Delivering, Growing, Innovating

Investor and Analyst Presentation

Mortgage Advice Bureau (Holdings) plc

Final results for the year ended 31 December 2020

Summary and outlook

Appendices

20 22

Highlights

Financial Highlights

Revenue

Gross Profit

Adj. PBT1

(-1% excl. First Mortgage)

(-3% excl. First Mortgage)

(-17% excl. First Mortgage)

Adj. EPS1

Final Dividend

Cash Conversion2

(-16% excl. First Mortgage)

  • Total dividend for the year of 25.6p, including 6.4p catch up dividend (2019: 17.5p)

  • 1. Adjusted in 2020 for £0.4m (2019: £0.2m) amortisation of acquired intangibles and £0.9m (2019: £0.4m) of additional non-cash operating expenses relating to the put and call option agreement to acquire the remaining 20% of First Mortgage. In 2019, £0.4m of one-off costs associated with the acquisition of First Mortgage were also adjusted. PBT and EPS are also adjusted for impairment of loans to related parties of £1.7m in 2020 (2019: £nil), £1.4m net of tax.

  • 2. Adjusted cash conversion is cash generated from operating activities adjusted for movements in non-trading items, including loans to Appointed Representative firms ("ARs") and associates totalling £(1.5)m and increases in restricted cash balances of £0.6m in 2020, as a percentage of adjusted operating profit.

Operational Highlights

Mortgage Completions1

Market Share2

(+3% excl. First Mortgage)

Adviser Numbers3

(+10% excl. First Mortgage)

Revenue Per Active Adviser4

(+8% excl. First Mortgage)

  • 1. MAB's gross mortgage completions, including product transfers.

    (-7% excl. First Mortgage)

  • 2. Market share of gross new mortgage lending (excluding product transfers).

    Strategic progress

    Digital business acceleration

    • Platform roll out

    • Remote advice/security

    • Lead Generation

    • Compliance transformation

    M&A / Joint Ventures

    New BuildInternationalAddressable Market

  • 3. Includes the Advisers of a firm previously authorised under an Appointed Representative agreement with MAB until 7 December 2020. MAB continues to provide services to this firm, now directly authorised by the FCA.

  • 4. Based on average number of active advisers for the period. An active adviser is an adviser who had not been furloughed, and was therefore able to write business

Market Backdrop

£m

Mortgage Lending Market

Gross new mortgage lending values1

30,000

25,000

20,000

15,000

10,000

5,000

-

First time buyersHome-owner remortgagesBTL remortgagesHome-owner moversBTL purchases

Other (inc. lifetime and further advances)

  • 1. Source: UK Finance. Chart excludes product transfers.

  • 2. Includes further advances and lifetime mortgages, excludes product transfers.

  • 3. Source: UK Finance.

Commentary

  • Gross new mortgage lending of £243.1bn2, down 9% as a result of the closure of the housing market in Q2

Purchase market:

  • Purchase mortgage activity most adversely impacted in Q2 (down 46%)

  • Q3 activity continued to be impacted due to pipeline conversion timeframes (down 11%)

  • Sharp return to growth in Q4 (up 28%)

Re-financing market:

  • External re-mortgage activity less impacted in Q2 (down 18%)

  • Activity remained low in Q3 (down 22%) and Q4 (down 30%) due the volume of borrowers only being able to internally transfer their mortgages

  • Product transfers: up 1% for the year to £168bn3

140,000

Property Market

UK property transactions by volume1

Year-on-year changes:

120,000

100,000

80,000

60,000

40,000

20,000

0

EnglandScotland

  • 1. Sources: UK Finance. Q4 2020 figures are provisional.

    Q1: -1%Q2: -47%Q3: -16%

    WalesNorthern Ireland

  • 2. Source: Land Registry. House price inflation is the increase in house prices from December 2019 to December 2020. The increase in average house price is the year-on-year increase in average house prices for the year.

Q4: +17%

Commentary

  • Q1 broadly flat year-on-year (-1%)

  • Q2 property transaction volumes down 44% in England, as housing market shut for nearly 2 months.

  • In Scotland, where the housing market was shut for 3 months, Q2 volumes decreased by 63%

  • Despite the market recovery, Q3 volumes (down 16%) were still impacted due to pipeline conversion timeframes

  • Q4 data shows a 17% increase in transaction volumes

  • House price inflation c.9%, with 3% increase in average house price for the year2

Financial Review

Financial KPIs

Number of advisers: 1,580

14.5% overheads1 as % of revenue

26.9% gross profit margin

12.0% adj. PBT margin2

  • 1. Adjusted in 2020 for £0.4m (2019 £0.2m) amortisation of acquired intangibles and £0.9m (2019 £0.4m) of additional non-cash operating expenses relating to the put and call option agreement to acquire the remaining 20% of First Mortgage. In 2019, £0.4m of one-off costs associated with the acquisition of First Mortgage were also adjusted.

  • 2. Adjusted for items in note (1) above and impairment of loans to related parties of £1.7m in 2020.

Revenue: income source

Income sourceChange

2020

Change

2019

(£m)

(%)

Mortgage Procuration Fees

Commentary

£67.2m

£64.3m

£2.9m

+4%

  • Group revenue up 3% to £148.3m with completions up 5%, higher proportion of Product Transfers

    Protection and General Insurance Commission

    £58.8m

    £56.2m

    £2.6m

    +5%

  • Revenue excluding First Mortgage down 1% with completions up 3%

    Client FeesOther Income

    £19.0m

    £20.2m

    £(1.2)m

    -6%

    £3.3m

    £3.0m

    £0.3m

    +10%

    Total

    £148.3m

    £143.7m

    £4.6m

    +3%

    45%

    45%

  • Continued growth across all income sources other than client fees as a result of H1 contribution from First Mortgage, despite pandemic impact

  • Procuration fees up 4% with Group completions up 5%; increase driven by H1 First Mortgage contribution and associated revenue synergies, 1% increase in MAB (excl. First Mortgage) procuration fees, offset by increased product transfers

  • Protection and general insurance commission up 5% driven by H1 First Mortgage contribution and associated revenue synergies, offset by slightly lower banked protection in MAB (excl. First Mortgage)

  • Client fees (MAB excl. First Mortgage only) reduced by 6% due to fall in attachment rate of client fees as customers mainly transacted remotely and change in mortgage mix towards Product Transfers

Revenue: quarterly

Quarterly revenue

Q1

Q2

Q3

Q4

Year

Revenue (y-o-y change)

£35.0m (+£7.0m)

£28.5m (-£4.5m)

£37.1m (-£2.8m)

£47.7m (+£4.9m)

£148.3m (+£4.6m)

Average active Advisers

1,457

1,348

1,455

1,552

1,455

Average revenue per active Adviser

£24.0k

£21.2k

£25.5k

£30.8k

£101.9k

Commentary

  • Q1 strong post December 2019 General Election

  • Q2 heavily impacted both in terms of active Advisers and banked and written productivity

  • Q3 banked productivity continued to be impacted despite considerable increase in written business activity from increase in house purchase volumes

  • Strong Q4 banked and written productivity

Strong cash conversion supports growing dividend

1.

Adjusted cash conversion is cash generated from operating activities adjusted for movements in non-trading items, including loans to Appointed Representative firms and loans to associates, totalling £(1.5)m in 2020 (2019: £0.9m) and increases in restricted cash balances of £0.5m in 2020 (2019: £2.2m) as a percentage of adjusted operating profit.

112% Cash Conversion1

Commitment to dividends

InterimFinalSeries3

£11.7m Excess Capital

Unrestricted Cash Balance

Income Statement

Commentary

  • Revenue up 3% to £148.3m, including £14.7m from First Mortgage

  • Gross profit margin increase, growth in administrative expenses and overheads ratio mainly reflect the full year impact of the First Mortgage acquisition

  • Overheads ratio also impacted by lower revenue growth despite overhead savings of c.£3m

  • Adjusted Profit Before Tax1 down 5% to £17.8m in a year heavily affected by Covid-19

  • Adjusted Profit Before Tax1 Margin of 12.0% (2019: 13.0%)

  • Adjusted EPS1 down 5% to 28.6p (2019: 30.1p)

    • 1. Adjusted in 2020 for £0.4m (2019 £0.2m) amortisation of acquired intangibles and £0.9m (2019 £0.4m) of additional non-cash operating expenses relating to the put and call option agreement to acquire the remaining 20% of First Mortgage. In 2019, £0.4m of one-off costs associated with the acquisition of First Mortgage were also adjusted. Also adjusted for impairment of loans to related parties of £1.7m in 2020 (2019: £nil).

    • 2. An active adviser is an adviser who had not been furloughed, and was therefore able towrite business.

