Investor and Analyst Presentation Delivering, Growing, Innovating Mortgage Advice Bureau (Holdings) plc Final Results – year ended 31 December 2018
Disclaimer The information contained in this document members, officers, trustees, employees or agent, as it may make, save in respect of any requirement (“Presentation”) has been prepared by Mortgage to the accuracy, fairness or completeness of the under applicable law or regulation. Any forward- Advice Bureau (Holdings) plc (the “Company”). information or opinions contained in this Presentation looking statements in this Presentation reflect the This Presentation has not been approved by an and, save in respect of fraud or wilful default, no Company’s current views with respect to future authorised person within the meaning of the Financial liability is accepted for any such information or events and are subject to these and other risks, Services and Markets Act 2000. opinions or for any loss howsoever arising, directly or uncertainties and assumptions relating to the indirectly, from any use of this document or its Company’s operations, results of operations and contents or information expressed in the presentation. growth strategy. No statement in this presentation is For the purposes of investors in the United Kingdom, intended to be a profit forecast or be relied upon as a this Presentation is being made to and directed only guide to future performance. Past performance at persons: (i) who fall within Article 19 of the It should be noted that past performance cannot be cannot be relied upon as a guide to future Financial Services and Markets Act 2000 (Financial relied on as a guide to future performance. This performance and persons needing advice should Promotion) Order 2005 (the “FPO”); (ii) who fall within presentation may contain forward-looking statements consult an independent financial adviser. Article 49(2)(a) to (d) of the FPO; or (iii) to whom this with respect to the Company’s plans and objectives Presentation may otherwise be lawfully made to or regarding its financial condition, results of operations directed at, all such persons together being referred and businesses. All statements other than statements For more detailed information, the entire text of the to as Relevant Persons. The investments and of historical facts including, without limitation, those final results announcement for the year ended 31 investment activity to which this Presentation relates regarding the Company’s financial position, business December 2018, can be found on the Investor are available to, and will only be engaged in with, strategy, plans and objectives of management for Relations section of the Company’s website Relevant Persons. No other person should act or future operations are forward looking statements. All www.mortgageadvicebureau.com/investor-relations rely on it. forward-looking statements address matters that involve risks and uncertainties and, accordingly, there are or will be important factors that could cause the This Presentation does not purport to contain all Company’s actual results to differ materially from information that a prospective investor may require those indicated in these statements. The Company and is subject to updating, revision and amendment. undertakes no obligation to update any forward- No representation or warranty, express or implied, is looking statements contained in this Presentation or given by the Company or any of its subsidiaries, any other forward looking statements advisers, directors, 2
Agenda Table of Contents • Presentation Team • Key Financial Highlights 2018 • Key Operational Achievements 2018 • How we performed – KPIs • Revenue • Dividends • MAB and Industry Trends • Market Share Opportunities • Technology update • Growing our Addressable Market • Outlook • Appendices 3
Presentation Team Peter Brodnicki Ben Thompson Lucy Tilley Chief Executive Officer Managing Director Finance Director • Co-founded the business in 2000 • >30 years in Mortgages & Financial • Joined MAB Board in May 2015 as • >30 years’ Mortgage and Financial Services Services Finance Director experience • Most recently CEO of ULS Technology • Former corporate financier; extensive experience • British Mortgage Awards: Business Leader • British Mortgage Awards: Business Leader working with listed companies (particularly in of the Year (3 consecutive years) of The Year, Press Spokesperson & Financial Services, inc. lead roles in IPOs of MAB, Technology Advocate. Secure Trust Bank and River and Mercantile) • Chartered Accountant, qualified at KPMG in 1996 4
Key Financial Highlights 2018 Revenue Gross Profit Profit Before Tax £123.3m | +13% £28.4m | +10% £15.7m | +8% Total Proposed Cash Conversion 1 EPS Dividends 25.9p | +9% 113% 23.3p | +9% Although housing transactions fell during 2018, MAB increased its share of new mortgage lending from 4.3% to 4.7% of the overall UK market. 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 loans to associates totalling £2.2m in 2018 (2017: 5 £0.7m) and increases in restricted cash balances of £2.3m in 2018 (2017: £1.5m) as a percentage of operating profit.
