MORTGAGE ADVICE BUREAU (HOLDINGS)
PLC
("MAB" or "the Group")
19 March 2024
Final Results for the year ended
31 December 2023
Mortgage Advice Bureau (Holdings)
plc (AIM: MAB1.L) is pleased to announce its final results for the
year ended 31 December 2023.
Financial summary
|
2023
|
2022
|
Change
|
Revenue
|
£239.5m
|
£230.8m
|
+3.8%
|
Gross profit
|
£70.2m
|
£62.9m
|
+11.5%
|
Gross profit margin
|
29.3%
|
27.3%
|
+2.0pp(1)
|
Adjusted
EBITDA*
|
£26.7m
|
£29.1m
|
-8.1%
|
Adjusted EBITDA
margin*
|
11.2%
|
12.6%
|
-1.4pp
|
Adjusted profit before
tax*
|
£23.2m
|
£27.2m
|
-14.8%
|
Statutory profit before
tax
|
£16.2m
|
£17.4m
|
-6.8%
|
Adjusted profit before tax
margin*
|
9.7%
|
11.8%
|
-2.1pp
|
Adjusted profit before tax as a
percentage of net revenue*
|
24.6%
|
34.0%
|
-9.4pp
|
Reported profit before tax
margin
|
6.8%
|
7.5%
|
-0.7pp
|
Adjusted fully diluted
EPS*
|
29.6p
|
37.4p
|
-20.9%
|
Basic EPS
|
23.6p
|
21.8p
|
+8.1%
|
Adjusted cash
conversion*
|
119%
|
105%
|
+14pp
|
Proposed final dividend
|
14.7p
|
14.7p
|
-
|
Operational highlights
●
|
Market share of new mortgage
lending(2) up 11% to 8.3% (2022:
7.5%)
|
●
|
Gross mortgage
completions(2) (including product transfers) down 8% to
£25.1bn (2022: £27.3bn)
|
●
|
Gross new mortgage
completions(2) (excluding product transfers) down 21% to
£18.6bn (2022: £23.6bn)
|
●
|
Adviser numbers down 4% to
2,158(3) (2022: 2,254)
|
●
|
Average number of mainstream
advisers(4) down 2% to 1,940 (2022: 1,988)
|
●
|
Revenue per mainstream
adviser(4) up 6% following a full year impact of the
acquisition of Fluent
|
●
|
Proportion of revenue from
re-financing at 35% (2022: 32%)
|
Post period end
●
|
2,135 advisers at 15 March 2024,
including 116 advisers from Fluent
|
* In
addition to statutory reporting, MAB reports alternative
performance measures ("APMs") which are not defined or specified
under the requirements of International Financial Reporting
Standards ("IFRS"). The Group uses these APMs to improve the
comparability of information between reporting periods, by
adjusting for certain items which impact upon IFRS measures, to aid
the user in understanding the activity taking place across the
Group's businesses. APMs are used by the Directors and management
for performance analysis, planning, reporting and incentive
purposes. A summary of APMs used and their closest equivalent
statutory measures is given in the Glossary of Alternative
Performance Measures.
Peter Brodnicki, Chief Executive,
commented:
"Against a very challenging backdrop in 2023,
MAB continued its exceptional track record of outperformance and
market share growth in all market conditions.
"Despite the severe market
downturn, we continued our investment across the entire business
and remained resolutely focused on long-term growth. Our
proposition for growth focused mortgage and protection firms is
outstanding, underpinned by best-in-class technology, lead
generation and infrastructure, and our aim is to continue to
further increase MAB's differentiation versus our competitors and
grow market share and profitability.
"2024 has started well, with both
purchase and re-financing activity having picked up significantly.
We believe this signals the early stages of a market recovery that
builds towards a catch-up year in 2025, with pent-up demand
continuing to be released as consumer confidence and affordability
increase.
"Although we expect organic adviser
growth to start building some momentum again in H2 as our AR firms
gain more confidence in the sustainability of the recovery,
recruitment activity in terms of new AR firms is exceptionally
strong, reflecting the significant strides we have made in terms of
our technology and lead generation developments, as well as how we
have engaged with and supported our partner firms with the
introduction and integration of Consumer Duty.
"Following an exceptionally strong
year for our most mature investment First Mortgage, strong progress
has been made in terms of efficiencies and lead sources in all our
other AR investments, with adviser productivity in these firms
being significantly higher than our average across the Group. We
expect a record performance from our investments this year and
believe the portfolio will contribute to accelerated Group profit
growth over the medium term."
Current Trading and Outlook
Following the modest improvement in
trading towards the end of last year, we have seen a very positive
start to 2024 across both purchase and re-financing, including a
long-awaited recovery in Buy-to-Let activity.
We previously reported our
expectation that overall market activity would increase once
inflation was under control and the Bank of England base rate had
peaked or started to fall back. Although a first reduction in the
base rate is not expected until later this year, mortgage rates
have reduced notably, the availability of mortgage products has
increased, and mortgage underwriting criteria are starting to
signal a more positive outlook.
This has all helped consumer
sentiment, resulting in increasing house purchase activity, some of
which will certainly be driven by the pent-up demand that has built
up since the events of September 2022.
Although we expect it will be the
second half before we see organic adviser growth recommence, our AR
firms are eager to resume their growth plans and are preparing to
do so now. New AR recruitment activity started picking up strongly
in the latter part of 2023, following an understandable lull in the
previous 12 months. That momentum has built strongly, boosted by
the significant developments in technology and lead generation we
have delivered, as well as further investment in our recruitment
resources to ensure we can capitalise on the opportunity our
proposition enhancements will bring.
Although the macroeconomic
environment remains difficult to predict, we are increasingly
optimistic about the Group's prospects for this new financial year,
with current trading in line with
expectations.
For further information please
contact:
Mortgage Advice Bureau (Holdings)
Plc
|
+44 (0)1332 525 007
|
Peter Brodnicki - Chief
Executive Officer
|
|
Ben Thompson - Deputy Chief
Executive Officer
|
|
Lucy Tilley - Chief Financial
Officer
|
|
|
|
Nominated Adviser and Joint
Broker:
Deutsche Numis
Stephen Westgate / Giles
Rolls
|
+44 (0)20 7260
1000
|
|
|
Joint Broker:
Peel Hunt LLP
Andrew Buchanan / Mike
Burke
|
+44
(0)20 7418 8900
|
Media enquiries:
investor.relations@mab.org.uk
Analyst presentation
There will be an analyst
presentation to discuss the results at 9:30am
today.
Those analysts wishing to attend
are asked to contact investor.relations@mab.org.uk.
Copies of this interim results
announcement are available at
www.mortgageadvicebureau.com/investor-relations
The information contained within
this announcement is deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of
the European Union (Withdrawal) Act 2018 ("UK
MAR").
(1) Percentage points.
(2) Based on first charge mortgage completions, excluding secured
personal loans (second charge mortgages), later life lending
mortgages and bridging finance.
(3) Includes 117 Fluent advisers as at 31 December 2023 (61
advisers in the first charge mortgages division, 49 in the secured
personal loans division, 2 in the later life division, and 5 in the
bridging finance division). Includes a total of 240 advisers at 31
December 2023 who are later life advisers or advisers in directly
authorised firms that use MAB's subsidiary, Auxilium, a specialist
protection service provider, for protection. For both later life
and directly authorised advisers the fees received by MAB represent
the net income received by MAB as there are no commission payouts
made by MAB.
(4) Excludes directly authorised advisers, MAB's later life
advisers and, advisers from associates in the process of being
onboarded under MAB's AR arrangements. Includes Fluent's second
charge, later life and bridging advisers who have a higher revenue
per adviser than first charge advisers.
Chief Executive's Review
2023 started with much depleted
mortgage and protection pipelines, following the very turbulent and
difficult final quarter of 2022 post the mini-budget. From this
very low base, mortgage activity gradually increased through much
of H1, as it seemed that inflation was starting to come under
control, and mortgage rates were appearing to stabilise at
manageable levels for borrowers. However, mid-way through the year,
the inflationary backdrop began to disappoint, which took markets
by surprise. Consequently, mortgage rates rose quickly and to
levels sufficiently high enough to markedly reduce house purchase
activity, forcing many borrowers to pause and wait longer before
re-financing their existing mortgages, on the hope that mortgage
rates would subside later in the year.
As expected, these borrowers
started to re-finance in greater numbers much later in the year. We
also saw a slight improvement in purchase related mortgage activity
right at the end of the year, as mortgage rates became more
attractive against a backdrop of lower inflation pointing to a more
predictable and better outlook for new business in 2024.
Against this difficult market
backdrop where new mortgage lending was down by 29%, MAB grew its
market share of new mortgages(1) to 8.3% from 7.5%, once
again outperforming the market in difficult trading conditions.
Much of this outperformance was a clear reflection of how MAB
helped ARs and advisers to successfully pivot and focus their
efforts largely towards re-finance and protection opportunities, in
the absence of an active purchase market. As a result, adviser
productivity remained virtually unchanged despite the significant
drop in purchase transactions. The ability to do this on the rare
occasion of a major downturn strongly underlines the resilience of
MAB's operating model, and of course any drop in property
transactions is typically made up once the housing market
recovers.
In terms of MAB's strategy,
although conditions were very challenging, we continued to invest
for growth, as opposed to making short-term cost cuts at the
expense of longer-term opportunities. This was to ensure we remain
on a path towards establishing even greater differentiation versus
our competitors, enabling us to carry on growing market share and
profitability.
MAB ARs have more employed
advisers than the intermediary sector average, and as a result they
understandably reduced adviser numbers quickly in response to a
sharp decline in purchase transactions. The 4% fall overall in
adviser numbers was expected as firms consolidated and focused on
efficiency and productivity rather than growth in such uncertain
times. We expect a better outcome in 2024, as existing ARs
gradually become more confident in a sustainable
recovery.
Despite the 29% drop in UK new
mortgage lending, Group revenue for the period was up 4% to £239.5m
(2022: £230.8m), with organic revenue (excluding the Fluent,
Auxilium and Vita acquisitions) down 4%, and Group first charge
mortgage completions down 8% to £25.1bn (2022: £27.3bn).
Re-financing transactions accounted for 53% of the Group's first
charge mortgage completions by lending value (2022: 42%), driven by
a 75% increase in the Group's product transfer completions to
£6.5bn (2022: £3.7bn).
MAB's first charge mortgage
completions are analysed as follows:
|
2023
|
2022
|
Change
|
|
£bn
|
£bn
|
|
New mortgage lending
|
18.6
|
23.6
|
-21%
|
Product Transfers
|
6.5
|
3.7
|
+75%
|
Gross mortgage lending
|
25.1
|
27.3
|
-8%
|
Adjusted EBITDA was down 8% to
£26.7m (2022: £29.1m), primarily due to a £9.7m or 28.1% increase
in administrative expenses, reflecting the planned further
investment in the Group's growth strategy.
Lead generation and lifetime customer value
Our investment and developments in
early customer capture and nurture, data analytics and customer
profiling are helping us build a better understanding of our
existing and future customers and how to best service all their
likely requirements to generate a larger lifetime value.
This learning is driving the
development of our customer and broker platform, apps and tools
whilst shaping our entire customer engagement strategy. These
optimisations are already delivering early signs of the size of the
opportunity we have, including driving an increasing number of
opportunities from our existing lead channels, supporting the
conversion of all leads, and identifying high propensity for
requirements of additional products and services.
Although we are in the early
stages of implementation and the learning this strategy will bring,
we enter an exciting period as we layer additional opportunities of
potential customers and their value to MAB into our existing
environment.
MAB's client bank and related
retention opportunities grows year after year, as MAB and its ARs
continue to generate new lead flows.
Our acquisition of Fluent has added
Price Comparison Websites ("PCWs") and other major national lead
sources to MAB's market leading position in the estate agency and
new build sectors. These are by far the three largest sources of
new customers for intermediaries. However, with estate agency and
new build in particular, the leads generated have been largely
reliant on human referral, which at best can be
inconsistent.
Our development of digital customer
engagement and research tools enables MAB to reduce that reliance
and generate additional opportunities from these existing lead
sources, with those potential customers already having had a
positive online experience before engaging with an adviser. We see
this becoming a major growth opportunity over the medium term, with
the same digital engagement and nurture helping MAB to improve
retention year-on-year from an ever-increasing client
base.
MAB's success has been built on
being the leader in providing an exceptional service to introducer
lead sources and their customers. Our digital customer engagement
and nurture strategy will strengthen our leading position still
further and is already starting to provide opportunities for new
introducer relationships.
Although MAB is the market leader
in customer acquisition and fulfilment from local and national lead
sources, we also support our ARs in optimising direct customer
engagement and acquisition through organic website traffic and
social media.
Lead generation - whether that be
new customers, retaining customers, or increasing the lifetime
value of a customer - is the major and increasing differentiator
for MAB that drives adviser and AR growth, performance, and
retention. Technology and Artificial
Intelligence (AI) are likely to have an
increasing impact on how we acquire, retain, and build extended
value for our customers and for MAB, its ARs and their advisers.
Accordingly, continued investment in these areas remains a
priority, regardless of market conditions, and will continue to
underpin our strategy for strong market share and profit
growth.
Leveraging existing invested-in partners
The majority of our subsidiaries
and associates had significant growth plans in 2023, which have
been delayed because of the difficult market backdrop, albeit First
Mortgages did deliver an excellent performance, helped partly by
the Scottish property market being less affected than the rest of
the UK.
All our subsidiaries and
associates strengthened their businesses last year, are in a good
position to capitalise on a recovering market and are expected to
resume some level of adviser growth in 2024. Adviser productivity
in this portfolio is significantly higher than the average across
MAB and continues to build. We expect a record performance from our
investments this year, and for them to increasingly contribute to
our plans for accelerated profit growth.
Technology, Automation and
AI
Technology remains central to our
strategy and our investment in our MIDAS Platform will continue at
the levels required to ensure we are always in the strongest
possible position to optimise operational efficiency and drive
revenue growth from new lead flow, lead nurture, customer
retention, adviser productivity, and customer lifetime
value.
We are committed to maintaining our
differentiation through technological advantage, and our roadmap
now incorporates enhanced functionality through the adoption of AI.
As with our MIDAS Platform development, automation and AI will
significantly contribute to our growth plans and operational
efficiency across all areas of the business, as well as future
proof our business model and cement our leadership position in the
intermediary sector.
Fluent
Fluent had a growing employed salesforce at
the time of acquisition. We have worked very closely with the
Fluent management team to re-balance the business to better suit
the much-reduced levels of new business experienced last year. This
process saw significant cost reductions and some key personnel
changes. Although adviser numbers were quickly reduced, other cost
savings and efficiencies continued throughout the year, ensuring
the business is in the best possible shape to capitalise on
improving market conditions.
During this period, Fluent also
secured a new long-term contract with its largest provider of
mortgage leads, whilst adding new lead sources that will support
new business growth in 2024/25.
With a better-balanced cost base,
new lead sources and processes, and a strong management team,
Fluent is well-positioned for a good recovery in revenue and
profits in 2024.
Consumer Duty
In 2023, the deadline for the
implementation of the Consumer Duty requirements came into effect.
The Financial Conduct Authority's ("FCA") new rules require all
regulated firms to consider the needs, characteristics, and
objectives of their customers, and to ensure they are always acting
to consider and deliver the right outcome for customers.
The new requirements also include
the need to show consideration, flexibility and attention to
customers with characteristics of vulnerability. The Consumer Duty
sets clear standards of consumer protection across financial
services and requires all firms to put the needs of their customers
first, and central to all they do.
The Group's Board closely
monitored the preparations for the introduction of the Consumer
Duty and could confirm it was satisfied that the firm was prepared
for the new requirements by the 31 July 2023 deadline.
Since implementation, work has
continued to ensure the Consumer Duty requirements are embedded
into all MAB's activities and owned by senior leaders across the
business. This helps us to ensure that good customer outcomes are
considered as a matter of course, and at all
times.
Good customer outcomes have always
been, and continue to be, central to MAB's strategy and culture,
and so we see the implementation of Consumer Duty as hugely
complementary and supportive of our objectives as a
Group.
Board changes
Non-executive chair
Katherine Innes Ker, non-executive
chair, will retire from the Board at the conclusion of the Annual
General Meeting on 22 May 2024. Katherine joined us as Chair at our
IPO nearly 10 years ago and has been an integral part of our
success since then. Mike Jones, non-executive director, will
succeed Katherine as chair with effect from his re-election at the
AGM. Mike joined the Board in March 2021 and has chaired the Group
Risk Committee since November 2022. His vision and strategic
thinking have made an immediate impact and we look forward to his
continued contribution as Group chair.
Chief Financial Officer
Lucy Tilley, Chief Financial
Officer, submitted her resignation to the Board in January 2024 and
is currently serving her six months' notice. The search for her
replacement is well advanced and an update will be provided in due
course.
Non-executive director
A search for an additional
independent non-executive director who will complement the Board in
terms of profile, skills and experience is also well advanced, and
we look forward to updating our shareholders in due
course.
Summary
It is very rare to see such a
severe downturn in UK purchase related mortgages as the one we have
experienced, and it significantly affected what would otherwise
have been an incredibly strong year for MAB. This was clearly a
setback for the business but only one of timing.
The investment in our AR and
customer proposition continued as planned, as we strengthened
across all business areas, whilst ensuring we were fully prepared
for implementation of the Consumer Duty.
We also made good progress on our
ESG strategy, as we explore how we can become a real influencer in
terms of helping the UK housing stock to become more carbon
efficient, and how we can be at the forefront to set the standard
within the intermediary sector.
The acquisition of Fluent was
strategically important, however the timing of the downturn could
not have come at a worse time for the expected growth of the
business. Despite an understandably challenging first 18 months,
the work we have done together will ensure a better performance
this year as Fluent starts to build back towards our original
expectations.
We expect a strong contribution
from our all our investments this year, and that they will play an
increasingly important part in our plans to deliver accelerated
profit growth.
Although we do not see normal
growth in organic adviser numbers resuming until 2025, AR
recruitment activity is building very strongly and reflects the
significant technology and lead generation developments seen at MAB
over the last 12 months. We believe our approach and implementation
of the Consumer Duty across the business is also a major
consideration for firms looking at MAB's overall
proposition.
Although much of the last quarter
of 2023 was challenging in terms of written activity levels, which
will have some impact on this year, purchase and re-financing
activity since then has picked up notably driven by reducing
mortgage rates and inflation. We believe this signals the early
stages of a recovery in 2024 that will build towards a catch-up
year in 2025 with pent up demand continuing to be released as
consumer confidence and affordability increase.
(1) First charge mortgage completions, excluding secured personal
loans (second charge mortgages), later life lending mortgages and
bridging finance.
Market review
The fall in new mortgage approval volumes in
the aftermath of the September 2022 mini-budget continued
throughout 2023, as the rising costs of living and higher interest
rates created further affordability constraints and reduced
consumer confidence. After a much-depressed Q1 2023, with mortgage
approvals 40% down year-on-year, Q2 saw a slight improvement (down
26% year-on-year). However conditions toughened further in Q3 2023
(down 41% year-on-year) and this continued into Q4 (down 13%
year-on-year despite Q4 2022 being heavily affected by the
mini-budget). Overall, new mortgage approvals were down 32% for
2023, as summarised in the graph below.
http://www.rns-pdf.londonstockexchange.com/rns/3457H_1-2024-3-19.pdf
Source: UK Finance
This led to gross new mortgage
completions(1) being down 29% to £223.5bn (2022:
£313.2bn(2)). The purchase segment was down 30% and the
re-mortgaging segment down 29%, as illustrated in the table and
graph below.
UK Gross new mortgage lending by segment,
£bn
|
|
2023
|
2022
|
%
|
Residential purchase
|
121.1
|
168.2
|
-28%
|
Buy-to-let purchase
|
8.2
|
17.4
|
-53%
|
Purchase segment
|
129.3
|
185.6
|
-30%
|
|
|
|
|
Residential re-mortgage
|
65.2
|
82.2
|
-21%
|
Buy-to-let re-mortgage
|
19.8
|
38.0
|
-48%
|
Re-mortgage segment
|
85.0
|
120.2
|
-29%
|
|
|
|
|
Buy-to-let segment
|
28.0
|
55.4
|
-50%
|
Source: UK Finance
http://www.rns-pdf.londonstockexchange.com/rns/3457H_2-2024-3-19.pdf
Source: UK Finance
Whilst affordability pressures restricted the
external re-mortgaging sector during the period, Product Transfers
saw a 21% increase by value.
Property transactions were down 19% in 2023
compared to 2022, as illustrated in the graph below. The smaller
contraction relative to mortgage lending volumes indicates an
increasing proportion of cash buyers, with higher interest rates
putting cash buyers in an increasingly favourable position to those
taking out a mortgage.
http://www.rns-pdf.londonstockexchange.com/rns/3457H_3-2024-3-19.pdf
Source: UK Finance
The value of mortgage lending was also impacted
by average house prices starting to fall from the peak reached in
H2 2022. Average house prices in 2023 were down 2% compared to H2
2022, and flat compared to average prices in 2022 as a
whole.
The share of UK residential
mortgage transactions via intermediaries (excluding Buy to Let,
where intermediaries have a higher market share, and Product
Transfers where intermediaries have a lower market share) continued
to grow to 87% (2022: 84%), with customers increasingly needing
choice, advice and support in a more complex and uncertain macro
environment. We expect this increased intermediary market share to
remain stable.
UK Finance's and the Intermediary Mortgage
Lenders Association's latest estimates of gross new mortgage
lending for 2024, published in December 2023, are £215bn and
£205bn, down 4% and 8% respectively compared to 2023.
However, the Group's current trading and the
latest market data would indicate that actual numbers may end up
higher than these forecasts. Despite the continuing headwinds, the
underlying level of demand for home ownership and mortgages remains
strong, and we expect activity levels to be notably stronger this
year. We also expect external re-mortgaging to make up a greater
share of re-financing in 2024, even though Product Transfers will
remain strong.
(1) First charge mortgage completions, excluding secured personal
loans (second charge mortgages), later life lending mortgages and
bridging finance.
(2) UK Finance regularly updates its estimate of gross new
mortgage lending, and previously reported £313.9bn at the time of
our 2022 results.
Financial review
We measure the development,
performance, and position of our business against several key
indicators.
http://www.rns-pdf.londonstockexchange.com/rns/3457H_4-2024-3-19.pdf
Revenue
Group revenue increased by 3.8% to
£239.5m (2022: £230.8m) despite the
average number of mainstream(1) advisers during the year
down 2.4% to 1,940 (2022: 1,988). Organic(2)
revenue reduced by 4.3% to £199.6m (2022: £208.6m) driven by a 5%
reduction in the average number of organic(2)
mainstream(1) advisers to 1,801 (2022: 1,901) and a 1%
increase in revenue per organic mainstream
adviser, partly
due to a lower proportion of new advisers in the year. Our existing
AR firms paused recruitment and focused on efficiency following the
September 2022 mini-budget and inflationary pressures causing
further increases in interest rates. In addition, we entered 2023
with a lower-than-expected pipeline of written mortgages and new AR
firms.
Fluent, which was acquired on 12
July 2022, had 117 (2022: 182) mainstream advisers as at 31
December 2023, and contributed £37.5m (2022: £21.9m) of revenue
during the year. Auxilium, which was acquired on 3 November 2022,
had 226 (2022: 161) directly authorised advisers to as at 31
December 2023, and contributed £1.1m (2022: £0.2m) of revenue. MAB
increased its stake in Vita from 49% to 75% on 12 July 2022,
with its adviser numbers and revenues already incorporated into the
Group's figures due to it having been an AR of the Group since
2016.
The Group continued to generate
revenue from three core areas, as set out below.
Income source (£m)
|
2023
|
2022
|
Change
|
Mortgage procuration
fees
|
98.0
|
106.6
|
-8.1%
|
Protection and General Insurance
Commission
|
93.1
|
82.1
|
+13.4%
|
Client Fees
|
43.4
|
36.3
|
+19.7%
|
Other Income
|
5.0
|
5.8
|
-14.5%
|
Total
|
239.5
|
230.8
|
+3.8%
|
MAB's organic(1)
revenue across the three core areas was as follows:
Income source (£m)
|
2023
|
2022
|
Change
|
Mortgage procuration
fees
|
85.5
|
99.0
|
-13.7%
|
Protection and General Insurance
Commission
|
88.6
|
80.5
|
+10.1%
|
Client Fees
|
21.3
|
23.7
|
-10.1%
|
Other Income
|
4.2
|
5.4
|
-22.9%
|
Total
|
199.6
|
208.6
|
-4.3%
|
As a result of the market downturn
in 2023, MAB's organic banked mortgage(3) mix had a considerably
lower proportion of house purchase transactions compared to the
prior year at 45% (2022: 51%), driven by a 19% reduction in UK
property purchase transactions overall, and an even larger
reduction of 30% in mortgage-backed UK property purchase
transactions as a result of the fall in consumer confidence.
The proportion of re-financing transactions in MAB's organic banked
mortgage mix increased to 55% (2022: 49%) of completions by volume,
as we saw a further increase in the proportion of product transfer
completions by volume to 28% of MAB's mortgages(3)
(2022: 21%, 2021: 13%). Product transfers have a lower
average procuration fee and typically have lower protection,
general insurance and client fee attachment rates than other
mortgage types.
The Group's organic net
mortgage(3) completions by value reduced by 9%, with
mortgage procuration fees reducing by 14% as a result of the
increased proportion of product transfers. Client fees reduced by
10%. The Group's organic protection and general insurance
commissions however increased by 10%, reflecting the strong focus
of MAB's advisers on protection when volumes in the mortgage market
fall, particularly in our invested businesses, and the strength of
MAB's proposition and support in these areas.
MAB's average first charge mortgage size
decreased by 7.1% compared to the prior year, with average house
prices remaining flat year-on-year, reflecting the increased
proportion of re-financing completions where the average mortgage
size is lower than for purchase transactions.
Fluent's revenue contribution
across the Group's three core revenue streams during the year was
as follows, with an additional £1.1m (2022: £0.1m)
of revenue synergies realised:
Income source (£m)
|
2023
|
12 July 2022 - 31 Dec
2022
|
Mortgage procuration
fees
|
12.4
|
7.6
|
Protection and General Insurance
Commission
|
2.2
|
1.4
|
Client Fees
|
22.1
|
12.5
|
Other Income
|
0.8
|
0.4
|
Total
|
37.5
|
21.9
|
Fluent generates revenue from a
wider range of mortgage types than MAB, including first charge
mortgages, secured personal loans (second charge mortgages), later
life lending mortgages and bridging finance. Fluent earns revenue
on first charge mortgages in the same way as MAB. In its other
divisions, Fluent predominantly earns procuration and client fees,
with a smaller proportion of protection and general insurance
commission earned on loans arranged for its customers.
Auxilium, a specialist protection
service provider, contributed revenue of £1.1m (2022: £0.2m).
Auxilium's revenues are classified under protection and general
insurance commission and represent the total income received, with
there being no commission payouts to the directly authorised
entities serviced by the business.
MAB's overall revenue from
re-financing (including both re-mortgages and product transfers)
represented circa 35% (35% on an organic basis) of total revenue
(2022: 32%, 2021: 25%) due to the Group's organic banked mortgage
mix having a higher proportion of re-financing and Fluent having a
higher proportion of re-financing in its first charge mortgage mix,
with 2021 reflecting a particularly high level of purchase
transactions.
The proportion of organic revenue
derived from each of the Group's core revenue streams has remained
reasonably stable as summarised below, with the movements
reflecting the change in banked mortgage mix during the period, as
well as the focus on protection.
Income source
|
2023
|
2022
|
Mortgage Procuration
Fees
|
43%
|
47%
|
Protection and General Insurance
Commission
|
44%
|
39%
|
Client Fees
|
11%
|
11%
|
Other Income
|
2%
|
3%
|
Total
|
100%
|
100%
|
The proportion of total revenue
derived from each of the Group's core revenue streams has also
changed, due to the dynamics set out above for organic revenue and
a full year effect of the Fluent acquisition. Client fees as a
proportion of Fluent's revenue are higher than for the organic
Group, with protection and general insurance commission being a
lower proportion of Fluent's revenue due to lower attachment rates
on second charge mortgages, with the Group's revenue mix summarised
as follows:
Income source
|
2023
|
2022
|
Mortgage Procuration
Fees
|
41%
|
46%
|
Protection and General Insurance
Commission
|
39%
|
36%
|
Client Fees
|
18%
|
16%
|
Other Income
|
2%
|
2%
|
Total
|
100%
|
100%
|
In first charge mortgages we
expect client fees to become increasingly dependent upon the type
and complexity of the mortgage transaction, as well as the delivery
channel, leading to a broader spread of client fees on mortgage
transactions, which represent the Group's lowest margin revenue
stream.
Gross profit margin
Gross profit margin for the year
increased to 29.3% (2022: 27.3%) and MAB's organic gross profit
margin also increased to 28.5% (2022: 26.5%). This increase in
gross margin is primarily due to the increased proportion of
protection revenue in the organic Group in 2023.
The network organic business of
the Group receives slightly reduced revenue share as existing ARs
grow by increasing their adviser numbers. In addition, larger new
ARs typically join the Group on lower-than-average margins due to
their existing scale, hence a degree of erosion is expected in
MAB's underlying gross profit margin due to the continued growth of
our existing ARs and the addition of new larger ARs.
Looking ahead, we expect any
further erosion in underlying organic gross margin to be offset by
operational leverage reducing the Group's administrative expenses
ratio*.
Administrative expenses
Group administrative expenses
increased by £10.7m (+29.7%) to £46.7m, mainly reflecting the full
year impact of the acquisitions of Fluent and Vita. Organic
adjusted administrative expenses increased by £4.5m (+14.9%) to
£34.6m, reflecting MAB's continued investment in growth through the
market downturn in 2023, and specifically in its technology
platform and marketing team through a mix of employee and
third-party costs, which we expect to drive enhanced lead
generation opportunities and future revenue
growth. Head office
costs, including those of First Mortgage, and compliance costs also
increased to support the Group's growth strategy.
MAB's Head office refurbishment at the end of
2022 led to a £0.5m increase in the depreciation
charge. All development work on
MAB's MIDAS platform continues to be fully expensed.
The Group's administrative expenses ratio was
19.5% (2022: 15.6%), and the organic administrative expenses
ratio* increased to 17.3% (2022: 14.4%) reflecting the
adverse impact of the market downturn on revenue growth in a period
where the Board originally expected to deliver operational
leverage.
The Group expects to continue to benefit from
the relatively fixed cost nature of much of its cost base, where
those costs typically rise at a slower rate than revenue, with the
operational leverage offsetting the expected slight erosion of
MAB's underlying organic gross margin as the business continues to
grow.
Associates and Investments
MAB's share of profits from
Associates was £0.8m (2022: £0.7m) with all of the Group's
Associates being adversely impacted by the market
downturn.
Management believes that the value
of a number of its associate investments exceeds their carrying
value recognised using the equity accounting method under IAS
28.
Adjusted EBITDA, profit before tax and margin
thereon
Adjusted EBITDA* was
down 8.1% to £26.7m (2022: £29.1m), with the margin thereon of
11.2% (2022: 12.6%) reflecting the impact
of the market downturn and MAB's continued investment through this
period.
Organic adjusted
EBITDA* was £24.6m (2022: £26.9m), with the margin
thereon of 12.3% (2022: 12.9%).
Adjusted profit before
tax* was down 14.8% to £23.2m (2022: £27.2m), with the
margin thereon being 9.7% (2022: 11.8%), also reflecting a full
year of interest charges on MABs debt facilities. Organic adjusted
profit before tax* was £22.2m (2022: £25.5m), with the
margin thereon of 11.1% (2022: 12.2%). Statutory profit before tax
was £16.2m (2022: £17.4m) reflecting a full year impact of Fluent,
Vita and Auxilium ongoing acquisition-related costs, including
amortisation of acquired intangibles and non-cash operating
expenses associated with the put and call option agreements
relating to the minority interests on the Fluent and Auxilium
acquisitions. As a result, the margin on statutory profit before
tax was 6.8% (2022: 7.5%).
Vita and Auxilium contributed
adjusted profit before tax of £0.5m (2022: £0.05m) and £0.7m (2022:
£0.1m) respectively. Fluent made an adjusted loss before tax of
£1.1m, which was due to Fluent's performance in H1 2023, with an
improved performance in H2 2023, and having made an adjusted profit
before tax of £1.5m in the period from acquisition to 31 December
2022. These figures exclude the impact of any non-cash
charges associated with the put and call options for Fluent and
Auxilium.
Adjusted profit before
tax* as a percentage of net revenue* was
24.6% (2022: 34.0%) primarily due to the effect of the market
downturn and MAB's continued investment in
growth.
Finance revenue
Finance income of £0.3m (2022:
£0.1m) reflects the uptick in interest rates that prevailed for
most of the financial year and the interest income accrued or
received on loans to associates and other appointed
representatives.
On 28 March 2022 MAB entered into
new four-year debt facilities with NatWest, comprising a £20m Term
Loan (the "Term Loan") and a £15m revolving credit facility (the
"RCF") to be used in connection with the acquisition of Fluent. The
RCF is also available for general corporate purposes. There is an
option to extend the RCF and the Term Loan for a further
year.
Finance expenses of £2.6m (2022:
£1.2m) include £1.4m (2022: £0.6m) of interest and non-utilisation
fees payable on MAB's debt facilities, the interest expense on
lease liabilities and a £1.1m charge (2022: £0.6m) relating to the
unwinding of the redemption liability associated with the Fluent
Option and a £0.1m charge (2022: nil) relating to the unwinding of
the redemption liability associated with the Auxilium
Option.
A remeasurement of the redemption
liability associated with the Fluent and Auxilium options has been
undertaken at the year end. This has resulted in a £4.5m gain
(2022: £nil) recognised in the year, split as a £4.7m gain for the
Fluent Option, predominantly due to further acquisition of share
capital undertaken in the year, and a cost of £0.2m for Auxilium
options.
Taxation
The effective tax rate on adjusted profit
before tax*
increased to 21.8% (2022: 16.8%), primarily
due to the increase in the prevailing UK corporation tax rate from
1 April 2023. The effective rate of
tax on reported profit before tax reduced to 23.0% (2022: 26.4%),
primarily due to lower acquisition related costs, a gain on
redemption liabilities in the current year and write off of the
Boomin investment in the prior year, which are all disallowable for
tax purposes. This is offset by a higher prevailing tax rate and
higher disallowable share option costs linked to
acquisitions. We expect the effective tax rate on adjusted
PBT in future years to be in line with the prevailing UK
corporation tax rate.
Earnings per share and dividend
Adjusted fully diluted earnings
per share* was 29.6p (2022: 37.4p). Basic earnings per share increased
to 23.6p (2022: 21.8p) due to £2.6m lower acquisition-related
costs, £4.5m fair value gain on redemption liabilities in 2023 and
the £2.8m write off of the Boomin investment in 2022, offset by
£2.6m higher amortisation of acquired intangibles due to a full
year of amortisation on 2022 acquisitions.
