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2023 ReportMortgage Advice Bureau (Holdings) plc Annual Report 2023 M o r t g a g e A d v i c e B u r e a u ( H o l d i n g s ) p l c A n n u a l R e p o r t 2 0 2 3 Contents Strategic report Financial statements 04 Financial highlights 05 Operational highlights 06 Business model 11 13 21 22 Chair’s statement Chief Executive’s review Financial review Financial performance and future developments 28 Principal risks and uncertainties 43 Environmental, Social and Governance (ESG) • Section 172(1) statement • Stakeholders • Climate-related financial disclosures • Environmental performance and strategy • Strategy and improvement plan 118 119 120 Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity 121 Consolidated statement of cash flows 122 Notes to the consolidated financial statements 183 Company statement of financial position 184 Company statement of changes in equity 185 Notes to the Company statement of financial position 190 Glossary of Alternative Performance Measures 194 Glossary of terms Governance 80 Board of Directors 81 Company information 82 Directors’ report 86 Corporate governance 98 Directors’ remuneration report 105 Directors’ responsibilities for the financial statements 106 Independent auditor’s report For more information please visit our website www.mortgageadvicebureau.com/investor-relations 2 “ Against a very challenging backdrop in 2023, MAB continued its exceptional track record of outperformance and market share growth in all market conditions. “Despite the severe market downturn, we continued our investment across the entire business and remained resolutely focused on long-term growth. Our proposition for growth focused mortgage and protection firms is outstanding, underpinned by best-in-class technology, lead generation and infrastructure, and our aim is to continue to further increase MAB’s differentiation versus our competitors and grow market share and profitability. “2024 has started well, with both purchase and re-financing activity having picked up significantly. We believe this signals the early stages of a market recovery that builds towards a catch-up year in 2025, with pent-up demand continuing to be released as consumer confidence and affordability increase. “Although we expect organic adviser growth to start building some momentum again in H2 as our AR firms gain more confidence in the sustainability of the recovery, recruitment activity in terms of new AR firms is exceptionally strong, reflecting the significant strides we have made in terms of our technology and lead generation developments, as well as how we have engaged with and supported our partner firms with the introduction and integration of Consumer Duty. “Following an exceptionally strong year for our most mature investment First Mortgage, strong progress has been made in terms of efficiencies and lead sources in all our other AR investments, with adviser productivity in these firms being significantly higher than our average across the Group. We expect a record performance from our investments this year and believe the portfolio will contribute “ to accelerated Group profit growth over the medium term. Peter Brodnicki Chief Executive Officer 3 3 Strategic report | Financial highlights Revenue £239.5m 2022: £230.8m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +4% Gross profit £70.2m 2022: £62.9m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +12% Adjusted profit before tax* £23.2m 2022: £27.2m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-15% Adjusted fully diluted EPS* 29.6 pence 2022: 37.4 pence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-21% Proposed final ordinary dividends 14.7 pence per share 2022: 14.7 pence per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- * In addition to statutory reporting, MAB reports alternative performance measures (“APMs”) which are not defined or specified under the requirements of International Financial Reporting Standards (“IFRS”). The Group uses these APMs to improve the comparability of information between reporting periods, by adjusting for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group’s businesses. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes. A summary of APMs used and their closest equivalent statutory measures is given in the Glossary of Alternative Performance Measures. 4 5 Strategic report | Operational highlights Adviser numbers 2,158 2022: 2,254 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-4% Average number of mainstream advisers 1,940 2022: 1,988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2% Market share of new mortgage lending 8.3% 2022: 7.5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .+11% Gross mortgage completions1 £25.1bn 2022: £27.3bn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-8% 4 5 1 First charge mortgage completions, excluding secured personal loans (second charge mortgages), later life lending mortgages and bridging finance. Strategic report | Business model Who we are and what we do Mortgage Advice Bureau is one of the UK’s leading MAB has historically benefited from exceptionally strong consumer intermediary brands and specialist appointed lead flow in the estate agency and new build sectors. representative networks for mortgage intermediaries. The acquisition of The Fluent Money Group (“Fluent”) MAB’s Appointed Representatives (“ARs”) and their advisers specialise in providing mortgage advice to customers, as well as advice on protection and general insurance products. Our proposition is aimed at high quality mortgage broking firms with high growth and productivity ambitions that MAB supports with our proprietary technology and services, including adviser recruitment in 2022 gives us a leading position with national lead sources such as price comparison websites (“PCWs”), which represent a growing proportion of consumer searches. This gives us a dominant position in the three largest lead sectors. MAB has made a number of strategic investments including Fluent that we expect to significantly escalate our profit growth in the years ahead. and lead generation, learning and development, We are a cash generative and capital light business, that compliance auditing and supervision, and digital delivers strong and consistent year on year growth and marketing and website solutions. returns for our investors. Approximately 50% of our partner firms trade as Mortgage Advice Bureau, that is the most widely recognised mortgage intermediary brand in the UK. Our proprietary technology platform, delivers operational Approximately 50% of our partner firms trade as efficiencies, and is used by all our distribution to capture Mortgage Advice Bureau, that and nurture customers, manage and distribute leads, is the most widely recognised support the advice and mortgage application process, manage advice quality, and provide an exceptional AR, adviser and customer experience. mortgage intermediary brand in the UK. 6 7 Our revenue model MAB retains a revenue share from the following Mortgage Procuration Fees: products sold by the Advisers of its AR firms to These are paid to MAB by lenders either via the L&G customers. The average number of advisers in each Mortgage Club or directly. financial year is one of the key drivers of revenue. 2% 2023 Revenue £239.5m Insurance Commissions: From advised sales of protection and general insurance policies. Client Fees: Paid by the underlying customer for the provision of advice on mortgages, other loans and protection. Other Income: From services provided to directly authorised entities, fees in relation to Later Life lending and Wealth and 18% ancillary services such as conveyancing and surveying. 39% 41% Mortgage Procuration Fees Insurance Commissions Client Fees Other Income 6 7 Strategic report | Business model (continued) Our performance since IPO MAB has performed strongly and consistently in all market conditions since our IPO in 2014. Historic growth trends are expected to continue, boosted by accelerated profit growth as a result of high quality and strategically important investments and acquisitions made. Adviser numbers Mortgage completions 2,254 2,158 1,885 1,580 1,457 1,213 1,078 950 790 634 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 £30bn £25bn £20bn £15bn £10bn £5bn 0 l s n o i t e p m o c e g a g t r o M 2,500 2,000 1,500 1,000 500 0 s r e b m u n r e s v d A i 25002500 8 9 Our compound annual growth rate (“CAGR”) in gross mortgage(1) lending since our IPO in 2014 is 18%. This was achieved in a stagnant UK housing market (-2% CAGR since 2014), and illustrates our ability to grow our market share in all market conditions. 1.2m 1.2m 1.2m 1.2m 1.2m 1.2m 1.5m 1.0m 4.1% 4.3% 4.7% 5.7% 6.1% 6.3% £24.2m £15.7m £14.5m £18.7m £17.8m £10.4m £12.5m £8.0m 1.3m 7.5% £27.2m 1.0m 8.3% £23.2m 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 UK housing transactions MAB market share Adjusted Profit before tax Note: mortgage completions refer to first charge mortgages. Future growth We aim to capitalise on maturing and new growth drivers. These, combined with our continuing significant investment, high calibre management, resource, and technology, put MAB in a strong position to start accelerating growth over the next few years. Illustrative profit profile - Investment Historic Revenue Profit Before Tax Future Revenue Profit Before Tax New national lead model and investments offer potential for accelerating profit growth Productivity has greatest margin impact on investments Investments ARs Platform Speed | Ease | Efficiency Lead Generation Growth | Productivity | Margin 8 9 Strategic report | Business model (continued) Establishing dominance in lead generation Since inception MAB has established an exceptionally strong position in lead generation in its core markets of estate agency and new build. Today, the Group has relationships with over 2,000 estate agencies, and a 20%+ market share of the new build sector. The acquisition of Fluent in 2022 has enabled MAB to enter the price comparison website (“PCW”) sector as a leader, thereby significantly increasing its customer reach. PCWs represent a growing proportion of consumer searches and this is therefore a strategically important sector for MAB. This means MAB now has a dominant position in the three largest lead sectors. In turn, these three sectors all feed into MAB’s growing client bank and through Fluent we have gained access to a large additional pool of opportunities. We have also developed and launched new processes and technology to improve customer retention and continue to focus on this strategically important area. Company headlines 2023 in numbers: • Exceptional management team and highly engaged • Revenue: £239.5m (2022: £230.8m) employees • Leading proprietary platform – MIDAS Platform driving enhanced performance • Leading consumer intermediary brand • Award winning – over 200 industry awards • Adjusted EBITDA: £26.7m (2022: £29.1m) • 2,158 advisers at 31 December 2023 (2022: 2,254) • £25.1bn gross mortgage completions(1) in 2023 (2022: £27.3bn) • Continued strong growth in market share, to 8.3% in • Reputation for innovation and excellence 2023 (2022: 7.5%) • Investments play a key part in our plans for accelerated growth • Focus on exceptional quality and productivity • Commitment to outstanding service • High standards of governance and Board oversight • Diverse and inclusive work environment • Strong, sustainable returns • Dividend policy to pay out a minimum of 75% of adjusted earnings • Meaningful impact on local communities with our foundation, the Mortgage Advice Bureau Foundation • MAB is a Platinum-rated Feefo member, with a score of 4.9 out of 5 from over 25,000 reviews (1) First charge mortgage completions, excluding secured personal loans (second charge mortgages), later life lending mortgages and bridging finance. 10 Strategic report | Chair’s statement Dear Shareholder During 2023 MAB resolutely continued to invest for This will be my last statement to you as Chair as I will be retiring from the Board at the Annual General Meeting in May after nearly ten years since MAB listed on AIM in November 2014. In my first report to you in 2015 the Bank of England Base Rate was 0.5% and had stayed at the same level for six years since March 2009. This long period of growth, favouring long-term growth and shareholder value as well as the needs of its employee base and customers, over short-term profitability. MAB’s adjusted EBITDA for the year was £26.7m, an 8.1% decrease compared to 2022, and adjusted earnings per share were 29.6 pence on a fully diluted basis, a decrease of 20.9%. The Group remains highly cash generative, with an adjusted cash conversion of 119% (2022: 105%). Environmental, Social and Governance (ESG) very low interest rates came to an end during 2022, MAB remains committed to the implementation of when rates were increased eight times in quick its integrated ESG strategy and ensuring that we are succession, from 0.25% at the start of the year to 3.5% a responsible business that grows sustainably and by December 2022. After 14 years of very low interest makes a positive contribution to all stakeholders – our rates this shook consumer confidence and immediately customers, shareholders, employees, suppliers, and impacted affordability. The turbulent final quarter of the local communities in which we operate, whilst 2022, precipitated by the disastrous mini-budget that minimising our environmental impact. September, further shattered consumer confidence. Thus, MAB entered 2023 with a significantly lower pipeline of mortgage and protection as consumers delayed their house purchase plans. The ESG section of the Annual Report sets out the excellent progress we have continued to make in 2023. Our Scope 1 (gas) and Scope 2 (electricity) emissions intensity per employee, as calculated using the UK During 2023 interest rates continued to rise and there Government’s 2023 GHG Conversion Factors for were five further rate increases. Rates reached the Company Reporting, have continued to decrease, current level of 5.25% in August, their highest level largely thanks to the refurbishment we conducted at for over 15 years. Since then rates have been held and head office in Q4 2022 which delivered huge benefits in the current expectation is for the next move to be terms of working environment and energy efficiency. downwards, bar any unexpected deterioration in the economy and/or external market shocks. We also made good progress in relation to diversity, equity and inclusion in the workplace, and MAB is Against a very difficult market backdrop in 2023 where committed to the principle of equal opportunity in UK gross new mortgage lending fell sharply by 29%, employment, regardless of a person’s race, creed, MAB delivered another strong performance, achieving colour, nationality, gender, age, marital status, sexual revenue growth of 4% to £239.5m and an increase in orientation, religion or disability. its market share in new first charge mortgage lending by 11% to 8.5% (2022: 7.3%). At 31 December 2023 total adviser numbers were down 4% to 2,158 (31 December 2022: 2,254). Adviser productivity remained unchanged compared to last year, which is testament to MAB’s ambition and continued success in helping its Appointed Representatives and advisers best adapt their focus and resources in all market conditions and FCA Consumer Duty In 2023 the implementation of the new Consumer Duty requirements was completed ahead of the deadline of 31 July. The new rules require all regulated firms to consider the needs, characteristics, and objectives of their customers, to ensure they are always acting to consider and deliver the right outcome for our deliver the best possible outcomes for consumers. customers. 11 11 Strategic report | Chair’s statement (continued) Since implementation, work has continued to ensure ■ Non-Executive Director the requirements of the FCA’s Consumer Duty are embedded into the business-as-usual activities within MAB and owned by senior leaders across the business. We have always been committed to maintaining our standards of high-quality advice and good customer outcomes and believe the implementation of Consumer Duty supports our Group’s objectives and has A search for an additional independent Non-Executive Director who will complement the Board in terms of profile, skills and experience is well advanced, and we look forward to updating our shareholders in due course. Dividend strengthened further our operations and governance Our dividend policy is to pay out a minimum of 75% of framework. Board changes ■ Chair Mike Jones will succeed me as your independent non- executive Chair with effect from his re-election at our Annual General Meeting (AGM) on 22 May 2024. Mike joined the Board in March 2021 and has chaired the Group Risk Committee since November 2022. Mike’s leadership, vision and strategic thinking at Lloyds Banking Group contributed to shape the mortgage and retail banking markets in the UK. His appointment brought a wide range of experience and skills to the Board and I have every confidence that under his leadership, the Board will continue to ensure that the business prospers whilst maintaining the highest standards of corporate governance. ■ Chief Financial Officer Lucy Tilley, Chief Financial Officer, submitted her resignation to the Board in January 2024 and is currently serving her six months’ notice. Lucy joined the Group in May 2015 having first advised the business on its flotation and admission on AIM in 2014. During those nine years Lucy has overseen a huge increase in the Group’s size and complexity and managed the demands on the finance function with great skill and aplomb. We wish her well in her next role. The search for her replacement is well advanced and an update will be provided in due course. adjusted earnings. Our high cash conversion allows this return to be made to shareholders, whilst at the same time continuing to deliver on our growth strategy. The Board is pleased to recommend the payment of a final dividend for the year of 14.7 pence per ordinary share. This brings the total proposed dividend for the year to 28.1 pence per ordinary share, reflecting the Group’s policy to pay dividends reflecting a minimum pay-out ratio of 75% of the Group’s adjusted earnings for the year. If approved, the final dividend will be paid on 29 May 2024 to shareholders on the register on 26 April 2024. Dividends paid during the year amounted to £16.0m and were in respect of the final dividend for the year ended 31 December 2022, and the interim dividend for the year ended 31 December 2023. Outlook The Group has seen a very positive start to 2024, with mortgage rates having reduced compared to their peak last year, the availability of mortgage products having increased, and mortgage underwriting criteria having started to reflect a more positive outlook. Although the current macroeconomic environment remains difficult to predict, we are optimistic that the Group will have a strong year and be able to resume its planned accelerated growth trajectory as we build momentum into 2025. Current trading is in line with expectations. Katherine Innes Ker Chair 19 March 2024 12 13 13 Strategic report | Chief Executive’s review 12 13 13 Current trading and outlookFollowing the modest improvement in trading towards the end of last year, we have seen a very positive start to 2024 across both purchase and re-financing, including a long-awaited recovery in Buy-to-Let activity. We previously reported our expectation that overall market activity would increase once inflation was under control and the Bank of England base rate had peaked or started to fall back. Although a first reduction in the base rate is not expected until later this year, mortgage rates have reduced notably, the availability of mortgage products has increased, and mortgage underwriting criteria are starting to signal a more positive outlook.This has all helped consumer sentiment, resulting in increasing house purchase activity, some of which will certainly be driven by the pent-up demand that has built up since the events of September 2022.Although we expect it will be the second half before we see organic adviser growth recommence, our AR firms are eager to resume their growth plans and are preparing to do so now. New AR recruitment activity started picking up strongly in the latter part of 2023, following an understandable lull in the previous 12 months. That momentum has built strongly, boosted by the significant developments in technology and lead generation we have delivered, as well as further investment in our recruitment resources to ensure we can capitalise on the opportunity our proposition enhancements will bring.Although the macroeconomic environment remains difficult to predict, we are increasingly optimistic about the Group’s prospects for this new financial year, with current trading in line with expectations. Strategic report | Chief Executive’s review (continued) Overview of 2023 2023 started with much depleted mortgage and protection pipelines, following the very turbulent and difficult final quarter of 2022 post the mini-budget. From this very low base, mortgage activity gradually increased through much of H1, as it seemed that inflation was starting to come under control, and mortgage rates were appearing to stabilise at manageable levels for borrowers. However, mid-way through the year, the inflationary backdrop began to disappoint, which took markets by surprise. Consequently, mortgage rates rose quickly and to levels sufficiently high enough to markedly reduce house purchase activity, forcing many borrowers to pause and wait longer before re-financing their existing mortgages, on the hope that mortgage rates would subside later in the year. As expected, these borrowers started to re-finance in greater numbers much later in the year. We also saw a slight improvement in purchase related mortgage activity right at the end of the year, as mortgage rates became more attractive against a backdrop of lower inflation pointing to a more predictable and better outlook for new business in 2024. Against this difficult market backdrop where new mortgage lending was down by 29%, MAB grew its market share of new mortgages(1) to 8.3% from 7.5%, once again outperforming the market in difficult trading conditions. Much of this outperformance was a clear reflection of how MAB helped ARs and advisers to successfully pivot and focus their efforts largely towards re-finance and protection opportunities, in the absence of an active purchase market. As a result, adviser productivity remained virtually unchanged despite the significant drop in purchase transactions. The ability to do this on the rare occasion of a major downturn strongly underlines the resilience of MAB’s operating model, and of course any drop in property transactions is typically made up once the housing market recovers. In terms of MAB’s strategy, although conditions were very challenging, we continued to invest for growth, as opposed to making short-term cost cuts at the expense of longer-term opportunities. This was to ensure we remain on a path towards establishing even greater differentiation versus our competitors, enabling us to carry on growing market share and profitability. MAB ARs have more employed advisers than the intermediary sector average, and as a result they understandably reduced adviser numbers quickly in response to a sharp decline in purchase transactions. The 4% fall overall in adviser numbers was expected as firms consolidated and focused on efficiency and productivity rather than growth in such uncertain times. We expect a better outcome in 2024, as existing ARs gradually become more confident in a sustainable recovery. Despite the 29% drop in UK new mortgage lending, Group revenue for the period was up 4% to £239.5m (2022: £230.8m), with organic revenue (excluding the Fluent, Auxilium and Vita acquisitions) down 4%, and Group first charge mortgage completions down 8% to £25.1bn (2022: £27.3bn). Re-financing transactions accounted for 53% of the Group’s first charge mortgage completions by lending value (2022: 42%), driven by a 75% increase in the Group’s product transfer completions to £6.5bn (2022: £3.7bn). MAB’s first charge mortgage completions are analysed as follows: New mortgage lending Product Transfers Gross mortgage lending 2023 £bn 2022 £bn Change 18.6 6.5 25.1 23.6 3.7 27.3 -21% +75% -8% (1) First charge mortgage completions, excluding secured personal loans (second charge mortgages), later life lending mortgages and bridging finance. 14 15 Adjusted EBITDA was down 8% to £26.7m engaging with an adviser. We see this becoming a major (2022: £29.1m), primarily due to a £9.7m or 28.1% increase growth opportunity over the medium term, with the in administrative expenses, reflecting the planned same digital engagement and nurture helping MAB to further investment in the Group’s growth strategy. improve retention year-on-year from an ever-increasing Lead generation and lifetime customer value client base. Our investment and developments in early customer capture and nurture, data analytics and customer profiling are helping us build a better understanding of our existing and future customers and how to best service all their likely requirements to generate a larger lifetime value. This learning is driving the development of our customer and broker platform, apps and tools whilst shaping our entire customer engagement strategy. These optimisations are already delivering early signs of the size of the opportunity we have, including driving an MAB’s success has been built on being the leader in providing an exceptional service to introducer lead sources and their customers. Our digital customer engagement and nurture strategy will strengthen our leading position still further and is already starting to provide opportunities for new introducer relationships. Although MAB is the market leader in customer acquisition and fulfilment from local and national lead sources, we also support our ARs in optimising direct customer engagement and acquisition through organic website traffic and social media. increasing number of opportunities from our existing Lead generation - whether that be new customers, lead channels, supporting the conversion of all leads, retaining customers, or increasing the lifetime value of a and identifying high propensity for requirements of customer - is the major and increasing differentiator for additional products and services. MAB that drives adviser and AR growth, performance, Although we are in the early stages of implementation and the learning this strategy will bring, we enter an exciting period as we layer additional opportunities of potential customers and their value to MAB into our existing environment. MAB’s client bank and related retention opportunities grows year after year, as MAB and its ARs continue to generate new lead flows. Our acquisition of Fluent has added Price Comparison Websites (“PCWs”) and other major national lead sources to MAB’s market leading position in the estate agency and new build sectors. These are by far the three largest sources of new customers for intermediaries. However, with estate agency and new build in particular, the leads generated have been largely reliant on human and retention. Technology and Artificial Intelligence (AI) are likely to have an increasing impact on how we acquire, retain, and build extended value for our customers and for MAB, its ARs and their advisers. Accordingly, continued investment in these areas remains a priority, regardless of market conditions, and will continue to underpin our strategy for strong market share and profit growth. Leveraging existing invested-in partners The majority of our subsidiaries and associates had significant growth plans in 2023, which have been delayed because of the difficult market backdrop, albeit First Mortgage did deliver an excellent performance, helped partly by the Scottish property market being less affected than the rest of the UK. referral, which at best can be inconsistent. All our subsidiaries and associates strengthened Our development of digital customer engagement and research tools enables MAB to reduce that reliance and generate additional opportunities from these existing lead sources, with those potential customers already having had a positive online experience before their businesses last year, are in a good position to capitalise on a recovering market and are expected to resume some level of adviser growth in 2024. Adviser productivity in this portfolio is significantly higher than the average across MAB and continues to build. We 14 15 Strategic report | Chief Executive’s review (continued) expect a record performance from our investments this Consumer Duty year, and for them to increasingly contribute to our plans for accelerated profit growth. Technology, Automation and AI Technology remains central to our strategy and our investment in our MIDAS Platform will continue at the levels required to ensure we are always in the strongest possible position to optimise operational efficiency and In 2023, the deadline for the implementation of the Consumer Duty requirements came into effect. The Financial Conduct Authority’s (“FCA”) new rules require all regulated firms to consider the needs, characteristics, and objectives of their customers, and to ensure they are always acting to consider and deliver the right outcome for customers. drive revenue growth from new lead flow, lead nurture, The new requirements also include the need to show customer retention, adviser productivity, and customer consideration, flexibility and attention to customers with lifetime value. We are committed to maintaining our differentiation through technological advantage, and our roadmap now incorporates enhanced functionality through characteristics of vulnerability. The Consumer Duty sets clear standards of consumer protection across financial services and requires all firms to put the needs of their customers first, and central to all they do. the adoption of AI. As with our MIDAS Platform The Group’s Board closely monitored the preparations development, automation and AI will significantly for the introduction of the Consumer Duty and could contribute to our growth plans and operational confirm it was satisfied that the firm was prepared for efficiency across all areas of the business, as well as the new requirements by the 31 July 2023 deadline. future proof our business model and cement our leadership position in the intermediary sector. Fluent Fluent had a growing employed salesforce at the time of acquisition. We have worked very closely with the Since implementation, work has continued to ensure the Consumer Duty requirements are embedded into all MAB’s activities and owned by senior leaders across the business. This helps us to ensure that good customer outcomes are considered as a matter of course, and at Fluent management team to re-balance the business all times. to better suit the much-reduced levels of new business Good customer outcomes have always been, and experienced last year. This process saw significant cost continue to be, central to MAB’s strategy and culture, reductions and some key personnel changes. Although and so we see the implementation of Consumer Duty as adviser numbers were quickly reduced, other cost hugely complementary and supportive of our objectives savings and efficiencies continued throughout the year, as a Group. ensuring the business is in the best possible shape to capitalise on improving market conditions. During this period, Fluent also secured a new long-term contract with its largest provider of mortgage leads, whilst adding new lead sources that will support new business growth in 2024/25. With a better-balanced cost base, new lead sources and processes, and a strong management team, Fluent is well-positioned for a good recovery in revenue and profits in 2024. Board changes ■ Non-executive chair Katherine Innes Ker, non-executive chair, will retire from the Board at the conclusion of the Annual General Meeting on 22 May 2024. Katherine joined us as Chair at our IPO nearly 10 years ago and has been an integral part of our success since then. Mike Jones, non-executive director, will succeed Katherine as chair with effect from his re-election at the AGM. Mike joined the Board in March 2021 and has chaired the Group Risk Committee since November 2022. His vision and strategic thinking have made an immediate impact and we look forward to his continued contribution as Group chair. 16 17 ■ Chief Financial Officer Lucy Tilley, Chief Financial Officer, submitted her We expect a strong contribution from all our investments this year, and that they will play an resignation to the Board in January 2024 and is currently increasingly important part in our plans to deliver serving her six months’ notice. The search for her accelerated profit growth. replacement is well advanced and an update will be provided in due course. ■ Non-Executive Director A search for an additional independent non-executive director who will complement the Board in terms of profile, skills and experience is also well advanced, and we look forward to updating our shareholders in due course. Summary It is very rare to see such a severe downturn in UK purchase related mortgages as the one we have Although we do not see normal growth in organic adviser numbers resuming until 2025, AR recruitment activity is building very strongly and reflects the significant technology and lead generation developments seen at MAB over the last 12 months. We believe our approach and implementation of the Consumer Duty across the business is also a major consideration for firms looking at MAB’s overall proposition. Although much of the last quarter of 2023 was challenging in terms of written activity levels, which will have some impact on this year, purchase and experienced, and it significantly affected what would re-financing activity since then has picked up notably otherwise have been an incredibly strong year for MAB. driven by reducing mortgage rates and inflation. We This was clearly a setback for the business but only one believe this signals the early stages of a recovery in 2024 of timing. The investment in our AR and customer proposition continued as planned, as we strengthened across all that will build towards a catch-up year in 2025 with pent up demand continuing to be released as consumer confidence and affordability increase. business areas, whilst ensuring we were fully prepared Market review for implementation of the Consumer Duty. The fall in new mortgage approval volumes in the We also made good progress on our ESG strategy, as we aftermath of the September 2022 mini-budget explore how we can become a real influencer in terms of continued throughout 2023, as the rising costs of living helping the UK housing stock to become more carbon and higher interest rates created further affordability efficient, and how we can be at the forefront to set the constraints and reduced consumer confidence. After a standard within the intermediary sector. The acquisition of Fluent was strategically important, however the timing of the downturn could not have come at a worse time for the expected growth of the business. Despite an understandably challenging first 18 months, the work we have done together will ensure a better performance this year as Fluent starts to build back towards our original expectations. much-depressed Q1 2023, with mortgage approvals 40% down year-on-year, Q2 saw a slight improvement (down 26% year-on-year). However conditions toughened further in Q3 2023 (down 41% year-on-year) and this continued into Q4 (down 13% year-on-year despite Q4 2022 being heavily affected by the mini-budget). Overall, new mortgage approvals were down 32% for 2023, as summarised in the graph below. 16 17 Strategic report | Chief Executive’s review (continued) New mortgage approvals and mortgage rates This led to gross new mortgage completions(1) being down 29% to £223.5bn (2022: £313.2bn(2)). The purchase segment was down 30% and the re-mortgaging segment down 29%, as illustrated in the table and graph below. UK Gross new mortgage lending by segment, £bn Source: UK Finance Residential purchase Buy-to-let purchase Purchase segment Residential re-mortgage Buy-to-let re-mortgage Re-mortgage segment Buy-to-let segment 2023 121.1 8.2 129.3 65.2 19.8 85.0 2022 168.2 17.4 185.6 82.2 38.0 120.2 % -28% -53% -30% -21% -48% -29% 28.0 55.4 -50% Source: UK Finance (1) First charge mortgage completions, excluding secured personal loans (second charge mortgages), later life lending mortgages and bridging finance. (2) UK Finance regularly updates its estimate of gross new mortgage lending, and previously reported £313.9bn at the time of our 2022 results. 18 19 New mortgage lending by purpose of loan New mortgage lending by purpose of loan 30 ,00 0 25 ,00 0 20 ,00 0 m £ 15 ,00 0 10 ,00 0 5,0 00 - Jan-22 M ar-22 M ay-22 Jul-22 Sep-22 N ov-22 Jan-23 M ar-23 M ay-23 Jul-23 Sep-23 N ov-23 Other (inc. lifetime and further advances) BTL re-mortgages BTL purchases Home-owner re-mortgages Home-owner movers First time buyers Source: UK Finance Whilst affordability pressures restricted the external re-mortgaging sector during the period, Product Transfers saw a 21% increase by value. Property transactions were down 19% in 2023 compared to 2022, as illustrated in the graph below. The smaller contraction relative to mortgage lending volumes indicates an increasing proportion of cash buyers, with higher interest rates putting cash buyers in an increasingly favourable position to those taking out a mortgage. UK property transactions by volume 18 Source: UK Finance 19 Strategic report | Chief Executive’s review (continued) The value of mortgage lending was also impacted by UK Finance’s and the Intermediary Mortgage Lenders average house prices starting to fall from the peak Association’s latest estimates of gross new mortgage reached in H2 2022. Average house prices in 2023 were lending for 2024, published in December 2023, are down 2% compared to H2 2022, and flat compared to £215bn and £205bn, down 4% and 8% respectively average prices in 2022 as a whole. compared to 2023. The share of UK residential mortgage transactions However, the Group’s current trading and the latest via intermediaries (excluding Buy to Let, where market data would indicate that actual numbers intermediaries have a higher market share, and may end up higher than these forecasts. Despite the Product Transfers where intermediaries have a lower continuing headwinds, the underlying level of demand market share) continued to grow to 87% (2022: 84%), for home ownership and mortgages remains strong, with customers increasingly needing choice, advice and we expect activity levels to be notably stronger this and support in a more complex and uncertain macro year. We also expect external re-mortgaging to make environment. We expect this increased intermediary up a greater share of re-financing in 2024, even though market share to remain stable. Product Transfers will remain strong. 20 21 Strategic report | Financial Review We measure the development, performance and position of our business against a number of key indicators: Revenue £239.5m Adjusted EBITDA1 £26.7m £239.5m £230.8m £29.1m £25.3m £26.7m £188.7m £148.3m £18.5m Adjusted earnings per share1 29.8p 37.1p 37.8p 28.6p 29.8p 2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023 Total income from all revenue streams. Strategy / objective Shareholder value and financial performance. Earnings before interest, tax, depreciation and amortisation. Strategy / objective Shareholder value and financial performance. Total comprehensive income attributable to equity holders of the Company, adjusted for exceptional items, divided by total number of ordinary shares. Strategy / objective Shareholder value and financial performance. Gross profit margin 29.3% Adjusted EBITDA margin1 11.2% Administrative expenses ratio 19.5% 26.9% 27.0% 27.3% 29.3% 12.5% 13.4% 12.6% 11.2% 14.5% 14.8% 19.5% 15.6% 2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023 Gross profit generated as a proportion of revenue. Strategy/objective Managing gross margins. Earnings before interest, tax, depreciation and amortisation as a proportion of revenue. Strategy/objective Shareholder value and financial performance. Administrative expenses, depreciation and amortisation as a proportion of revenue. Strategy/objective Operating efficiency. Adviser numbers 2,158 1,885 1,580 2,254 2,158 Unrestricted cash balances / (Net debt) Net cash / (debt) £18.6m £17.6m £(16.2)m £(15.2)m Unrestricted cash balances £18.6m £17.6m 2020 2021 2022 2023 2020 2021 2022 £3.0m 2023 Average number of mainstream advisers2 for 2023 was 1,940 (2022: 1,988). Strategy/objective Increasing the scale of operations. Bank balances at 31 December available for use in operations. Strategy/objective Financial stability. £7.2m Capital adequacy £28.0m £17.1m Surplus Capital £18.9m Surplus Capital £3.4m £4.3m £28.0m Surplus Capital £26.8m Surplus Capital £5.5m £5.5m FCA 2020 FCA 2021 FCA 2022 FCA 2023 Surplus capital requirements over amounts required by the Financial Conduct Authority (FCA). Strategy/objective Financial stability. 1 In addition to statutory reporting, MAB reports alternative performance measures (“APMs”) which are not defined or specified under the requirements of International Financial Reporting Standards (“IFRS”). The Group uses these APMs to improve the comparability of information between reporting periods, by adjusting for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group’s businesses. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes. A summary of APMs used and their closest equivalent statutory measures is given in the Glossary of Alternative Performance Measures. 2 Excludes directly authorised advisers and MAB’s later life advisers Includes Fluent’s second charge, later life and bridging advisers who have a higher revenue per adviser than first charge advisers. 