TIDMMAB1
RNS Number : 7775B
Mortgage Advice Bureau(Holdings)PLC
25 September 2018
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
("MAB" or "the Group")
25 September 2018
Interim Results
Mortgage Advice Bureau (Holdings) PLC (AIM: MAB1.L) is pleased
to announce its interim results for the six months ended 30 June
2018.
Financial highlights
-- Revenue up 17% to GBP57.9m (H1 2017: GBP49.6m)
-- Gross profit up 9% to GBP13.0m (H1 2017: GBP12.0m)
-- Gross margin of 22.5% (H1 2017: 24.1%)
-- Overheads ratio of 10.9% (H1 2017: 12.0%)
-- Profit before tax up 11% to GBP7.0m (H1 2017: GBP6.3m)
-- Profit before tax margin of 12.0% (H1 2017: 12.7%)
-- EPS up 11% to 11.7p (H1 2017: 10.6p)
-- High operating profit to adjusted cash conversion(1) of 108% (H1 2017: 116%)
-- Interim dividend up 12.0% to 10.6p (H1 2017: 9.5p)
-- Strong financial position with significant surplus above regulatory capital requirement
-- Unrestricted cash balances of GBP12.5m (31 Dec 2017: GBP13.2m)
Operational highlights
-- Adviser numbers up 6% to 1,138 at 30 June 2018 (31 Dec 2017: 1,078)
-- Average number of Advisers during the period up 13% to 1,103 (H1 2017: 974)
-- Gross mortgage lending arranged (including product transfers)
up 25% to GBP6.5bn (H1 2017: GBP5.2bn)
-- Gross mortgage lending arranged with new lenders(2) up 18% to
GBP5.9bn (H1 2017: GBP5.0bn(3) )
-- Market share of new mortgage lending up 12% to 4.7% (H1 2017: 4.2%(3) )
-- Ben Thompson appointed as Managing Director
Post period end
-- Adviser numbers up 19 from period end to 1,157 at 21 September 2018
H1 2018 H1 2017 Change
Revenue GBP57.9m GBP49.6m +17%
Gross profit GBP13.0m GBP12.0m +9%
Gross profit margin 22.5% 24.1%
Profit before tax GBP7.0m GBP6.3m +11%
PBT margin 12.0% 12.7%
EPS 11.7p 10.6p +11%
Interim dividend per share 10.6p 9.5p +12%
(1) Adjusted cash conversion is cash generated from operating
activities adjusted for movements in non-trading items including
loans to Appointed Representative firms ("ARs") and loans to
associates totalling GBP0.8m in H1 2018 (H1 2017: GBP0.3m) and
increases in restricted cash balances of GBP1.0m in H1 2018 (H1
2017: GBP0.2m), as a percentage of operating profit.
(2 ") Gross mortgage lending arranged with new lenders" means
either a new mortgage in connection with a house purchase or a
re-mortgage with a different lender to the customer's existing
lender
(3) H1 2017 figure re-stated to exclude Product Transfers in
that period of GBP0.2bn.
Peter Brodnicki, Chief Executive commented:
"I'm very pleased with our results for the first half, with
revenue up 17% and PBT up 11% on the prior year despite market
headwinds. We have built upon our established track record to
deliver further top and bottom line growth, with a clear
outperformance against the housing market which has seen a 5% fall
in the number of transactions compared to the equivalent period in
2017.
"Importantly, we continue to grow MAB's market share, with our
primary focus being to support our business partners and ensure
they deliver the best advice to as many customers as possible. I am
delighted to report 12% growth in our share of the new mortgage
lending market to 4.7%, against 4.2%(1) last year.
"UK Finance recently provided their first estimate of the value
of Product Transfers(2) giving a figure of GBP53.7bn for the first
quarter of 2018. Along with the reduction in house purchase
transactions, the increase in Product Transfers has resulted in a
changing sales mix in the first half and presents a considerable
opportunity for MAB to increase its market share in Product
Transfers alongside a greater focus on protection sales for
non-purchase business.
"We have always sought to use technology to improve the way we
operate and we are deliberately making technology central and
integral to our business model. As we look forward, we expect to
use developments in technology to directly benefit MAB advisers and
customers, through improvements in efficiency, productivity, lead
generation, product offering and customer experience. We are
excited about how delivering this will help us to attract more
advisers and customers into MAB, assisting our future growth
plans."
(1) H1 2017 figure re-stated to exclude Product Transfers in
that period of GBP0.2bn.
(2 ") Product Transfers" are when customers change (switch)
mortgage products with their existing lender
Current Trading and Outlook
Current trading is in line with the Board's expectations.
Adviser numbers have continued to grow since the period end with
the Group having 1,157 Advisers at 21 September 2018. We remain
confident about our planned growth in adviser numbers in both the
remainder of 2018 and in 2019, both organically and from new
ARs.
Although UK Finance has not recently updated its estimates for
gross new mortgage lending for 2018 and 2019, the current run rate
broadly supports their previous estimates of GBP260bn and GBP271bn
for 2018 and 2019 respectively, indicating that the market is
likely to be relatively flat in the near term. These figures
exclude Product Transfers, and it has only been over the last year
or so that the large lenders have engaged intermediaries to help
them to retain their existing mortgage borrowers. UK Finance have
recently estimated that the size of this market for the first three
months of 2018 was GBP53.7bn, indicating an annual market size of
c. GBP200bn.
For further information please contact:
Mortgage Advice Bureau (Holdings) plc
Peter Brodnicki, Chief Executive Officer
Ben Thompson, Managing Director
David Preece, Chief Operating Officer
Lucy Tilley, Finance Director +44 (0)1332 525007
Numis Securities Limited (NOMAD and Broker)
Stephen Westgate / Jamie Lillywhite (Corporate Finance)
Michael Burke (Corporate Broking) +44 20 7260 1000
Media Enquiries:
investorrelations@mab.org.uk
Analyst presentation
There will be an analyst presentation to discuss the results at
08:30am today at Numis Securities Limited, 10 Paternoster Square,
London, EC4M 7LT.
Those analysts wishing to attend are asked to contact
investorrelations@mab.org.uk
Copies of interim report
Copies of the interim report are available at
www.investor.mortgageadvicebureau.com
Chief Executive's Review
This has been another strong period for MAB. Revenue and profits
have continued to increase strongly, building on our consistent
track record of delivering growth.