The Board is pleased to propose a
final dividend of 14.7p per share (2022: 14.7p). This brings the
total proposed dividend for the year to 28.1p per share (2022:
28.1p), reflecting the Group's policy to pay dividends reflecting a
minimum pay-out ratio of 75% of the Group's annual adjusted
post-tax and minority interest profits. This represents a cash
outlay of £8.4m (2022: £8.4m). Following payment of the dividend,
the Group will continue to maintain significant surplus regulatory
reserves.
The record date for the final
dividend will be 26 April 2024 and the payment date 29
May 2024. The ex-dividend date will be 25 April
2024.
Balance sheet
In connection with the
acquisitions of Fluent, Vita and Auxilium in 2022, the Group
recognised separately identifiable intangible assets with a fair
value on acquisition of £55.4m and goodwill totalling £38.7m. The
carrying value of the intangible assets after amortisation at 31
December 2023 was £50.1m (2022: £55.2m). In addition, redemption
liabilities of £2.4m (2022: £7.0m) and £0.4m (2022: £0.2m) in
respect of the put and call options relating to the Fluent and
Auxilium acquisitions respectively, are included in other payables
as at 31 December 2023.
A clawback liability is recognised
on the balance sheet. Life insurance commissions are paid
upfront on an indemnity basis, mainly over a four-year period. If a
policy is cancelled during the indemnity period, part of the
commission received may have to be repaid to the policy provider.
The clawback liability estimates the value and timing of repaying
commission received on an indemnity basis for policies that may
lapse in a period of up to four years following
inception.
In 2022, the Group entered into an
agreement on 28 March 2022 with NatWest, in respect of a new term
loan for £20m and a revolving credit facility for £15m (the
"Facilities Agreement"), in order to part fund the cash
consideration payable in relation to the Fluent acquisition.
As at 31 December 2023, the Group had drawn down £1.6m (2022:
£3.2m) on the revolving credit facility, in addition to a remaining
balance of £16.3m (2022: £20.0m) on the term loan, and had £0.4m
(2022: £0.2m) of accrued interest net of prepaid loan arrangement
fees. Net debt (adjusting only for unrestricted cash balances
of £3.0m (2022: £7.2m)) was £15.2m (2022: £16.2m).
Cash flow and cash conversion
The Group's operations produce
positive cash flow, which is reflected in the net cash generated
from operating activities of £24.3m (2022:
£24.3m).
Adjusted cash
conversion* was:
|
2023
|
119%
|
2022
|
105%
|
Other than the £2.8m refurbishment
of the Group's head office in Derby in 2022, the Group's operations
are typically capital-light, with the most significant ongoing
capital investment being in computer equipment. A further £0.4m was
spent on the final elements of the head office refurbishment
project in early 2023, and only £0.5m of general capital
expenditure on office and computer equipment was required during
the year (2022: £0.4m). Group policy is not to provide
company cars and no other significant capital expenditure is
foreseen.
The Group's regulatory capital
requirement represents 2.5% of regulated revenue and totalled £5.5m
at 31 December 2023 (2022: £5.5m), with the Group reporting a
surplus of £28.0m (2022: £26.8m).
The following table demonstrates
how cash generated from operations was applied:
|
£m
|
Unrestricted bank balances at the
beginning of the year
|
7.2
|
Cash generated from operating
activities excluding movements in restricted balances and dividends
received from associates
|
28.6
|
Dividends received from
associates
|
0.4
|
Dividends paid
|
(16.0)
|
Dividends paid to minority
interest
|
(0.8)
|
Tax paid
|
(5.4)
|
Investment in associates
(including payment of contingent consideration)
|
(0.5)
|
Repayment of borrowings
|
(5.4)
|
Net interest paid and principal
element of lease payments
|
(1.9)
|
Acquisition of minority interest
in subsidiaries
|
(1.2)
|
Capital expenditure
|
(2.0)
|
Unrestricted bank balances at the
end of the year
|
3.0
|
|
|
* In
addition to statutory reporting, MAB reports alternative
performance measures ("APMs") which are not defined or specified
under the requirements of International Financial Reporting
Standards ("IFRS"). The Group uses these APMs to improve the
comparability of information between reporting periods, by
adjusting for certain items which impact upon IFRS measures, to aid
the user in understanding the activity taking place across the
Group's businesses. APMs are used by the Directors and management
for performance analysis, planning, reporting and incentive
purposes. A summary of APMs used and their closest equivalent
statutory measures is given in the Glossary of Alternative
Performance Measures.
(1) Excludes directly authorised advisers, MAB's later life
advisers and advisers from associates in the process of being
onboarded under MAB's AR arrangements. Includes Fluent's second
charge, later life and bridging advisers who have a higher revenue
per adviser than first charge advisers.
(2) Organic means the Group before the impact of the acquisitions
made in 2022 (Fluent, July 2022; Vita,
July 2022; and Auxilium, November 2022).
(3)
First charge mortgage completions, excluding
secured personal loans (second charge mortgages), later life
lending mortgages and bridging finance.
Principal Risks and
uncertainties
The Board is ultimately responsible
for risk management. It regularly considers the most significant
and emerging threats to the Group's strategy, as well as
establishing and maintaining the Group's systems of internal
control and risk management and reviewing the effectiveness of
those systems. The Board and senior management are actively
involved in a regular risk assessment process as part of the risk
management framework, supported by TriLine Governance and Risk and
Compliance software (TGRC), to enable consistency and ownership by
risk owners across MAB. The Group's risk assessment process
considers the impact and likelihood of risk events that could
materialise and affect the delivery of the Group's strategic goals.
If and when necessary, risk owners regularly review and update the
controls in place to mitigate the impact of the risks, with the
output of these reviews being reported to the Risk & Compliance
Committee (RCC) and Group Risk Committee (GRC). This is to ensure
that appropriate oversight is provided and that actions are in
place to mitigate any areas of concern. Throughout the Group, all
employees have a responsibility for managing risk and adhering to
the control framework.
There are a number of potential
risks that could hinder the implementation of the Group's strategy
and have a material impact on its long-term performance. These
arise from internal or external events, acts or omissions that
could pose a threat to the Group. The principal risks identified as
having a potential material impact on the Group are detailed below,
together with the primary means of mitigation. These risks have
been assigned a rating based on: (a) likelihood of the risk materialising
to a point where it will impact MAB's strategic objectives; and (b)
perceived impact to MAB
that the crystalised risk may cause. In addition, we show whether
the risk has remained the same, reduced, or increased versus the
prior year. The risk factors mentioned do not purport to be
exhaustive as there may be additional risks that materialise over
time that the Group has not yet identified or deemed to have a
potentially material adverse effect on the business.
Risk Title
|
Risk Description
|
Mitigating Factors / Commentary
|
Likelihood
|
Impact
|
Change in Risk
|
Strategic & Market
Risks
|
Geo-political issues resulting in increasing global
conflict.
|
In 2022, the major concerns
related to the Russia-Ukraine conflict and the deteriorating
relationship between the USA and China.
However, in the last 12 months
there has been an increase in the number of conflicts arising
across the globe. Active conflicts are at their highest levels in
decades.
Currently, there are three main
conflicts where escalation is considered possible: Ukraine; the
Middle East; and Taiwan.
The recent escalation with the US
and UK targeting Houthi rebels in Yemen is one example of a
materialisation of this and the risk of the conflict expanding
outside of Israel across the wider region of the Middle East
appears to be increasing.
Previous conflicts have had
a knock-on negative domestic impact in the UK, in
particular due to rising energy prices, cost-of-living increases,
and political uncertainty. Specific risk can be felt from the
resulting upward pressure placed upon mortgage rates due to higher
inflation.
Consumer confidence levels, and
consequently the housing and mortgages markets, have been disrupted
and this is likely to continue or increase, should conflicts
escalate or persist.
|
It is anticipated that the
conflict in Ukraine and the Middle East will continue with the
outcome remaining uncertain. Should these conflicts escalate
further it is expected to further reduce household expenditure and
consumer confidence.
The UK
funding markets however continue to be notably liquid, with Lenders
having access to significant resources. The wider capital markets
remain open and active too.
The Bank Base Rate increases
appear to have slowed while the market recovers, but the impact
these conflicts could have on inflation remains unclear.
MAB has no presence in the
impacted regions, so the conflict does not present a direct
physical risk to the continuity of services. However, it has
outsourced some small technology-related activities within Poland
but continues to monitor the situation with a view to implementing
mitigation measures should this neighbouring country become more
directly affected by the conflict.
The impact of the UK's involvement
in the Israeli and Palestinian conflict is uncertain. However, it
is possible that this could result in increasing divides across the
population and disruption to supply chains across the
world.
|
Medium
|
High
|
Increased
|
Macroeconomic
|
MAB's performance is subject to
macroeconomic conditions surrounding the UK housing market, which
impact on property transaction levels. The risk of regular and
meaningful increases in interest rates is likely to have a
detrimental impact on the housing market and customers' financial
situations.
|
MAB regularly stress tests its
forecast and considers this against housing market changes and
movements in Bank Base Rate. It is also notable that MAB has a
highly cash generative business model.
Throughout 2023 the impact of the
Autumn 2022 mini budget was felt. Rising costs of living and
inflation, resulting in sequential rises in the Bank Base Rates to
levels not seen for several years.
Lenders have much greater levels
of liquidity to enable borrowing, albeit at rates that borrowers
may not have been used to in recent years. It is anticipated that
the costs of borrowing will reduce as market competition
intensifies, with lenders aiming to maintain their market shares in
2024.
The mortgage market has seen
delays in transactions, and in many instances, borrowers seeking to
remortgage before their rates increased further.
MAB is well positioned to help its
customers and maximise new opportunities in such an
environment.
|
Low
|
High
|
No change
|
Availability of Mortgage Lending
|
MAB's offering would be at risk in
the event of a significant reduction in the availability of
mortgage lending.
|
The macroeconomic volatility of
Autumn 2022 steadied during 2023, with inflation continuing its
downward trend and the Bank Base Rate consequently stabilising.
There is now and even a chance of a rate reduction at some point in
2024. Confidence has therefore returned to lenders and customers
alike.
Affordability has eased which is
providing many customers with good purchase and remortgage
opportunities. Lenders have responded with greater competition
through pricing and less stringent underwriting
criteria.
With UK banks remaining very well
capitalised and funded, and greater interest and activity in the
securitisation market, the future for lenders is
positive.
For 2024, market expectations are
that c1.5m existing mortgage borrowers will be coming off existing
fixed rate mortgage deals. With mortgage rates at least 1% lower
than at this time last year, customer choice is significantly
better.
When taking on new mortgage
borrowers, lenders must assess affordability. Whilst many borrowers
are still faced with increasing mortgage rates, more are able to
meet these tests. The result is that fewer borrowers will therefore
rely on Product Transfers this year compared to 2023, which
presents an improved outcome for MAB.
MAB expects mortgage availability
to continue to further stabilise, and as a result ARs and Advisers
will be able to provide a highly competitive range of products for
customers, enabling them to re-finance and move home more
freely.
|
Low
|
Medium
|
Decreased
|
Climate Change impact and attitudes of consumers, investors,
and other stakeholders
|
The impact of climate change is at
the forefront of the minds of many in terms of the role businesses
have in meeting the challenges set by global leaders to drive
change and transition to lower carbon economies. Businesses that do
not embark on a journey to reduce their emissions are likely to be
prejudiced or penalised.
|
Whilst MAB's day to day operations
are non-energy intensive, it has assessed the direct environmental
impact of its business and continues to monitor the risks
identified.
MAB is further committed to
reducing its environmental impact where feasible. A new post
of Head of ESG was created in 2023 and an appointment to the role
was made.
|
Low
|
Low
|
No Change
|
Given the rising frequency in
climate change related events, particularly floods, it is paramount
for businesses to conduct a thorough assessment of potential
climate events in respect of potential damages to its own premises
and that of critical suppliers.
|
Whilst none of MAB's facilities
are located in areas at risk from climate related events, the
business has re-evaluated its business continuity and disaster
recovery plans to ensure that even if MABs facilities were to be
impacted, a seamless continuity of its business operations is
ensured.
Given MAB's critical IT
infrastructure is now also 100% Cloud hosted, any potential
business disruption resulting from damages to facilities of its IT
supply chain has been minimised.
|
Low
|
Low
|
New Risk
|
Investors and consumers are
increasingly looking towards sustainability related credentials of
the companies they interact with. Businesses failing to address
rising expectations in this respect are likely to be materially
prejudiced.
|
MAB recognises that it has an
important part to play in attending to the issues of climate change
through its role as a leading financial services intermediary. MAB
continues to invest in its ESG strategy and is currently developing
a new 'Green Mortgage' service via its preferred lenders who
similarly recognise the shift in consumer and investor
perspectives, and the corresponding potential for good outcomes for
customers in this area.
MAB has consolidated its efforts
in respect to ESG (including community support, employee relations
and governance) under the remit of the Sustainability Committee,
which ensures that progress in this area is appropriately monitored
by the Board of Directors.
|
Low
|
High
|
New Risk
|
Legal & Regulatory
Risks
|
Regulatory compliance
|
Failure to comply with current
regulatory requirements, or appropriately anticipate, react to, and
embed new legislation, regulation and applicable standards, could
result in reputational and financial damage, as well as sanctioning
by the relevant regulators such as the FCA (withdrawal of
authorisations) and the ICO (imposition of censure and/or financial
penalties).
|
MAB maintains open and effective
relationships with regulators and relevant industry associations,
in addition to having relevant and appropriate governance
structures and controls in place across the business. This ensures
MAB complies with current regulatory and legislative requirements
and continually monitors emerging changes. This includes the
evolving standards relating to the issues of climate change and
broader Environmental, Social and Governance ('ESG') compliance. It
is anticipated post-Consumer Duty implementation there will be
increased engagement by the FCA across varying Firms and
Sectors.
MAB operates an enhanced
risk-based approach to supervision and governance. It continues to
undertake a programme of investment in the further development of
its 'Risk Profiler System', together with the deployment and
integration of external systems, to ensure MAB can evidence that
Advisers are delivering best advice and outcomes for
customers.
|
Low
|
High
|
No change
|
Appointed Representative (AR) model
|
MAB has full regulatory
responsibility for the actions of its ARs and Advisers.
|
As Principal, MAB assumes overall
regulatory responsibility for its ARs. This is reflected in the
policies and procedures comprised in its governance and supervision
framework.
The Appointed Representative
Regime requires the relationship between 'Principals' and 'ARs' to
continue be the subject of detailed enquiry and actively monitored.
As a consequence, MAB has a control environment and oversight
approach to meet the regulatory standards and expectations. MAB
also continues to proactively engage with the regulator and
industry associations to discuss the dynamics of operational
processes and procedures, to ensure best practice is
maintained.
|
Low
|
Medium
|
Decreased
|
Litigation and complaints
|
MAB could be subject to litigation
or complaints not covered by insurance.
|
MAB has comprehensive advice
guidance and compliance processes in place for Advisers. These
mandate high standards of advice and thorough maintenance of
record-keeping at all times.
Accordingly, upheld complaint
levels remain very low compared to transactional volumes.
Furthermore, MAB has not been subject to any actual or threatened
material litigation.
Appropriate Professional Indemnity
Insurance is procured and reviewed regularly.
|
Low
|
High
|
No change
|
Fraud
|
There is a risk that MAB is
potentially exposed and exploited by fraudulent activity by any of
its Customers, AR firms, Advisers, Employees or unknown third
parties.
|
MAB has robust controls in place
to monitor and identify potentially fraudulent activity by AR
firms, advisers and customers, with the resource available to
conduct detailed investigations should the need arise. MAB
continues to assess the effectiveness of these controls and
identify opportunities to improve, with oversight by the
RCC.
MAB utilises an Electronic
Identity Verification solution to mitigate risks during advisers'
engagement with customers, particularly where there is no
face-to-face interaction.
In addition, regular guidance and
support is given to ARs and advisers to ensure awareness of
potential risks and trends, with interactive training on best
practices. Robust controls are also in place across MAB systems to
limit the opportunities for employees to commit fraud, particularly
where individuals have access to financial resources.
|
Medium
|
High
|
No Change
|
Operational
Risks
|
Infrastructure and IT systems
|
MAB's performance would be
adversely impacted if the availability and security of its
proprietary system, and other IT infrastructure, was
compromised.
|
There has been significant and
continued investment into MAB's IT infrastructure. There are two
primary line-of-business applications, both of which are located in
the Cloud following the transition completed in 2023.
|
Low
|
High
|
Decreased
|
Cyber and Information Security
|
The negative impact of MAB
suffering a deliberate cyber-attack on its systems could be
significant.
|
The landscape of cyber threats MAB
faces remains diverse: from state-sponsored cyber-attacks on UK
businesses and infrastructure, to smaller groups or individual
parties attempting to disrupt services and gain financially, and to
the growth in Artificial Intelligence (AI) seen in 2023.
Through investment in dedicated
resource in cyber security, MAB is well placed to prevent ingress,
damage, or theft by unauthorised third parties. In the unlikely
event of a system being compromised, it has the ability to gain
early warning and mitigate the effects of such incidents, through
active monitoring of systems and alerts on a continuous basis
24/7.
To combat the growing risks AI
represents, governments are beginning to roll out new and evolving
regulations to target both hosts and creators of online
disinformation and illegal content. Regulation of generative AI
will likely complement these efforts.
MAB's 'Information Security
Strategic Vision' has been complemented by a 3-year 'Cyber Security
Strategy', establishing a formal framework for cyber security and
defining a timetable for ongoing improvements to address known
threats, as well as adopting a flexible approach to counter any new
ones (including AI), through a combination of prevention, detection
and responsive defensive measures.
The Cyber Security Strategy will
also facilitate MAB in attaining industry-recognised accreditation,
demonstrating that all reasonable measures are being taken to
prevent cyber incidents, and to protect data.
|
Medium
|
High
|
No Change
|
Technological advancements
|
MAB may fall behind its
competitors if it does not keep abreast of expectations in
relation to the use of technology, or implement solutions
accordingly, and otherwise drive change at the pace demanded by the
market it operates in, and its existing and prospective
customers.
|
Fundamentally, via its ARs and
Advisers, MAB provides a comprehensive and thorough advice journey
to its customers. The greatest level of trust and confidence during
this stems from the in-person interactions between adviser and
customer. For this reason, alternative new
business models that aim to make mortgage advice to customers more
streamlined through the use of new technology, have yet to gain any
traction in the UK.
However, MAB is aware that newer
technologies, such as AI, may significantly impact the market and
is certainly not complacent. MAB is focussed on ensuring that the
preliminary interactions, advice journeys, and continued
relationships with customers are supported through the use of
various new technology solutions that are being implemented (such
as The Home Buying App and My MAB App), with the associated
efficiencies and ease of use that these allow. At the same time,
MAB appreciates that demographic groups have subtly different
appetites, expectations and skillsets when choosing whether or not
to utilise such tools.
MAB, is investing heavily in new
technologies and continues to monitor such issues closely and is
well positioned to innovate or partner with other parties as
further technological developments occur.
|
Low
|
Low
|
Decreased
|
AR Size and Concentration
|
MAB's ARs are spread throughout
the UK, a small number of whom have significant numbers of Advisers
(over 100 per firm). There are possible risks should such larger
ARs fail or where there is a heightened concentration of ARs in
certain locations.
|
MAB maintains strong relationships
with its ARs to ensure it provides appropriate support for
continued growth, whilst being aware of key risks posed within its
AR Model.
MAB conducts regular monitoring of
the ARs, including heightened and close financial scrutiny of those
in which it is directly invested.
To the extent that certain
regions, such as Scotland, have historically had a larger
concentration of Advisers than other parts of the UK, this has been
rebalanced following the addition of advisers via the Fluent
acquisition in 2022.
|
Medium
|
Low
|
No Change
|
Key Employees
|
The impact of MAB losing Key
Employees and/or otherwise experiencing a substantial number of
departures of employees would be significant.
|
MAB continues to invest in its
People & Culture Team and its strategy for pursuit of
excellence in this area. This is being effected through increasing
employee engagement, promoting MAB's Diversity, Equity and
Inclusion related policies, and enhancing the implementation of its
ESG standards by appointing a dedicated Head of ESG.
Remuneration continues to be
reviewed annually, and takes account of the National Minimum Wage
and the on-going cost-of-living crisis.
MAB continues to successfully
retain its senior employees. The recruitment of further leaders
continues, and development of future leaders enhances the breadth
of management experience and span of control.
Succession planning is assessed
annually by MAB's Nominations Committee, where the retention and
succession of key personnel is discussed and agreed in
detail.
MAB has succession plans in place
for Board members and its Senior Management Team, aiming to improve
the roster of internal candidates for key roles. A new role of
Chief People Officer was created in 2023 and an appointment made at
the beginning of 2024, to oversee and further develop succession
planning and talent management throughout the
business.
|
Medium
|
Low
|
No Change
|
Supply Chain dependencies
|
Disruption to MAB's supply chain
would likely cause operational, financial and reputational
harm.
|
MAB continues to be reliant on
suppliers to ensure the delivery of its services. This is a common
trend across all financial services organisation. The increased use
of Cloud-based systems and system integrations is notable, bringing
associated risks should the relevant suppliers fail.
MAB continues to enhance its
procurement and supplier management framework. The new Contract and
Procurement Manager was appointed in Autumn 2023 to oversee and
manage the Procurement process within MAB. The output is an
enhanced onboarding and due diligence process and further improved
oversight of MAB's contract repository and supplier
records.
To further strengthen its control
framework around suppliers, MAB enhanced its governance structure
throughout 2023 with the implementation of the Resilience and
Recovery Committee to oversee the risk supply chains present to
operations.
|
Medium
|
High
|
No Change
|
Financial
Risks
|
Investment & Acquisitions
|
Poor execution of investment and
acquisition strategy. This could apply to:
a. New investments or
acquisitions b. Poor trading outcomes of existing investments or
acquisitions.
Increased operational risks could
derive from having a broader commercial offering as a result of
such corporate activity.
|
MAB has a deliberate and focussed
strategy to deliver year on year growth in market share and
positive returns to investors. In part, this is achieved through
new acquisitions and investments to support its
objectives.
All new investments or
acquisitions are subject to an appropriate level of operational,
financial, and legal due diligence, engaging external specialists
as required.
Investment and acquisition risks
are managed through a set of operating performance metrics and
restrictions which are set out in a suite of legal documents
drafted by experienced specialists and approved by the
Board.
MAB has a broad portfolio of
investments, which as with all businesses are to some degree
impacted by market conditions.
There are innate risks associated
with managing a more diverse and larger group of entities and
ensuring strong performance. To mitigate these, MAB conducts
regular performance reviews and financial monitoring, with
assistance and expertise offered in the development of growth
plans.
MAB proactively uses its contacts,
technology, support infrastructure and financial expertise to help
maximise the performance of its investments. It also continues to
embed its Risk Oversight framework to monitor and mitigate the
operational risks outlined above in the wider group
context.
|
Medium
|
Medium
|
No Change
|
Potential loss of a major partnership or contract (lead
sources)
|
MAB has an increasing number
of material commercial partnerships with customer lead
sources.
The loss of one of these contracts,
or a reduction in lead volumes could impact revenues
and consequently reduce profitability and strategic
performance.
|
The risk of over-reliance on
certain partners across the businesses remains, with the impact of
the loss of a major lead source still being significant.
MAB has an experienced
relationship management team in place, with responsibility for key
account management and liaison defined at senior management level
and supported by members of MAB's Executive Committee. Regular
reviews are undertaken with partners to ensure continued focus on
performance against service levels and compliance with contractual
requirements.
The broadening of MAB Group should
offer a more attractive proposition to such partners. This also
gives MAB the ability to diversify its lead sources, reducing the
scope for 'over-reliance' on a particular lead source type.
Furthermore, the associated margin impact in relation to a single
lead source partner on one part of MAB Group is not anticipated as
being critical to MAB's overall commercial performance.
|
Medium
|
Low
|
No Change
|
Reputational
Risks
|
Reputational risk
|
The quality of MAB's proposition,
its continued growth, and the credibility of its ARs and Advisers
in meeting the obligations to customers are each material factors
that directly affect its reputation. Any failures in this regard
would present an immediate risk.
Indirectly, were another large
mortgage intermediary to fail to meet its obligations to consumers
there is a risk that this could cause wider reputational harm to
the market, and equivalent intermediaries (such as MAB).
|
MAB prides itself on maintaining
the reputation of its Advisers as offering the best support to and
ensuring good outcomes for their customers. Following the
implementation of the AR oversight and Consumer Duty, MAB has
further enhanced its control framework to ensure customers are
receiving the correct outcomes. MAB also continues to review
further opportunities across the Group.
MAB is especially mindful of how
it responds to customer complaints and interactions with the
Financial Ombudsman Service, always seeking to ensure an objective
assessment of matters is undertaken, preserving its integrity in
doing so.
Customer feedback on external
portals such as Feefo and Trustpilot is regularly monitored to
enable MAB to have broader visibility of the experience's customers
are having. Where appropriate customers are encouraged to further
interact with MAB if they are concerned or dissatisfied.
The membership of, and significant
participation in, the Association of Mortgage Intermediaries
('AMI') forum allows MAB to voice its concerns and drive positive
change across the market in the interests of all, in particular
consumers.
|
Low
|
Medium
|
No Change
|
ESG (Environmental, Social, Governance)
MAB remains committed to the
implementation of its integrated ESG strategy and ensuring that we
are a responsible business that grows sustainably and makes a
positive contribution to all stakeholders - our customers,
shareholders, employees, suppliers, and the local communities in
which we operate, whilst minimising our direct environmental
impact.
The Group's Mission and Vision
Statements reflect how we are integrating social and environmental
considerations in our decision making:
Our
Mission: We help people fulfil their aspirations, by making key
financial moments in life a simple, happy and reassuring experience
- from home ownership and beyond.
Our Vision:
We want to
become the leading financial partner through life's key
moments.
By being an amazing place to
work, providing an outstanding experience for our customers,
transforming the industry with the best mortgage journey, having a
positive social and environmental
impact.
The ESG section of this report
outlines the activities we have progressed throughout the year to
embed and further our integration of core sustainability themes
into our operations, and includes:
·
details of how the Group continues to build upon
the progress made in previous years in implementing and advancing
its ESG strategy;
·
our stakeholder engagement arrangements,
including the section 172 statement of the Companies Act
2006;
·
our environmental performance and strategy
report;
·
how the Group assesses and manages
climate-related risks and opportunities, in line with the
requirements of Climate-related Financial Disclosure Regulations
2022; and
·
our ESG strategy and progress.
Section 172(1) statement
The Directors of MAB consider that
in conducting the business of the Company over the course of the
year they have complied with Section 172(1) of the Companies Act
2006 (the "Act"), by fulfilling their duty to promote the success
of the Company and act in the way they consider, in good faith,
would be the most likely to promote the success of the Company for
the benefit of its members as a whole, having regard to the matters
set out in s172(1)(a-f) of the Act.
The continued success of our
business is dependent on the support of all of our stakeholders.
Building positive relationships with stakeholders that share our
values is essential to us and working together towards shared goals
assists us in delivering long-term sustainable success.
To fulfil their duties, the senior
management team and the Directors take care to have regard to the
likely consequences on all stakeholders of the decisions and
actions they take, with a long-term view in mind and with the
highest standards of conduct. Where possible, decisions are
carefully discussed with the groups concerned and are therefore
fully understood and supported when taken.
Reports are regularly made to the
Board by the senior management team about the strategy, performance
and key decisions taken, which provides assurance that proper
consideration is given to stakeholder interests in decision-making,
and the Board uses this information to assess the impact of
decisions on each stakeholder group as part of its own
decision-making process.
The Group's governance structure
allows the Board and the senior management team to have due regard
to the impact of decisions on the following matters specified in
Section 172(1) of the Act, as set out in the table
below.
Section 172 factor
|
Approach taken
|
Consequences of any decision in
the long-term
|
Our core business model and
strategy are designed to secure sustainable long-term growth whilst
continuing to deliver strong results in the meantime, and as such
the long-term is firmly within the sights of the Board when making
all material decisions.
The business model and strategy of
the Company is set out in the Annual Report of the Company. Any
amendment to that strategy is subject to Board approval.
At least annually, the Board
considers a budget for the delivery of its strategic objectives
based on a three-year forecast model. The senior management team
reports financial and non-financial key performance indicators to
the Board each month, including but not limited to the measures set
out in the 'Key performance indicators' section of the Strategic
report, which are used to assess the outcome of decisions
made.
The Board's commitment to keeping
in mind the long-term consequences of its decisions underlies its
focus on risk, including risks to the long-term success of the
business. Our low financial leverage following our recent
acquisitions ensures that the payment of dividends to shareholders
and remuneration to employees, are balanced. This is especially
important given the ongoing cost-of-living crisis and the
heightened geopolitical uncertainty.
|
Interests of employees
|
Our employees are fundamental to
the delivery of our strategy. We are committed to developing our
staff and maintaining the capacity to deliver sustainable growth.
How the Directors have had regard to the interests of the Group's
employees is set out in the Environmental, Social and Governance
section of the Strategic Report.
|
Fostering business relationships
with suppliers, customers and others
|
Engaging with our stakeholders is
very much a part of our ethos as it strengthens our relationships
and helps us make better business decisions.
How the business has engaged with
suppliers, clients and other counterparties is set out in the
Environmental, Social and Governance section of the Strategic
Report . Suppliers and other counterparties are typically our
appointed representative firms, mortgage and protection product
providers, affinity partners and other professional firms with
which the senior management team often has a longstanding
relationship.
Where material counterparties are
new to the business, checks are conducted prior to transacting any
business to ensure that no reputational or legal issues would arise
from engaging with that counterparty. The Company pays suppliers in
accordance with pre-agreed terms.
|
Impact of operations on the
community and the environment
|
We are proud to support our local
community, building on the success of the Mortgage Advice Bureau
Foundation. More details on our engagement with local communities
and charitable activities during the year can be found in the
Environmental, Social and Governance section of the Strategic
Report.
The Group's impact on the
environment is limited due to the nature of the Group's business
operations, as set out in the Environmental performance and
strategy section of the Strategic report. However, the Board is
committed to limiting the impact of the business on the environment
where possible.
|
Maintaining high standards of
business conduct
|
The Board is committed to
achieving and maintaining high standards of business conduct,
corporate governance, integrity and business ethics.
A key to maintaining our
reputation for high standards is to treat our customers, partners
and employees fairly at all times, and our approach to conducting
our business is focused on this outcome.
The Group's Risk and Compliance
function acts as the second line of defence within MAB to provide
appropriate support, oversight and challenge to the activity
undertaken by MAB and its appointed representative firms to avoid
customer detriment and ensure good outcomes are achieved. Regular
reporting is reviewed by the Risk and Compliance Committee (RCC)
and the Board Group Risk Committee (GRC) to scrutinise activity and
provide assurance to the Board that the Company's strategic and
growth objectives can be met within our risk and compliance
framework.
The Group further strengthened its
internal governance framework in 2023 by implementing
sub-Committees to RCC. These include the Product & Pricing
Committee and the Resilience and Recovery Committee.
As part of the ongoing
enhancements of the governance, risk and compliance framework MAB
is moving away from a solely outsourced internal audit function.
Following the appointment of an Internal Audit Manager in January
2024, MAB will be moving to a co-source model. The Internal Audit
Manager will operate as MAB's independent assurance function within
the third line of defence, reporting directly into the Chair of the
Audit Committee and will challenge the design and effectiveness of
our controls whilst using our co-source internal audit supplier
when necessary. More details on risk and our internal controls can
be found in the Governance section of the Annual Report.
MAB is focussed on maintaining a
positive relationship with our regulators. MAB is a proactive
member of the Association of Mortgage Intermediaries (AMI) and
supports the trade associations' interactions with the government,
regulators and policymakers to ensure the mortgage industry meets
the needs of our customers and appointed representative
firms.
The Group continuously monitors
upcoming changes to regulation and is well positioned through our
membership with AMI and our relationship with the regulator to
understand the implications of and respond to, any changes. More
details on the Company's approach to Consumer Duty can be found in
the Strategic Report.
|
Acting fairly between
members
|
The Board is committed to openly
engaging with our shareholders. We recognise the importance of a
continuing effective dialogue, whether with major institutional
investors, private or employee shareholders. Further details on how
we engage with our shareholders can be found in the Governance
section of the Annual Report.
The Board oversees an investor
relations programme which involves the Directors routinely meeting
with the Company's institutional shareholders. The programme is
managed by the Company's brokers and the Board receives prompt
feedback on the outcomes of meetings.
The Board aims to be open with
shareholders and available to them, subject to compliance with
relevant securities laws. The Independent Non-Executive Chair of
the Company and other Non-Executive Directors make themselves
available for meetings as appropriate and all attend the Company's
Annual General Meeting ("AGM").
The investor relations programme
is designed to promote formal engagement with investors and is
typically conducted after each half-yearly results announcement.
The Group also has open lines of communication with existing
investors, who may request meetings, and with potential new
investors on an ad hoc basis throughout the year, including where
prompted by Company announcements.
Shareholder presentations are made
available on the Company's website. The Company has a single class
of shares in issue with all members of the Company having equal
rights.
|
Methods used by the Board
The main methods used by the
Directors to perform their duties include:
• Board meetings or strategy days
to review all aspects of the Group's business model, performance
and strategy and assess the long-term sustainable success of the
Group, as well as its impact on key stakeholders. Regular senior
management team strategy sessions also took place during the
year;
• The Board meets regularly
throughout the year as well as on an ad hoc basis, as required by
time critical business needs, such as acquisitions or other
investments;
• The Board is responsible for the
Company's ESG activities set out in the Strategic Report. Ben
Thompson is the Group's designated executive with responsibility
for ESG;
• Specialist advice from external
consultancy firms is sought where appropriate, for instance with
regards to ESG or executive remuneration;
• The Board's risk management
procedures set out in the Corporate governance report identify the
potential consequences of decisions in the short, medium and long
term so that mitigation plans can be put in place to prevent,
reduce or eliminate risks to the Company and wider
stakeholders;
• The Board sets the Company's
purpose, values and strategy, as detailed in the Strategic Report,
and the senior management team ensures they align with its
culture;
• The Board carries out direct
shareholder engagement via the AGM and the Executive Directors
attend shareholder meetings on a regular and an ad hoc
basis;
• External assurance is received
through internal and external audits and reports from brokers and
advisers; and
• Specific training for existing
Directors and induction for new Directors as set out in the
Corporate governance report.
Stakeholders
Engaging with our stakeholders is
very much a part of our ethos as it strengthens our relationships
and helps us to make better business decisions to enable us to
deliver on our commitments. The Board is regularly updated on wider
stakeholder engagement feedback to stay abreast of customers,
suppliers and shareholders' insights into the issues that matter
most to them and our business. The below table outlines how we
consider these stakeholders and how we engage with them:
Stakeholder
|
Why we engage
|
How we engage and outcomes
|
Consumers
|
We aim to be at the forefront of
providing the best consumer outcomes.
|
· The
quality of consumer outcomes has always been central to MAB's
culture, and the implementation of the Consumer Duty has seen us
further strengthen our focus and processes in this area.