20 21 Strategic report | Financial performance and future developments Revenue Group revenue increased by 3.8% to £239.5m (2022: £230.8m) despite the average number of mainstream(1) advisers during the year down 2.4% to 1,940 (2022: 1,988). Organic(2) revenue reduced by 4.3% to £199.6m (2022: £208.6m) driven by a 5% reduction in the average number of organic(2) mainstream(1) advisers to 1,801 (2022: 1,901) and a 1% increase in revenue per organic mainstream adviser, partly due to a lower proportion of new advisers in the year. Our existing AR firms paused recruitment and focused on efficiency following the September 2022 mini-budget and inflationary pressures causing further increases in interest rates. In addition, we entered 2023 with a lower-than-expected pipeline of written mortgages and new AR firms. Fluent, which was acquired on 12 July 2022, had 117 (2022: 182) mainstream advisers as at 31 December 2023, and contributed £37.5m (2022: £21.9m) of revenue during the year. Auxilium, which was acquired on 3 November 2022, had 226 (2022: 161) directly authorised advisers as at 31 December 2023, and contributed £1.1m (2022: £0.2m) of revenue. MAB increased its stake in Vita from 49% to 75% on 12 July 2022, with its adviser numbers and revenues already incorporated into the Group’s figures due to it having been an AR of the Group since 2016. The Group continued to generate revenue from three core areas, as set out below. Income source (£m) Mortgage procuration fees Protection and General Insurance Commission Client Fees Other Income Total MAB’s organic(2) revenue across the three core areas was as follows: Income source (£m) Mortgage procuration fees Protection and General Insurance Commission Client Fees Other Income Total 2023 98.0 93.1 43.4 5.0 2022 106.6 82.1 36.3 5.8 239.5 230.8 Change -8.1% +13.4% +19.7% -14.5% +3.8% 2023 2022 Change 85.5 88.6 21.3 4.2 99.0 80.5 23.7 5.4 199.6 208.6 -13.7% +10.1% -10.1% -22.9% -4.3% As a result of the market downturn in 2023, MAB’s organic banked mortgage(3) mix had a considerably lower proportion of house purchase transactions compared to the prior year at 45% (2022: 51%), driven by a 19% reduction in UK property purchase transactions overall, and an even larger reduction of 30% in mortgage-backed UK property purchase transactions as a result of the fall in consumer confidence. The proportion of re-financing transactions in MAB’s organic banked mortgage mix increased to 55% (2022: 49%) of completions by volume, as we saw a further increase in the proportion of product transfer completions by volume to 28% of MAB’s mortgages(3) (2022: 21%, 2021: 13%). Product transfers have a lower average procuration fee and typically have lower protection, general insurance and client fee attachment rates than other mortgage types. (1) Excludes directly authorised advisers, MAB’s later life advisers and advisers from associates in the process of being onboarded under MAB’s AR arrangements. Includes Fluent’s second charge, later life and bridging advisers who have a higher revenue per adviser than first charge advisers. (2) Organic means the Group before the impact of the acquisitions made in 2022 (Fluent, July 2022; Vita, July 2022; and Auxilium, November 2022). (3) First charge mortgage completions, excluding secured personal loans (second charge mortgages), later life lending mortgages and bridging finance. 22 23 The Group’s organic net mortgage(1) completions by value reduced by 9%, with mortgage procuration fees reducing by 14% as a result of the increased proportion of product transfers. Client fees reduced by 10%. The Group’s organic protection and general insurance commissions however increased by 10%, reflecting the strong focus of MAB’s advisers on protection when volumes in the mortgage market fall, particularly in our invested businesses, and the strength of MAB’s proposition and support in these areas. MAB’s average first charge mortgage size decreased by 7.1% compared to the prior year, with average house prices remaining flat year-on-year, reflecting the increased proportion of re-financing completions where the average mortgage size is lower than for purchase transactions. Fluent’s revenue contribution across the Group’s three core revenue streams during the year was as follows, with an additional £1.1m (2022: £0.1m) of revenue synergies realised: Income source (£m) Mortgage procuration fees Protection and General Insurance Commission Client Fees Other Income Total 2023 12 July 2022 – 31 Dec 2022 12.4 2.2 22.1 0.8 37.5 7.6 1.4 12.5 0.4 21.9 Fluent generates revenue from a wider range of mortgage types than MAB, including first charge mortgages, secured personal loans (second charge mortgages), later life lending mortgages and bridging finance. Fluent earns revenue on first charge mortgages in the same way as MAB. In its other divisions, Fluent predominantly earns procuration and client fees, with a smaller proportion of protection and general insurance commission earned on loans arranged for its customers. Auxilium, a specialist protection service provider, contributed revenue of £1.1m (2022: £0.2m). Auxilium’s revenues are classified under protection and general insurance commission and represent the total income received, with there being no commission payouts to the directly authorised entities serviced by the business. MAB’s overall revenue from re-financing (including both re-mortgages and product transfers) represented circa 35% (35% on an organic basis) of total revenue (2022: 32%, 2021: 25%) due to the Group’s organic banked mortgage mix having a higher proportion of re-financing and Fluent having a higher proportion of re-financing in its first charge mortgage mix, with 2021 reflecting a particularly high level of purchase transactions. The proportion of organic revenue derived from each of the Group’s core revenue streams has remained reasonably stable as summarised below, with the movements reflecting the change in banked mortgage mix during the period, as well as the focus on protection. Income source Mortgage Procuration Fees Protection and General Insurance Commission Client Fees Other Income Total 2023 43% 44% 11% 2% 2022 47% 39% 11% 3% 100% 100% (1) First charge mortgage completions, excluding secured personal loans (second charge mortgages), later life lending mortgages and bridging finance. 22 23 Strategic report | Financial performance and future developments (continued) The proportion of total revenue derived from each of the Group’s core revenue streams has also changed, due to the dynamics set out above for organic revenue and a full year effect of the Fluent acquisition. Client fees as a proportion of Fluent’s revenue are higher than for the organic Group, with protection and general insurance commission being a lower proportion of Fluent’s revenue due to lower attachment rates on second charge mortgages, with the Group’s revenue mix summarised as follows: Income source Mortgage Procuration Fees Protection and General Insurance Commission Client Fees Other Income Total 2023 2022 41% 39% 18% 2% 46% 36% 16% 2% 100% 100% In first charge mortgages we expect client fees to become increasingly dependent upon the type and complexity of the mortgage transaction, as well as the delivery channel, leading to a broader spread of client fees on mortgage transactions, which represent the Group’s lowest margin revenue stream. Gross profit margin Gross profit margin for the year increased to 29.3% (2022: 27.3%) and MAB’s organic gross profit margin also increased to 28.5% (2022: 26.5%). This increase in gross margin is primarily due to the increased proportion of protection revenue in the organic Group in 2023. The network organic business of the Group receives slightly reduced revenue share as existing ARs grow by increasing their adviser numbers. In addition, larger new ARs typically join the Group on lower-than-average margins due to their existing scale, hence a degree of erosion is expected in MAB’s underlying gross profit margin due to the continued growth of our existing ARs and the addition of new larger ARs. Looking ahead, we expect any further erosion in underlying organic gross margin to be offset by operational leverage reducing the Group’s administrative expenses ratio*. Administrative expenses Group administrative expenses increased by £10.7m (+29.7%) to £46.7m, mainly reflecting the full year impact of the acquisitions of Fluent and Vita. Organic adjusted administrative expenses increased by £4.5m (+14.9%) to £34.6m, reflecting MAB’s continued investment in growth through the market downturn in 2023, and specifically in its technology platform and marketing team through a mix of employee and third-party costs, which we expect to drive enhanced lead generation opportunities and future revenue growth. Head office costs, including those of First Mortgage, and compliance costs also increased to support the Group’s growth strategy. MAB’s Head office refurbishment at the end of 2022 led to a £0.5m increase in the depreciation charge. All development work on MAB’s MIDAS platform continues to be fully expensed. The Group’s administrative expenses ratio was 19.5% (2022: 15.6%), and the organic administrative expenses ratio* increased to 17.3% (2022: 14.4%) reflecting the adverse impact of the market downturn on revenue growth in a period where the Board originally expected to deliver operational leverage. * In addition to statutory reporting, MAB reports alternative performance measures (“APMs”) which are not defined or specified under the requirements of International Financial Reporting Standards (“IFRS”). The Group uses these APMs to improve the comparability of information between reporting periods, by adjusting for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group’s businesses. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes. A summary of APMs used and their closest equivalent statutory measures is given in the Glossary of Alternative Performance Measures. 24 25 The Group expects to continue to benefit from the of £1.1m, which was due to Fluent’s performance in H1 relatively fixed cost nature of much of its cost base, 2023, with an improved performance in H2 2023, and where those costs typically rise at a slower rate than having made an adjusted profit before tax of £1.5m in revenue, with the operational leverage offsetting the the period from acquisition to 31 December 2022. These expected slight erosion of MAB’s underlying organic figures exclude the impact of any non-cash charges gross margin as the business continues to grow. associated with the put and call options for Fluent and Associates and Investments Auxilium. MAB’s share of profits from Associates was £0.8m (2022: Adjusted profit before tax* as a percentage of net £0.7m) with all of the Group’s Associates being adversely impacted by the market downturn. revenue* was 24.6% (2022: 34.0%) primarily due to the effect of the market downturn and MAB’s continued Management believes that the value of a number of investment in growth. its associate investments exceeds their carrying value Finance revenue recognised using the equity accounting method under IAS 28. Adjusted EBITDA, profit before tax and margin thereon Adjusted EBITDA* was down 8.1% to £26.7m (2022: £29.1m), with the margin thereon of 11.2% (2022: 12.6%) reflecting the impact of the market downturn and MAB’s continued investment through this period. Organic adjusted EBITDA* was £24.6m (2022: £26.9m), with the margin thereon of 12.3% (2022: 12.9%). Finance income of £0.3m (2022: £0.1m) reflects the uptick in interest rates that prevailed for most of the financial year and the interest income accrued or received on loans to associates and other appointed representatives. On 28 March 2022 MAB entered into new four-year debt facilities with NatWest, comprising a £20m Term Loan (the “Term Loan”) and a £15m revolving credit facility (the “RCF”) to be used in connection with the acquisition of Fluent. The RCF is also available for general corporate purposes. There is an option to extend the RCF and the Adjusted profit before tax* was down 14.8% to £23.2m Term Loan for a further year. (2022: £27.2m), with the margin thereon being 9.7% (2022: 11.8%), also reflecting a full year of interest charges on MAB’s debt facilities. Organic adjusted profit before tax* was £22.2m (2022: £25.5m), with the margin thereon of 11.1% (2022: 12.2%). Statutory profit before tax was £16.2m (2022: £17.4m) reflecting a full year impact of Fluent, Vita and Auxilium ongoing acquisition-related costs, including amortisation of acquired intangibles and non-cash operating expenses associated with the put and call option agreements relating to the minority interests on the Fluent and Auxilium acquisitions. As a result, the margin on statutory profit before tax was 6.8% (2022: 7.5%). Vita and Auxilium contributed adjusted profit before tax of £0.5m (2022: £0.05m) and £0.7m (2022: £0.1m) respectively. Fluent made an adjusted loss before tax Finance expenses of £2.6m (2022: £1.2m) include £1.4m (2022: £0.6m) of interest and non-utilisation fees payable on MAB’s debt facilities, the interest expense on lease liabilities and a £1.1m charge (2022: £0.6m) relating to the unwinding of the redemption liability associated with the Fluent Option and a £0.1m charge (2022: nil) relating to the unwinding of the redemption liability associated with the Auxilium Option. A remeasurement of the redemption liability associated with the Fluent and Auxilium options has been undertaken at the year end. This has resulted in a £4.5m gain (2022: £nil) recognised in the year, split as a £4.7m gain for the Fluent Option, predominantly due to further acquisition of share capital undertaken in the year, and a cost of £0.2m for Auxilium options. * In addition to statutory reporting, MAB reports alternative performance measures (“APMs”) which are not defined or specified under the requirements of International Financial Reporting Standards (“IFRS”). The Group uses these APMs to improve the comparability of information between reporting periods, by adjusting for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group’s businesses. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes. A summary of APMs used and their closest equivalent statutory measures is given in the Glossary of Alternative Performance Measures. 25 24 Strategic report | Financial performance and future developments (continued) Taxation The effective tax rate on adjusted profit before tax* increased to 21.8% (2022: 16.8%), primarily due to the The record date for the final dividend will be 26 April 2024 and the payment date 29 May 2024. The ex-dividend date will be 25 April 2024. increase in the prevailing UK corporation tax rate from Balance sheet 1 April 2023. The effective rate of tax on reported profit before tax reduced to 23.0% (2022: 26.4%), primarily due to lower acquisition related costs, a gain on redemption liabilities in the current year and write off of the Boomin investment in the prior year, which are all disallowable for tax purposes. This is offset by a higher prevailing tax rate and higher disallowable share option costs linked to acquisitions. We expect the effective tax rate on adjusted profit before tax in future years to be in line with the prevailing UK corporation tax rate. In connection with the acquisitions of Fluent, Vita and Auxilium in 2022, the Group recognised separately identifiable intangible assets with a fair value on acquisition of £55.4m and goodwill totalling £38.7m. The carrying value of the intangible assets after amortisation at 31 December 2023 was £50.1m (2022: £55.2m). In addition, redemption liabilities of £2.4m (2022: £7.0m) and £0.4m (2022: £0.2m) in respect of the put and call options relating to the Fluent and Auxilium acquisitions respectively, are included in other Earnings per share and dividend payables as at 31 December 2023. Adjusted fully diluted earnings per share* was 29.6p A clawback liability is recognised on the balance sheet. (2022: 37.4p). Basic earnings per share increased to 23.6p Life insurance commissions are paid upfront on an (2022: 21.8p) due to £2.6m lower acquisition-related indemnity basis, mainly over a four-year period. If a costs, £4.5m fair value gain on redemption liabilities in policy is cancelled during the indemnity period, part 2023 and the £2.8m write off of the Boomin investment of the commission received may have to be repaid to in 2022, offset by £2.6m higher amortisation of acquired the policy provider. The clawback liability estimates the intangibles due to a full year of amortisation on 2022 value and timing of repaying commission received on acquisitions. The Board is pleased to propose a final dividend of 14.7p per share (2022: 14.7p). This brings the total proposed dividend for the year to 28.1p per share (2022: 28.1p), reflecting the Group’s policy to pay an indemnity basis for policies that may lapse in a period of up to four years following inception. In 2022, the Group entered into an agreement on 28 March 2022 with NatWest, in respect of a new term loan for £20m and a revolving credit facility for £15m dividends reflecting a minimum pay-out ratio of 75% (the “Facilities Agreement”), in order to part fund the of the Group’s annual adjusted post-tax and minority cash consideration payable in relation to the Fluent interest profits. This represents a cash outlay of £8.4m acquisition. As at 31 December 2023, the Group had (2022: £8.4m). Following payment of the dividend, the drawn down £1.6m (2022: £3.2m) on the revolving Group will continue to maintain significant surplus credit facility, in addition to a remaining balance of regulatory reserves. £16.3m (2022: £20.0m) on the term loan, and had £0.4m (2022: £0.2m) of accrued interest net of prepaid loan arrangement fees. Net debt (adjusting only for unrestricted cash balances of £3.0m (2022: £7.2m)) was £15.2m (2022: £16.2m). * In addition to statutory reporting, MAB reports alternative performance measures (“APMs”) which are not defined or specified under the requirements of International Financial Reporting Standards (“IFRS”). The Group uses these APMs to improve the comparability of information between reporting periods, by adjusting for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group’s businesses. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes. A summary of APMs used and their closest equivalent statutory measures is given in the Glossary of Alternative Performance Measures. 26 27 Cash flow and cash conversion The Group’s regulatory capital requirement represents 2.5% of regulated revenue and totalled £5.5m at The Group’s operations produce positive cash flow, 31 December 2023 (2022: £5.5m), with the Group which is reflected in the net cash generated from reporting a surplus of £28.0m (2022: £26.8m). The following table demonstrates how cash generated from operations was applied: operating activities of £23.7m (2022: £24.3m). Headline cash conversion* was: 123% Adjusted cash conversion* was: 110% 105% 119% 2021 2022 2022 2023 Other than the £2.8m refurbishment of the Group’s Unrestricted bank balances at the beginning of the year Cash generated from operating activities excluding movements in restricted balances and dividends received from associates Dividends received from associates Dividends paid Dividends paid to minority interest Tax paid Investment in associates (including payment of contingent consideration) Repayment of borrowings Net interest paid and principal element of lease payments £m 7.2 28.6 0.4 (16.0) (0.8) (5.4) (0.5) (5.4) (1.9) (1.2) (2.0) 3.0 head office in Derby in 2022, the Group’s operations are Acquisition of minority interest in subsidiaries typically capital-light, with the most significant ongoing Capital expenditure Unrestricted bank balances at the end of the year capital investment being in computer equipment. A further £0.4m was spent on the final elements of the head office refurbishment project in early 2023, and only £0.5m of general capital expenditure on office and computer equipment was required during the year (2022: £0.4m). Group policy is not to provide company cars and no other significant capital expenditure is foreseen. 26 27 * In addition to statutory reporting, MAB reports alternative performance measures (“APMs”) which are not defined or specified under the requirements of International Financial Reporting Standards (“IFRS”). The Group uses these APMs to improve the comparability of information between reporting periods, by adjusting for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group’s businesses. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes. A summary of APMs used and their closest equivalent statutory measures is given in the Glossary of Alternative Performance Measures. Strategic report | Principal risks and uncertainties The Board is ultimately responsible for risk management and regularly considers the most significant and emerging threats to the Group’s strategy, as well as establishing and maintaining the Group’s systems of internal control and risk management and reviewing the effectiveness of those systems. The Board and senior management are actively involved in a regular risk assessment process as part of our risk management framework, supported by TriLine Governance, Risk and Compliance software (TGRC) to enable consistency and ownership by risk owners across MAB. The Group’s risk assessment process considers the impact and likelihood of risk events that could materialise and affect the delivery of the Group’s strategic goals. Risk owners regularly review and update where needed the controls in place to mitigate the impact of the risks, with the output of these reviews being reported to the Risk & Compliance Committee (RCC) and secondly the Group Risk Committee (GRC) to ensure appropriate oversight is provided and that actions are in place to mitigate any areas of concern. Throughout the Group, all employees have a responsibility for managing risk and adhering to our control framework. There are a number of potential risks that could hinder the implementation of the Group’s strategy and have a material impact on its long-term performance. These arise from internal or external events, acts or omissions that could pose a threat to the Group. The principal risks identified as having a potential material impact on the Group are detailed below, together with the principal means of mitigation. These risks have been assigned a rating based on: (a) likelihood of the risk materialising to a point where it will impact MAB’s strategic objectives; and (b) perceived impact to MAB that the crystallised risk may cause. The risk factors mentioned do not purport to be exhaustive as there may be additional risks that materialise over time that the Group has not yet identified or deemed to have a potentially material adverse effect on the business. Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Strategic & Market Risks Geo-political In 2022, the major concerns It is anticipated that the conflict in Medium High Increased issues resulting in related to the Russia- Ukraine and the Middle East will increasing global Ukraine conflict and the continue with the outcome remaining conflict. deteriorating relationship uncertain. Should these conflicts between the USA and China. escalate further it is expected to However, in the last 12 months there has been further reduce household expenditure and consumer confidence. an increase in the number The UK funding markets however of conflicts arising across continue to be notably liquid, with the globe. Active conflicts Lenders having access to significant are at their highest levels in resources. The wider capital markets decades. remain open and active too. 28 29 Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Currently, there are three The Bank Base Rate increases appear main conflicts where to have slowed while the market escalation is considered recovers, but the impact these possible: Ukraine; the Middle conflicts could have on inflation East; and Taiwan. remains unclear. The recent escalation MAB has no presence in the impacted with the US and UK regions, so the conflict does not targeting Houthi rebels present a direct physical risk to the in Yemen is one example continuity of services. However, it has of a materialisation of this outsourced some small technology- and the risk of the conflict related activities within Poland but expanding outside of Israel continues to monitor the situation with across the wider region of a view to implementing mitigation the Middle East appears to measures should this neighbouring be increasing. country become more directly Previous conflicts have affected by the conflict. had a knock-on negative The impact of the UK’s involvement in domestic impact in the UK, the Israeli and Palestinian conflict is in particular due to rising uncertain. However, it is possible that energy prices, cost-of-living this could result in increasing divides increases, and political across the population and disruption uncertainty. Specific risk can to supply chains across the world. be felt from the resulting upward pressure placed upon mortgage rates due to higher inflation. Consumer confidence levels, and consequently the housing and mortgages markets, have been disrupted and this is likely to continue or increase, should conflicts escalate or persist. 28 29 Strategic report | Principal risks and uncertainties (continued) Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Macroeconomic MAB’s performance is MAB regularly stress tests its forecast Low High No change subject to macroeconomic and considers this against housing conditions surrounding market changes and movements in the UK housing market, Bank Base Rate. It is also notable that which impact on property MAB has a highly cash generative transaction levels. The risk business model. of regular and meaningful increases in interest rates is likely to have a detrimental impact on the housing market and customers’ financial situations. Throughout 2023 the impact of the Autumn 2022 mini budget was felt. Rising costs of living and inflation, resulting in sequential rises in the Bank Base Rates to levels not seen for several years. Lenders have much greater levels of liquidity to enable borrowing, albeit at rates that borrowers may not have been used to in recent years. It is anticipated that the costs of borrowing will reduce as market competition intensifies, with lenders aiming to maintain their market shares in 2024. The mortgage market has seen delays in transactions, and in many instances, borrowers seeking to remortgage before their rates increased further. MAB is well positioned to help its customers and maximise new opportunities in such an environment. Availability of MAB’s offering would be The macroeconomic volatility of Low Medium Decreased Mortgage Lending at risk in the event of a Autumn 2022 steadied during 2023, significant reduction in the with inflation continuing its downward availability of mortgage trend and the Bank Base Rate lending. consequently stabilising. There is now even a chance of a rate reduction at some point in 2024. Confidence has therefore returned to lenders and customers alike. 30 31 Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Affordability has eased which is providing many customers with good purchase and remortgage opportunities. Lenders have responded with greater competition through pricing and less stringent underwriting criteria. With UK banks remaining very well capitalised and funded, and greater interest and activity in the securitisation market, the future for lenders is positive. For 2024, market expectations are that c1.5m existing mortgage borrowers will be coming off existing fixed rate mortgage deals. With mortgage rates at least 1% lower than at this time last year, customer choice is significantly better. When taking on new mortgage borrowers, lenders must assess affordability. Whilst many borrowers are still faced with increasing mortgage rates, more are able to meet these tests. The result is that fewer borrowers will therefore rely on Product Transfers this year compared to 2023, which presents an improved outcome for MAB. MAB expects mortgage availability to continue to further stabilise, and as a result ARs and Advisers will be able to provide a highly competitive range of products for customers, enabling them to re-finance and move home more freely. 30 31 Strategic report | Principal risks and uncertainties (continued) Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Climate Change The impact of climate Whilst MAB’s day to day operations are Low Low No change impact and attitudes of change is at the forefront of non-energy intensive, it has assessed the minds of many in terms the direct environmental impact of its consumers, of the role businesses have business and continues to monitor the investors, and in meeting the challenges risks identified. other stakeholders set by global leaders to drive change and transition to lower carbon economies. Businesses that do not embark on a journey to reduce their emissions are likely to be prejudiced or penalised. MAB is further committed to reducing its environmental impact where feasible. A new post of Head of ESG was created in 2023 and an appointment to the role was made. Given the rising frequency Whilst none of MAB’s facilities are Low Low New Risk in climate change related located in areas at risk from climate events, particularly floods, it related events, the business has is paramount for businesses re-evaluated its business continuity to conduct a thorough and disaster recovery plans to ensure assessment of potential that even if MAB’s facilities were to be climate events in respect impacted, a seamless continuity of its of potential damages to its business operations is ensured. own premises and that of critical suppliers. Given MAB’s critical IT infrastructure is now also 100% Cloud hosted, any potential business disruption resulting from damages to facilities of its IT supply chain has been minimised. Investors and consumers MAB recognises that it has an Low High New Risk are increasingly looking important part to play in attending towards sustainability to the issues of climate change related credentials of the through its role as a leading financial companies they interact services intermediary. MAB continues with. Businesses failing to to invest in its ESG strategy and is address rising expectations currently developing a new ‘Green in this respect are likely to Mortgage’ service via its preferred be materially prejudiced. lenders who similarly recognise the shift in consumer and investor perspectives, and the corresponding potential for good outcomes for customers in this area. 32 33 Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Regulatory compliance MAB has consolidated its efforts in respect to ESG (including community support, employee relations and governance) under the remit of the Sustainability Committee, which ensures that progress in this area is appropriately monitored by the Board of Directors. Legal & Regulatory Risks Failure to comply with MAB maintains open and effective Low High No change current regulatory relationships with regulators and requirements, or relevant industry associations, in appropriately anticipate, addition to having relevant and react to, and embed new appropriate governance structures legislation, regulation and controls in place across the and applicable standards, business. This ensures MAB complies could result in reputational with current regulatory and legislative and financial damage, as requirements and continually monitors well as sanctioning by the emerging changes. This includes the relevant regulators such evolving standards relating to the as the FCA (withdrawal of issues of climate change and broader authorisations) and the ICO Environmental, Social and Governance (imposition of censure and/ (‘ESG’) compliance. It is anticipated or financial penalties). post-Consumer Duty implementation there will be increased engagement by the FCA across varying Firms and Sectors. MAB operates an enhanced risk- based approach to supervision and governance. It continues to undertake a programme of investment in the further development of its ‘Risk Profiler System’, together with the deployment and integration of external systems, to ensure MAB can evidence that advisers are delivering best advice and outcomes for customers. 32 33 Strategic report | Principal risks and uncertainties (continued) Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Appointed MAB has full regulatory As Principal, MAB assumes overall Low Medium Decreased Representative responsibility for the actions regulatory responsibility for its (AR) model of its ARs and advisers. ARs. This is reflected in the policies and procedures comprised in its governance and supervision framework. The Appointed Representative Regime requires the relationship between ‘Principals’ and ‘ARs’ to continue to be the subject of detailed enquiry and actively monitored. As a consequence, MAB has a control environment and oversight approach to meet the regulatory standards and expectations. MAB also continues to proactively engage with the regulator and industry associations to discuss the dynamics of operational processes and procedures, to ensure best practice is maintained. Litigation and MAB could be subject to MAB has comprehensive advice Low High No change complaints litigation or complaints not guidance and compliance processes covered by insurance. in place for advisers. These mandate high standards of advice and thorough maintenance of record-keeping at all times. Accordingly, upheld complaint levels remain very low compared to transactional volumes. Furthermore, MAB has not been subject to any actual or threatened material litigation. Appropriate Professional Indemnity Insurance is procured and reviewed regularly. 34 35 Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Fraud There is a risk that MAB is MAB has robust controls in place Medium High No Change potentially exposed and to monitor and identify potentially exploited by fraudulent fraudulent activity by AR firms, activity by any of its advisers and customers, with the customers, AR firms, resource available to conduct detailed advisers, employees or investigations should the need unknown third parties. arise. MAB continues to assess the effectiveness of these controls and identify opportunities to improve, with oversight by the RCC. MAB utilises an Electronic Identity Verification solution to mitigate risks during advisers’ engagement with customers, particularly where there is no face-to-face interaction. In addition, regular guidance and support is given to ARs and advisers to ensure awareness of potential risks and trends, with interactive training on best practices. Robust controls are also in place across MAB systems to limit the opportunities for employees to commit fraud, particularly where individuals have access to financial resources. Operational Risks Infrastructure and MAB’s performance would There has been significant and Low High Decreased IT systems be adversely impacted if the continued investment into MAB’s IT availability and security of infrastructure. There are two primary its proprietary system, and line-of-business applications, both other IT infrastructure, was of which are located in the Cloud compromised. following the transition completed in 2023. 34 35 Strategic report | Principal risks and uncertainties (continued) Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Cyber and The negative impact of MAB The landscape of cyber threats Medium High No Change Information suffering a deliberate cyber- MAB faces remains diverse: from Security attack on its systems could state-sponsored cyber-attacks on be significant. UK businesses and infrastructure, to smaller groups or individual parties attempting to disrupt services and gain financially, and to the growth in Artificial Intelligence (AI) seen in 2023. Through investment in dedicated resource in cyber security, MAB is well placed to prevent ingress, damage, or theft by unauthorised third parties. In the unlikely event of a system being compromised, it has the ability to gain early warning and mitigate the effects of such incidents, through active monitoring of systems and alerts on a continuous basis 24/7. To combat the growing risks AI represents, governments are beginning to roll out new and evolving regulations to target both hosts and creators of online disinformation and illegal content. Regulation of generative AI will likely complement these efforts. MAB’s ‘Information Security Strategic Vision’ has been complemented by a 3-year ‘Cyber Security Strategy’, establishing a formal framework for cyber security and defining a timetable for ongoing improvements to address known threats, as well as adopting a flexible approach to counter any new ones (including AI), through a combination of prevention, detection and responsive defensive measures. The Cyber Security Strategy will also facilitate MAB in attaining industry-recognised accreditation, demonstrating that all reasonable measures are being taken to prevent cyber incidents, and to protect data. 36 37 Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Technological MAB may fall behind its Fundamentally, via its ARs Low Low Decreased advancements competitors if it does and advisers, MAB provides a not keep abreast of comprehensive and thorough expectations in relation advice journey to its customers. The to the use of technology, greatest level of trust and confidence or implement solutions during this stems from the in-person accordingly, and otherwise interactions between adviser and drive change at the pace customer. For this reason, alternative demanded by the market it new business models that aim to operates in, and its existing make mortgage advice to customers and prospective customers. more streamlined through the use of new technology, have yet to gain any traction in the UK. However, MAB is aware that newer technologies, such as AI, may significantly impact the market and is certainly not complacent. MAB is focussed on ensuring that the preliminary interactions, advice journeys, and continued relationships with customers are supported through the use of various new technology solutions that are being implemented (such as The Home Buying App and My MAB App), with the associated efficiencies and ease of use that these allow. At the same time, MAB appreciates that demographic groups have subtly different appetites, expectations and skillsets when choosing whether or not to utilise such tools. MAB, is investing heavily in new technologies and continues to monitor such issues closely and is well positioned to innovate or partner with other parties as further technological developments occur. 36 37 Strategic report | Principal risks and uncertainties (continued) Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk AR Size and MAB’s ARs are spread MAB maintains strong relationships Medium Low No Change Concentration throughout the UK, a with its ARs to ensure it provides small number of whom appropriate support for continued have significant numbers growth, whilst being aware of key risks of advisers (over 100 per posed within its AR Model. firm). There are possible risks should such larger ARs fail or where there is a heightened concentration of ARs in certain locations. MAB conducts regular monitoring of the ARs, including heightened and close financial scrutiny of those in which it is directly invested. To the extent that certain regions, such as Scotland, have historically had a larger concentration of advisers than other parts of the UK, this has been rebalanced following the addition of advisers via the Fluent acquisition in 2022. Key Employees The impact of MAB losing MAB continues to invest in its People Medium Low No Change key employees and/or & Culture Team and its strategy for otherwise experiencing pursuit of excellence in this area. This a substantial number of is being effected through increasing departures of employees employee engagement, promoting would be significant. MAB’s Diversity, Equity and Inclusion related policies, and enhancing the implementation of its ESG standards by appointing a dedicated Head of ESG. Remuneration continues to be reviewed annually, and takes account of the National Minimum Wage and the on-going cost-of-living crisis. MAB continues to successfully retain its senior employees. The recruitment of further leaders continues, and development of future leaders enhances the breadth of management experience and span of control. 38 39 Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Succession planning is assessed annually by MAB’s Nominations Committee, where the retention and succession of key personnel is discussed and agreed in detail. MAB has succession plans in place for Board members and its Senior Management Team, aiming to improve the roster of internal candidates for key roles. A new role of Chief People Officer was created in 2023 and an appointment made at the beginning of 2024, to oversee and further develop succession planning and talent management throughout the business. Supply Chain Disruption to MAB’s supply MAB continues to be reliant on Medium High No Change dependencies chain would likely cause suppliers to ensure the delivery of its operational, financial and services. This is a common trend across reputational harm. all financial services organisation. The increased use of Cloud-based systems and system integrations is notable, bringing associated risks should the relevant suppliers fail. MAB continues to enhance its procurement and supplier management framework. The new Contract and Procurement Manager was appointed in Autumn 2023 to oversee and manage the Procurement process within MAB. The output is an enhanced onboarding and due diligence process and further improved oversight of MAB’s contract repository and supplier records. To further strengthen its control framework around suppliers, MAB enhanced its governance structure throughout 2023 with the implementation of the Resilience and Recovery Committee to oversee the risk supply chains present to operations. 38 39 Strategic report | Principal risks and uncertainties (continued) Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Investment & Poor execution of MAB has a deliberate and focussed Medium Medium No Change Acquisitions investment and acquisition strategy to deliver year on year growth Financial Risks strategy. This could apply to: in market share and positive returns a. New investments or acquisitions b. Poor trading outcomes of existing investments or acquisitions. to investors. In part, this is achieved through new acquisitions and investments to support its objectives. All new investments or acquisitions are subject to an appropriate level of operational, financial, and legal due Increased operational risks diligence, engaging external specialists could derive from having as required. a broader commercial offering as a result of such corporate activity. Investment and acquisition risks are managed through a set of operating performance metrics and restrictions which are set out in a suite of legal documents drafted by experienced specialists and approved by the Board. MAB has a broad portfolio of investments, which as with all businesses are to some degree impacted by market conditions. There are innate risks associated with managing a more diverse and larger group of entities and ensuring strong performance. To mitigate these, MAB conducts regular performance reviews and financial monitoring, with assistance and expertise offered in the development of growth plans. MAB proactively uses its contacts, technology, support infrastructure and financial expertise to help maximise the performance of its investments. It also continues to embed its Risk Oversight framework to monitor and mitigate the operational risks outlined above in the wider group context. 