2022 Interim Report

MORTGAGE ADVICE BUREAU (HOLDINGS) PLC

("MAB" or "the Group")

27 September 2022

Interim Results for the six months ended 30 June 2022

Mortgage Advice Bureau (Holdings) Plc (AIM: MAB1.L) is pleased to announce its interim results for the six months ended 30 June 2022.

Financial highlights

	H1 2022	H1 2021	Change vs
			2021
Revenue	£96.5m	£92.4m	+4%
Gross profit	£25.4m	£24.6m	+3%
Gross profit margin	26.4%	26.7%	-0.3pp(1)
Adjusted overheads ratio(2)	14.7%	14.8%	-0.1pp(1)
Adjusted profit before tax(3)	£11.5m	£11.6m	-
Statutory profit before tax	£10.1m	£10.8m	-6%
Adjusted profit before tax margin(3)	12.0%	12.5%	-0.5pp(1)
Adjusted profit before tax as a	39%	41%	-2pp(1)
percentage of net revenue(4)
Reported profit before tax margin	10.5%	11.7%	-1.2pp(1)
Adjusted(3) EPS	16.4p	17.9p	-8%
Basic EPS	14.0p	16.5p	-15%
Operating profit to adjusted cash	124%	120%	+4pp(1)
conversion(5)
Interim dividend(6)	13.4p	13.4p	-

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Operational highlights

• Adviser numbers up 8% to 2,034(7) at 30 June 2022 (31 December 2021: 1,885)
• Average number of mainstream advisers(8) up 19% to 1,890 (H1 2021: 1,584)
• Revenue per mainstream adviser down 13%(9) with pipelines taking longer to convert and against a very strong comparative in H1 2021 as a result of stamp duty holiday changes accelerating house purchase mortgage completions in that year
• Gross mortgage completions (including product transfers) up 11% to £12.2bn (H1 2021: £11.0bn)
• Gross new mortgage completions (excluding product transfers) up 7% to £10.3bn (H1 2021: £9.6bn)
• Market share of new mortgage lending up 13% to 6.8% (H1 2021: 6.0%(10))
• Proportion of revenue from re-financing at 30% (H1 2021: 24%)

Post period end

• Completed the acquisition of The Fluent Money Group, which is transformational for the Group's lead generation strategy
• Increased stake in leading protection and general insurance advice firm Vita Financial Ltd from 49% to 75%
• 2,160(7) advisers at 23 September 2022, including 156(11) advisers from The Fluent Money Group

Peter Brodnicki, Chief Executive, commented:

"This is a strong set of results when compared to the exceptional results reported for the same period last year, particularly given the increasingly difficult macro environment that developed during the period. I am especially pleased that we have delivered a large gain in market share during the first half.

"The integration of Fluent is progressing very well. Lead flow has been growing strongly, ahead of our expectations, and we expect it to continue to do so despite the purchase market starting to slow. Accordingly, recruiting new advisers to ensure this strong consumer demand is met remains a high priority for Fluent.

"The well documented congestion of property and mortgage pipelines has resulted in transactions taking a month longer to complete than in H1 2021, with the anticipated improvement still to materialise. A more cautious market outlook typically leads to broker firms seeking a partner that can help them optimise income and support continued business growth. Our pipeline of new appointed representatives ("AR") and adviser recruitment remains strong, and MAB is well positioned to attract those firms focused on achieving growth in an increasingly challenging economic climate."

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Current Trading and Outlook

Due to extended completion timeframes, the Group started the second half with a pipeline of written new business that was over 30% higher than expected, allowing for adviser growth, compared to the start of the year. Re-financing activity continues to increase, as advisers, lenders, and customers focus on making the most of securing new mortgage deals as mortgage rates rise. Whilst consumer demand has cooled a little, housing transaction levels are expected to remain steady. It remains clear that those who have built up strong savings and equity over recent years are sufficiently well positioned and confident to move home. In addition, mortgage lenders are well capitalised with ample liquidity, meaning product availability and price competition for mortgages is very strong despite the increasing interest rate environment. In this increasing interest rate environment, advisers have experienced constant change in mortgage products as well as short notice withdrawal of those products, and we expect this to continue whilst interest rate uncertainty continues.

A continuation of slow pipeline conversion, a further softening of purchase activity, and an increasingly cautious approach to recruitment by some ARs is likely to lead to a slight reduction in the Group's financial result for the year against previous expectations.

We expect the recent mini budget to support the housing and mortgage markets. The Stamp Duty changes that help aspiring first time buyers are particularly welcome, demonstrating the Government's ongoing commitment towards maintaining a healthy and active housing market.

We were delighted to complete the acquisition of The Fluent Money Group on 12 July 2022. The acquisition is expected to be significantly earnings accretive in 2023 and will allow the enlarged Group to rapidly benefit from a far greater level of national lead generation. Since Q2 2022, Fluent has delivered faster than expected lead growth in its mortgage division, requiring additional investment in the recruitment of new advisers and associated administrative staff to handle the strong consumer demand. This reinforces our confidence in the outlook for 2023 and beyond.

There will be an analyst presentation to discuss the results at 9:30am today.

Those analysts wishing to attend are asked to contact [email protected]

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Copies of this interim results announcement are available at

www.mortgageadvicebureau.com/investor-relations

1. Percentage points.
2. MAB uses adjusted results as key performance indicators as the Directors believe that these provide a more consistent measure of operating performance by adjusting for acquisition related charges and significant one-off or non-cash items. Adjusted overheads ratio is stated before £1.5m (H1 2021: £nil) of costs relating to the acquisition of The Fluent Money Group, £0.4m (H1 2021: £0.6m) of costs relating to the First Mortgage option, and £0.2m (H1 2021: £0.2m) of amortisation of acquired intangibles.
3. Adjusted profit before tax is stated before the items in (2) above and £0.7m of net fair value gains on deferred considerations (H1 2021: £nil), and £0.03m (H1 2021: £nil) of net fair value losses on derivative financial instruments. Adjusted earnings per share is stated on the same basis, net of any associated tax effects.
4. Net revenue is revenue less commissions paid.
5. Adjusted cash conversion is cash generated from operating activities adjusted for movements in non-trading

items, including loans to AR firms and associates totalling £(0.3)m in H1 2022 (H1 2021: £(0.9)m), and increases in

restricted cash balances of £0.5m in H1 2022 (H1 2021: £1.2m), as a percentage of adjusted operating profit.

1. Dividend policy based on a minimum payout ratio of 75% of annual adjusted profit after tax post minority interests.
2. Includes a total of 67 advisers at 30 June 2022 and 73 advisers at 23 September 2022 who are either directly authorised or later life advisers. The directly authorised advisers are employees of a firm previously authorised under an Appointed Representative agreement with MAB until 7 December 2020. MAB continues to provide services to this firm, which is now directly authorised by the FCA. 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. The 30 June 2022 and 23 September 2022 figures also include 14 advisers from associates, who are in the process of being onboarded under MAB's AR arrangements. These advisers will shortly become mainstream advisers. Until these 14 advisers become onboarded fully as mainstream advisers, MAB currently only recognises its share of profit after tax from these associates.
3. Excludes directly authorised advisers, later life advisers, and advisers from associates in the process of being onboarded under MAB's AR arrangements.
4. Based on average number of mainstream advisers.
5. For H1 2021, market share stated for the seven months ended 31 July 2021 due to the distortion effect around 30 June 2021 with the tapering of the stamp duty holiday thereafter.
6. Fluent's 156 advisers as at 23 September 2022 include 78 advisers in the first charge mortgages division, 60 in the secured personal loans division, 13 in the later life division, and 5 in the bridging finance division.

Chief Executive's Review

Despite a 29% drop in UK housing transactions in the period compared to H1 2021, when stamp duty holiday changes accelerated house purchase completions, the Group grew its revenue by 4% to £96.5m (H1 2021: £92.4m), its mortgage completions by 11% to £12.2bn (H1 2021: £11.0bn), and its market share by 13% to 6.8% (H1 2021: 6.0%). This once again demonstrates the strength and resilience of the Group's business model, with adjusted profit before tax in line with the prior period at £11.5m (H1 2021: £11.6m).

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Our growth in mortgage completions is analysed as follows:

UK mortgage lending activity returned to more normal levels during the first half of this year, after the unprecedented surge seen in H1 2021. In addition, the time taken to complete a property purchase increased by approximately one month compared to the equivalent period last year, adversely impacting the number of mortgage completions. Compared to H1 2021, UK mortgage completions in the purchase segment saw a 30% drop. UK gross mortgage completions as a whole were down 10% at £151.4bn (H1 2021: £168.5bn(1)), and up 20% compared to pre-Covid-19 levels in 2019 (H1 2019: £126.2bn).

A number of factors are delaying property transactions and mortgage pipelines, including conveyancing backlogs, local authority capacity constraints, and also expiring mortgage offers that need to be reconsidered and reissued by lenders due to the frequency of UK base rate increases in the period. Consequently, our pipeline of written but unbanked business has grown to larger than usual levels.

Delivering our growth strategy

Adviser growth

Adviser growth continues to be a major focus for the Group, boosted by the need to service new lead flow whilst using technology to help maximise opportunities from existing customers and lead sources.

Adviser numbers grew by 8% to 2,034 during the period. Every year, MAB helps its ARs replace 300+ advisers, and overall growth in adviser numbers is derived from organic growth in these existing firms and also new ARs being onboarded with their existing advisers. Over the summer months, MAB saw a significant fall in the number of new advisers onboarded with a far higher than usual summer holiday slowdown experienced. This is an unfortunate break in strong momentum in adviser growth this year, which has now resumed and is expected to remain strong for the remainder of the year. As a result, adviser numbers were 2,160 as at 23 September 2022, including 156 Fluent advisers.

We have a strong pipeline of new advisers and ARs and, combined with Fluent's rapidly growing adviser base in the Mortgage division, we expect to continue to deliver further adviser growth.

As trading conditions are likely to become more challenging, some existing firms will take a more cautious view on organic growth whilst others, including newly onboarded growth- focussed firms, expect to continue with their plans for adviser and market share growth.

With increasing expectations and even higher standards expected from the regulator, more directly authorised firms are seeking greater support from a strategic partner like MAB. We

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