Investing to deliver margin enhancement

  • Investment to generate revenue growth:

    • Adviser productivity

    • Scaling of existing ARs

    • New AR firms

  • Operational benefits: Growth in revenue will increasingly outstrip growth in costs over the medium term Productivity and efficiency gains within our invested businesses will deliver increased profits from associates

… delivering margin enhancement

15

Strategy

Investing in future ready capabilities

Provide customers with the optimum balance of efficient digital solutions, combined with the reassurance of human interaction and adviceTransform risk management process and strengthen our technology infrastructure

Further develop our business model to help our ARs to have deeper and longer-lasting relationship with their customers

Digital

Business Acceleration

Platform developments will enhance scalability and agility resulting in improving overheads ratio in the medium term

Deliver a platform solution and data analytics that enable our AR partners to flex in scale and scope quickly and cost effectively

17

Set-up for Acceleration

Q1 2021 Progress on our initiatives

*

*

*

  • Exclusive partnership with innovative new property portal

  • Major focus on millions of homeowners and future buyers in early stages of research

  • Strategic partnership to deliver MAB Home Buying Buddy app

  • Digital coaching technology engages and nurtures consumers to achieve their life goals

  • Customer insights will deliver a more personalised experience

  • New MAB brand for planned increase in non-mortgage related products and services

  • Initial launch with MAB Wealth Management and home moving services

  • Collaboration with technology firm MQube leveraging its expertise and investment in data

  • Explore and deliver practical implications of machine learning and AI for mortgages

Adviser Growth

*see Appendix for further information

Adviser ProductivityLead Generation

New Products & ServicesAddressable

MarketCustomer Experience

Summary and Outlook

Summary & outlook

  • Strong performance and market share growth demonstrates the resilience of our operating model.

  • Significant progress made through securing major new lead sources that are fundamental to MAB's growth strategy.

  • Healthy pipeline of both Adviser recruitment and written business, despite the various lockdown restrictions.

  • Strong fundamentals of house purchase demand will be supported by recent Budget announcement.

  • Current trading is in line with Board expectations.

  • Maturing and new growth drivers will support future profits and market share growth.

Appendices

Award Winning

Company Overview

  • Mortgage Advice Bureau ("MAB") is a leading UK mortgage intermediary network

  • Directly authorised by FCA, MAB operates an Appointed Representative (AR) network which specialises in providing mortgage advice to customers as well as advice on protection and general insurance

  • Over 1,600 Advisers, almost all employed or engaged by ARs

  • All compliance supervision undertaken by MAB employees

  • Broad geographical spread across the UK

  • Developed leading in-house proprietary trading platform called MIDAS Pro

  • Won over 150 awards

Management

Executive Team

Non-Executive Team

* David Preece retired as Chief Operating Officer on 30 June 2019 and became a Non-executive Director.

Growth Focus - our investments

Online Leads 49%

Shareholding1

Distribution

Strategic

Specialism

Conveyancing 43%

Specialist New Build 25%

+

MAB Australia

+

Surveys 49%

International 48%New Build / Shared Ownership

40%49%

1. InitialMaximum

2. In March 2021, Meridian agreed to acquire Metro Finance Brokers Ltd. The acquisition is subject to FCA approval

Cash Balance Waterfall Unrestricted net cash balances1

40.0

£m

35.0

30.0

25.0

20.0

15.0

10.0

5.0

-

Unrestricted balances Cash generated from

at 1 January 2020

operations excl. associates and movement in restricted balances2

Issue of sharesDividends received from associatesDividends paid

Tax paid

Capital expenditureInvestments in associates

Net interest paid and Unrestricted balancesprincipal element of lease payments 3

  • 1. Unrestricted net cash balances are for operational purposes; they exclude restricted balances (AR retained commission in case of clawback) and £12m Natwest Revolving Credit Facility loan.

  • 2. Cash generated from operating activities of £22.1m, less £0.2m dividends received from associates and movements in restricted balances of £0.5m.

  • 3. Principal elements of lease payments of £0.35m. Interest received of £0.1m, less interest paid of £0.2m.

at 31 December 2020

Balance Sheet - Strong financial position

Growth Focus - early customer capture / nurture

-24 months

-12 months

Completion

+12 months

+36 months

+60 months

-6 months

+48 months

Property Search

Estate Agents

Remo / Product Transfer

Mortgage Platforms

Builders

Protection Reviews

Tenants / LISA Savers

Mortgage Shops

Financial Planning

-18 months

Workplace/employees

Online

Capture / Nurture

+24 months

Home Services

Nurture / Financial Reviews

Our latest Partnerships

30

Our latest Partnerships

31

32

Attachments

  • Original document
  • Permalink

Disclaimer

Mortgage Advice Bureau (Holdings) plc published this content on 23 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 March 2021 08:28:04 UTC.