40 41 Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Potential loss of a MAB has an increasing The risk of over-reliance on certain Medium Low No Change major partnership number of material partners across the businesses or contract (lead commercial partnerships remains, with the impact of the loss sources) with customer lead sources. of a major lead source still being The loss of one of these significant. contracts, or a reduction in MAB has an experienced relationship lead volumes could impact management team in place, with revenues and consequently responsibility for key account reduce profitability and management and liaison defined strategic performance. at senior management level and supported by members of MAB’s Executive Committee. Regular reviews are undertaken with partners to ensure continued focus on performance against service levels and compliance with contractual requirements. The broadening of MAB Group should offer a more attractive proposition to such partners. This also gives MAB the ability to diversify its lead sources, reducing the scope for ‘over-reliance’ on a particular lead source type. Furthermore, the associated margin impact in relation to a single lead source partner on one part of MAB Group is not anticipated as being critical to MAB’s overall commercial performance. 40 41 Strategic report | Principal risks and uncertainties (continued) Risk Title Risk Description Mitigating Factors / Commentary Likeli- Impact Change in hood Risk Reputational risk The quality of MAB’s MAB prides itself on maintaining the Low Medium No Change Reputational Risks proposition, its continued reputation of its advisers as offering growth, and the credibility the best support to and ensuring of its ARs and advisers in good outcomes for their customers. meeting the obligations to Following the implementation of the customers are each material AR oversight and Consumer Duty, factors that directly affect MAB has further enhanced its control its reputation. Any failures framework to ensure customers in this regard would present are receiving the correct outcomes. an immediate risk. MAB also continues to review further Indirectly, were another opportunities across the Group. large mortgage MAB is especially mindful of how it intermediary to fail to meet responds to customer complaints its obligations to consumers and interactions with the Financial there is a risk that this could Ombudsman Service, always seeking cause wider reputational to ensure an objective assessment of harm to the market, and matters is undertaken, preserving its equivalent intermediaries integrity in doing so. (such as MAB). Customer feedback on external portals such as Feefo and Trustpilot is regularly monitored to enable MAB to have broader visibility of the experience’s customers are having. Where appropriate customers are encouraged to further interact with MAB if they are concerned or dissatisfied. The membership of, and significant participation in, the Association of Mortgage Intermediaries (‘AMI') forum allows MAB to voice its concerns and drive positive change across the market in the interests of all, in particular consumers. 42 43 Strategic report | ESG | Section 172(1) statement MAB remains committed to the implementation of its integrated ESG strategy and ensuring that we are a responsible business that grows sustainably and makes a positive contribution to all stakeholders – our customers, shareholders, employees, suppliers, and the local communities in which we operate, whilst minimising our direct environmental impact. In 2023, MAB made significant progress on its ESG strategy, having deliberately opted to continue investing in this important area, despite the pressures to cut costs in what was a difficult market. MAB already helps hundreds of thousands of customers every year to find their dream home and re-finance their mortgages. In addition, every customer is offered a proper conversation about protecting their mortgage and their families against unforeseen, unfortunate, and sometimes very sad circumstances. The Group has therefore a strong social purpose, reflected in its Mission and Vision Statements: Our Mission: We help people fulfil their aspirations, by making key financial moments in life a simple, happy and reassuring experience – from home ownership and beyond. Our Vision: We want to become the leading financial partner through life’s key moments. By being an amazing place to work, providing an outstanding experience for our customers, transforming the industry with the best mortgage journey, having a positive social and environmental impact. The ESG section of this report outlines the activities we have progressed throughout the year to embed and further our integration of core sustainability themes into our operations, and includes: • details of how the Group continues to build upon the progress made in previous years in implementing and advancing its ESG strategy; • our stakeholder engagement arrangements, including the section 172 statement of the Companies Act 2006; • our environmental performance and strategy report; • how the Group assesses and manages climate-related risks and opportunities, in line with the requirements of Climate-related Financial Disclosure Regulations 2022; and • our ESG strategy and progress. Section 172(1) statement The Directors of MAB consider that in conducting the business of the Company over the course of the year they have complied with Section 172(1) of the Companies Act 2006 (the “Act”), by fulfilling their duty to promote the success of the Company and act in the way they consider, in good faith, would be the most likely to promote the success of the Company for the benefit of its members as a whole, having regard to the matters set out in s172(1)(a-f) of the Act. ■ Engaging with stakeholders The continued success of our business is dependent on the support of all of our stakeholders. Building positive relationships with stakeholders that share our values is essential to us and working together towards shared goals assists us in delivering long-term sustainable success. To fulfil their duties, the senior management team and the Directors take care to have regard to the likely consequences on all stakeholders of the decisions and actions they take, with a long-term view in mind and with the highest standards of conduct. Where possible, decisions are carefully discussed with the groups concerned and are therefore fully understood and supported when taken. 42 43 Strategic report | ESG | Section 172(1) statement (continued) Reports are regularly made to the Board by the senior management team about the strategy, performance and key decisions taken, which provides assurance that proper consideration is given to stakeholder interests in decision- making, and the Board uses this information to assess the impact of decisions on each stakeholder group as part of its own decision-making process. The Group’s governance structure allows the Board and the senior management team to have due regard to the impact of decisions on the following matters specified in Section 172(1) of the Act, as set out in the table below. Section 172 factor Approach taken Consequences of Our core business model and strategy are designed to secure sustainable long-term any decision in the growth whilst continuing to deliver strong results in the meantime, and as such the long-term long-term is firmly within the sights of the Board when making all material decisions. The business model and strategy of the Company is set out on pages 6 to 10. Any amendment to that strategy is subject to Board approval. At least annually, the Board considers a budget for the delivery of its strategic objectives based on a three-year forecast model. The senior management team reports financial and non-financial key performance indicators to the Board each month, including but not limited to the measures set out in the ‘Key performance indicators’ section of the Strategic report on page 21, which are used to assess the outcome of decisions made. The Board’s commitment to keeping in mind the long-term consequences of its decisions underlies its focus on risk, including risks to the long-term success of the business. Our low financial leverage following our recent acquisitions ensures that the payment of dividends to shareholders and remuneration to employees, are balanced. This is especially important given the ongoing cost-of-living crisis and the heightened geopolitical uncertainty. Interests of employees Our employees are fundamental to the delivery of our strategy. We are committed to developing our staff and maintaining the capacity to deliver sustainable growth. How the Directors have had regard to the interests of the Group’s employees is set out on page 51 and pages 65 to 70 in the Environmental, Social and Governance section of the Strategic Report. Fostering business Engaging with our stakeholders is very much a part of our ethos as it strengthens our relationships with relationships and helps us make better business decisions. suppliers, customers and others How the business has engaged with suppliers, clients and other counterparties is set out on pages 49, 50, 84 and 85. Suppliers and other counterparties are typically our appointed representative firms, mortgage and protection product providers, affinity partners and other professional firms with which the senior management team often has a longstanding relationship. Where material counterparties are new to the business, checks are conducted prior to transacting any business to ensure that no reputational or legal issues would arise from engaging with that counterparty. The Company pays suppliers in accordance with pre-agreed terms. 44 45 Section 172 factor Approach taken Impact of operations We are proud to support our local community, building on the success of the Mortgage on the community and Advice Bureau Foundation. More details on our engagement with local communities the environment and charitable activities during the year can be found on pages 72 to 76, in the Environmental, Social and Governance section of the Strategic Report. The Group’s impact on the environment is limited due to the nature of the Group’s business operations, as set out in the Environmental performance and strategy section of the Strategic report on pages 61 and 62. However, the Board is committed to limiting the impact of the business on the environment where possible. Maintaining high The Board is committed to achieving and maintaining high standards of business standards of business conduct, corporate governance, integrity and business ethics. conduct A key to maintaining our reputation for high standards is to treat our customers, partners and employees fairly at all times, and our approach to conducting our business is focused on this outcome. The Group’s Risk and Compliance function acts as the second line of defence within MAB to provide appropriate support, oversight and challenge to the activity undertaken by MAB and its appointed representative firms to avoid customer detriment and ensure good outcomes are achieved. Regular reporting is reviewed by the Risk and Compliance Committee (RCC) and the Board Group Risk Committee (GRC) to scrutinise activity and provide assurance to the Board that the Company’s strategic and growth objectives can be met within our risk and compliance framework. The Group further strengthened its internal governance framework in 2023 by implementing sub-Committees to RCC. These include the Product & Pricing Committee and the Resilience and Recovery Committee. As part of the ongoing enhancements of the governance, risk and compliance framework, MAB is moving away from a solely outsourced internal audit function. Following the appointment of an Internal Audit Manager in January 2024, MAB will be moving to a co-source model. The Internal Audit Manager will operate as MAB’s independent assurance function within the third line of defence, reporting directly into the Chair of the Audit Committee and will challenge the design and effectiveness of our controls whilst using our co-source internal audit supplier when necessary. More details on risk and our internal controls can be found on pages 86 to 97. MAB is focussed on maintaining a positive relationship with our regulators. MAB is a proactive member of the Association of Mortgage Intermediaries (AMI) and supports the trade association’s interactions with the government, regulators and policymakers to ensure the mortgage industry meets the needs of our customers and appointed representative firms. 44 45 Strategic report | ESG | Section 172(1) statement (continued) Section 172 factor Approach taken The Group continuously monitors upcoming changes to regulation and is well positioned through our membership with AMI and our relationship with the regulator to understand the implications of and respond to, any changes. More details on the Company’s approach to Consumer Duty can be found on pages 16 and 96. Acting fairly between The Board is committed to openly engaging with our shareholders. We recognise members the importance of a continuing effective dialogue, whether with major institutional investors, private or employee shareholders. Further details on how we engage with our shareholders can be found on pages 96 and 97. The Board oversees an investor relations programme which involves the Directors routinely meeting with the Company’s institutional shareholders. The programme is managed by the Company’s brokers and the Board receives prompt feedback on the outcomes of meetings. The Board aims to be open with shareholders and available to them, subject to compliance with relevant securities laws. The Independent Non-Executive Chair of the Company and other Non-Executive Directors make themselves available for meetings as appropriate and all attend the Company’s Annual General Meeting (“AGM”). The investor relations programme is designed to promote formal engagement with investors and is typically conducted after each half-yearly results announcement. The Group also has open lines of communication with existing investors, who may request meetings, and with potential new investors on an ad hoc basis throughout the year, including where prompted by Company announcements. Shareholder presentations are made available on the Company’s website. The Company has a single class of shares in issue with all members of the Company having equal rights. 46 47 ■ Methods used by the Board The main methods used by the Directors to perform their duties include: • Board meetings or strategy days to review all aspects of the Group’s business model, performance and strategy and assess the long-term sustainable success of the Group, as well as its impact on key stakeholders. Regular senior management team strategy sessions also took place during the year; • The Board meets regularly throughout the year as well as on an ad hoc basis, as required by time critical business needs, such as acquisitions or other investments; • The Board is responsible for the Company’s ESG activities set out in the Strategic Report on pages 43 to 78. Ben Thompson is the Group’s designated executive with responsibility for ESG; • Specialist advice from external consultancy firms is sought where appropriate, for instance with regards to ESG or executive remuneration; • The Board’s risk management procedures set out in the Corporate governance report identify the potential consequences of decisions in the short, medium and long term so that mitigation plans can be put in place to prevent, reduce or eliminate risks to the Company and wider stakeholders; • The Board sets the Company’s purpose, values and strategy, as detailed in the Strategic Report, and the senior management team ensures they align with its culture; • The Board carries out direct shareholder engagement via the AGM and the Executive Directors attend shareholder meetings on a regular and an ad hoc basis; • External assurance is received through internal and external audits and reports from brokers and advisers; and • Specific training for existing Directors and induction for new Directors as set out in the Corporate governance report. 46 47 Strategic report | ESG | Stakeholders Engaging with our stakeholders is very much a part of our ethos as it strengthens our relationships and helps us to make better business decisions to enable us to deliver on our commitments. The Board is regularly updated on wider stakeholder engagement feedback to stay abreast of customers, suppliers and shareholders’ insights into the issues that matter most to them and our business. The below table outlines how we consider these stakeholders and how we engage with them: Stakeholder Why we engage How we engage and outcomes Consumers We aim to be at the forefront of • The quality of consumer outcomes has providing the best consumer always been central to MAB’s culture, and outcomes. the implementation of the Consumer Duty has seen us further strengthen our focus and processes in this area. • Our enhanced focus on consumer outcomes encompasses the four pillars of Consumer Duty: (a) products and services; (b) price and value; (c) consumer understanding; and (d) consumer support; with an additional important pillar we decided to add relating to customer vulnerability. • Our digital solutions continue to improve, thus enhancing consumers’ choice of how they want to transact, whilst giving our ARs the tools to improve their productivity. • Customer feedback is a core component in our strategy to ensure consumers receive a first-class experience. We continue to monitor the feedback on the service our advisers provide via the online review company Feefo, which has remained at a strong 4.9 (out of 5) throughout the year. • Our website has seen a complete overhaul in 2023 and we have significantly enhanced its content and tools offering with a view to providing consumers with a host of useful information relating to mortgages, sustainable living, first time buying and various other related topics. • We engage with customers via various surveys to better understand any concerns they may have and help shape our strategies, for instance in relation to the changing buy-to-let landscape and legislation around minimum EPC ratings. 48 49 Stakeholder Why we engage How we engage and outcomes Appointed Maintaining an active dialogue and • We use a collaborative approach in operational Representatives supporting our AR partners is key to matters such as setting goals and objectives our business. and hold regular review meetings with each AR firm. We also work with specialist ARs and providers to explore new ideas and growing markets. • We have continued to broaden our Learning & Development offering to support our advisers’ professional development. This included the organisation of specific roadshow events as well as regular adviser “clinics” at which knowhow and supervision matters are discussed; including the launch of our new interactive Masterclasses. • To support the implementation of the FCA’s Consumer Duty, we carried out a review of our processes and policies, to ensure they were aligned with the new principle. Through our ongoing programme of training and support, we provide ongoing guidance to AR firms to help them meet their obligations and to ensure good customer outcomes. • We strengthened our Academy adviser induction processes to offer a flexible environment of self-learning with daily trainer interaction discussion-led webinars, activities and case studies. Our onboarding journeys for advisers have been accredited by the Princess Royal Training Awards for the content, feedback and results they have garnered. • We have replaced our communication platform “MABChat” with a more intuitive and flexible system (“Tribe”) which allows us to increase our reach and better tailor content to multiple audiences across all marketing channels. • We continued to improve the technology platform at the core of our business, based on the feedback of our ARs and advisers and trends in the market. 48 49 Strategic report | ESG | Stakeholders (continued) Stakeholder Why we engage How we engage and outcomes • As in the previous year, we issued an adviser- facing green survey to identify any material changes in consumer attitudes toward green mortgages and the energy efficiency of properties, whilst also establishing potential knowledge gaps amongst our adviser community. Suppliers Strong and sustainable relationships • We hold regular roundtable events with with our suppliers and providers our product providers and lead partners are fundamental to our long-term where topics such as business process success. improvements are discussed as a group. Similarly, disciplined procurement • Building on the implementation of practices encourage better standardised procurement processes in 2022, relationships and greater efficiencies. we expanded our team in 2023 in order to bring sourcing under central control, as well as strengthen our supply chain governance. • In 2023 we also enhanced our supplier code of conduct and procurement policies further with added emphasis on environmental matters when procuring goods and services. Shareholders As owners of the Group, we rely on • We have an open dialogue with our our shareholders’ support and their shareholders through one-to-one meetings, opinions are important to us. group meetings and the AGM. Discussions with shareholders cover a wide range of topics including financial performance, strategy, outlook, governance, environmental, social and ethical practices. • Shareholder feedback along with details of movements in our shareholder base are regularly reported to and discussed by the Board and their views are considered as part of decision-making. • We provide detailed financial reports and presentations on the business at the half year and full year. 50 51 Stakeholder Why we engage How we engage and outcomes Employees Our employees are our most valuable • We focus on creating a working environment asset. Their immense knowledge, in which people thrive and where our core skills and experience are key to our values are communicated effectively and success and are vital to ensuring upheld. We believe that a positively engaged we maintain the high standards of workforce is one that is more productive, customer service. happier and fulfilled, which in turns leads to improved performance, greater customer satisfaction and reduced employee attrition. • In 2023 we strengthened our People Team through the onboarding of a dedicated Head of Employee Engagement and Development, as well as an Internal Communications Manager. • We launched a new internal communications platform, Chatter, which gives us added control over published content and allows us to better engage with our colleagues via multiple channels. “Chatter” also provides employees with Health and Wellbeing related content as well as discounts on numerous products. • We created and launched our new Performance Excellence Framework, a standardised methodology to evaluate the performance of our colleagues taking into account the MABology DNA behaviours. • 2023 also saw us increase focus on Diversity, Equity and Inclusion, with a number of employees coming together to form a new DEI affinity group ‘U’Nity’. • We continued to uphold our regular internal communication events including ”MABFest” and “Friday Joy”. • We started to introduce ESG-specific responsibilities and objectives as part of job descriptions and performance reviews, starting with the senior management team. • As in previous years, we surveyed our colleagues twice to capture any changes in relation to employee satisfaction, sentiment and engagement. 50 51 Strategic report | ESG | Stakeholders (continued) Stakeholder Why we engage How we engage and outcomes Communities An important component of being a • We engage with the communities in which good corporate citizen is to recognise we operate to build trust and understand the the role we can play in supporting local issues that are important to them. Key the communities around us and areas of focus include: implementing initiatives to do so. - how we can support local causes and issues, create opportunities to recruit and develop local people; and - partnering with local charities and organisations at an individual office level to raise awareness and funds. • We are proud of the positive impact of our charity, The Mortgage Advice Bureau Foundation (“Foundation”). The Foundation supports charitable projects that create awareness amongst MAB stakeholders of the growing needs of their local communities. • The impact of decisions on the environment both locally and nationally is considered, and comprises a notable focus as part of our wider ESG related activity. • In 2023, 16% of MAB employees took advantage of our volunteering policy and gave some of their time to volunteer. 52 53 Stakeholder Why we engage How we engage and outcomes The Government and The evolving regulatory landscape • We engage with the Government and regulators has a direct and material impact regulators through a range of industry on the day-to-day operation of our consultations, forums, meetings and business. conferences to communicate our views to policy makers relevant to our business. • We have dedicated specialist Legal, Compliance and Risk experts with many decades of combined experience who are focussed on ensuring we meet our regulatory obligations. Most recent examples include: - enhancing the policies and process relating to Appointed Representative oversight, as expected of us by the FCA; and - Reviewing and strengthening our policies and processes as part of the implementation of the Consumer Duty. Further information on the ways in which the Board engages with stakeholders is set out in the Strategic Report on pages 43 to 48, in the Directors’ report on pages 84 and 85 and in the Corporate governance report on pages 96 and 97. 52 53 Strategic report | ESG | Stakeholders (continued) Case Study: Mortgage PA What Attracted you to MAB? When I first met with MAB, I was really impressed with How has MAB helped you with Consumer Duty? the plans that they had for our business, as they had Even when Consumer Duty was only being talked already done some research on our business before we about, MAB was already enhancing its systems and even spoke. Within an hour or so we had a clear vision processes to make sure that good customer outcomes for our business and understood what we needed to do continued to be central in what we do. This work to hit our goals. Joining MAB has been like rocket fuel meant MAB was prepared and aligned with the FCA’s for our business. The support that you get in terms of business consultancy, lead generation, engagement with introducers and technology is really helping us to take our business forward, even if you are not yet a business of a certain size, like with other networks. requirements in most areas and the small changes required meant we didn’t actually feel like we had to significantly change what we are doing from one day to another in order to meet the Consumer Duty. From the lead up to implementation of the Duty until now, the team have been fantastic at keeping us informed about the latest developments, making sure that we are helping our customers every step of the way. What’s your experience being part of the MAB Network? Our experience is that MAB are very organised but Why should other businesses join MAB? also very much like a family. So any time that we have Other businesses should join MAB because in a market a question or query on what we need as a business, that is constantly changing, one should work with a whether it’s to do with marketing, technology, business that’s got a proven track record of capturing compliance or recruitment, there is always someone opportunities, managing growth, and responding to at the end of the phone – and if they don’t know the challenges. answer, they know the person who to go to. MAB always want to help you be as successful as They very much want to support and have helped us possible. If you’re an ambitious business that wants to to develop a solid direction for our business. MAB is grow, then this is definitely the right place to be. MAB is very good with technology and continuously invest in very entrepreneurial and always looking at new ways to developing their tech to stay ahead of the game. generate new leads, income streams and ways to help you grow your business. If you need an expert on a particular subject, then there’s always someone that you can call to ask for that support and some guidance. 54 55 What tools have helped you generate more leads? Tools and technology are definitely areas where MAB excels. They spend a lot of time on their technology and that really supports our business, whether that’s the Home Buying App which has allowed us to recruit and acquire new clients very early on in their research and looking at their options; or Platform, which has allowed us to ingest those clients as they’ve come back and started looking into their options, through to the Mortgage Monitoring system which gives our clients regular updates on a monthly basis around the value of their property, their options with their mortgage and booking a call with one of our advisers. It's been absolutely brilliant. Our clients feel really well supported and I think it’s what sets us apart from all the businesses that are our competitors. 54 55 Strategic report | ESG | Climate-related financial disclosures The Group is now within scope of the Companies for achieving these Goals and related activities (‘ESG (Strategic Report) (Climate-related Financial Disclosure) improvement plan’), including capturing the actions Regulations 2022 (“CRFD”). Such disclosures on how for reporting on the same climate change will affect businesses are intended to assist investors and wider stakeholders in understanding how climate-related financial risks are managed. The Board supports this regulation and the TCFD framework, and has prepared the Group’s CRFD disclosures to a level of detail that are reflective of the nature of its business. The Group’s disclosures address the following four pillars: Governance The Group views climate-related risks and opportunities as growing in importance. The Board is ultimately responsible for the oversight and compliance with all applicable laws, together with assessment of the impact of climate change on risk to the organisation in line with its reporting obligations. During 2023 MAB’s Sustainability Committee was established to promote all related activities of the Group and ensure appropriate governance. The Sustainability Committee has taken a lead role in assessing the climate- related risks the Group faces, as well as implementing strategic initiatives to mitigate such risks and meet the evolving expectations of our customers and partners. - Documenting the corresponding decision making and governance steps in pursuit of the Goals - Ensuring that risks (including climate-related) and vulnerabilities in achieving the Goals are identified, managed and mitigated across the Group - Ensuring the efficient removal of any obstructions throughout the implementation of goals and actions - Giving regard to the consequences of any decision in the long term - Considering in full the need to maintain a reputation for high standards of business conduct at all times In terms of CRFD, the Committee reports into: (i) the Group’s Audit Committee, and (ii) the Board, whilst also ensuring that significant risks are appropriately disseminated as part of the Group’s Risk Management Framework including the Risk and Compliance Committee (RCC) and the Group Risk Committee (GRC). ESG more generally has now been integrated into board discussions as a standing agenda item for its meetings. Sustainability-related risk management and strategy The Sustainability Committee members includes the The Sustainability Committee is kept abreast of all following members: • Head of ESG (Chair) legal and regulatory developments in connection with ESG and climate-related issues, including actions and reporting obligations via our dedicated In-House legal • Deputy Chief Executive Officer function, and with support of our external advisers • Chief Financial Officer • Chief Risk Officer • Head of Legal (Deputy Chair) • Company Secretary • Chief People Officer • Financial Accountant The Sustainability Committee’s scope and responsibilities include: and know-how tools. Other key colleagues also garner intelligence in relation to industry specific political and economic considerations through active collaboration in relevant external forums, such as MCAG (‘Mortgage Climate Action Group’), an initiative by the Association of Mortgage Intermediaries which aims to help and shape how intermediaries can support the transition to a net zero economy. We have ensured that climate-related risks have been identified, assessed and quantified in consultation with colleagues from the Operational Risk function, - Identifying and disseminating MAB’s Sustainability members of the Sustainability Committee and the Goals across the Group - Developing and implementing the Project Plan(s) Finance team through continuous interaction as well as dedicated scenario analysis workshops with all business functions. The tracking of climate-related risks is fully 56 57 integrated into the Group’s risk management function Metrics and targets and processes, supported by the TriLine Governance, Risk and Compliance software which is used across the Group. This allows us to monitor the impact and likelihood of risk events that could materialise and affect the delivery of the Group’s strategic goals, to ensure that mitigation strategies for any risks deemed material are implemented quickly and consistently. The output of our climate-related risk assessment incorporates the common risk methodology of correlating both the likelihood and impact of a risk materialising that applies to all aspects of the Group’s risk protocols. For MAB, the key climate-related risks and opportunities are predominantly driven by sector- related considerations, such as climate-related impact on properties in the UK, government guidelines and legislation regarding the energy efficiency of housing and considerations relating to the value of such assets. Furthermore, we recognise that our supply chain plays an important role in ensuring the seamless operation of our business, including, but not limited to, our technology partners. To the extent that certain climate-related physical risks could materialise at the Group’s operational locations, appropriate mitigation measures are in place. All sites are regularly monitored to ensure they are optimally utilised and increasingly efficient (to the extent possible) from an energy consumption and waste perspective. In terms of transitional risks, the Group has dedicated teams focused on interacting with key lenders and other stakeholders with a common interest in evolving financial services to support consumers as they, and their homes, face the challenges that climate events may cause. The Board has not identified any climate-related scenarios that are expected to materially impact the financial position, or resilience, of the Group. Via the Given the nature of the business, we consider that there are very limited metrics or targets that reflect the climate-related risks that the Group may face, other than physical risks in connection with its footprint from an operating locations perspective. Those risks are appropriately tracked, and the extent of the Group’s emissions are set out in this report. It is, however, anticipated that the Group may start to monitor the emissions and energy performance of the properties of customers it has advised with a view to understanding the extent of this collective impact more fully, and informing the Group’s strategy in supporting such customers in the future. Climate risk assessment – scenario analysis During 2023 we carefully scrutinised our practices across the Group, as well as reflected on our interactions with customers, lenders, providers and other parties we engage with, to assess the potential impacts of certain climate-related scenarios occurring. This Group-wide initiative was undertaken in conjunction with our Risk team, the Sustainability Committee, and key colleagues from our Finance, Operations, Sales, and Technology teams. Our analysis (as summarised in the matrix below) has factored in those tangible ‘physical’ aspects as well as strategic ‘transition’ elements – all of which may present certain risks or opportunities. Primarily, we have considered the scenario of global temperatures rising by up to 2 degrees, as well as the potential resulting events, and the Government strategies and policies towards carbon neutrality that may derive from this, e.g.: - Changes to frequency and severity of extreme weather events, including (but not limited to) droughts and storms; Sustainability Committee, the Group will continue to - Certain geographic locations being compromised, monitor all relevant risks and scenarios. e.g., via sea-levels rising, coastal erosion, fluvial floods; - Government, market, and technology shifts; and - Other changes to expectations of us as a business. 56 57 Strategic report | ESG | Climate-related financial disclosures (continued) MAB Climate Risk Matrix Physical risk Transition risk High Impact / Low Likelihood High Impact / High Likelihood 4 1 3 8 2 6 5 Climate Risk Assessment 7 13 10 9 Low Impact / Low Likelihood Low Impact / High Likelihood 14 y t i r e v e S Likelihood No Risk 1 2 Facilities - owned Facilities - leased 3 Employees (in case of office shut down) 4 5 6 Technology & solution infrastructure (including external suppliers) Contents - buildings Employees living in areas prone to climate change related events 12 11 No Risk 8 Susceptible to failures of utilities providers (telecom & electricity) 9 Our AR’s limited knowledge of green mortgage solutions impacting their ability to provide comprehensive advice 10 11 12 13 Failing to adjust to changing market demands driven by climate change Lenders not wanting to finance certain properties Insurances increasing for at risk properties (Specific insurance products) Lack of product availability to finance upgrade works that improve the environmental credentials of properties 7 Customer assets at risk from damage due to 14 Lenders moving to net zero models – climate events MAB not proactively meeting new standards (expected of an intermediary) 58 59 Physical Risks Physical climate risk describes the potential for physical damage and financial losses because of increased exposure to climate hazards. UK homes are responsible for a notable proportion (up to 26%) of emissions. We therefore believe it is imperative for organisations in our industry to actively promote the decarbonisation of the UK housing stock to contribute to achieving the government’s 2050 net zero Given the geographic locations of the Group’s ambitions. operations, acute risks of climate change (flooding, storms etc.) have to date had no impact on financial performance. No chronic (longer term) risks are considered to be relevant. It is critical that our advisers are fully aware and equipped to provide our customers with financial advice that enables them to implement appropriate solutions. We continue to develop our Learning & Development Given the locations of the offices of our subsidiaries, resources with this in mind and work closely with a there is limited risk that these will be exposed variety of industry partners in raising awareness of the to climate-related incidents, such as flooding or essential role the housing sector can have in achieving subsidence issues. We did assess the impact of possible net zero targets. damage to our physical operations (both owned and leased premises) due to the climate, and whilst it could be costly to repair any damage to our offices, appropriate insurance policies are in place. It is too early to have a view on the impact on the Group of any possible material lenders’ responses to climate-related risks to their assets and operations, but it is anticipated that this could have a marginal impact A business continuity plan is in place, including a on the Group’s finances, for instance where there may switch to remote working for office-based staff, should be a failure to evolve an adequate product and service our physical infrastructure be compromised. Having offering for those assets that may be most at risk. completed the cloud migration of our most critical IT infrastructure throughout 2023, we have effectively reduced the risk of an adverse impact resulting from climate-related events to our day-to-day operations further. We are fully aware of the need to consider the goals that lenders and other providers are setting for themselves and keep closely in touch with them in order to allow us to respond to changing expectations. In 2023 we commissioned further work with our ESG consultants In terms of the harm that customers and their to gain a more detailed understanding of our carbon properties may face, we do not believe that this will have footprint to guide us in setting credible carbon a direct material impact on the Group’s financial position reduction targets. in the short or medium term. However, we are, of course, extremely sensitive to the difficulties such events could cause, and are working on strategies to help mitigate the impact of the UK housing stock on the environment. Transition Risks Transition risks result from the relative uncertainty With regards to transition risk, we currently do not perceive there to be expectations to change our current business model. Furthermore, we recognise that with rising temperatures causing potential damage to insured customer assets, we may be presented with additional commercial opportunities for our insurance created by the global shift towards a more sustainable, related businesses. net-zero economy. Transition risks are very broad Summary in nature and can be difficult to quantify or model. Regulatory, geopolitical, and even social pressures may create material impacts on the operations of a business, its reputation, and the value of its assets, amongst other things. To date, no climate-related risks have been identified as potentially having a material financial impact on the Group in the short to medium-term (i.e., up to 5 years). 