Mortgage Advice Bureau(Holdings)PLC – Final Results for the year ended 31 December 2018

Mortgage Advice Bureau (Holdings) PLC (AIM: MAB1.L) is pleased to announce its final results for the year ended 31 December 2018.

Financial highlights

• Tenth consecutive year of strong revenue and profit growth
• Revenue up 13% to £123.3m (2017: £108.8m)
• Gross profit up 10% to £28.4m (2017: £25.9m)
• Gross margin of 23.1% (2017: 23.8%)
• Overheads ratio of 10.7% (2017: 10.9%)
• Profit before tax up 8% to £15.7m (2017: £14.5m)
• Profit before tax margin of 12.7% (2017: 13.4%)
• Basic EPS up 9% to 25.9p (2017: 23.8p)
• Continued high operating profit to adjusted cash conversion¹ of 113% (2017: 109%)
• Proposed final dividend of 12.7p making proposed total ordinary dividends for the year of 23.3p (2017: 21.4p), up 9% (payout ratio of 90%)

Operational highlights

• Average number of Advisers in 2018 up 12% to 1,130 (2017: 1,008)
• Adviser numbers up 13% to 1,213 at 31 December 2018 (2017: 1,078)
• Revenue per Adviser up 1%²
• Gross mortgage lending arranged (including product transfers) up 18% to £14.0bn (2017: £11.9bn)
• Gross mortgage lending arranged with new lenders³ up 14% to £12.7bn (2017: £11.2bn⁴)
• Market share of new mortgage lending up 10% to 4.7% (2017: 4.3%⁵)

Post period end

• Adviser numbers have increased to 1,234 at 15 March 2019

Peter Brodnicki, Chief Executive commented: 

 “I am delighted to report another set of strong results.  Despite continued political uncertainty we have achieved robust growth in revenue, up 13% to £123m, which has translated into strong growth in EPS up 9% to 25.9p.  Accordingly, the Board is pleased to propose the payment of an increased final dividend of 12.7p per share, making total proposed ordinary dividends for the year of 23.3p, up 9% 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.  Our mortgage completions increased by 18% and our market share by 10%. We are pleased to have now completed the first development phase of our new platform, which we are commencing testing with a number of our business partners, before rolling out to the remainder of our firms over the course of this year.

“We are focused on delivering sustainable long-term growth and providing the best possible solutions and outcomes for our customers.  We plan to continue growing our market share and mortgage completions, whilst leading the evolution of intermediary distribution that we expect to see over the coming years.”

	2018	2017	Change
Revenue	£123.3m	£108.8m	+13%
Gross profit	£28.4m	£25.9m	+10%
Gross profit margin	23.1%	23.8%
Profit before tax	£15.7m	£14.5m	+8%
PBT margin	12.7%	13.4%
Basic EPS	25.9p	23.8p	+9%
Proposed final dividend per share	12.7p	11.9p	+7%
Proposed total ordinary dividends per share	23.3p	21.4p	+9%
Operating profit to headline cash conversion5	128%	120%
Operating profit to adjusted cash conversion1	113%	109%

¹ Adjusted cash conversion is headline cash conversion adjusted for increases in restricted cash balances of £2.3m in 2018 (2017: £1.5m) as a percentage of operating profit.
² Based on Average number of Advisers
³‘Gross mortgage lending arranged with new lenders’ means either a new mortgage in connection with a house purchase or a re-mortgage with a different lender to the customer’s existing lender
⁴ 2017 figure re-stated to exclude Product Transfers of £0.7bn.
⁵ 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 £2.2m in 2018 (2017: £0.7m) as a percentage of operating profit. 

Current Trading and Outlook

UK Finance predicts that new gross mortgage lending will rise to £278bn for 2019, indicating that the market is likely to be broadly similar in the near term. These figures exclude Product Transfers, and it has only been over the last year or so that the large lenders have engaged intermediaries to help them to retain their existing mortgage borrowers.  The latest UK Finance statistics indicate that the product transfer market is likely to continue to increase from the c. £160bn for 2018.

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. As a result we expect revenue per adviser to be broadly flat in 2019.  Adviser numbers have continued to grow since the period end with the Group having 1,234 Advisers at 15 March 2019. We have good visibility that supports our anticipated growth in Adviser numbers from new ARs. The majority of our existing ARs have strong growth plans for 2019 and 2020, however those that operate primarily in the estate agency sector are tending to pause their expansion plans and delay filling vacancies.  This will impact marginally upon our average Adviser figures for 2019.  Due to the many initiatives that MAB has in place, we expect the growth in revenue per adviser and adviser growth to return to normal levels in 2020.  These assumptions are based on no noticeable improvement in the housing market in 2019 and 2020.

When the political climate becomes clearer, we expect to see overall confidence return.  At this point we should see the start of some pent-up demand in the housing market being released and our estate agency focused AR’s responding in terms of delivering adviser growth. We are confident that our strategy, driven by our customers and their changing expectations, will continue to drive growth in MAB’s market share year on year and deliver attractive returns to investors.