Our growth in mortgage lending arranged is set out below:
H1 2018 H1 2017 Increase
GBPbn GBPbn
-------- -------- ---------
New mortgage lending 5.9 5.0 +18%
-------- -------- ---------
Product Transfers 0.6 0.2 +196%
-------- -------- ---------
Gross mortgage lending 6.5 5.2 +25%
======== ======== ---------
As set out in the table above, our total gross mortgage lending
arranged (including Product Transfers) was up 25% to GBP6.5bn (H1
2017: GBP5.2bn). Gross mortgage lending arranged through new
lenders(1) was up 18% to GBP5.9bn (H1 2017: GBP5.0bn). This growth
in purchase and re-mortgage lending takes our overall share of UK
new mortgage lending up to 4.7%, from 4.2% (2) . Product Transfers
represented GBP0.6bn of the GBP6.5bn and, based on Q1 2018 UK
Finance data, we estimate that our market share is c. 0.6%, which
is approximately half of our natural current market share given
intermediaries in total have a share of c.25-30% of this market at
present. This reflects MAB being primarily a purchase-focused
business and indicates the scale of our medium-term
opportunity.
We are pleased that this growth was achieved in a weaker house
purchase market. Although one or two segments of mortgage lending
have risen slightly, overall housing transactions have reduced,
with our first half results representing a clear outperformance
against the housing market.
We are making good progress against our three-year plan which we
are about half way through. We are now in the build phase of our
new fintech developments, which are aimed at giving us an agile
technology platform, that will provide our advisers with increased
and improved interaction with mortgage customers, and, most
importantly, ensuring that those customers receive an even better
mortgage and home-moving or re-mortgaging experience.
Our innovation and investment in technology, should further
differentiate us from our competitors, supporting adviser growth
and improved profitability.
We are also delighted to have appointed Ben Thompson, our new
Managing Director, in June. He was previously CEO of ULS Technology
plc (AIM) and brings with him a wealth of relevant mortgage,
conveyancing and technology experience.
(1") Gross mortgage lending arranged with new lenders" means
either a new mortgage in connection with a house purchase or a
re-mortgage with a different lender to the customer's existing
lender
(2) H1 2017 figure re-stated to exclude Product Transfers in
that period of GBP0.2bn.
Market environment
Housing transactions over the period fell by 5%. Overall house
moves are low versus historical averages and they remain in a flat,
yet relatively stable, environment, with the current house purchase
market remaining predominantly comprised of those moving home due
to non-discretionary lifestyle factors, first time buyers and
serious investors. There are multiple factors that contribute to
this, including constrained affordability, increased levels of
stamp duty for some, lack of available property to move to and, of
course, an overall air of uncertainty driven by the Brexit
agenda.
However, the picture is somewhat regional or even local. Whilst
London and parts of the wider South East and East Anglia have seen
a slowdown, other parts of the UK are performing comparatively
better (UK Residential Market Survey by the Royal Institute of
Chartered Surveyors, August 2018) but are still muted.
The national picture for mortgages shows that First Time Buyer
activity was slightly up over the period and home-movers slightly
down, effectively cancelling each other out overall. Buy to Let
purchase has continued to slow, reflecting the taxation changes
applied to landlords over the last few years. This slowdown is
mirrored in a recent UK Residential Market Survey by the Royal
Institute of Chartered Surveyors (July 2018), which shows an eighth
consecutive quarter of reductions in new instructions in the
lettings sector.
Buy to Let in many parts of the UK no longer looks to be as
attractive an investment option as it was earlier this decade. In
addition, for a proportion of home-owners it is easier or more
appealing to improve and extend their existing homes rather than
move, contributing to housing stock levels remaining at historical
lows.
However, we expect this prolonged period of lower housing
transactions to contribute to the pent-up demand that at some point
will need to be released, perhaps when consumer confidence returns,
and the post-Brexit landscape becomes clearer.
Mortgage rates remain at near record lows, meaning that although
housing has become more expensive, servicing mortgage debt is cheap
compared to previous decades. The low cost of borrowing, in
conjunction with incentives for First Time Buyers such as the Help
to Buy Scheme and lenders offering a wider range of products to
First Time Buyers, mean that the mortgage market should continue
broadly at its current run rate, regardless of the impact of the
factors above.
Although interest rates are low, we have seen them rise from
their lowest level. This change has been the catalyst for a higher
level of re-mortgaging, with both residential and buy to let
re-mortgaging showing mid-teen percentage increases on H1 2017, as
well as the emergence of more Product Transfers as customers lock
in to new deals.
Historically, lenders have offered their customers Product
Transfers directly, with intermediaries having very little input
into the Product Transfer market. Recently, however, many lenders
have recognised the value intermediaries can bring to a customer
decision and have engaged intermediaries to assist retaining
existing customers through active facilitation of customer Product
Transfers. MAB estimates that the intermediary market share of
Product Transfers is already at c. 25-30%. This development
presents incremental customer interaction and new opportunities for
MAB advisers especially as MAB has traditionally been predominantly
a house purchase focused model. We expect activity in this area to
remain strong, and MAB is well positioned to capitalise on this
development and grow its market share.
The UK Finance industry data on gross new mortgage lending
excludes Product Transfers, and UK Finance has recently estimated
the size of the Product Transfer market in Q1 2018 to be GBP53.7bn.
As anticipated, Product Transfers typically deliver lower overall
income per transaction compared to re-mortgages, with this
partially offset by Product Transfers having a much lower dropout
to completion and delivering banked income in a shorter
timeframe.
In terms of the national housing outlook, our view is that it
looks overall like more of the same, i.e. both flat but also steady
in terms of transactions and much the same if not marginally
upwards in terms of prices, again with regional and local
variations. Housing stock for sale is also set to remain at or
close to record lows. UK Finance has not updated its forecasts
recently, but predicts a relatively flat market for gross new
mortgage lending (which excludes Product Transfers) for 2018 as a
whole, with a 4% increase for 2019 as the Government continues to
manage the UK's exit from the EU. Intermediary market share(1) has
increased slightly to 74% for H1 2018. MAB and its ARs' growth is
not directly reliant on increasing housing transactions, property
prices, or intermediary market share as our continued year on year
growth demonstrates.
(1) Excluding Buy To Let, where intermediaries have a higher
market share, and Product Transfers, where intermediaries have a
lower market share
Delivering on our strategy
Technology Developments
We are progressing well in the build of our new technology
platform, which once completed, will further strengthen our unique
business model.
We are deliberately making technology central and integral to
our business model, in a way that directly benefits MAB advisers
and customers. We are yet to see any real technological
transformation or major process change in the mortgage and
home-moving process. In no small part this is due to the
importance, complexity and sheer enormity of buying a home.
However, the industry will inevitably see meaningful change in the
medium term and MAB aims to be right at the forefront of any
change, leading as opposed to following.
Put simply, we want MAB advisers to have the best and most
straightforward technology tools to enable them to procure and help
more customers, offer a wider range of products and services, and,
most importantly, we want to use technology to design processes and
provide an overall experience for customers that is second to none.
A key part of this is delivering digital tools that can be used to
support a customer's research process and help them apply for a
mortgage.
We are investing in this new technology and are excited about
the impact that this could bring to MAB, in the shape of increased
productivity and efficiency with existing advisers, as well as our
ability to attract new advisers that don't currently have some of
the technology that we are now building.
Telephone based advice is also becoming more prevalent, as we
help our AR Firms to invest in making their businesses more
productive, efficient and customer friendly.