58 59 Strategic report | ESG | Climate-related financial disclosures (continued) In our role as an intermediary, we believe that it is Furthermore, we are committed to the decarbonisation premature to try and assess further impacts to the of UK housing stock and this may be another critical Group in the longer term, as they will primarily be a factor that will help us retain a competitive advantage. consequence of the decisions by lenders and other providers in the context of evolving government policy, technological advancements, and the wider socio-economic changes. No significant climate-related transactions have occurred during 2023. We confirm that neither MAB nor any member of the Group, has been subject to any corruption or ESG-related controversies, or In the longer term, given our close working relationships enforcement action/sanctioning (or equivalent scrutiny), with lenders and providers, we believe that the Group in connection with its operating practices. is well placed to align with such partners in developing products and solutions that can support customers in tackling any effect that climate change may have on their homes. 60 61 Strategic report | ESG | Environmental performance and strategy The Companies (Directors’ Report) and Limited This year, we have reported our scope 2 electricity Liability Partnerships (Energy and Carbon Report) emissions both using a location-based approach, Regulations 2018 implement the government’s i.e. based on grid average emissions factors, and a policy on Streamlined Energy and Carbon Reporting, market-based approach. Market-based emissions allow requiring disclosure of the environmental performance for a reduced emission figure where, for example, a of the Group’s assets through calculating the Group’s renewable energy tariff is used. At MAB we took action greenhouse gas (“GHG”) emissions and subsequently, to switch electricity suppliers to be powered by 100% setting strategies to minimise these emissions. renewable electricity at our head office as well as all the The following information summarises the Group’s First Mortgage offices. We intend for Fluent to follow environmental performance over the year. suit as soon as its existing energy contract ends. As Methodology GHG emissions are quantified and reported according to the Greenhouse Gas Protocol. Consumption data has been collated and converted into CO2 equivalent. To collect consumption data, the Group has reviewed utility invoicing and its staff expense software to track business mileage in employee vehicles. We have used the UK Government’s 2023 GHG Conversion Factors for Company Reporting in order to calculate emissions from corresponding activity data. Our analysis includes the data collected for MAB and other Group subsidiaries: First Mortgage, Fluent part of the overall refurbishment of our Head Office in 2022, we also moved from dual fuel to a new single fuel high-efficiency Variable Refrigerant system. This significant investment ensures we can best leverage our switch to 100% renewable electricity as well as provide a more consistent and controlled temperature throughout the building. As such, we believe that a market-based approach is a more relevant indicator of the Group’s carbon intensity. Reporting boundaries and limitations The GHG sources that constitute our operational boundary for the reporting period are: and Vita. Auxilium only has two employees and is • Scope 1: Natural gas combustion within boilers. MAB considered to have minimal impact. As at 31 December does not provide any company cars; 2023, MAB owned 80% of First Mortgage, 84% of Fluent, • Scope 2: Purchased electricity consumption for our and 75% of Vita, but we have factored in 100% of the own use; and Scope 1, Scope 2, and Scope 3 emissions for these subsidiaries. We have calculated energy intensity in tCO2e per employee per year using the average number of employees during the year. We consider this to be a good indicator of the scale of the business and our energy intensity. • Scope 3: Fuel consumption from employee-owned cars for business use. Fuel connected with employee train and plane travel for business use has been excluded as amounts are likely to be immaterial and we consider it impractical to make estimations. Water usage has also been excluded as amounts are also likely to be immaterial. Fugitive As part of the data collection, a materiality assessment gases from office air conditioning are also considered was applied to determine which indicators were immaterial. We have estimated Scope 3 emissions relevant to the Group. We have assessed each indicator based on the split of Diesel vs. Petrol cars in the UK. in terms of its impact on the Group and its perceived importance to stakeholders. 60 61 Strategic report | ESG | Environmental performance and strategy (continued) Performance The table below shows our Scope 1, 2 and 3 emissions for 2023 and 2022 on both a market basis and location basis. Energy consumption and associated GHG emissions (tCO2e) Scope 1 Fuel consumption Scope 2 (gas office heating) (kWh) Associated GHG (tCO2e) Electricity consumption (office electricity) (kWh) Associated GHG (tCO2e) Total Scope 1 & 2 emissions and Scope 2 Total Scope 1 In kWh In tCO2e Scope 1 and 2 intensity (tCO2e/ employee/ yr) Fuel consumption (own cars Scope 3 MARKET BASIS LOCATION BASIS 2022 2023 Change 2022 2023 Change 692,986 495,556 126 91 -28% -28% 692,986 495,556 126 91 -28% -28% 742,817 869,352 128 255 141 232 17% 10% -9% 742,817 869,352 144 270 180 271 1,435,803 1,364,908 -5% 1,435,803 1,364,908 255 232 -9% 270 271 17% 25% 0% -5% 0% 0.26 0.23 -11% 0.27 0.27 -2% for business use) (miles) 450,662 546,827 21% 450,662 546,827 21% Fuel consumption (own cars for business use) (kWh) Associated GHG (tCO2e) Fuel consumption Scope 3 549,699 661,206 134 158 20% 18% emissions 134 158 18% 134 134 549,699 661,206 158 20% 18% 158 18% Scope 3 emissions intensity (tCO2e/employee/yr) Including subsidiaries First Average 0.14 0.16 16% 0.14 0.16 16% employees Mortgage, Fluent and Vita 983 1,001 2% 983 1,001 2% Overall, our Scope 1 and Scope 2 emissions in kWh In terms of fuel consumption for business use, our reduced by 5%, which is due to efficiency measures emissions increased by 18% compared to 2022, or 16% implemented at Head Office as part of the major on a per employee basis. This is due to our employees refurbishment that took place in Q4 2022, including increasingly returning to more face-to-face meetings upgrading to a new highly efficient heating and and pre-coronavirus pandemic ways of working. ventilation system. In equivalent tonnes of CO2, our location-based emissions were flat year-on-year due to a 7% adverse movement in the UK Government’s 2023 GHG Conversion Factor for UK electricity. Taking into account the supply of 100% renewable electricity at Head Office and First Mortgage, our market-based Scope 1 and Scope 2 emissions in tCO2e decreased by 9%, and by 11% on a per employee basis. This follows a 17% reduction year-on-year in 2022. Sustainability is embedded into our core values and we have taken a number of steps to reduce our impact on the environment. These are detailed later in the Environmental, Social and Governance section on pages 77 and 78. We continue to investigate new strategies to make our business more sustainable and through collaboration with all our stakeholders we expect to make further positive steps in this regard in 2024. 62 Strategic report | ESG | Strategy and improvement plan The Board recognises the need to ensure that we are a responsible business that grows sustainably and makes a positive contribution to all its stakeholders – our customers, shareholders, employees, suppliers, and the local communities in which we operate. At MAB we firmly believe that strengthening our positive impact on society will also help us become a better company, with a more engaged workforce and sustainable competitive advantage. ESG remains a priority for MAB and in 2023 we continued to increase our investment in this area. We appointed a new Head of ESG to drive the implementation of our improvement plan across all business functions and continued to work with our ESG consultants to ensure ESG is an integral part of what we do and is embedded within our broader Group strategy. In 2022, we elected to base our roadmap for ESG improvements on the B-Corp framework. B-Corp is a widely recognised framework to assess a company’s social and environmental performance. Whilst we do not seek to achieve B-Corp certification at present, the B-Corp framework delivers best practices with regards to demonstrating accountability for an organisation’s impact on the environment, the economy and people, and we aim to leverage it to improve our performance across five impact areas: • • • • • Employees; Community engagement; Environment; Customers; and, Governance. Our ESG roadmap set out 71 individual improvement actions, a number of which are described in detail in the following pages under the headings (i) Employee wellbeing, diversity, equity and inclusion (“DEI”); (ii) Community engagement and charitable activities; and (iii) Minimising our impact on the environment. The table below sets out a summary of some of the key areas we have progressed throughout the year under ESG. Employees • Significantly strengthened our internal Learning and Development offering • Improved our employee engagement methods by hiring an Internal Communications Manager and introducing a new engagement platform • Strengthened our internal policies including maternity leave, flexible working, and in relation to menopause, neurodiversity and bereavement • Launched an Employee DEI group to help us devise our long-term strategy in this area, MAB U’Nity • Introduced Pex, a new Performance Excellence and review process Community • Improved our volunteering policy • Formalised our financial commitment to the MAB Foundation • Established a process that allows us to donate our decommissioned IT equipment to charity 63 63 Strategic report | ESG | Strategy and improvement plan (continued) Environment • Introduced new supplier policies and enhanced our supplier code of conduct to ensure environmental stewardship throughout the supply chain • Further reduced our carbon intensity due to the installation of a highly efficient single fuel heating and ventilation system at Head Office in late 2022 • Actively promoted the role of retrofit in helping to decarbonise the UK housing stock Governance • • Incorporated social and environmental impact in our mission statement and vision Created a Sustainability Committee which reports into the Audit Committee, and feeds into the Group Risk Committee. • Successfully implemented the Consumer Duty into our operations • Added ESG as a standing agenda item to Board meetings • Introduced ESG related objectives to senior management roles • Linked senior management remuneration to ESG performance Customers • Strengthened the content on our Green Hub in relation to sustainable living and the role of housing in climate change • Continued to achieve outstanding customer satisfaction ratings of 4.9 (out of 5) from over 25,000 reviews on Feefo, resulting in us being awarded with the “Platinum Trusted Service” and “Exceptional Service” awards • Introduced a new communications platform “Tribe” to enhance the way we communicate with our ARs and advisers We progressed the majority of the identified 71 actions, with a broad spread across all categories: Progressed actions by impact area Community Customers Environment Governance Employees 24% 4% 14% 26% 32% 64 65 Employee wellbeing, diversity, equity and inclusion ■ Employee wellbeing (financial, emotional and physical) Our employees are our most valuable asset. Their immense knowledge, skills and experience are key to our success in delivering our business plan and are vital to ensuring we maintain the high standards of customer service and satisfaction which underpin the provision of quality advice. We focus on creating a working environment in which our diverse team can thrive and where our core values are communicated effectively and upheld. We believe that a positively engaged workforce is one that is more productive, happier and fulfilled, which in turns leads to improved performance, greater customer satisfaction and reduced employee attrition. In January 2023 we were delighted to re-open our newly refurbished headquarters. Employee wellbeing and Diversity, Equity and Inclusion were key considerations during the design phase of this project. We gathered extensive feedback from our employees to understand their diverse requirements. We now have a state-of-the- art office space that caters for hybrid working and offers a wide range of working environments with collaborative spaces, pods and booths, and quiet zones, as well as fixed desking and agile seating so all employees have the option to work in an environment that suits their needs. This has proved to be an enormous success. 64 65 Strategic report | ESG | Strategy and improvement plan (continued) We have now added a designated wellbeing room, which is available for employees to use when they require a moment away from their work or for employees to participate in prayer. The room is also stocked with a range of items to support employees – yoga mats, fans, cold water and a resource library containing information from various health and wellbeing organisations, as well as books on a range of relevant wellbeing topics. As in previous years, we ran a comprehensive programme of events and awareness campaigns throughout the year to promote a healthy lifestyle, incorporating physical, mental and financial wellbeing. We offered support to our employees on a wide range of topics, via both online and in-person events. We celebrated Employee Appreciation Day with an early finish and letter box brownies in recognition of everyone’s hard work. Once again, we partnered with a number of charities to bring their expertise inhouse, marking occasions such as Mind’s ‘Time to Talk Day’ in the Hub; hosting a cardiopulmonary resuscitation (CPR) training session with British Heart Foundation; raising awareness during Men’s Health Week with Prostate Cancer UK, and of course, everyone’s favourite the Great MAB Bake Off for MacMillan Cancer Care. In October, we celebrated Menopause Awareness Month with the publication of a Menopause Support Policy, for those experiencing peri-menopausal or menopausal symptoms. We ran an internal awareness campaign and organised training for ten Menopause Champions, who are now available to support and signpost employees that need help. The mental health of our workforce continued to be a key focus for us this year. As well as the internal awareness campaigns, our team of Mental Health First Aiders held a number of drop-in sessions in our wellbeing room, and we rolled out our Employee Assistance Programme, which includes a 24/7 telephone and text helpline, to our Appointed Representative network. 66 67 In addition to this, we introduced a policy offering support to those with additional learning needs, alongside a Neurodiversity Policy to support our neurodivergent colleagues and offer guidance to their managers. We also updated our Bereavement and Compassionate Leave Policy, to offer employees up to days paid leave, to ensure they are taking the time they need to grieve and process events. 2023 was a difficult year financially for many, so we ran sessions to support our employees, including a financial education webinar with AAG Wealth Management; a first-time buyer’s clinic; a mortgage advice surgery; and internal benefits webinars. We also brought forward the December and January pay dates to help employees manage their expenses around the end of year season. One important project in 2023 was the introduction of our new intranet platform, Chatter. As well as a tool for engaging and communicating with employees, the site contains a discounts platform to help with the cost of living and a dedicated wellbeing area that offers online exercise classes, healthy recipes and general wellbeing advice. To best leverage the new platform, our People team also recruited an Internal Communications Manager who is responsible for all communications across the business, ensuring a coherent approach to how we communicate and maximise employee engagement. The introduction of Chatter has been a great success and has made a significant difference to how we communicate as a business. Recognising the importance of maintaining a healthy work life balance, we continued to offer a hybrid working approach in 2023, and updated our Flexible Working Policy to introduce the concept of “core hours”, which enables employees to flex their start and finish times to suit their personal preferences and priorities. 66 67 Strategic report | ESG | Strategy and improvement plan (continued) ■ Diversity, Equity and Inclusion (DEI) MAB is committed to the principle of equal opportunity in employment, regardless of a person’s race, creed, colour, nationality, gender, age, marital status, sexual orientation, religion or disability. Employment policies are written in gender neutral language and are fair, equitable and consistent with the skills and abilities of employees and the needs of the business. All of our job advertisements have been updated to reflect this approach to DEI, and we encourage applicants from a diverse talent pool to apply. Following the launch of our “MABology” in April 2021, we have been working hard to embed the Mission, Vision and DNA behaviours into everything we do at MAB. This has helped us create the foundations of a diverse and inclusive working environment, by encouraging employees to take pride in who they are, celebrate the uniqueness of others and to be open and honest. In 2023 we continued to promote the MABology values through our Team Based Embedding initiative, a series of events which provided the opportunity for MAB teams to fully immerse themselves into the MAB DNA and underpinning behaviours – all aimed at breaking down silos and creating high performing teams. Over 180 colleagues attended a Team Based Embedding event in 2023, with further sessions planned for 2024. BE AWESOME DELIVER WOW BREAK THE MOULD SEE THINGS THROUGH USE YOUR VOICE SHARE THE LOVE Chatter is a great tool for communication, and I like that the tv’s scattered around the offices communicate new and upcoming people/events etc. Employee Engagement Survey (October 2023) We’ve made so much great progress this year on how we communicate. With the launch of Chatter, we’re now in a great place to spread the word and communicate across the business to a greater degree than we’ve done yet Employee Engagement Survey (October 2023) 68 69 Throughout 2023 we continued to seek regular feedback from our workforce and conduct regular Employee Engagement Surveys. For the first time, we included DEI specific questions in our most recent survey. 88% of respondents agreed that they had a good understanding of DEI and 73% believed that MAB was committed to promoting it. Over the last 12 months we focussed on reviewing our policies, processes and initiatives through a DEI lens. To support working parents, we increased our paid Maternity, Paternity, Adoption and Shared Parental Leave offering by two weeks. We also introduced two paid “guilt free days” for parents returning from Family Leave, to enable them to better manage the transition back to work. We continue to advertise all our vacancies internally, making use of the additional communication tools now available to us and have simplified the internal application process to encourage more internal applicants. We are pleased with the impact this is having and last year we saw 20% of new Head Office roles filled via internal applicants. In 2023 we also set up a new initiative, MAB U’Nity, which encompasses a diverse group of 20 with the objective of furthering MAB’s DEI agenda, and fostering a workplace culture that celebrates diversity, ensures equality and promotes inclusion. This will be achieved by breaking down barriers, championing fair treatment for all and embracing diversity. Based on feedback from our employees, we continued to offer a mixture of virtual and in person social events, to ensure that everyone feels included. We continued to foster employee connections through a range of social events such as Coffee Roulette, online quizzes and onsite events at our head office. As MAB continues to grow, and particularly in a hybrid/remote set up, it is paramount to maintain an environment where employees are encouraged to meet, interact and share ideas and knowledge with each other. 68 69 Strategic report | ESG | Strategy and improvement plan (continued) ■ Learning and Development (“L&D”) Feedback includes: The Group is committed to developing its employees to enhance our capacity to deliver sustainable growth and maximise workforce engagement and employee retention. In 2023, our new L&D initiatives included a new “I really loved my experience of the Learn to Lead programme. Not only does it cover some key topics for anyone wishing to develop into a leadership position, but it has been very interesting to discuss these topics with people from different teams that have different approach to our induction programme for new starters experiences and perspectives.” – Nicola Mawby or those employees that are returning from long-term (Financial Crime Analyst) leave. Our new Induction Day kicks off with a tour of our We also have a growing number of colleagues head office, followed by a series of briefings including on the Group’s history, its Mission, Vision and DNA, and our wellbeing programme. It also includes an interactive quiz as well as an introduction to our ESG programme. 60 new colleagues attended the Induction Day throughout 2023, with the initiative achieving an overall satisfaction rate of 4.7 / 5.0. undertaking professional qualifications through taking advantage of the Apprenticeship Levy, and have seven colleagues completing the bespoke Level 3 and Level 5 Women in Leadership Apprenticeship. These are tailored programmes which aim to enable career progression and nurture women into leadership roles and senior positions, and forms part of our strategy to “The induction at MAB is one of the best that I have empower women within MAB. been involved with throughout my working career. Overall, we won four awards in 2023 for our initiatives in When we were introduced to the MAB Vision and DNA DEI and L&D: it all made complete sense and was something that I have experienced in my day-to-day working here. • Barclays D&I Awards – Best Inclusive Culture; I know more about some people here than I did some • MoneyAge Mortgage Awards - Diversity Initiative of of my colleagues at my previous employment where the Year; • Women’s Leadership Association Awards - Woman in Management; and • Money Marketing Awards – Diversity Champion. I had worked for 13 years. So, thank you to everyone for making me feel so welcome and part of the MAB family” - Emma Scarborough (Network Marketing) 2023 saw the launch of the “Mentoring Gang”, a group created to provide the opportunity for colleagues to grow and develop their career goals. We currently have 16 mentors within MAB from a variety of roles and intend to extend this further in 2024 to include professional coaching too. Developing our internal talent remains a priority, and we pride ourselves for providing a culture that encourages both personal and professional growth. Throughout 2023 there were 43 internal promotions at MAB. Our Learn to Lead programme remains popular. Consisting of a wide range of topics from effective communication to conflict resolution and emotional intelligence to DEI, this internally designed programme is an important means for us to develop talent. Nine aspiring leaders graduated in 2023. 70 71 ■ ESG dashboard This year we are including the first iteration of an ESG dashboard for MAB. The dashboard will no doubt improve in future years, however we have sought to incorporate the feedback received on our ESG disclosures, for instance by adding data on employee attrition. Environment Governance Scope 1 & 2 emissions intensity Customer complaints as a proportion of (tCO2e/employee/year) written volume 0.26 0.23 0.3% 0.2% 2022 2023 2022 2023 Social1 Gender equality Regretted leavers as % employees Gender split of employees – women Gender split of management – women Volunteering rate2 52% 50% 42% 42% n/a 11% 7% 16% 2022 2023 2022 2023 2022 2023 2022 2023 1 Data excludes subsidiaries FMD, Fluent, Vita and Auxilium. 2 % of employees having taken advantage of our volunteering policy. Data was only collected from 2023. 70 71 Strategic report | ESG | Strategy and improvement plan (continued) Community engagement and charitable activities ■ The Mortgage Advice Bureau Foundation Corporate Social Responsibility is very important to the Group, and we strive to maximise our positive impact on the communities in which we operate. Throughout 2023, MAB continued to fund and provide staffing resources to the Mortgage Advice Bureau Foundation, our grant-giving charity. Established to coordinate MAB charitable activity, the Foundation aims to create sustainable, positive change within the local communities of our staff and customers. Issuing grants from £500 to £5,000 to local community projects the Foundation engages with MAB’s employees, customers and business partners to put forward projects for consideration. The grant giving purposes remain unchanged as the Foundation looks to support charitable activities in the three following areas: 1) Health and Wellbeing – projects that help communities address health and wellbeing issues so that everybody’s quality of life can be improved. 2) Preventing and relieving poverty – projects to support communities through financial hardship and social exclusion. 3) Environmental and conservation – practical and educational projects to help communities make green choices and reduce their carbon footprint. Funding applications are only accepted when nominated by a MAB employee, a business partner or one of our customers. During 2023: • the Foundation received 68 nominations for funding, completing on 13 applications which received funding from the Foundation of £47,405, and • the Foundation helped these 13 projects raise a total of £139,149 through its partnership with Crowdfunder. This meant that for every £1 donated by the Foundation a further £2 was raised. This is a great outcome which was achieved in part by encouraging other grant funders to support these projects, including British Airways, M&S, Sport England and Aviva. Trustees The Trustees responsible for the management and administering of the trust according to its purpose are:- Name Mortgage Advice Bureau Foundation role Other role Andy Frankish Trustee and CEO Lucy Tilley Trustee and Chair Chief Financial Officer at Mortgage Advice Bureau Peter Brodnicki Ali Crossley Esther Dijkstra Fabien Holler Ben Thompson Trustee Trustee Trustee Trustee Trustee Chief Executive Officer at Mortgage Advice Bureau Managing Director, Distribution at Legal and General Managing Director, Intermediaries at Lloyds Banking Group Company Secretary at Mortgage Advice Bureau Deputy Chief Executive Officer at Mortgage Advice Bureau 72 73 Tranche Funding Throughout 2023 the Foundation reviewed its funding model and in December 2023 it moved to a tranche funding model. By making a tranche of money available for charities to apply for by a fixed end date, the Foundation Committee will be able to review a larger number of applications for funding at the same time, thus ensuring that it can apply its robust scoring criteria consistently to select the most appropriate projects, maximise funding for the best projects, and better control the funds available to the Foundation. Award Winning We are delighted that in November 2023 the Mortgage Advice Bureau Foundation received an industry award in recognition of its Excellence in Philanthropy and Community Service. The judges commented on how MAB had set standards for other businesses to follow in demonstrating a commitment to Corporate Social Responsibility. 72 73 Strategic report | ESG | Strategy and improvement plan (continued) Case Study: Printed by Us Case Study: Flamingo Chicks Part of The Archer Project, which has a proven history Flamingo Chicks is a multi-award-winning charity and of transforming the lives of the vulnerable and an inclusive community, giving disabled or ill children homeless in Sheffield and the wider region, Printed the opportunity to explore movement through dance. by Us is a social enterprise that employs people, in Since the coronavirus pandemic, they have experienced a supported environment, who have experienced a surge in demand for their support. homelessness or similar adversities and most need help and understanding. Printed by Us uses the craft of screen-printing to give these vulnerable people the opportunity to learn new skills, build confidence and thrive. The Project was nominated by one of the MAB business Flamingo Chicks delivers ground-breaking, inclusive programmes designed to support disabled children and families through five core pillars: • inclusive dance classes; • peer-to-peer support; owners in Sheffield who has long worked with The • intergenerational volunteering; Archer Project, volunteering in their soup kitchen. • youth-led advocacy; and The project needed new equipment to further develop the programme and set a target of £10,000 which • global outreach. they achieved with the help of a £5,000 grant from the Flamingo Chicks was looking to raise £20,000 to Foundation. increase its programme’s outreach to more children and shine a spotlight on the importance of supporting disabled children’s mental and physical health. Nominated by the MAB business owners in Bristol, the project secured a £5,000 grant from the Foundation and through the Crowdfunder platform it vastly exceeded its fundraising target, raising over £34,000. This included joint grant funding from the British Airways Foundation. 74 75 ■ Employee Volunteering In addition to grant funding the Foundation also assists in organising volunteering days with the projects it supports. MAB gives its employees two fully paid days per year to work with charities of their choice, and the Foundation helps link up the projects that need support with employees. As well as onsite work, the Foundation also coordinates specialist support that MAB staff can carry out from their desks including help with IT, project management, content writing, marketing and social media. This helps deliver support faster and across a greater number of staff. In 2023, we greatly increased the number of organised volunteering events, enjoying good team participation rates and great feedback from all volunteers. These events included: • a mock interview day at a school with Making the Leap, a London-based charity that seeks to improve social mobility by raising the aspirations of, and increasing opportunities for, young people; • helping Derby Kid’s Camp turn an empty field into a huge summer camp. Derby Kid’s Camp is a children’s charity that provides free holidays to Derbyshire-based young people most in need of a break; and • supporting a local children’s mental health charity, Bridge the Gap, with its social media strategy and content creation. In November 2023, a group of MAB employees spent a day volunteering at Treetops Hospice, a charity that provides nursing care and emotional support for adults and their families in Derbyshire and Nottinghamshire. Our group of volunteers spent the day at the Treetops Hospice grounds, clearing leaves from the outdoor spaces and redecorating the internal corridors. Their hard work was rewarded with homemade cake and a tour of the brand new building used for counselling and support activities for young people and children that was recently constructed as part of DIY SOS for Children in Need. 74 75 Strategic report | ESG | Strategy and improvement plan (continued) As in previous years, one of the highlights of our volunteering calendar is helping Derby City Mission with their Christmas Gift Appeal, helping to provide Christmas presents to Derby’s most vulnerable children. Overall, 16% of MAB employees volunteered throughout the year. ■ Other charitable activities MAB Foundation in Numbers In 2023, in addition to its commitment to the Mortgage Since launch in September 2022 Advice Bureau Foundation in excess of £40,000, MAB helped raise the following amounts for charitable donations: • £16,334 as part of the MAB Golf Day; £139,145 total fund-raising target £159,149 raised for the projects supported • £8,429 as part of the MAB Awards; and £59,905 of grants issued • £1,792 as part of the Derby Marathon. Fluent also made charitable donations over the year totaling £40,271 which included £33,205 to the Education for Children Foundation, whose mission is to break the cycle of poverty through education, empowerment and enterprise at the heart of the community. Education for Children Foundation works in partnership with disadvantaged families, children and young adults in Guatemala and Central America. Finally, MAB now donates its decommissioned mobile phones and laptops to help the local community. Once the devices have been thoroughly wiped and factory reset, they are donated to Derbyshire Refugee Solidarity, where they are redistributed to people who otherwise may not be able to take advantage of modern technology. 80 different projects reviewed 21 gone to application 26 ongoing 33 declined 21 grant funding applications received 3 still fundraising 10 completed 8 declined 29 projects referred by our AR Partners Plus 18 referrals by Head Office Staff Plus 3 referrals by customers Plus 25 referrals by business partners 76 77 Minimising our impact on the environment In 2023, we created a supplier code of conduct which Reducing our environmental footprint remains an important priority for MAB, despite our overall footprint being limited due to the nature of our operations as a mortgage intermediary business. In January 2023 we re-opened our head office after carrying out a major refurbishment project. Minimising our environmental impact was a central consideration for this project, as was sourcing products from local outlines our expectations in terms of our suppliers’ commitments to environmental and ethical standards. All new suppliers are asked to commit to adhering to our code of conduct and we are working with our already established supply chain to do the same retrospectively. Where possible, we endeavour to work with local (<50 miles) suppliers in order to minimise the impact of transport-related emissions. suppliers where practical, and repurposing furniture. We continue to operate a hybrid working model that As part of this refurbishment, we installed a new single fuel high efficiency heating and ventilation system, as well as new high efficiency LED lighting operating allows our colleagues to work from home up to two days per week, and the use of electric vehicles is encouraged through our Electric Vehicle chargers at head office. ‘on motion’ sensor activation throughout the building. ■ Waste reduction These measures contributed to reducing the Group’s Scope 1 and Scope 2 emissions intensity by a further 11%. MAB continues to monitor the production of waste from its facilities and our waste management supplier We no longer use a gas supply in our head office, and only works with “Zero waste to Landfill” partners in its 100% of our electricity at our head office and First own supply chain. Effectively this means that 95% of our Mortgage offices comes from renewable sources. We general waste is used for energy production, with the commissioned two EPC reports, before and after the remaining 5% being recycled appropriately. This includes refurbishment, with our energy performance rating paper, ink and cardboard and we also have recycling having improved from 84 (D rating) to 39 (B rating). stations where our colleagues can discard used batteries. We will continue to work with specialist consultants throughout 2024 to improve further our carbon reporting framework based on science-based targets and drive the Group’s sustainability agenda. The adoption of new technology and processes can be an important waste minimisation factor, and improvements to our MIDAS technology platform and to the structure of our compliance function have meant Scope 1 & 2 emissions intensity (tCO2e/employee/yr) ARs, advisers and their clients are required to print 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 0.38 0.31 -18% fewer documents. Our focus on reducing the level of printing undertaken by the Group continues. We no longer use plastic mineral water bottles or single 0.26 -17% 0.23 -11% use plastic drinking cups. ■ Promoting energy efficient homes 2020 2021 2022 2023 With an estimated 20%+ of carbon emissions in the UK being attributed to the housing sector and given the UK Government’s Net Zero strategy by 2050, we recognise that we are uniquely positioned to influence change and have a significant positive impact on the UK’s overall carbon footprint. 