· Our
enhanced focus on consumer outcomes encompasses the four pillars of
Consumer Duty: (a) products and services; (b) price and value; (c)
consumer understanding; and (d) consumer support; with an
additional important pillar we decided to add relating to customer
vulnerability.
· Our
digital solutions continue to improve, thus enhancing
consumers' choice of how they want to transact, whilst giving our
ARs the tools to improve their productivity.
· Customer feedback is a core component in our strategy to
ensure consumers receive a first-class experience. We continue to
monitor the feedback on the service our advisers provide via the
online review company Feefo, which has remained at a strong 4.9
(out of 5) throughout the year.
· Our
website has seen a complete overhaul in 2023 and we have
significantly enhanced its content and tools offering with a view
to providing consumers with a host of useful information relating
to mortgages, sustainable living, first time buying and various
other related topics.
We engage with customers via
various surveys to better understand any concerns they may have and
help shape our strategies, for instance in relation to the changing
buy-to-let landscape and legislation around minimum EPC
ratings.
|
Appointed Representatives
|
Maintaining an active dialogue and
supporting our AR partners is key to our business.
|
· We
use a collaborative approach in operational matters such as setting
goals and objectives and hold regular review meetings with each AR
firm. We also work with specialist ARs and providers to explore new
ideas and growing markets.
· We
have continued to broaden our Learning & Development offering
to support our advisers' professional development. This included
the organisation of specific roadshow events as well as regular
adviser "clinics" at which knowhow and supervision matters are
discussed; including the launch of our new interactive
Masterclasses.
· To
support the implementation of the FCA's Consumer Duty, we carried
out a review of our processes and policies, to ensure they were
aligned with the new principle. Through our ongoing programme of
training and support, we provide ongoing guidance to AR firms to
help them meet their obligations and to ensure good customer
outcomes.
· We
strengthened our Academy adviser induction processes to offer a
flexible environment of self-learning with daily trainer
interaction discussion-led webinars, activities and case studies.
our onboarding journeys for advisers have been accredited by the
Princess Royal Training Awards for the content, feedback and
results they have garnered.
· We
have replaced our communication platform "MABChat" with a more
intuitive and flexible system ("Tribe") which allows us to increase
our reach and better tailor content to multiple audiences across
all marketing channels.
· We
continued to improve the technology platform at the core of our
business, based on the feedback of our ARs and advisers and trends
in the market.
· Like
in the previous year, we issued an advisor-facing green survey to
identify any material changes in consumer attitudes toward green
mortgages and the energy efficiency of properties, whilst also
establishing potential knowledge gaps amongst our advisor
community.
|
Suppliers
|
Strong and sustainable
relationships with our suppliers and providers are fundamental to
our long-term success.
Similarly, disciplined procurement
practices encourage better relationships and greater
efficiencies.
|
· We
hold regular roundtable events with our product providers and lead
partners where topics such as business process improvements are
discussed as a group.
· Building on the implementation of standardised procurement
processes in 2022, we expanded our team in 2023 in order to bring
sourcing under central control, as well as strengthen our supply
chain governance.
In 2023 we also enhanced our
supplier code of conduct and procurement policies further with
added emphasis on environmental matters when procuring goods and
services.
|
Shareholders
|
As owners of the Group, we rely on
our shareholders' support and their opinions are important to
us.
|
· We
have an open dialogue with our shareholders through one-to-one
meetings, group meetings and the AGM. Discussions with shareholders
cover a wide range of topics including financial performance,
strategy, outlook, governance, environmental, social and ethical
practices.
· Shareholder feedback along with details of movements in our
shareholder base are regularly reported to and discussed by the
Board and their views are considered as part of
decision-making.
· We
provide detailed financial reports and presentations on the
business at the half year and full year.
|
Employees
|
Our employees are our most
valuable asset. Their immense knowledge, skills and experience are
key to our success and are vital to ensuring we maintain the high
standards of customer service.
|
· We
focus on creating a working environment in which people thrive and
where our core values are communicated effectively and upheld. We
believe that a positively engaged workforce is one that is more
productive, happier and fulfilled, which in turns leads to improved
performance, greater customer satisfaction and reduced employee
attrition.
· In
2023 we strengthened our People Team through the onboarding of a
dedicated Head of Employee Engagement and Development, as well as
an Internal Communications Manager.
· We
launched a new internal communications platform, Chatter, which
gives us added control over published content and allows us to
better engage with our colleagues via multiple channels. "Chatter"
also provides employees with Health and Wellbeing related content
as well as discounts on numerous products.
· We
created and launched our new Performance Excellence Framework, a
standardised methodology to evaluate the performance of our
colleagues taking into account the MABology DNA
behaviours.
· 2023
also saw us increase focus on Diversity, Equity and Inclusion, with
a number of employees coming together to form our first ever DEI
affinity group 'U'Nity'.
· We
continued to uphold our regular internal communication events
including "MABFest" and "Friday
Joy".
· We
started to introduce ESG-specific responsibilities and objectives
as part of job descriptions and performance reviews, starting with
the senior management team.
· As
in previous years, we surveyed our colleagues twice to capture any
changes in relation to employee satisfaction, sentiment and
engagement.
|
Communities
|
An important component of being a
good corporate citizen is to recognise the role we can play in
supporting the communities around us and implementing initiatives
to do so.
|
· We
engage with the communities in which we operate to build trust and
understand the local issues that are important to them. Key areas
of focus include:
- how we can support local causes and issues, create
opportunities to recruit and develop local people; and
- partnering with local charities and organisations at an
individual office level to raise awareness and funds.
· We
are proud of the positive impact of our charity, The Mortgage
Advice Bureau Foundation ("Foundation"). The Foundation supports
charitable projects that create awareness amongst MAB stakeholders
of the growing needs of their local communities.
· The
impact of decisions on the environment both locally and nationally
is considered, and comprises a notable focus as part of our wider
ESG related activity.
· In
2023, 16% of MAB employees took advantage of our volunteering
policy and gave some of their time to volunteer.
|
The Government and regulators
|
The evolving regulatory landscape
has a direct and material impact on the day-to-day operation of our
business.
|
· We
engage with the Government and regulators through a range of
industry consultations, forums, meetings and conferences to
communicate our views to policy makers relevant to our
business.
· We
have dedicated specialist Legal, Compliance and Risk experts with
many decades of combined experience who are focussed on ensuring we
meet our regulatory obligations. Most recent examples
include:
- enhancing the policies and process relating to Appointed
Representative oversight, as expected of us by the FCA;
and
- Reviewing and strengthening our policies and processes as
part of the implementation of the Consumer Duty.
|
Climate-related financial disclosure
The Group is now within scope of
the Companies (Strategic Report) (Climate-related Financial
Disclosure) Regulations 2022 ("CRFD"). Such disclosures on how
climate change will affect businesses are intended to assist
investors and wider stakeholders in understanding how
climate-related financial risks are managed.
The Board supports the initiatives
of the TCFD, and has prepared the Group's CRFD disclosures to a
level of detail that are reflective of the nature of its
business.
The Group's disclosures address
the following four pillars:
Governance
The Group views climate related
risks and opportunities as growing in importance. The Board is
ultimately responsible for the oversight and compliance with all
applicable laws, together with assessment of the impact of climate
change on risk to the organisation in line with its reporting
obligations.
During 2023 MAB's Sustainability
Committee was established to promote all related activities of the
Group and ensure appropriate governance. The Sustainability
Committee has taken a lead role in assessing the climate related
risks the Group faces, as well as implementing strategic
initiatives to mitigate such risks and meet the evolving
expectations of our customers and partners.
The Sustainability Committee
members includes the following members:
·
Head of ESG (Chair)
·
Deputy Chief Executive Officer
·
Chief Financial Officer
·
Chief Risk Officer
·
Head of Legal (Deputy Chair)
·
Company Secretary
·
Chief People Officer
·
Financial Accountant
The Sustainability Committee's
scope and responsibilities include:
-
Identifying and disseminating MAB's
Sustainability Goals across the Group
-
Developing and implementing the Project Plan(s)
for achieving these Goals and related activities ('ESG improvement
plan'), including capturing the actions for reporting on the
same
-
Documenting the corresponding decision making and
governance steps in pursuit of the Goals
-
Ensuring that risks (including climate-related)
and vulnerabilities in achieving the Goals are identified, managed
and mitigated across the Group
-
Ensuring the efficient removal of any
obstructions throughout the implementation of goals and
actions
-
Giving regard to the consequences of any decision
in the long term
-
Considering in full the need to maintain a
reputation for high standards of business conduct at all
times
In terms of CRFD, the Committee
reports into: (i) the Group's Audit Committee, and (ii) the Board,
whilst also ensuring that significant risks are appropriately
disseminated as part of the Group's Risk Management Framework
including the Risk and Compliance Committee (RCC) and the Group
Risk Committee (GRC). ESG more generally has now been integrated
into board discussions as a standing agenda item for its
meetings.
Sustainability-related risk management and
strategy
The Sustainability Committee is
kept abreast of all legal and regulatory developments in connection
with ESG and climate-related issues, including actions and
reporting obligations via our dedicated In-House legal function,
and with support of our external advisers and know-how tools. Other
key colleagues also garner intelligence in relation to industry
specific political and economic considerations through active
collaboration in relevant external forums, such as MCAG ('Mortgage
Climate Action Group'), an initiative by the Association of
Mortgage Intermediaries which aims to help and shape how
intermediaries can support the transition to a net zero
economy.
We have ensured that
climate-related risks have been identified, assessed and quantified
in consultation with colleagues from the Operational Risk function,
members of the Sustainability Committee and the Finance team
through continuous interaction as well as dedicated scenario
analysis workshops with all business functions. The tracking of
climate-related risks is fully integrated into the Group's risk
management function and processes, supported by the TriLine
Governance, Risk and Compliance software which is used across the
Group. This allow us to monitor the impact and likelihood of risk
events that could materialise and affect the delivery of the
Group's strategic goals, to ensure that
mitigation strategies for any risks deemed material are implemented
quickly and consistently.
The output of our
climate-related risk assessment incorporates the common risk
methodology of correlating both the likelihood and impact of a risk
materialising that applies to all aspects of the Group's risk
protocols.
For MAB, the key climate-related
risks and opportunities are predominantly driven by sector-related
considerations, such as climate-related impact on properties in the
UK, government guidelines and legislation regarding the energy
efficiency of housing and considerations relating to the value of
such assets. Furthermore, we recognise that our supply chain plays
an important role in ensuring the seamless operation of our
business, including, but not limited to, our technology
partners.
To the extent that certain climate
related physical risks could materialise at the Group's operational
locations, appropriate mitigation measures are in place. All
sites are regularly monitored to ensure they are optimally utilised
and increasingly efficient (to the extent possible) from an energy
consumption and waste perspective.
In terms of transitional risks,
the Group has dedicated teams focused on interacting with key
lenders and other stakeholders with a common interest in evolving
financial services to support consumers as they, and their homes,
face the challenges that climate events may cause.
The Board has not identified any
climate-related scenarios that are expected to materially impact
the financial position, or resilience, of the Group. Via the
Sustainability Committee, the Group will continue to monitor all
relevant risks and scenarios.
Metrics and targets
Given the nature of the business,
we consider that there are very limited metrics or targets that
reflect the climate-related risks that the Group may face, other
than physical risks in connection with its footprint from an
operating locations perspective. Those risks are appropriately
tracked, and the extent of the Group's emissions are set out in
this report.
It is, however, anticipated that
the Group may start to monitor the emissions and energy performance
of the properties of customers it has advised with a view to
understanding the extent of this collective impact more fully, and
informing the Group's strategy in supporting such customers in the
future.
Climate risk assessment - scenario analysis
During 2023 we carefully
scrutinised our practices across the Group, as well as reflected on
our interactions with customers, lenders, providers and other
parties we engage with, to assess the potential impacts of certain
climate-related scenarios occurring.
This Group-wide initiative was
undertaken in conjunction with our Risk team, the Sustainability
Committee, and key colleagues from our Finance, Operations, Sales,
and Technology teams.
Our analysis (as summarised in the
matrix below) has factored in those tangible 'physical' aspects as
well as strategic 'transition' elements - all of which may present
certain risks or opportunities.
Primarily, we have considered the
scenario of global temperatures rising by up to 2 degrees, as well
as the potential resulting events, and the Government strategies
and policies towards carbon neutrality that may derive from this,
e.g.:
- Changes to frequency and severity of extreme weather events,
including (but not limited to) droughts and storms;
- Certain geographic locations being compromised, e.g., via
sea-levels rising, coastal erosion, fluvial floods;
- Government, market, and technology shifts;
and
- Other changes to expectations of us as a business.
MAB Climate Risk Matrix
http://www.rns-pdf.londonstockexchange.com/rns/3457H_5-2024-3-19.pdf
Physical Risks
Physical climate risk describes
the potential for physical damage and financial losses because of
increased exposure to climate hazards.
Given the geographic locations of
the Group's operations, acute risks of climate change (flooding,
storms etc.) have to date had no impact on financial performance.
No chronic (longer term) risks are considered to be
relevant.
Given the locations of the offices
of our subsidiaries, there is limited risk that these will be
exposed to climate-related incidents, such as flooding or
subsidence issues. We did assess the impact of
possible damage to our physical operations (both owned and leased
premises) due to the climate, and whilst it could be costly to
repair any damage to our offices, appropriate insurance
policies are in place.
A business continuity plan is in
place, including a switch to remote working for office-based staff,
should our physical infrastructure be compromised. Having completed
the cloud migration of our most critical IT infrastructure
throughout 2023, we have effectively reduced the risk of an adverse
impact resulting from climate-related events to our day-to-day
operations further.
In terms of the harm that
customers and their properties may face, we do not believe that
this will have a direct material impact on the Group's financial
position in the short or medium term. However, we are, of course,
extremely sensitive to the difficulties such events could cause,
and are working on strategies to help mitigate the impact of the UK
housing stock on the environment.
Transition Risks
Transition risks result from the
relative uncertainty created by the global shift towards a more
sustainable, net-zero economy. Transition risks are very broad in
nature and can be difficult to quantify or model. Regulatory,
geopolitical, and even social pressures may create material impacts
on the operations of a business, its reputation, and the value of
its assets, amongst other things.
UK homes are responsible for a
notable proportion (up to 26%) of emissions. We therefore believe
it is imperative for organisations in our industry to actively
promote the decarbonisation of the UK housing stock to contribute
to achieving the government's 2050 net zero ambitions.
It is critical that our advisers
are fully aware and equipped to provide our customers with
financial advice that enables them to implement appropriate
solutions. We continue to develop our Learning & Development
resources with this in mind and work closely with a variety of
industry partners in raising awareness of the essential role the
housing sector can have in achieving net zero targets.
It is too early to have a view on
the impact on the Group of any possible material lenders' responses
to climate-related risks to their assets and operations, but it is
anticipated that this could have a marginal impact on the Group's
finances, for instance where there may be a failure to evolve an
adequate product and service offering for those assets that may be
most at risk.
We are fully aware of the need to
consider the goals that lenders and other providers are setting for
themselves and keep closely in touch with them in order to allow us
to respond to changing expectations. In 2023 we commissioned
further work with our ESG consultants to gain a more detailed
understanding of our carbon footprint to guide us in setting
credible carbon reduction targets.
With regards to transition risk,
we currently do not perceive there to be expectations to change our
current business model. Furthermore, we recognise that with rising
temperatures causing potential damage to insured customer assets,
we may be presented with additional commercial opportunities for
our insurance related businesses.
Summary
To date, no climate-related risks
have been identified as potentially having a material financial
impact on the Group in the short to medium-term (i.e., up to 5
years).
In our role as an intermediary, we
believe that it is premature to try and assess further impacts to
the Group in the longer term, as they will primarily be a
consequence of the decisions by lenders and other providers in the
context of evolving government policy, technological advancements,
and the wider socio-economic changes.
In the longer term, given our
close working relationships with lenders and providers, we believe
that the Group is well placed to align with such partners in
developing products and solutions that can support customers in
tackling any effect that climate change may have on their
homes.
Furthermore, we are committed to the decarbonisation of UK housing stock
and this may be another critical factor that will help us retain a
competitive advantage.
No significant climate-related
transactions have occurred during 2023. We
confirm that neither MAB nor any member of the Group, has been
subject to any corruption or ESG-related controversies, or
enforcement action/sanctioning (or equivalent scrutiny), in
connection with its operating practices.
Environmental performance and strategy
The Companies (Directors' Report)
and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018 implement the government's policy on Streamlined
Energy and Carbon Reporting, requiring disclosure of the
environmental performance of the Group's assets through calculating
the Group's greenhouse gas ("GHG") emissions and subsequently,
setting strategies to minimise these emissions. The following
information summarises the Group's environmental performance over
the year.
Methodology
GHG emissions are quantified
and reported according to the Greenhouse Gas Protocol. Consumption
data has been collated and converted into CO2
equivalent. To collect consumption data, the Group has reviewed
utility invoicing and its staff expense software to track business
mileage in employee vehicles. We have used the UK Government's 2023
GHG Conversion Factors for Company Reporting in order to calculate
emissions from corresponding activity data.
Our analysis includes the data
collected for MAB and other Group subsidiaries: First Mortgage,
Fluent and Vita. Auxilium only has two employees and is considered
to have minimal impact. As at 31 December 2023, MAB owned 80% of
First Mortgage, 84% of Fluent, and 75% of Vita, but we have
factored in 100% of the Scope 1, Scope 2, and Scope 3 emissions for
these subsidiaries.
We have calculated energy
intensity in tCO2e per employee per year using the
average number of employees during the year. We consider this to be
a good indicator of the scale of the business and our energy
intensity.
As part of the data collection, a
materiality assessment was applied to determine which indicators
were relevant to the Group. We have assessed each indicator in
terms of its impact on the Group and its perceived importance to
stakeholders.
This year, we have reported our
scope 2 electricity emissions both using a location-based approach,
i.e. based on grid average emissions factors, and a market-based
approach. Market-based emissions allow for a reduced emission
figure where, for example, a renewable energy tariff is used. At
MAB we took action to switch electricity
suppliers to be powered by 100% renewable electricity at our head
office as well as all the First Mortgage offices. We intend for
Fluent to follow suit as soon as its existing energy contract ends.
As part of the overall refurbishment of our Head Office in 2022, we
also moved from dual fuel to a new single fuel high-efficiency Variable Refrigerant system. This significant
investment ensures we can best leverage our switch to 100%
renewable electricity as well as provide a more consistent and
controlled temperature throughout the building. As such, we believe
that a market-based approach is a more relevant indicator of the
Group's carbon intensity.
Reporting boundaries and limitations
The GHG sources that constitute
our operational boundary for the reporting period are:
· Scope 1: Natural gas combustion within boilers. MAB does not
provide any company cars;
· Scope 2: Purchased electricity consumption for our own use;
and
· Scope 3: Fuel consumption from employee-owned cars for
business use.
Fuel connected with employee train
and plane travel for business use has been excluded as amounts are
likely to be immaterial and we consider it impractical to make
estimations. Water usage has also been excluded as amounts are also
likely to be immaterial. Fugitive gases from office air
conditioning are also considered immaterial. We have estimated
Scope 3 emissions based on the split of Diesel vs. Petrol cars in
the UK.
Performance
The table below shows our Scope 1,
2 and 3 emissions for 2023 and 2022 on both a market basis and
location basis.
http://www.rns-pdf.londonstockexchange.com/rns/3457H_6-2024-3-19.pdf
Overall, our Scope 1 and Scope 2
emissions in kWh reduced by 5%, which is due to efficiency measures
implemented at Head Office as part of the major refurbishment that
took place in Q4 2022, including upgrading to a new highly
efficient single high efficiency heating and ventilation system. In
equivalent tonnes of CO2, our location-based emissions
were flat year-on-year due to a 7% adverse movement in the
UK Government's 2023 GHG Conversion Factor for UK
electricity. Taking into account the supply of 100% renewable
electricity at Head Office and First Mortgage, our market-based
Scope 1 and Scope 2 emissions in tCO2e decreased by 9%,
and by 11% on a per employee basis. This follows a 17% reduction
year-on-year in 2022.
In terms of fuel consumption for
business use, our emissions increased by 18% compared to 2022, or
16% on a per employee basis. This is due to our employees
increasingly returning to more face-to-face meetings and
pre-coronavirus pandemic ways of working.
Sustainability is embedded into
our core values and we have taken a number of steps to reduce our
impact on the environment. These are detailed later in the
Environmental, Social and Governance section.
We continue to investigate new
strategies to make our business more sustainable and through
collaboration with all our stakeholders we expect to make further
positive steps in this regard in 2024.
ESG strategy and
progress
The Board recognises the need to
ensure that we are a responsible business that grows sustainably
and makes a positive contribution to all its stakeholders - our
customers, shareholders, employees, suppliers, and the local
communities in which we operate.
At MAB we firmly believe that
strengthening our positive impact on society will also help us
become a better company, with a more engaged workforce and
sustainable competitive advantage. ESG remains a priority for MAB
and in 2023 we continued to increase our investment in this area.
We appointed a new Head of ESG to drive the implementation of our
improvement plan across all business functions and continued to
work with our ESG consultants to ensure ESG is an integral part of
what we do and is embedded within our broader Group
strategy.
In 2022, we elected to base our
roadmap for ESG improvements on the B-Corp framework.
B Corp is a widely recognised framework to assess
a company's social and environmental performance. Whilst we do not
seek to achieve B Corp certification at present,
the B-Corp framework delivers best practices with
regards to demonstrating accountability for an organisation's
impact on the environment, the economy and people, and we
aim to leverage it to improve our
performance across five impact areas:
- Employees;
- Community engagement;
- Environment;
- Customers; and,
- Governance.
Our ESG roadmap set out 71
individual improvement actions, a number of which are described in
detail in the following pages under the headings (i)
Employee wellbeing, diversity, equity and
inclusion ("DEI"); (b) Community engagement and charitable
activities; and (iii) Minimising our impact on the
environment.
The table below sets out a summary
of some of the key areas we have
progressed throughout the year under ESG.
Employees
|
· Significantly strengthened our internal Learning and
Development offering
· Improved our employee engagement methods by hiring an
Internal Communications Manager and introducing a new engagement
platform
· Strengthened our internal policies including maternity leave,
flexible working, and in relation to menopause, neurodiversity and
bereavement
· Launched an Employee DEI group to help us devise our
long-term strategy in this area, MAB U'Nity
· Introduced PEx, a
new Performance Excellence and review process
|
Community
|
· Improved our volunteering policy
· Formalised our financial commitment to the MAB
Foundation
· Established a process that allows us to donate our
decommissioned IT equipment to charity
|
Environment
|
· Introduced new supplier policies and enhanced our supplier
code of conduct to ensure environmental stewardship throughout the
supply chain
· Further reduced our carbon intensity due to the installation
of a highly efficient single fuel heating and ventilation system
and Head Office in late 2022
· Actively promoted the role of retrofit in helping to
decarbonise the UK housing stock
|
Governance
|
· Incorporated social and environmental impact in our mission
statement and vision
· Created a Sustainability Committee which reports into the
Audit Committee, and feeds into the Group Risk
Committee.
· Successfully implemented the Consumer Duty into our
operations
· Added ESG as a standing agenda item to Board
meetings
· Introduced ESG related objectives to senior management
roles
· Linked senior management renumeration to ESG
performance
|
Customers
|
· Strengthened the content on our Green Hub in relation to
sustainable living and the role of housing in climate
change
· Continued to achieve outstanding customer satisfaction
ratings of 4.9 (out of 5) on Feefo, resulting in us being awarded
with the "Platinum Trusted Service" and "Exceptional Service"
awards
· Introduced a new communications platform "Tribe" to enhance
the way we communicate with our ARs and advisers
|
We progressed the majority of the
identified 71 actions, with a broad spread across all
categories.
Employee wellbeing, diversity, equality and
inclusivity
Our employees are our most
valuable asset. Their immense knowledge, skills and experience are
key to our success in delivering our business plan and are vital to
ensuring we maintain the high standards of customer service and
satisfaction which underpin the provision of quality advice. We
focus on creating a working environment in which our diverse team
can thrive and where our core values are communicated effectively
and upheld. We believe that a positively engaged workforce is one
that is more productive, happier and fulfilled, which in turns
leads to improved performance, greater customer satisfaction and
reduced employee attrition.
Employee wellbeing (Financial, Emotional and
Physical)
In January 2023 we were delighted
to re-open our newly refurbished headquarters. Employee wellbeing
and Diversity, Equity and Inclusion were key considerations during
the design phase of this project. We gathered extensive feedback
from our employees to understand their diverse requirements. We now
have a state-of-the-art office space that caters for hybrid working
and offers a wide range of working environments with collaborative
spaces, pods and booths, and quiet zones, as well as fixed desking
and agile seating so all employees have the option to work in an
environment that suits their needs. This has proved an enormous
success.
We have now added a designated
wellbeing room, which is available for employees to use when they
require a moment away from their work or for employees to
participate in prayer. The room is also stocked with a range of
items to support employees - yoga mats, fans, cold water and a
resource library containing information from various health and
wellbeing organisations, as well as books on a range of relevant
wellbeing topics.
As in previous years, we ran a
comprehensive programme of events and awareness campaigns
throughout the year to promote a healthy lifestyle, incorporating
physical, mental and financial wellbeing. We offered support to our
employees on a wide range of topics, via both online and in-person
events. We celebrated Employee Appreciation Day with an early
finish and letter box brownies in recognition of everyone's hard
work.
Once again, we partnered with a
number of charities to bring their expertise inhouse, marking
occasions such as Mind's 'Time to Talk Day' in the Hub; hosting a
cardiopulmonary resuscitation (CPR) training session with British
Heart Foundation; raising awareness during Men's Health Week with
Prostate Cancer UK, and of course, everyone's favourite the Great
MAB Bake Off for MacMillan Cancer Care.
In October, we celebrated
Menopause Awareness Month with the publication of a Menopause
Support Policy, for those experiencing peri-menopausal or
menopausal symptoms. We ran an internal awareness campaign and
organised training for ten Menopause Champions, who are now
available to support and signpost employees that need
help.
The mental health of our workforce
continued to be a key focus for us this year. As well as the
internal awareness campaigns, our team of Mental Health First
Aiders held a number of drop-in sessions in our wellbeing room, and
we rolled out our Employee Assistance Programme, which includes a
24/7 telephone and text helpline, to our Appointed Representative
network.
In addition to this, we introduced
a policy offering support to those with additional learning needs,
alongside a Neurodiversity Policy to support our neurodivergent
colleagues and offer guidance to their managers. We also updated
our Bereavement and Compassionate Leave Policy, to offer employees
a minimum of ten days paid leave, to ensure they are taking the
time they need to grieve and process events.
2023 was a difficult year
financially for many, so we ran sessions to support our employees,
including a financial education webinar with AAG Wealth Management;
a first-time buyer's clinic; a mortgage advice surgery; and
internal benefits webinars.
We also brought forward the
December and January pay dates to help employees manage their
expenses around the end of year season.
One important project in 2023 was
the introduction of our new intranet platform, Chatter. As well as
a tool for engaging and communicating with employees, the site
contains a discounts platform to help with the cost of living and a
dedicated wellbeing area that offers online exercise classes,
healthy recipes and general wellbeing advice.
To best leverage the new platform,
our People team also recruited an Internal Communicatrions Manager
who is responsible for all communications across the business,
ensuring a coherent approach to how we communicate and maximum
employee engagement. The introduction of Chatter has been a great
success and has made a significant difference to how we communicate
as a business.
Recognising the importance of
maintaining a healthy work life balance, we continued to offer a
hybrid working approach in 2023, and updated our Flexible Working
Policy to introduce the concept of "core hours", which enables
employees to flex their start and finish times to suit their
personal preferences and priorities.
Diversity, Equity and Inclusion (DEI)
MAB is committed to the principle
of equal opportunity in employment, regardless of a person's race,
creed, colour, nationality, gender, age, marital status, sexual
orientation, religion or disability. Employment policies are
written in gender neutral language and are fair, equitable and
consistent with the skills and abilities of employees and the needs
of the business. All of our job advertisements have been updated to
reflect this approach to DEI, and we encourage applicants from a
diverse talent pool to apply.
Following the launch of our
"MABology" in April 2021, we have been working hard to embed the
Mission, Vision and DNA behaviours into everything we do at MAB.
This has helped us create the foundations of a diverse and
inclusive working environment, by encouraging employees to take
pride in who they are, celebrate the uniqueness of others and to be
open and honest. In 2023 we continued to promote the MABology
values through our Team Based Embedding initiative, a series of
events which provided the opportunity for MAB teams to fully
immerse themselves into the MAB DNA and underpinning behaviours -
all aimed at breaking down silos and creating high performing
teams. Over 180 colleagues attended a Team Based Embedding event in
2023, with further sessions planned for 2024.
Throughout 2023 we continued to
seek regular feedback from our workforce and conduct regular
Employee Engagement Surveys. For the first time, we included DEI
specific questions in our most recent survey. 88% of respondents
agreed that they had a good understanding of DEI and 73% believed
that MAB was committed to promoting it.
Over the last 12 months we focused
on reviewing our policies, processes and initiatives through a DEI
lens. To support working parents, we increased our paid Maternity,
Paternity, Adoption and Shared Parental Leave offering by two
weeks. We also introduced two paid "guilt free days" for parents
returning from Family Leave, to enable them to better manage the
transition back to work.
We continue to advertise all our
vacancies internally, making use of the additional communication
tools now available to us and have simplified the internal
application process to encourage more internal applicants. We are
pleased with the impact this is having and last year we saw 20% of
new Head Office roles filled via internal applicants.
In 2023 we also set up a new
initiative, MAB U'nity,
which encompasses a diverse group of 20 with the objective of
furthering MAB's DEI agenda, and fostering a workplace culture that
celebrates diversity, ensures equality and promotes inclusion. This
will be achieved by breaking down barriers, championing fair
treatment for all and embracing diversity.
Based on feedback from our
employees, we continued to offer a mixture of virtual and in person
social events, to ensure that everyone feels included. We continued
to foster employee connections through a range of social events
such as Coffee Roulette, online quizzes and onsite events at our
head office. As MAB continues to grow, and particularly in a
hybrid/remote set up, it is paramount to maintain an environment
where employees are encouraged to meet, interact and share ideas
and knowledge with each other.
Learning and Development ("L&D")
The Group is committed to
developing its employees to enhance our capacity to deliver
sustainable growth and maximise workforce engagement and employee
retention.
In 2023, our new L&D
initiatives included a new approach to our induction programme for
new starters or those employees that are returning from long-term
leave. Our new Induction Day kicks off with a tour of our head
office, followed by a series of briefings including on the Group's
history, its Mission, Vision and DNA, and our wellbeing programme.
It also includes an interactive quiz as well as an introduction to
our ESG programme. 60 new colleagues attended the Induction Day
throughout 2023, with the initiative achieving an overall
satisfaction rate of 4.7 / 5.0.
2023 saw the launch of the
"Mentoring Gang", a group created to provide the opportunity for
colleagues to grow and develop their career goals. We currently
have 16 mentors within MAB from a variety of roles and intend to
extend this further in 2024 to include professional coaching
too.
Developing our internal talent
remains a priority, and we pride ourselves for providing a culture
that encourages both personal and professional growth. Throughout
2023 there were 43 internal promotions at MAB. Our Learn to Lead
programme remains popular. Consisting of a wide range of topics
from effective communication to conflict resolution and emotional
intelligence to DEI, this internally designed programme is an
important means for us to develop talent. Nine aspiring leaders
graduated in 2023.
We also have a growing number of
colleagues undertaking professional qualifications through taking
advantage of the Apprenticeship Levy, and have seven colleagues
completing the bespoke Level 3 and Level 5 Women in Leadership
Apprenticeship. These are tailored programmes which aim to enable
career progression and nurture women into leadership roles and
senior positions, and forms part of our strategy to empower women
within MAB.
Overall, we won four awards in
2023 for our initiatives in DEI and L&D:
·
Barclays D&I Awards - Best Inclusive
Culture;
·
MoneyAge Mortgage Awards - Diversity Initiative
of the Year;
·
Women's Leadership Association Awards - Woman in
Management; and
·
Money Marketing Awards - Diversity &
Inclusivity Champion.
Community engagement and
charitable activities
Corporate Social Responsibility is
very important to the Group, and we strive to maximise our positive
impact on the communities in which we operate.
Throughout 2023, MAB continued to
fund and provide staffing resources to the Mortgage Advice Bureau
Foundation, our grant-giving charity. Established to coordinate MAB
charitable activity, the Foundation aims to create sustainable,
positive change within the local communities of our staff and
customers.
Issuing grants from £500 to £5,000
to local community projects the Foundation engages with MAB's
employees, customers and business partners to put forward projects
for consideration.
The grant giving purposes remain
unchanged as the Foundation looks to support charitable activities
in the three following areas:
1. Health and
Wellbeing - projects that help communities address health and
wellbeing issues so that everybody's quality of life can be
improved.
2. Preventing and
relieving poverty - projects to support communities through
financial hardship and social exclusion.
3. Environmental and
conservation - practical and educational projects to help
communities make green choices and reduce their carbon
footprint.
Funding applications are only
accepted when nominated by a MAB employee, a business partner or
one of our customers.
During 2023:
-
the Foundation received 68 nominations for
funding, completing on 13 applications which received funding from
the Foundation of £47,405, and
-
the Foundation helped these 13 projects raise a
total of £139,149 through its partnership with
Crowdfunder.
This meant that for every £1
donated by the Foundation a further £2 was raised. This is a great
outcome which was achieved in part by encouraging other grant
funders to support these projects, including British Airways,
M&S, Sport England and Aviva.
Trustees
The Trustees responsible for the
management and administering of the trust according to its
purpose are:-
Andy Frankish
CEO Trustee
Lucy Tilley
Chair
Trustee
Chief Financial Officer at Mortgage Advice Bureau
Peter
Brodnicki
Trustee
Chief Executive Officer at Mortgage Advice Bureau
Ali
Crossley
Trustee
Managing Director, Distribution at Legal and General
Esther
Dijkstra
Trustee
Managing Director, Intermediaries at Lloyds Banking
Group
Fabien
Holler
Trustee
Company Secretary at Mortgage Advice Bureau
Ben
Thompson
Trustee
Deputy Chief Executive Office at Mortgage Advice Bureau
Tranche
Funding
Throughout 2023 the Foundation
reviewed its funding model and in December 2023 it moved to a
tranche funding model. By making a tranche of money available for
charities to apply for by a fixed end date, the Foundation
Committee will be able to review a larger number of applications
for funding at the same time, thus ensuring that it can apply its
robust scoring criteria consistently to select the most appropriate
projects, maximise funding for the best projects, and better
control the funds available to the Foundation.
Award
Winning
We are delighted that in November
2023 the Mortgage Advice Bureau Foundation received an industry
award in recognition of its Excellence in Philanthropy and
Community Service. The judges commented on how MAB had set
standards for other businesses to follow in demonstrating a
commitment to Corporate Social Responsibility.
