Investor and Analyst Presentation
Delivering,
Growing,
Innovating.
Mortgage Advice Bureau (Holdings) plc
Interim results - six months ended 30 June 2020
Contents
• | Highlights | 2 |
• | Market backdrop | 5 |
• | Financial review | 9 |
• | Strategy | 15 |
• | Summary and outlook | 19 |
• | Appendices | 21 |
1
Highlights
Financial Highlights
Revenue
£63.5m | +4%
(-6% excl. First Mortgage)
Adj. EPS1
13.2p | +7%
(-9% excl. First Mortgage)
Gross Profit
£17.2m | +22%
(-6% excl. First Mortgage)
Dividend
- The Board intends to only pay a final dividend in respect of the year ending 31 December 2020
- Intention to pay remaining 6.4p when the Board considers it prudent to do so
Adj. PBT1
£7.9m | +6%
(-8% excl. First Mortgage)
Cash conversion2
97%
1. In H1 2020, adjustments of £0.2m amortisation of acquired intangibles and £0.4m of additional non-cash operating expenses relating to the put and call option agreement to acquire the remaining 20% of First Mortgage, the loan write off and loan
provision totalling £1.7m, and £0.5m of Government grant income (resulting in a £1.8m net adjustment in H1 2020), and £0.2m of one-off costs relating to the acquisition of First Mortgage in H1 2019. | 3 |
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 £0.3m in H1 2020, £(0.2)m of Government grant income received, and increases in restricted cash balances of £0.3m in H1 2020, as a percentage of adjusted operating profit.
Operational Highlights
Mortgage completions1Market share2£7.5bn | +8% | 5.9% | +17% |
(-3% excl. First Mortgage) | (+7% excl. First Mortgage) |
1,470 | +14% | £45.5k | -7% |
(+7% excl. First Mortgage) | (-11% excl. First Mortgage) |
- MAB's gross mortgage completions, including product transfers.
- Market share of gross new mortgage lending (excluding product transfers).
- At 30 June 2020, including 101 furloughed Advisers.
- Based on average number of active advisers for the period. An active adviser is an adviser who has not been furloughed, and is therefore able to write business.
Strategic developments
- Meridian investment (40%) - MAB's leading new build AR
- Australia - Australia Finance Group Ltd as a new JV partner
- Launch of MAB Later Life
Technology platform
- Continued roll out following successful testing and pilot phases
- Many projects brought forward by the pandemic, e.g. new compliance platform
4
Market backdrop
Mortgage lending market
Gross new mortgage lending volumes1
25
20
15
£bn
10
5
0
Source: UK Finance
- Chart excludes product transfers.
- Includes further advances and lifetime mortgages, excludes product transfers.
Commentary
- Gross new mortgage lending of £109.7bn2 in H1, down 13%
- Q1: £64.9bn (+5%)
- Q2: £44.8bn (-30%)
- Purchase mortgage activity down c.45% in Q2
- Re-financingless adversely affected in Q2, driven by product transfers
- Home-ownerre-mortgages down 15%
- BTL re-mortgages down 21%
- Product transfers: up 4% to c.£43bn
First time buyers | Home-owner movers | |
Home-owner remortgages | BTL purchases | |
BTL remortgages | Other (inc. lifetime and further advances) | |
6 |
Property market
UK property transactions by volume
120
100
80 | |
'000s | 60 |
40 |
20
0
England | Wales | Scotland | Northern Ireland | |||
Commentary
- Q1 broadly flat year-on-year(-1%)
- In England for Q2, volumes were down 56%, 50% and 29% in April, May and June respectively
- In Scotland for Q2, volumes were down 66%, 66% and 57% in April, May and June respectively
- Overall for H1, UK property transactions down 25%
7
Sources: UK Finance data and Land Registry.
