Trading Update

30 July 2020

Mortgage Advice Bureau (Holdings) plc 

("MAB" or the "Group")

Trading Update

Mortgage Advice Bureau (Holdings) plc (AIM:MAB1), one of the UK's leading consumer intermediary brands and specialist Appointed Representative ("AR") networks, today issues the following trading update in advance of its interim results for the six months ended 30 June 2020, which are to be announced on Tuesday 29 September 2020.

Revenue for the six months ended 30 June 2020 increased by 4% to £63m (H1 2019: £61m), including £6m of revenue generated by First Mortgage, which was acquired in July 2019.

Temporary cost-cutting measures were implemented early to protect the Group's financial position as the scale and length of the pandemic was unknown, including the furloughing of some staff and reduced salaries across the business commencing on 1 April. At 30 June 2020, the Group had a strong balance sheet with total cash of over £35m, and over £21m (31 December 2019: £7m) of unrestricted cash balances, including the £12m drawn down on the Group's Revolving Credit Facility ("RCF") to provide additional flexibility to react quickly and capitalise on potential opportunities. 

Trading in the first quarter of the year was strong. Improved confidence levels amongst consumers following the General Election in December 2019 led to a more buoyant housing market and a marked increase in new business levels and productivity amongst Advisers. As at 20 March 2020, Adviser numbers had grown to 1,484 (31 December 2019: 1,457) despite a noticeable pandemic-related slowdown in the run-up to that date.

MAB responded quickly to the pandemic, prioritising the health and safety of staff and ensuring our resources were deployed where our Advisers needed them most, specifically in relation to optimising re-mortgage, product transfer, and protection opportunities. We rolled out more than 40 new campaigns and initiatives to our AR network during April and May to support Adviser performance in these areas.

Whilst lenders were facing major capacity issues, MAB launched a comprehensive contact campaign and helpline to support new and existing customers who were addressing the financial challenges of the pandemic. This resulted in customer relationships being further strengthened, and new business opportunities being identified. We continue to work closely with our AR partners to help them adapt their business models, to ensure the increased levels of customer focus and business efficiency remain, as purchase volumes return to more normal levels.

Progressing our technology initiatives remained a priority throughout the period to ensure key projects relating to increased operational efficiency, lead generation and productivity are delivered to plan. The immediate transition to full telephony advice, already an important and fast-growing area of the business, was seamless, with technology enhancements planned to further improve the Adviser and customer experience.

Current trading

Since the re-opening of the housing market, first in England on 13 May and then in Scotland, Wales and Northern Ireland at the end of June, there has been a sharp increase in purchase-related mortgage activity, particularly from first time buyers despite the extremely restricted availability of higher loan to value mortgages. Advisers are continuing to engage remotely with customers, with the number of mortgage applications across the network reaching record levels.

Temporary measures from the Government in support of the housing market and the broader economy are likely to underpin current momentum. We expect the increase in the stamp duty threshold, which took effect in July 2020 and will last until 31 March 2021, to further support this recovery.

During the period from March to May we saw normal levels of attrition in Adviser numbers and our AR firms placing around 245 on furlough at the height of the crisis. Recruitment of new Advisers was very limited, and although discussions with potential new ARs continued, no new firms were added over this period.

Subsequently, recruitment activity has picked up strongly, both in terms of organic growth and new ARs, with the vast majority of Advisers furloughed now back at work. As at 30 June 2020, our Adviser number was 1,470 including 101 furloughed Advisers and, as at 24 July 2020, our Adviser number was 1,472, with 55 remaining on furlough. We believe that until the longer-term picture becomes more certain, some of our AR firms will remain cautious on Adviser recruitment, but will look to strengthen where required in terms of Adviser quality and productivity.

On 1 July, MAB's own staff that were still furloughed returned to work, with the exception of some of those within First Mortgage due to the timing of the Scottish property market reopening, and normal salaries resumed for all.

The Group is currently trading strongly, however due to the uncertainty arising from the pandemic, the Board intends to only pay a final dividend in respect of the year ending 31 December 2020. As previously announced, the Board remains committed to paying a further 6.4 pence per share when it considers it prudent to do so.

Peter Brodnicki, Chief Executive Officer, said:

"The pandemic has illustrated the exceptional resilience of our Group and the quality and dedication of our management team and staff. By reacting quickly and redeploying our resources to capture all possible opportunities during the peak of the crisis, we ensured that our H1 performance remained strong.

"The speed, level and quality of support delivered to our ARs and their Advisers during such unprecedented times was exceptional, bringing us even closer together and more aligned than ever. 

"The lack of meaningful support received during the pandemic has led many other firms to review their relationship with their existing network. This an opportunity MAB is already capitalising on, with AR recruitment activity building very strongly.

"The extreme impact of the pandemic quickly highlighted any weaknesses that may have existed in some AR processes and business models, and our AR firms have been responding equally quickly and adapting to further strengthen performance.

"In addition, lockdown led to MAB and our ARs adopting new ways of working. We are proactively building upon these new processes as the recovery continues and believe these will bring long-lasting benefits to the Group.

"The crisis has also accelerated the development of our technology projects in many areas of the business to support these new ways of working, which will further enhance our competitive advantage.

"Despite the economic challenges that lie ahead, the strong factors that underpin housing demand, combined with existing and future Government support, cause us to be optimistic about the outlook.

"Activity levels are strong, and we are well positioned to capitalise on the recovery, whilst continuing to deliver our strategy of market share growth; technology-led operational improvements; and expansion of our addressable market."

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

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