We remain advocates of the importance of customers receiving
full advice and this will continue to be our primary and most
important focus. However, we will explore how customers can perhaps
get the mortgage they want through more expedient means, as they
increasingly seek to research in a more remote and digital way.
Driving income opportunities
We are consistently ensuring that our customers receive the best
possible protection advice to cover their home buying and mortgage
commitments. We achieve this through technology solutions,
embedding the factfinding, submission and reporting into our core
platform, to ensure all customers are always provided with the
opportunity to fully protect their borrowings and where applicable
their family.
Further initiatives will be embedded into our process by the end
of the year, when we expect to see our protection strategy start to
positively impact our financial performance. The increase in
Product Transfer activity and reduction in house purchase mortgages
in the first half has in the meantime slightly pegged back
protection sales as it did in the run up to the stamp duty deadline
in H1 2016, with buy to let also having far lower associated
protection sales.
At the end of 2017 we increased our investment in Sort Group
Limited ("Sort Group"), with a view to further embedding
conveyancing technology into our platform and processes. Sort Group
comprises the Sort Refer technology platform, which enables the
sourcing, selection, submission and tracking of conveyancing. A
recent development for Sort Group is the investment it has made in
Sort Legal, its own conveyancing subsidiary, to provide the Sort
Refer platform with its own captive conveyancing capability.
We have also made further progress in Australia and continue to
test this market to ascertain the feasibility of scaled cross
border expansion. We continue to broaden the lead sources for MAB
Broker Services and the signs are encouraging against a market
backdrop that in many ways is similar to that of how the UK market
was over a decade ago.
Our direct to consumer marketing plans have also progressed,
with the launch of a range of new marketing initiatives designed at
providing lead generation to our advisers, including a TV
advertising pilot that started in the summer. We are already seeing
encouraging data and trends emerging and continue to explore how
and where best to grow this further. This strategy differentiates
MAB from its competitors and adds value to its advisers in the form
of new customer acquisition opportunities.
Additionally, a new market segment that is emerging is lending
into retirement, or, so-called 'Later Life Lending' as lenders
introduce a far wider range of solutions for customers over 60
years of age. The most specialist part of this market, namely
"Equity Release" where no repayments of capital or interest are
made, although growing, will remain quite small in the overall
context of the anticipated growth in Later Life Lending. Some
lenders have already expanded their mortgage portfolios to also
include products that help customers to borrow money at older ages,
and, also to borrow that money until they are much older. This
relaxation or innovation is in response to demand from an ageing
population, and those that want to provide intergenerational
assistance to help family members to fund university or a first
home for example.
It is estimated that Later Life Lending will represent c.GBP80bn
of additional outstanding mortgage lending by 2027(1) . It is also
estimated that the housing wealth of the 'over-55s' is worth GBP2.5
trillion(2) . Again, the anticipated growth in this market presents
MAB with incremental opportunities, as a direct result of a new and
growing market segment which will be highly intermediated.
Finally, MAB will be exploring home-moving as a process in its
entirety, from start to finish. Currently MAB is involved in
mortgages, protection, household insurance, surveys and
conveyancing. In the medium term, we intend to expand our
involvement beyond the mortgage transaction, through vertical
integration with the ultimate aim of using technology to control
the whole home moving process for a customer and increasing the
footprint of our services to ease that process and add further
customer value.
(1) Centre for Economics and Business Research and more 2
life
(2) Swiss Re Term and Health Watch 2017
Summary
This has been another very strong performance from MAB, and one
that has clearly outperformed the housing market, which has seen a
reduction in the number of transactions.
We continue to invest and focus our efforts in keeping MAB at
the forefront of change, especially technological change. We intend
to have the best proposition for our advisers and we will continue
to help our advisers to provide the best possible experience to
their customers. We will also continue investing in building our
MAB brand, and provide support in lead generation to help our AR
firms and advisers to grow their businesses and market share
further.
This virtuous circle is the model we back and support to
continue our track record of success, with technology very much
leading the way.
We are about halfway through our three-year plan and are pleased
with our progress. We intend to balance investing in new technology
and driving new income opportunities, whilst continuing to deliver
strong financial results.
MAB has made (and continues to develop) several key strategic
investments and will continue to consider new opportunities that
arise, as and when they are deemed to clearly support, enhance and
accelerate our agenda of increasing our market share and
profitability. Whilst our investments to date have been relatively
modest in size, we will consider making larger investments to help
accelerate the development of our customer and adviser proposition,
lead generation and distribution. However, given our strong
financial position and prospects for growth we do not expect any
such investment to adversely affect our payout ratio or the future
growth in dividends.
Business Review of the half year
I am pleased to report strong growth in revenue of 17% to
GBP57.9m with profit before tax rising by 11% to GBP7.0m. MAB's
gross mortgage lending (including Product Transfers) increased by
25% to GBP6.5bn in H1 2018 (H1 2017: GBP5.2bn) driven primarily by
a 13% increase in the average number of Advisers. MAB's overall
share of UK new mortgage lending increased by 12% to 4.7% (H1 2017:
4.2%(1) ).
(1) H1 2017 figure re-stated to exclude Product Transfers in
that period of GBP0.2bn.
Industry data and trends
Gross new mortgage lending activity in H1 2018 increased by 6%
to GBP126bn (H1 2017: GBP119bn). Although UK Finance has not
recently updated its estimates for gross new mortgage lending for
2018 and 2019; the current run rate broadly supports their previous
estimates of GBP260bn and GBP271bn for 2018 and 2019 respectively,
indicating the market is likely to be relatively flat in the near
term with a slight increase for 2019. The UK Finance industry data
on gross new mortgage lending excludes Product Transfers, and UK
Finance has recently estimated the size of the Product Transfer
market in Q1 2018 to be GBP53.7bn.
UK property transactions by volume for H1 2018 were 5% lower
than H1 2017, as illustrated in the graph below.
http://www.rns-pdf.londonstockexchange.com/rns/7775B_1-2018-9-24.pdf
Mid-teen percentage increases in both residential and buy to let
re-mortgage volumes combined with property inflation of 4.0%(1)
offset the fall in property transactions and led to an increase in
UK gross new mortgage lending during the period of 6%, as
illustrated in the graph below.
(1) Land Registry House Price Index
http://www.rns-pdf.londonstockexchange.com/rns/7775B_2-2018-9-24.pdf
UK gross new mortgage lending in H1 2018 for home-owner
purchases and re-mortgages grew by 2% and 14% respectively compared
to the same period last year. UK gross new mortgage lending in H1
2018 for buy to let purchases fell by 14% and for buy to let
re-mortgages increased by 15%.
Approximately 74% of UK mortgage transactions (excluding buy to
let, where intermediaries have a higher market share, and Product
Transfers where intermediaries have a lower market share) were via
an intermediary in H1 2018 which is broadly stable compared to
2017. MAB expects this position to remain broadly stable going
forward.
