.
During the period the Group received dividends from associate companies as
follow:
Six months ended 30 June
2022 2021
Unaudited Unaudited
£'000
£'000
CO2 Commercial Limited 167 88
Evolve FS Ltd 245 -
M & R FM Ltd 188 -
Total dividends 600 88
19 Share based payments
On 6 June 2022, 154,850 options over ordinary shares of 0.1 pence each in the
Company were granted to the Executive Directors and senior executives of MAB
under the equity-settled Mortgage Advice Bureau Executive Share Option Plan
(the "Options"). Exercise of the Options is subject to the service conditions
and achievement of performance conditions based on total shareholder return
and earnings per share criteria. Subject to achievement of the performance
conditions, the Options will be exercisable 34 months from the date of
grant. The exercise price for the Options is 0.1 pence, being the nominal
cost of the Ordinary Shares.
Included in administrative expenses are share-based remuneration expenses of
£601,865 (2021: £695,795) which comprises the charge for the equity-settled
schemes of £327,057 (2021: £355,255) and related employer's National
Insurance Contributions of £168,986 (2021: £185,221). Also included are the
matching element of the Group's Share Incentive Plan for all employees of
£58,889 (2021: £63,624) and costs for free shares awarded to employees of
£46,933 (2021: £91,695). Further share-based payments costs of £204,726
(2021: £338,118) in respect of the option relating to First Mortgage Direct
Limited are shown separately (note 4).
20 Events after the reporting date
The Fluent Money Group Limited
On 28 March 2022 Mortgage Advice Bureau (Holdings) plc announced that it had
agreed to acquire 75.4% of Project Finland Topco Limited, which indirectly
owns 100% of The Fluent Money Group Limited ("Fluent" or the "Business") from
its shareholders including Beech Tree Private Equity and founders for a total
cash consideration of £72.7 million (the "Acquisition"). The Acquisition
completed on 12 July 2022 and the cash consideration was funded from the
Company's existing cash resources, a drawdown on new debt facilities of £25
million and the proceeds of the placing of new ordinary shares in the Company,
conducted on 28 March 2022 which raised £40 million gross, and £38.4 million
net of expenses directly associated with the placing.
MAB also entered into a shareholders' agreement with Fluent's founders and
senior management who have retained 24.6% of the issued share capital of
Fluent. This sets out the terms of the put and call option for MAB to acquire
this remaining stake after six years at a valuation subject to performance
criteria relating to future growth and profitability to align with MAB's
growth objectives. The total consideration for the above put and call option
and a put and call option over certain growth shares that have been issued to
Fluent's wider management team is capped at £118 million and will be
determined on the basis of future financial performance. MAB will, at its
discretion, be able to satisfy up to 50% of the exercise consideration for the
above put and call options in ordinary shares and such shares will be subject
to a 12 month orderly market undertaking upon issue.
Fluent is a fast-growing telephone advice mortgage and specialist lending
intermediary that has formed relationships with a range of third party brands,
including aggregators and other national lead sources operating across first
charge, second charge, lifetime mortgages and bridging loan product areas. MAB
has also targeted this fast-growing sector. Combined, MAB and Fluent can grow
this new market share opportunity quickly and effectively, complementing the
local/regional strategy delivered by the rest of the Group's growing
distribution.
At the date of authorisation of these interim financial statements it has not
yet been possible to complete a detailed assessment of the fair value of the
identifiable net assets.
Fair value of consideration
paid
£'000
Cash
72,691
Vita Financial Limited
On 12 July 2022 the Group increased its stake from 49% to 75% in Vita
Financial Limited, a leading protection and general insurance advice firm.
This is a strategically important step for the Group as we look to achieve an
even stronger market presence in this area.
At the date of authorisation of these interim financial statements a detailed
assessment of the fair value of the identifiable net assets has not been
completed.
Fair value of consideration paid
£'000
Cash
460
There were no other material events after the reporting period, which have a
bearing on the understanding of the consolidated interim financial statements.
Investment in non-listed equity shares
PD Innovations Limited, trading as Boomin, is in the process of raising
capital and an update as to the implications for the valuation of MAB's
shareholding will be provided in due course.
Head Office refurbishment project
In September 2022, the Group made a capital commitment for c.£3 million to
refurbish its head office premises located in Derby.
There were no other material events after the reporting period, which have a
bearing on the understanding of the consolidated interim financial statements.
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