Case Study -
Printed by Us
Part of The Archer Project, which
has a proven history of transforming the lives of the vulnerable
and homeless in Sheffield and the wider region, Printed by Us is a
social enterprise that employs people, in a supported environment,
who have experienced homelessness or similar adversities and most
need help and understanding. Printed by Us uses the craft of
screen-printing to give these vulnerable people the opportunity to
learn new skills, build confidence and thrive.
The Project was nominated by one
of the MAB business owners in Sheffield who has long worked with
The Archer Project, volunteering in their soup kitchen.
The project needed new equipment
to further develop the programme and set a target of £10,000 which
they achieved with the help of a £5,000 grant from the
Foundation.
Case Study -
Flamingo Chicks
Flamingo Chicks is a
multi-award-winning charity and an inclusive community, giving
disabled or ill children the opportunity to explore movement
through dance. Since the coronavirus pandemic, they have
experienced a surge in demand for their support.
Flamingo Chicks delivers
ground-breaking, inclusive programmes designed to support disabled
children and families through five core pillars:
-
inclusive dance classes;
-
peer-to-peer support;
-
intergenerational volunteering;
-
youth-led advocacy; and
-
global outreach.
Flamingo Chicks was looking to
raise £20,000 to increase its programme's outreach to more children
and shine a spotlight on the importance of supporting disabled
children's mental and physical health.
Nominated by the MAB business
owners in Bristol, the project secured a £5,000 grant from the
Foundation and through the Crowdfunder platform it vastly exceeded
its fundraising target, raising over £34,000. This included joint
grant funding from the British Airways Foundation.
Employee volunteering
In addition to grant funding the
Foundation also assists in organising volunteering days with the
projects it supports. MAB gives its employees two fully paid days
per year to work with charities of their choice, and the Foundation
helps link up the projects that need support with employees. As
well as onsite work, the Foundation also coordinates specialist
support that MAB staff can carry out from their desks including
help with IT, project management, content writing, marketing and
social media. This helps deliver support faster and across a
greater number of staff.
In 2023,
we greatly increased the number of organised volunteering events,
enjoying good team participation rates and great feedback from all
volunteers. These events included:
-
a mock interview day at a school with Making the
Leap, a London-based charity that seeks to improve social mobility
by raising the aspirations of, and increasing opportunities for,
young people;
-
helping Derby Kid's Camp turn an empty field into
a huge summer camp. Derby Kid's Camp is a children's charity that
provides free holidays to Derbyshire-based young people most in
need of a break; and
-
supporting a local children's mental health
charity, Bridge the Gap, with its social media strategy and content
creation.
In November 2023, a group of MAB
employees spent a day volunteering at Treetops Hospice, a charity
that provides nursing care and emotional support for adults and
their families in Derbyshire and Nottinghamshire.
Our group of volunteers spent the
day at the Treetops Hospice grounds, clearing leaves from the
outdoor spaces and redecorating the internal corridors. Their hard
work was rewarded with homemade cake and a tour of the brand new
building used for counselling and support activities for young
people and children that was recently constructed as part of DIY
SOS for Children in Need.
As in previous years, one of the
highlights of our volunteering calendar is helping Derby City
Mission with their Christmas Gift Appeal, helping to provide
Christmas presents to Derby's most vulnerable children.
Overall, 16% of MAB employees
volunteered throughout the year.
Other charitable activities
In 2023, in addition to its
commitment to the Mortgage Advice Bureau Foundation in excess of
£40,000, MAB helped raise the following amounts for charitable
donations:
- £16,334 as part of the MAB Golf Day;
- £8,429 as part of the MAB Awards; and
- £1,792 as part of the Derby Marathon.
Fluent also made charitable
donations over the year totaling £40,271 which included £33,205 to
the Education for Children Foundation, whose mission is to break
the cycle of poverty through education, empowerment and enterprise
at the heart of the community. Education for Children Foundation
works in partnership with disadvantaged families, children and
young adults in Guatemala and Central America.
Finally, MAB now donates its
decommissioned mobile phones and laptops to help the local
community. Once the devices have been thoroughly wiped and factory
reset, they are donated to Derbyshire Refugee Solidarity, where
they are redistributed to people who otherwise may not be able to
take advantage of modern technology.
Minimising our impact on the environment
Reducing our environmental
footprint remains an important priority for MAB, despite our
overall footprint being limited due to the nature of our operations
as a mortgage intermediary business.
In January 2023 we re-opened our
head office after carrying out a major refurbishment project.
Minimising our environmental impact was a central consideration for
this project, as was sourcing products from local suppliers where
practical, and repurposing furniture.
As part of this refurbishment, we
installed a new single fuel high efficiency heating and ventilation
system, as well as new high efficiency LED lighting operating 'on
motion' sensor activation throughout the building. These measures
contributed to reducing the Group's Scope 1 and Scope 2 emissions
intensity by a further 11%.
We no longer use a gas supply in
our head office, and 100% of our electricity at our head office and
First Mortgage offices comes from renewable sources. We
commissioned two EPC reports, before and after the refurbishment,
with our energy performance rating having improved from 84 (D
rating) to 39 (B rating). We will continue to work with specialist
consultants throughout 2024 to improve further our carbon reporting
framework based on science-based targets and drive the Group's
sustainability agenda.
In 2023, we created a supplier
code of conduct which outlines our expectations in terms of our
suppliers' commitments to environmental and ethical standards. All
new suppliers are asked to commit to adhering to our code of
conduct and we are working with our already established supply
chain to do the same retrospectively.
Where possible, we endeavour to
work with local (<50 miles) suppliers in order to minimise the
impact of transport-related emissions.
We continue to operate a hybrid
working model that allows our colleagues to work from home up to
two days per week, and the use of electric vehicles is encouraged
through our Electric Vehicle chargers at head office.
Waste reduction
MAB continues to monitor the
production of waste from its facilities and our waste management
supplier only works with "Zero waste to Landfill" partners in its
own supply chain. Effectively this means that 95% of our general
waste is used for energy production, with the remaining 5% being
recycled appropriately. This includes paper, ink and cardboard and
we also have recycling stations where our colleagues can discard
used batteries.
The adoption of new technology and
processes can be an important waste minimisation factor, and
improvements to our MIDAS technology platform and to the structure
of our compliance function have meant ARs, advisers and their
clients are required to print fewer documents. Our focus on
reducing the level of printing undertaken by the Group
continues.
We no longer use plastic mineral
water bottles or single use plastic drinking cups.
Promoting energy efficient homes
With an estimated 20%+ of carbon
emissions in the UK being attributed to the housing sector and
given the UK Government's Net Zero strategy by 2050, we recognise
that we are uniquely positioned to influence change and have a
significant positive impact on the UK's overall carbon
footprint.
In 2023 we continued our work with
our adviser community to ensure that all our advisers are kept
abreast of legislation changes and industry concerns, whilst
working with our lending partners to collaborate on what the future
product landscape might look like in this respect. We are currently
in the process of building a new proposition that addresses the
financing needs of customers who wish to explore energy efficiency
retrofit options, and also helps them to navigate the complexities
of sourcing and installing the right equipment by having a
nationwide solution under which customers can make the desired
environmentally-friendly changes to their homes.
Our Head of ESG joined the
Mortgage Climate Action Group's steering committee in July 2023, an
initiative by the Association of Mortgage Intermediaries designed
to help raise awareness of this area. We also continued to enhance
the content of our Green Hub to promote cost effective ways to
reduce utility bills and educate consumers on the subject of "Green
Mortgages".
.
Independent auditor's report to the members of Mortgage
Advice Bureau (Holdings) plc
Opinion on the financial statements
In our opinion:
•
the financial statements give a true and fair
view of the state of the Group's and of the Parent Company's
affairs as at 31 December 2023 and of the Group's profit for the
year then ended;
•
the Group financial statements have been properly
prepared in accordance with UK adopted international accounting
standards;
•
the Parent Company financial statements have been
properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
•
the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006.
We have audited the financial
statements of Mortgage Advice Bureau (Holdings) PLC (the 'Parent
Company') and its subsidiaries (the 'Group') for the year ended 31
December 2023 which comprise the Consolidated Statement of
Comprehensive Income, Consolidated and Company Statement of
Financial Position, Consolidated and Company Statement of Changes
in Equity, Consolidated Statement of Cash Flows, and notes to the
financial statements, including material and significant accounting
policy information.
The financial reporting framework
that has been applied in the preparation of the Group financial
statements is applicable law and UK adopted international
accounting standards. The financial reporting framework that has
been applied in the preparation of the Parent Company financial
statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 102 The Financial Reporting Standard in the
United Kingdom and Republic of Ireland (United Kingdom
Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in
accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group
and the Parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the
UK, including the FRC's Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
Conclusions relating to going concern
In auditing the financial
statements, we have concluded that the Directors' use of the going
concern basis of accounting in the preparation of the financial
statements is appropriate. Our evaluation of the Directors'
assessment of the Group and the Parent Company's ability to
continue to adopt the going concern basis of accounting
included:
·
We have assessed the reasonableness of the
assumptions within the Directors' forecast for liquidity and
profitability for a period of 12 months from the signing of these
accounts corroborating the inputs to supporting documentary
evidence. This involved considering the base and stress scenarios
testing undertaken by the Directors to support the Going concern
assessment which included assumptions about the potential impact
this could have on revenue (mainly from purchase mortgages) and
possible cost saving measures.
·
We examined the existing agreement of the
Revolving Credit Facility and reviewed the nature of the facility,
repayment terms, covenants and attached conditions. We assessed its
continued availability to the Group through the going concern
period and checked the completeness of management's covenant
assessment;
·
We verified the mathematical accuracy of the
going concern model for the period to 31 December 2025;
·
We considered whether there were any indicators
of other sources of finance not considered by Directors in their
assessment;
·
We assessed whether the
capital and cash positions are adequate and whether the Group
complies with its covenant requirements in both the base and stress
scenarios.
·
We assessed the appropriateness of the duration
of the going concern assessment period to 31 December 2025 and
considered the existence of any significant events or conditions
beyond this period based on our procedures on the Group's cash flow
forecasts and from knowledge arising from other areas of the
audit;
·
We have reviewed publicly available information on the housing market and
house price index to assess any impact on going concern.
·
We assessed how the Directors have factored in
ongoing economic pressures such as high inflation, cost of living
crisis and increasing interest rates on the business, checking
these had been appropriately considered as part of the Directors'
going concern assessment.
·
We reviewed the disclosures made relating to
going concern included in the financial statements in order to
assess the appropriateness of the disclosures and conformity with
reporting standards.
The Directors' assessment
forecasts that the Group will maintain sufficient liquidity
throughout the going concern assessment period in the base case
scenario and will not breach banking covenants. Under the Group
severe but plausible scenario, which includes a significant
reduction in performance throughout the going concern period,
liquidity remains and there is no breach of covenants.
We have not identified any climate
related risks that would materially impact the Group's forecasts to
31 December 2025.
Controllable mitigating actions
available to management over the going concern assessment period
include reductions to non-declared dividend payments.
Based on the work we have
performed, we have not identified any material uncertainties
relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and the
Parent Company's ability to continue as a going concern for a
period of at least twelve months from when the financial statements
are authorised for issue.
Our responsibilities and the
responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report
Overview
Coverage
|
99% (2022: 99.1%) of Group profit before
tax
100% (2022: 99.9%) of Group revenue
99.8% (2022: 99.4%) of Group total assets
|
Key audit matters
|
|
2023
|
2022
|
Revenue Recognition
|
✔
|
✔
|
Clawback Liability
|
✔
|
✔
|
Valuation of put/call options over
the purchase of minority interests in subsidiaries
|
✔
|
✔
|
Acquisition of
subsidiaries
|
✖
|
✔
|
Goodwill Impairment assessment in
relation to Fluent CGU
|
✔
|
✖
|
Acquisition of subsidiaries is no
longer considered a KAM because there were no subsidiary
acquisitions made during the year.
|
|
|
|
Materiality
|
Group financial statements as a whole
£1,036,000 (2022: £1,006,000)
based on 5% of average profit before tax for the last three years
(2022: 5% Profit before tax).
|
An overview of the scope of our audit
Our Group audit was scoped by
obtaining an understanding of the Group and its environment,
including the Group's system of internal control, and assessing the
risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls,
including assessing whether there was evidence of bias by the
Directors that may have represented a risk of material
misstatement.
The Group is made up of the Parent
Company and its subsidiaries. The significant components were
determined to be MAB Limited and MAB Derby
Limited together '(MAB Core'), First
Mortgage Direct Limited ('FMD') and Project Finland Topco
Limited and its subsidiaries
('Fluent Group'). These three components were
subject to full scope audits performed by the Group audit team. In
respect of the non-significant components the Group audit team
carried out specific procedures on balances that were identified as
material to the Group.
Climate change
Our work on the assessment of
potential impacts of climate-related risks on the Group's
operations and financial statements included:
·
Enquiries and challenge of management to
understand the actions they have taken to identify climate-related
risks and their potential impacts on the financial statements and
adequately disclose climate-related risks within the annual
report;
·
Our own qualitative risk assessment taking into
consideration the sector in which the Group operates and how
climate change affects this particular sector;
·
Review of the minutes of Board and Audit
Committee meeting and any other relevant party and other papers
related to climate change and performed a risk assessment as to how
the impact of the Group's commitment as set out in the Strategic
report may affect the financial statements and our
audit.
The Group has explained in the
Strategic report how they have reflected the impact of climate
change in their financial statements. The Group did not identify
any climate risk that would materially impact the carrying values
of the group's assets or have any other impact on the financial
statements. These disclosures also explain where governmental and
societal responses to climate change risks are still developing,
and where the degree of certainty of these changes means that they
cannot be taken into account when determining asset and liability
valuations under the requirements of UK adopted international
accounting standards. Our audit effort in considering the impact of
climate change on the financial statements was focused on
evaluating management's assessment of the impact of climate risk,
physical and transition, and their climate commitments. As part of
this evaluation, we performed our own risk assessment to determine
the risks of material misstatement in the financial statements from
climate change which needed to be considered in our audit. We also
challenged the Directors' considerations of climate change risks in
their assessment of going concern and viability and associated
disclosures. Where considerations of climate change were relevant
to our assessment of going concern, these are described
above
Based on our risk assessment procedures, we did not identify there to be any Key
Audit Matters materially impacted by climate-related risks.
Key audit matters
Key audit matters are those
matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the
current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we
identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit,
and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matter
|
How the scope of our audit addressed the key audit
matter
|
Revenue recognition
Management's associated accounting
policies are outlined in note 1 and with the detailed disclosure in
note 3 to the financial statements.
|
The Group's revenue comprises of
commissions (including procuration fees), client fees, protection
and general insurance and other income.
Group total revenue £240m (2022:
£231m).
Revenue recognition is a
significant audit risk as it is a key driver of the return to
investors and there is a risk that there could be manipulation,
fraud or omission of amounts recorded in the system. This risk is
applicable for all revenue streams across the group as detailed
above.
For these reasons we considered
revenue a key audit matter.
|
We performed the following
procedures:
• We
assessed whether the Group's revenue recognition policies are in
accordance with the applicable accounting standards.
• We
performed walkthroughs of each significant stream of revenue and
confirmed the existence of key controls around the recognition of
revenue.
• For a
sample of transactions, we independently obtained direct
confirmations of the revenue and transactions amounts from third
party providers.
• For a
sample of commission income, we obtained the third-party reports
supporting the transactions and traced back to cash
receipts.
• We
recalculated a sample of the procuration fees using third party
reports obtained independently and agreed to cash
received.
• We
agreed a sample of client fees to providers' statements and cash
receipts.
• We
performed cut-off testing for the period before and after the year
end with reference to underlying documents such as rebate reports,
reclaims files and evidence of management's assessment of the point
of revenue recognition.
• We
performed full and specific scope audit procedures over this risk
area in components which have revenue
Key observations:
Based on the procedures performed,
we have not identified any material misstatements in the revenue
recognised in the year.
|
|
|
|
Clawback liability
Management's associated accounting
policies with detail about judgements in applying accounting
policies and critical accounting estimates are outlined in note 2
with the detailed disclosure in note 23 to the financial
statements.
|
The clawback liability is an
estimate of the commission received up front that is repayable on
life assurance policies that may lapse in a period of up to four
years following inception of the policies.
The Group has recognised a
clawback liability of £10.3m (2022: £8.0m).
There is significant risk of
material misstatement due to fraud or error as result of the
estimation uncertainty inherent in the valuation of the clawback
liability.
The valuation of clawback
liability is subject to significant judgements and estimates with
specific reference to the determination of the Lapse and Recovery
rate applied.
The risk is over the clawback
liability recorded in the three significant components: MAB Core,
FMD and Fluent.
|
Our procedures included the following:
• We
assessed whether the accounting
treatment adopted for the clawback
liability was in line with the applicable
accounting standard
requirements.
• We
evaluated the design and implementation of the financial reporting
process relevant for the determination of the clawback
liability.
• We
tested the appropriateness of the model and its logical application
and then independently recalculated the results.
• We
compared the data relating to unearned commission and assumptions
such as future lapse rates and lapse rate history to third party
reports.
• For
other inputs and assumptions such as age profile of the commission
received, the success of the Appointed Representatives in
preventing lapses and/or generating new income at the point of a
lapse, we validated these to management's supporting analysis of
the Group's actual experience based on data gathered from third
party providers' statements.
• We
reviewed the historic payback patterns and performed testing on the
historical accuracy of management's estimate by comparing clawbacks
during the current financial year to the prior year provision
raised.
Key observations:
Based on the work performed we
have not identified any material misstatement in the clawback
liability.
|
Valuation of put/call options over the purchase of minority
interests in subsidiaries
Refer to note 5 to the financial
statements.
|
The acquisition of Fluent in 2022
had put and call options attached to the purchase of the minority
interests exercisable at a future date. The valuation of the put
and call is driven by inputs that are subject to management's
judgement and estimation uncertainty.
We have identified a significant
risk of material misstatement due to error over the remeasurement
of the redemption liability.
The cash flow projections
(including the EBITDA projections) used in the remeasurement of the
redemption liability are subject to management's
judgements.
The Group had a redemption
liability fair value gain of £4.5m (2022:£nil) of which £4.7m
relates to Fluent (loss of £0.2m relates to Auxilium put and call
options).
|
Our procedures included the following:
• We
evaluated the design and implementation of the financial reporting
process relevant for the Valuation of put/call options.
• We
tested that the valuation methodology is appropriate.
• With the
assistance from our valuation experts, we assessed the
appropriateness of the assumptions being cash flow projections and
discount rate against the ones adopted by management as part of the
impairment of goodwill assessment where relevant.
• We
assessed the reasonableness of cashflow forecasts
and its assumptions by reviewing the governance process
in light of the potential impact of
macro-economic factors.
• We
reviewed the accounting treatment to check that it is in
line with accounting standards (IFRS 2/IAS 19 and IFRS
9).
Key observations:
Based on the work performed we
have not identified any material misstatement in the redemption
liability.
|
Goodwill impairment assessment in relation to Fluent
CGU
Refer to note 2
with the detailed disclosure in
note 14 to the financial statements.
|
The Carrying value of Goodwill is
£53.9m (2022: 53.9m). Of this amount, £37.0m relates to the Fluent
cash generating unit ('CGU').
We identified a significant risk
of fraud and error on the recoverability of the goodwill relating
to Fluent CGU because it's trading performance was significantly
below budget.
In determining the recoverable
amount, the value in use calculation is subject to estimation
uncertainty due to the significant estimates and judgements
involved in determining the discount rate, Long-term growth rates
('LTGR'), and the future cashflows (including EBITDA
projections).
As a result, we concluded this was
a key audit matter.
|
We performed the following
procedures:
•
With the involvement of our valuation experts, we
assessed the appropriateness of the valuation methodology applied
and key assumptions.
•
We inspected the Group's approved strategic
plans.
• We
compared the Group's key assumptions to externally derived data and
other macro-economic factors such as interest rates and inflation
rates.
• We
performed a sensitivity analysis which considered reasonably
possible changes in the key assumptions and their impact on the
valuation.
• We
independently developed our own estimate of a range of reasonably
possible discount rate, EBITDA projections and revenue growth rate
for the CGU, based on external market data and our understanding of
the business, and compared this to what was used in the
model.
Key observations:
We have not identified any
indicator that would suggest the assumptions and judgements applied
in the valuation model are unreasonable.
|
Our application of materiality
We apply the concept of
materiality both in planning and performing our audit, and in
evaluating the effect of misstatements. We consider materiality to
be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken
based on the financial statements.
In order to reduce to an
appropriately low level the probability that any misstatements
exceed materiality, we use a lower materiality level, performance
materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of
identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial
statements as a whole.
Based on our professional
judgement, we determined materiality for the financial statements
as a whole and performance materiality as follows:
|
Group financial
statements
|
Parent company financial
statements
|
|
2023
£m
|
2022
£m
|
2023
£m
|
2022
£m
|
Materiality
|
£1,036,000
|
£1,006,000
|
£332,000
|
£268,000
|
Basis for determining materiality
|
5% of
average profit before tax for the last three years
|
5% of
profit before tax, excluding write off of investment in non-listed
equity shares
|
5% of
Total investments
|
Rationale for the benchmark applied
|
Average profit before tax was
determined to be the most appropriate benchmark as the Group is
listed with profitability seen as the main interest of
investors.
|
Profit before tax was determined
to be the most appropriate benchmark as the Group is listed with
profitability seen as the main interest of investors.
|
As the
Parent Company is a holding company, it was considered appropriate
to determine materiality based on Total investments.
|
Performance materiality
|
2023
£777,000
|
2022
£754,000
|
2023
£249,000
|
2022
£201,000
|
Basis for determining performance
materiality
|
75% of
materiality based on our risk assessment and our assessment of
expected total value of known and likely misstatements.
|
Component materiality
We set materiality for each
significant component of the Group, including the parent company,
based on a percentage of between 31% and 95% (2022: 43% and 79%) of
Group materiality dependent on the size and our assessment of the
risk of material misstatement of that component. Component
materiality ranged from £237,000 to £738,000 (2022: £436,515 to
£792,000). In the audit of each significant component, we further
applied performance materiality levels at 75% (2022: 75%) of
the component materiality to our testing to ensure that the risk of
errors exceeding component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the Audit Committee
that we would report to them all individual audit differences in
excess of £51,000 (2022: £20,000). We also agreed to report
differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
Other information
The Directors are responsible for
the other information. The other information comprises the
information included in the Annual Report and Financial Statements
other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this
regard.
Independent auditor's report to the members of Mortgage
Advice Bureau (Holdings) plc
Other Companies Act 2006 reporting
Based on the responsibilities
described below and our work performed during the course of the
audit, we are required by the Companies Act 2006 and ISAs (UK) to
report on certain opinions and matters as described
below.
Strategic report and Directors' report
|
In our opinion, based on the work
undertaken in the course of the audit:
·
the information given in the Strategic report and
the Directors' report for the financial year for which the
financial statements are prepared is consistent with the financial
statements; and
·
the Strategic report and the Directors' report
have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the Group and
Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
Strategic report or the Directors' report.
|
Matters on which we are required to report by
exception
|
We have nothing to report in
respect of the following matters in relation to which the Companies
Act 2006 requires us to report to you if, in our opinion:
·
adequate accounting records have not been kept by
the Parent Company, or returns adequate for our audit have not been
received from components not visited by us; or
·
the Parent Company financial statements are not
in agreement with the accounting records and returns; or
·
certain disclosures of Directors' remuneration
specified by law are not made; or
·
we have not received all the information and
explanations we require for our audit.
|
Responsibilities of Directors
As explained more fully in the
Directors' responsibilities statement, the Directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial
statements, the Directors are responsible for assessing the Group's
and the Parent Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Parent Company or to
cease operations, or have no realistic alternative but to do
so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain
reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken based on these
financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud,
are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud is
detailed below:
Non-compliance with laws and regulations
Based on:
•
Our understanding of the Group and the industry
in which it operates;
•
Discussion with management and those charged with
governance, legal counsel and Audit Committee;
•
Obtaining and understanding of the Group's
policies and procedures regarding compliance with laws and
regulations.
We considered the significant laws
and regulations to be IFRS as adopted by the UK, UK tax
legislation, Companies Act 2006 and the AIM Listing
Rules.
The Group is also subject to laws
and regulations where the consequence of non-compliance could have
a material effect on the amount or disclosures in the financial
statements, for example through the imposition of fines or
litigations.
We identified such laws and
regulations to be the health and safety legislation and the
Anti-Bribery Act including fraud, corruption and
bribery.
Our procedures in respect of the
above included:
·
Review of minutes of meetings of those charged
with governance for any instances of non-compliance with laws and
regulations;
·
Review of correspondence with regulatory and tax
authorities for any instances of non-compliance with laws and
regulations;
·
Review of financial statement disclosures and
agreeing to supporting documentation;
·
Involvement of tax specialists in the
audit;
·
Review of legal expenditure accounts to
understand the nature of expenditure incurred.
Fraud
We assessed the susceptibility of
the financial statements to material misstatement, including fraud.
Our risk assessment procedures included:
·
Enquiry with management and those charged with
governance also considered Audit Committee regarding any known or
suspected instances of fraud;
·
Obtaining an understanding of the Group's
policies and procedures relating to:
o Detecting and responding to the risks of fraud;
and
o Internal controls established to mitigate risks related to
fraud.
·
Review of minutes of meetings of those charged
with governance for any known or suspected instances of
fraud;
·
Discussion amongst the engagement team as to how
and where fraud might occur in the financial statements;
·
Performing analytical procedures to identify any
unusual or unexpected relationships that may indicate risks of
material misstatement due to fraud;
·
Considering remuneration incentive schemes and
performance targets and the related financial statement areas
impacted by these;
Based on our risk assessment, we
considered the areas most susceptible to fraud to be revenue,
management override of controls and clawback liability.
Our procedures in respect of the
above included:
·
Testing a sample of journal entries throughout
the year, which met a defined risk criteria, by agreeing to
supporting documentation;
·
Assessing significant estimates made by
management for bias;
·
Reviewing the financial statement disclosures and
testing to supporting documentation to assess compliance with
relevant laws and regulations discussed above;
·
Enquiring of management and the Audit Committee
for any instances of non- compliance with laws and regulation and
any known or suspected instances of fraud;
·
Performing analytical procedures to identify any
unusual or unexpected relationships that may indicate risks of
material misstatement due to fraud;
·
Reading minutes of meetings of those charged with
governance and correspondence with the Financial Conduct Authority
to check for any instances of non-compliance with applicable laws
and regulations;
·
In addressing the risk of fraud through
management override of controls, testing the appropriateness of
journal entries and other adjustments on a sample basis to
supporting documentation;
·
In respect of the risk of fraud
in relation to revenue recognition and in
accounting estimates such as the clawback liability and goodwill
impairment assessment performing the procedures as set out in the
Key Audit Matters section of our report; and
·
Evaluating the business rationale of any
significant transactions that are unusual or outside the normal
course of business.
·
At a component level, our full and specific scope
component audit team's procedures included inquiries of component
management, journal entry testing and focused testing, including in
respect of the key audit matter of revenue recognition.
We also communicated relevant
identified laws and regulations and potential fraud risks to all
engagement team members who were all deemed to have appropriate
competence and capabilities and remained alert to any indications
of fraud or non-compliance with laws and regulations throughout the
audit.
Our audit procedures were designed
to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through
collusion. There are inherent limitations in the audit procedures
performed and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we are to become aware of
it.
A further description of our
responsibilities is available on the Financial Reporting Council's
website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor's report.
Use of our report
This report is made solely to the
Parent Company's members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Parent Company's members
those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Parent Company and the Parent Company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
David Gonnelli (Senior Statutory
Auditor)
For and on behalf of BDO LLP,
Statutory Auditor
London, UK
19 March 2024
BDO LLP is a limited liability
partnership registered in England and Wales (with registered number
OC305127).
Consolidated statement of comprehensive income
for the year ended 31 December 2023
|
Note
|
|
|
|
2023
£'000
|
2022
£'000
|
Revenue
|
3
|
239,533
|
230,820
|
Cost of sales
|
4
|
(169,371)
|
(167,873)
|
Gross profit
|
|
70,162
|
62,947
|
Administrative expenses
|
|
(46,674)
|
(36,000)
|
Share of profit of
associates
|
15
|
848
|
712
|
Costs relating to First Mortgage,
Fluent and Auxilium options
|
5
|
(4,277)
|
(1,999)
|
Amortisation of acquired
intangibles
|
5
|
(5,160)
|
(2,582)
|
Acquisition costs
|
5
|
(159)
|
(2,755)
|
Restructuring costs
|
|
(539)
|
-
|
Non-listed equity investment
written off
|
16
|
-
|
(2,783)
|
Profit on disposal of
associate
|
15
|
-
|
19
|
Profit on sale of non-listed
equity investment
|
16
|
-
|
58
|
Gain on fair value measurement of
contingent consideration
|
15
|
-
|
884
|
Loss on fair value measurement of
derivative financial instruments
|
15
|
(190)
|
(18)
|
Operating profit
|
6
|
14,011
|
18,483
|
Finance income
|
8
|
291
|
108
|
Finance expenses
|
8
|
(2,610)
|
(1,238)
|
Gain on remeasurement of
redemption liability
|
5
|
4,486
|
-
|
Profit before tax
|
|
16,178
|
17,353
|
Tax expense
|
9
|
(3,719)
|
(4,574)
|
Profit for the year
|
|
12,459
|
12,779
|
Total comprehensive income
|
|
12,459
|
12,779
|
|
|
|
|
|
|
|
|
|
Profit is attributable to:
|
|
|
|
Equity owners of Parent
Company
Non
|
|
13,467
|
12,237
|
Non-controlling
interests
|
|
(1,008)
|
542
|
|
|
12,459
|
12,779
|
|
|
|
|
Earnings per share attributable to the owners of the Parent
Company
|
|
Basic
|
10
|
23.6p
|
21.8p
|
Diluted
|
10
|
23.5p
|
21.6p
|
|
|
|
|
|
|
All amounts shown relate to
continuing activities.
The notes that follow form part of
these financial statements.
Consolidated statement of cash flows
for the year ended 31 December 2023
|
Notes
|
2023
£'000
|
2022
£'000
|
Cash flows from operating activities
|
|
|
|
Profit for the year before
tax
|
|
16,178
|
17,353
|
Adjustments for:
|
|
|
|
Depreciation of property, plant
and equipment
|
12
|
1,225
|
591
|
Depreciation of right of use
assets
|
13
|
857
|
563
|
Impairment of right of use
assets
|
13
|
428
|
-
|
Amortisation of
intangibles
|
14
|
5,470
|
2,866
|
Unwinding of loan arrangement
fees
|
34
|
77
|
-
|
Profit from sale of non-listed
equity investment
|
16
|
-
|
(58)
|
Profit from disposal of
associate
|
15
|
-
|
(19)
|
Loss from disposal of fixed
assets
|
12
|
36
|
38
|
Share-based payments
|
30
|
4,429
|
2,983
|
Share of profit from
associates
|
15
|
(848)
|
(712)
|
Gain on remeasurement of
redemption liability
|
5
|
(4,486)
|
-
|
Non-listed equity investment,
amount written off
|
16
|
-
|
2,783
|
Loss/(gains) on fair value
movements taken to profit and loss
|
15
|
190
|
(866)
|
Dividends received from
associates
|
15
|
403
|
910
|
Finance income
|
8
|
(291)
|
(108)
|
Finance expense
|
8
|
2,610
|
1,238
|
|
|
26,278
|
27,562
|
Changes in working capital
|
|
|
|
Decrease/(increase) in trade and
other receivables
|
18
|
1,432
|
(1,317)
|
(Decrease)/increase in trade and
other payables
|
20
|
(283)
|
833
|
Increase in clawback
liability
|
23
|
2,293
|
1,387
|
Cash generated from operating activities
|
|
29,720
|
28,465
|
Income taxes paid
|
|
(5,390)
|
(4,124)
|
Acquisition of minority
interests
|
5
|
(592)
|
-
|
|
Net cash generated from operating
activities
|
|
23,738
|
24,341
|
Cash flows from investing activities
|
|
|
|
Purchase of property, plant and
equipment
|
12
|
(932)
|
(3,229)
|
Purchase of intangibles
|
14
|
(1,121)
|
(615)
|
Proceeds from sale of non-listed
equity investment
|
16
|
-
|
115
|
Net cashflow on acquisition of
subsidiaries
|
18
|
-
|
(49,157)
|
Acquisition of associates and
contingent consideration for associates
|
15
|
(469)
|
(1,327)
|
Net cash used in investing activities
|
|
(2,522)
|
(54,213)
|
Cash flows from financing activities
|
|
|
|
Proceeds from
borrowings
|
21,
34
|
-
|
22,918
|
Settlement of loan notes and
accrued interest on acquisition
|
17,
34
|
-
|
(21,891)
|
Repayment of borrowings
|
21,
34
|
(5,350)
|
(1,500)
|
Interest received
|
|
304
|
102
|
Interest paid
|
|
(1,312)
|
(102)
|
Principal element of lease
payments
|
34
|
(907)
|
(547)
|
Issue of shares
|
25
|
-
|
40,000
|
Costs relating to issue of
shares
|
25
|
-
|
(1,619)
|
Acquisition of minority
interests
|
5
|
(593)
|
-
|
|
Dividends paid to Company's
shareholders
|
11
|
(16,038)
|
(16,023)
|
Dividends paid to minority
interest
|
|
(842)
|
(415)
|
Net cash used in financing activities
|
|
(24,738)
|
20,923
|
Net (decrease) in cash and cash
equivalents
|
|
(3,522)
|
(8,949)
|
|
Cash and cash equivalents at the
beginning of year
|
|
25,462
|
34,411
|
|
Cash and cash equivalents at the
end of the year
|
|
21,940
|
25,462
|
|
|
|
|
|
|
|
|
|
|
The notes that follow form part of these financial
statements.
Notes to the consolidated financial statements
for the year ended 31 December 2023
1 Accounting
policies
Basis of preparation
The principal accounting policies
adopted in the preparation of the consolidated financial statements
are set out below. The policies have been consistently applied to
all the years presented.
The consolidated financial
statements are presented in Great British Pounds and all amounts
are rounded to the relevant thousands, unless otherwise
stated.
These financial statements have
been prepared in accordance with UK-adopted International
Accounting Standards in conformity with the requirements of the
Companies Act 2006 that are applicable to companies that prepare
financial statements in accordance with IFRSs.
The preparation of financial
statements in compliance with adopted IFRS requires the use of
certain critical accounting estimates. It also requires Group
management to exercise judgement in applying the Group's accounting
policies. The areas where significant judgements and estimates have
been made in preparing the financial statements and their effect
are disclosed in note 2.
The financial statements have been
prepared on a historical cost basis, except for investments in
non-listed equities and derivative financial instruments relating
to investments in associates that have been measured at fair
value.
The Group's business activities,
together with the factors likely to affect its future development,
performance and position are set out in the Strategic Report as set
out earlier in these financial statements. The financial position
of the Group, its cash flows and liquidity position are also
set out in the Strategic Report as set out
earlier in these financial statements.