Financial review
We measure the development, performance and position of our
business against a number of key indicators.
http://www.rns-pdf.londonstockexchange.com/rns/7775B_3-2018-9-24.pdf
Revenues
Revenues increased by 17% to GBP57.9m (H1 2017: GBP49.6m). A key
driver of revenue is the average number of Advisers during the
period. Our business model continues to attract forward thinking
ARs who are seeking to expand and grow their own market share.
Average adviser numbers increased by 13% to 1,103 in the six months
ended 30 June 2018 (H1 2017: 974) due to a combination of expansion
by existing ARs and the recruitment of new ARs.
The Group generates revenue from three core areas, summarised as
follows:
Income source H1 2018 H1 2017 Increase
GBPm GBPm
-------- -------- ---------
Mortgage procuration fees 26.8 20.5 31%
-------- -------- ---------
Protection and General Insurance
Commission 21.3 19.8 8%
-------- -------- ---------
Client fees 8.9 8.5 5%
-------- -------- ---------
Other income 0.9 0.8 10%
-------- -------- ---------
Total 57.9 49.6 17%
-------- -------- ---------
MAB's revenue, in terms of proportion, is split as follows:
Income source H1 2018 H1 2017
Mortgage procuration fees 46% 41%
-------- --------
Protection and General Insurance
Commission 37% 40%
-------- --------
Client Fees 15% 17%
-------- --------
Other Income 2% 2%
-------- --------
Total 100% 100%
-------- --------
All income sources continued to grow with the average number of
Advisers in the period increasing by 13% on the same period last
year, with a 3% increase in average revenue per adviser for the six
months ended 30 June 2018.
With gross mortgage lending arranged (including Product
Transfers) increasing by 25% in the period, mortgage procuration
fees increased by 31%. The increase of 8% in protection and general
insurance commission reflects a reduction in the proportion of our
residential purchase business, resulting from reduced house
purchase transactions, and an increase in re-mortgaging and Product
Transfers which have lower protection penetration. Further
initiatives will be embedded into our protection process by the end
of the year, when we expect to see our protection strategy starting
to positively impact financial performance. Client fees rose by 5%
in the period, reflecting the increase in re-mortgaging and Product
Transfers over the comparative period, where a client fee is less
likely to be charged.
The effect of increased re-mortgaging and Product Transfers
translates into the revenue mix which has skewed more in favour of
procuration fees in the period.
Looking ahead, we expect client fees to become increasingly
dependent upon the type and complexity of the mortgage transaction,
as well as the delivery channel. This will lead to a broader spread
of client fees on mortgage transactions, which, by their nature,
are our lowest margin revenue stream.
Gross profit margin
Gross profit margin for the period was 22.5% (H1 2017: 24.1%)
partly due to the revenue mix being less in favour of protection
resulting from a reduction in house purchase mortgages and an
increase in re-mortgages and Product Transfers. The Group typically
receives a slightly reduced margin as its existing ARs grow their
revenue organically through increasing their Adviser numbers. In
addition, larger new ARs typically join the Group on lower than
average margins due to their existing scale, which therefore
impacts upon the Group's gross margin.
Going forward, we expect to see some further erosion of gross
profit margin due to the continued growth of our existing ARs and
the addition of new larger ARs.
Overheads
Overheads as a percentage of revenue were 10.9% (H1 2017:
12.0%). This reduction in overheads as a percentage of revenue
results from the scalable nature of the cost base as well as our
regulatory costs being broadly consistent with the prior period due
to a change in FSCS charging periods this year to realign with the
FCA financial year.
Certain costs, primarily those relating to compliance personnel,
which represent approximately 20% of our cost base, are closely
correlated to the growth in the number of Advisers, due to the high
standards we demand and the requirement to maintain regulatory
spans of control. The balance of our compliance costs, representing
c. 20% of our cost base, mainly relates to FCA and FSCS regulatory
fees and charges. With the FCA confirming in May 2018 that it is
moving pure protection intermediation from the Life and Pensions
Intermediation funding class of FSCS to the General Insurance
Distribution funding class to ensure a fairer distribution of
levies, we are not expecting to see any increase in the rates of
these turnover based charges moving forwards. The remainder of
MAB's costs typically rise at a slower rate than revenue which
will, in part, counter the expected erosion of gross margin as the
business continues to grow.
As a result of MAB's IT plans, and as previously indicated, we
expect our amortisation on IT capital expenditure and IT costs to
increase by a modest amount. All development work on MIDAS Pro is
treated as revenue expenditure.
Profit before tax and margin thereon
Profit before tax rose by 11% to GBP7.0m (H1 2017: GBP6.3m) with
the margin thereon being 12.0% (H1 2017: 12.7%).
Net finance revenue
Net finance revenues of GBP0.03m (H1 2017: GBP0.01m) reflect
continued low interest rates.
Taxation
The effective rate of tax fell to 14.1% (H1 2017: 14.6%),
principally due to the tax deduction arising following the exercise
of the second tranche of employee share options since IPO. Going
forward we expect our effective tax rate to be marginally below the
prevailing UK corporation tax rate subject to tax credits for MAB's
research and development expenditure on our continued development
of MIDAS Pro, MAB's proprietary software, still being available and
further tax deductions arising from the exercise of share
options.
Earnings per share and dividend
Earnings per share increased to 11.7 pence (H1 2017: 10.6
pence).
The Board is pleased to confirm an interim dividend for the year
ending 31 December 2018 of 10.6p per share, amounting to a total of
GBP5.4m. Following payment of the interim dividend, the Group will
retain a significant surplus above its regulatory capital
requirement. The interim dividend represents c. 90% of the Group's
post-tax profits for H1 2018 and reflects our intention to
distribute excess capital going forward. MAB typically requires c.
10% of profit after tax to fund increased regulatory capital and
other capital expenditure.
The record date for the interim dividend is 5 October 2018 and
the payment date is 26 October 2018. The ex-dividend date will be 4
October 2018.
Cash flow and cash conversion
The Group's operations produce positive cash flow. This is
reflected in the net cash inflow from operating activities of
GBP6.4m (H1 2017: GBP5.8m).
Headline cash conversion (1) was:
H1 2018 123%
H1 2017 119%
Adjusted cash conversion (2) was:
H1 2018 108%
H1 2017 116%
The Group's operations are capital light with our most
significant ongoing capital investment being in computer equipment.
Only GBP0.6m of capital expenditure on office and computer
equipment and software licences was required during the period (H1
2017: GBP0.06m). Group policy is not to provide company cars, and
no other significant capital expenditure is foreseen in the coming
year.
The Group had no bank borrowings at 30 June 2018 (H1 2017:
GBPnil) with unrestricted bank balances of GBP12.5m (31 December
2017: GBP13.2m).
The Group has a regulatory capital requirement amounting to 2.5%
of regulated revenue. At 30 June 2018 this regulatory capital
requirement was GBP2.7m (31 December 2017: GBP2.5m).