2020 written purchase business
Q1: strong performance year-on-year | Q2: housing market shutdown1 | Q3: exceptionally strong activity |
Q3 AVG
Q1 AVG
Q2 AVG
Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep2 | ||||||
Q1 2019 | Q1 2020 | Q2 2020 | ||||||||||||
Q3 2020 | ||||||||||||||
- Purchase written volumes up 29% year- on-year in Q1 overall (+17% excl. FMD)
- Improved customer sentiment in Q1 post UK General Election/Brexit
- Purchase written volumes down 48% in Q2 vs. Q1 2020 due to housing market shutdown
- Increased focus on retention, including product transfers, and protection
- Purchase written volumes up 159% vs. Q2 2020, and 35% vs. Q1 2020
- Despite continued lending restrictions
1. | The housing market re-opened on 13 May 2020 in England, and then in Scotland, Wales and Northern Ireland at the end of June 2020. | 8 |
2. | September purchase volumes extrapolated based on actual volumes as at 22 September 2020, and end of month historic trends. |
Financial review
Financial KPIs
Number of advisers: 1,470 | 14.9% overheads1 as % of revenue |
87 | 3.3% | ||||||
1,383 | |||||||
1,293 | |||||||
12.0% | 11.6% | ||||||
1,138 | 10.9% | 11.2% | |||||
1,008 | |||||||
H1 2017 | H1 2018 | H1 2019 | H1 2020 | H1 2017 | H1 2018 | H1 2019 | H1 2020 |
27.2% gross profit margin | MAB excl. FMD | 12.4% adj. PBT margin | ||||||||||||||||
2 | ||||||||||||||||||
Impact of FMD | ||||||||||||||||||
3.9% | 12.7% | |||||||||||||||||
24.1% | 23.3% | 0.6% | ||||||||||||||||
23.3% | ||||||||||||||||||
22.5% | 12.2% | |||||||||||||||||
12.0% | ||||||||||||||||||
11.8% | ||||||||||||||||||
H1 2017 | H1 2018 | H1 2019 | H1 2020 | H1 2017 | H1 2018 | H1 2019 | H1 2020 |
10 | |||||||
- Excl. £0.6m of non-cash operating expenses relating to the acquisition of First Mortgage in H1 2020 and £0.2m of one-off costs associated with the First Mortgage acquisition in H1 2019.
- Adjusted for items in note (1) above, the loan write off and loan provision totalling £1.7m in H1 2020, and £0.5m of Government grant income.
Revenue
Q1 | Q1 2020 | Q1 2019 | % change |
Average advisers | 1,457 | 1,221 | +19% |
Average revenue per adviser | £24.0k | £22.9k | +5% |
Total Revenue | £35.0m | £27.9m | +25% |
Q2 | Q2 2020 | Q2 2019 | % change |
Average active advisers | 1,348 | 1,261 | +7% |
Average revenue per active adviser | £21.2k | £26.2k | -19% |
Total Revenue | £28.5m | £33.0m | -14% |
Q1 Total: £35.0m | Q2 Total: 27.9m | ||
2% | 2% | ||
15% | 10% | ||
44% | 43% | ||
39% | 45% |
Income source | H1 2020 | H1 2019 | % change |
Mortgage Procuration Fees | £27.6m | £26.7m | +3% |
Protection and General | £26.3m | £23.6m | +11% |
Insurance Commission | |||
Client Fees | £8.1m | £9.7m | -16% |
Other Income | £1.5m | £0.9m | +63% |
Total | £63.5m | £60.9m | +4% |
Commentary
- Continued growth across all income sources other than client fees as a result of positive contribution from First Mortgage, despite pandemic impact in Q2
- Client fees reduced by 16% due to considerable fall in attachment rate of client fees and change in mortgage mix towards re-financing in Q2
- 11% increase in protection and general insurance commission driven by First Mortgage acquisition, increased attachment rates and freestanding protection sales in Q2
Proc Fees | Insurance Commission | Client Fees | Other | 11 | |||
Continued strong cash conversion
- Unrestricted net cash balance2 at 30 June 2020: £9.4m (31 December 2019: £7.5m)
97% cash conversion1 | £15.6m excess capital |
116% | 108% | ||
99% | 97% | ||
H1 2017 | H1 2018 | H1 2019 | H1 2020 |
FCA Requirement | Excess | £15.6m | |
£11.6m
£9.6m
£7.3m
£2.2m | £2.7m | £2.8m | £2.9m |
30/06/2017 | 30/06/2018 | 30/06/2019 | 30/06/2020 |
- The Board remains committed to paying a further 6.4 pence per share when it considers it prudent to do so
1. Adjusted cash conversion is cash generated from operating activities adjusted for movements in non-trading items, including loans to Appointed Representative firms ("ARs") and associates totalling £0.3m in H1 2020, £(0.2)m of Government grant 12 income received, and increases in restricted cash balances of £0.3m in H1 2020, as a percentage of adjusted operating profit.