76 77 Strategic report | ESG | Strategy and improvement plan (continued) In 2023 we continued our work with our adviser community to ensure that all our advisers are kept abreast of legislation changes and industry concerns, whilst working with our lending partners to collaborate on what the future product landscape might look like in this respect. We are currently in the process of building a new proposition that addresses the financing needs of customers who wish to explore energy efficiency retrofit options, and also helps them to navigate the complexities of sourcing and installing the right equipment by having a nationwide solution under which customers can make the desired environmentally-friendly changes to their homes. Our Head of ESG joined the Mortgage Climate Action Group’s steering committee in July 2023, an initiative by the Association of Mortgage Intermediaries designed to help raise awareness of this area. We also continued to enhance the content of our Green Hub to promote cost effective ways to reduce utility bills and educate consumers on the subject of “Green Mortgages”. To enable us to assess whether a Anti-bribery policy particular activity is at high risk of facilitating modern slavery or human trafficking: MAB highly values its reputation for ethical behaviour and upholding the utmost integrity. We have a • MAB holds a Risk Register of zero tolerance approach to bribery all operations, and regularly and corruption and ensure that reviews this in the context of all of our employees and suppliers supply chain and business are adequately trained to limit our operations. exposure to bribery by: • There are no high-risk activities • Setting out clear anti-bribery identified in relation to modern and corruption policies; slavery or human trafficking. • Providing mandatory training to The nature of MAB Group’s supply chain reflects the fact that it is primarily a recipient of services, rather than goods and materials. Essentially, it relies on a mix of general business suppliers (ranging from facilities management support to technology solutions), as well as financial services providers, such as mortgage providers and insurance providers. The relationships with many of these all employees; • Encouraging our employees to be vigilant and report any suspected cases of bribery in accordance with the specified procedures; and • Escalating and investigating instances of suspected bribery and assisting the police or other appropriate authorities in their investigations. Gender pay reporting key suppliers and outsourcers are The Equality Act 2010 (Gender well-established, with appropriate Pay Gap Information) Regulations governance and oversight procedures in place. We also review our salaries on an annual basis to ensure our 2017 requires all employers with 250 or more employees in the UK to publish details of their gender pay gap. Modern slavery employees are not paid below The aim of this legislation is to MAB recognises that it has a responsibility to take a robust approach to the issues derived from the national minimum wage. We achieve greater transparency about provide a competitive package of gender pay difference. The analysis benefits to all employees. is based on data as at 5 April of each the Modern Slavery Act 2015 and A copy of our Modern Slavery and has implemented processes that Human Trafficking Statement can are aimed at ensuring that there is be found on our website at www. no slavery or human trafficking in mortgageadvicebureau.com/modern- its business or supply chains. slavery-and-human-trafficking. year and shows the differences in the average pay between men and women. More details can be found on our website at https:// www.mortgageadvicebureau.com/ gender-pay-gap. 78 78 79 Forward looking statements The strategic report is prepared for the members of MAB and should not be relied upon by any other party for any other purpose. Where the report contains forward- looking statements these are made by the Directors in good faith based on the information available to them at the time of their approval of this report. Consequently, such statements should be treated with caution due to the inherent uncertainties, including both economic and business risks underlying such forward looking statements and information. The Group undertakes no obligation to update these forward looking statements. On behalf of the Board Lucy Tilley Chief Financial Officer 19 March 2024 78 78 79 Governance | Board of Directors The Board comprises three Executive and four Non-Executive Directors. A short biography of each Director is set out below: Katherine Innes Ker, Aged 63 Non-Executive Chair Peter Brodnicki, Aged 61 Chief Executive Officer Katherine has extensive executive and non-executive director experience. She is Senior Independent Director of Forterra plc and of Stelrad Group plc, Non-Executive Director of Ground Rents Income Fund plc, and Chair of toob ltd. Her experience as a Chair includes The Television Corporation plc, Shed Media plc, Victoria Carpets plc and Sovereign Housing Association, and she was Deputy Chair of Marine Farms S.A. Katherine has been a Non- Executive Director of, amongst others, Vistry plc, St Modwen Properties plc, Taylor Wimpey plc, Taylor Woodrow plc, Fibernet plc, Williams Lea plc, S&U plc and Gyrus Group plc. She is Chair of the Remuneration Committee, Balliol College, Oxford. As one of the founders of MAB in 2000, Peter has more than 35 years’ experience in mortgage and financial services. Prior to founding MAB, he was with Legal & General for five years, where he held the position of Head of the Estate Agency Network, and also latterly as Recruitment Director. Peter’s experience prior to Legal & General includes sales and management roles at Albany Life, before which he was at John Charcol. Peter has received a number of industry awards over the years, including Business Leader of the Year six times, Mortgage Strategist of the Year twice, and the Industry’s Most Influential Person. Ben Thompson, Aged 54 Deputy Chief Executive Officer Ben has been in financial services since 1986 and before joining MAB in 2018, he was Chief Executive Officer of ULS Technology, the AIM-listed provider of online B2B platforms for the UK conveyancing and financial intermediary markets. Prior to that, he held senior positions at Legal & General Group Plc, where he ran their market- leading mortgage distribution business, as well as the banking division. Before Legal & General, Ben held roles at Paymentshield, St. James’s Place, Winterthur Life and TSB. He also has extensive experience in both retail and private banking, as well as in residential property, in particular estate agency. Lucy Tilley, Aged 52 Chief Financial Officer Lucy joined MAB in May 2015 as Finance Director and became Chief Financial Officer in July 2019. She qualified as a Chartered Accountant in 1996 with KPMG. Prior to joining MAB, Lucy was a director in the corporate broking team at Canaccord Genuity Limited, and was part of the team that worked on MAB’s admission to AIM in November 2014. At Canaccord Genuity Limited, she advised numerous quoted and unquoted companies predominantly in the financial services sector. Lucy is also Chair of the MAB Foundation. Nathan Imlach, Aged 54 Senior Independent Non-Executive Director Nathan is Chief Strategic Adviser to AIM listed Mattioli Woods plc, where his focus is on acquisitions and contributing to its future direction. He qualified as a Chartered Accountant with Ernst & Young, specialising in providing mergers and acquisitions advice to a broad range of quoted and unquoted clients in the UK and abroad. He is a Fellow of the Chartered Institute for Securities & Investment and holds the Corporate Finance qualification from the Institute of Chartered Accountants in England and Wales. Nathan is also a trustee of Leicester Grammar School Trust. David Preece, Aged 63 Non-Executive Director David joined MAB as an Executive Director in 2004 and retired as Chief Operating Officer in 2019, remaining on the Board as a Non-Executive Director. He has more than 40 years of experience in financial services and is an Associate of the Chartered Institute of Bankers. Prior to joining MAB, David’s roles included Senior Manager at NatWest Group Financial Control, Head of Mortgage Operations at NatWest and Head of Membership Services at the Britannia Building Society. Mike Jones, Aged 60 Independent Non- Executive Director Mike joined Lloyds Bank plc in 1985 and retired from Lloyds Banking Group plc (LBG) at the end of 2020. He worked in various roles across the group, with his final role as Managing Director, Intermediaries & Specialist Brands since 2010. He led the Halifax, BM Solutions and Scottish Widows Bank business development teams working with mortgage intermediaries across the UK. Mike chaired the LBG Housing Forum, the LBG Intermediary Conduct Forum and was responsible in the UK for Birmingham Midshires, Scottish Widows Bank and intelligent Finance businesses. He was also responsible from March 2019 for LBG's European retail bank operating in Germany and The Netherlands, a role that sees him continue as Chair of the Supervisory Board of Lloyds Bank GmbH. 80 81 Governance | Company information Company: Directors: Mortgage Advice Bureau (Holdings) plc Katherine Innes Ker Peter Brodnicki Ben Thompson Lucy Tilley Nathan Imlach David Preece Mike Jones Non-Executive Chair Chief Executive Officer Deputy Chief Executive Officer Chief Financial Officer Senior Independent Non-Executive Director Non-Executive Director Independent Non-Executive Director Company secretary: Fabien Holler Registered office: Capital House Pride Place Pride Park Derby DE24 8QR Registered number: 04131569 Nominated adviser and joint broker: Joint broker: Auditor: Solicitors: Principal bankers: Registrars: Deutsche Numis 45 Gresham Street London England EC2V 7BF Peel Hunt LLP 100 Liverpool Street London England EC2M 2AT BDO LLP 55 Baker Street London W1U 7EU Norton Rose Fulbright LLP 3 More London Riverside London SE1 2AQ NatWest Bank plc Cumberland Place Nottingham NG1 7ZS Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA 80 81 Governance | Directors’ report The Directors have pleasure in presenting their report This has not been included within the Group financial together with the financial statements for the year statements as no obligation existed at 31 December ended 31 December 2023. For the purposes of this 2023. If approved, the final dividend will be paid on report, the expression “Company” means Mortgage 29 May 2024 to ordinary shareholders whose names are Advice Bureau (Holdings) plc and the expression on the register on 26 April 2024. Dividends paid during “Group” means the Company and its subsidiaries. the year amounted to £16.0m and were in respect of ■ Results and business review the final dividend for the year ended 31 December 2022 and the interim dividend for the year ended The principal activity of the Group continues to be the provision of financial services, in particular the provision of mortgage advice and advice on protection and 31 December 2023. ■ Going concern general insurance products. The principal activity of the The Directors have assessed the Group’s prospects Company is that of a non-trading holding company. until 31 December 2025, taking into consideration the The review of the business, operations, principal risks current operating environment, including the impact and outlook are included in the Strategic report on of the ongoing geopolitical and macroeconomic pages 4 to 79. The financial statements set out the uncertainty and inflationary pressures on property and results of the Group on pages 118 to 193. lending markets. The Directors’ financial modelling In 2023, despite the market downturn the Group continued to deliver its strategy to achieve year-on-year growth in market share, irrespective of prevailing market conditions. In a market where gross new first considers the Group’s profit, cash flows, regulatory capital requirements, borrowing covenants under its current debt facility and other key financial metrics over the period. charge mortgage lending was down 29%: These metrics are subject to sensitivity analysis, • Group revenue increased by 4% to £239.5m; and • our market share of new first charge mortgage lending increased by 11% to 8.3%. As expected given the prevailing market conditions during the year, adviser numbers at 31 December 2023 decreased by 4% to 2,158 (2022: 2,254), and adjusted EBITDA decreased by 8% to £26.7m (2022: £29.1m). Group profit after taxation for the year amounted to £12.5m, down 3% on the previous year. Income tax expense for the year was £3.7m, an effective rate of 23.0% (2022: 26.4%). ■ Dividends The Board is pleased to propose a final dividend of 14.7p per share (2022: 14.7p). This brings the total proposed dividend for the year to 28.1p per share (2022: 28.1p), reflecting the Group’s policy to pay dividends reflecting a minimum pay-out ratio of 75% of the Group’s annual adjusted post-tax and minority interest profits. This represents a cash outlay of £8.4m (2022: £8.4m). which involves flexing a number of key assumptions underlying the projections, including the effect of the ongoing geopolitical and macroeconomic uncertainty and inflationary pressures and their impact on the UK property and lending markets and the Group’s business volumes and revenue mix, which the Directors consider to be severe but plausible stress tests on the Group’s cash position, banking covenants and regulatory capital adequacy. The Group’s financial modelling shows that the Group should continue to be cash generative, maintain a surplus on its regulatory capital requirements and be able to operate within its current financing arrangements. Based on the results of the financial modelling, the Directors expect that the Group will be able to continue in operation and meet its liabilities as they fall due over this period. Accordingly, the Directors continue to adopt the going concern basis for the preparation of the financial statements. 82 83 ■ Events after the reporting date The Panel on Takeovers and Mergers (“the Panel”) There were no material events after the reporting period, which have a bearing on the understanding of the consolidated financial statements. ■ Directors considers two of the Directors (Peter Brodnicki and David Preece) as persons acting in concert for the purposes of the City Code. At 31 December 2023 the Concert Party held ordinary shares, in aggregate, representing 19.8% of the issued share capital of the A list of the current serving Directors and their Company. biographies is given on page 80. Katherine Innes Ker, Non-Executive Chair, and Lucy Tilley, Chief Financial Officer, will step down after the 2024 Annual General Meeting and accordingly will not seek re-election. The other Directors will all stand for re-election at the 2024 ■ Substantial shareholdings At 31 December 2023, the Company had been notified of the following interests representing 3% or more of its issued share capital: Annual General Meeting. ■ Directors’ indemnity Shareholder Holding All Directors and Officers of the Company have the benefit of the indemnity provision contained in the Company’s Articles of Association and have received a deed of indemnity from the Company. The Group also purchased and maintained throughout the financial year Directors’ and Officers’ liability insurance in respect of itself and its Directors and Officers, although no cover exists in the event Directors or Officers are found to have acted fraudulently or dishonestly. Liontrust Investment Partners Peter Brodnicki abrdn plc Kayne Anderson Rudnick Investment Management Octopus Investments Ltd M&G Plc SEB Investment Management AB Wasatch Advisors, Inc SEB Investment Management AB 19.48% 18.21% 9.88% 8.06% 5.05% 4.90% 3.33% 3.10% 3.01% ■ Share capital ■ Directors’ interests Mortgage Advice Bureau (Holdings) plc is a public limited company incorporated in England and Wales and its shares are quoted on the AIM market of the London Stock Exchange plc. The Company’s issued share capital during the year and as at 31 December 2023 is shown in note 25. Save as agreed at the Annual General Meeting of the shareholders, the ordinary shares have pre-emption rights in respect of any future issues of ordinary shares to the extent conferred by section 561 of the Companies Act 2006. Directors’ emoluments, beneficial interests in the shares of the Company and their options to acquire shares are disclosed in the Directors’ Remuneration Report. During the period covered by this report, no Director had a material interest in a contract to which the Company or any of its subsidiaries was a party (other than their own service contract), requiring disclosure under the Companies Act 2006. There are procedures in place to deal with any Directors’ conflicts of interest arising under section 175 of the Companies Act 2006 and ■ Rule 9 of the City Code such procedures have operated effectively. Under rule 9 of the City Code, where any person ■ Related party transactions acquires an interest in shares which carry 30% or more of the voting rights that person is normally required to make a general offer to all remaining shareholders of the Company to acquire their shares. Details of related party transactions are given in note 28. 82 83 Governance | Directors’ report (continued) ■ Employee engagement In particular, maintaining an active dialogue and At MAB, we are committed to investing in and developing our employees to build the expertise and capacity to deliver sustainable growth over the long term. We maintain a culture that is based on knowledge, professionalism and diversity, putting customers first and adopting a team-based, collegiate approach. Retaining the commitment, integrity, expertise and passion of our people is vital to our success and remains a priority of the Board. More details on how we have engaged with employees in 2023 can be found on in the Environmental, Social and Governance section of the Strategic Report on pages 63 to 70. supporting our ARs is key to our business and in 2023 we continued to invest in this area. We use a collaborative approach in operational matters such as setting goals and objectives and hold regular review meetings with each AR firm. We also work with specialist ARs and providers to explore new ideas and growing markets. We offer two leadership programmes to our ARs. These were originally designed for our internal management team but in 2022 we decided to open them to our ARs’ business leaders. The Leadership Programme is a 9-month long course for business owners and their established leadership teams which covers a broad range of topics including Emotional Intelligence, Succession Planning and Conflict Resolution. The Learn to Lead We continue to share the success of the Group with our programme is an 8-month long course aimed to support employees. MAB operates a WorkSave Pension Plan new or aspiring future leaders by providing them with the available to all employees and contributes to the pension knowledge and tools to become effective leaders. Both schemes of Directors and all employees. The Group programmes are proving very popular. operates an Unapproved Incentive Plan and a Share Incentive Plan, details of which are given in the Directors’ Remuneration Report and the financial statements. All of our ARs also enjoy the support of MAB’s Regional L&D consultants, a dedicated resource to create bespoke learning solutions based on the needs of the advisers and The Mortgage Advice Bureau (Holdings) plc Share market conditions. The aim of our L&D consultants is to Incentive Plan (“the SIP”) enables eligible employees create and deliver content on a wide range of topics from to buy shares in the Company in a tax advantageous lead generation to mindset - all with the aim to improve manner by having an amount deducted from results and knowledge across the board and ensure pre-tax salary each month. In addition, the Company we remain best-in-class when it comes to servicing our grants participating employees matching shares. customers. The SIP is continuing to prove popular among our employees despite the cost-of-living crisis, with MAB employee participation now standing at 47% (2022: 48%), with an average monthly contribution of £107 (2022: £111). ■ Engagement with customers and suppliers Engaging with our stakeholders is very much a part of our ethos as it strengthens our relationships and helps us to make better business decisions to deliver on our Several initiatives were introduced and built upon throughout the year to maximise engagement with our ARs and advisers, as we continued our investment across all of our major support functions, including sales, recruitment, marketing, regulatory and compliance. More details on how we have interacted with our ARs in 2023 are set out in the Stakeholder section of the Strategic Report on pages 49 and 50. commitments. The Board is regularly updated on wider In recognition of our approach to learning and stakeholder engagement feedback to stay abreast of customers, suppliers and shareholders’ insights into the issues that matter most to them and our business. development, MAB is proud to have achieved the City & Guilds Princess Royal Training Award. The award is an honour for UK employers across all industries that have 84 85 created lasting impact by successfully linking their skills ■ Principal risks and uncertainties development needs to business performance. Strong and sustainable relationships with our product providers are also fundamental to our success. We hold regular roundtable events with them where topics such The Directors’ view of the principal risks and uncertainties facing the business is summarised in the Strategic report on pages 28 to 42. A full review of financial risk management can be seen on pages 168 to as business process improvements are discussed as a 172. group. This open dialogue has for instance contributed to ■ Corporate governance the implementation by our technology team of a more seamless mortgage submission process. We continue our plans to extend our direct-to-lender submission routes further for mortgage applications. Fluent also holds regular meetings with its key lead partners, ranging from weekly to monthly depending on the partner. Fluent produces a detailed suite a reporting KPIs for its lead partners, with KPIs including lead volumes, sales conversions, product choice, rate, payment, revenues, and many other customer data points. This KPI pack can also be automated and delivered directly into partner platforms in a timing schedule to suit them. A full review of Corporate governance appears on pages 86 to 97. ■ Auditors BDO LLP, who were appointed as auditors during 2014, have confirmed their willingness to continue in office as auditor in accordance with Section 489 of the Companies Act 2006. The Group is satisfied that BDO LLP are independent and there are adequate safeguards in place to safeguard their objectivity. A resolution to re-appoint BDO as the Company’s auditor will be proposed at the AGM on 22 May 2024. Maintaining good relationships with suppliers is also important to us. In 2023 we paid 74% of all our invoices within 30 days and won a Fast Payer Award. ■ Community engagement and charitable donations As set out in the Audit Committee report on page 93, the Audit Committee intends to decide on a policy on the frequency of tendering and the length of tenure of external auditors to ensure that the independence of the external auditor is, and is seen to be, safeguarded, Corporate Social Responsibility is important to the Group, in light of the revised QCA Corporate Governance Code and we try to engage with the communities in which we published in November 2023. operate in a meaningful and impactful manner. ■ Directors’ statement as to disclosure of information More details on our community engagement and charitable donations can be found in the Environmental, Social and Governance section of the Strategic Report on pages 72 to 76. ■ Political donations to the auditor All of the Directors who were members of the Board at the time of approving the Directors’ Report have taken all the steps they might reasonably be expected to have taken to make themselves aware of any relevant audit information and to establish that the auditor is The Group has made no political donations during the aware of that information. To the best of each Director’s year (2022: £nil). ■ Annual General Meeting knowledge and belief, there is no relevant audit information of which the Company’s auditor is unaware. The Annual General Meeting (AGM) of the Company On behalf of the Board will be held on 22 May 2024. The notice of meeting is included with this document and contains further Lucy Tilley information on the ordinary business to be proposed at Chief Financial Officer the meeting. 19 March 2024 84 85 Governance | Corporate governance ■ Introduction The Board is committed to achieving high standards of corporate governance, integrity and business ethics. Under the AIM Rules the Group is required to apply a recognised corporate governance code. The Board adopted the Quoted Companies Alliance (“QCA”) corporate governance code, which requires the Group to apply 10 principles focused on the pursuit of medium to long-term value for shareholders and also to publish certain related disclosures. All the Non-Executive Directors bring a mix of skills and experience at a senior level of business operations and strategy. Together they bring the skills and experience which support our strategic direction and our culture. All Directors have access to the Company Secretary, Fabien Holler, who is responsible for ensuring that Board procedures and applicable rules and regulations are observed. The Board meets at least seven times each year, and additional meetings are held as required. The Board is the principal forum for directing the As a Board we believe that good governance is crucial to business of the Group. the delivery of our strategic objectives. We aim always to ■ Operation of the Board remain abreast of best practice and of developments in the regulatory framework within which we operate, and in the way in which we seek to serve the needs of our customers. Further details on MAB’s corporate governance are contained in the section entitled ‘Corporate Governance’ on MAB’s investor website (www.mortgageadvicebureau. com/investor-relations). The Board is responsible to shareholders for the proper management of the Group, sets its long-term objectives and commercial strategy, and approves its business plans, operating and capital budgets, and the interim and annual accounts. The Board considers and approves the Group’s dividend policy, changes in the Group’s capital and financing structure, and significant transactions ■ Board composition and independence including acquisitions and disposals. The Board is The composition of the Board changed during 2023, with the resignation of independent Non-Executive Director Stephen Smith, who stood down at the 2023 AGM in May. Prior to this the Board of Directors comprised three Executive Directors, four independent Non-Executive Directors and one non-independent Non-Executive Director. There remain three independent Non-Executive Directors. The Directors’ biographies on page 80 demonstrate a range of experience which is key to the success of the Group. Three Non-Executive Directors are considered by the Board to be independent of management and free from any relationship which might materially interfere with the exercise of independent judgement. As such, they provide a strong independent element to the Board. The Board does not consider the independent Non-Executive Directors’ shareholdings to impinge responsible for ensuring the maintenance of a sound system of internal control and risk management, for Board appointments and succession planning, the approval of the Remuneration Policy and remuneration arrangements for the Directors and other senior managers, and for setting the terms of reference for Board Committees. Other matters are delegated to management, supported by policies for reporting to the Board. The Company maintains appropriate insurance cover in respect of legal action against the Company’s Directors, but no cover exists in the event that a director is found to have acted fraudulently or dishonestly. The agenda and papers for Board meetings are distributed by the Company Secretary on a timely basis, usually five days before each Board meeting. on their independence. Nathan Imlach is the Senior The roles of Chair and Chief Executive Officer are Independent Director. distinct with clear division of responsibilities. The Chair’s role is to ensure good corporate governance, 86 87 and her responsibilities include leading the Board, ■ Induction, training and performance evaluation ensuring the effectiveness of the Board in all aspects of its role, setting the Board’s agenda, ensuring that all directors participate fully in the activities and decision making of the Board, and ensuring communication with shareholders. As part of the Senior Managers and Certification Regime (SM&CR) which applies to the Company as an FCA-regulated firm, the Chief Executive Officer, Deputy Chief Executive Officer and Chief Financial Officer each have a specific role clearly set out in a statement of responsibilities. Together, they are responsible for overseeing the development and the delivery of the strategy approved by the Board, and the day-to-day operational and commercial management of the Group by the senior executive team. The Board is committed to developing the corporate governance and management structures of the Group to ensure they continue to meet the ongoing needs of the business. On appointment, Board members, in particular the Chair and the Non-Executive Directors, disclose their commitments and agree to allocate such time as is necessary to the Company in order to discharge their duties effectively. The Board has considered the time commitments of each director and is comfortable that each has sufficient available capacity to carry out the required duties for the Company. Any conflicts of interest are dealt with in accordance with the Board’s All the Directors keep abreast of key issues and developments pertaining to industry, financial, regulatory and governance matters. The Directors regularly attend briefing seminars, conferences and/or industry forums, read trade publications and undertake training courses or online learning to keep up-to-date on relevant matters. Where appropriate, the Board receives presentations from industry and professional experts. The Chief Executive Officer and Deputy Chief Executive Officer are regular participants at a number of industry specific conferences, and the Chief Financial Officer regularly participates in seminars on accounting, other financial and governance matters. In addition, the Non-Executive Directors hold other directorships and continually add to their skillset through those connections. Regular and open communication ensures that relevant information is disseminated effectively to the Board as a whole. Any Director, on appointment and throughout their service, is entitled to receive any training they consider necessary to fulfil their responsibilities effectively. As required by SM&CR, the non-executive Chair regularly assesses the continuing fitness and propriety of each Board member and their individual contributions to ensure amongst other things that: conflict of interest procedures. • their contribution is relevant and effective; All Executive and Non-Executive Directors retire and • they are committed; and put themselves forward for re-election annually at each • where relevant, they have maintained their Annual General Meeting. The Board aims to lead by example and do what is in the best interests of the Company. We have a strong set of values as part of our MABology behaviours framework, that we communicate as fundamental to achieving good customer outcomes and promoting business success, and this is core to our culture. The Board is committed to ensuring MAB has a healthy corporate culture and conducts an annual staff survey as part of this. independence. Board evaluation In 2023 a Board evaluation was undertaken. This assessed the progress made since the 2020 assessment and areas for further improvement in the operation and performance of the Board, and of the Board Committees. A summary of the findings of the review of the Board’s, Committee’s and Chair’s performance and overall effectiveness is detailed below. The Terms of Reference for each of the committees of the Board were updated to reflect changes required by developments in governance standards and practices. The Schedule of Matters Reserved for the Board was reviewed and approved with minor changes. 87 86 Governance | Corporate governance (continued) The effectiveness evaluation process focused on the Induction programme following areas: The Board has an induction programme so that new • composition, mix of skills and experience, diversity directors receive a formal induction on their appointment and inclusion; • procedures and operation of the Board and Committees; covering the activities of the Group, its key business, governing law and corporate governance codes, strategy, financial and regulatory risks, the terms of reference of the Board and its Committees, and the latest financial • culture and tone from the top; information. The induction programme includes meetings • stewardship and governance; and • strategy. with the Executive Directors, Company Secretary, members of the Executive board and other members of management, meetings with external advisers including The evaluation confirmed that the Board understands our Nominated Adviser and auditors as appropriate, and its strengths and weaknesses, and can respond access to Board and Committee papers and minutes. appropriately according to changing market and business needs. The Board concluded that the composition of the Board and its Committees are appropriate, procedures in place are effective, responsibilities are divided clearly, and the Directors have the skills and experience, independence and knowledge to allow the Board and its Committees to effectively discharge their duties. The Senior Independent Director conducted a separate review with each of the Directors to assess the performance of the Chair and compiled a detailed report on these areas, shared with the Chair, and which concluded that the Chair was effective, and had the requisite skills, experience and knowledge required. ■ Meetings and attendance ■ Board committees To assist in discharging its duties, the Board has delegated authority to four specialist committees: an Audit Committee, a Group Risk Committee, a Remuneration Committee, and a Nominations Committee. The terms of reference of each committee are approved by the Board and reviewed annually. The Chair of each committee provides a report to the Board of any matters that are considered significant and that lie outside the scope of the committee’s delegated responsibility and authority. All directors are expected to attend all Board meetings and meetings of Committees of which they are members. In 2023, the number of Board meetings held was higher than scheduled as the Group faced the challenges caused by the difficult trading conditions. Directors’ attendance at meetings during the year was as follows: Meetings attended (eligible to attend) Katherine Innes Ker Peter Brodnicki Ben Thompson Lucy Tilley Nathan Imlach Mike Jones Stephen Smith1 David Preece2 Board Audit Remuneration Nomination GRC 13 (13) 12 (13) 13 (13) 13 (13) 12 (13) 13 (13) 5 (7) 13 (13) 6 (6) 6 (6) – – – 6 (6) 6 (6) 2 (3) – – – – 6 (6) 6 (6) 3 (5) – 2 (2) 0 (2) – – 2 (2) 2 (2) 1 (1) 2 (2) 7 (7) 5 (7) 7 (7) 7 (7) 7 (7) 7 (7) 2 (3) 7 (7) Notes: 1. Stephen Smith stood down as a director at the 2023 AGM on 24 May 2023 and his attendance is shown up to that date. 2. David Preece stood down as a member of the Audit and Remuneration Committees following the Company’s 2020 AGM. He is invited to attend these Committees but in the event of a vote, does not participate. 88 89 ■ Audit Committee Activities during the year The Audit Committee comprises Nathan Imlach (Chair), The Audit Committee met five times during the year, Katherine Innes Ker and Mike Jones. Nathan Imlach where it considered the significant financial and audit is a Chartered Accountant and the Board is satisfied issues, the judgements made in connection with the that all members of the committee have recent and financial statements and reviewed the narrative within relevant financial experience. We have considered the Annual Report and the Interim Report. the Financial Reporting Council’s guidance that the Committee should have competence relevant to the financial services sector and have concluded that the Committee, as a whole, satisfies this requirement. The Board believes the Committee is independent, with all members being independent Non-Executive Directors. During the year the Audit Committee continued to monitor the operation of the internal audit function, which has been outsourced to RSM Risk Assurance Services LLP since March 2021. In light of an ever-changing regulatory environment, the committee resolved that outsourcing gives the Group access to greater skills externally, while The responsibilities of the Audit Committee are having the ability to expand or reduce our internal audit outlined in the Committee’s Terms of Reference, with activities to meet the ongoing demands of the business. its key responsibilities being: The Audit Committee also considered the appointment • to review the reporting of financial and other of, and fees payable to, the external auditor and information to the shareholders of the Company and discussed with them the scope of the interim review to monitor the integrity of the financial statements; and annual audit. • to review the Group’s accounting procedures and provide oversight of significant judgement areas; • to review the effectiveness of the Group’s internal financial systems and controls; • to review the effectiveness of the external audit process and the independence and objectivity of the external auditor; • to review audit fees and proposals for future years; and • to report to the Board how it has discharged its responsibilities. Specific audit issues the committee discussed included: • Assessment of whether each entity and the Group as a whole are going concerns, including whether forecast performance would result in an adequate level of headroom over the Group’s available cash facilities; • Fraud risk in recognition of revenues; • Review of whether any impairment needed to be recognised in respect of the intangible assets of the Group, including the assumptions underlying the calculation of the value in use of the cash generating Committee meetings are normally attended by units tested for impairment; representatives of the external and internal auditors. The Chief Executive Officer, Chief Financial Officer and Deputy Chief Executive Officer are invited to attend at the Committee’s request. The presence of other senior executives from the Group may be requested. The Committee meets the Chief Financial Officer not less than four times a year and with representatives of the external auditors, without management present, at least once a year. • Review of the valuation of put and call options associated with recent business combinations; • Review of provisions recognised in respect of commission on life policies that may be clawed back if the policy lapses within four years of being taken out and management’s key assumptions and estimates applied in reaching these recognition and measurement decisions; • Review and approval of the internal audit plan for the There is a cross membership with the Group Risk year; and Committee, to help ensure that agendas are aligned, and key information is shared appropriately across the Board Committees. • Monitoring the progress of previous issues raised by the internal and external auditors, to ensure a satisfactory completion and assurance level. 88 89 Governance | Corporate governance (continued) Significant judgements and estimates Significant critical accounting judgements and key estimates in connection with the Group’s financial statements for the year ended 31 December 2023 and other matters considered by the committee included: Goodwill and intangible assets As set out in Note 14 to the Group financial The committee considered the impairment reviews statements, at 31 December 2023, the Group had carried out by management. These reviews focused goodwill of £53.9m (2022: £53.9m). Under IAS 36, on the assumptions underlying the calculation of the these balances are assessed annually for impairment. value in use of the cash generating units tested for Impairment testing requires the application of impairment. The underlying cash flow assumptions judgement, largely around the assumptions that are were challenged by management and the built into the calculation of the value in use of the committee, having regard to historical performance. cash generating unit being tested for impairment. This was supported by the challenge to the Group’s budgets earlier in the year. The main assumptions reviewed by the committee were the achievability of long-term business plans and the discount rate used as outlined in Note 14. These assumptions were subject to sensitivity analysis by management which was also reviewed by the committee. The committee concluded that the carrying values of goodwill and intangibles included in the financial statements are appropriate. Valuation of put and call options In the year ended 31 December 2022, the Fluent For investments in subsidiaries with put and call and Auxilium business combinations had put and options attached to them, the committee reviewed call options associated with the acquisition of the the most recent valuation report and considered minority interest at a future date. whether the impact had been correctly recognised. The valuation of the put and call options gives rise The committee concluded that the present values to key inherent risks with respect to management of the put and call options included in the financial judgements and estimates, such as discount rates statements are appropriate and the impact of and projected financial results. changes in valuation have been correctly recognised. 90 91 Clawback provision As detailed in Note 23, the Group recognises The committee considered and challenged the a provision for the estimated cost of repaying nature of the provision, the potential outcomes and commission income received upfront on protection the prior history of cancellations to assess whether policies that may lapse in the four years following the provision recorded is prudent and appropriate. issue. This provision is an estimate and the actual amount and timing of future cash flows are dependent on future events. The committee discussed with management the key elements of judgement to assure themselves as to the adequacy and appropriateness of the Management reviews this provision at each reporting provision. Following this discussion, the committee date to ensure it is measured at the current best was satisfied that the judgements exercised were estimate of the expenditure required to refund the appropriate and that the provision was fairly stated liabilities. Any difference between the amounts in the financial statements. previously recognised and the current estimate is recognised immediately in the statement of comprehensive income. Use of alternative performance measures The Group has identified certain measures that The committee considered the measures and felt it believes will assist in the understanding of the that these alternative performance measures are performance of the business. These measures are those considered by management to be important not defined under IFRS but can be used, subject comparables and key measures used within the to appropriate disclosure in the Annual Report and business for assessing performance. They are not Accounts. These alternative performance measures substitute for, or superior to, any IFRS measures. are net revenue, administrative expenses ratio, The committee was also satisfied that the disclosure adjusted operating profit, adjusted profit before tax, of the alternative performance measures was adjusted EBITDA, adjusted EBITDA margin, adjusted appropriate. fully diluted EPS adjusted earnings per share, headline cash conversion, adjusted cash conversion, and net debt, as set out on pages 190 to 193. 90 91 Governance | Corporate governance (continued) Other matters In addition to the above matters, the committee The committee considered whether the forecast assessed whether each entity and the Group as a financial performance would result in an adequate whole are going concerns. The committee also reconsidered a number of other judgements made by management including IFRS 2 ‘Share-based payment’, IFRS 9 ‘Financial instruments’ and IFRS 16 ‘Leases’. level of headroom over the Group’s available cash facilities. The committee also discussed the key assumptions underpinning the Group’s forecast financial performance with management regularly during the year and considered a range of sensitivities to those forecasts, together with the feasibility and effectiveness of mitigating factors. The committee concluded there are no material uncertainties that cast doubt about the Group’s ability to continue as a going concern and that the adoption of the going concern basis is appropriate. The committee considered management’s approach, proposed disclosures, assessment of impact on the financials and the judgements made in relation to impairment allowances and the factors considered around expected credit losses on financial instruments. Internal audit The internal audit function is responsible for providing assurance over the design and operational effectiveness of the internal controls related to the Group’s key activities. Our internal audit activity is based around a strategic, risk-based approach to cyclical internal audit with consideration of the Group’s key strategic priorities and risks. This approach is designed to provide assurance over key areas including governance, risk management and control. During the year the internal audit function engaged in a number of activities, including: • Developing our internal audit plan based on an analysis of the Group’s corporate objectives, risk profile and assurance framework, as well as other factors such as emerging issues in our sector; • Delivering audits providing assurance over the Group’s Financial Crime control framework, preparedness for the new Consumer Duty rules, how material IT change programmes are being managed, migration of the MIDAS Pro platform to the cloud, cyber security, complaints handling and oversight of Appointed Representatives; and • The internal audit function has developed a forward-looking plan to provide the Group with assurance over key risks facing the business and its sector as a whole in 2024 and 2025, including training and competence and outsourcing. The plan is supplemented by additional reviews on core business areas including information technology general controls as well as work due under a cyclical approach. As the third line of defence, the internal audit function (together with the external auditors in connection with their audit of the financial statements) builds risk awareness within the organisation by challenging the first and second lines of defence to continue improving the internal control framework. External auditor An analysis of fees payable to the external audit firm in respect of audit and non-audit services during the year is set out in note 6 to the financial statements. The Company is satisfied the external auditor remains independent in the discharge of their audit responsibilities. 