The following table demonstrates how cash generated from
operations was applied:
GBPm
Unrestricted bank balances at the beginning of the period 13.2
Cash generated from operating activities excluding movements
in restricted balances and dividends received from associates 6.6
Issue of shares 0.5
Dividends received from associates 0.2
Dividends paid (6.0)
Tax paid (1.4)
Capital expenditure (0.6)
Unrestricted bank balances at the end of the period 12.5
--------------------------------------------------------------- -----
The Group's treasury strategy is to reduce risk by spreading
deposits over a number of institutions rather than to seek marginal
improvements in returns.
(1) Headline cash conversion is cash generated from operating
activities adjusted for movements in non-trading items including
loans to Appointed Representative firms ("ARs") and loans to
associates totalling GBP0.8m in H1 2018 (H1 2017: GBP0.3m) as a
percentage of operating profit.
(2) Adjusted cash conversion is headline cash adjusted for
increases in restricted cash balances of GBP1.0m in H1 2018 (H1
2017: GBP0.2m) as a percentage of operating profit.
Current Trading and Outlook
Current trading is in line with the Board's expectations.
Adviser numbers have continued to grow since the period end with
the Group having 1,157 Advisers at 21 September 2018. We remain
confident about our planned growth in adviser numbers in both the
remainder of 2018 and in 2019, both organically and from new
ARs.
Although UK Finance has not recently updated its estimates for
gross new mortgage lending for 2018 and 2019, the current run rate
broadly supports their previous estimates of GBP260bn and GBP271bn
for 2018 and 2019 respectively, indicating that the market is
likely to be relatively flat in the near term. These figures
exclude Product Transfers, and it has only been over the last year
or so that the large lenders have engaged intermediaries to help
them to retain their existing mortgage borrowers. UK Finance have
recently estimated that the size of this market for the first three
months of 2018 was GBP53.7bn, indicating an annual market size of
c. GBP200bn.
INDEPENT REVIEW REPORT TO MORTGAGE ADVICE BUREAU (HOLDINGS)
PLC
Introduction
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 2018 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.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM 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.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
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 for companies trading securities
on AIM and 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.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. 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.
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 2018 is not prepared, in all material respects, in accordance
with the rules of the London Stock Exchange for companies trading
securities on AIM.
BDO LLP
Chartered Accountants
London
United Kingdom
24 September 2018
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 2018
Six months ended
30 June
Note 2018
Unaudited 2017
GBP'000 Unaudited
GBP'000
-------------------------------------- ------ ------------ ------------
Revenue 2 57,854 49,593
Cost of sales 2 (44,822) (37,623)
-------------------------------------- ------ ------------ ------------
Gross profit 13,032 11,970
Administrative expenses (6,307) (5,936)
Share of profit from associates 206 230
Profit from operations 6,931 6,264
Finance income 3 31 11
Profit before tax 6,962 6,275
Tax expense 4 (980) (915)
-------------------------------------- ------ ------------ ------------
Profit for the period attributable
to equity holders of parent company 5,982 5,360
-------------------------------------- ------ ------------ ------------
Other comprehensive income - -
Total comprehensive income, net
of tax 5,982 5,360
Earnings per share attributable
to the owners of the parent 5
Basic 11.7p 10.6p
Diluted 11.3p 10.4p
Interim condensed consolidated statement of financial position
as at 30 June 2018 and 31 December 2017
30 June 2018 31 Dec
Note Unaudited 2017
GBP'000 Audited
GBP'000
------------------------------- ------ ------------- ---------
Assets
Non-current assets
Property, plant and equipment 2,602 2,648
Goodwill 7 4,114 4,114
Other intangible assets 8 615 98
Investments in associates and
joint ventures 9 1,426 1,339
Deferred tax asset 1,259 925
------------------------------- ------ ------------- ---------
Total non-current assets 10,016 9,124
------------------------------- ------ ------------- ---------
Current assets
Trade and other receivables 10 5,315 4,426
Cash and cash equivalents 13 22,841 22,551
------------------------------- ------ ------------- ---------
Total current assets 28,156 26,977
------------------------------- ------ ------------- ---------
Total assets 38,172 36,101
Equity and liabilities
Equity attributable to owners
of the parent
Share capital 14 51 51
Share premium 14 4,094 3,574
Capital redemption reserve 20 20
Share option reserve 1,899 1,450
Retained earnings 13,038 13,071
Total equity 19,102 18,166
------------------------------- ------ ------------- ---------
Liabilities
Non-current liabilities
Provisions 1,580 1,496
Deferred tax liability 53 51
------------------------------- ------ ------------- ---------
Total non-current liabilities 1,633 1,547
------------------------------- ------ ------------- ---------
Current liabilities
Trade and other payables 11 16,425 14,999
Corporation tax liability 1,012 1,389
------------------------------- ------ ------------- ---------
Total current liabilities 17,437 16,388
------------------------------- ------ ------------- ---------
Total liabilities 19,070 17,935
------------------------------- ------ ------------- ---------
Total equity and liabilities 38,172 36,101
------------------------------- ------ ------------- ---------
Interim condensed consolidated statement of changes in equity
for the six months ended 30 June 2018
Share Capital Share Retained Total
Share Premium redemption option earnings Equity
Capital GBP'000 reserve reserve GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
----------------------- --------- ---------- ------------ --------- ----------- ----------
As at 1 January
2017 51 3,042 20 380 11,680 15,173
Profit for the
period - - - - 5,360 5,360
Total comprehensive
income - - - - 5,360 5,360
----------------------- --------- ---------- ------------ --------- ----------- ----------
Transactions with
owners
Issue of shares - 532 - - - 532
Share based payment
transactions - - - 184 - 184
Deferred tax assets
recognised in equity - - - 332 - 332
Reserve transfer - - - (62) 62 -
Dividends paid - - - - (5,888) (5,888)
----------------------- --------- ---------- ------------ --------- ----------- ----------
Total transactions
with owners - 532 - 454 (5,826) (4,840)
----------------------- --------- ---------- ------------ --------- ----------- ----------
As at 30 June 2017
(unaudited) 51 3,574 20 834 11,214 15,693
----------------------- --------- ---------- ------------ --------- ----------- ----------
As at 1 January
2018 51 3,574 20 1,450 13,071 18,166
Profit for the
period - - - - 5,982 5,982
----------------------- --------- ---------- ------------ --------- ----------- ----------
Total comprehensive
income - - - - 5,982 5,982
----------------------- --------- ---------- ------------ --------- ----------- ----------
Transactions with
owners
Issue of shares - 520 - - - 520
Share based payment
transactions - - - 225 - 225
Deferred tax asset
recognised in equity - - - 291 - 291
Reserve transfer - - - (67) 67 -
Dividends paid - - - - (6,082) (6,082)
----------------------- --------- ---------- ------------ --------- ----------- ----------
Total transactions
with owners - 520 - 449 (6,015) (5,046)
As at 30 June 2018
(unaudited) 51 4,094 20 1,899 13,038 19,102
----------------------- --------- ---------- ------------ --------- ----------- ----------
Interim condensed consolidated statement of cash flows for the
six months ended 30 June 2018
Six months ended
30 June
2018 2017
Unaudited Unaudited
GBP'000 GBP'000
------------------------------------------- ------------ -----------
