31 January 2023

Mortgage Advice Bureau (Holdings) plc 

("MAB" or the "Group")

Trading Update 

Mortgage Advice Bureau (Holdings) plc (AIM: MAB1) today issues a trading update for the year ended 31 December 2022, ahead of publishing its final results on Tuesday, 28 March 2023.

The Group increased revenue for the year by 22% to circa £230m, despite the immediately negative impact of September's mini-budget on the mortgage market, with organic revenue growth of 10%. The acquisition of The Fluent Money Group ("Fluent") on 12 July 2022 added £22m of revenue.  The Group's adjusted profit before tax for the year ended 31 December 2022 is expected to be in line with expectations.

The total number of Advisers at the year end was up 20% to 2,254⁽¹⁾ (2021: 1,885), including 182 advisers at Fluent, with the average number of mainstream⁽²⁾ advisers during the year up 21% to 1,988 (2021: 1,649), representing organic growth of 15%.  The number of mainstream advisers at the year end increased by 17% to 2,074 (2021: 1,774), with organic growth in mainstream advisers of 7%.  

Following a leap in mortgage interest rates, the withdrawal of many mortgage products and a rapid tightening in lenders' underwriting criteria, Q4 saw significantly reduced house purchase and re-financing activity.  Buy-to-Let activity was also significantly impacted.  As a result of the sharp slowdown in all mortgage activity, most of our AR firms suspended adviser recruitment and reassessed their staffing requirements for 2023.  This has resulted in cutbacks in advisers by some firms, particularly due to the significant short-term fall in purchase transactions requiring a mortgage.

After the Chancellor's Autumn Statement, mortgage rates stabilised and then improved a little towards the year end.  The number of mortgages available also started to increase and this trend has strengthened into 2023.  Although markets expect further rises in the Bank of England base rate, we expect lending conditions will continue to improve throughout 2023.

As anticipated, our congested pipeline of written new business started completing at a faster pace in Q4 due to lower new business levels freeing-up conveyancing capacity to process cases.  We also expect this improving trend to continue through 2023. 

Current Trading and Outlook

Current activity levels are below the levels seen this time last year.  However, towards the very end of this month there have been early signs of increasing lead volumes and written business across the Group, which we anticipate will build steadily as borrowers gain confidence in a more stable macroeconomic and interest rate environment.  

UK Finance estimates that gross new mortgage lending for 2022 was £322bn (2021: £308bn).  The Intermediary Mortgage Lenders Association and UK Finance's recent estimates of gross new mortgage lending for 2023 are £265bn and £275bn respectively, representing a 15% to 18% reduction versus 2022.

Although house purchase transactions will be lower this year, overall we expect a second-half weighted recovery.  Re-financing opportunities from MAB's client bank are at a record level for 2023.  In the wider market, 1.8 million borrowers' current mortgage deals will expire during 2023, providing further opportunity for MAB.  It is forecast that Product Transfers will be a higher proportion of re-financing transactions than in prior years.  We are ensuring our resources are deployed where our advisers and customers need them most, with lead generation continuing to be a major area of focus.

We expect to see a fall in adviser numbers in our current ARs during Q1 2023 as firms reduce their headcount in line with expected H1 2023 purchase activity.  Lower lead levels result in a tightening of adviser numbers and an increased focus on maximising opportunities and productivity.  However, we expect adviser numbers in our current ARs to stabilise in Q2 2023 and then build gradually in the second half as business volumes improve. We expect recruitment of new AR firms to be boosted by the quieter market and the tightening regulatory environment.

Despite the more challenging housing and mortgage market outlook for 2023, MAB's long term fundamentals remain very strong.  We have taken a proactive and rigorous approach to costs, while progressing with the planned investment in our proposition to ensure the strongest possible recovery and market share growth in 2024 and beyond.  Current trading is in line with expectations.

1      Includes a total of 180 advisers at 31 December 2022 who are later life advisers or advisers in directly authorised firms that use MAB's subsidiary, Auxilium, a specialist protection service provider, for protection. 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.

2      Excludes directly authorised advisers, later life advisers and advisers from associates in the process of being onboarded under MAB's AR arrangements.

Peter Brodnicki, CEO of MAB, commented:

"Despite the uncertain macroeconomic outlook, MAB remains very well positioned to grow its market share strongly again through 2023.  In times like these housing transactions are typically postponed, not lost, and the opportunity these conditions generate for new AR recruitment will benefit MAB in the medium term.

"The technology we have developed to help our AR firms optimise lead flow from existing lead sources and clients will help support an H2 recovery, and boost firm and adviser performance in all market conditions.  Strong and effective lead flow has a heightened importance in times where purchase activity slows.

"We anticipate a very strong year ahead for re-financing, a slow but steady improvement in consumer confidence and housing transaction levels, combined with an increase in new AR recruitment and the incremental impact of new lead generation initiatives.  I am confident that whilst continuing to grow market share this year, MAB will be in a very strong position to regain significant momentum in 2024."

Enquiries:

Mortgage Advice Bureau (Holdings) plc                            +44 (0)1332 525007

Peter Brodnicki, Chief Executive Officer

Ben Thompson, Deputy Chief Executive Officer

Lucy Tilley, Chief Financial Officer

Numis Securities Limited                                                                             

Stephen Westgate / Giles Rolls

Joint Broker:

Peel Hunt LLP

Andrew Buchanan / Mike Burke                                            +44 (0) 20 7418 8900

Media Enquiries:

investorrelations@mab.org.uk

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR").