Mortgage Advice Bureau (Holdings) PLC (AIM: MAB1.L) is pleased to announce its interim results for the six months ended 30 June 2019.
Financial highlights
● | Revenue up 5% to £60.9m (H1 2018: £57.9m); 9% on an underlying basis(1) |
● | Gross profit up 9% to £14.2m (H1 2018: £13.0m) |
● | Gross margin of 23.3% (H1 2018: 22.5%) |
● | Overheads ratio (before acquisition costs(2)) of 11.2% (H1 2018: 10.9%) |
● | Profit before tax and acquisition costs up(2) 6% to £7.4m (H1 2018: £7.0m) |
● | Statutory profit before tax up 3% to £7.2m (H1 2018: £7.0m) |
● | Profit before tax margin pre acquisition costs of 12.2% (H1 2018: 12.0%) |
● | Profit before tax margin of 11.8% (H1 2018: 12.0%) |
● | Adjusted(2) EPS up 5% to 12.3p (H1 2018: 11.7p) |
● | Basic EPS up 1% to 11.9p (H1 2018: 11.7p) |
● | Continued high operating profit to adjusted cash conversion(3) of 99% (H1 2018: 108%) |
● | Interim dividend up 5% to 11.1p (H1 2018: 10.6p), (payout ratio of 91%) |
Operational highlights
● | Average number of Advisers during the period up 13% to 1,242 (H1 2018: 1,103) |
● | Adviser numbers up 7% to 1,293(4) at 30 June 2019 (31 December 2018: 1,213), which excludes c. 90 Advisers from the acquisition of First Mortgage Direct Limited which completed post period end |
● | Underlying revenue per Adviser down 4%(5), due to lower banked productivity in Q1 2019 (in line with expectations for Q2 2019) |
● | Gross mortgage lending arranged (including product transfers) up 6% to £6.9bn (H1 2018: £6.5bn) |
● | Gross mortgage lending arranged with new lenders up 7% to £6.3bn (H1 2018: £5.9bn) |
Post period end
● | Completion of acquisition of 80% of First Mortgage Direct Limited (“First Mortgage”) on 2 July 2019 adding c. 90 Advisers (not included in H1 2019 adviser growth) |
● | Initial cash consideration paid for First Mortgage of £16.5m, valuing First Mortgage at £20.6m |
● | The acquisition of First Mortgage is expected to be significantly earnings accretive in the first full year following completion and thereafter |
● | Adviser numbers have increased to 1,433 at 20 September 2019 |
Peter Brodnicki, Chief Executive commented:
“I am delighted to report another set of strong results. Despite continued uncertainty, we have achieved strong revenue growth of 9% on an underlying basis to £61m, which has translated into adjusted EPS being up 5% to 12.3p. Our mortgage completions increased by 6% and our market share by 7%. Accordingly, the Board is pleased to declare an increased interim dividend of 11.1p per share, up 5% on the prior year. MAB continues to deliver on its strategy to grow market share in all market conditions whilst maintaining a strong financial position.
“In addition to our strong growth achieved in H1 and into H2, through both advisers joining existing ARs and the addition of new ARs, adviser numbers have further increased since the period end through the acquisition of one of the very best performing and highly respected UK brokers, First Mortgage, in July. This has been a tremendous addition to the MAB Group, adding to the growing number of exceptional firms choosing to partner with MAB, that will play a major role in our plans to grow our market share through increasing both adviser numbers and productivity. Against this backdrop, I remain confident of delivering further growth in line with our strategic plans.
“We are pleased to have completed the first development phase of our new platform, which we are continuing testing with a number of our business partners, before rolling out to the remainder of our firms over the course of this year and into 2020.
“We are focused on delivering sustainable long-term growth by providing the best solutions and outcomes for our customers largely driven by our significant focus on technology developments. We plan to continue growing our market share and mortgage completions, whilst leading the evolution of intermediary distribution.”
H1 2019 | H1 2018 | Change | |
Revenue | £60.9m | £57.9m | +5% |
Gross profit | £14.2m | £13.0m | +9% |
Gross profit margin | 23.3% | 22.5% | |
Profit before tax and acquisition costs2 | £7.4m | £7.0m | +6% |
Profit before tax | £7.2 | £7.0m | +3% |
PBT margin before acquisition costs2 | 12.2% | 12.0% | |
PBT margin | 11.8% | 12.0% | |
Adjusted EPS2 | 12.3p | 11.7p | +5% |
Basic EPS | 11.9p | 11.7p | +1% |
Interim dividend per share | 11.1p | 10.6p | +5% |
Operating profit to headline cash conversion6 | 113% | 123% | |
Operating profit to adjusted cash conversion3 | 99% | 108% |
1 Underlying basis excludes a one-off adjustment in H1 2018 of £1.7m for procuration fees awaiting processing
2 Costs associated with the acquisition of First Mortgage of £0.2m
3 Adjusted cash conversion is headline cash conversion adjusted for increases in restricted cash balances of £1.0m in H1 2019 (H1 2018: £1.0m) as a percentage of adjusted operating profit.
4 This figure excludes the c. 90 advisers within First Mortgage that joined the Group on 2nd July 2019 when the acquisition completed
5 Based on Average number of Advisers
6 Headline cash conversion is cash generated from operating activities adjusted for movements in non-trading items, including loans to Appointed Representative firms (“ARs”) and loans to associates, totalling £1.6m in H1 2019 (H1 2018: £0.8m) as a percentage of adjusted operating profit.
Current Trading and Outlook
In the absence of any updates to estimates from UK Finance, and with gross new mortgage lending for H1 2019 of £125bn, MAB anticipates that total gross new mortgage lending for 2019 could be below the figure of £268bn for 2018. This figure excludes Product Transfers. The latest UK Finance statistics indicate that the product transfer market is likely to continue to increase from the c. £160bn for 2018; with product transfers increasing by 8% in H1 2019 versus the comparative period.
Due to the uncertainty resulting from the extended Brexit negotiations current trading for our estate agency based ARs continues to be muted and similar to our experience towards the end of 2018 and H1 2019. Following a slower than expected start to the year in Q1 2019 in written and banked business, and despite productivity being in line with expectations for Q2 2019, we expect overall revenue per adviser for the year to be slightly below that of 2018.
Current trading is in line with the Board’s expectations. Adviser numbers have continued to grow since the period end with the Group having 1,433 Advisers at 20 September 2019, including the Advisers at First Mortgage. We have good visibility that supports our anticipated growth in Adviser numbers from new ARs. The majority of our existing ARs continue to have strong growth plans for 2019 and 2020, however those that operate primarily in the estate agency sector continue to pause their expansion plans and delay filling vacancies. Despite this, growth in Adviser numbers, both from existing and new ARs, remains strong. Due to the many focused initiatives that MAB has in place, we expect the growth in revenue per adviser to return to normal levels in 2020. This assumption is based on no noticeable improvement in the housing market in 2019 and 2020. We then expect to see further productivity growth starting to come through in 2021 and beyond due to our technology and lead generation initiatives.
When overall consumer confidence returns we expect some pent-up demand in the housing market to be released and our estate agency focused ARs to respond in terms of delivering adviser growth. We are confident that our strategy, driven by our advisers, their customers and their changing expectations, will continue to drive growth in MAB’s market share year on year and deliver attractive returns to investors.
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