Cash flows from operating activities
Profit for the period before tax 6,962 6,275
Adjustments for
Depreciation of property, plant
and equipment 97 95
Amortisation of intangibles 20 9
Share based payments 225 184
Share of profit from associates (263) (230)
Dividends received from associates 176 211
Finance income (31) (11)
7,186 6,533
Changes in working capital
Increase in trade and other receivables (884) (287)
Increase in trade and other payables 1,426 882
Increase in provisions 84 45
Cash generated from operating activities 7,812 7,173
Income taxes paid (1,398) (1,354)
-------------------------------------------- ------------ -----------
Net cash generated from operating
activities 6,414 5,819
-------------------------------------------- ------------ -----------
Cash flows from investing activities
Purchase of property, plant and
equipment (51) (61)
Purchase of intangibles (537) (79)
Acquisitions of associates, including
deferred consideration - (50)
-------------------------------------------- ------------ -----------
Net cash used in investing activities (588) (190)
-------------------------------------------- ------------ -----------
Cash flows from financing activities
Interest received 26 11
Issue of shares 520 532
Dividends paid (6,082) (5,888)
-------------------------------------------- ------------ -----------
Net cash used in financing activities (5,536) (5,345)
-------------------------------------------- ------------ -----------
Net increase in cash and cash equivalents 290 284
Cash and cash equivalents at the
beginning of the period 22,551 18,711
-------------------------------------------- ------------ -----------
Cash and cash equivalents at the
end of the period 22,841 18,995
-------------------------------------------- ------------ -----------
Notes to the interim condensed consolidated financial statements
for the six months ended 30 June 2018
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 2018
were authorised for issue in accordance with a resolution of the
directors on 24 September 2018.
Mortgage Advice Bureau (Holdings) Plc (the "Company") is a
limited company incorporated and domiciled in England whose shares
are publicly traded. The registered office is located at Capital
House, Pride Place, Pride Park, Derby. The Group's principal
activity is the provision of financial services.
Basis of preparation
The interim condensed consolidated financial statements for the
six months ended 30 June 2018 have been prepared in accordance with
IAS 34 Interim Financial Reporting. The Group has applied the same
accounting policies and methods of computation in its interim
consolidated financial statements as in its 2017 annual financial
statements, except for those that relate to new standards and
interpretations effective for the first time for periods beginning
on (or after) 1 January 2018, and will be adopted in the 2018
annual financial statements. New standards impacting the Group that
will be adopted in the annual financial statements for the year
ended 31 December 2018, and which have given rise to changes in the
Group's accounting policies are noted below under 'Significant
accounting policies".
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's IFRS financial information as at 31 December 2017.
The information relating to the six months ended 30 June 2018
and the six months ended 30 June 2017 is unaudited and does not
constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006. The Group's statutory
financial statements for the year ended 31 December 2017 have been
reported on by its auditor and delivered to the Registrar of
Companies. The report of the auditor was unqualified and did not
draw attention to any matters by way of emphasis, or contain a
statement under section 498(2) or (3) of the Companies Act
2006.
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 2017
except where the implementation of IFRS 9 discussed above requires
a different approach to the accounting previously applied.
Significant estimates and judgements that have been required for
the implementation of the new standard are:
-- estimating the lifetime losses of short-term trade receivables for the purposes of IFRS 9's
expected credit loss model.
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 2017, except for those that relate to
new standards and interpretations effective for the first time for
periods beginning on (or after) 1 January 2018, and will be adopted
in the 2018 annual financial statements. New standards impacting
the Group that will be adopted in the annual financial statements
for the year ended 31 December 2018, and which have given rise to
changes in the Group's accounting policies are:
Significant accounting policies (continued)
IFRS 9 Financial Instruments
Details of the impact this standard has had are given below.
Other new and amended standards and Interpretations issued by the
IASB that will apply for the first time in the next annual
financial statements, namely IFRS 15 Revenue from Contracts with
Customers, is not expected to impact the Group as it requires
accounting which is consistent with the Group's current accounting
policies.
IFRS 9 Financial Instruments
The adoption of IFRS 9, which replaces IAS 39 Financial
Instruments: Recognition and Measurement from 1 January 2018 has
impacted its consolidated financial statements in one key area:
The Group has applied an expected credit loss model when
calculating impairment losses on its trade and other receivables
and its cash and cash equivalents. This resulted in increased
impairment provisions and greater judgement due to the need to
factor in forward looking information when estimating the
appropriate amount of provisions. In applying IFRS 9, the Group has
considered the probability of a default occurring over the
contractual life of its trade receivables on initial recognition of
those assets. Under the new model applied to all trade and other
receivables, the amount of impairment losses as at 1 January 2018
was not material. In accordance with the provisions of IFRS 9, an
impairment provision of GBP79,000 as at 30 June 2018 has been
recognised in the condensed consolidated interim financial
statements in respect of loans to associated companies.
The Group has chosen not to restate comparatives on adoption of
IFRS 9 and, therefore, this change has been processed at the date
of initial application (i.e. 1 January 2018), and presented in the
statement of changes in equity for the six months to 30 June
2018.
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:
Future new standards and interpretations (continued)
Standard or interpretation Periods commencing
on or after
IFRS 16 Leases 1 January 2019
----------------------------- -------------------
IFRIC Interpretation Uncertainty over income 1 January 2019
23 tax treatments
----------------------------- -------------------
IFRS 17 Insurance contracts 1 January 2021
----------------------------- -------------------
Amendments to Sale or contribution of 1 January 2019
IFRS 10 and IAS assets between an Investor
28 and its Associates or Joint
Ventures
----------------------------- -------------------
IFRS 16 Leases. IFRS 16 was issued in January 2016 and it
replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement
contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27
Evaluating the Substance of Transactions involving the Legal Form
of a Lease. IFRS 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases and requires
lessees to account for all leases under a single on-balance sheet
model similar to the accounting for finance leases under IAS 17.
The standard includes two recognition exemptions for lessees -
leases of 'low-value' assets (e.g., personal computers) and
short-term leases (i.e., leases with a lease term of 12 months or
less). At the commencement date of a lease, a lessee will recognise
a liability to make lease payments (i.e., the lease liability) and
an asset representing the right to use the underlying asset during
the lease term (i.e., the right-of-use asset). Lessees will be
required to separately recognise the interest expenses on the lease
liability and the depreciation expense on the right-of-use
asset.