Key Operational Achievements 2018 Market People Technology • Mortgages arranged 1 • Ben Thompson joins • First development phase +18% as Managing Director now commencing testing with a number of our • Market share increase 2 • Dan Maunder joins business partners of 10% to 4.7% (against as Chief Technology backdrop of UK property Officer • Strengthening our unique transactions being down business model 2.5%) • Average adviser numbers +12% • Developments will • Revenue per Adviser directly benefit MAB, its increase of 1% despite • Delivered 15% CAGR ARs, their advisers and macro headwinds in advisers over last 3 customers years 1. Gross mortgage lending (inc. Product Transfers) 6 2. Of new mortgage lending
How we performed – KPIs 1,213 advisers 10.7% overheads at 31 December of revenue Some costs (eg. Compliance Average adviser numbers up 1213 personnel) closely correlated to 1078 11.6% 12% to 1,130 (2017: 1,008) 950 11.1% growth. Majority of remainder of 10.9% 10.7% 790 Further growth continues: costs typically rise at a slower 1,234 advisers at rate than revenue. We expect a 15 March 2019. modest increase in our IT costs as part of our fintech 2015 2016 2017 2018 2015 2016 2017 2018 development. 23.1% Gross profit 12.7% Profit before margin tax margin 13.8% Mortgage mix affects gross Subject to the growth in our IT 13.5% 13.4% 12.7% 24.2% 23.9% 23.8% 23.1% profit margin. Existing ARs costs, we would expect the receive slightly better terms as scalable nature of our cost base their revenue grows. New to in part counter the expected larger ARs typically join on erosion on gross margin as the lower than average margins. business continues to grow. 2015 2016 2017 2018 2015 2016 2017 2018 7
Revenue 2018 2017 Income source 2018 2017 Increase £m £m Mortgage procuration 56.2 46.8 20% 43% 46% fees Mortgage Mortgage Protection and General 47.0 42.9 10% Procuration Fees Procuration Fees Insurance Commission Client Fees 18.3 17.5 5% Other Income 1.8 1.7 7% 39% 38% Total 123.3 108.8 13% Insurance Commissions Insurance Commissions • Revenue increase of 13% generated from: 16% 15% • +12% average Advisers Client Fees Client Fees • +1% increase in revenue per Adviser 1% 2% Other Income Other Income • Gross mortgage completions up 18% • Increased product transfer opportunities and a reduction in proportion of higher margin residential purchase business, due to slower purchase market, have led to a lower proportion of insurance commission and client fees • Protection and GI dependent on mortgage mix • Client fees reflect mortgage mix, average client fee when charged flat 8
Strong cash conversion supports Dividend Policy 23.3p £14.4m Capital 23.3p 21.4p £11.6m Excess 18.3p £9.5m Adequacy 1 Proposed Capital 12.7p Excess 11.9p £7.8m 14.4p Capital Ordinary Excess 10.5p £6.1m Capital Excess 9.5p Dividends Capital 10.6p 9.5p 7.8p £2.8m £2.5m £2.1m £1.7m 4.9p FCA 2015 FCA 2016 FCA 2017 FCA 2018 2015 2016 2017 2018 £13.9m • MAB is highly cash generative and capital light • Materially, operating profits = cash Unrestricted MAB requires c. 10% of PAT for increased regulatory capital 1 • and other CapEx Cash £13.9 £13.2 • The 90% H2 18 final dividend reflects our ongoing intentions m m £10.8m to: Balances £8.2m - Distribute reserves not required to support growth in the business; and - Maintain a strong regulatory capital buffer. 2015 2016 2017 2018 9 1. Regulatory capital requirement: 2.5% of regulated revenue, excess capital peaks at period end
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