The Group made an operating profit
of £14.0m during 2023 (2022: £18.5m) and had net current
liabilities of £21.4m as at 31 December 2023 (31 December 2022:
£14.9m) and equity attributable to owners of the Group of £70.2m
(31 December 2022: £67.9m).
Going concern
The Directors have assessed the
Group's prospects until 31 December 2025, taking into consideration
the current operating environment, including the impact of
geopolitical and macroeconomic uncertainty and inflationary
pressures on property and lending markets. The Directors' financial
modelling considers the Group's profit, cash flows, regulatory
capital requirements, borrowing covenants and other key financial
metrics over the period.
These metrics are subject to
sensitivity analysis, which involves flexing a number of key
assumptions underlying the projections, including the effect of
geopolitical and macroeconomic uncertainty and inflationary
pressures and their impact on the UK property and lending markets
and the Group's business volumes and revenue mix, which the
Directors consider to be severe but plausible stress tests on the
Group's cash position, banking covenants and regulatory capital
adequacy. The Group's financial modelling shows that the Group
should continue to be cash generative, maintain a surplus on its
regulatory capital requirements and be able to operate within its
current financing arrangements.
Based on the results of the
financial modelling, the Directors expect that the Group will be
able to continue in operation and meet its liabilities as they fall
due over this period. Accordingly, the Directors continue to adopt
the going concern basis for the preparation of the financial
statements.
The
impact of climate risk on accounting estimates
In preparing the Financial
Statements, the Directors have considered the impact of climate
change, taking into account the relevant disclosures in the
Strategic Report, including those made in accordance with the
framework of the Taskforce on Climate-Related Financial Disclosures
(TCFD).
The Group has assessed
climate-related risks, covering both physical risks and transition
risks.
Many of the effects arising from
climate change will be longer term in nature with an inherent level
of uncertainty and have limited impact on accounting estimates for
the current period.
Climate change may also have an
impact on the carrying value of goodwill but the potential impact
of climate related risks on the Group's impairment assessment is
considered sufficiently remote at this point in time and therefore
no sensitivity analysis has been performed.
Changes in accounting policies
New standards, interpretations and amendments effective for
the year ended 31 December 2023
New standards,
interpretations and amendments applied for the first
time
The Group applied a number of
standards and interpretations for the first time in 2023 but these
did not have an impact on the consolidated financial statements of
the Group. The Group has not early adopted any standards,
interpretations or amendments that have been issued but are not yet
effective.
New standards with an impact
on the Group
· Amendments to IAS 1 and IFRS
Practice Statement 2 - Disclosure of accounting policies (Effective
1 January 2023)
The amendments to IAS 1 and IFRS
Practice Statement 2 Making Materiality Judgements provide guidance
and examples to help entities apply materiality judgements to
accounting policy disclosures. The Group has ensured that material
accounting policy disclosures have been made in the financial
statements in line with the amendments to IAS 1 & IFRS Practice
statement 2.
New standards with no impact
on the Group
· IFRS 17 Insurance contracts
(Effective 1 January 2023)
· Amendments to IAS 8 -
Definition of accounting estimates (Effective 1 January
2023)
· Amendments to IAS 12 -
Deferred tax related to assets and liabilities arising from a
single transaction (Effective 1 January
2023)
New standards,
interpretations, and amendments not yet effective
Future new standards and
interpretations
A number of new standards and
amendments to standards and interpretations will be effective for
future years and, therefore, have not been applied in preparing
these Consolidated Financial Statements. These standards are not
expected to have a material impact on the Group in the current or
future reporting periods, on foreseeable future transactions or
disclosures other than as identified below:
Standard or Interpretation
|
Periods commencing on or after
|
IFRS S1 - General Requirements for
Disclosure of Sustainability-related Financial
Information
|
1 January 2024
|
IFRS S2 - Climate-related
Disclosures
|
1 January 2024
|
IFRS S1 and IFRS S2 are not expected to have a material impact on
the results of the Group other than to expand on climate related
disclosures within the Financial Statements. It is anticipated that
transition reliefs for comparative information prior to the first
year of adoption will be utilised.
Current versus non-current classification
The Group presents assets and
liabilities in the consolidated statement of financial position
based on current/non-current classification. An asset is
current when it is:
· Expected to be realised or intended to be sold or consumed in
the normal operating cycle.
· Held
primarily for the purpose of trading.
· Expected to be realised within twelve months after the
reporting date.
All other assets are classified as
non-current.
Due to their short-term nature,
the carrying value of cash and cash equivalents, trade and other
receivables approximates their fair value.
Basis of
consolidation
Subsidiaries
Where the Company has control over
an investee, it is classified as a subsidiary. The Company controls
an investee if all three of the following elements are present:
power over the investee, exposure to variable returns from the
investee, and the ability of the investor to use its power to
affect those variable returns. Control is reassessed whenever facts
and circumstances indicate that there may be a change in any of
these elements of control.
The consolidated financial
statements present the results of the Company and its subsidiaries
as if they formed a single entity. Intercompany transactions and
balances between group companies are therefore eliminated in
full.
The consolidated financial
statements incorporate the results of business combinations using
the acquisition method. In the consolidated statement of
financial position, the acquiree's identifiable assets, liabilities
and contingent liabilities are initially recognised at their fair
values at the acquisition date. The results of acquired operations
are included in the consolidated statement of comprehensive income
from the date on which control is obtained. They are
deconsolidated from the date on which control
ceases.
Non-controlling interests
The Group recognises
non-controlling interests in an acquired entity either at fair
value or at the non-controlling interest's proportionate share of
the acquired entity's net identifiable assets. This decision is
made on an acquisition-by-acquisition basis. For the
non-controlling interests in First Mortgage Direct Limited, Project
Finland Topco Limited, Vita Financial Limited and Aux Group
Limited, the Group elected to recognise the non-controlling
interests at its proportionate share of the acquired net
identifiable assets. There are no other non-controlling interests.
See note 1 for the Group's accounting policies for business
combinations.
Associates
Where the Group has the power to
participate in, but not control the financial and operating policy
decisions of another entity, it is classified as an associate where
the group holds between 20% and 49% of the voting rights.
Associates are initially recognised in the consolidated statement
of financial position at cost. Subsequently, associates are
accounted for using the equity method, where the Group's share of
post-acquisition profits and losses and other comprehensive income
is recognised in the consolidated statement of comprehensive income
(except for losses in excess of the Group's investment in the
associate unless there is an obligation to make good those
losses).
Accounting policies for
equity-accounted investees have been adjusted to conform the
accounting policies of the associate to the Group's accounting
policies. Profits and losses arising on transactions between the
Group and its associates are recognised only to the extent of
unrelated investors' interests in the associate. The investor's
share in the associate's profits and losses resulting from these
transactions is eliminated against the carrying value of the
associate.
Any premium paid for an associate
above the fair value of the Group's share of the identifiable
assets, liabilities and contingent liabilities acquired is
capitalised and included in the carrying amount of the associate.
Where there is objective evidence that the investment in an
associate has been impaired the carrying amount of the investment
is tested for impairment. More information on the impairment of
associates is included in note 2.
Joint ventures
The Group accounts for its
interests in joint ventures in the same manner as investments in
associates (i.e. using the equity method).
Any premium paid for an investment
in a joint venture above the fair value of the Group's share of the
identifiable assets, liabilities and contingent liabilities
acquired is capitalised and included in the carrying amount of the
investment in the joint venture. Where there is objective evidence
that the investment in a joint venture has been impaired the
carrying amount of the investment is tested for impairment in the
same way as other non-financial assets.
Property, plant and equipment
Items of property, plant and
equipment are initially recognised at cost. As well as the
purchase price, cost includes directly attributable
costs.
Depreciation is provided on all
items of property, plant and equipment, except freehold land at
rates calculated to write off the cost of each asset on a
straight-line basis over their expected useful lives, as
follows:
Freehold
land
not depreciated
Freehold
buildings
36 years
Fixtures and
fittings
5 and 10 years
Computer
equipment 3 years
Gains and losses on disposal are
determined by comparing the proceeds with the carrying amount and
are recognised in the income statement. The Directors reassess the
estimated residual values and useful economic lives of the assets
at least annually.
Goodwill
Goodwill represents the excess of
a cost of a business combination over the Group's interest in the
fair value of identifiable assets under IFRS 3 Business
Combinations.
Goodwill is allocated to
cash-generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the
business combination in which the goodwill arose. The units or
groups of units are identified at the lowest level at which
goodwill is monitored for internal management purposes.
Goodwill is capitalised as an
intangible asset with any impairment in carrying value being
charged to the consolidated statement of comprehensive income.
Where the fair value of identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration paid,
the excess is credited in full to the consolidated statement of
comprehensive income on the acquisition date.
Other intangible assets
Intangible assets other than
goodwill acquired by the Group comprise licences, the website
software, acquired technology, customer and member relationships,
lender and introducer relationships and trademarks and brands and
are stated at cost less accumulated amortisation and impairment
losses.
Software development can include
both third party costs and internally generated costs. Internally
generated costs are only capitalised once development of the
intangible has commenced, where technical feasibility of the
project has been confirmed, and where it is probable the asset will
generate future economic benefits. All costs prior to this are
expensed in the period. Software development assets that are not in
use are tested for impairment on an annual basis.
Amortisation is
charged to the consolidated statement of comprehensive income on a straight-line basis
over the period of the licence agreements or expected useful life
of the asset and is charged once the asset is in use. The Group
reviews the expected useful lives of assets with a finite life at
least annually.
Amortisation, which is reviewed
annually, is provided on intangible assets to write off the cost of
each asset on a straight-line basis over its expected useful life
as follows:
Licences
6 years
Website
3 years
Software
development
3 years
Acquired
technology
10 years
Customer relationships
5 to 9 years
Trademarks and brands
3 to 11 years
Lender and introducer
relationships
14 years
Member relationships
3 years
Impairment of non-financial assets
Impairment tests on goodwill and
other intangible assets with indefinite useful economic lives are
undertaken annually at the financial year end or whenever events or
changes in circumstances indicate that their carrying amount may
not be recoverable. Other intangible assets are tested for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Where the carrying
value of the asset exceeds its recoverable amount (i.e. the higher
of value in use and fair value less costs to sell), the asset is
written down accordingly.
Where it is not possible to
estimate the recoverable amount of an individual asset, the
impairment test is carried out on the smallest group of assets to
which it belongs for which there are separately identifiable cash
flows, its cash generating units ('CGUs'). Goodwill is
allocated on initial recognition to each of the Group's CGUs that
are expected to benefit from the synergies of the combination
giving rise to the goodwill.
Impairment charges are included in
profit or loss except to the extent that they reverse gains
previously recognised in other comprehensive income. An impairment
loss for goodwill is not reversed.
Financial assets
In the consolidated statement of
financial position, the Group classifies its financial assets as at
amortised cost only if both of the following criteria are
met:
· the
asset is held within a business model whose objective is to collect
the contractual cash flows; and
· the
contractual terms give rise to cash flows that are solely payments
of principal and interest.
All other financial assets are
classified as fair value through profit or loss.
Loans and trade receivables
Loans and trade receivables are
non-derivative financial assets with fixed or determinable payments
which arise principally through the Group's trading activities, and
these assets arise principally to collect contractual cash flows
and the contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised
cost using the effective interest rate method, less provision for
impairment.
Impairment provisions for trade
receivables are recognised based on the simplified approach within
IFRS 9 using the lifetime expected credit losses. During this
process the probability of the non-payment of the trade receivables
is assessed on an individual receivable balance. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within cost of sales in the consolidated
statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
Impairment provisions for loans to
associates and other parties are recognised based on a
forward-looking expected credit loss model. The methodology used to
determine the amount of the provision is based on whether there has
been a significant increase in credit risk since initial
recognition of the financial asset. For those where the
credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For
those for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised.
Investments in non-listed equity shares
Investments in non-listed shares
are non-derivative financial assets, and are carried at fair value,
with gains and losses arising from changes in fair value taken
directly to the consolidated statement of comprehensive
income.
Derivative financial instruments
Derivative financial instruments
comprise option contracts to acquire additional ordinary share
capital of associates of the Group. Derivative financial assets are
carried at fair value, with gains and losses arising from changes
in fair value taken directly to the statement of comprehensive
income. Fair values of derivatives are determined using valuation
techniques, including option pricing models.
Financial liabilities
Trade and other payables are
recognised initially at fair value and subsequently carried at
amortised cost.
Loans and other borrowings
Loans and other borrowings
comprise the Group's bank loans including any bank overdrafts.
Loans and other borrowings are recognised initially at fair value
net of any directly attributable transaction costs. After initial
recognition, loans and other borrowings are subsequently carried at
amortised cost using the effective interest calculation
method.
Leases
The Group's leasing
activities and how they are accounted for
The Group leases a number of
properties from which it operates and office equipment. Rental
contracts are typically made for fixed periods of five to ten
years, with break clauses negotiated for some of the
properties.
Contracts may contain both lease
and non-lease components. The Group allocates the consideration in
the contract to the lease and non-lease components based on their
relative stand-alone prices.
The Group adopted the modified
transition approach and from 1 January 2019, all leases are
accounted for by recognising a right of use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group, except for:
· leases of low value assets; and
· leases with a duration of 12 months or less
Payments associated with
short-term leases and leases of low value assets will continue to
be recognised on a straight-line basis as an expense in the
statement of comprehensive income. Low value assets within the
Group comprise of IT equipment.
Assets and liabilities arising
from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease
payments:
· fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
· variable lease payments that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date; and
· payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under
reasonably certain extension options are also included in the
measurement of the liability. The lease
payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the Group's incremental
borrowing rate is used, being the rate that the Group would have to
pay to borrow the funds necessary to obtain an asset of similar
value to the right of use asset in a similar economic environment
with similar terms, security and conditions.
To determine the incremental
borrowing rate, the Group:
·
where possible, uses recent third-party financing
received by the individual lessee as a starting point, adjusted to
reflect changes in financing conditions since third party financing
was received;
·
where it does not have recent third-party
financing, the Group uses a build-up approach that starts with a
risk-free interest rate adjusted for credit risk for leases held by
the Group; and
·
makes adjustments specific to the lease, e.g.
term, country and security.
Lease payments are allocated
between principal and finance cost. The finance cost is charged to
profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period.
Right of use assets are measured
at cost comprising the following:
·
the amount of the initial measurement of lease
liability,
·
any lease payments made at or before the
commencement date less any lease incentives received,
and
·
any initial direct costs.
Right of use assets are
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis. The Group does not revalue its
land and buildings that are presented within property, plant and
equipment, and has chosen not to do so for the right of use
buildings held by the Group.
Variable lease
payments
The Group is exposed to potential
future increases in variable lease payments based on an index or
rate, which are not included in the lease liability until they take
effect. When adjustments to lease payments based on an index or
rate take effect, the lease liability is reassessed and adjusted
against the right of use asset.
Extension and termination
options
Termination options are included
in a number of the leases across the Group. These are used to
maximise operational flexibility in terms of managing the assets
used in the Group's operations. The majority of termination options
held are exercisable only by the Group and not by the respective
lessor.
In determining the lease term,
management considers all facts and circumstances that create an
economic incentive to exercise an extension option, or not exercise
a termination option. Extension options (or periods after
termination options) are only included in the lease term if the
lease is reasonably certain to be extended (or not
terminated).
For leases of property, the
following factors are normally the most relevant:
· If
there are significant penalties to terminate, the Group is
typically reasonably certain not to terminate.
· If
any leasehold improvements are expected to have a significant
remaining value, the Group is typically reasonably certain to not
terminate.
· Otherwise, the Group considers other factors including
historical lease durations and the costs and business disruption
required to replace the leased asset. Most extension options
in offices have not been included in the lease liability, because
the Group could replace the assets without significant cost or
business disruption.
Remeasurement
The Group will remeasure a lease
when there has been a contractual variation that amends the scope
or length of the lease or in cases where there is a change in the
Group's intention to exercise a break option or clause that exists
in the contract. The lease liability will be remeasured using the
new interest rate implicit in the lease or a revised incremental
borrowing rate if the interest rate implicit in the lease isn't
readily determined.
When the lease liability is
remeasured, an equivalent adjustment is made to the right of use
asset unless its carrying amount is reduced to nil, in which case
any remaining amount is recognised within administrative expenses
within the consolidated statement of comprehensive
income.
Business combinations and goodwill
Business combinations are
accounted for using the acquisition method. The cost of an
acquisition is measured as the aggregate of the consideration
transferred, which is measured at acquisition date fair value, and
the amount of any non-controlling interests in the acquiree. For
each business combination, the Group elects whether to measure the
non-controlling interests in the acquiree at fair value or at the
proportionate share of the acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
When the Group acquires a
business, it assesses the financial assets and liabilities assumed
for appropriate classification and designation in accordance with
the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation
of embedded derivatives in host contracts by the
acquiree.
Any contingent consideration to be
transferred by the acquirer will be recognised at fair value at the
acquisition date. Contingent consideration classified as equity is
not remeasured and its subsequent settlement is accounted for
within equity. Contingent consideration classified as a liability
that is a financial instrument and within the scope of IFRS 9
Financial Instruments, is measured at fair value with the changes
in fair value recognised in the statement of profit or loss in
accordance with IFRS 9. Other contingent consideration that
is not within the scope of IFRS 9 is measured at fair value at each
reporting date with changes in fair value recognised in profit or
loss.
Goodwill is initially measured at
cost (being the excess of the aggregate of the consideration
transferred and the amount recognised for non-controlling interests
and any previous interest held over the net identifiable assets
acquired and liabilities assumed). If the fair value of the
net assets acquired is in excess of the aggregate consideration
transferred, the Group re-assesses whether it has correctly
identified all of the assets acquired and all of the liabilities
assumed and reviews the procedures used to measure the amounts to
be recognised at the acquisition date. If the reassessment
still results in an excess of the fair value of net assets acquired
over the aggregate consideration transferred, then the gain is
recognised in the consolidated statement of comprehensive
income.
After initial recognition,
goodwill is measured at cost less any accumulated impairment
losses. For the purpose of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows from
other assets or groups of assets (cash-generating
units).
Where goodwill has been allocated
to the Group's cash-generating units (CGUs) and part of the
operation within the unit is disposed of, the goodwill associated
with the disposed operation is included in the carrying amount of
the operation when determining the gain or loss on disposal.
Goodwill disposed in these circumstances is measured based on the
relative values of the disposed operation and the portion of the
cash generating unit retained.
If the business combination is
achieved in stages, the acquisition date carrying value of the
acquirer's previously held equity interest in the acquiree is
remeasured to fair value at the subsequent acquisition date. Any
gains or losses arising from such remeasurement are recognised in
profit or loss.
Where a business combination is
for less than the entire issued share capital of the acquiree and
there is an option for the acquirer to purchase the remainder of
the issued share capital of the business and/or for the vendor to
sell the rest of the entire issued share capital of the business to
the acquirer, then the acquirer will assess whether a
non-controlling interest exists and also whether the instrument(s)
fall within the scope of IFRS 9 Financial Instruments and is/are
measured at fair value with the changes in fair value recognised in
the statement of profit or loss in accordance with IFRS
9.
Options that are not within the
scope of IFRS 9 and are linked to service will be accounted for
under IAS 19 Employee Benefits and/or IFRS 2 Share-based Payments
as appropriate.
IFRS 3 prohibits the recognition
of contingent assets acquired in a business combination. No
contingent assets are recognised by the Group in business
combinations even if it is virtually certain that they will become
unconditional or non-contingent.
Provisions
A provision is recognised in the
statement of financial position when the Group has a present legal
or constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to
settle the obligation.
Share capital
Financial instruments issued by
the Group are treated as equity only to the extent that they do not
meet the definition of a financial liability. The Company's
ordinary shares are classified as equity instruments. Incremental
costs directly attributable to the issue of new shares are shown in
share premium as a deduction from the proceeds.
Revenue
The Group recognises revenue from
the following main sources:
• Mortgage
procuration fees paid to the Group
by lenders either via the L&G Mortgage Club or
directly
• Insurance
commissions from advised sales of
protection and general insurance policies
• Client
fees paid by the underlying
customer for the provision of advice on mortgages, other loans and
protection
• Other
Income comprising income from
services provided to directly authorised entities, fees in relation
to Later Life lending and Wealth and ancillary services such as
conveyancing and surveying
Mortgage procuration fees,
insurance commissions and client fees are included at the amounts
received by the Group in respect of all services provided. The
Group operates a revenue share model with its trading partners and
therefore commissions are paid in line with the Group revenue
recognition policy and are included in cost of sales.
Mortgage procuration fees are
recognised at a point in time when commission is approved for
payment by the L&G Mortgage Club or direct from the lender,
which is the point at which all performance obligations have been
met.
Insurance commissions are
recognised at a point in time when the policy is accepted by the
insurer. Life insurance commissions are paid on an indemnity basis,
mainly over a four year period. If a policy is cancelled during the
indemnity period, part of the commission received may have to be
repaid to the provider. A clawback liability is recognised for the
expected level of commissions repayable with the liability movement
recognised as an offset against revenue recognised in the
period. More information on the clawback liability is
included in note 2(e).
Client fees and Other income is
recognised at a point in time when payment is received or
guaranteed to be received, as until this point it is not possible
to be certain that the performance obligation has been
satisfied.
Taxation
Income tax comprises current and
deferred tax. Income tax is recognised in the consolidated
statement of comprehensive income. Other than if it relates to
items recognised directly in equity in which case it is also
recognised directly in equity.
Current tax is the expected tax
payable on the taxable income for the year using tax rates enacted
or substantively enacted by the statement of financial position
date and any adjustment to tax payable in respect of previous
years.
Deferred tax is provided using the
liability method on temporary differences between the tax bases of
assets and liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax assets and
liabilities are recognised for all taxable temporary differences,
except for when:
· The
difference arises from the initial recognition of goodwill or an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss.
• In respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in joint
arrangements, deferred tax assets are recognised only to the extent
that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred
tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that enough taxable profit
will be available to allow all or part of the deferred tax asset to
be utilised. Unrecognised deferred tax assets are re-assessed at
each reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the deferred
tax asset to be recovered.
Deferred tax assets and
liabilities are measured at the tax rates that are expected to
apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the reporting date.
Deferred tax relating to items
recognised outside profit or loss is recognised outside profit or
loss. Deferred tax items are recognised in correlation to the
underlying transaction either in OCI or directly in
equity.
Tax benefits acquired as part of a
business combination, but not satisfying the criteria for separate
recognition at that date, are recognised subsequently if new
information about facts and circumstances change. The adjustment is
either treated as a reduction in goodwill (as long as it does not
exceed goodwill) if it was incurred during the measurement period
or recognised in profit or loss.
Deferred tax assets and
liabilities are offset when the Group has a legally enforceable
right to offset current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by the same tax
authority on either:
• the same taxable group company; or
• different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
Segment reporting
An operating segment is a
distinguishable segment of an entity that engages in business
activities from which it may earn revenues and incur expenses and
whose operating results are reviewed regularly by the entity's
chief operating decision maker (CODM). The Board reviews the
Group's operations and financial position as a whole and therefore
considers that it has only one operating segment, being the
provision of financial services operating solely within the UK. The
information presented to the CODM directly reflects that presented
in the financial statements and they review the performance of the
Group by reference to the results of the operating segment against
budget.
Operating profit is the profit
measure, as disclosed on the face of the consolidated statement of
comprehensive income that is reviewed by the CODM.
Dividends
Dividends are recognised when they
become legally payable. In the case of interim dividends to equity
shareholders, this is when they are paid. In the case of
final dividends, this is when they are approved by the
shareholders.
Share-based payments
a) Equity-settled transactions
Where equity-settled share options
are awarded to employees, the fair value of the options at the date
of grant is charged to the statement of comprehensive income over
the vesting period. Non-market vesting conditions are taken into
account by adjusting the number of equity instruments expected to
vest at each reporting date so that, ultimately, the cumulative
amount recognised over the vesting period is based on the number of
options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied.
Where the terms and conditions of
options are modified before they vest, the increase in the fair
value of the options, measured immediately before and after the
modification, is also charged to the statement of comprehensive
income over the remaining vesting period.
Where options are granted to
persons other than employees, the statement of comprehensive income
is charged with the fair value of the options at the date of the
grant over the vesting period.
b) Acquisition related Cash-settled
transactions
A liability is recognised for the
fair value of cash-settled transactions. The fair value is measured
initially at the date of the grant and is subsequently remeasured
at each reporting date up to and including the settlement date. The
fair value is expensed over the period until the vesting date with
a corresponding increase in liabilities. The fair value is
determined using a discounted net present value model, with
estimates over service and performance conditions updated to
reflect management's best estimate of the awards expected to vest
at each reporting date.
2 Critical
accounting estimates and judgements
The Group makes certain estimates
and assumptions regarding the future. Estimates and judgements are
continually evaluated based on historical experience and other
factors, including expectations of future events that are believed
to be reasonable under the circumstances. In the future,
actual experience may differ from these estimates and assumptions.
The Directors consider that the estimates and judgements that have
the most significant effect on the carrying amounts of assets and
liabilities within the financial statements are set out
below.
(a) Acquisitions
and business combinations
When an acquisition arises, the
Group is required under UK-adopted International Accounting
Standards to calculate the Purchase Price Allocation ("PPA"). The
PPA requires companies to report the fair value of assets and
liabilities acquired and it establishes useful lives for identified
assets. The identification and the valuation of the assets
and liabilities acquired involves estimation and judgement when
determining whether the recognition criteria are met.
Subjectivity is also involved in
the PPA with the estimation of the future value of relationships,
technology, brand and goodwill. The fair value of separately
identifiable intangible assets acquired during the year was £nil
(2022: £55.4m), with the key assumptions used to calculate these
fair values being those around the estimated useful lives of the
acquired introducer relationships and technology, the estimated
future cash flows expected to arise from these relationships and
technology and the appropriate discount rate to be used to discount
these cash flows to their present value. Residual goodwill
totalling £nil (2022: £38.7m) has been accounted for during the
year.
(b) Fair value of
put and call options in connection with
acquisitions
When the Group makes an
acquisition of less than 100% of the entire issued share capital of
an entity, in certain cases it has entered into a put and call
option agreement to acquire the remaining share capital of that
entity after a certain amount of time. The fair value of the put
and call option will need to be determined in accounting for the
instrument which involves certain estimates regarding the future
financial performance of the entity, including EBITDA or profit
before tax, as well as the use of an appropriate discount rate. The
fair value of the options are recognised as either a Redemption
Liability in Note 5 or within accruals in Note 20.
The carrying value of the
liabilities relating to acquisition options, recorded within Note
20 under accruals, are as follows:
|
2023
|
|
2022
|
|
IAS19 Service Charge
Accrual
(£'000)
|
IFRS 2 Option Charge
Accrual
(£'000)
|
|
IAS19
Service Charge Accrual
(£'000)
|
IFRS 2
Option Charge Accrual
(£'000)
|
First Mortgage Direct
Ltd
|
1,925
|
-
|
|
1,477
|
-
|
Project Finland Topco
Ltd
|
-
|
441
|
|
-
|
491
|
Aux Group Ltd
|
-
|
138
|
|
-
|
7
|
Total
|
1,925
|
579
|
|
1,477
|
498
|
(c) Impairment of
intangible assets
For the purposes of impairment
testing, acquired relationships, technology, brands, goodwill and
other intangibles are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units).
Impairment tests on goodwill and
other intangible assets with indefinite useful economic lives are
undertaken annually at the financial year end or whenever events or
changes in circumstances indicate that their carrying amount may
not be recoverable. Other intangible assets are tested for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. The recoverable
amount of the assets is the higher of an asset's or CGU's fair
value less cost of disposal and its value in use.
Value in use calculations are
utilised to calculate recoverable amounts of a CGU. Value in use is
calculated as the net present value of the projected pre-tax cash
flows of the CGU in which the relationships, technology and brand
is contained. The net present value of cash flows is calculated by
applying a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
that asset.
The key assumptions used in
respect of value in use calculations are those regarding growth
rates and anticipated changes to revenues and expenses during the
period covered by the calculations. Changes to revenue and
expenses are based upon management's expectation and actual
outcomes may vary. Forecast cash flows are
derived from the Group's forecast model, extrapolated for future
years, and assume a terminal growth rate of 3.5% (2022: 5.0%),
which management considers reasonable given the Group's historic
growth rates and its market share growth model.
The Group is required to test, on
an annual basis, whether goodwill has suffered any impairment.
The recoverable amount is determined based on value in use
calculations. The use of this method requires the estimation of
future cash flows and the choice of a discount rate in order to
calculate the present value of the cash flows. Actual outcomes may
vary. More information including carrying values is included in
note 14.
(d) Impairment of
trade and other receivables
Judgement is required when
determining if there is any impairment to the trade and other
receivable balances, and the Group
uses the simplified approach for trade
receivables within IFRS 9 using the lifetime expected credit
losses. During this process judgements about the probability of the
non-payment of the trade receivables are made.
In considering impairment
provisions for loans to associates the forward-looking expected
credit loss model is used. In determining the lifetime
expected credit losses for loans to associates, the Group has taken
into account the effect of geopolitical and macroeconomic
uncertainty and inflationary pressures and their impact on the UK
property and lending markets, and considered different scenarios for repayments of these loans and have
also estimated percentage probabilities assigned to each scenario
for each associate where applicable. More
information is included in note 18.
(e) Clawback
liability
The liability relates to the
estimated value and timing of repaying commission received up front
on protection policies that may lapse in a period of up to four
years following inception. The liability balance is calculated
using a model that has been developed over several years. The model
uses a number of factors including the total 'unearned' commission
(i.e. that could still be subject to clawback) at the point of
calculation, the age profile of the commission received, estimates
of future lapse rates, and the success of the Appointed
Representatives in preventing lapses and/or generating new income
at the point of a lapse.
The key uncertainties in the
calculation are driven by lapse rates and recovery rates. A 0.5%
change (absolute) in lapse rates causes a £0.5m change in the
liability. A 2% change (absolute) in the recoveries rate causes
a £0.2m change in
the liability. More information is included in note 23.
(f) Investments in associates
The Group is required to consider
whether any investments in associates have suffered any
impairment.
The Group uses two methods to test
for impairment,
· Net
Present Value of the next 5 year's projected free cash flow and
terminal value.
· Valuation of business on a multiple basis.
The use of both methods requires
the estimation of future cash flows, future profit before tax and
choice of discount rate. Actual outcomes may vary. Where the
carrying amount in the consolidated statement of financial position
is in excess of the estimated value, the Group will make an
impairment charge against the investment value and charge this
amount to the consolidated statement of comprehensive income under
impairment and amount written off associates.
The Group continues to make
investments in associates, with elements of contingent
consideration in some cases, as well as enter into commitments or
option agreements to increase its stake or fully acquire certain
associates. In accounting for these, the Group has had to
make certain estimates on the amounts of contingent consideration
likely to be payable and also the future performance and value of
these businesses in determining the fair value of the
options.
(g)
Share options,
employer's National Insurance Contributions and Deferred
Tax
Under the Group's equity-settled
share-based remuneration schemes (see note 30), estimates are made
in assessing the fair value of options granted. The fair value is
spread over the vesting period in accordance with IFRS 2. The Group
engages an external expert in assessing fair value, both
Black-Scholes and Stochastic models are used, and estimates are
made as to the Group's expected dividend yield and the expected
volatility of the Group's share price.
In addition, the Group estimates
the employer's National Insurance Contributions that will fall due
on exercise of options and provides for this over the vesting
period. In doing so, estimates as to the share price at vesting and
the proportion of options from each grant that will vest are made
with reference to the Group's prospects.
Deferred tax assets include
temporary timing differences related to the issue and exercise of
share options. Recognition of the deferred tax assets assigns an
estimate of the proportion of options likely to vest and an
estimate of share price at vesting. The carrying amount of deferred
tax assets relating to share options as at 31 December 2023 was
£1.4m (2022: £1.0m). This has been presented net of other Group
deferred tax liabilities in the consolidated statement of financial
position.
3
Revenue
The Group operates in one segment
being that of the provision of financial services in the UK.
Revenue is derived as follows:
|
2023
£'000
|
|
2022
£'000
|
Mortgage procuration
fees
|
98,033
|
|
106,615
|
Protection and general insurance
commission
|
93,144
|
|
82,095
|
Client fees
|
43,325
|
|
36,257
|
Other income
|
5,031
|
|
5,853
|
|
|
239,533
|
|
230,820
|
|
|
|
|
|
4 Cost of
sales
Costs of sales are as
follows:
|
2023
|
2022
|
|
£'000
|
£'000
|
Commissions paid
|
130,934
|
142,769
|
Fluent affinity partner
payments
|
14,481
|
8,000
|
Impairment of trade
receivables
|
(22)
|
102
|
Other cost of sales
|
1,214
|
601
|
Wages and salary costs
|
22,764
|
16,401
|
|
|
169,371
|
167,873
|
|
|
|
|
Wages and salary costs
|
2023
£'000
|
2022
£'000
|
|
|
|
Gross wages
|
19,633
|
14,001
|
Employers' national
insurance
|
2,046
|
1,530
|
Defined contribution pension
costs
|
734
|
570
|
Other direct costs
|
351
|
300
|
|
22,764
|
16,401
|
5
Acquisition
related costs, acquisition of minority interests and redemption
liability
Acquisition related
costs
First Mortgage Direct
Limited
On 2 July 2019 Mortgage Advice
Bureau (Holdings) plc acquired 80%
of the entire issued share capital of First
Mortgage Direct Limited ("First Mortgage").
Costs relating to the amortisation
of acquired intangibles amounted to £367,000 (2022: £367,000) in
the year ended 31 December 2023. There is a put and call option
over the remaining 20% of the issued share capital of First
Mortgage which has been accounted for under IAS 19 Employee
Benefits and IFRS 2 Share-based Payments due to its link to the
service of First Mortgage's Managing Director.
The costs relating to this
acquisition for the year are made up as follow:
|
|
|
2023
£'000
|
2022
£'000
|
Amortisation of acquired
intangibles
|
367
|
367
|
Option costs (IAS 19)
|
448
|
436
|
Option costs (IFRS 2)
|
409
|
409
|
Total costs
|
1,224
|
1,212
|
The Fluent Money Group
Limited
On 28 March 2022 Mortgage Advice
Bureau (Holdings) plc acquired 75.4% of the entire issued share capital
of Project Finland Topco Limited which indirectly owns 100% of The
Fluent Money Group Limited ("Fluent").
Further acquisitions of minority interests
April 2023
On 11 April 2023, Mortgage Advice
Bureau Ltd acquired a further 0.8% of the ordinary share capital of
Project Finland Topco Limited for £188,967 taking its shareholding
to 76.2%. This resulted in a reduction in the redemption liability
of £94,484 relating to the consideration element of the
transaction. The equity settled remuneration element resulted in an
acceleration of equity settled option costs of £151,674 and
reduction in parent equity of £47,242. The cash settled
remuneration element resulted in additional option costs of
£36,549. Further to this, £140,067 of accumulated non-controlling
interest was transferred to retained earnings representing the
relevant proportion of non-controlling interest at the purchase
date.
