# Mortgage Advice Bureau (Holdings) plc has delivered yet another strong performance

- Link: https://www.directorstalkinterviews.com/mortgage-advice-bureau-holdings-plc-delivered-yet-another-strong-performance/412722437
- Published: 2017-01-27T07:14:35+00:00
- Author: Giles Arbor

**Mortgage Advice Bureau (Holdings) plc** (LON:MAB1), one of the UK’s leading networks
for mortgage intermediaries, today issues a pre-close trading update for the year
ended 31 December 2016, ahead of publishing its final results announcement on Tuesday,
28 March 2017(1).

Revenue for the year ended 31 December 2016 was in line with market consensus and
increased by 23% to £92m driven by a 23% increase in the average number of Advisers
to 888 in the 12 months to 31 December 2016. The total number of Advisers had increased
to 950 at 31 December 2016, an increase of 160 or 20% since last year end (790 at
31 December 2015). Although average revenue per adviser was flat in 2016 due to 
the impact of the lull in activity in the housing and mortgage market surrounding
the EU referendum, MAB expects to see growth in the current year.

The Group’s underlying profit before tax for the year ended 31 December 2016 was
ahead of market consensus despite the impact of this lull. Following absorption 
of £0.4m of FSCS supplementary levies in the year ended 31 December 2016 which the
FSCS recently announced for life and pensions advisers, general insurers and mortgage
advisers, the Group’s profit before tax was marginally ahead of market consensus.

At 31 December 2016, the Group had a balance sheet cash position of over £18m, including
over £10m of unrestricted cash balances.

Following confirmation that the Substantial Shareholding Exemption applies to the
capital gain arising on MAB’s sale of its 49% stake in Capital Private Finance Limited,
no corporation tax is payable on the £2.7m capital gain. Accordingly, the £0.5m 
balance of the gain not already distributed will be distributed in full to shareholders
by way of a special dividend of 1.1 pence per share (2).

The Council of Mortgage Lenders (“CML”) recently published revised estimates for
gross mortgage lending for 2016 and 2017 of £246bn and £248bn respectively, as well
as publishing their first estimate for 2018 of £252bn; gross mortgage lending growth
is therefore expected to be flat for each of 2017 and 2018. MAB remains focused 
on continuing its long track record of growing market share.

(1) It is expected that a proposed final dividend in respect of the year ended 31
December 2016 will be paid on 31 May 2017 to shareholders on the register at close
of business on 5 May 2017.

(2) The special dividend will be paid on 3 March 2017 to shareholders on the register
at close of business on 10 February 2017.

> **Peter Brodnicki, CEO of Mortgage Advice Bureau (Holdings) plc, said:** “Despite
> the uncertainty the EU referendum brought to the housing and mortgage markets 
> last summer, MAB has delivered yet another strong performance. Activity levels
> picked up following the expected summer lull, and from this position the housing
> and mortgage markets are forecast to be flat over the next few years.
> “Our increase in adviser numbers was ahead of our expectations last year and we
> remain confident about continued growth in 2017 and 2018, both organically and
> from new Appointed Representatives.
> “Regardless of the EU referendum and predictions of flat housing and mortgage 
> markets, MAB’s future growth plans remain unchanged. Our strategy is very clear
> both in the short and longer term, and the investments made in 2016 form part 
> of our longer term planning to maintain year on year market share growth and further
> strengthen MAB’s overall market position.”

**Zeus view**

MAB’s revenue and profit growth is principally driven by rising adviser numbers.
We expected MAB to have 940 advisers on 31 December 2016: MAB is ahead of our expectations
with 950. Revenue of £92m is within 2% of our £93.5m forecast.

As PBT before FSCS levies is above consensus, we have increased our 2016 PBT, adj
EPS and DPS forecasts by 2%, but left our forecast for 2017 unchanged.

**Valuation**

At 371p MAB shares are trading on a 4.9% 2016 dividend yield with prospects of 17%
growth to 5.7% in 2017.

In our opinion 400p is a credible September 2017 target price, as MAB would then
be trading on a 2017 PER of 17.0x, a PEG of 0.9x and a 5.3% dividend yield with 
prospects of a 6.3% dividend yield in 2018.

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