2. Unrestricted cash balances are for operational purposes; they exclude restricted balances (AR retained commission) and the £12m Natwest Revolving Credit Facility.
Income statement
£m | ||
Average number of active advisers | 2 | |
Average revenue per active adviser (£) | ||
Revenue | ||
Cost of Sales | ||
Gross Profit | ||
Gross Profit margin | ||
Government grant income | ||
Administrative expenses | ||
Impairment losses | ||
Share of profit of associates, net of tax | ||
Net finance income / (expense) | ||
Reported PBT | ||
Reported PBT margin | ||
Add back: Exceptional items | 1 | |
Adjusted PBT | ||
Adj. PBT margin | ||
Tax | ||
Reported PAT | ||
Adjusted EPS | ||
Basic EPS |
H1 2020 | H1 2019 |
1,396 | 1,242 |
45,461 | 49,028 |
63.5 60.9
(46.2) | (46.7) |
17.2 14.2
27.2% | 23.3% |
0.50.0
(10.0) | (7.0) |
(1.7) | 0.0 |
0.1 (0.0)
(0.0) | 0.1 |
6.17.2
9.6% | 11.8% |
1.80.2
7.97.4
12.4% | 12.2% |
(0.8) | (1.1) |
5.46.1
13.2p | 12.3p |
10.1p | 11.9p |
Commentary
- Revenue up 4%, including £6.1m from First Mortgage
- Gross Profit margin and ratio of Overheads as % of revenue increases reflect shift between Cost of Sales and Admin expense as a result of the FMD acquisition
- Adjusted Profit Before Tax1 up 6%
- Adjusted Profit Before Tax1 Margin of 12.4% (H1 2019: 12.2%)
- Adjusted EPS1 up 7% to 13.2p
1. | Adjustments of £0.2m amortisation of acquired intangibles and £0.4m of additional non-cash operating expenses relating to the put and call option agreement to acquire the remaining 20% of First Mortgage, the loan write off and loan provision | 13 |
totalling £1.7m, and £0.5m of Government grant income. | ||
2. | An active adviser is an adviser who has not been furloughed, and is therefore able to write business. |
Cash Balance Waterfall Unrestricted net cash balances1
£m
16.0 | |||||||
£0.6m | £0.1m | £3.4m | |||||
£7.5m | |||||||
14.0 | |||||||
£2.0m | |||||||
12.0 | |||||||
10.0 | £0.2m | £0.2m | £9.4m | |
8.0
£7.0m
6.0
4.0
2.0
-
Unrestricted balances at | Cash generated from | Issue of shares | Dividends received from | Dividends paid | Tax paid | Capital expenditure | Net interest paid and | Unrestricted net |
1 January 2020 1 | operations excl. | associates | principal element of | balances at 30 June | ||||
associates and | lease payments3 | 2020 | ||||||
movement in restricted | ||||||||
balances2 |
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 £7.9m, less dividends received from associates of £0.1m and movements in restricted balances of £0.3m. | 14 |
3. | Principal elements of lease payments of £0.2m. Interest received of £0.05m, less interest paid of £0.03m. |
Strategy
Good progress delivering on all our initiatives
Adviser Growth | Adviser Productivity | Lead Generation |
Addressable Market | New Products & Services | Customer Experience | ||||
Underpinned by a Strong Management Team, Technology and Culture
16
Strategic developments
New build sector: Meridian | MAB Later Life | |
• | Key part of our strategy in the specialist new | • | Broadens our addressable market |
build sector | • | ||
Exclusive strategic alliance with Key Group | |||
• | MAB's leading new build AR | • | |
Unique broker proposition, with Key Group | |||
• | 40% investment | providing market leading infrastructure | |
• | Track record of growth and profitability, led by | • | Comprises a panel of 4 lenders including |
a strong management team | more2Life, Key Group's lifetime mortgage lender | ||
• | Close links with builders nationwide | • | Extends our opportunity for adviser growth |
- >50 advisers
Australia: new JV partner
- International growth
- Australian Finance Group Ltd (ASX:AFG) our new JV partner in Australia
- Leading Australian mortgage network
- Extensive distribution channels and strong broker proposition
- Allows us to attract the best brokers across Australia into our differentiated business model
- Real step change in our growth plans in this strategic market
17
Transformation programme
Customers
Lead Generation
Advisers
MAB / AR Firms
Customer Portal - live and generating volume mortgage leads. Quote Generation - all MAB branded businesses live.
Affinity partner integration capability completed. Integrations with partners now commenced.
Platform rollout - commenced.
Features - new lead management and distribution capabilities.
Early customer capture and nurture capability completed. Priority focus - customer retention / repeat business.
Additional capabilities being deployed:
- Contact Centre solution
- API's for use by partners
- Enhanced Business Intelligence capabilities
- Reporting Suite and Data Science Tools
- Risk & Compliance - utilising robotics
Lenders | Lender integration progressing. |
18
Summary and outlook
Summary and outlook
- Strong performance in the period illustrates the resilience of our operating model
- Continued growth in market share in all market conditions
- Good progress on strategic initiatives
- Group currently trading strongly, with number of mortgage applications across the network reaching record levels
- Sharp resumption of recruitment activity, both in terms of organic growth and new ARs
- Financial resilience: strong balance sheet, regulatory capital position and cash conversion
- Absent any significant restrictions on the housing market, we expect adjusted PBT for the full year to be significantly ahead of market's current expectations
20
Appendices
Over 150 awards in the last 5 years
22
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 1,400 Advisers, almost all employed or engaged by ARs
- All compliance supervision undertaken by MAB employees
-
Broad geographical spread across the UK, with just 7% of the
Group's revenue derived from the London market - Developed leading in-house proprietary trading platform called MIDAS Pro
- Won over 150 awards in last 5 years
23
Our Business Model
Lenders
Appointed
Representatives
Customers"ARs"Insurers
(over 1,400
Advisers) *
FCA | Other |
services | |
* Including First Mortgage advisers. | 24 |
Our Business Model
-
One of UK's leading independent networks for mortgage intermediaries, with over
170 ARs and over 1,400 Advisers* nationwide - Operates two models: (i) MAB-branded mortgage franchise and (ii) non-branded mortgage network
- Strong reputation for business quality, innovation and support
- Very low attrition rates of ARs
- 90% of ARs have contracts for duration of 5 years or more from commencement
* Including First Mortgage advisers.
25
Revenue and Cash Flow
- Highly cash generative
- All income is paid directly to MAB, from which it deducts its share of income
- Before paying the AR, MAB also retains typically 5% of the total amount due to the AR to protect the AR and MAB against potential future clawbacks of protection commission
- This retention is held in MAB's name and is segregated through the use of a separate bank account for each AR
- MAB pays the AR weekly
- AR pays its Advisers
- Materially MAB's profits = cash
Lenders | Insurers | Client |
Fees | ||
AR
ClawbackMIDAS
Fund
c.5%
ARs
(over 1,400
Advisers)
Advisers
26
Growth Focus - broadening our addressable market
TENANTS/RENTAL | LATER LIFE LENDING (£65BN OF OUTSTANDING |
- using technology to fully leverage our significant estate agency | LENDING IN 2017 TO £142BN BY 2027) |
and letting distribution. | - growth in this market will be driven by intermediaries, not providers. |
- help tenants to become FTBs. | |
- intergenerational linkage with aspiring FTBs ('Bank of Mum & Dad'). | |
- protect tenants against inability to pay rent. | |
- interest only mortgages/roll-off. | |
- shortfall in pensions/longer living & working. | |
- older FTBs = later mortgage maturity. |
20 | 35 | 60 | 80 |
RENTERS | MAB CORE CURRENT MARKET | LATER LIFE LENDING | ||
BUYING | RETIREMENT | LIFETIME | ||
PREPARING TO BUY | MORTGAGES | |||
REMORTGAGING | INTEREST ONLY | |||
RENTING FOR LIFE | (EQUITY RELEASE) | |||
PRODUCT TRANSFERS | ||||
INTERGENERATIONAL (BANK OF MUM & DAD) | 27 | |
Growth Focus - early customer capture / nurture
-24 months | -12 months | Completion | +12 months | +36 months | +60 months | |||||||||
-18 | ||||||||||||||
months | -6 months | +24 months | +48 months | |||||||||||
Property Search | Estate Agents | Remo / Product Transfer | ||||||||||||
Mortgage | ||||||||||||||
Builders | Protection Reviews | |||||||||||||
Platforms | ||||||||||||||
Lettings Agents | Mortgage Shops | Financial Planning | ||||||||||||
Workplace/employees | Home Services | |||||||||||||
Online | ||||||||||||||
Capture / Nurture | Nurture / Financial Reviews | 28 |
Growth Focus - strengthening our proposition
Omnichannel | Technology | Lead Generation |
Distribution | ||
1,5231 / 2482 | Customer | B2B |
Full Postcode Coverage | Broker | |
6 Tel. Based Advice Centres | Lead Sources | B2C |
Sector | Home | Protection | MAB's Investments |
Specialisation | Moving Services | ||
Estate Agents | Surveys | Home Owners | Distribution |
New Build | Conveyancing | Tenants | Leads |
Employers | Utilities | Strategic |
Lending Specialisation | Multi Brand Strategy |
Buy-To-Let | B2B Mortgages |
Later Life | B2C Mortgages |
Other Specialist | B2C Home Ownership |
Key:
- What we have today.
- What we are piloting and/or considering for the future.
Financial Planning | Manufacturing Margin |
Pensions | Mortgages |
Investments | Protection |
29
1. Adviser numbers as at 25 September 2020. 2. Advisers in AR firm where MAB has a shareholding as at 25 September 2020 (includes Meridian).
Growth Focus - our investments
Distribution | Strategic | |
Clear | Clear | |
Freedom 365 | Freedom 365 | |
- | Mortgage Focus | |
Vita | Vita | |
- | ||
- | ||
- | MAB Australia |
New Build | 80% | 100% |
Telephony / Network | 25% | 49% |
Telephony | 25% | 49% |
Telephony | 35% | |
Online Leads | 49% | |
Specialist New Build | 25% | |
Protection | 20% | 49% |
Conveyancing | 39% | |
Surveys | 49% | |
International | 48% | |
New build | 40% | 49% |
30
1. InitialMaximum
Balance Sheet: strong financial position
31
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Disclaimer
Mortgage Advice Bureau (Holdings) plc published this content on 02 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 October 2020 16:39:02 UTC