December 2023
On 19 December 2023, Mortgage
Advice Bureau Ltd acquired a further 8.1% of the ordinary share
capital of Project Finland Topco Limited for £1,991,616 taking its
shareholding to 84.3%. Half of the payment was made in 2023, with
the balance deferred, split equally and payable in December 2024
and December 2025. This resulted in a reduction in the redemption
liability of £995,808 relating to the consideration element of the
transaction. The equity settled remuneration element resulted in an
acceleration of equity settled option costs of £1,598,566 and
reduction in parent equity of £497,904. The cash settled
remuneration element resulted in additional option costs of
£385,205. Further to this, £1,346,893 of accumulated
non-controlling interest was transferred to retained earnings
representing the relevant proportion of non-controlling interest at
the purchase date.
A summary of the cash flows and
deferred elements relating to the acquisition of minority interests
in the year is as follows:
|
Paid in
cash
£'000
|
Deferred
£'000
|
Total
£'000
|
Consideration - financing
activities
|
593
|
498
|
1,091
|
Remuneration - operating
activities
|
592
|
498
|
1,090
|
Total costs
|
1,185
|
996
|
2,181
|
The deferred amounts are
recognised in accruals within trade and other payables
Put and call options
There is a put and call option
over the remaining 15.7% of the issued share capital of Fluent
which has been accounted for under IAS 32 Financial Instruments and
IFRS 2 Share-based Payments, as respectively a proportion is
treated as consideration under IAS 32, with the balance treated as
remuneration under IFRS 2, because the amount payable on exercise
of the option consists of a non-contingent element, and an element
that is contingent upon continued employment of the option holders
within the Group. There is also a put and call option over certain
growth shares that have been issued to Fluent's wider management
team that has been accounted for under IFRS 2 Share-based Payments
as exercise is solely contingent upon continued
employment.
The costs relating to this
acquisition for the period are made up as follow:
|
|
|
2023
£'000
|
2022
£'000
|
Amortisation of acquired
intangibles
|
4,399
|
2,127
|
Option costs (IFRS 2)
|
3,289
|
1,147
|
Acquisition related
costs
|
159
|
2,610
|
Total costs
|
7,847
|
5,883
|
Vita Financial
Limited
On 12 July 2022 Mortgage Advice
Bureau (Holdings) plc increased its stake in Vita Financial Limited
("Vita") from 49% to 75% of the entire issued share
capital.
The costs relating to this
acquisition for the period are made up as follow:
|
|
|
2023
£'000
|
2022
£'000
|
Amortisation of acquired
intangibles
|
65
|
33
|
Acquisition related
costs
|
-
|
15
|
Total costs
|
65
|
48
|
Aux Group
Limited
On 3 November 2022 Mortgage Advice
Bureau (Holdings) plc acquired 75% of the entire issued share
capital of Aux Group Limited ("Auxilium").
There is a put and call option
over the remaining 25% of the issued share capital of Aux Group
Limited which has been accounted for under IAS 32 Financial
Instruments and IFRS 2 Share-based Payments, as respectively a
proportion is treated as consideration under IAS 32, with the
balance treated as remuneration under IFRS 2 because the amount
payable on exercise of the option consists of a non-contingent
element, and an element that is contingent upon continued
employment of the option holder within the Group.
The costs relating to this
acquisition for the period are made up as follow:
|
|
|
2023
£'000
|
2022
£'000
|
Amortisation of acquired
intangibles
|
329
|
55
|
Option costs (IFRS 2)
|
131
|
7
|
Acquisition related
costs
|
-
|
130
|
Total costs
|
460
|
192
|
Remeasurement of redemption
liability
At 31 December 2023, the expected
cash flows relating to the redemption liability were remeasured
resulting in gain of £4.5m included within the consolidated
statement of comprehensive income. £1.2m has been included within
finance expenses relating to the unwinding of the redemption
liability from the end of the prior year.
Carrying value of redemption liability
|
|
|
2023
£'000
|
2022
£'000
|
Balance as at 1 Jan
|
7,186
|
-
|
Redemption liability arising on
acquisition
|
-
|
6,540
|
Purchase of additional minority
interest in Fluent
|
(1,090)
|
-
|
Gain on remeasurement
|
(4,486)
|
-
|
Unwinding of redemption
liability
|
1,183
|
646
|
Balance as at 31 Dec
|
2,793
|
7,186
|
Redemption liabilities are in
respect of the put and call options relating to the Fluent and
Auxilium acquisitions and are £2.4m (2022: £7.0m) and £0.4m (2022:
£0.2m) respectively.
The total costs relating to the
four acquisitions above that are included in the consolidated
statement of comprehensive income are as follows:
|
|
|
2023
£'000
|
2022
£'000
|
Amortisation of acquired
intangibles
|
5,160
|
2,582
|
Option costs (IFRS 2 and IAS
19)
|
4,277
|
1,999
|
Acquisition related
costs
|
159
|
2,755
|
Total costs
|
9,596
|
7,336
|
The Fluent minority interest
purchase during the year resulted in £1.8m accelerated equity
settled option costs and £0.4m additional cash settled option
costs.
6 Operating
profit
Operating profit is stated after
the following items:
|
Note
|
2023
£'000
|
2022
£'000
|
Depreciation of property, plant
and equipment
|
12
|
1,225
|
591
|
Depreciation of right of use
assets
|
13
|
857
|
563
|
Impairment of right of use
assets
|
13
|
428
|
-
|
Amortisation of acquired
intangibles
|
5,
14
|
5,160
|
2,582
|
Amortisation of other
intangibles
|
14
|
310
|
284
|
Costs related to
acquisition options
|
5
|
4,277
|
1,999
|
Costs related to
acquisitions
|
5
|
159
|
2,755
|
Costs related to
restructuring
|
|
539
|
-
|
Impairment and amounts written off
non-listed equity investments
|
16
|
-
|
2,783
|
Gain on fair value measurement of
contingent consideration
|
15
|
-
|
(884)
|
Loss on fair value measurement of
derivative financial instruments
|
15
|
190
|
18
|
Profits from associates are
disclosed as part of the operating profit as this is the
operational nature of the Group.
|
2023
£'000
|
2022
£'000
|
Auditor remuneration:
|
|
|
Fees payable to the Group's
auditor for the audit of the Group's financial
statements.
|
571
|
312
|
Fees payable to the Group's
auditor and its associates for other services:
|
|
|
Audit of the accounts of
subsidiaries
|
66
|
288
|
Audit-related assurance
services
|
133
|
55
|
|
|
|
7 Staff
costs
Staff costs, including executive
and non-executive Directors' remuneration, are as
follows:
|
2023
£'000
|
2022
£'000
|
|
|
|
Wages and salaries
|
42,753
|
32,204
|
Share-based payments (see note
30)
|
4,429
|
2,983
|
Social security costs
|
4,585
|
3,608
|
Defined contribution pension
costs
|
1,736
|
1,373
|
Other employee benefits
|
738
|
730
|
|
54,241
|
40,898
|
|
|
|
Staff costs are included in the
consolidated statement of comprehensive income as
follows:
|
2023
|
2022
|
|
£'000
|
£'000
|
Cost of sales (see note
4)
|
22,764
|
16,401
|
Administrative expenses
|
31,477
|
24,497
|
|
|
54,241
|
40,898
|
|
|
|
|
The average number of people
employed by the Group during the year was:
|
2023
Number
|
2022
Number
|
Executive Directors
|
3
|
3
|
Advisers
|
285
|
216
|
Compliance
|
106
|
98
|
Sales and marketing
|
110
|
106
|
Operations
|
497
|
367
|
Total
|
1,001
|
790
|
|
|
|
Key management compensation
Key management are those persons
having authority and responsibility for planning, directing and
controlling the activities of the Group, which are the Directors of
Mortgage Advice Bureau (Holdings) plc.
|
2023
£'000
|
2022
£'000
|
Wages and salaries
|
1,387
|
2,047
|
Share-based payments
|
159
|
441
|
Social security costs
|
181
|
280
|
Defined contribution pension
costs
|
11
|
2
|
Other employment
benefits
|
4
|
4
|
|
1,742
|
2,774
|
During the year retirement benefits were accruing to 2
Directors (2022: 2) in respect of defined contribution pension
schemes.
The total amount payable to the
highest paid Director in respect of emoluments was £580,161 (2022:
£858,176). The value of the Group's contributions paid to a defined
contribution pension scheme in respect of the highest paid Director
amounted to £nil (2022: £nil).
8 Finance income and
expenses
Finance income
|
2023
£'000
|
2022
£'000
|
Interest
income
|
291
|
102
|
Interest income accrued on loans
to associates
|
-
|
6
|
|
291
|
108
|
Finance expenses
|
2023
£'000
|
2022
£'000
|
Interest
expense
|
1,320
|
515
|
Interest expense on lease
liabilities
|
107
|
77
|
Unwinding of redemption
liability
|
1,183
|
646
|
|
2,610
|
1,238
|
During the year, interest accrued in previous years of £426,000 was
paid (2022: £nil).
The interest expense mainly
relates to the term loan and the revolving credit facility (see
note 21).
9 Income
tax
|
2023
£'000
|
|
2022
£'000
|
Current tax expense
|
|
|
|
UK corporation tax charge on
profit for the year
|
5,434
|
|
4,184
|
Total current tax
|
5,434
|
|
4,184
|
Deferred tax expense
|
|
|
|
Origination and reversal of timing
differences
|
(1,766)
|
|
291
|
Temporary difference on
share-based payments
|
51
|
|
128
|
Effect of changes in tax
rates
|
-
|
|
(29)
|
Total deferred tax (see note 24)
|
(1,715)
|
|
390
|
Total tax expense
|
3,719
|
|
4,574
|
The reasons for the difference
between the actual charge for the year and the standard rate of
corporation tax in the United Kingdom of 23.52% (2022: 19.00%)
applied to profit for the year is as follows:
|
|
2023
£'000
|
|
2022
£'000
|
Profit for the year before
tax
|
16,178
|
|
17,353
|
Expected tax charge based on
corporation tax rate
|
3,805
|
|
3,297
|
Expenses not deductible for tax
purposes
amortisation and
impairment
|
115
|
|
495
|
Research &
Development
|
(48)
|
|
(139)
|
Tax on share options
exercised
|
(89)
|
|
(27)
|
Other share option
differences
|
1,099
|
|
652
|
Adjustment to deferred tax charge
due to change in tax rate
|
-
|
|
25
|
Other differences
|
12
|
|
(5)
|
Fair value loss/(gain) on
derivative financial instruments
|
45
|
|
(70)
|
Fair value gain on contingent
consideration
|
-
|
|
(168)
|
Redemption liability
movements
|
(777)
|
|
123
|
Profits from associates
|
(199)
|
|
(135)
|
Amounts written off
investments
|
-
|
|
529
|
Fixed asset differences
|
(207)
|
|
55
|
Short term timing differences at
different tax rates
|
(22)
|
|
(54)
|
Chargeable gains
|
-
|
|
(4)
|
Utilisation of brought forward tax
losses
|
(22)
|
|
-
|
Adjustments to prior
years
|
7
|
|
-
|
Total tax expense
|
3,719
|
|
4,574
|
Options exercised during the
period resulted in a current tax credit of £0.1m (2022: nil)
recognised directly in equity relating to the current tax deduction
in excess of the cumulative share-based payment expense relating to
these options.
For the year ended 31 December
2023 the deferred tax credit relating to unexercised share options
recognised in equity was £448,826 (2022: £783,556 - charge). A
charge of £nil (2022: £16,568) was recognised in deferred tax in
equity as a result of remeasurements arising from changes to UK
corporation tax rates.
10 Earnings per
share
Basic earnings per share are
calculated by dividing net profit for the year attributable to
ordinary equity holders of the Company by the weighted average
number of ordinary shares outstanding during the year.
|
2023
|
|
2022
|
Basic earnings per share
|
£'000
|
|
£'000
|
Profit for the year attributable
to the owners of the parent
|
13,467
|
|
12,237
|
Weighted average number of shares
in issue
|
57,090,793
|
|
56,081,853
|
Basic earnings per share (in pence
per share)
|
23.6p
|
|
21.8p
|
For diluted earnings per share,
the weighted average number of ordinary shares in existence is
adjusted to include potential ordinary shares arising from share
options.
|
|
2023
|
|
2022
|
Diluted earnings per share
|
£'000
|
|
£'000
|
Profit for the year attributable
to the owners of the parent
|
13,467
|
|
12,237
|
Weighted average number of shares
in issue
|
57,434,053
|
|
56,528,515
|
Diluted earnings per share (in
pence per share)
|
23.5p
|
|
21.6p
|
The share data used in
the basic and diluted earnings per share computations are as
follows:
Weighted average number of ordinary shares
|
2023
|
|
2022
|
Issued ordinary shares at start of
year
|
57,030,995
|
|
53,204,620
|
Effect of shares issued during
year
|
59,798
|
|
2,877,233
|
Basic weighted average number of
shares
|
57,090,793
|
|
56,081,853
|
Potential ordinary shares arising
from options
|
343,260
|
|
446,662
|
Diluted weighted average number of
shares
|
57,434,053
|
|
56,528,515
|
|
|
|
|
|
The reconciliation between the
basic and adjusted figures is as follows:
|
2023
£'000
|
2022
£'000
|
2023
Basic
earnings
per share
pence
|
2022
Basic
earnings
per
share
pence
|
2023
Diluted
earnings
per share
pence
|
2022
Diluted
earnings
per
share
pence
|
Profit for the year
|
13,467
|
12,237
|
23.6
|
21.8
|
23.5
|
21.6
|
Adjustments:
|
|
|
|
|
|
|
Amortisation of acquired
intangibles
|
3,575
|
2,582
|
6.3
|
4.6
|
6.2
|
4.6
|
Costs relating to the First
Mortgage, Fluent and Auxilium options
|
3,477
|
1,715
|
6.1
|
3.1
|
6.1
|
3.0
|
Costs relating to Fluent and
Auxilium acquisitions
|
159
|
2,755
|
0.3
|
4.9
|
0.3
|
4.9
|
Gain on contingent
consideration
|
-
|
(891)
|
-
|
(1.6)
|
-
|
(1.6)
|
Loss on derivative financial
instruments
|
190
|
18
|
0.3
|
-
|
0.3
|
-
|
Amount written off non-listed
equity investment
|
-
|
2,783
|
-
|
5.0
|
-
|
4.9
|
Restructuring costs
|
412
|
-
|
0.7
|
-
|
0.7
|
-
|
Unwinding of redemption
liability
|
(3,303)
|
646
|
(5.8)
|
1.1
|
(5.8)
|
1.1
|
Profit on sale of
assets
|
-
|
(19)
|
-
|
-
|
-
|
-
|
Tax effect of
adjustments
|
(966)
|
(609)
|
(1.7)
|
(1.1)
|
(1.7)
|
(1.1)
|
Adjusted earnings
|
17,012
|
21,217
|
29.8
|
37.8
|
29.6
|
37.4
|
The Group uses adjusted results as
key performance indicators, as the Directors believe that these
provide a more consistent measure of operating performance.
Adjusted profit is therefore stated before one-off acquisition
costs and one-off restructuring costs, ongoing non-cash items
relating to the acquisitions of First Mortgage, Fluent and
Auxilium, fair value gains on financial instruments relating to
options to increase shareholding in associate businesses and
impairment of loans to related parties, net of tax.
11 Dividends
|
2023
|
2022
|
|
£'000
|
£'000
|
Dividends paid and declared on
ordinary shares during the year:
|
|
|
Final dividend for 2022:
14.7p per share
(2021: 14.7p)
|
8,384
|
8,381
|
Interim dividend for 2023:
13.4p per share
(2022: 13.4p)
|
7,654
|
7,642
|
|
|
16,038
|
16,023
|
|
|
|
|
|
|
2023
|
2022
|
|
Equity dividends on ordinary
shares:
|
£'000
|
£'000
|
|
Proposed for approval by
shareholders at the AGM:
|
|
|
Final dividend for 2023: 14.7p per
share (2022: 14.7p)
|
8,398
|
8,384
|
|
|
8,398
|
8,384
|
|
|
|
|
|
|
|
The record date for the final dividend is 26
April 2024 and the payment date is 29 May 2024. The
ex-dividend date will be 25 April 2024. The
Company statement of changes in equity shows that the Company had
positive reserves as at 31 December 2023 of £5.7m. There are
sufficient distributable reserves in subsidiary companies to pass
up to Mortgage Advice Bureau (Holdings) plc in order to pay the
proposed final dividend. The proposed final dividend for 2023 has
not been provided for in these financial statements, as it has not
yet been approved for payment by shareholders.
The final dividends paid and
declared can differ from the proposed total dividends for approval
due to (1) additional shares issued after the publication of these
accounts but before the record date and (2) the number of
unallocated shares within the Group's Share Incentive Plan that do
not receive a dividend.
12 Property, plant and
equipment
|
Freehold land
and building
£'000
|
Fixtures &
fittings
£'000
|
Computer equipment
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
As at 1 January 2023
|
2,536
|
3,681
|
1,515
|
7,732
|
Additions
|
-
|
535
|
397
|
932
|
Disposals
|
-
|
(55)
|
(262)
|
(317)
|
As at 31 December 2023
|
2,536
|
4,161
|
1,650
|
8,347
|
Depreciation
|
|
|
|
|
As at 1 January 2023
|
407
|
404
|
793
|
1,604
|
Charge for the year
|
54
|
666
|
505
|
1,225
|
Eliminated on disposal
|
-
|
(20)
|
(261)
|
(281)
|
As at 31 December 2023
|
461
|
1,050
|
1,037
|
2,548
|
|
|
|
|
|
|
Freehold land
and building
£'000
|
Fixtures &
fittings
£'000
|
Computer equipment
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
As at 1 January 2022
|
2,536
|
1,050
|
1,417
|
5,003
|
Additions
|
-
|
2,903
|
326
|
3,229
|
Acquisition of
subsidiaries
|
-
|
348
|
513
|
861
|
Disposals
|
-
|
(620)
|
(741)
|
(1,361)
|
As at 31 December 2022
|
2,536
|
3,681
|
1,515
|
7,732
|
Depreciation
|
|
|
|
|
As at 1 January 2022
|
349
|
823
|
1,164
|
2,336
|
Charge for the year
|
58
|
164
|
369
|
591
|
Eliminated on disposal
|
-
|
(583)
|
(740)
|
(1,323)
|
As at 31 December 2022
|
407
|
404
|
793
|
1,604
|
Net Book Value
As at 31 December 2023
|
2,075
|
3,111
|
613
|
5,799
|
As at 31 December 2022
|
2,129
|
3,277
|
722
|
6,128
|
As at 31 December 2021
|
2,187
|
227
|
253
|
2,667
|
|
|
|
|
|
Office refurbishment
During the prior year, the Group
undertook a refurbishment project of its head office premises
located in Derby costing £2.8m, which is included within Fixtures
and fittings. As a result of this project, the Group disposed of
assets with an original cost of £1.4m and a net book value of
£0.04m for nil consideration.
13 Right of use
assets
Leases
This note provides information for
leases where the Group is a lessee. The consolidated
statement of financial position shows the following amounts on
leases:
Right of use assets
|
|
Land and Buildings
£'000
|
Office
equipment
£'000
|
Total
£'000
|
As at 1 January 2023
|
|
3,747
|
125
|
3,872
|
Additions
|
|
-
|
13
|
13
|
Remeasurement
|
|
(317)
|
-
|
(317)
|
Impairment
|
|
(423)
|
(5)
|
(428)
|
Depreciation
|
|
(821)
|
(36)
|
(857)
|
As at 31 December 2023
|
|
2,186
|
97
|
2,283
|
Lease liabilities
|
|
Land and
Buildings
£'000
|
Office
equipment
£'000
|
Total
£'000
|
As at 1 January 2023
|
|
3,822
|
125
|
3,947
|
Additions
|
|
-
|
13
|
13
|
Remeasurement
|
|
(317)
|
|
(317)
|
Interest expense
|
|
102
|
5
|
107
|
Lease payments
|
|
(973)
|
(41)
|
(1,014)
|
As at 31 December 2023
|
|
2,634
|
102
|
2,736
|
Right of use assets
|
|
Land and Buildings
£'000
|
Office
equipment
£'000
|
Total
£'000
|
As at 1 January 2022
|
|
2,457
|
-
|
2,457
|
Additions
|
|
950
|
-
|
950
|
Acquisition of
subsidiary
|
|
919
|
142
|
1,061
|
Depreciation
|
|
(546)
|
(17)
|
(563)
|
Disposals
|
|
(33)
|
-
|
(33)
|
As at 31 December 2022
|
|
3,747
|
125
|
3,872
|
|
|
|
|
|
|
|
Lease liabilities
|
|
Land and
Buildings
£'000
|
Office
equipment
£'000
|
Total
£'000
|
As at 1 January 2022
|
|
2,596
|
-
|
2,596
|
Additions
|
|
919
|
-
|
919
|
Acquisition of
subsidiary
|
|
874
|
142
|
1,016
|
Interest expense
|
|
74
|
3
|
77
|
Lease payments
|
|
(604)
|
(20)
|
(624)
|
Disposals
|
|
(37)
|
-
|
(37)
|
As at 31 December 2022
|
|
3,822
|
125
|
3,947
|
The present value of the lease
liabilities is as follows:
31 December 2023
|
|
Within 1
year
|
1 - 2
years
|
2 -5 years
|
After 5
years
|
Total
|
Lease payments
(undiscounted)
|
|
997
|
792
|
1,005
|
81
|
2,875
|
Finance charges
|
|
(66)
|
(37)
|
(36)
|
-
|
(139)
|
Net present values
|
|
931
|
755
|
969
|
81
|
2,736
|
|
|
|
|
|
|
|
31 December 2022
|
|
Within 1
year
|
1 - 2
years
|
2 -5 years
|
After 5
years
|
Total
|
Lease payments
(undiscounted)
|
|
1,048
|
994
|
1,857
|
345
|
4,244
|
Finance charges
|
|
(115)
|
(83)
|
(94)
|
(5)
|
(297)
|
Net present values
|
|
933
|
911
|
1,763
|
340
|
3,947
|
Leases
The consolidated statement of
comprehensive income shows the following amounts relating to
leases:
|
|
2023
£'000
|
2022
£'000
|
Depreciation of right of use
assets
|
|
857
|
563
|
Impairment of right of use
assets
|
|
428
|
-
|
Interest expense
|
|
107
|
77
|
Short term lease
expense
|
|
79
|
40
|
Low value lease expense
|
|
2
|
3
|
The total cash flow for leases
during the period was £1.1m (2022: £0.7m)
Variable lease
payments
One property lease contains
variable lease payments linked to current market rental from
January 2023, August 2023 and December 2024. A 1% fluctuation in
market rent would impact total annual lease payments by
approximately £1,000.
Extension and termination
options
During the year, a break clause
was exercised on one property. This resulted in a remeasurement of
the associated lease liability of £317,000. An impairment
assessment of the impacted right of use asset resulted in an
impairment of £428,000 recognised in the consolidated statement of
comprehensive income.
As at 31 December 2023, the
carrying amounts of all other lease liabilities are not reduced by
the amount of payments that would be avoided from exercising a
break clause because it was considered reasonably certain that the
Group would not exercise its right to break the lease. Total lease
payments of £85,320 are potentially avoidable were the Group to exercise break
clauses at the earliest opportunity.
14 Intangible
assets
Goodwill and identified intangible
assets arising on acquisitions are allocated to the cash-generating
unit of that acquisition. The Board considers that the Group has
only one operating segment and now has five cash-generating units
(CGUs). The goodwill relates to the following
acquisitions:
- Talk
Limited in 2012, and in particular its main operating subsidiary
Mortgage Talk Limited ("Mortgage Talk")
- First
Mortgage Direct Limited ("First Mortgage") in 2019
- Project
Finland Topco Limited ("Fluent") in 2022
- Vita
Financial Limited ("Vita") in 2022
- Auxilium
Partnership Limited ("Auxilium") in 2022
Goodwill
|
|
|
2023
£'000
|
2022
£'000
|
Cost
|
|
|
|
|
As at 1 January
|
|
|
54,038
|
15,308
|
Acquisition of
subsidiaries
|
|
|
-
|
38,730
|
As at 31 December
|
|
|
54,038
|
54,038
|
Accumulated impairment
|
|
|
|
|
As at 1 January and 31
December
|
|
|
153
|
153
|
Net book value
|
|
|
|
|
As at 31 December
|
|
|
53,885
|
53,885
|
Where the goodwill allocated to
the CGU is significant in comparison with the entity's total
carrying amount of goodwill this is set out below:
Goodwill
|
Mortgage
Talk
|
First
Mortgage
|
Fluent
|
Other1
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Cost
|
|
|
|
|
|
As at 1 January and 31 December
2023
|
4,267
|
11,041
|
36,974
|
1,756
|
54,038
|
Accumulated impairment
|
|
|
|
|
|
As at 1 January and 31 December
2023
|
153
|
-
|
-
|
-
|
153
|
Net book value
|
|
|
|
|
|
At 31 December 2023
|
4,114
|
11,041
|
36,974
|
1,756
|
53,885
|
1 'Other' comprises Vita and Auxilium.
The goodwill is deemed to have an
indefinite useful life. Under IAS 36, "Impairment of assets",
the Group is required to review and test its goodwill for
impairment annually or in the event of a significant change in
circumstances. The impairment reviews conducted at the end of 2023
concluded that there had been no further impairment of
goodwill.
The key assumptions set out below
and used in respect of value in use calculations are those
regarding growth rates and anticipated changes to revenues and
costs during the period covered by the calculations, based upon
management's expectations, with the discount rates reflecting
current market assessments of the time value of money and the risks
specific to these assets, based on the Group's WACC. Revenue growth
is based on past performance and management's expectation of growth
rates in the markets in which it operates, and forecast costs are
based on management's expectations of changes to the current
structure of each CGU. The terminal value growth rate of 3.5%
reflects the Group's market share growth model.
Goodwill arose on the acquisition
of Mortgage Talk Limited and has since been allocated to the CGU of
the Group as it existed prior to the impact of the subsequent four
acquisitions listed above. Impairment testing for this CGU is
carried out by determining recoverable amount on the basis of value
in use, which is then compared to the carrying value of the assets
of the CGU including goodwill. The value in use that has been
determined exceeds the £4.1m (2022: £4.1m) carrying value of
goodwill for this CGU
and therefore no impairment of goodwill is required.
Management has estimated future cash flows over a
five-year period, which are based on extrapolated budget models
which have been approved by the Board, and applied a discount rate
of 13.2% (2022: 11.3%) and then applied a
terminal value calculation, which assumes
a growth rate of 3.5% (2022: 5%) in future cashflows, in order to
estimate the present value of those cash flows in determining the
value in use. Management believes that any reasonably
possible changes to any of the key assumptions applied in
determining the value in use would not cause the carrying amount of
goodwill to exceed the present value of the estimated future
cashflows.
Goodwill arose on the acquisition
of First Mortgage and has since been allocated to this CGU of the
Group. Impairment testing for this CGU is carried out by
determining recoverable amount on the basis of value in use, which
is then compared to the carrying value of the assets of the CGU
including goodwill. The value in use that has been determined
exceeds the £11.0m (2022: £11.0m) carrying value of goodwill for
this CGU and therefore no impairment of goodwill is required.
Management has estimated future cash flows over a five-year
period, which are based on extrapolated
budget models which have been approved by the Board,
and applied a discount rate of 13.2% (2022:
20.7%) and then applied a terminal value calculation, which assumes
a growth rate of 3.5% (2022: 5%) in future cashflows, in order to
estimate the present value of those cash flows in determining the
value in use. Management believes that any reasonably possible changes to any
of the key assumptions applied in determining the value in use
would not cause the carrying amount of goodwill to exceed the
present value of the estimated future cashflows.
Goodwill arose on the acquisition
of Fluent and has since been allocated to this CGU of the
Group. Impairment testing for this CGU is carried out by
determining recoverable amount on the basis of value in use, which
is then compared to the carrying value of the assets of the CGU
including goodwill. The value in use that has been determined
exceeds the £37.0m carrying value of goodwill for this CGU and
therefore no impairment of goodwill is required. Management has
estimated future cash flows over a five-year period,
which are based on extrapolated budget models
which have been approved by the Board, and
applied a discount rate of 13.2% and then applied a terminal value
calculation, which assumes a growth rate of 3.5% in future cashflows, in order
to estimate the present value of those cash flows in determining
the value in use. Management believes that any reasonably possible changes to any
of the key assumptions applied in determining the value in use
would not cause the carrying amount of goodwill to exceed the
present value of the estimated future cashflows.
The sensitivity of the value in
use for all acquisitions to changes in the key assumptions are as
follows:
Assumption
|
Base assumption
|
Change in base assumption
|
(Decrease) in value in use, £m
|
Discount rate
|
13.2%
|
+1.0% (absolute)
|
(26.8)
|
Years 1-5 cash flows
|
Various
|
-5.0% (proportionate)
|
(42.3)
|
Long-term growth rate
|
3.5%
|
-1.0% (absolute)
|
(19.9)
|
Other intangible assets
|
Licences
£'000
|
Website
£'000
|
Internally Generated
Technology/Software
£'000
|
Technology/Software
£'000
|
Customer
contracts
£'000
|
Trademarks
and
brands
£'000
|
Other
relationships
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
|
|
|
|
As at 1 January 2023
|
108
|
223
|
1,105
|
16,824
|
2,337
|
5,089
|
34,568
|
60,254
|
Additions
|
-
|
133
|
988
|
-
|
-
|
-
|
-
|
1,121
|
Disposals
|
-
|
(140)
|
(554)
|
-
|
-
|
-
|
-
|
(694)
|
As at 31 December 2023
|
108
|
216
|
1,539
|
16,824
|
2,337
|
5,089
|
34,568
|
60,681
|
Accumulated Amortisation
|
|
|
|
|
|
|
|
|
As at 1 January 2023
|
108
|
140
|
610
|
842
|
797
|
680
|
1,254
|
4,431
|
Charge for the year
|
-
|
51
|
258
|
1,683
|
273
|
483
|
2,722
|
5,470
|
Disposals
|
-
|
(140)
|
(554)
|
-
|
-
|
-
|
-
|
(694)
|
As at 31 December 2023
|
108
|
51
|
314
|
2,525
|
1,070
|
1,163
|
3,976
|
9,207
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets
|
Licences
£'000
|
Website
£'000
|
Internally Generated
Technology/Software
£'000
|
Technology
/Software
£'000
|
Customer
contracts
£'000
|
Trademarks and brands
£'000
|
Other
relationships
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
|
|
|
|
As at 1 January 2022
|
108
|
140
|
571
|
-
|
1,980
|
1,470
|
-
|
4,269
|
Additions
|
-
|
83
|
534
|
-
|
-
|
-
|
-
|
617
|
Acquisition of
subsidiaries
|
-
|
-
|
-
|
16,824
|
357
|
3,619
|
34,568
|
55,368
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
As at 31 December 2022
|
108
|
223
|
1,105
|
16,824
|
2,337
|
5,089
|
34,568
|
60,254
|
Accumulated Amortisation
|
|
|
|
|
|
|
|
|
As at 1 January 2022
|
108
|
140
|
399
|
-
|
550
|
368
|
-
|
1,565
|
Charge for the year
|
-
|
-
|
211
|
842
|
247
|
312
|
1,254
|
2,866
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
As at 31 December 2022
|
108
|
140
|
610
|
842
|
797
|
680
|
1,254
|
4,431
|
Net book value
|
|
|
|
|
|
|
|
|
As at 31 December 2023
|
-
|
165
|
1,225
|
14,299
|
1,267
|
3,926
|
30,592
|
51,474
|
As at 31 December 2022
|
-
|
83
|
495
|
15,982
|
1,540
|
4,409
|
33,314
|
55,823
|
As at 31 December 2021
|
-
|
-
|
172
|
-
|
1,430
|
1,102
|
-
|
2,704
|
|
|
|
|
|
|
|
|
|
|
Assets which are internally
generated are solely within asset categories; Website and
Internally Generated Technology/Software. Technology/software
contains only acquired technology assets. Other relationships
include lender and introducer relationships and member
relationships assets.
Individually Material Intangible Assets
Asset Description
|
Asset
Category
|
NBV as at 31 December
2023
£'000
|
NBV as at 31 December
2022
£'000
|
Amortisation End
Date
|
Fluent Money Limited -
Technology
|
Technology/Software
|
14,305
|
15,988
|
July
2032
|
Fluent Mortgages Limited -
Introducer Relationships
|
Other
relationships
|
11,149
|
12,041
|
July
2036
|
Fluent Lifetime Limited -
Introducer Relationships
|
Other
relationships
|
6,985
|
7,543
|
July
2036
|
Fluent Money Limited - Lender
Relationships
|
Other
relationships
|
6,254
|
6,754
|
July
2036
|
Fluent Bridging Limited -
Introducer relationships
|
Other
relationships
|
5,614
|
6,063
|
July
2036
|
Fluent Money Limited -
Brand
|
Trademarks and brands
|
2,997
|
3,313
|
July
2033
|
First Mortgage Direct Limited -
Customer relationships
|
Customer
Contracts
|
990
|
1,210
|
July
2028
|
First Mortgage Direct Limited -
Brand
|
Trademarks and brands
|
809
|
956
|
July
2029
|
15 Investments in associates and
joint venture
The Group holds investments in
associates and a joint venture, all of which are accounted for
under the equity method, as follows:
Company name
|
Registered office
|
Percentage of ordinary
shares held
|
Description
|
CO2 Commercial Limited
|
Profile House, Stores Road, Derby
DE21 4BD
|
49
|
Property
surveyors
|
Sort Group Limited
|
Burdsall House, London Road, Derby
DE24 8UX
|
43.25
|
Conveyancing services
|
Buildstore Limited
|
NSB & RC Lydiard Fields, Great
Western Way, Swindon SN5 8UB
|
25
|
Provision of financial services
|
Clear Mortgage Solutions
Limited
|
114 Centrum House, Dundas Street,
Edinburgh EH3 5DQ
|
49
|
Provision of financial services
|
MAB Broker Services PTY
Limited
|
Level 5, 2 Elizabeth Plaza, North
Sydney, NSW 2060
|
48.05
|
Provision of financial services
|
The Mortgage Broker Group
Limited
|
Prospect House 1, Prospect Place,
Derby, DE24 8HG
|
25
|
Provision of financial
services
|
Meridian Holdings Group
Limited
|
68 Pullman Road, Wigston,
Leicester, LE18 2DB
|
40
|
Provision of financial services
|
Evolve FS Ltd
|
Unit 26-28 Brightwell Barns,
Waldringfield Road, Brightwell, Ipswich, Suffolk, IP10
0BJ
|
49
|
Provision of financial services
|
Heron Financial Limited
|
Moor Park Golf Club, Moor Park,
Rickmansworth, Hertfordshire, England, WD3 1QN
|
49
|
Insurance agent and broker
|
M & R FM
Ltd(1)
|
14 Kensington Terrace, Gateshead,
NE11 9SL
|
37
|
Provision of financial services
|
The reporting date for the Group's
associates, as listed in the table above, other than Clear Mortgage
Solutions Limited and MAB Broker Services PTY Ltd, is 31 December
and their country of incorporation is England and Wales. The
reporting date for Clear Mortgage Solutions Limited is 30 December
and its country of incorporation is England and Wales.