Lessees will be also required to remeasure the lease liability
upon the occurrence of certain events (e.g. a change in the lease
term, a change in future lease payments resulting from a change in
an index or rate used to determine those payments). The lessee will
generally recognise the amount of the remeasurement of the lease
liability as an adjustment to the right-of-use asset.
Lessor accounting under IFRS 16 is substantially unchanged from
today's accounting under IAS 17. Lessors will continue to classify
all leases using the same classification principle as in IAS 17 and
distinguish between two types of leases: operating and finance
leases.
IFRS 16 also requires lessees and lessors to make more extensive
disclosures than under IAS 17.
IFRS 16 is effective for annual periods beginning on or after 1
January 2019. Early application is permitted, but not before an
entity applies IFRS 15. A lessee can choose to apply the standard
using either a full retrospective or a modified retrospective
approach. The standard's transition provisions permit certain
reliefs.
This amendment is not expected to have any impact on the
Group.
IFRIC Interpretation 23 - Uncertainty over income tax
treatments. The interpretation addresses the accounting for income
taxes when tax treatments involve uncertainty that affects the
application of IAS 12 and does not apply to taxes or levies outside
the scope of IAS 12, nor does it specifically include requirements
relating to interest and penalties associated with uncertain tax
treatments.
The interpretation is effective for annual reporting periods
beginning on or after 1 January 2019, but certain transition
reliefs are available. The Group will apply this interpretation and
it may affect its consolidated financial statements and the
required disclosures.
In addition, the Group may need to establish processes and
procedures to obtain information that is necessary to apply the
Interpretation on a timely basis.
IFRS 17 - Insurance contracts. IFRS 17, a comprehensive new
accounting standard for insurance contracts covering recognition
and measurement, presentation and disclosure was issued in May
2017. Once effective, IFRS 17 will replace IFRS 4. IFRS 17 applies
to all types of insurance contracts, regardless of the type of
entities that issue them, as well as to certain guarantees and
financial instruments with discretionary participation features.
The objective of IFRS 17 is to provide an accounting model for
insurance contracts that is more useful and consistent for
insurers.
IFRS 17 is effective for reporting periods beginning on or after
1 January 2021, with comparative figures required. Early
application is permitted, provided the entity also applies IFRS 9
and IFRS 15 on or before the date it first applies IFRS 17. This
standard is not applicable to the Group.
Amendments to IFRS 10 and IAS 28: Sale or contribution of Assets
between an Investor and its Associate or Joint Venture. The
amendments address the conflict between IFRS 10, Consolidated
Financial Statements and IAS 28 in dealing with the loss of control
of a subsidiary that is sold or contributed to an associate or
joint venture. The amendments clarify that the gain or loss
resulting from the sale or contribution of assets that constitute a
business, as defined in IFRS 3, between an investor and its
associate or joint venture, is recognised in full. Any gain or loss
resulting from the sale or contribution of assets that do not
constitute a business, however, is recognised only to the extent of
unrelated investors' interests in the associate or joint venture.
The IASB has deferred the effective date of these amendments
indefinitely, but an entity that early adopts the amendments must
apply them prospectively. The Group will apply these amendments
when they become effective.
Current versus non-current classification
The Group presents assets and liabilities in the statement of
financial position based on current/non-current classification. An
asset is current when it is:
-- Expected to be realised or intended to be sold or consumed in the normal operating cycle;
-- Held primarily for the purpose of trading; and
-- Expected to be realised within twelve months after the reporting date
All other assets are classified as non-current.
Assets included in current assets which are expected to be
realised within twelve months after the reporting date are measured
at fair value which is their book value. Fair value for investments
in unquoted equity shares is the net proceeds that would be
received for the sale of the asset where this can be reasonably
determined.
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 2018, 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
2018 2017
Unaudited Unaudited
GBP'000 GBP'000
Mortgage related products 35,671 28,972
Insurance and other protection products 21,308 19,818
Other income 875 803
------------------------------------------ ------------ ------------
57,854 49,593
------------------------------------------ ------------ ------------
Costs of sales are as follows:
2018 2017
Unaudited Unaudited
GBP'000 GBP'000
Commissions paid 43,945 36,860
Wages and salary costs 877 763
----------------------------------------- ------------ ------------
44,822 37,623
----------------------------------------- ------------ ------------
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.
3 Finance income
Six months ended 30
June
2018 2017
Unaudited Unaudited
GBP'000 GBP'000
------------------------------------------------ ------------ -----------
Interest income 26 11
Interest income accrued on loans to associates 5 --
------------------------------------------------ ------------ -----------
31 11
------------------------------------------------ ------------ -----------
4 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
2018 2017
Unaudited Unaudited
GBP'000 GBP'000
------------------------------------------------ ------------ -----------
Current tax expense
UK corporation tax charge on profit for
the period 1,021 984
Adjustments for over provision in prior - -
periods
------------------------------------------------ ------------ -----------
Total current tax 1,021 984
------------------------------------------------ ------------ -----------
Deferred tax expense
Origination and reversal of timing differences - (19)
Temporary difference on share based payments (41) (50)
Total deferred tax (41) (69)
------------------------------------------------ ------------ -----------
Total tax expenses 980 915
------------------------------------------------ ------------ -----------
For the period ended 30 June 2018, the deferred tax recognised
in equity was GBP291,996.
5 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. No adjustments to profits were necessary during the six
month period to 30 June 2018 and 30 June 2017.
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
2018 2017
Unaudited Unaudited
---------------------------------------- ------------ -------------
Weighted average number of shares used
in basic earnings per share 50,938,611 50,605,575
Potential ordinary shares arising from
options 1,848,634 768,232
---------------------------------------- ------------ -------------
Weighted average number of shares used
in diluted earnings per share 52,787,245 51,373,807
---------------------------------------- ------------ -------------
6 Dividends
Six months Six months
ended 30 ended
June 30 June Year ended
2018 2017 31 December
Unaudited Unaudited 2017
Audited
GBP'000 GBP'000 GBP'000
Dividends paid and declared during
the period:
On ordinary shares at 11.9p per share
(2017: 10.5p) 6,082 5,333 5,333
Special dividend: (2017:1.1p) - 555 555
Interim dividend for 2017: 9.5p per
share - - 4,824
6,082 5,888 10,712
--------------------------------------- ----------- ----------- -------------
Equity dividends on ordinary shares:
Declared:
Interim dividend for 2018: 10.6p per
share (2017: 9.5p) 5,417 4,825 -
Proposed for approval:
Final dividend for 2017: 11.9p per
share - - 6,044
--------------------------------------- ------ ------ ------
5,417 4,825 6,044
-------------------------------------- ------ ------ ------
The record date for the interim dividend is 5 October 2018 and
the payment date is 26 October 2018.
7 Goodwill
The goodwill relates to the acquisition of Talk Limited in 2012,
and in particular its main operating subsidiary Mortgage Talk
Limited. 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 review
conducted at the end of 2017 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
2017. There are no matters which have arisen in the period to 30
June 2018 which indicated that an impairment review was required at
that date.