92 93 The Committee also reviews the external auditor’s The Committee met six times during the year, with key management letter and detailed presentations are items considered including: made to the Committee by the Company’s auditor at least once a year. The QCA published an updated version of its Corporate Governance Code (QCA Code 2023) in November 2023. On auditor tendering, while there are no specific requirements for smaller quoted companies, larger listed companies are required to put their audit out to tender every ten years with an external auditor’s tenure being limited to twenty years. In this light, • The Group’s remuneration policy and its operation; • Annual review of the Executive Directors’ and Senior Managers’ base salaries and bonus arrangements; • The impact of the continuing cost of living crisis and support for employees, with a focus on the lower paid, maintaining for those employees a minimum excess of £1,000 per annum over the National Minimum Wage and the National Living Wage; the Committee intends to decide on a policy on the • Benchmarking of Executive directors’ base salaries frequency of tendering and the length of tenure of and total potential compensation by an external external auditors to ensure that the independence of remuneration consultant on behalf of the Committee; the external auditor is, and is seen to be, safeguarded. ■ Remuneration Committee • Awards to be granted under the share option and share incentives schemes operated by the Company; and As at 31 December 2023, the Remuneration Committee • Vesting of executive share options. comprised Katherine Innes Ker (Chair), Nathan Imlach, and Mike Jones. The Committee continues to review the Group’s long-term incentive plans to ensure it can continue to The Committee meets not less than twice a year, attract, retain and incentivise appropriately qualified and more frequently as required. It is responsible for staff to achieve its goals. determining and reviewing the Group’s policy on executive remuneration and other benefits, ensuring that this is aligned to the delivery of the Group’s strategic objectives and terms of employment, Further information about the Committee and the Group’s remuneration policy is as set out on pages 98 to 104 in the Directors’ Remuneration Report. including performance-related bonuses and share ■ Nominations Committee options. The Committee administers the operation of the share option and share incentive schemes established by the Company. The Nominations Committee comprises Katherine Innes Ker (Chair), Nathan Imlach, David Preece, Mike Jones and Peter Brodnicki. The members of the Remuneration Committee have no personal interest in the outcome of The Committee is responsible for: their decisions and seek to serve the interests of • reviewing the size, structure and composition shareholders to ensure the continuing success of (including the skills, knowledge, experience and the Company. All members of the Remuneration diversity) of the Board and to make recommendations Committee are independent Non-Executive Directors. to the Board with regard to any changes; The remuneration of the Non-Executive Directors is determined by the Executive Directors of the Board. No Director is permitted to participate in decisions concerning their own remuneration. • succession planning for both Executive Directors and Non-Executive Board roles, and other Senior Executives in the Group; and • identifying and recommending to the Board for approval candidates to fill Board and senior management vacancies where required. 92 93 Governance | Corporate governance (continued) The Committee works in close consultation with the Independent Non-Executive Director Executive Directors, with its main priorities being the Board structure and composition, ensuring that we have the right skills and experience to fulfil our responsibilities, and management development and succession planning. The Nominations Committee met twice during the year, to consider succession planning for the Executive Directors, to note appointments to and succession A search consultant was appointed by the Nominations Committee to conduct a search for an additional independent Non-Executive Director. The intention is to identify and appoint a suitable candidate as soon as is reasonably possible and ideally by the time of the 2024 AGM so that the balance of the Board between executive and Non-Executive directors is maintained. The new Non- Executive would chair the Remuneration Committee. planning for the executive team, and to consider ■ Group Risk Committee, and Risk and Compliance the development of succession planning for the Committee Non Executive Directors. The criteria for assessing the level of diversity at the Board and in the senior management team were broadened to include socio-economic background, nationality, educational attainment, gender and age, reflecting key principles within the QCA Code. The Group Risk Committee (GRC) comprises Mike Jones (Chair), Katherine Innes Ker, Nathan Imlach, David Preece, Peter Brodnicki, Ben Thompson and Lucy Tilley. In 2022 the Group appointed Paul Gill as Chief Risk Officer (CRO) who attends GRC. The GRC met seven times in 2023 to review and The current Board has an equal number of Executive consider the following: Directors and Independent Non Executive Directors, including the Chair. Board changes Chief Financial Officer • All major Group-related existing and potential risks, including a review of the Group Risk Register, Risk Appetite and Management Framework, and any Risk and Compliance Committee escalations; Following the resignation of the Chief Financial Officer • The preparation for and implementation of (CFO) in January 2024, a search for a successor was Consumer Duty regulation; initiated, and a search consultant with a specialism in • Regulatory consultation papers and impending Financial Services was appointed. The CFO is currently legislation changes; serving her six-month notice period and a further announcement will be made in due course. Chair succession After nearly ten years as Chair, Katherine Innes Ker will retire at the conclusion of the AGM on 22 May 2024. • Senior Managers and Certification Regime (SM&CR); • General Data Protection Regulation (GDPR); • Cyber Security; • Operational Resilience; Katherine joined the Board in October 2014 and led it • M&A activity through the successful IPO in November of that year. • Environmental, Social and Governance (ESG), Katherine will be succeeded by Mike Jones, who joined vulnerable clients, diversity, and any other relevant the Board in March 2021. The Nominations Committee, regulatory themes; led by Nathan Imlach as Senior Independent Director, performed an assessment of Mike Jones’ suitability as Chair. An external consultant was commissioned to conduct the assessment, and as a result, the Nominations Committee was able to recommend to the Board that Mike Jones be appointed as Chair Elect to succeed • The effectiveness of the Group’s procedures on whistleblowing, anti-bribery and corruption, and anti money-laundering; • Restructuring undertaken following the Fluent acquisition; and Katherine as Chair at the conclusion of the 2024 AGM. • Other major risk considerations and relevant upcoming legislation. 94 95 The Risk and Compliance Committee (RCC) is chaired MAB. This is enabled by an automated solution that will by the Chief Risk Officer. The RCC is a management support more proactive identification of key controls, committee and meets monthly and reports into the control gaps and enable Control Owners to annual GRC. The remit of the RCC include reviewing the attest to the design and operational effectiveness of adequacy and effectiveness of the Company’s internal controls across MAB. controls, compliance and risk management systems, ensuring that the Company is fulfilling its regulatory responsibilities. As and when required, the RCC escalates major risk events and seeks guidance from the GRC. During 2023, two new management committees were established to focus on system resilience and the ability to recover from any incidents, and on product and pricing activity across the business. MAB operate a “three lines of defence” model to support our risk management framework summarised as follows: • First line: senior management and risk owners accountable for identifying, managing, assessing and treating risks sits within first line. These responsibilities include implementing and operating systems and controls to manage risk, identifying and reporting risks, reducing risk and implementing • The Resilience and Recovery Committee (RRC) is revisions where risks exceed risk appetite; and chaired by the Head of Operational Risk and meets regularly assessing of risks within their remit. bi-monthly, reporting into the RCC. The remit of the RRC is to review the adequacy and effectiveness of the Company’s resilience, internal systems and controls and ensuring that it is fulfilling the relevant regulatory responsibilities in relation to resilience. • Second line: the second line consists of the following teams: Operational Risk, Compliance Policy & Governance, Quality & Risk Assurance, Supervision and Data Protection & Information Security who all provide a level of independence from the first line. • The Product and Pricing Committee (PPC) is chaired They are responsible for providing oversight and by the Chief Transformation Officer. The PPC meets challenge of the first line’s day-to-day management, monthly and reports into RCC on a quarterly basis monitoring and reporting of risks to both senior and enables MAB to meet our regulatory obligations management and in RCC. under the Consumer Duty in relation to product and pricing activity. Risk Management Framework • Third line: our external audit partners and Internal Audit Manager are responsible for providing independent assurance to both senior management The Group’s risk framework is designed to ensure and the Audit Committee as to the effectiveness that risks are identified, managed and reported of the Group’s governance, risk management and effectively. Since the appointment of the Chief Risk internal controls. Internal Audit is managed and Officer (CRO) in 2022 there has been continued delivered by the Internal Audit Manager who manage investment from MAB to further enhance the Group’s the relationship with MAB’s co-source internal audit risk management framework. This includes the supplier. adoption and development of TriLine Governance, Risk and Compliance solution (TGRC), which offers an effective portal for the tracking of risk-related activity, the appointment of a Risk Data Analyst and the newly developed role of the Risk and Resilience Manager Output from the three lines of defence model is reported into the Risk & Compliance Committee on a monthly basis. Statement of Risk Appetite (SORA) reporting into the Head of Operational Risk. The Statement of Risk Appetite outlines the amount Following the re-design of the risk taxonomy in September 2022, we have developed and are implementing an enhanced control framework across and type of risk that the Group is prepared to accept in pursuit of its strategic objectives. Factors such as market, people, technology, regulation and policies help shape the Group’s risk appetite. At least annually 94 95 Governance | Corporate governance (continued) the Statement of Risk Appetite is formally reviewed and Under the new rules, MAB is required to ensure that approved by the Risk & Compliance Committee, Group customers receive products that provide “fair value” Risk Committee and the Board. and to challenge product providers where required. The Group retains a balanced overall appetite for Good customer outcomes have always been central risk, ensuring that its internal controls support to MAB’s strategy. MAB created workstreams based business growth expectations and mitigate risk to on the four consumer outcomes, with an additional appropriate levels. Risk assessment one focused on customer vulnerability in order to ensure that area had appropriate focus throughout the project work. All risk owners within MAB are required to identify and assess their departmental risks on a quarterly basis. The MAB team made good progress against the TriLine has been configured to align with MAB’s risk planned activities, which includes reviewing our taxonomy and supports risk owners with the following: processes, policies, communications, and customer • Risk identification journey, to ensure we achieve good customer outcomes through our interactions and engagement • Assessment of risks and the potential consequences with customers and that where changes were required, • Management of significant risks • Reporting and monitoring of risks these were implemented across the business ahead of the 31 July 2023 implementation date. • Ownership of the risk management framework To drive these changes, we appointed a Board Champion and also an Executive Champion for The Group’s risk assessment process includes the Consumer Duty, the latter is the ultimate sponsor, assessment of the inherent and residual likelihood and promoter, and supporter of the new regulation. This impact of a risk materialising. Reporting is presented was a significant project for MAB, but one we believe to the Risk and Compliance Committee following furthered strengthen the Group and also the housing quarterly reviews with relevant information being and mortgage markets in which we trade. presented to GRC and the Board. Consumer Duty Since implementation, GRC has received regular updates from the CRO in relation to the on-going The Financial Conduct Authority published its final Consumer Duty activity within the business, including rules on the Consumer Duty in July 2022, with rules agreeing the plan in place with regard to the taking effect on 31 July 2023. The MAB Board approved submission and approval of the Annual Consumer Duty the Group’s Consumer Duty Implementation Plan in Board Report. 2022 which set out the intended plan and approach to enable MAB to meet the requirements of the duty by the deadline as established by the FCA. Progress against the plan was overseen by GRC. The enhanced customer outcomes focus principally encompasses the following four areas: MAB has been actively engaged throughout in the work of the Association of Mortgage Intermediaries (AMI) trade body on Consumer Duty and its requirements. ■ Communications with shareholders The Board is committed to maintaining • products and services; communication with the Company’s shareholders. • price and value; • consumer understanding; and • consumer support. 96 The principal methods of communication with private investors remain the Annual Report and Financial Statements, the Interim Report, the AGM and the 97 Group’s website (www.mortgageadvicebureau.com/ The Directors believe that the Group has internal investor-relations). All Directors will normally attend each AGM and shareholders are given the opportunity to ask questions. In addition, the Chief Executive Officer, Deputy Chief Executive Officer and Chief Financial Officer welcome dialogue with individual institutional shareholders to understand their views and feed these back to the Board. General presentations are also given to analysts and investors covering the annual and interim results, and prompt feedback is received by the Board through the Company’s corporate brokers. The Board aims to be open with shareholders and available to them, subject to compliance with relevant securities laws. The Chair and other Non-Executive Directors make themselves available for meetings as appropriate. ■ Internal control and risk management control procedures in place appropriate to the size and nature of the business. In accordance with the guidance of the Turnbull Committee on internal control, an ongoing process is in operation for the identification, evaluation and management of significant risks faced by the Group. The Board routinely reviews the effectiveness of the system of internal control and risk management to ensure controls react to changes in the nature of the Group’s operations. There are two Board committees that review various risks: the Audit Committee and the Group Risk Committee. Further details of these committees are described on pages 89 and 94. The Group maintains appropriate insurance cover and reviews the adequacy of the cover regularly, in conjunction with the Group’s insurance brokers. The Board is ultimately responsible for the Group’s On behalf of the Board system of internal control and for reviewing its effectiveness. Such systems are designed to manage Lucy Tilley rather than eliminate risks and can only provide reasonable not absolute assurance against material Chief Financial Officer misstatement or loss. 19 March 2024 96 97 Governance | Directors’ remuneration report ■ Remuneration committee The committee is responsible for the Group’s policy on executive remuneration, including performance related annual bonus and share option awards, other benefits, and terms of employment. The Committee also administers the operation of the share option schemes and share incentive schemes established by the company, including the Long Term Incentive Plan (LTIP) and Appointed Representative option scheme. The Committee operates under terms of reference approved by the Board. The annual bonus performance targets for 2023 were based 90% on adjusted profit before tax, and 10% on personal business objectives (PBOs), including ESG measures related to good customer outcomes. These are detailed below. In 2024 the proportion of the annual bonus linked to PBOs will increase to 20%, with the remaining 80% based on adjusted profit before tax. The Remuneration Committee will consider including further meaningful ESG-related metrics within the incentive arrangements including the LTIP performance criteria from 2025 onwards. The members of the Committee as at 31 December ■ Remuneration activity in response to the continuing 2023 were Katherine Innes Ker (Chair), Nathan Imlach, cost-of-living crisis and Mike Jones. ■ Remuneration policy The Group’s remuneration policy sets basic salaries at a level which is competitive with comparable AIM-listed businesses, with a substantial proportion of the overall package of compensation linked to performance In 2023 the average pay rise awarded to employees across MAB was 6%. In response to the continuing cost of living crisis and the sustained high rates of inflation, salary raises were weighted towards the lowest paid employees and the premium over the National Minimum Wage and the National Living Wage was maintained. through participation in short and long term incentive ■ Salaries and fees schemes. Executive Directors receive other customary benefits such as pension contributions, death in service insurance, sick pay, and private medical insurance. The objective is to attract, retain and appropriately incentivise high performing executives capable of achieving the Group’s objectives and thereby enhance shareholder value. During the year, the Committee reviewed the operation of the remuneration policy, assessing the appropriateness and effectiveness of the performance measures and the balance between the use of short and long term performance measures, being the annual bonus and the LTIP. Salaries for Executive Directors are reviewed annually, taking into account increases in base pay for employees, and the effective date for changes in Directors’ remuneration is 1 January. Fees for the Non-Executive Directors are determined by the Executive Directors, having regard to the fees paid to Non-Executive Directors in other AIM-listed companies of a similar size and complexity, the time commitment and the responsibilities of the role. Non-Executive Directors do not receive bonuses and do not participate in the share incentive schemes. No options are held by the Non-Executive Directors. No Director is permitted to participate in decisions about The Committee agreed that from 2023 onwards the his or her own remuneration. Executive Directors’ remuneration structure would be rebalanced in favour of longer term objectives. The maximum potential payout under the annual bonus was reduced from 200% to 150% of base salary and the maximum annual award under the LTIP was increased from 100% to 150% of base salary. This structure better aligns the remuneration with best practice and with shareholder interests, and will be maintained in 2024. In Q4 2023 the Committee commissioned an independent review of the current levels of remuneration and benchmarked these against other companies of similar size and complexity. This was the first external benchmarking study that had been commissioned by the Company since IPO. 98 99 This review was commenced prior to Lucy Tilley’s These new performance targets reflect the importance resignation but this did further highlight the to the Group of a robust governance framework importance of ensuring that the levels of remuneration that puts the customer first and the work that has are appropriately set within the Company to ensure been carried out towards the implementation of the management is fully motivated and retained, especially Consumer Duty, as well as our sustainability goals. They given the outstanding growth track record of the were recommended by and measured with input from Company and in a highly competitive talent market. the Group Risk Committee. Following the review of the current levels of The performance against the PBOs was assessed remuneration the following changes to the base and the payout on those elements was 12.5% of salaries of the Executive Directors were proposed and base salary (out of a maximum of 15% of base salary) implemented with effect from 1 January 2024: for both the CEO, Peter Brodnicki, and the Deputy • Peter Brodnicki, CEO - £450,000, an increase of 9.7%; and • Ben Thompson, Deputy CEO - £360,000 an increase of 32.1%. Following the review of roles and responsibilities it was determined that setting a salary for Ben Thompson that equated to 80% of Peter Brodnicki’s CEO, Ben Thompson. No bonus was paid to the CFO, Lucy Tilley in consequence of her resignation, submitted in January 2024. The adjusted profit before tax element of the annual bonus was based on certain adjusted Profit before Tax targets. These were missed and no bonus was paid for this element. was appropriate. It should be noted that although 2023 the benchmarking data was used to inform the Committee’s deliberations it only formed one part of a much broader consideration when determining the appropriate salary levels. Percentage of annual bonus Percentage of Base Salary at Maximum Bonus Bonus paid as percentage of Base Salary Annual base fees for the Non-Executive Directors were increased from 1 January 2024 by 6% in line with the average salary increase across MAB. ■ Annual bonus Adjusted PBT PBOs Total 90% 10% 100% 135% 15% 150% 0% 12.5% 12.5% More details are set out in the single total figure of In 2023, the Remuneration Committee introduced remuneration table below. Personal Business Objectives (“PBOs”) to the Executive Directors’ annual bonus structure, in line with best practice. The annual bonus for 2023 was based on adjusted PBT for 90% of the bonus and on the achievement of five PBOs for the remaining 10%. Annual Bonus 2024 The balance between the financial objectives and the Personal Business Objectives was changed with more emphasis placed on the achievement of the PBOs, with a weighting of 80% and 20% respectively. The financial Out of the five PBOs, three were ESG criteria linked to objectives are again based on adjusted Profit before good customer outcomes, the implementation of the Tax and the PBOs include objectives derived from ESG Consumer Duty regulation, and the Group’s overall ESG metrics and reflect again the importance of continuing score improvement against the B-Corp framework. progress and improvement in key areas relating to Two PBOs were based on the achievement of essential good customer outcomes and sustainability measures. elements of the Group’s technology roadmap. 98 99 Governance | Directors’ remuneration report (continued) ■ Long Term Incentive Plan The Group has adopted the Mortgage Advice Bureau Executive Share Option plan as the Long Term Incentive Plan (LTIP) to incentivise certain of its senior employees and directors. On 31 May 2023, 296,375 options over ordinary shares of 0.1 pence each in the company were granted to the Executive Directors and Senior Management of MAB The Non-Executive Directors do not have service contracts. A Letter of Appointment provides for an initial period of 36 months and continues until terminated by either party by giving three months’ prior written notice at any time after the initial 36-month period. All Directors are subject to annual re-election at the Annual General Meeting. ■ Employee incentivisation and reward under the Mortgage Advice Bureau Executive Share MAB is committed to the provision of an inclusive Option Plan. The exercise of the options is subject to working environment and ensuring the fair reward the achievement of a performance condition based of all employees, regardless of seniority across the on earnings per share (EPS) criteria. Subject to the business. In addition to the Executive Directors and achievement of the performance condition, these senior management, the Committee considers wider options will vest on 2 April 2026. The exercise price for workforce remuneration and reward. these options is 0.1 pence, being the nominal cost of ■ Share Incentive Plan ordinary shares. The 2020 LTIP award vested in April 2023. Half of the award was subject to an EPS performance condition measured over three financial years and the other half subject to a TSR performance condition measured over three years from grant. Both the TSR and EPS performance conditions were fully achieved, and the award therefore vested in full. ■ Service contracts The Mortgage Advice Bureau (Holdings) plc Share Incentive Plan (SIP) enables employees to buy shares in the Company at an effective discount to the London Stock Exchange price by having an amount deducted from pre-tax salary each month. In addition, the Company grants participating employees matching shares. The Share Incentive Plan is continuing to be popular among our employees despite the cost-of-living crisis, It is the Group’s policy for all Executive Directors to have with MAB employee participation standing at 47% contracts of employment that contain a termination (2022: 48%). The average monthly contribution in 2023 notice period not exceeding twelve months. The was £107 (2022: £111). appointment of the Chief Executive Officer, Peter Brodnicki, continues until terminated by either party giving not less than twelve months’ notice to the other party. The appointments of the Deputy Chief Executive Officer, Ben Thompson, continues until terminated by either party giving not less than six months’ notice to the other party. 100 101 ■ Single total figure of remuneration for each director The Directors’ remuneration payable in respect of the year ended 31 December 2023 was as follows: Basic salary and fees Annual bonus Pension contributions1 Benefits2 Long-term incentive plan3 Total 2023 £000s 2022 £000s 2023 £000s 2022 2022 £000s £000s £000s 2023 2023 2022 £000s £000s 2023 £000s 2022 £000s 2023 £000s 2022 £000s Executives Peter Brodnicki Ben Thompson Lucy Tilley Sub-Total Non-Executives Katherine Innes Ker Nathan Imlach Stephen Smith4 David Preece5 Mike Jones Sub-Total Total 410 272 268 950 100 49 17 42 49 257 1,207 373 248 239 860 89 44 42 68 42 286 1,145 51 34 – 85 – – – – – – 282 282 242 806 – – – – – – 41 32 32 106 – – – – – – 37 25 24 86 – – – – – – 85 806 106 86 2 3 2 8 – – – – – – 8 2 7 5 14 – – – – – – 263 263 205 732 – – – – – – 298 298 232 827 – – – – – – 769 606 506 993 859 741 1,881 2,593 100 49 17 42 49 257 89 44 42 68 42 286 14 732 827 2,138 2,878 Notes: 1. Pension includes the cash value of Company contributions to defined contribution pension plans and cash payments in lieu of pension contributions. In previous years we included payments in lieu of pension contributions as part of basic salary and fees, so 2022 has been restated. The benefit package of each Executive Director includes the provision of life assurance, a travel allowance, the option of private medical assurance under a Group scheme, and the option to participate in the Group's Share Incentive Plan which includes a matched element. 2. 3. Total market price of shares under option vesting during the year at their vesting date, less any option exercise price payable. 4. Stephen Smith stepped down after the 2023 AGM on 24 May 2023. 5. For 2022, basic salary and fees figure included Non-Executive Director fees of £38,400 and an additional consultancy fee of £30,000. No consultancy fee was paid in 2023. ■ Directors’ interests in shares As at 31 December 2023, the interest of the Directors in the Ordinary shares of the Company were: Director Peter Brodnicki David Preece Ben Thompson Nathan Imlach Lucy Tilley Katherine Innes Ker Mike Jones Ordinary shares of 0.1p 10,401,472 924,800 89,474 29,576 22,096 16,304 3,000 % 18.21 1.62 0.16 0.05 0.04 0.03 0.01 Note: Directors’ shareholdings include any shareholdings of trusts or family members deemed to be connected persons. 100 101 Governance | Directors’ remuneration report (continued) ■ Interest in options The Group operates the Mortgage Advice Bureau Executive Option Plan by which certain of the Executive Directors and other Senior Executives are able to subscribe for ordinary shares in the Company. The interests of the Directors during 2023 were as follows: Director Peter Brodnicki Ben Thompson Lucy Tilley Date granted May-23 Jun-22 Apr-21 Jul-20 Jul-19 Apr-18 May-23 Jun-22 Apr-21 Jul-20 Jul-19 May-23 Jun-22 Apr-21 Jul-20 Jul-19 Apr-18 (1) (2) (3) (4) (5) (6) (1) (2) (3) (4) (5) (1) (2) (3) (4) (5) (6) Exercise price £ At 1 Jan 2023 No. Forfeited/ Granted Exercised Not vested during during the year the year No. No. during the year No. At 31 Dec 2023 No. 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 – 36,262 19,766 37,108 33,717 9,957 136,810 – 24,097 19,766 37,108 33,717 114,688 – 23,231 17,570 28,862 26,223 9,957 105,843 83,146 – – – – – 55,230 – – – – 54,236 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 83,146 36,262 19,766 37,108 33,717 9,957 219,956 55,230 24,097 19,766 37,108 33,717 169,918 54,236 23,231 17,570 28,862 26,223 9,957 160,079 Notes: (1) Unapproved Option scheme - first date exercisable is 2 April 2026, last date exercisable is 31 May 2031. (2) Unapproved Option scheme - first date exercisable is 6 April 2025, last date exercisable is 6 June 2030. (3) Unapproved Option scheme - first date exercisable is 1 April 2024, last date exercisable is 1 April 2029. (4) Unapproved Option scheme - first date exercisable is 22 April 2023, last date exercisable is 22 July 2028. (5) Unapproved Option scheme - first date exercisable is 1 July 2022, last date exercisable is 1 July 2027. (6) Unapproved Option scheme - first date exercisable is 11 April 2021, last date exercisable is 10 April 2026. All the LTIP awards are subject to a three-year performance period. For the 2021 and 2022 awards, half of the award is subject to a condition relating to the Company’s growth in adjusted EPS over three financial years (the EPS Performance Condition), and the other half is subject to a condition relating to the Company’s growth in TSR over three years from grant (the TSR Performance Condition). The 2023 award is based solely on an EPS performance condition. Vested and unvested LTIP awards are subject to a formal malus and clawback mechanism. 102 103 The following performance conditions apply to the outstanding LTIP awards. Vesting is on a straight-line basis between threshold and maximum. 2021 award: Metric Vesting (% of maximum) Weighting Performance (% of award) condition Threshold Maximum 25% 100% Adjusted EPS 50% Absolute growth in adjusted earnings Total shareholder return (TSR) 50% Average absolute annual growth in TSR over the three years from grant 5% 15% per share over the three-year performance period 40% 70% 2022 award: Metric Vesting (% of maximum) Weighting Performance (% of award) condition Adjusted EPS Total shareholder return 50% 50% Compound annual growth rate in EPS Compound annual growth rate in Threshold Maximum 25% 15% 100% 26% (TSR) 2023 award: shareholder value 10% 20% Metric Vesting (% of maximum) Weighting Performance (% of award) condition Adjusted EPS 100% Compound annual growth rate in EPS Threshold Maximum 25% 5% 100% 10% Note 30 to the financial statements contains details of all options granted to directors and employees as at 31 December 2023. All of the share options were granted for nil consideration. 102 103 Governance | Directors’ remuneration report (continued) ■ Total shareholder return performance graph The graph below illustrates the total shareholder return (TSR) for the period from 1 January 2015 to 31 December 2023 in terms of the change in value of an initial investment of £100 against the corresponding TSR in hypothetical holdings of shares in the FTSE AIM All-Share Index. £1,200 £1,000 £800 £600 £400 £200 £0 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Mortgage Advice Bureau Plc FTSE AIM All-Share index (rebased) The Company is a member of the FTSE AIM All-Share Index and considers this to be the most appropriate broad equity market index for the purpose of measuring the Company’s relative performance. The mid-market closing price of the Company’s ordinary shares at 29 December 2023 was 820 pence and the range during the financial year was 500 pence to 880 pence. None of the Directors had an interest in any contract of significance in relation to the business of the Company or its subsidiaries at any time during the financial year. ■ Shareholder engagement We take a keen interest in our shareholders’ views on executive remuneration and welcome any feedback on the Directors’ Remuneration Report. At the 2023 AGM, 55.4% of the votes cast were in favour of accepting the Remuneration Report. Following the AGM we consulted with a number of shareholders and understand that there were concerns with the payment of transaction-related bonuses in 2022. We have set out in the revised remuneration structure adopted from 2023 onwards, a rebalancing of incentives in favour of longer-term objectives, and confirm that in future, bonuses directly related to the completion of a transaction will not be offered. This Remuneration Report will be subject to an advisory vote at the 2024 AGM. Our goal is to be clear and transparent in the presentation of this report and I look forward to shareholders’ support on this resolution. On behalf of the Board Katherine Innes Ker Chair of the Remuneration Committee 19 March 2024 104 105 Governance | Directors’ responsibilities for the financial statements The Directors are responsible for preparing the The Directors are responsible for keeping adequate Directors’ report, strategic report and the financial accounting records that are sufficient to show and statements in accordance with applicable law and explain the Group’s and the Company’s transactions regulations. UK company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare Group financial statements in accordance with and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other International Accounting Standards in conformity with the requirements of the Companies Act 2006 that irregularities. are applicable to companies that prepare financial The Directors are responsible for ensuring the annual statements in accordance with IFRSs. report and the financial statements are made available on a website. The maintenance and integrity of the corporate and financial information included on the Group’s website is the responsibility of the Directors. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing each of the Group and Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs adopted by the EU; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. 104 105 Governance | Independent auditor’s report to the members of Mortgage Advice Bureau (Holdings) plc Opinion on the financial statements statements section of our report. We believe that the In our opinion: audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. • the financial statements give a true and fair view of Independence the state of the Group’s and of the Parent Company’s affairs as at 31 December 2023 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance • the Parent Company financial statements have been with these requirements. properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the We have audited the financial statements of Mortgage Directors’ assessment of the Group and the Parent Advice Bureau (Holdings) plc (the ‘Parent Company’) Company’s ability to continue to adopt the going and its subsidiaries (the ‘Group’) for the year ended concern basis of accounting included: 31 December 2023 which comprise the Consolidated Statement of Comprehensive Income, Consolidated and Company Statement of Financial Position, Consolidated and Company Statement of Changes in Equity, Consolidated Statement of Cash Flows, and Notes to the financial statements, including material and significant accounting policy information. • We have assessed the reasonableness of the assumptions within the Directors’ forecast for liquidity and profitability for a period of 12 months from the signing of these accounts, corroborating the inputs to supporting documentary evidence. This involved considering the base and stress scenarios testing undertaken by the Directors to support The financial reporting framework that has been the Going concern assessment which included applied in the preparation of the Group's financial assumptions about the potential impact this could statements is applicable law and UK adopted have on revenue (mainly from purchase mortgages) international accounting standards. The financial and possible cost saving measures. reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard in the United Kingdom and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). Basis for opinion We conducted our audit in accordance with • We examined the existing agreement of the Revolving Credit Facility and reviewed the nature of the facility, repayment terms, covenants and attached conditions. We assessed its continued availability to the Group through the going concern period and checked the completeness of management’s covenant assessment; • We verified the mathematical accuracy of the going concern model for the period to 31 December 2025; International Standards on Auditing (UK) (ISAs • We considered whether there were any indicators of (UK)) and applicable law. Our responsibilities other sources of finance not considered by Directors under those standards are further described in the in their assessment; Auditor’s responsibilities for the audit of the financial 106 107 Conclusions relating to going concern (continued) • We assessed whether the capital and cash positions are adequate and whether the Group complies with its covenant requirements in both the base and stress scenarios. The Directors’ assessment forecasts that the Group will maintain sufficient liquidity throughout the going concern assessment period in the base case scenario and will not breach banking covenants. Under the Group's severe but plausible scenario, which includes a significant reduction in performance throughout the going concern period, liquidity remains and there is no • We assessed the appropriateness of the duration of the going concern assessment period to breach of covenants. 31 December 2025 and considered the existence We have not identified any climate related risks that of any significant events or conditions beyond this would materially impact the Group’s forecasts to period based on our procedures on the Group’s cash 31 December 2025. flow forecasts and from knowledge arising from other areas of the audit; • We have reviewed publicly available information on the housing market and house price index to assess any impact on going concern. • We assessed how the Directors have factored in ongoing economic pressures such as high inflation, cost of living crisis and increasing interest rates on the business, checking these had been appropriately considered as part of the Directors’ going concern assessment. • We reviewed the disclosures made relating to going Controllable mitigating actions available to management over the going concern assessment period include reductions to non-declared dividend payments. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. concern included in the financial statements in order Our responsibilities and the responsibilities of the to assess the appropriateness of the disclosures and Directors with respect to going concern are described conformity with reporting standards. in the relevant sections of this report Overview Coverage 99% (2022: 99.1%) of Group profit before tax 100% (2022: 99.9%) of Group revenue 99.8% (2022: 99.4%) of Group total assets Key audit matters (KAM) 2023 2022 Revenue Recognition Clawback Liability Valuation of put/call options over the purchase of minority Interests in subsidiaries Acquisition of subsidiaries Goodwill Impairment assessment in relation to Fluent CGU Acquisition of subsidiaries is no longer considered a KAM because there were no subsidiary acquisitions made during the year. ✔ ✔ ✔ ✘ ✔ Materiality Group financial statements as a whole £1,036,000 (2022: £1,006,000) based on 5% of average profit before tax for the last three years (2022: 5% Profit before tax). ✔ ✔ ✔ ✔ ✘ 107 106 Governance | Independent auditor’s report to the members of Mortgage Advice Bureau (Holdings) plc (continued) An overview of the scope of our audit • Review of the minutes of Board and Audit Committee Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of meetings and any other relevant party and other papers related to climate change and performed a risk assessment as to how the impact of the Group’s commitment as set out in the Strategic report may affect the financial statements and our audit. management override of internal controls, including The Group has explained in the Strategic report how assessing whether there was evidence of bias by the they have reflected the impact of climate change in Directors that may have represented a risk of material their financial statements. The Group did not identify misstatement. The Group is made up of the Parent Company and its subsidiaries. The significant components were determined to be MAB Limited and MAB Derby Limited together ‘(MAB Core’), First Mortgage Direct Limited (‘FMD’) and Project Finland Topco Limited and its subsidiaries (‘Fluent Group’). These three components were subject to full scope audits performed by the Group audit team. In respect of the non-significant components the Group audit team carried out specific procedures on balances that were identified as material to the Group. Climate change Our work on the assessment of potential impacts of climate-related risks on the Group’s operations and financial statements included: • Enquiries and challenge of management to any climate risk that would materially impact the carrying values of the Group’s assets or have any other impact on the financial statements. These disclosures also explain where governmental and societal responses to climate change risks are still developing, and where the degree of certainty of these changes means that they cannot be taken into account when determining asset and liability valuations under the requirements of UK adopted International Accounting Standards. Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s assessment of the impact of climate risk, physical and transition, and their climate commitments. As part of this evaluation, we performed our own risk assessment to determine the risks of material misstatement in the financial statements from climate change which needed to be considered in our audit. We also challenged the Directors’ considerations of climate change risks in understand the actions they have taken to identify their assessment of going concern and viability and climate-related risks and their potential impacts on associated disclosures. Where considerations of climate the financial statements and adequately disclose change were relevant to our assessment of going climate-related risks within the annual report; concern, these are described above. • Our own qualitative risk assessment taking into Based on our risk assessment procedures, we did not consideration the sector in which the Group operates identify there to be any Key Audit Matters materially and how climate change affects this particular sector; impacted by climate-related risks. 108 109 An overview of the scope of our audit (continued) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How the scope of our audit addressed the key audit matter Revenue recognition We performed the following procedures: Management’s associated accounting policies are outlined in note 1 and with the detailed disclosure in note 3 to the financial statements. • We assessed whether the Group’s revenue recognition policies are in accordance with the applicable accounting standards. The Group’s revenue comprises of commissions (including procuration fees), client fees, protection and general insurance and other income. Group total revenue £240m (2022: £231m). Revenue recognition is a significant audit risk as it • We performed walkthroughs of each significant stream of revenue and confirmed the existence of key controls around the recognition of revenue. • For a sample of transactions, we independently obtained direct confirmations of the revenue and transactions amounts from third party providers. is a key driver of the return to investors and there • For a sample of commission income, we obtained is a risk that there could be manipulation, fraud or the third-party reports supporting the transactions omission of amounts recorded in the system. This risk and traced back to cash receipts. is applicable for all revenue streams across the Group as detailed above. For these reasons we considered revenue a key audit matter. • We recalculated a sample of the procuration fees using third party reports obtained independently and agreed to cash received. • We agreed a sample of client fees to providers’ statements and cash receipts. • We performed cut-off testing for the period before and after the year end with reference to underlying documents such as rebate reports, reclaims files and evidence of management’s assessment of the point of revenue recognition. • We performed full and specific scope audit procedures over this risk area in components which have revenue. Key observations: Based on the procedures performed, we have not identified any material misstatements in the revenue recognised in the year. 109 108 Governance | Independent auditor’s report to the members of Mortgage Advice Bureau (Holdings) plc (continued) An overview of the scope of our audit (continued) Key audit matters (continued) Key audit matter How the scope of our audit addressed the key audit matter Clawback liability Our procedures included the following: Management’s associated accounting policies with detail about judgements in applying accounting policies and critical accounting estimates are outlined in note 2 with the detailed disclosure in note 23 to the financial statements. • We assessed whether the accounting treatment adopted for the clawback liability was in line with the applicable accounting standard requirements. • We evaluated the design and implementation of the financial reporting process relevant for the The clawback liability is an estimate of the commission determination of the clawback liability. received up front that is repayable on life assurance policies that may lapse in a period of up to four years following inception of the policies. • We tested the appropriateness of the model and its logical application and then independently recalculated the results. The Group has recognised a clawback liability of • We compared the data relating to unearned £10.3m (2022: £8.0m). There is significant risk of material misstatement due commission and assumptions such as future lapse rates and lapse rate history to third party reports. to fraud or error as result of the estimation uncertainty • For other inputs and assumptions such as age inherent in the valuation of the clawback liability. profile of the commission received, the success The valuation of clawback liability is subject to significant judgements and estimates with specific reference to the determination of the Lapse and Recovery rate applied. The risk is over the clawback liability recorded in the of the Appointed Representatives in preventing lapses and/or generating new income at the point of a lapse, we validated these to management’s supporting analysis of the Group’s actual experience based on data gathered from third party providers’ statements. three significant components: MAB Core, FMD and • We reviewed the historic payback patterns and performed testing on the historical accuracy of management’s estimate by comparing clawbacks during the current financial year to the prior year provision raised. Key observations: Based on the work performed we have not identified any material misstatement in the clawback liability. Fluent. 110 111 An overview of the scope of our audit (continued) Key audit matters (continued) Key audit matter How the scope of our audit addressed the key audit matter Valuation of put/call options over the purchase of Our procedures included the following: minority interests in subsidiaries Refer to note 5 to the financial statements. The acquisition of Fluent in 2022 had put and call options attached to the purchase of the minority interests exercisable at a future date. The valuation of the put and call is driven by inputs that are subject to management’s judgement and estimation uncertainty. We have identified a significant risk of material • We evaluated the design and implementation of the financial reporting process relevant for the Valuation of put/call options. • We tested that the valuation methodology is appropriate. • With the assistance from our valuation experts, we assessed the appropriateness of the assumptions being cash flow projections and discount rate against the ones adopted by management as part of the impairment of goodwill assessment where misstatement due to error over the remeasurement relevant. of the redemption liability. The cash flow projections (including the EBITDA projections) used in the remeasurement of the • We assessed the reasonableness of cashflow forecasts and its assumptions by reviewing the governance process in light of the potential impact redemption liability are subject to management’s of macro-economic factors. judgements. The Group had a redemption liability fair value gain of £4.5m (2022:£nil) of which £4.7m relates to Fluent • We reviewed the accounting treatment to check that it is in line with accounting standards (IFRS 2/ IAS 19 and IFRS 9). (loss of £0.2m relates to Auxilium put and call options). Key observations: Based on the work performed we have not identified any material misstatement in the redemption liability. 110 111 Governance | Independent auditor’s report to the members of Mortgage Advice Bureau (Holdings) plc (continued) An overview of the scope of our audit (continued) Key audit matters (continued) Key audit matter How the scope of our audit addressed the key audit matter Goodwill impairment assessment in relation to We performed the following procedures: Fluent CGU Refer to note 2 with the detailed disclosure in note 14 to the financial statements. The Carrying value of Goodwill is £53.9m (2022: £53.9m). Of this amount, £37.0m relates to the Fluent cash generating unit (‘CGU'). We identified a significant risk of fraud and error on the recoverability of the goodwill relating to Fluent CGU because it’s trading performance was significantly below budget. In determining the recoverable amount, the value in use calculation is subject to estimation uncertainty due to the significant estimates and judgements involved in determining the discount rate, Long- term growth rates (‘LTGR’), and the future cashflows (including EBITDA projections). • With the involvement of our valuation experts, we assessed the appropriateness of the valuation methodology applied and key assumptions. • We inspected the Group’s approved strategic plans. • We compared the Group’s key assumptions to externally derived data and other macro-economic factors such as interest rates and inflation rates. • We performed a sensitivity analysis which considered reasonably possible changes in the key assumptions and their impact on the valuation. • We independently developed our own estimate of a range of reasonably possible discount rate, EBITDA projections and revenue growth rate for the CGU, based on external market data and our understanding of the business, and compared this to what was used in the model. As a result, we concluded this was a key audit matter. Key observations: We have not identified any indicator that would suggest the assumptions and judgements applied in the valuation model are unreasonable. 112 113 Our application of materiality materiality, to determine the extent of testing needed. We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken based on the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Group financial statements Parent company financial statements 2023 £m 2022 £m 2023 £m 2022 £m Materiality £1,036,000 £1,006,000 £332,000 £268,000 Basis for determining materiality 5% of average profit 5% of profit before tax, 5% of Total before tax for the last excluding write off of investments three years investment in non- listed equity shares Rationale for the benchmark applied Average profit before Profit before tax was As the Parent tax was determined determined to be Company is a to be the most the most appropriate holding company, appropriate benchmark benchmark as the it was considered as the Group is listed Group is listed with appropriate to with profitability seen profitability seen as determine materiality as the main interest of the main interest of based on Total investors. 2023 £777,000 investors. investments. 2022 2023 2022 £754,000 £249,000 £201,000 Performance materiality Basis for determining performance materiality 75% of materiality based on our risk assessment and our assessment of expected total value of known and likely misstatements. 112 113 Governance | Independent auditor’s report to the members of Mortgage Advice Bureau (Holdings) plc (continued) Our application of materiality (continued) in the Annual Report and Financial Statements other than Component materiality the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover We set materiality for each significant component of the other information and, except to the extent otherwise the Group, including the parent company, based on explicitly stated in our report, we do not express any form a percentage of between 31% and 95% (2022: 43% and of assurance conclusion thereon. Our responsibility is 79%) of Group materiality dependent on the size and to read the other information and, in doing so, consider our assessment of the risk of material misstatement whether the other information is materially inconsistent of that component. Component materiality ranged with the financial statements or our knowledge obtained from £237,000 to £738,000 (2022: £436,515 to £792,000). in the course of the audit, or otherwise appears to In the audit of each significant component, we further be materially misstated. If we identify such material applied performance materiality levels at 75% (2022: inconsistencies or apparent material misstatements, 75%) of the component materiality to our testing to we are required to determine whether this gives rise ensure that the risk of errors exceeding component to a material misstatement in the financial statements materiality was appropriately mitigated. themselves. If, based on the work we have performed, Reporting threshold We agreed with the Audit Committee that we would we conclude that there is a material misstatement of this other information, we are required to report that fact. report to them all individual audit differences in excess We have nothing to report in this regard. of £51,000 (2022: £20,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. Other information Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to The Directors are responsible for the other information. report on certain opinions and matters as described The other information comprises the information included below. Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from components not visited by us; or • the Parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. 114 115 Responsibilities of Directors our procedures are capable of detecting irregularities, As explained more fully in the Directors’ responsibilities including fraud is detailed below: statement, the Directors are responsible for the Non-compliance with laws and regulations preparation of the financial statements and for being Based on: satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary • Our understanding of the Group and the industry in to enable the preparation of financial statements that which it operates; are free from material misstatement, whether due to • Discussion with management and those charged fraud or error. with governance, legal counsel and Audit Committee; In preparing the financial statements, the Directors • Obtaining and understanding of the Group’s policies are responsible for assessing the Group’s and the and procedures regarding compliance with laws and Parent Company’s ability to continue as a going regulations. concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease We considered the significant laws and regulations to be IFRS as adopted by the UK, UK tax legislation, Companies Act 2006 and the AIM Listing Rules. operations, or have no realistic alternative but to do so. The Group is also subject to laws and regulations Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. are free from material misstatement, whether due We identified such laws and regulations to be the to fraud or error, and to issue an auditor’s report that health and safety legislation and the Anti-Bribery Act includes our opinion. Reasonable assurance is a high including fraud, corruption and bribery. level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken based on these financial statements. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of Our procedures in respect of the above included: • Review of minutes of meetings of those charged with governance for any instances of non-compliance with laws and regulations; • Review of correspondence with regulatory and tax authorities for any instances of non-compliance with laws and regulations; • Review of financial statement disclosures and agreeing to supporting documentation; non-compliance with laws and regulations. We design • Involvement of tax specialists in the audit; procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which • Review of legal expenditure accounts to understand the nature of expenditure incurred. 114 115 Governance | Independent auditor’s report to the members of Mortgage Advice Bureau (Holdings) plc (continued) Auditor’s responsibilities for the audit of the financial statements (continued) Fraud We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included: • Enquiry with management and those charged with governance also considered Audit Committee regarding any known or suspected instances of fraud; • Enquiring of management and the Audit Committee for any instances of non- compliance with laws and regulation and any known or suspected instances of fraud; • Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; • Reading minutes of meetings of those charged with governance and correspondence with the Financial Conduct Authority to check for any instances • Obtaining an understanding of the Group’s policies of non-compliance with applicable laws and and procedures relating to: regulations; • Detecting and responding to the risks of fraud; and • In addressing the risk of fraud through management • Internal controls established to mitigate risks related to fraud. • Review of minutes of meetings of those charged with governance for any known or suspected instances of fraud; • Discussion amongst the engagement team as to how and where fraud might occur in the financial statements; • Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; • Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these; override of controls, testing the appropriateness of journal entries and other adjustments on a sample basis to supporting documentation; • In respect of the risk of fraud in relation to revenue recognition and in accounting estimates such as the clawback liability and goodwill impairment assessment performing the procedures as set out in the Key Audit Matters section of our report; and • Evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. • At a component level, our full and specific scope component audit team’s procedures included inquiries of component management, journal entry testing and focused testing, including in respect of Based on our risk assessment, we considered the areas the key audit matter of revenue recognition. most susceptible to fraud to be revenue, management override of controls and clawback liability. Our procedures in respect of the above included: We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained • Testing a sample of journal entries throughout the alert to any indications of fraud or non-compliance with year, which met a defined risk criteria, by agreeing to laws and regulations throughout the audit. supporting documentation; • Assessing significant estimates made by management for bias; • Reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and regulations discussed above; Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are 116 117 Auditor’s responsibilities for the audit of the financial statements (continued) Fraud (continued) inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. David Gonnelli (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, UK 19 March 2024 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 116 117 Financial statements | Consolidated statement of comprehensive income for the year ended 31 December 2023 Note 3 4 15 5 5 5 16 15 16 15 15 6 8 8 5 9 Revenue Cost of sales Gross profit Administrative expenses Share of profit of associates Costs relating to First Mortgage, Fluent and Auxilium options Amortisation of acquired intangibles Acquisition costs Restructuring costs Non-listed equity investment written off Profit on disposal of associate Profit on sale of non-listed equity investment Gain on fair value measurement of contingent consideration Loss on fair value measurement of derivative financial instruments Operating profit Finance income Finance expenses Gain on remeasurement of redemption liability Profit before tax Tax expense Profit for the year Total comprehensive income Profit is attributable to: Equity owners of Parent Company Non-controlling interests Earnings per share attributable to the owners of the Parent Company Basic Diluted 10 10 All amounts shown relate to continuing activities. The notes on pages 122 to 182 form part of these financial statements. 2023 £’000 239,533 (169,371) 70,162 (46,674) 848 (4,277) (5,160) (159) (539) – – – – (190) 14,011 291 (2,610) 4,486 16,178 (3,719) 12,459 12,459 13,467 (1,008) 12,459 23.6p 23.5p 2022 £’000 230,820 (167,873) 62,947 (36,000) 712 (1,999) (2,582) (2,755) – (2,783) 19 58 884 (18) 18,483 108 (1,238) – 17,353 (4,574) 12,779 12,779 12,237 542 12,779 21.8p 21.6p 118 119 Financial statements | Consolidated statement of financial position as at 31 December 2023 Assets Non-current assets Property, plant and equipment Right of use assets Goodwill Other intangible assets Investments in associates and joint venture Derivative financial instruments Trade and other receivables Deferred tax asset Total non-current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity and liabilities Share capital Share premium Capital redemption reserve Share option reserve Retained earnings Equity attributable to owners of the Parent Company Non-controlling interests Total equity Liabilities Non-current liabilities Trade and other payables Redemption liability Lease liabilities Derivative financial instruments Loans and other borrowings Deferred tax liability Total non-current liabilities Current liabilities Trade and other payables Clawback liability Lease liabilities Loans and other borrowings Corporation tax Total current liabilities Total liabilities Total equity and liabilities Note 12 13 14 14 15 15 18 24 18 19 25 26 26 26 26 20 5 13 15 21 24 20 23 13 21 2023 £’000 5,799 2,283 53,885 51,474 12,301 302 353 719 127,116 9,321 21,940 31,261 158,377 57 48,155 20 6,045 15,921 70,198 4,211 74,409 2,642 2,793 1,805 183 12,426 11,417 31,266 35,225 10,331 931 5,824 391 52,702 83,968 158,377 The notes on pages 122 to 182 form part of these financial statements. The financial statements were approved by the Board of Directors on 19 March 2024. P Brodnicki Director L Tilley Director 2022 £’000 6,128 3,872 53,885 55,823 11,387 320 831 1,797 134,043 10,288 25,462 35,750 169,793 57 48,155 20 4,511 15,154 67,897 7,548 75,445 2,252 7,186 3,014 10 16,598 14,659 43,719 34,397 8,038 933 6,809 452 50,629 94,348 169,793 119 118 Financial statements | Consolidated statement of changes in equity for the year ended 31 December 2023 Attributable to the holders of the Parent Company Share Share capital premium £’000 £’000 Note Capital redemption reserve £’000 Share option reserve £’000 Retained earnings £’000 Non– controlling interests £’000 Total £’000 Total Equity £’000 Balance as at 1 January 2022 53 9,778 20 3,523 25,408 38,782 2,205 40,987 Profit for the year Total comprehensive income Transactions with owners – – – – Issue of shares 4 38,377 Non-controlling interests on acquisition of subsidiaries Acquisition of subsidiaries Share-based payment transactions Current and deferred tax recognised in equity Reserve transfer Dividends paid 30 11, 31 – – – – – – – – – – – – Transactions with owners 4 38,377 – – – – – – – – – – 12,237 12,237 542 12,779 12,237 12,237 542 12,779 – – 38,381 – 38,381 – 5,216 5,216 – – – – – (6,540) (6,540) 1,827 (767) – – 1,827 (767) (72) 72 – – – – – (6,540) 1,827 (767) – – (16,023) (16,023) (415) (16,438) 988 (22,491) 16,878 4,801 21,679 Balance as at 31 December 2022 and 1 January 2023 Profit for the year Total comprehensive income Transactions with owners Issue of shares Acquisition of minority interests 5 Share-based payment transactions 30 Current and deferred tax recognised in equity Reserve transfer Dividends paid Transactions with owners 9, 24 30 11, 31 57 48,155 20 4,511 15,154 67,897 7,548 75,445 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 13,467 13,467 (1,008) 12,459 13,467 13,467 (1,008) 12,459 – – – – 942 942 (1,487) (545) 3,380 – 3,380 449 101 550 (2,295) 2,295 – – – – 3,380 550 – – (16,038) (16,038) (842) (16,880) 1,534 (12,700) (11,166) (2,329) (13,495) Balance as at 31 December 2023 57 48,155 20 6,045 15,921 70,198 4,211 74,409 120 121 Financial statements | Consolidated statement of cash flows for the year ended 31 December 2023 Notes Cash flows from operating activities Profit for the year before tax Adjustments for: Depreciation of property, plant and equipment Depreciation of right of use assets Impairment of right of use assets Amortisation of intangibles Unwinding of loan arrangement fees Profit from sale of non-listed equity investment Profit from disposal of associate Loss from disposal of fixed assets Share-based payments Share of profit from associates Gain on remeasurement of redemption liability Non-listed equity investment, amount written off Loss/(gains) on fair value movements taken to profit and loss Dividends received from associates Finance income Finance expense Changes in working capital Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Increase in clawback liability Cash generated from operating activities Income taxes paid Acquisition of minority interests Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangibles Proceeds from sale of non-listed equity investment Net cashflow on acquisition of subsidiaries Acquisition of associates and contingent consideration for associates 12 13 13 14 34 16 15 12 30 15 5 16 15 15 8 8 18 20 23 5 12 14 16 18 15 Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Settlement of loan notes and accrued interest on acquisition Repayment of borrowings Interest received Interest paid Principal element of lease payments Issue of shares Costs relating to issue of shares Acquisition of minority interests Dividends paid to Company’s shareholders Dividends paid to minority interest Net cash used in financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at the end of the year 21, 34 17, 34 21, 34 34 25 25 5 11 The notes on pages 122 to 182 form part of these financial statements. 2023 £’000 16,178 1,225 857 428 5,470 77 – – 36 4,429 (848) (4,486) – 190 403 (291) 2,610 26,278 1,432 (283) 2,293 29,720 (5,390) (592) 23,738 (932) (1,121) – – (469) (2,522) – – (5,350) 304 (1,312) (907) – – (593) (16,038) (842) (24,738) (3,522) 25,462 21,940 2022 £’000 17,353 591 563 – 2,866 – (58) (19) 38 2,983 (712) – 2,783 (866) 910 (108) 1,238 27,562 (1,317) 833 1,387 28,465 (4,124) – 24,341 (3,229) (615) 115 (49,157) (1,327) (54,213) 22,918 (21,891) (1,500) 102 (102) (547) 40,000 (1,619) – (16,023) (415) 20,923 (8,949) 34,411 25,462 121 120 Financial statements | Notes to the consolidated financial statements for the year ended 31 December 2023 1 Accounting policies ■ Basis of preparation The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. The policies have been consistently applied to all the years presented. The consolidated financial statements are presented in Great British Pounds and all amounts are rounded to the relevant thousands, unless otherwise stated. These financial statements have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 that are applicable to companies that prepare financial statements in accordance with IFRS. ■ Going concern The Directors have assessed the Group’s prospects until 31 December 2025, taking into consideration the current operating environment, including the impact of geopolitical and macroeconomic uncertainty and inflationary pressures on property and lending markets. The Directors’ financial modelling considers the Group’s profit, cash flows, regulatory capital requirements, borrowing covenants and other key financial metrics over the period. These metrics are subject to sensitivity analysis, which involves flexing a number of key assumptions underlying the projections, including the effect of geopolitical and macroeconomic uncertainty and inflationary pressures and their impact on the UK property and lending markets and the Group’s business volumes and The preparation of financial statements in compliance revenue mix, which the Directors consider to be severe with adopted IFRS requires the use of certain but plausible stress tests on the Group’s cash position, critical accounting estimates. It also requires Group banking covenants and regulatory capital adequacy. The management to exercise judgement in applying the Group’s accounting policies. The areas where Group’s financial modelling shows that the Group should continue to be cash generative, maintain a surplus on its significant judgements and estimates have been regulatory capital requirements and be able to operate made in preparing the financial statements and their within its current financing arrangements. effect are disclosed in note 2. Based on the results of the financial modelling, The financial statements have been prepared on the Directors expect that the Group will be able to a historical cost basis, except for investments in continue in operation and meet its liabilities as they non-listed equities and derivative financial instruments fall due over this period. Accordingly, the Directors relating to investments in associates that have been continue to adopt the going concern basis for the measured at fair value. preparation of the financial statements. The Group’s business activities, together with ■ The impact of climate risk on accounting the factors likely to affect its future development, estimates performance and position are set out in the Strategic Report as set out earlier in these financial statements. The financial position of the Group, its cash flows and liquidity position are also set out in the Strategic Report as set out earlier in these financial statements. In preparing the financial statements, the Directors have considered the impact of climate change, taking into account the relevant disclosures in the Strategic Report, including those made in accordance with the framework of the Taskforce on Climate-Related The Group made an operating profit of £14.0m during Financial Disclosures (TCFD). 2023 (2022: £18.5m) and had net current liabilities of £21.4m as at 31 December 2023 (31 December 2022: £14.9m) and equity attributable to owners of the Group of £70.2m (31 December 2022: £67.9m). The Group has assessed climate-related risks, covering both physical risks and transition risks. Many of the effects arising from climate change will be longer term in nature with an inherent level of uncertainty and have limited impact on accounting estimates for the current period. 122 123 1 Accounting policies (continued) New standards, interpretations, and amendments not ■ The impact of climate risk on accounting yet effective estimates (continued) Future new standards and interpretations Climate change may also have an impact on the A number of new standards and amendments to carrying value of goodwill but the potential impact standards and interpretations will be effective for of climate related risks on the Group’s impairment future years and, therefore, have not been applied in assessment is considered sufficiently remote at this preparing these Consolidated Financial Statements. point in time and therefore no sensitivity analysis has These standards are not expected to have a material been performed. impact on the Group in the current or future reporting ■ Changes in accounting policies New standards, interpretations and amendments effective for the year ended 31 December 2023 New standards, interpretations and amendments applied for the first time The Group applied a number of standards and interpretations for the first time in 2023 but these did not have an impact on the consolidated financial statements of the Group. The Group has periods, on foreseeable future transactions or disclosures other than as identified below: Standard or Interpretation Periods commencing on or after IFRS S1 - General Requirements 1 January 2024 for Disclosure of Sustainability- related Financial Information IFRS S2 - Climate-related 1 January 2024 Disclosures not early adopted any standards, interpretations or IFRS S1 and IFRS S2 are not expected to have a amendments that have been issued but are not yet material impact on the results of the Group other than effective. ■ New standards with an impact on the Group to expand on climate related disclosures within the financial statements. It is anticipated that transition reliefs for comparative information prior to the first • Amendments to IAS 1 and IFRS Practice Statement year of adoption will be utilised. 2 – Disclosure of accounting policies (Effective 1 January 2023) The amendments to IAS 1 and ■ Current versus non-current classification IFRS Practice Statement 2 Making Materiality The Group presents assets and liabilities in the Judgements provide guidance and examples to help consolidated statement of financial position based on entities apply materiality judgements to accounting current/non-current classification. An asset is current policy disclosures. The Group has ensured that when it is: material accounting policy disclosures have been made in the financial statements in line with the amendments to IAS 1 & IFRS Practice Statement 2. ■ New standards with no impact on the Group • IFRS 17 Insurance contracts (Effective 1 January 2023) • Amendments to IAS 8 – Definition of accounting estimates (Effective 1 January 2023) • Amendments to IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction (Effective 1 January 2023) • Expected to be realised or intended to be sold or consumed in the normal operating cycle. • Held primarily for the purpose of trading. • Expected to be realised within twelve months after the reporting date. All other assets are classified as non-current. Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables approximates their fair value. 122 123 1 Accounting policies (continued) ■ Associates ■ Basis of consolidation Subsidiaries Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Where the Group has the power to participate in, but not control the financial and operating policy decisions of another entity, it is classified as an associate where the Group holds between 20% and 49% of the voting rights. Associates are initially recognised in the consolidated statement of financial position at cost. Subsequently, associates are accounted for using the equity method, where the Group’s share of post- acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of comprehensive income (except for losses in excess of the Group’s investment in the associate unless there is The consolidated financial statements present the an obligation to make good those losses). results of the Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. Accounting policies for equity-accounted investees have been adjusted to conform the accounting policies of the associate to the Group’s accounting policies. Profits and losses arising on transactions between the The consolidated financial statements incorporate the Group and its associates are recognised only to the results of business combinations using the acquisition extent of unrelated investors’ interests in the associate. method. In the consolidated statement of financial The investor’s share in the associate’s profits and losses position, the acquiree’s identifiable assets, liabilities resulting from these transactions is eliminated against and contingent liabilities are initially recognised at the carrying value of the associate. their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. ■ Non-controlling interests The Group recognises non-controlling interests in an acquired entity either at fair value or at the Any premium paid for an associate above the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment. More information on the impairment of associates is included in note 2. non-controlling interest’s proportionate share of the ■ Joint ventures acquired entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. For the non-controlling interests in First Mortgage Direct Limited, Project Finland Topco Limited, Vita Financial Limited and Aux Group Limited, the Group elected to recognise the non-controlling interests at its proportionate share of the acquired net identifiable assets. There are no other non-controlling interests. See note 1 for the Group’s accounting policies for business combinations. The Group accounts for its interests in joint ventures in the same manner as investments in associates (i.e. using the equity method). Any premium paid for an investment in a joint venture above the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in the joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets. 124 125 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 1 Accounting policies (continued) ■ Other intangible assets ■ Property, plant and equipment Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs. Depreciation is provided on all items of property, plant and equipment, except freehold land at rates calculated to write off the cost of each asset on a straight-line basis over their expected useful lives, as follows: Freehold land not depreciated Intangible assets other than goodwill acquired by the Group comprise licences, the website software, acquired technology, customer and member relationships, lender and introducer relationships and trademarks and brands and are stated at cost less accumulated amortisation and impairment losses. Software development can include both third party costs and internally generated costs. Internally generated costs are only capitalised once development of the intangible has commenced, where technical Freehold buildings 36 years feasibility of the project has been confirmed, and Fixtures and fittings 5 and 10 years where it is probable the asset will generate future Computer equipment 3 years Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised in the consolidated statement of economic benefits. All costs prior to this are expensed in the period. Software development assets that are not in use are tested for impairment on an annual basis. comprehensive income. The Directors reassess the Amortisation is charged to the consolidated statement estimated residual values and useful economic lives of of comprehensive income on a straight-line basis over the assets at least annually. ■ Goodwill the period of the licence agreements or expected useful life of the asset and is charged once the asset is in use. The Group reviews the expected useful lives of Goodwill represents the excess of a cost of a business assets with a finite life at least annually. combination over the Group’s interest in the fair value of identifiable assets under IFRS 3 Business Combinations. Amortisation, which is reviewed annually, is provided on intangible assets to write off the cost of each asset on a straight-line basis over its expected useful life as Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit follows: Licences Website from the business combination in which the goodwill Software development arose. The units or groups of units are identified at the Acquired technology lowest level at which goodwill is monitored for internal Customer relationships management purposes. Trademarks and brands 6 years 3 years 3 years 10 years 5 to 9 years 3 to 11 years Goodwill is capitalised as an intangible asset with any Lender and introducer relationships 14 years impairment in carrying value being charged to the Member relationships 3 years consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date. 124 125 1 Accounting policies (continued) ■ Loans and trade receivables ■ Impairment of non-financial assets Loans and trade receivables are non-derivative Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Other intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Where the carrying value of the asset exceeds its recoverable amount (i.e. the higher of value in use and financial assets with fixed or determinable payments which arise principally through the Group’s trading activities, and these assets arise principally to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. fair value less costs to sell), the asset is written down Impairment provisions for trade receivables are accordingly. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows, its cash generating units (‘CGUs’). Goodwill is allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill. Impairment charges are included in consolidated statement of comprehensive income except to the extent that they reverse gains previously recognised in other comprehensive income. An impairment loss for goodwill is not reversed. ■ Financial assets recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed on an individual receivable balance. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Impairment provisions for loans to associates In the consolidated statement of financial position, the and other parties are recognised based on a Group classifies its financial assets as at amortised cost forward-looking expected credit loss model. The only if both of the following criteria are met: • the asset is held within a business model whose objective is to collect the contractual cash flows; and methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where • the contractual terms give rise to cash flows that are the credit risk has not increased significantly since solely payments of principal and interest. initial recognition of the financial asset, twelve month All other financial assets are classified as fair value through profit or loss. expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. 