The reporting date for the Group's joint venture,
MAB Broker Services PTY Limited, is 30 June and its country of
incorporation is Australia.
(1) 37% of the ordinary share capital of M & R FM Ltd is held
by First Mortgage Direct Ltd.
The investment in associates and
the joint venture at the reporting date is as follows:
|
2023
£'000
|
2022
£'000
|
As at 1 January
|
11,387
|
12,433
|
Additions
|
469
|
-
|
Disposals
|
-
|
(848)
|
Credit to the consolidated statement of comprehensive
income:
|
|
|
Share of profit
|
848
|
712
|
|
848
|
712
|
Dividends received
|
(403)
|
(910)
|
As at 31 December
|
12,301
|
11,387
|
The Group is entitled to the
results of its associates in equal proportion to its equity
stakes.
The carrying value of the Group's
joint venture, MAB Broker Services PTY Limited, as at 31 December
2023 is £nil (2022: £nil). In the year ended 30 June 2023, MAB
Broker Services PTY Limited reported a profit of AUD0.01m (2022:
loss of AUD0.38m).
Acquisitions and disposals
2023
On 26 May 2023, First Mortgage
Direct Limited, an 80% owned subsidiary of the Group, acquired a
further 12% of M & R FM Limited for a consideration of
£469,454, bringing its total stake to 37%.
2022
On 14 April 2022, Mortgage Advice
Bureau Limited paid a further £277,600 in contingent consideration
in respect of its acquisition of a 49% stake in Heron Financial
Limited in November 2021.
On 27 April 2022, Mortgage Advice
Bureau Limited paid a further £179,252 in contingent consideration
in respect of its acquisition of a further 29% interest in Vita
Financial Limited in May 2021.
On 21 July 2022, Mortgage Advice
Bureau Limited paid a further £625,567 in contingent consideration
in respect of its acquisition of a 49% stake in Evolve FS Limited
in July 2021.
On 12 July 2022, Mortgage Advice
Bureau Limited acquired a further 26% of Vita Financial Limited
having previously held 49% of the share capital of Vita Financial
Limited. As a result, the Group now exercises control over Vita
Financial Limited and so the investment is considered a subsidiary
of the Group. The carrying value of the 49% holding in Vita
Financial Limited was £848,022. The fair
value of the previously held equity interest was established to be
£867,500, therefore a gain of £19,478 is recognised in the
consolidated statement of comprehensive income as this previously
held interest is treated as though it has been disposed
of.
On 15 July 2022, First Mortgage
Direct Limited, an 80% owned subsidiary of the Group, paid a
further £244,858 in contingent consideration in respect of its
acquisition of a 25% stake in M & R FM Limited in January
2021.
On 19 October 2022, Mortgage
Advice Bureau Limited disposed of its 49% stake in Lifetime FS
Limited for nil consideration.
A total net gain of £884,000 was
recognised in the consolidated statement of comprehensive income in
respect of the actual contingent consideration paid or expected to
be paid on the above associate businesses in 2022.
Summarised financial information for
associates
The tables below provide
summarised financial information for those associates and joint
ventures that are material to the Group. The information disclosed
reflects the amounts presented in the unaudited financial
statements or management accounts of the relevant associates and
joint ventures and not the Group's share of those
amounts:
2023
|
Evolve FS
Ltd
£'000
|
Heron Financial
Ltd
£'000
|
Meridian Holdings Group
Ltd
£'000
|
Sort Group Limited
£'000
|
Clear Mortgage Solutions
Ltd
£'000
|
M & R
FM
Limited
£'000
|
Non-current assets
|
29
|
221
|
1,974
|
649
|
24
|
53
|
Cash balances
|
420
|
522
|
1,076
|
2,295
|
1,097
|
1,073
|
Current assets (excluding cash
balances)
|
349
|
873
|
675
|
567
|
384
|
485
|
Current liabilities
|
(614)
|
(455)
|
(652)
|
(642)
|
(404)
|
(377)
|
Non-current liabilities and
provisions
|
(8)
|
(419)
|
(380)
|
(84)
|
(600)
|
(410)
|
Revenue
|
4,237
|
2,409
|
7,129
|
11,794
|
4,974
|
3,874
|
Profit before taxation
|
60
|
600
|
385
|
788
|
507
|
1,000
|
Total comprehensive
income
|
48
|
497
|
289
|
673
|
416
|
802
|
Carrying value of investment
|
|
|
|
|
|
As at 1 January 2023
|
2,882
|
2,638
|
1,497
|
1,936
|
864
|
906
|
Increase in investment
|
-
|
-
|
-
|
-
|
-
-
|
469
|
Profit attributable to
Group
|
23
|
244
|
69
|
259
|
213
|
249
|
Dividends received
|
-
|
(125)
|
-
|
-
|
(56)
|
(222)
|
As at 31 December 2023
|
2,905
|
2,757
|
1,566
|
2,195
|
1,021
|
1,402
|
2022
|
Evolve FS
Ltd
£'000
|
Heron Financial
Ltd
£'000
|
Meridian Holdings Group
ltd
£'000
|
Sort Group Limited
£'000
|
Pinnacle Surveyors (England
& Wales) Limited
£'000
|
Non-current assets
|
45
|
183
|
1,927
|
592
|
30
|
Cash balances
|
502
|
409
|
1,700
|
2,003
|
316
|
Current assets (excluding cash
balances)
|
356
|
266
|
166
|
605
|
708
|
Current liabilities
|
(493)
|
(150)
|
(868)
|
(1,134)
|
(569)
|
Non-current liabilities and
provisions
|
(7)
|
(161)
|
(740)
|
(93)
|
(49)
|
Revenue
|
4,792
|
2,576
|
6,873
|
12,042
|
5,838
|
(Loss)/profit before
taxation
|
(26)
|
275
|
(78)
|
976
|
424
|
Total comprehensive
(loss)/income
|
(26)
|
209
|
(78)
|
820
|
345
|
|
Carrying value of investments
|
|
|
|
|
|
|
As at 1 January 2022
|
3,143
|
2,536
|
1,541
|
1,628
|
464
|
(Loss)/profit attributable to
Group
|
(16)
|
102
|
(44)
|
438
|
165
|
|
Dividends received
|
(245)
|
-
|
-
|
(130)
|
(348)*
|
|
As at 31 December 2022
|
2,882
|
2,638
|
1,497
|
1,936
|
281
|
|
|
|
|
|
|
|
|
|
|
|
|
* These dividends are received
from CO2 Commercial Limited, the parent undertaking of Pinnacle
Surveyors (England & Wales) Limited. All other information
disclosed above relates to Pinnacle Surveyors (England & Wales)
Limited.
Individually immaterial associates and joint
ventures
In addition to the interests in
associates disclosed above, the group also has interests in a
number of individually immaterial associates and a joint venture
that are accounted for using the equity method. The aggregate of
the summarised financial information for these associates is shown
below, along with the summarised financial information for the
joint venture. The information disclosed reflects the amounts
presented in the unaudited financial statements or management accounts of the relevant associates and the
joint venture and not the Group's share of those
amounts:
|
2023 Associates
£'000
|
2022
Associates
£'000
|
2023
Joint Venture
£'000
|
2022
Joint
Venture
£'000
|
Non-current assets
|
991
|
413
|
5
|
42
|
Cash balances
|
680
|
3,287
|
26
|
25
|
Current assets (excluding cash
balances)
|
1,295
|
1,561
|
1,127
|
1,167
|
Current liabilities
|
(1,202)
|
(2,155)
|
(53)
|
(74)
|
Non-current liabilities and
provisions
|
(794)
|
(1,366)
|
(111)
|
(109)
|
Revenue
|
8,893
|
14,470
|
406
|
486
|
(Loss)/profit before
taxation
|
(645)
|
424
|
11
|
(267)
|
Total comprehensive (loss)/
income
|
(675)
|
146
|
11
|
(213)
|
(Loss)/profit attributable to Group
|
(210)
|
67
|
-
|
-
|
Dividends received
|
0
|
188
|
-
|
-
|
All associates and joint venture prepare their financial statements in
accordance with FRS 102 other than MAB Broker Services PTY Limited
who prepare their financial statements in accordance with the
Australian Accounting Standards. There would be no material
difference to the profit attributable to the Group if the accounts
of any of the associates were prepared in accordance with
IFRS.
Unrecognised losses
The Group has discontinued
recognising its share of losses from its joint venture as these
exceed the carrying amount of the investment. The Group had
unrecognised profits in the year of £44,186 (2022: losses of
£75,948) and cumulative unrecognised losses of £757,458 (2022:
801,644).
Derivative financial instruments
The put and call options are
carried at fair value through profit or loss. The carrying values
for the call options at 31 December 2023 have resulted in a
financial asset of £302,319 (2022:
£255,994) for Evolve and £112 (2022: £64,114) for Heron. The
carrying value for the put option has resulted in a financial
liability of £182,984 (2022: £10,280) for Heron at 31 December
2023.
The fair values of the option
contracts have been calculated using an option valuation model. The
key assumptions used to value the options in the model are the
value of shares in the associate, the anticipated growth of the
business, the option exercise price, the expected life of the
option, the expected share price volatility of similar businesses,
forecast dividends and the risk-free interest rate.
The gains and losses relating to the derivative
financial instruments is included within 'operating profit'. These
financial instruments are categorised as Level 3 within the fair
value hierarchy.
Contingent Consideration
The fair value of contingent
consideration at 31 December 2023 was £nil (2022: £nil). During the
year, no contingent consideration was paid (2022: £1.3m) and a gain
of £nil (2022: £0.9m) has been recognised in the consolidated
statement of comprehensive income.
16 Investments in non-listed equity
shares
|
2023
£'000
|
2022
£'000
|
As at 1 January
|
-
|
2,783
|
Additions
|
-
|
-
|
Revaluation
|
-
|
-
|
Write-off of investment
|
-
|
(2,783)
|
Disposals
|
-
|
-
|
As at 31 December
|
-
|
-
|
The investment at the start of the
prior year represented a shareholding of 2.92% in PD Innovations
Limited, trading as Boomin, at a value of £2.8m. This investment
was classified as Level 3 for the purpose of disclosure in the fair
value hierarchy, with any fair value movements taken to the
consolidated statement of comprehensive income. Boomin was put into liquidation in October 2022, having not
been able to secure new investors in the challenging economic
climate, which lead to a £2.8m non-cash write-off of the
investment. The Group originally paid cash consideration of £2.5m
on 9 April 2021 for a 3.17% stake in PD Innovations
Limited.
In 2022, contingent consideration
of £115,000 was received relating to the sale of Yourkeys
Technology Limited on 23rd April 2021. This was £58,000
higher than estimated, resulting in a gain recognised in the
consolidated statement of comprehensive income.
17 Subsidiaries
The subsidiaries of Mortgage
Advice Bureau (Holdings) plc at the reporting date have been
included in the consolidated financial statements. The trading
subsidiaries are as follows:
Company name
|
Country of Incorporation
|
Percentage of ordinary
shares held (effective holding)
|
Nature of
business
|
Mortgage Advice Bureau
Limited
|
England and Wales
|
100
|
Provision of financial services
|
Mortgage Advice Bureau (Derby)
Limited
|
England and Wales
|
100
|
Provision of financial services
|
Capital Protect Limited
|
England and Wales
|
100
|
Provision of financial services
|
Mortgage Talk Limited
|
England and Wales
|
100
|
Provision of financial services
|
MABWM Limited
|
England and Wales
|
100
|
Provision of financial services
|
First Mortgage Direct
Limited
|
Scotland
|
80
|
Provision of financial services
|
First Mortgage Limited
|
Scotland
|
80
|
Provision of financial services
|
Property Law Centre
Limited
|
Scotland
|
80
|
Provision of financial services
|
Talk Limited
|
England and Wales
|
100
|
Intermediate holding company
|
Mortgage Advice Bureau Australia
(Holdings) PTY Limited
|
Australia
|
100
|
Intermediate holding company
|
Mortgage Advice Bureau PTY
Limited
|
Australia
|
100
|
Holding
of intellectual property
|
Vita Financial Limited
|
England and Wales
|
75
|
Provision of financial services
|
BPR Protect Limited
|
England and Wales
|
75
|
Provision of financial services
|
Company Protection
Limited
|
England and Wales
|
56.3
|
Provision of financial services
|
Aux Group Limited
|
England and Wales
|
75
|
Provision of financial services
|
Auxilium Partnership
Limited
|
England and Wales
|
75
|
Provision of financial services
|
Project Finland Topco
Limited
|
England and Wales
|
84.3
|
Intermediate holding company
|
Project Finland Bidco
Limited
|
England and Wales
|
84.3
|
Intermediate holding company
|
The Fluent Money Group
Limited
|
England and Wales
|
84.3
|
Intermediate holding company
|
Fluent Mortgages Holdings
Limited
|
England and Wales
|
84.3
|
Intermediate holding company
|
Fluent Mortgages
Limited
|
England and Wales
|
84.3
|
Provision of financial services
|
Fluent Mortgages Horwich
Limited
|
England and Wales
|
84.3
|
Provision of financial services
|
Fluent Lifetime Limited
|
England and Wales
|
84.3
|
Provision of financial services
|
Fluent Money Limited
|
England and Wales
|
84.3
|
Provision of financial services
|
Fluent Loans Limited
|
England and Wales
|
84.3
|
Provision of financial services
|
Fluent Bridging Limited
|
England and Wales
|
84.3
|
Provision of financial services
|
Mortgage Advice Bureau (Holdings)
plc also holds a number of dormant subsidiaries which at the
reporting date have been included in the consolidated financial
statements. The dormant subsidiaries are as follows:
Company name
|
Country of Incorporation
|
Percentage of ordinary
shares held
|
Nature of
business
|
Mortgage Advice Bureau (UK)
Limited
|
England and Wales
|
100
|
Dormant
|
Mortgage Advice Bureau (Bristol)
Limited
|
England and Wales
|
100
|
Dormant
|
MAB (Derby) Limited
|
England and Wales
|
100
|
Dormant
|
L&P 137 Limited
|
England and Wales
|
100
|
Dormant
|
Mortgage Talk (Partnership)
Limited
|
England and Wales
|
100
|
Dormant
|
Financial Talk Limited
|
England and Wales
|
100
|
Dormant
|
Survey Talk Limited
|
England and Wales
|
100
|
Dormant
|
L&P 134 Limited
|
England and Wales
|
100
|
Dormant
|
Loan Talk Limited
|
England and Wales
|
100
|
Dormant
|
MAB1 Limited
|
England and Wales
|
100
|
Dormant
|
MAB Private Finance
Limited
|
England and Wales
|
100
|
Dormant
|
MAB Financial Planning
Limited
|
England and Wales
|
100
|
Dormant
|
First Mortgage Shop
Limited
|
Scotland
|
80
|
Dormant
|
First Mortgages Limited
|
Scotland
|
80
|
Dormant
|
Fresh Start Finance
Limited
|
Scotland
|
80
|
Dormant
|
The registered office for Vita
Financial Limited and its subsidiary is 1st Floor Tudor House, 16
Cathedral Road, Cardiff CF11 9LJ. The registered office of Mortgage
Advice Bureau Australia (Holdings) PTY Limited and Mortgage Advice
Bureau PTY Limited is Norton Rose Fulbright, Level 18, 225 George
Street, Sydney, NSW 2000, Australia. The registered office for
First Mortgage Direct Limited and its subsidiaries which are
incorporated in Scotland is 30 Walker Street, Edinburgh, EH3 7HR.
The registered office for Project Finland Topco Limited and its
subsidiaries is 102 Rivington House Chorley New Road, Horwich,
Bolton, England, BL6 5UE.
The registered office for all other subsidiaries of Mortgage Advice
Bureau (Holdings) plc is Capital House, Pride Place, Pride Park,
Derby, DE24 8QR, United Kingdom.
Mortgage Advice Bureau (Holdings)
plc holds 100% of the ordinary share capital of Mortgage Advice
Bureau Limited and Talk Limited.
Mortgage Advice Bureau Limited
holds 100% of the ordinary share capital of Mortgage Advice Bureau
(Derby) Limited, Capital Protect Limited, MABWM Limited and
Mortgage Advice Bureau Australia (Holdings) PTY Limited.
Mortgage Advice Bureau Australia
(Holdings) PTY Limited has a 100% equity stake in Mortgage Advice
Bureau PTY Limited and a 48.05% equity
stake in MAB Broker Services PTY Limited.
On 2 July 2019, Mortgage Advice
Bureau Limited acquired 80% of the ordinary share capital of First
Mortgage Direct Limited. First Mortgage Direct Limited holds
100% of the ordinary share capital of First Mortgage Limited,
Property Law Centre Limited, First Mortgages Limited, First
Mortgage Shop Limited, and Fresh Start Finance Limited.
On 12 July 2022 Mortgage Advice
Bureau Limited acquired 75.4% of the ordinary share capital
of Project Finland Topco Limited. On 11
April 2023 Mortgage Advice Bureau Limited increased its stake in
Project Finland Topco Limited to 76.2% and further increased its
stake on 19 December 2023 to 84.3% (see note 5). Project Finland
Topco Limited holds 100% of the ordinary share capital of Project
Finland Bidco Limited, which in turn holds 100% of the ordinary
share capital of The Fluent Money Group Limited. The Fluent
Money Group Limited holds 100% of the issued share capital of
Fluent Mortgage Holdings Limited, Fluent Lifetime Limited, Fluent
Money Limited, Fluent Loans Limited and Fluent Bridging Limited.
Fluent Mortgage Holdings Limited owns 100% of the ordinary share
capital of Fluent Mortgages Limited and Fluent Mortgages Horwich
Limited.
On 12 July 2022 Mortgage Advice
Bureau Limited increased its stake in Vita Financial Limited to
75%. Vita
Financial Limited holds 100% of the
ordinary share capital of BPR Protect Limited and 75% of the
ordinary share capital of Company Protection Limited.
On 3 November 2022 Mortgage Advice
Bureau Limited acquired 75% of the ordinary share capital of Aux
Group Limited. Aux Group Limited holds 100% of the
ordinary share capital of Auxilium Partnership Limited.
Talk Limited holds 100% of the
ordinary share capital of Mortgage Talk Limited, L&P 137
Limited, Mortgage Talk (Partnership) Limited, Financial Talk
Limited, and Survey Talk Limited.
Mortgage Talk Limited holds 100%
of the ordinary share capital of Loan Talk Limited.
L&P 137 Limited holds 100% of
the ordinary share capital of L&P 134 Limited.
Three of the Group's subsidiaries,
First Mortgage Limited (SC177681), Property Law Centre Limited
(SC348791) and Fluent Mortgages Horwich Limited (14127588) are
exempt from the audit of individual accounts under section 479A of
the Companies Act 2006.
There are no restrictions
regarding the utilisation of cash or other resources held by any
subsidiary.
18 Trade and other
receivables
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
Trade receivables
|
2,028
|
|
3,029
|
Less provision for impairment of
trade receivables
|
(454)
|
|
(476)
|
Trade receivables - net
|
1,574
|
|
2,553
|
Receivables from related
parties
|
-
|
|
29
|
Other receivables
|
924
|
|
962
|
Loans to related
parties
|
201
|
|
559
|
Less provision for impairment of
loans to related parties
|
(18)
|
|
(2)
|
Total non-derivative financial assets other than cash and
cash equivalents classified at amortised costs
|
2,681
|
|
4,101
|
Prepayments and accrued
income
|
6,993
|
|
7,018
|
Total trade and other
receivables
|
9,674
|
|
11,119
|
Less: non-current portion - Loans
to related parties
|
(77)
|
|
(305)
|
Less: non-current - Trade
receivables
|
(276)
|
|
(526)
|
Current portion
|
9,321
|
|
10,288
|
|
2023
|
|
2022
|
Reconciliation of movement in trade receivables to
cashflow
|
£'000
|
|
£'000
|
Movement per trade
receivables
|
(1,445)
|
|
3,679
|
Accrued interest
movement
|
13
|
|
(6)
|
Accrual of contingent
consideration for Yourkeys disposal
|
-
|
|
55
|
Acquired trade and other
receivables
|
-
|
|
(2,710)
|
Intercompany arising on
acquisitions
|
-
|
|
299
|
Total movement per cash
flow
|
(1,432)
|
|
1,317
|
The carrying value of trade and
other receivables classified at amortised cost approximates fair
value.
Included within trade receivables
are operational business development loans to Appointed
Representatives. The non-current trade receivables balance is
comprised of loans to Appointed Representatives.
Also included in trade receivables
are amounts due from Appointed Representatives relating to
commissions that are refundable to the Group when policy lapses or
other reclaims exceed new business. As these balances have no
credit terms, the Board of Directors consider these to be past due
if they are not received within seven days. In the management of
these balances, the Directors can recover them from subsequent new
business entered into with the Appointed Representative or utilise
payables that are owed to the same counterparties and included
within payables as the Group has the legally enforceable right of
set off in such circumstances. These payables are considered
sufficient by the Directors to recover receivable balances should
they default, and, accordingly, credit risk in this respect is
minimal.
In light of the above, the
Directors do not consider that disclosure of an aging analysis of
trade and other receivables would provide useful additional
information. Further information on the credit quality of financial
assets is set out in note 22.
Impairment provisions for trade
receivables are recognised based on the simplified approach within
IFRS 9 using the lifetime expected credit losses. During this
process the probability of the non-payment of the trade receivables
is assessed. This probability is then multiplied by the
amount of the expected loss arising from default to determine the
lifetime expected credit loss for the trade receivables. For
trade receivables, which are reported net, such provisions are
recorded in a separate provision account with the loss being
recognised within cost of sales in the consolidated statement of
comprehensive income. On confirmation that the trade receivable
will not be collectable, the gross carrying value of the asset is
written off against the associated provision. As at 31 December
2023 the lifetime expected loss provision for trade receivables is
£0.5m (2022: £0.5m). The movement in the impairment allowance for
trade receivables has been included in cost of sales in the
consolidated statement of comprehensive income.
Impairment provisions for loans to
associates are recognised based on a forward-looking expected
credit loss model. The methodology used to determine the amount of
the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial
asset. For those where the credit risk has not increased
significantly since initial recognition of the financial asset,
twelve month expected credit losses along with gross interest
income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with
the gross interest income are recognised. For those that are
determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised. In
determining the lifetime expected credit losses for loans to
associates, the Directors have considered different scenarios for
repayments of these loans and have applied percentage probabilities
to each scenario for each associate where applicable.
A summary of the movement in the
provision for the impairment of receivables is as
follows:
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
As at 1 January
|
476
|
|
374
|
New provisions for impairment
losses
|
-
|
|
106
|
Increases in existing provisions
for impairment losses
|
-
|
|
-
|
Impairment provisions no longer
required
|
(22)
|
|
(4)
|
As at 31 December
|
454
|
|
476
|
A summary of the movement in the
provision for the impairment of loans to related parties is as
follows:
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
As at 1 January
|
2
|
|
2
|
Increases in existing provisions
for impairment losses
|
16
|
|
-
|
Impairment provisions no longer
required
|
-
|
|
-
|
As at 31 December
|
18
|
|
2
|
As at 31 December 2023 the
lifetime expected loss provision for loans to associates is £0.0m
(2022: £0.0m), with 12 month expected credit losses recognised for
remaining associates.
The maximum exposure to credit
risk at the reporting date is the carrying value of each class of
receivables mentioned above less collateral held as security.
Details of security held are given in note 22.
19 Cash and cash
equivalents
|
|
2023
£'000
|
|
2022
£'000
|
|
Unrestricted cash and bank
balances
|
3,022
|
|
7,219
|
|
Bank balances held in relation to
retained commissions
|
18,918
|
|
18,243
|
|
Cash and cash
equivalents
|
21,940
|
|
25,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank balances held in relation to retained commissions earned on an
indemnity basis from protection policies are held to cover
potential future lapses in Appointed Representatives commissions.
Operationally the Group does not treat these balances as available
funds. An equal and opposite liability is shown within Trade
and other payables (note 20).
20 Trade and other
payables
|
|
2023
£'000
|
|
2022
£'000
|
|
Appointed Representatives retained
commission
|
18,918
|
|
18,243
|
|
Other trade payables
|
7,644
|
|
8,658
|
|
Trade payables
|
26,562
|
|
26,901
|
|
Social security and other
taxes
|
2,116
|
|
2,190
|
|
Other payables
|
169
|
|
208
|
|
Accruals
|
9,020
|
|
7,350
|
|
|
37,867
|
|
36,649
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
|
£'000
|
|
£'000
|
|
Current
|
35,225
|
|
34,397
|
|
Non-current
|
2,642
|
|
2,252
|
|
|
37,867
|
|
36,649
|
|
|
|
|
|
|
|
Should a protection policy be
cancelled within four years of inception, a proportion of the
original commission will be clawed back by the insurance provider.
The majority of any such repayment is payable by the Appointed
Representative, with the Group making its own liability for its
share of any such repayment as set out in note 23. It is the
Group's policy to retain a proportion of commission payable to the
Appointed Representative to cover such potential future lapses;
these sums remain a liability of the Group. This commission is held
in a separate ring-fenced bank account as described in note
19.
The non-current portion of trade
and other payables relates to Appointed Representative retained
commission and accruals (See note 22).
As at 31 December 2023 and 31
December 2022, the carrying value of trade and other payables
classified as financial liabilities measured at amortised cost
approximates fair value.
|
2023
|
|
2022
|
Reconciliation of movement in trade payables to cash
flow
|
£'000
|
|
£'000
|
Movement per trade
payables
|
1,218
|
|
4,723
|
Contingent consideration on
associates
|
-
|
|
1,327
|
Fair value measurement of
contingent consideration
|
-
|
|
884
|
Share-based payment
accruals
|
(505)
|
|
(656)
|
Accrued amounts relating to
minority interest purchase
|
(996)
|
|
-
|
Acquired trade and other
payables
|
-
|
|
(5,192)
|
Intercompany arising on
acquisition
|
-
|
|
(253)
|
Total movement per cash
flow
|
(283)
|
|
833
|
21 Loans and
borrowings
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
Bank loans
|
18,250
|
|
23,407
|
Total loans and borrowings
|
18,250
|
|
23,407
|
Less: non-current portion - Bank
loans
|
(12,426)
|
|
(16,598)
|
Current portion
|
5,824
|
|
6,809
|
A summary of the maturity of loans
and borrowings is as follows:
|
2023
|
|
2022
|
Bank loans
|
£'000
|
|
£'000
|
Payable in 1 year
|
5,824
|
|
6,809
|
Payable in 1-2 years
|
3,750
|
|
3,750
|
Payable in 2-5 years
|
8,676
|
|
12,848
|
Total bank loans
|
18,250
|
|
23,407
|
In connection with the acquisition
of Fluent, the Group entered into an agreement on 28 March 2022
with NatWest, in respect of a new term loan for £20m and a
revolving credit facility for £15m (the "Facilities Agreement"), in
order to part fund the cash consideration payable in relation to
the acquisition. It is MAB's intention to repay the drawn
down proportion of the revolving element of this debt facility as
soon as practicable. In respect of the new facilities, the Group
has given security to NatWest in the form of fixed and floating
charges over the assets of Mortgage Advice Bureau Limited, Mortgage
Advice Bureau (Derby) Limited, Mortgage Advice Bureau (Holdings)
plc, First Mortgage Direct Limited, First Mortgage Limited, Project
Finland Bidco Limited, Fluent Money Limited and Fluent Mortgages
Limited.
Loan
covenants
Under the terms of the
Facilities Agreement,
the Group is required to comply with the following financial
covenants:
· Interest cover shall not be less than 5:1
· Adjusted leverage shall not exceed 2:1
The
Group has complied with these covenants since the Facilities
Agreement was entered into.
22 Financial instruments - risk
management
The Group is exposed through its
operations to the following financial risks:
· Credit risk
· Liquidity risk
· Market risk
In common with all other
businesses, the Group is exposed to risks that arise from its use
of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the
methods used to measure them. Further quantitative information in
respect of these risks is presented throughout these financial
statements.
Principal financial instruments
· Trade and other receivables
· Investments in non-listed equity shares
· Derivative financial instruments
· Cash
and cash equivalents
· Trade and other payables
· Loans and other borrowings
A summary of financial instruments
held by category is provided below:
Financial assets
|
2023
|
2022
|
|
£'000
|
£'000
|
Cash and cash
equivalents
|
21,940
|
25,462
|
Trade and other receivables
(amortised cost)
|
2,681
|
4,101
|
Derivative financial instruments
(FVTPL)
|
302
|
320
|
Total financial assets
|
24,923
|
29,883
|
Financial liabilities
|
2023
|
2022
|
|
£'000
|
£'000
(restated)*
|
Trade and other payables
(amortised cost)
|
7,812
|
8,866
|
Loans and borrowings (amortised
cost)
|
18,250
|
23,407
|
Accruals (amortised
cost)
|
9,020
|
7,350
|
Redemption liability
(FVTPL)
|
2,793
|
7,186
|
Clawback liability
(FVTPL)
|
10,331
|
8,038
|
Lease liabilities (amortised
cost)
|
2,736
|
3,947
|
Derivative financial instruments
(FVTPL)
|
183
|
10
|
Appointed representative retained
commission
|
18,918
|
18,243
|
Total financial liabilities
|
70,043
|
77,047
|
*The disclosure of financial liabilities incorrectly excluded
the clawback liability, which is a financial instrument, and
included £2.2m of social security and other taxes, which are not
financial instruments. The disclosure is therefore restated to make
this correction. The correction has no other impact on these
financial statements.
General objectives, policies and processes
The Board has overall
responsibility for the determination of the Group's risk management
objectives and policies, and designs and operates processes that
ensure the effective implementation of the objectives and policies
to the Group's finance function. The Board sets guidelines to the
finance team and monitors adherence to its guidelines on a monthly
basis.
The overall objective of the Board
is to set policies that seek to reduce risk as far as possible
without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out
below.
Credit risk
Credit risk is the risk of
financial loss to the Group if a trading partner or counterparty to
a financial instrument fails to meet its contractual obligations.
The Group is mainly exposed to credit risk from loans to its
trading partners. It is Group policy to assess the credit risk of
trading partners before advancing loans or other credit facilities.
Assessment of credit risk utilises external credit rating
agencies. Personal guarantees are generally obtained from the
Directors of its trading partners.
Quantitative disclosures of the credit risk exposure in relation to
financial assets are set out below. Further disclosures
regarding trade and other receivables are given in note
18.
Financial assets - maximum exposure
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
Cash and cash
equivalents
|
21,940
|
|
25,462
|
Trade and other receivables
(Amortised cost)
|
2,681
|
|
4,101
|
Derivative financial instruments
(FVTPL)
|
302
|
|
320
|
Total financial assets
|
24,923
|
|
29,883
|
The carrying amounts stated above
represent the Group's maximum exposure to credit risk for trade and
other receivables. An element of this risk is mitigated by
collateral held by the Group for amounts due to them.
Trade receivables consist of a
large number of unrelated trading partners and therefore credit
risk is not concentrated. Due to the large volume of trading
partners the Group does not consider that there is any significant
credit risk as a result of the impact of external market factors on
their trading partners. Additionally, within trade payables are
Appointed Representative retained commission amounts due to the
same trading partners that are included in trade receivables; this
collateral of £0.2m (2022: £0.7m) reduces the credit
risk.
The Group's credit risk on cash
and cash equivalents is limited because the Group places funds on
deposit with National Westminster Bank plc (rated A), The Royal
Bank of Scotland plc (rated A+), Barclays plc (rated A), HSBC Bank
plc (rated AA-) and Bank of Scotland plc (rated A+).
Market risk
Interest rate risks
The Group's main interest rate
risk arises from borrowings, both short term facilities and
long-term debt, with floating interest rates that are linked to
SONIA. The Group manages the risk by continually reviewing expected
future volatility in UK interest rates and will consider entering
into hedges as deemed appropriate to fix the floating interest
rate. A maturity analysis of loans and borrowings is set out in
Note 21.
Foreign exchange risk
As the Group does not operate
outside of the United Kingdom and has only one investment outside
the UK, it is not exposed to any material foreign exchange
risk.
Liquidity risk
Liquidity risk arises from the
Group's management of working capital. It is the risk that the
Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Group's policy is to ensure
that it will always have sufficient cash to allow it to meet its
liabilities when they become due. The Group's trade and other
payables are repayable within one year from the reporting date and
the contractual undiscounted cash flow analysis for the Group's
trade and other payables is the same as their carrying value. The
contractual maturities of financial liabilities are as
follows:
31 December 2023 (£'000)
|
|
Within 1
year
|
1 - 2
years
|
2 -5 years
|
After 5
years
|
Total
|
Trade and other payables
(amortised cost)
|
|
7,812
|
-
|
-
|
-
|
7,812
|
Loans and borrowings
(amortised cost)
|
|
5,825
|
3,817
|
8,608
|
-
|
18,250
|
Accruals (amortised cost)
|
|
7,305
|
1,046
|
669
|
-
|
9,020
|
Redemption liability
(FVTPL)
|
|
-
|
-
|
2,793
|
-
|
2,793
|
Clawback liability
(FVTPL)
|
|
10,331
|
-
|
-
|
-
|
10,331
|
Lease liabilities (amortised
cost)
|
|
997
|
792
|
1,005
|
81
|
2,875
|
Derivative financial instruments
(FVTPL)
|
-
|
183
|
-
|
-
|
183
|
Appointed representative retained
commission (amortised cost)
|
17,991
|
49
|
700
|
178
|
18,918
|
Total
|
|
50,261
|
5,887
|
13,775
|
259
|
70,182
|
31 December 2022 (£'000) (restated)*
|
|
Within 1
year
|
1 - 2
years
|
2 -5 years
|
After 5
years
|
Total
|
Trade and other payables
(amortised cost)
|
|
8,866
|
-
|
-
|
-
|
8,866
|
Loans and borrowings (amortised
cost)
|
|
6,809
|
3,750
|
12,848
|
-
|
23,407
|
Accruals (amortised
cost)
|
|
5,644
|
168
|
1,538
|
-
|
7,350
|
Redemption liability
(FVTPL)
|
|
-
|
-
|
169
|
7,017
|
7,186
|
Clawback liability
(FVTPL)
|
|
8,038
|
-
|
-
|
-
|
8,038
|
Lease liabilities (amortised
cost)
|
|
1,048
|
994
|
1,857
|
345
|
4,244
|
Derivative financial instruments
(FVTPL)
|
-
|
10
|
-
|
-
|
10
|
Appointed representative retained
commission (amortised cost)
|
17,697
|
30
|
440
|
76
|
18,243
|
Total
|
|
48,102
|
4,952
|
16,852
|
7,438
|
77,344
|
*The disclosure incorrectly excluded the clawback liability,
which is a financial instrument, and its maturity analysis as at 31
December 2022. The disclosure is therefore restated to make this
correction. The correction has no other impact on these financial
statements.