8 Other intangible assets
Acquisitions
During the six months ended 30 June 2018, the Group acquired
intangible assets at a cost of GBP537,035 (2017: GBPnil).
9 Investments in associates and joint ventures
The investment in associates and joint ventures at the reporting
date is as follows:
30 June 31 December
2018 2017
Unaudited Audited
GBP'000 GBP'000
------------------------ ----------- ------------
At start of the period 1,339 1,008
Additions - 184
Share of profit 263 500
Dividends received (176) (353)
------------------------ ----------- ------------
At period end 1,426 1,339
------------------------ ----------- ------------
10 Trade and Other Receivables
30 June 31 December
2018 2017
Unaudited Audited
GBP'000 GBP'000
----------------------------------------- ----------- ------------
Trade receivables not past due 1,323 1,144
Trade receivables past due but not
impaired 11 13
Trade receivables past due but impaired 278 273
----------------------------------------- ----------- ------------
Trade receivables 1,612 1,430
Less provision for impairment of trade
receivables (278) (273)
----------------------------------------- ----------- ------------
Trade receivables - net 1,334 1,157
Amounts due from associates 1,280 719
Prepayments and accrued income 2,701 2,550
----------------------------------------- ----------- ------------
5,315 4,426
----------------------------------------- ----------- ------------
Trade and other receivables are all current and the book value
is the same as their fair value. Trade receivables are impaired on
an expected loss basis. Amounts due from associates include an
impairment balance of GBP76,108 (2017: GBPnil).
11 Trade and Other Payables - current
30 June 31 December
2018 2017
Unaudited Audited
GBP'000 GBP'000
----------------------------------------------- ----------- ------------
Appointed Representatives retained commission 10,387 9,381
Other trade payables 4,106 3,526
----------------------------------------------- ----------- ------------
Trade payables 14,493 12,907
Social security and other taxes 292 315
Other payables 26 40
Accruals and deferred income 1,614 1,737
----------------------------------------------- ----------- ------------
16,425 14,999
----------------------------------------------- ----------- ------------
As at 30 June 2018 and 31 December 2017, the book value of trade
and other payables approximates their fair value given that they
are short term in nature.
12 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 advanced loans to its trading partners which are
classified as trade receivables. 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. Further disclosures
regarding trade and other receivables are given in note 10.
Financial assets - maximum exposure
30 June 31 December
2018 2017
Unaudited Audited
GBP'000 GBP'000
----------------------------- ----------- ------------
Cash and cash equivalents 22,841 22,551
Trade and other receivables 2,614 1,876
----------------------------- ----------- ------------
Total financial assets 25,455 24,427
----------------------------- ----------- ------------
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 several UK banks all
of whom are A or BBB+ rated 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 2018 31 December
Unaudited 2017
Audited
GBP'000 GBP'000
-------------------------------------------- ------------- ------------
Unrestricted cash and bank balances 12,454 13,170
Bank balances held in relation to retained
commissions 10,387 9,381
-------------------------------------------- ------------- ------------
Cash and cash equivalents 22,841 22,551
-------------------------------------------- ------------- ------------
Bank balances held in relation to retained commissions relate to
commissions earned on an indemnity from life policies and 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 Payables (note 11).
14 Share Capital
Issued and fully paid
30 June 2018 31 December
Unaudited 2017
GBP'000 GBP'000
------------------------------- -------- ------------
Ordinary shares of 0.1p each 51 51
Total share capital 51 51
------------------------------- -------- ------------
During the period 318,363 ordinary shares of 0.1p each were
issued following exercise of the second tranche of options issued
at the time of the Initial Public Offering of the Company at a
premium of GBP520,176. See also note 16.
15 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 2018 and 2017, as well as balances with
related parties as at 30 June 2018 and 31 December 2017.
At 30 June 2018 there was a loan outstanding from Buildstore
Limited, an associated company, of GBP15,000 (2017: GBP45,000)
included in trade and other receivables. During the period the
Group paid commissions of GBP397,321 (2017: GBP520,807) to
Buildstore Limited.
During the period the Group received introducer commission from
MAB Wealth Management Limited, an associated company of GBP527
(2017: GBP5,917). There is no balance outstanding with MAB Wealth
Management Limited at 30 June 2018 (2017: GBPnil).
During the period the Group received introducer commission from
Sort Limited, a subsidiary of an associated company of GBP329,798
(2017: GBP92,743). There was an amount of GBP18,288 outstanding
with Sort Group Limited at 30 June 2018 (2017: GBP18,288) included
in trade and other receivables.
During the period the Group paid commission to Clear Mortgage
Solutions Limited, an associated company, of GBP1,492,133 (2017:
GBP975,710).
During the period the Group purchased services from Twenty7tec
Group Limited, a company in which the Group holds an investment, of
GBP21,650 (2017: GBP3,600).
During the period the Group paid commission to Freedom 365
Mortgage Solutions Limited, an associated company, of GBP401,954
(2017: GBP119,225). At 30 June 2018 there was a loan outstanding
from Freedom 365 Mortgage Solutions Limited of GBP910,000 included
in trade and other receivables (2017: GBP280,000).
During the period the Group paid commission to Vita Financial
Limited, an associated company, of GBP412,793 (2017: GBP347,784).
At 30 June 2018 there was a loan outstanding of GBP27,000 included
in trade and other receivables.
At 30 June 2018 there was a loan outstanding from MAB Broker
Services PTY Limited, an associated company, of GBP427,226
(AUD745,000) included in trade and other receivables (2017:
GBP148,138, AUD250,000).
During the period the Group received dividends from associated
companies as follow:
2018 2017
Unaudited Unaudited
GBP'000 GBP'000
------------------------ ----------- -----------
CO2 Commercial Limited 176 211
------------------------ ----------- -----------
16 Share based payments
On 10 April 2018, 103,566 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 three years
from the date of grant. The exercise price for the Options is 0.1
pence, being the nominal cost of the Ordinary Shares.
On 7 June 2018, 59,263 options over ordinary shares of 0.1 pence
each in the Company were granted to Ben Thompson, Managing
Director, 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 three years from the date of grant. The
exercise price for the Options is 0.1 pence, being the nominal cost
of the Ordinary Shares.
Options exercised in April 2018 resulted in 318,363 ordinary
shares being issued at an exercise price of GBP1.60 and GBP2.19.
The price of the ordinary shares at the time of exercise was
GBP6.27 per share.
For the six months ended 30 June 2018, the Group has recognised
GBP429,988 of share based remuneration expense in the statement of
comprehensive income (2017: GBP247,065) which includes the charge
for equity-settled schemes of GBP357,941 (2017: GBP184,479) and the
matching element of the Group's Share Incentive Plan for all
employees of GBP19,485 (2017: GBP7,707).
17 Events after the reporting date
There are no significant events to report after the reporting
date
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR VZLFLVKFFBBD
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