Appointed Representative retained
commission does not have a definite maturity date and it is not
possible to accurately estimate the repayment profile, other than
when Appointed Representative firms are in the initial term of
their contract. The Directors consider that the disclosed maturity
profile is the most appropriate.
The Board receives annual 12-month
cash flow projections based on working capital modelling as well as
information regarding cash balances monthly. At the end of the
financial year, these projections indicated that the Group expected
to have sufficient liquid resources to meet its obligations under
all reasonably expected circumstances. Additionally, the Group has
financial resource requirements set by its regulator, the Financial
Conduct Authority. The Board has set a policy to ensure that
adequate capital is maintained to ensure that these externally set
financial resource requirements are exceeded at all times.
Quarterly reports are made to the Financial Conduct Authority and
submission is authorised by the Chief Financial Officer, at which
time capital adequacy is re-assessed.
Capital management
The Group monitors its capital
which consists of all components of equity (i.e. share capital,
share premium, capital redemption reserve, share option reserve and
retained earnings).
The Group's objectives when
maintaining capital are:
·
To safeguard the entity's ability to continue as
a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders,
·
To ensure that capital is maintained at all times
to ensure that financial resource requirements set by its
regulator, the Financial Conduct Authority, are exceeded at all
times, and
·
To ensure the Group has the cash available to
develop the services provided by the Group to provide an adequate
return to shareholders.
23 Clawback
liability
|
2023
£'000
|
2022
£'000
|
As at 1 January
|
8,038
|
5,716
|
Acquisition of
subsidiary
|
-
|
935
|
Charged to the consolidated
statement of comprehensive income
|
2,293
|
1,387
|
As at 31 December
|
10,331
|
8,038
|
The balance relates to refund
liabilities for the estimated cost of repaying commission income
received upfront on protection policies that may lapse in the four
years following issue. Under the Group's revenue contracts with
protection providers, if the policy is cancelled by the customer
within a four-year period after the inception of the policy, then a
proportion of the commission received upfront has to be repaid to
the protection provider. While the exact timing of any future
repayments (termed 'clawbacks') within the four-year period is
uncertain, it has been estimated based on both data from protection
providers and internal commission data that £4.4m (2022: £3.4m) of
the liability would be payable after more than one year. The
liability is based on the Directors' best estimate, using industry
data where available, of the probability of clawbacks to be
made.
A liability is recognised in the
financial statements of nine of the Group's subsidiaries: Mortgage
Advice Bureau Limited, Mortgage Advice Bureau (Derby) Limited,
Capital Protect Limited, First Mortgage Limited, Fluent Mortgages
Limited, Fluent Mortgages Horwich Limited, Vita Financial Limited,
BPR Protect Limited and Auxilium Partnership Limited.
The clawback liability was incorrectly presented as a
non-current liability in the prior year. This has been restated in
the consolidated statement of financial position as a current
liability. The correction has no other impact on these financial
statements.
24 Deferred tax
Deferred tax is calculated in full
on temporary differences using tax rates of 25% based on when the
temporary differences are expected to unwind (2022: 19% and
25%).
The movement in deferred tax is
shown below:
|
2023
£'000
|
2022
£'000
|
Net deferred tax (liability)/asset
- opening balance
|
(12,862)
|
1,114
|
Acquisition of
subsidiary
|
-
|
(12,820)
|
Recognised in the consolidated
statement of comprehensive income
|
1,715
|
(389)
|
Deferred tax movement recognised
in equity
|
449
|
(767)
|
Net deferred tax (liability) - closing
balance
|
(10,698)
|
(12,862)
|
The deferred tax balance is made
up as follows:
|
2023
£'000
|
|
2022
£'000
|
Fixed asset differences
|
(13,355)
|
|
(14,659)
|
Other timing
differences
|
295
|
|
312
|
Tax losses
|
1,138
|
|
659
|
Share-based payments
|
1,224
|
|
826
|
Net deferred tax
(liability)
|
(10,698)
|
|
(12,862)
|
Reflected in the statement of financial position as
follows:
|
2023
£'000
|
2022
£'000
|
Deferred tax liability
|
(11,417)
|
(14,659)
|
Deferred tax asset
|
719
|
1,797
|
Net deferred tax
(liability)
|
(10,698)
|
(12,862)
|
Deferred tax liabilities have arisen due to capital allowances
which have been received ahead of the depreciation charged in the
accounts and the recognition of the fair value of acquired assets
in business combinations.
25 Share capital
Issued and fully paid
|
2023
£'000
|
|
2022
£'000
|
Ordinary shares of 0.1p
each
|
57
|
|
57
|
Total share capital
|
57
|
|
57
|
During the year 96,039 ordinary
shares of 0.1p each were issued following partial exercise of
options issued in 2019 and 2020 at no premium. As at 31 December
2023, there were 57,127,034 ordinary shares of 0.1p in issue (2022:
57,030,995). See also note 30.
26 Reserves
The Group's policy is to maintain
an appropriate capital base and comply with its externally imposed
capital requirements whilst providing maximum shareholder
value.
The following describes the nature
and purpose of each reserve within equity:
Reserve
|
Description and purpose
|
Share premium
|
Amount subscribed for share
capital in excess of nominal value.
|
Capital redemption
reserve
Share option reserve
|
The capital redemption reserve
represents the cancellation of part of the original share capital
premium of the company at par value of any shares
repurchased.
The fair value of equity
instruments granted by the Company in respect of share-based
payment transactions and deferred tax recognised in
equity.
|
Retained earnings
|
All other net gains and losses and
transactions with owners (e.g. dividends) not recognised
elsewhere.
|
|
|
There is no restriction on the
distribution of retained earnings.
27 Retirement
benefits
The Group operates several defined
contribution pension schemes for the benefit of its employees and
also makes contributions to self-invested personal pensions
("SIPP"). The assets of the schemes and the SIPP are held
separately from those of the Group in independently administered
funds. The pension expense represents contributions payable by the
Group to the SIPP and amounted to £1.7m (2022: £1.4m). There were contributions payable to the SIPP as at 31
December 2023 of £0.3m (2022: £0.2m).
28 Related party
transactions
The following table shows the
total amount of transactions that have been entered into with
related parties during year ended 31 December 2023 and 2022, as
well as balances with related parties as at 31 December 2023 and 31
December 2022.
|
Relationship
|
Commission
received/(paid)
|
Balance of retained
commissions*
|
Loans owed to
MAB
|
|
|
31 December
2023
£'000
|
31
December 2022
£'000
|
31 December
2023
£'000
|
31
December 2022
£'000
|
31 December
2023
£'000
|
31
December 2022
£'000
|
Buildstore Limited
|
Associate
|
(830)
|
(927)
|
23
|
14
|
-
|
-
|
Sort Limited
|
Associate
|
1,512
|
1,492
|
-
|
-
|
-
|
218
|
Clear Mortgage Solutions
Limited
|
Associate
|
(5,227)
|
(4,550)
|
595
|
652
|
-
|
-
|
Evolve FS Ltd
|
Associate
|
(3,976)
|
(2,949)
|
178
|
76
|
-
|
-
|
The Mortgage Broker
Limited
|
Associate
|
(1,555)
|
(1,791)
|
67
|
67
|
5
|
20
|
Meridian Holdings Group
Ltd
|
Associate
|
(3,541)
|
(4,481)
|
550
|
546
|
81
|
319
|
M & R FM Ltd
|
Associate
|
(3,332)
|
(2,826)
|
184
|
107
|
-
|
-
|
Heron Financial Limited
|
Associate
|
(1,776)
|
(4)
|
41
|
-
|
-
|
-
|
Pinnacle Surveyors (England &
Wales) Ltd
|
Associate
|
-
|
-
|
-
|
-
|
100
|
-
|
BPR Protect Limited**
|
Associate
|
-
|
(223)
|
-
|
-
|
-
|
-
|
Vita Financial Limited**
|
Associate
|
-
|
(717)
|
-
|
-
|
-
|
-
|
MAB Broker Services PTY
Limited
|
Joint
venture
|
-
|
-
|
-
|
-
|
15
|
-
|
* Balances in relation to retained
commissions are to cover future lapses
** Vita Financial Limited and BPR
Protect Limited were associated companies of the Group until they
became subsidiaries on 12 July 2022 following Mortgage Advice
Bureau Limited's acquisition of Vita Financial Limited.
During the year the Group received
dividends from associated companies as follows:
|
2023
£'000
|
2022
£'000
|
M & R FM Ltd
|
222
|
187
|
Heron Financial Limited
|
125
|
-
|
Clear Mortgage Solutions
Limited
|
56
|
-
|
CO2 Commercial Limited
|
-
|
348
|
Evolve FS Ltd
|
-
|
245
|
Sort Group Limited
|
-
|
130
|
Total dividends received
|
403
|
910
|
29 Ultimate controlling
party
There is no ultimate controlling
party.
30 Share-based
payments
Mortgage Advice Bureau Executive Share Option
Plan
The Group operates two
equity-settled share-based remuneration schemes for Executive
Directors and certain senior management, one being an approved
scheme, the other unapproved, but with similar terms. For options
granted before 2023, half of the options are subject to a total
shareholder return (TSR) performance condition and the remaining
half are subject to an earnings per share (EPS) performance
condition. For options granted during 2023, the options are subject
to an earnings per share (EPS) performance condition. The
outstanding options in the unapproved scheme vest and are
exercisable as follows:
For options granted during 2018
and outstanding as at 1 January 2023:
· 100% based on performance to 31 March 2021, exercisable
between 11 April 2021 and 9 April 2026.
For options granted during 2019
and outstanding as at 1 January 2023:
· 100% based on performance to 31 March 2022, exercisable
between 1 July 2022 and 1 July 2027.
For options granted during 2020
and outstanding as at 1 January 2023:
· 100% based on performance to 31 March 2023, exercisable
between 22 April 2023 and 21 July 2028.
For options granted during 2021
and outstanding as at 1 January 2023:
· 100% based on performance to 31 March 2024, exercisable
between 1 April 2024 and 31 March 2029.
For options granted during 2022
and outstanding as at 1 January 2023:
· 100% based on performance to 31 March 2025, exercisable
between 6 April 2025 and 6 June 2030.
For options granted during the
year:
· 100% based on performance to 31 December 2025, exercisable
between 1 April 2026 and 30 May 2031.
The number and weighted average
exercise prices (WAEP) of, and movements in, share options during
the year for the Mortgage Advice Bureau Executive Share Option
Plan:
|
2023
WAEP
£
|
2023
Number
|
2022
WAEP
£
|
2022
Number
|
Outstanding as at 1
January
|
0.001
|
576,003
|
0.001
|
460,380
|
Granted during the year
|
0.001
|
296,375
|
0.001
|
154,850
|
Exercised
|
0.001
|
(96,039)
|
0.001
|
(16,851)
|
Lapsed *
|
-
|
(20,310)
|
-
|
(22,376)
|
Outstanding as at 31
December
|
0.001
|
756,029
|
0.001
|
576,003
|
*Due to not fully vesting,
retirement or leaving the Group.
As at 31 December 2023,
756,029 options over ordinary shares of
0.1 pence each in the Company were exercisable with a weighted
average exercise price of £0.001.
On 31 May 2023, 296,375 options
over ordinary shares of 0.1 pence each in the Company were granted
to the Executive Directors and senior executives of MAB under the
equity-settled Mortgage Advice Bureau Executive Share Option Plan
(the "Options") with a fair value of £6.31 per option.
Exercise of the Options is subject to the service conditions and
achievement of the performance condition based on earnings per
share criteria. Subject to achievement of the performance
condition, the Options will be exercisable 2 years and 10 months
from the date of grant. The exercise price for the Options is 0.1
pence, being the nominal cost of the Ordinary Shares.
Options exercised on 6 and 11
April 2023 resulted in respectively 1,498 and 1,498 ordinary shares
being issued at an exercise price of 0.1p per share. The
price of the ordinary shares at the time of exercise was
respectively £6.80 and £7.05 per share.
Options exercised on 19 May 2023
resulted in 93,043 ordinary shares being issued at an exercise
price of 0.1p per share. The price of the ordinary shares at the
time of exercise was £8.50 per share.
For the Options outstanding under
the Mortgage Advice Bureau Executive Share Option Plan as at 31
December 2023, the weighted average remaining contractual life is
5.9 years (2022: 5.9 years). This is now calculated on the
basis of the final date that the options can be exercised, whereas
previously it was disclosed on the basis of the first date the
options could be exercised, as it is currently the more relevant
figure.
The following information is
relevant in the determination of the fair value of options granted
during the year under the equity-settled share-based remuneration
scheme operated by the Group.
|
2023
|
2022
|
Equity-settled
|
|
|
Option pricing model -
EPS
|
Black-Scholes
|
Black-Scholes
|
Option pricing model -
TSR
|
-
|
Stochastic
|
Exercise price
|
£0.001
|
£0.001
|
Expected volatility
|
n/a(1)
|
41.66%
|
Expected dividend yield
|
3.98%
|
2.70%
|
Risk-free interest rate
|
n/a(1)
|
1.78%
|
(1) For option awards
that are not subject to market conditions, expected volatility and
the risk-free interest rate have no impact on the
valuation
The options granted during 2023
are subject to performance criteria based solely on earnings per
share performance. They have a vesting period of 2 years and 10
months from the date of grant and the calculation of the
share-based payment is based on this vesting period.
Expected volatility is a measure
of an amount by which the share price is expected to fluctuate
during a period. Dividends paid on shares reduce the fair value of
an award as a participant does not receive the dividend income on
these shares.
The Options offer participants the
opportunity to benefit from increasing per share value without
risking the current per share price. The risk-free rate used is the
rate of interest obtainable from UK government securities as at the
date of grant over the expected term.
MAB AR Option Plan
The Group operates an
equity-settled share plan, the AR Option Plan, to reward selected
ARs of the Group. The AR Option Plan provides for options which
have a nominal exercise price of 0.01 pence per share (or, for any
individual AR, not less than £1 on each occasion of exercise) to
acquire Ordinary Shares subject to performance conditions. Certain
criteria must be met in order for ARs to be eligible, including
using the Mortgage Advice Bureau brand and being party to an AR
Agreement which provides for an initial contract term of at least
five years at the date of grant. The AR Options will normally
become exercisable following the fifth anniversary of grant subject
to the satisfaction of performance conditions based on financial
and other targets, including quality of consumer outcomes,
compliance standards and continued use of the Mortgage Advice
Bureau brand.
There were no options outstanding
under the AR Option Plan at 1 January 2023 and there have been no
grants of options during the year.
Share-based remuneration expense
The share-based remuneration costs
for the year are made up as follows:
|
2023
£'000
|
2022
£'000
|
Charge for equity settled
schemes
|
177
|
763
|
National Insurance on equity
settled schemes
|
(13)
|
324
|
Share incentive plan
costs
|
143
|
147
|
Free shares awarded to
employees
|
293
|
186
|
Charge for equity settled
acquisition options
|
3,203
|
1,064
|
Charge for cash settled
acquisition options
|
626
|
499
|
Total costs
|
4,429
|
2,983
|
As a result of Fluent minority
interest purchases during the period, accelerated equity settled
charges of £1.8m and additional cash settled charges of £0.4m
relating to the acquisition options were recognised in the
consolidated statement of comprehensive income.
Options exercised during the
period resulted in a transfer from the Share option reserve to
Retained earnings of £0.4m
(2022: £0.1m) reflected in the consolidated
statement of changes in equity. In addition, £1.9m was transferred
from the Share option reserve to Retained earnings for the
cancelled acquisition options as a result of the Fluent minority
interest purchase
31 Non-controlling interests
(NCI)
Set out below is summarised
financial information for each subsidiary that has a
non-controlling interest that is material to the Group. The amounts
disclosed for each subsidiary are their consolidated financial
information before inter-company eliminations with Mortgage Advice
Bureau Limited.
2023
Summarised balance sheet
|
First Mortgage Direct
Limited ("First Mortgage")
2023
£'000
|
Project Finland Topco
Limited ("Fluent")
2023
£'000
|
Total
2023
£'000
|
Current assets
|
14,585
|
2,278
|
16,863
|
Current liabilities
|
(7,125)
|
(3,605)
|
(10,730)
|
Current net assets/(liabilities)
|
7,460
|
(1,327)
|
6,133
|
Non-current assets
|
3,281
|
11,021
|
14,302
|
Non-current liabilities
|
(1,410)
|
(1,805)
|
(3,215)
|
Non-current net assets
|
1,871
|
9,216
|
11,087
|
Net Group assets on
consolidation
|
1,349
|
35,218
|
36,567
|
Net assets
|
10,680
|
43,107
|
53,787
|
Accumulated NCI
|
2,386
|
1,289
|
3,675
|
|
|
|
|
Summarised statement of comprehensive
income
|
£'000
|
£'000
|
£'000
|
Revenue
|
22,602
|
37,521
|
60,123
|
Profit/(loss) for the period and
total comprehensive income
|
3,731
|
(7,772)
|
(4,041)
|
Profit/(loss) allocated to
NCI
|
781
|
(1,345)
|
(564)
|
Dividends paid to NCI
|
692
|
-
|
692
|
|
|
|
|
Summarised cash flows
|
£'000
|
£'000
|
£'000
|
Cash flows from operating
activities
|
3,251
|
550
|
3,801
|
Cash flows used in investing
activities
|
(516)
|
(594)
|
(1,110)
|
Cash flows used in financing
activities
|
(3,909)
|
(875)
|
(4,784)
|
Net (decrease) in cash & cash
equivalents
|
(1,174)
|
(919)
|
(2,092)
|
Net Group assets on consolidation
included above relate to acquired intangible assets and associated
deferred tax liabilities. The profit/(loss) for the period and
total comprehensive income includes the amortisation of these
acquired intangible assets and the associated movements in deferred
tax.
2022
Summarised balance sheet (restated*)
|
First Mortgage Direct
Limited
2022
£'000
|
Project Finland Topco
Limited ("Fluent")
2022
£'000
|
Total
2022
£'000
|
Current assets
|
12,443
|
3,721
|
16,164
|
Current liabilities
|
(5,213)
|
(27,395)
|
(32,608)
|
Current net assets/(liabilities)
|
7,230
|
(23,674)
|
(16,444)
|
Non-current assets
|
3,213
|
19,094
|
22,307
|
Non-current liabilities
|
(1,838)
|
(764)
|
(2,602)
|
Non-current net assets/(liabilities)
|
1,375
|
18,330
|
19,705
|
Net Group assets on
consolidation
|
1,630
|
38,478
|
40,108
|
Net assets/(liabilities)
|
10,235
|
33,134
|
43,369
|
Accumulated NCI
|
2,297
|
4,654
|
6,951
|
|
|
|
|
Summarised statement of comprehensive
income
|
£'000
|
£'000
|
£'000
|
Revenue
|
18,220
|
21,883
|
40,103
|
Profit/(loss) for the period and
total comprehensive income
|
2,534
|
(8)
|
2,526
|
Profit/(loss) allocated to
NCI
|
507
|
(2)
|
505
|
Dividends paid to NCI
|
415
|
-
|
415
|
|
|
|
|
Summarised cash flows
|
£'000
|
£'000
|
£'000
|
Cash flows from operating
activities
|
6,201
|
1,261
|
7,462
|
Cash flows used in investing
activities
|
(730)
|
(1,319)
|
(2,049)
|
Cash flows used in financing
activities
|
(1,659)
|
(1,725)
|
(3,384)
|
Net increase in cash & cash
equivalents
|
3,812
|
(1,783)
|
2,029
|
*The disclosure has been restated to disclose clawback
liabilities within current liabilities, which were incorrectly
included within non-current liabilities. The correction has no other
impact on these financial statements.
32 Contingent
liabilities
The Group had no contingent
liabilities as at 31 December 2023 or 31 December 2022.
33 Events after the reporting
date
There were no material events
after the reporting period, which have a bearing on the
understanding of these consolidated financial
statements.
34 Notes supporting statement of cash
flows
Cash and cash equivalents for
purposes of the statement of cash flows comprises:
|
2023
|
|
2022
|
|
£'000
|
|
£'000
|
Cash at bank available on
demand
|
3,022
|
|
7,219
|
Bank balances held in relation to
retained commissions
|
18,918
|
|
18,243
|
Total cash and cash equivalents
|
21,940
|
|
25,462
|
A reconciliation of liabilities
from financing transactions is set out as follows:
|
Loans and
borrowings
£'000
|
Leases
£'000
|
Total
£'000
|
Balance as at 1 January 2022
|
-
|
2,596
|
2,596
|
Cash flows
|
|
|
|
Principal loan amounts
|
23,200
|
-
|
23,200
|
Loan arrangement fees
|
(282)
|
-
|
(282)
|
Settlement of loan notes and
accrued interest on acquisition
|
(21,891)
|
-
|
(21,891)
|
Repayment of borrowings
|
(1,500)
|
-
|
(1,500)
|
Principal lease
payments
|
-
|
(547)
|
(547)
|
Non-cash flows
|
|
|
|
Acquisition of
subsidiaries
|
23,391
|
1,016
|
24,407
|
New leases
|
-
|
919
|
919
|
Accrued interest
|
426
|
-
|
426
|
Unwinding of loan arrangement
fees
|
63
|
-
|
63
|
Disposals
|
-
|
(37)
|
(37)
|
Balance as at 31 December 2022 and 1 January
2023
|
23,407
|
3,947
|
27,354
|
Cash Flows
|
|
|
|
Repayment of borrowings
|
(5,350)
|
-
|
(5,350)
|
Principal lease payments
|
-
|
(907)
|
(907)
|
Non-cash flows
|
|
|
|
New
leases
|
-
|
13
|
13
|
Accrued Interest
|
116
|
-
|
116
|
Unwinding of loan arrangement fees
|
77
|
-
|
77
|
Lease
remeasurement
|
-
|
(317)
|
(317)
|
Balance as at 31 December 2023
|
18,250
|
2,736
|
20,986
|
Glossary of Alternative Performance Measures ("APMs") for the
Group report and financial statements
Certain numerical information and
other amounts and percentages presented have been subject to
rounding adjustments. Accordingly, in certain instances, the
sum of the numbers in a column or a row in tables may not conform
exactly to the total figure given for that column or row or the sum
of certain numbers presented as a percentage may not conform
exactly to the total percentage given.
APM
|
Closest equivalent statutory measure
|
Definition and purpose
|
Income statement measures
|
|
Net revenue
|
Gross profit
|
Net revenue is revenue less
commissions paid to Appointed Representative firms and payments to
Fluent affinity partners.
£m
|
2023
|
2022
|
Revenue
|
239.5
|
230.8
|
Commissions paid
|
(130.9)
|
(142.8)
|
Payments to Fluent affinity
partners
|
(14.5)
|
(8.0)
|
Net revenue
|
94.1
|
80.0
|
|
|
|
|
Administrative expenses
ratio
|
None
|
Calculated as administrative
expenses (which exclude amortisation of acquired intangibles,
acquisition costs incurred in the year and non-cash operating
expenses relating to put and call option agreements) divided by
revenue.
|
Adjusted EBITDA
|
None
|
Calculated as EBITDA before
charges associated with acquisition and investments, and other
adjusting items that the Group deems, by their nature, require
adjustment in order to show more accurately the underlying business
performance of the Group from period to period in a consistent
manner.
Charges associated with
acquisition or investments in businesses include:
•
non-cash charges such as depreciation and amortisation of acquired
intangibles and the effect of fair valuation of acquired
assets,
•
non-cash operating expenses relating to put and call option
agreements and cash charges including transaction costs,
•
fair value movements on deferred consideration, and
•
fair value movements on derivative financial
instruments.
£m
|
2023
|
2022
|
Gross Profit
|
70.2
|
62.9
|
Administrative Expenses
|
(46.7)
|
(36.0)
|
Depreciation
|
2.1
|
1.2
|
Amortisation
|
0.3
|
0.3
|
Share of profit from
associates
|
0.8
|
0.7
|
Rounding difference
|
-
|
-
|
Adjusted EBITDA
|
26.7
|
29.1
|
|
Adjusted EBITDA margin
|
None
|
Calculated as Adjusted EBITDA
divided by revenue.
|
Adjusted operating
profit
|
Operating profit
|
Calculated as operating profit
before charges associated with acquisition and investments, and
other adjusting items that the Group deems, by their nature,
require adjustment in order to show more accurately the underlying
business performance of the Group from period to period in a
consistent manner.
Charges associated with
acquisition or investments in businesses include:
·
non-cash charges such as amortisation of acquired
intangibles and the effect of fair valuation of acquired
assets,
·
non-cash operating expenses relating to put and
call option agreements and cash charges including transaction
costs,
·
fair value movements on deferred consideration,
and
·
fair value movements on derivative financial
instruments.
£m
|
2023
|
2022
|
Operating profit
|
14.0
|
18.5
|
Amortisation of acquired
intangibles
|
5.2
|
2.6
|
Acquisition costs
|
0.2
|
2.8
|
Non-cash operating expenses
relating to put and call option agreements
|
4.3
|
2.0
|
Impairment losses
|
-
|
2.8
|
Non-cash fair value losses /
(gains) on financial instruments
|
0.2
|
(0.9)
|
Restructuring costs
|
0.5
|
-
|
Rounding difference
|
-
|
(0.1)
|
Adjusted operating profit
|
24.4
|
27.7
|
|
Adjusted profit before
tax
|
Profit before tax
|
Calculated as profit before tax
before charges associated with acquisition and investments, and
other adjusting items that the Group deems, by their nature,
require adjustment in order to show more accurately the underlying
business performance of the Group from period to period in a
consistent manner.
Charges associated with
acquisition or investments in businesses include:
·
non-cash charges such as amortisation of acquired
intangibles and the effect of fair valuation of acquired
assets,
·
non-cash operating expenses relating to put and
call option agreements and cash charges including transaction
costs,
·
fair value movements on deferred consideration,
and
·
fair value movements on derivative financial
instruments.
£m
|
2023
|
2022
|
Profit before tax
|
16.2
|
17.4
|
Amortisation of acquired
intangibles
|
5.2
|
2.6
|
Acquisition costs
|
0.2
|
2.8
|
Non-cash operating expenses
relating to put and call option agreements
|
4.3
|
2.0
|
Impairment losses
|
-
|
2.8
|
Non-cash fair value losses /
(gains) on financial instruments
|
0.2
|
(0.9)
|
Restructuring costs
|
0.5
|
-
|
Unwinding of redemption
liability
|
(3.3)
|
0.6
|
Rounding difference
|
(0.1)
|
(0.1)
|
Adjusted profit before tax
|
23.2
|
27.2
|
|
|
|
|
Adjusted profit before tax
margin
|
None
|
Calculated as Adjusted profit
before tax divided by revenue.
|
Adjusted earnings per
share
|
Basic earnings per
share
|
Calculated as basic earnings per
share before charges (net of tax) associated with acquisition and
investments, and other adjusting items that the Group deems, by
their nature, require adjustment in order to show more accurately
the underlying business performance of the Group from period to
period in a consistent manner.
|
Adjusted fully diluted earnings per
share
|
Diluted earnings per
share
|
Calculated as diluted earnings per
share (basic EPS, adjusting for the effects of potentially dilutive
share options) before charges (net of tax) associated with
acquisition and investments, and other adjusting items that the
Group deems, by their nature, require adjustment in order to show
more accurately the underlying business performance of the Group
from period to period in a consistent manner.
|
Adjusted profit before tax as a
percentage of net revenue
|
None
|
Calculated as Adjusted profit
before tax divided by Net revenue
|
|
|
|
|
Cash flow measures
|
Adjusted cash
conversion
|
None
|
Adjusted cash conversion is cash
generated from operating activities adjusted for movements in
non-trading items, including loans to AR firms and associates and
cash transaction costs, and for increases in restricted cash
balances, as a percentage of adjusted operating profit.
£m
|
2023
|
2022
|
Cash generated from operating
activities
|
29.7
|
28.5
|
Acquisition costs
|
0.2
|
2.8
|
Restructuring costs
|
0.5
|
-
|
Decrease in loans to AR firms and
associates
|
(0.8)
|
(0.8)
|
Increase in restricted cash
balances
|
(0.7)
|
(1.4)
|
Rounding difference
|
0.1
|
-
|
Adjusted cash generated
|
29.0
|
29.1
|
|
|
|
|
Balance sheet measures
|
Net debt
|
None
|
Loans and borrowings less
unrestricted cash balances.
|
Glossary of
terms
AI
|
Artificial Intelligence
|
Appointed Representative, AR, or AR firm
|
An intermediary firm or person who
is party to an agreement with a FCA regulated firm permitting them
to carry out certain regulated activities
|
AR Agreement
|
Agreement governing the terms of
the commercial relationship between MAB and an AR firm, and setting
out how income from products sold by Advisers of the AR is split
between MAB and the AR
|
Adviser
|
A person employed or engaged by an
AR firm, carrying out mortgage and/or general or protection
insurance advisory services to customers
|
Base Rate
|
The Bank of England base rate is
the interest rate that the Bank of England charges banks for
secured overnight lending. It is the UK Government's key interest
rate for enacting its monetary policy
|
Bridging Finance
|
Short-term borrowing used to
bridge a gap in funding until a property transaction
completes
|
Clawbacks
|
The right of insurers to reclaim
some or all of the commission paid to an intermediary in the event
premiums are not paid by the policy holder in the period during
which the policy holder pays monthly premiums, typically 48 months
for protection products for MAB
|
Client fee
|
A fee paid by the consumer to the
intermediary who has arranged the consumer's mortgage with a
lender
|
Consumer Duty
|
The policy statement published by
the FCA in July 2022, which aims to set higher and clearer
standards of consumer protection
|
Corporate Social Responsibility
|
A type of business self-regulation
that aims to contribute to societal goals by engaging in or
supporting ethically-oriented practices (e.g. fundraising for
charity)
|
Directly Authorised
|
An entity that is directly
authorised by the FCA to carry out regulated activities
|
ESG
|
Environmental, Social and
Governance
|
Execution only
|
Refers to a customer entering into
a regulated mortgage contract without being given advice, or where
the advice given by a firm has been rejected. This is effectively a
self-service process
|
FCA
|
Financial Conduct
Authority
|
FSCS
|
The Financial Services
Compensation Scheme is the UK's statutory deposit insurance and
investors compensation scheme for customers of authorised financial
services firms
|
FTB
|
First Time Buyer
|
GDPR
|
The General Data Protection
Regulation, a regulation in EU law on data protection and
privacy
|
General insurance
|
Buildings and contents insurance
and certain other non-life insurance products but excluding
protection
|
Gross mortgage lending
|
New mortgage lending and product
transfers
|
Help-to-Buy
|
UK Government incentives that aim
to help first time buyers and those looking to move homes purchase
a residential property. Help-to-Buy schemes include Equity Loans
and Shared Ownership schemes
|
Intermediary, intermediary firm, or mortgage
intermediary
|
A firm or individual who arranges
mortgages with lenders on behalf of customers, (as opposed to a
lender that the customer approaches directly). An intermediary is
either directly authorised by the FCA or is an appointed
representative of a directly authorised firm
|
IMLA
|
The Intermediary Mortgage Lenders
Association is a trade association that represents the views and
interests of UK mortgage lenders who are involved in the generation
of mortgage business via professional financial
intermediaries
|
Insurance or insurance products
|
Includes protection and general
insurance
|
IR35
|
The UK's anti-avoidance tax
legislation designed to tax disguised employment at a rate similar
to employment
|
Later Life Lending
|
Refers to mortgage products aimed
at those approaching or already in retirement, who are looking to
release some of the equity in their home for a variety of
reasons
|
Lifetime Mortgage
|
A type of Later Life Lending
whereby no capital or interest repayments are made. Compounded
interest is added to the capital throughout the term of the loan,
which is then repaid by selling the property when the borrower dies
or moves out
|
Mortgage Advice and Selling Standards
|
Policy statement issued by the FCA
in February 2020 which sets out a package of remedies aiming to
help consumers make better informed choices with regard to
mortgages
|
Mortgages Market Study
|
Market study conducted by the FCA
in 2019 as a precursor to the Mortgage Advice and Selling Standards
policy statement
|
Mortgage panel or lender panel
|
A panel of mortgage lenders used
by intermediaries
|
New build
|
Encompasses properties built by
developers, custom build, self-build and affordable
housing
|
New mortgage lending
|
Lending resulting from a mortgage
completion in connection with a house purchase or a re-mortgage
with a different lender to the customer's existing
lender
|
PCW
|
Price Comparison
Website
|
PPC
|
Pay-Per-Click
|
Procuration fee, or Mortgage procuration
fee
|
A fee paid by a lender to the
intermediary who has arranged a mortgage with the lender
|
Product transfer
|
The process of switching an
existing mortgage product to a new one with the same
lender
|
Protection insurance
|
Life insurance (including critical
illness), family income protection and certain other insurance
products (but excluding general insurance)
|
Secured Personal Loan
|
A loan that uses a property as
security, also known as second charge mortgage
|
Service centres or telephone centres
|
MAB's regional telephone service
centres operated by certain AR firms. The services provided by
these centres include reviews of mortgage and related insurance
products on an on-going basis with replacement or new products
offered to customers, as appropriate
|
SM&CR
|
The Senior Manager and
Certification Regime, a regime that aims to raise standards of
governance, increase individual accountability and help restore
confidence in the financial
services sector
|
Cautionary Statement
Certain statements included or
incorporated by reference within this announcement may constitute
"forward-looking statements" in respect of the Group's operations,
performance, prospects and/or financial condition. Forward-looking
statements are sometimes, but not always, identified by their use
of a date in the future or such words and words of similar meaning
as "aims", "anticipates", "believes", "continues", "could", "due",
"estimates", "expects", "goal", "intends", "may", "objectives",
"outlook", "plans", "potential", "probably", "project", "seeks",
"should", "targets", or "will" or, in each case, their negative or
other variations or comparable terminology.
By their nature, forward-looking
statements involve a number of risks, uncertainties and assumptions
and actual results or events may differ materially from those
expressed or implied by those statements. Accordingly, no assurance
can be given that any particular expectation will be met and
reliance should not be placed on any forward-looking statement.
Additionally, forward-looking statements regarding past trends or
activities should not be taken as a representation that such trends
or activities will continue in the future. Except as required by
applicable law or regulation, no responsibility or obligation is
accepted to update or revise any forward-looking statement
resulting from new information, future events or otherwise. Nothing
in this announcement should be construed as a profit
forecast.
This announcement does not
constitute or form part of any offer or invitation to sell, or any
solicitation of any offer to purchase any shares or other
securities in the Company, nor shall it or any part of it or the
fact of its distribution form the basis of, or be relied on in
connection with, any contract or commitment or investment decisions
relating thereto, nor does it constitute a recommendation regarding
the shares or other securities of the Company. Past performance
cannot be relied upon as a guide to future performance and persons
needing advice should consult an independent financial adviser
authorised under the Financial Services and Markets Act 2000 (as
amended). Statements in this announcement reflect the knowledge and
information available at the time of its preparation. Liability
arising from anything in this announcement shall be governed by
English law. Nothing in this announcement shall exclude any
liability under applicable laws that cannot be excluded in
accordance with such laws.