126 127 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 1 Accounting policies (continued) The Group adopted the modified transition approach ■ Investments in non-listed equity shares Investments in non-listed shares are non-derivative financial assets, and are carried at fair value, with gains and losses arising from changes in fair value taken directly to the consolidated statement of and from 1 January 2019, all leases are accounted for by recognising a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Group, except for: • leases of low value assets; and comprehensive income. • leases with a duration of 12 months or less. ■ Derivative financial instruments Payments associated with short-term leases and leases Derivative financial instruments comprise option contracts to acquire additional ordinary share capital of associates of the Group. Derivative financial assets are carried at fair value, with gains and losses arising from of low value assets will continue to be recognised on a straight-line basis as an expense in the statement of comprehensive income. Low value assets within the Group comprise of IT equipment. changes in fair value taken directly to the statement Assets and liabilities arising from a lease are initially of comprehensive income. Fair values of derivatives measured on a present value basis. Lease liabilities are determined using valuation techniques, including include the net present value of the following lease option pricing models. ■ Financial liabilities Trade and other payables are recognised initially at fair payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable; value and subsequently carried at amortised cost. • variable lease payments that are based on an index ■ Loans and other borrowings Loans and other borrowings comprise the Group’s bank loans including any bank overdrafts. Loans and other borrowings are recognised initially at fair value net of any directly attributable transaction costs. or a rate, initially measured using the index or rate as at the commencement date; and • payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. After initial recognition, loans and other borrowings Lease payments to be made under reasonably are subsequently carried at amortised cost using the certain extension options are also included in the effective interest rate method. measurement of the liability. The lease payments are ■ Leases The Group’s leasing activities and how they are accounted for discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the Group’s incremental borrowing rate is used, being the rate The Group leases a number of properties from which that the Group would have to pay to borrow the funds it operates and office equipment. Rental contracts are necessary to obtain an asset of similar value to the typically made for fixed periods of five to ten years, with right of use asset in a similar economic environment break clauses negotiated for some of the properties. with similar terms, security and conditions. Contracts may contain both lease and non-lease To determine the incremental borrowing rate, the Group: components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. • where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received; 126 127 1 Accounting policies (continued) termination options held are exercisable only by the ■ Leases (continued) • where it does not have recent third-party financing, the Group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group; and Group and not by the respective lessor. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included • makes adjustments specific to the lease, e.g. term, in the lease term if the lease is reasonably certain to be country and security. extended (or not terminated). Lease payments are allocated between principal and For leases of property, the following factors are finance cost. The finance cost is charged to profit or normally the most relevant: loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right of use assets are measured at cost comprising the following: • If there are significant penalties to terminate, the Group is typically reasonably certain not to terminate. • If any leasehold improvements are expected to have a significant remaining value, the Group is typically • the amount of the initial measurement of lease liability, reasonably certain to not terminate. • any lease payments made at or before the • Otherwise, the Group considers other factors commencement date less any lease incentives including historical lease durations and the costs received, and • any initial direct costs. Right of use assets are depreciated over the shorter of the asset’s useful life and the lease term on a and business disruption required to replace the leased asset. Most extension options in offices have not been included in the lease liability, because the Group could replace the assets without significant cost or business disruption. straight-line basis. The Group does not revalue its land and buildings that are presented within property, plant Remeasurement and equipment, and has chosen not to do so for the The Group will remeasure a lease when there has right of use buildings held by the Group. been a contractual variation that amends the scope or Variable lease payments The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right of use asset. Extension and termination options Termination options are included in a number of the leases across the Group. These are used to maximise length of the lease or in cases where there is a change in the Group’s intention to exercise a break option or clause that exists in the contract. The lease liability will be remeasured using the new interest rate implicit in the lease or a revised incremental borrowing rate if the interest rate implicit in the lease isn’t readily determined. When the lease liability is remeasured, an equivalent adjustment is made to the right of use asset unless its carrying amount is reduced to nil, in which case any remaining amount is recognised within administrative expenses within the consolidated statement of operational flexibility in terms of managing the comprehensive income. assets used in the Group’s operations. The majority of 128 129 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 1 Accounting policies (continued) recognised at the acquisition date. If the reassessment ■ Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at the fair value on acquisition date, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non- controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as a liability that is a financial instrument and within the scope of IFRS 9 Financial still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in the consolidated statement of comprehensive income. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Where goodwill has been allocated to the Group’s cash-generating units and part of the operation within the unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash generating unit retained. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the subsequent acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss. Instruments, is measured at fair value with the changes Where a business combination is for less than the entire in fair value recognised in the statement of profit or issued share capital of the acquiree and there is an loss in accordance with IFRS 9. Other contingent option for the acquirer to purchase the remainder of consideration that is not within the scope of IFRS 9 the issued share capital of the business and/or for the is measured at fair value at each reporting date with vendor to sell the rest of the entire issued share capital changes in fair value recognised in profit or loss. of the business to the acquirer, then the acquirer will Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value assess whether a non-controlling interest exists and also whether the instrument(s) fall within the scope of IFRS 9 Financial Instruments and is/are measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with IFRS 9. of the net assets acquired is in excess of the aggregate Options that are not within the scope of IFRS 9 and consideration transferred, the Group re-assesses are linked to service will be accounted for under IAS whether it has correctly identified all of the assets 19 Employee Benefits and/or IFRS 2 Share-based acquired and all of the liabilities assumed and reviews Payments as appropriate. the procedures used to measure the amounts to be 128 129 1 Accounting policies (continued) by the Group in respect of all services provided. The ■ Business combinations and goodwill (continued) IFRS 3 prohibits the recognition of contingent assets acquired in a business combination. No contingent assets are recognised by the Group in business combinations even if it is virtually certain that they will become unconditional or non-contingent. ■ Provisions Group operates a revenue share model with its trading partners and therefore commissions are paid in line with the Group revenue recognition policy and are included in cost of sales. Mortgage procuration fees are recognised at a point in time when commission is approved for payment by the L&G Mortgage Club or direct from the lender, which is the point at which all performance obligations A provision is recognised in the statement of financial have been met. position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. ■ Share capital Financial instruments issued by the Group are treated Insurance commissions are recognised at a point in time when the policy is accepted by the insurer. Life insurance commissions are paid on an indemnity basis, mainly over a four year period. If a policy is cancelled during the indemnity period, part of the commission received may have to be repaid to the provider. as equity only to the extent that they do not meet A clawback liability is recognised for the expected level the definition of a financial liability. The Company’s of commissions repayable with the liability movement ordinary shares are classified as equity instruments. recognised as an offset against revenue recognised in Incremental costs directly attributable to the issue the period. More information on the clawback liability of new shares are shown in share premium as a is included in note 2(e). deduction from the proceeds. ■ Revenue The Group recognises revenue from the following main sources: • Mortgage procuration fees paid to the Group by Client fees and Other income is recognised at a point in time when payment is received or guaranteed to be received, as until this point it is not possible to be certain that the performance obligation has been satisfied. ■ Taxation lenders either via the L&G Mortgage Club or directly. Income tax comprises current and deferred tax. • Insurance commissions from advised sales of protection and general insurance policies. Income tax is recognised in the consolidated statement of comprehensive income. Other than if it relates to items recognised directly in equity in which • Client fees paid by the underlying customer for the case it is also recognised directly in equity. provision of advice on mortgages, other loans and Current tax is the expected tax payable on the protection. • Other Income comprising income from services provided to directly authorised entities, fees in relation to Later Life lending and Wealth and ancillary services taxable income for the year using tax rates enacted or substantively enacted by the statement of financial position date and any adjustment to tax payable in respect of previous years. such as conveyancing and surveying. Deferred tax is provided using the liability method on Mortgage procuration fees, insurance commissions and client fees are included at the amounts received temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. 130 131 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 1 Accounting policies (continued) reduction in goodwill (as long as it does not exceed ■ Taxation (continued) Deferred tax assets and liabilities are recognised for all taxable temporary differences, except for when: • The difference arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. • In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable goodwill) if it was incurred during the measurement period or recognised in profit or loss. Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: • the same taxable Group company; or • different company entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be settled or recovered. profit will be available against which the temporary ■ Segment reporting differences can be utilised. An operating segment is a distinguishable segment The carrying amount of deferred tax assets is reviewed of an entity that engages in business activities from at each reporting date and reduced to the extent that it which it may earn revenues and incur expenses and is no longer probable that enough taxable profit will be whose operating results are reviewed regularly by the available to allow all or part of the deferred tax asset to be entity’s chief operating decision maker (CODM). The utilised. Unrecognised deferred tax assets are re-assessed Board reviews the Group’s operations and financial at each reporting date and are recognised to the extent position as a whole and therefore considers that it has that it has become probable that future taxable profits only one operating segment, being the provision of will allow the deferred tax asset to be recovered. financial services operating solely within the UK. The Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or information presented to the CODM directly reflects that presented in the financial statements and they review the performance of the Group by reference to the results of the operating segment against budget. substantively enacted at the reporting date. Operating profit is the profit measure, as disclosed Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax on the face of the consolidated statement of comprehensive income that is reviewed by the CODM. items are recognised in correlation to the underlying ■ Dividends transaction either in OCI or directly in equity. Dividends are recognised when they become legally Tax benefits acquired as part of a business payable. In the case of interim dividends to equity combination, but not satisfying the criteria for separate shareholders, this is when they are paid. In the case of recognition at that date, are recognised subsequently final dividends, this is when they are approved by the if new information about facts and circumstances shareholders. change. The adjustment is either treated as a 130 131 1 Accounting policies (continued) 2 Critical accounting estimates and judgements ■ Share-based payments The Group makes certain estimates and assumptions (a) Equity-settled transactions Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The Directors consider that the estimates and judgements that have the most significant effect on the carrying amounts of assets and liabilities within the financial statements are set out below. (a) Acquisitions and business combinations into the fair value of the options granted. As long as all When an acquisition arises, the Group is required other vesting conditions are satisfied, a charge is made under UK-adopted International Accounting Standards irrespective of whether the market vesting conditions to calculate the Purchase Price Allocation (“PPA”). are satisfied. The cumulative expense is not adjusted for The PPA requires companies to report the fair value failure to achieve a market vesting condition or where a of assets and liabilities acquired and it establishes non-vesting condition has been satisfied. useful lives for identified assets. The identification Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after and the valuation of the assets and liabilities acquired involves estimation and judgement when determining whether the recognition criteria are met. the modification, is also charged to the statement of Subjectivity is also involved in the PPA with the comprehensive income over the remaining vesting estimation of the future value of relationships, period. Where options are granted to persons other than employees, the statement of comprehensive income is charged with the fair value of the options at the date of the grant over the vesting period. (b) Acquisition related Cash-settled transactions technology, brand and goodwill. The fair value of separately identifiable intangible assets acquired during the year was £nil (2022: £55.4m), with the key assumptions used to calculate these fair values being those around the estimated useful lives of the acquired introducer relationships and technology, the estimated future cash flows expected to arise from these A liability is recognised for the fair value of cash-settled relationships and technology and the appropriate transactions. The fair value is measured initially at the discount rate to be used to discount these cash flows date of the grant and is subsequently remeasured to their present value. Residual goodwill totalling £nil at each reporting date up to and including the (2022: £38.7m) has been accounted for during the year. settlement date. The fair value is expensed over the period until the vesting date with a corresponding increase in liabilities. The fair value is determined using a discounted net present value model, with estimates over service and performance conditions updated to reflect management’s best estimate of the awards expected to vest at each reporting date. 132 133 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 2 Critical accounting estimates and judgements (continued) (b) Fair value of put and call options in connection with acquisitions When the Group makes an acquisition of less than 100% of the entire issued share capital of an entity, in certain cases it has entered into a put and call option agreement to acquire the remaining share capital of that entity after a certain amount of time. The fair value of the put and call option will need to be determined in accounting for the instrument which involves certain estimates regarding the future financial performance of the entity, including EBITDA or profit before tax, as well as the use of an appropriate discount rate. The fair value of the options are recognised as either a Redemption Liability in Note 5 or within accruals in Note 20. The carrying value of the liabilities relating to acquisition options, recorded within Note 20 under accruals, are as follows: 2023 IAS19 Service Charge Accrual (£’000) IFRS 2 Option Charge Accrual (£’000) IAS19 Service Charge Accrual (£’000) 2022 IFRS 2 Option Charge Accrual (£’000) 1,925 – – 1,925 – 441 138 579 1,477 – – 1,477 – 491 7 498 First Mortgage Direct Ltd Project Finland Topco Ltd Aux Group Ltd Total (c) Impairment of intangible assets For the purposes of impairment testing, acquired relationships, technology, brands, goodwill and other intangibles are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Other intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amount of the assets is the higher of an asset’s or CGU’s fair value less cost of disposal and its value in use. Value in use calculations are utilised to calculate recoverable amounts of a CGU. Value in use is calculated as the net present value of the projected pre-tax cash flows of the CGU in which the relationships, technology and brand is contained. The net present value of cash flows is calculated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to that asset. The key assumptions used in respect of value in use calculations are those regarding growth rates and anticipated changes to revenues and expenses during the period covered by the calculations. Changes to revenue and expenses are based upon management’s expectation and actual outcomes may vary. Forecast cash flows are derived from the Group’s forecast model, extrapolated for future years, and assume a terminal growth rate of 3.5% (2022: 5.0%), which management considers reasonable given the Group’s historic growth rates and its market share growth model. 132 133 2 Critical accounting estimates and judgements calculation, the age profile of the commission received, (continued) (c) Impairment of intangible assets (continued) The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Actual outcomes may vary. More information including carrying values is included in note 14. (d) Impairment of trade and other receivables Judgement is required when determining if there is any impairment to the trade and other receivable estimates of future lapse rates, and the success of the Appointed Representatives in preventing lapses and/or generating new income at the point of a lapse. The key uncertainties in the calculation are driven by lapse rates and recovery rates. A 0.5% change (absolute) in lapse rates causes a £0.5m change in the liability. A 2% change (absolute) in the recoveries rate causes a £0.2m change in the liability. More information is included in note 23. (f) Investments in associates The Group is required to consider whether any investments in associates have suffered any impairment. The Group uses two methods to test for impairment: balances, and the Group uses the simplified approach • Net Present Value of the next 5 year’s projected free for trade receivables within IFRS 9 using the cash flow and terminal value; and lifetime expected credit losses. During this process judgements about the probability of the non-payment of the trade receivables are made. In considering impairment provisions for loans to associates the forward-looking expected credit loss model is used. In determining the lifetime expected credit losses for loans to associates, the Group has taken into account the effect of geopolitical and macroeconomic uncertainty and inflationary pressures and their impact on the UK property and lending markets, and considered different scenarios for • Valuation of business on a multiple basis. The use of both methods requires the estimation of future cash flows, future profit before tax and choice of discount rate. Actual outcomes may vary. Where the carrying amount in the consolidated statement of financial position is in excess of the estimated value, the Group will make an impairment charge against the investment value and charge this amount to the consolidated statement of comprehensive income under impairment and amount written off associates. repayments of these loans and have also estimated The Group continues to make investments in percentage probabilities assigned to each scenario for associates, with elements of contingent consideration each associate where applicable. More information is in some cases, as well as enter into commitments or included in note 18. (e) Clawback liability The liability relates to the estimated value and timing of repaying commission received up front on protection policies that may lapse in a period of up to four years following inception. The liability balance is calculated using a model that has been developed over several years. The model uses a number of factors including the total ‘unearned’ commission (i.e. that could still be subject to clawback) at the point of option agreements to increase its stake or fully acquire certain associates. In accounting for these, the Group has had to make certain estimates on the amounts of contingent consideration likely to be payable and also the future performance and value of these businesses in determining the fair value of the options. 134 135 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 2 Critical accounting estimates and judgements (continued) (g) Share options, employer’s National Insurance Contributions and Deferred Tax Under the Group’s equity-settled share-based remuneration schemes (see note 30), estimates are made in assessing the fair value of options granted. The fair value is spread over the vesting period in accordance with IFRS 2. The Group engages an external expert in assessing fair value, both Black-Scholes and Stochastic models are used, and estimates are made as to the Group’s expected dividend yield and the expected volatility of the Group’s share price. In addition, the Group estimates the employer’s National Insurance Contributions that will fall due on exercise of options and provides for this over the vesting period. In doing so, estimates as to the share price at vesting and the proportion of options from each grant that will vest are made with reference to the Group’s prospects. Deferred tax assets include temporary timing differences related to the issue and exercise of share options. Recognition of the deferred tax assets assigns an estimate of the proportion of options likely to vest and an estimate of share price at vesting. The carrying amount of deferred tax assets relating to share options as at 31 December 2023 was £1.4m (2022: £1.0m). This has been presented net of other Group deferred tax liabilities in the consolidated statement of financial position. 3 Revenue The Group operates in one segment being that of the provision of financial services in the UK. Revenue is derived as follows: Mortgage procuration fees Protection and general insurance commission Client fees Other income 4 Cost of sales Costs of sales are as follows: Commissions paid Fluent affinity partner payments Impairment of trade receivables Other cost of sales Wages and salary costs 2023 £’000 98,033 93,144 43,325 5,031 2022 £’000 106,615 82,095 36,257 5,853 239,533 230,820 2023 £’000 130,934 14,481 (22) 1,214 22,764 169,371 2022 £’000 142,769 8,000 102 601 16,401 167,873 135 134 4 Cost of sales (continued) Wages and salary costs Gross wages Employers’ national insurance Defined contribution pension costs Other direct costs 2023 £’000 19,633 2,046 734 351 2022 £’000 14,001 1,530 570 300 22,764 16,401 5 Acquisition related costs, acquisition of minority interests and redemption liability First Mortgage Direct Limited On 2 July 2019 Mortgage Advice Bureau (Holdings) plc acquired 80% of the entire issued share capital of First Mortgage Direct Limited (“First Mortgage”). Costs relating to the amortisation of acquired intangibles amounted to £367,000 (2022: £367,000) in the year ended 31 December 2023. There is a put and call option over the remaining 20% of the issued share capital of First Mortgage which has been accounted for under IAS 19 Employee Benefits and IFRS 2 Share-based Payments due to its link to the service of First Mortgage’s Managing Director. The costs relating to this acquisition for the year are made up as follow: Amortisation of acquired intangibles Option costs (IAS 19) Option costs (IFRS 2) Total costs The Fluent Money Group Limited 2023 £’000 367 448 409 1,224 2022 £’000 367 436 409 1,212 On 28 March 2022 Mortgage Advice Bureau (Holdings) plc acquired 75.4% of the entire issued share capital of Project Finland Topco Limited which indirectly owns 100% of The Fluent Money Group Limited (“Fluent”). Further acquisitions of minority interests April 2023 On 11 April 2023, Mortgage Advice Bureau Ltd acquired a further 0.8% of the ordinary share capital of Project Finland Topco Limited for £188,967 taking its shareholding to 76.2%. This resulted in a reduction in the redemption liability of £94,484 relating to the consideration element of the transaction. The equity settled remuneration element resulted in an acceleration of equity settled option costs of £151,674 and reduction in parent equity of £47,242. The cash settled remuneration element resulted in additional option costs of £36,549. Further to this, £140,067 of accumulated non-controlling interest was transferred to retained earnings representing the relevant proportion of non-controlling interest at the purchase date. 136 137 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 5 Acquisition related costs, acquisition of minority interests and redemption liability (continued) The Fluent Money Group Limited (continued) Further acquisitions of minority interests (continued) December 2023 On 19 December 2023, Mortgage Advice Bureau Ltd acquired a further 8.1% of the ordinary share capital of Project Finland Topco Limited for £1,991,616 taking its shareholding to 84.3%. Half of the payment was made in 2023, with the balance deferred, split equally and payable in December 2024 and December 2025. This resulted in a reduction in the redemption liability of £995,808 relating to the consideration element of the transaction. The equity settled remuneration element resulted in an acceleration of equity settled option costs of £1,598,566 and reduction in parent equity of £497,904. The cash settled remuneration element resulted in additional option costs of £385,205. Further to this, £1,346,893 of accumulated non-controlling interest was transferred to retained earnings representing the relevant proportion of non-controlling interest at the purchase date. A summary of the cash flows and deferred elements relating to the acquisition of minority interests in the year is as follows: Consideration – financing activities Remuneration – operating activities Total costs Paid in cash £’000 Deferred £’000 593 592 1,185 498 498 996 Total £’000 1,091 1,090 2,181 The deferred amounts are recognised in accruals within trade and other payables. Put and call options There is a put and call option over the remaining 15.7% of the issued share capital of Fluent which has been accounted for under IAS 32 Financial Instruments and IFRS 2 Share-based Payments, as respectively a proportion is treated as consideration under IAS 32, with the balance treated as remuneration under IFRS 2, because the amount payable on exercise of the option consists of a non-contingent element, and an element that is contingent upon continued employment of the option holders within the Group. There is also a put and call option over certain growth shares that have been issued to Fluent’s wider management team that has been accounted for under IFRS 2 Share-based Payments as exercise is solely contingent upon continued employment. The costs relating to this acquisition for the period are made up as follow: Amortisation of acquired intangibles Option costs (IFRS 2) Acquisition related costs Total costs 2023 £’000 4,399 3,289 159 7,847 2022 £’000 2,127 1,147 2,610 5,883 137 136 5 Acquisition related costs, acquisition of minority interests and redemption liability (continued) Vita Financial Limited On 12 July 2022 Mortgage Advice Bureau (Holdings) plc increased its stake in Vita Financial Limited (“Vita”) from 49% to 75% of the entire issued share capital. The costs relating to this acquisition for the period are made up as follow: Amortisation of acquired intangibles Acquisition related costs Total costs Aux Group Limited 2023 £’000 65 – 65 2022 £’000 33 15 48 On 3 November 2022 Mortgage Advice Bureau (Holdings) plc acquired 75% of the entire issued share capital of Aux Group Limited (“Auxilium”). Put and call options There is a put and call option over the remaining 25% of the issued share capital of Aux Group Limited which has been accounted for under IAS 32 Financial Instruments and IFRS 2 Share-based Payments, as respectively a proportion is treated as consideration under IAS 32, with the balance treated as remuneration under IFRS 2 because the amount payable on exercise of the option consists of a non-contingent element, and an element that is contingent upon continued employment of the option holder within the Group. The costs relating to this acquisition for the period are made up as follow: Amortisation of acquired intangibles Option costs (IFRS 2) Acquisition related costs Total costs 2023 £’000 329 131 7 – 460 2022 £’000 55 130 192 138 139 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 5 Acquisition related costs, acquisition of minority interests and redemption liability (continued) Redemption liability At 31 December 2023, the expected cash flows relating to the redemption liability were remeasured resulting in gain of £4.5m included within the consolidated statement of comprehensive income. £1.2m has been included within finance expenses relating to the unwinding of the redemption liability from the end of the prior year. Carrying value of redemption liability Balance as at 1 Jan Redemption liability arising on acquisition Purchase of additional minority interest in Fluent Gain on remeasurement Unwinding of redemption liability Balance as at 31 Dec 2023 £’000 7,186 – (1,090) (4,486) 1,183 2,793 2022 £’000 – 6,540 – – 646 7,186 Redemption liabilities are in respect of the put and call options relating to the Fluent and Auxilium acquisitions and are £2.4m (2022: £7.0m) and £0.4m (2022: £0.2m) respectively. Total acquisition costs The total costs relating to the four acquisitions above that are included in the consolidated statement of comprehensive income are as follows: Amortisation of acquired intangibles Option costs (IFRS 2 and IAS 19) Acquisition related costs Total costs 2023 £’000 5,160 4,277 159 9,596 2022 £’000 2,582 1,999 2,755 7,336 The Fluent minority interest purchase during the year resulted in £1.8m accelerated equity settled option costs and £0.4m additional cash settled option costs. 138 139 6 Operating profit Operating profit is stated after the following items: Depreciation of property, plant and equipment Depreciation of right of use assets Impairment of right of use assets Amortisation of acquired intangibles Amortisation of other intangibles Costs related to acquisition options Costs related to acquisitions Costs related to restructuring Impairment and amounts written off non-listed equity investments Gain on fair value measurement of contingent consideration Loss on fair value measurement of derivative financial instruments Note 12 13 13 5, 14 14 5 5 16 15 15 2023 £’000 1,225 857 428 5,160 310 4,277 159 539 – – 2022 £’000 591 563 – 2,582 284 1,999 2,755 – 2,783 (884) 190 18 Profits from associates are disclosed as part of the operating profit as this is the operational nature of the Group. 2023 £’000 2022 £’000 Auditor remuneration: Fees payable to the Group’s auditor for the audit of the Group’s financial statements 571 Fees payable to the Group’s auditor and its associates for other services: Audit of the accounts of subsidiaries Audit-related assurance services 66 133 312 288 55 140 141 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 7 Staff costs Staff costs, including executive and non-executive Directors’ remuneration, are as follows: Wages and salaries Share-based payments (see note 30) Social security costs Defined contribution pension costs Other employee benefits 2023 £’000 42,753 4,429 4,585 1,736 738 2022 £’000 32,204 2,983 3,608 1,373 730 54,241 40,898 Staff costs are included in the consolidated statement of comprehensive income as follows: Cost of sales (see note 4) Administrative expenses The average number of people employed by the Group during the year was: 2023 £’000 22,764 31,477 54,241 2022 £’000 16,401 24,497 40,898 2023 Number 2022 Number Executive Directors Advisers Compliance Sales and marketing Operations Total 3 285 106 110 497 1,001 3 216 98 106 367 790 141 140 7 Staff costs (continued) Key management compensation Key management are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, which are the Directors of Mortgage Advice Bureau (Holdings) plc. Wages and salaries Share-based payments Social security costs Defined contribution pension costs Other employment benefits 2022 £’000 2,047 441 280 2023 £’000 1,387 159 181 11 2 4 4 1,742 2,774 During the year retirement benefits were accruing to 2 Directors (2022: 2) in respect of defined contribution pension schemes. The total amount payable to the highest paid Director in respect of emoluments was £580,161 (2022: £858,176). The value of the Group’s contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to £nil (2022: £nil). 8 Finance income and expenses Finance income Interest income Interest income accrued on loans to associates Finance expenses Interest expense Interest expense on lease liabilities Unwinding of redemption liability 2023 £’000 291 – 6 291 2023 £’000 1,320 107 1,183 2,610 2022 £’000 102 108 2022 £’000 515 77 646 1,238 During the year, interest accrued in previous years of £426,000 was paid (2022: £nil). The interest expense mainly relates to the term loan and the revolving credit facility (see note 21). 142 143 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 9 Income tax Current tax expense UK corporation tax charge on profit for the year Total current tax Deferred tax expense Origination and reversal of timing differences Temporary difference on share-based payments Effect of changes in tax rates Total deferred tax (see note 24) Total tax expense 2023 £’000 5,434 5,434 (1,766) 51 – (1,715) 3,719 2022 £’000 4,184 4,184 291 128 (29) 390 4,574 The reasons for the difference between the actual charge for the year and the standard rate of corporation tax in the United Kingdom of 23.52% (2022: 19.00%) applied to profit for the year is as follows: Profit for the year before tax Expected tax charge based on corporation tax rate Expenses not deductible for tax purposes Research & Development Tax on share options exercised Other share option differences Adjustment to deferred tax charge due to change in tax rate Other differences Fair value loss/(gain) on derivative financial instruments Fair value gain on contingent consideration Redemption liability movements Profits from associates Amounts written off investments Fixed asset differences Short term timing differences at different tax rates Chargeable gains Utilisation of brought forward tax losses Adjustments to prior years Total tax expense 2023 £’000 16,178 3,805 115 (48) (89) 1,099 – 12 45 – (777) (199) – (207) (22) – (22) 7 2022 £’000 17,353 3,297 495 (139) (27) 652 25 (5) (70) (168) 123 (135) 529 55 (54) (4) – – 3,719 4,574 143 142 9 Income tax (continued) Options exercised during the period resulted in a current tax credit of £0.1m (2022: nil) recognised directly in equity relating to the current tax deduction in excess of the cumulative share-based payment expense relating to these options. For the year ended 31 December 2023 the deferred tax credit relating to unexercised share options recognised in equity was £448,826 (2022: £783,556 - charge). A charge of £nil (2022: £16,568) was recognised in deferred tax in equity as a result of remeasurements arising from changes to UK corporation tax rates. 10 Earnings per share Basic earnings per share are calculated by dividing net profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. Basic earnings per share Profit for the year attributable to the owners of the parent 2023 £’000 13,467 2022 £’000 12,237 Weighted average number of shares in issue 57,090,793 56,081,853 Basic earnings per share (in pence per share) 23.6p 21.8p For diluted earnings per share, the weighted average number of ordinary shares in existence is adjusted to include potential ordinary shares arising from share options. Diluted earnings per share Profit for the year attributable to the owners of the parent 2023 £’000 13,467 2022 £’000 12,237 Weighted average number of shares in issue 57,434,053 56,528,515 Diluted earnings per share (in pence per share) 23.5p 21.6p The share data used in the basic and diluted earnings per share computations are as follows: Weighted average number of ordinary shares Issued ordinary shares at start of year Effect of shares issued during year 2023 2022 57,030,995 53,204,620 59,798 2,877,233 Basic weighted average number of shares 57,090,793 56,081,853 Potential ordinary shares arising from options 343,260 446,662 Diluted weighted average number of shares 57,434,053 56,528,515 144 145 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 10 Earnings per share (continued) The reconciliation between the basic and adjusted figures is as follows: 2023 £’000 13,467 2022 £’000 12,237 2023 Basic earnings per share pence 2022 Basic earnings per share pence 2023 Diluted earnings per share pence 2022 Diluted earnings per share pence 23.6 21.8 23.5 21.6 Profit for the year Adjustments: Amortisation of acquired intangibles 3,575 2,582 6.3 4.6 6.2 4.6 Costs relating to the First Mortgage, Fluent and Auxilium options 3,477 1,715 6.1 3.1 6.1 Costs relating to Fluent and Auxilium acquisitions 159 2,755 0.3 4.9 0.3 3.0 4.9 Gain on contingent consideration Loss on derivative financial – (891) – (1.6) – (1.6) instruments 190 18 0.3 – 0.3 Amount written off non–listed equity investment Restructuring costs – 412 Unwinding of redemption liability (3,303) Profit on sale of assets – Tax effect of adjustments (966) 2,783 – 646 (19) (609) – 0.7 (5.8) – (1.7) Adjusted earnings 17,012 21,217 29.8 5.0 – 1.1 – (1.1) 37.8 – 0.7 (5.8) – (1.7) 29.6 – 4.9 – 1.1 – (1.1) 37.4 The Group uses adjusted results as key performance indicators, as the Directors believe that these provide a more consistent measure of operating performance. Adjusted profit is therefore stated before one-off acquisition costs and one-off restructuring costs, ongoing non-cash items relating to the acquisitions of First Mortgage, Fluent and Auxilium, fair value gains on financial instruments relating to options to increase shareholding in associate businesses and impairment of loans to related parties, net of tax. 144 145 11 Dividends Dividends paid and declared on ordinary shares during the year: Final dividend for 2022: 14.7p per share (2021: 14.7p) Interim dividend for 2023: 13.4p per share (2022: 13.4p) Equity dividends on ordinary shares: Proposed for approval by shareholders at the AGM: Final dividend for 2023: 14.7p per share (2022: 14.7p) 2023 £’000 8,384 7,654 16,038 2023 £’000 8,398 8,398 2022 £’000 8,381 7,642 16,023 2022 £’000 8,384 8,384 The record date for the final dividend is 26 April 2024 and the payment date is 29 May 2024. The ex-dividend date will be 25 April 2024. The Company statement of changes in equity shows that the Company had positive reserves as at 31 December 2023 of £5.7m. There are sufficient distributable reserves in subsidiary companies to pass up to Mortgage Advice Bureau (Holdings) plc in order to pay the proposed final dividend. The proposed final dividend for 2023 has not been provided for in these financial statements, as it has not yet been approved for payment by shareholders. The final dividends paid and declared can differ from the proposed total dividends for approval due to (1) additional shares issued after the publication of these accounts but before the record date and (2) the number of unallocated shares within the Group’s Share Incentive Plan that do not receive a dividend. 146 147 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 12 Property, plant and equipment Freehold land and building £’000 Fixtures & fittings £’000 Computer equipment £’000 Cost As at 1 January 2023 Additions Disposals As at 31 December 2023 Depreciation As at 1 January 2023 Charge for the year Eliminated on disposal As at 31 December 2023 Cost As at 1 January 2022 Additions Acquisition of subsidiaries Disposals 2,536 – – 2,536 407 54 – 461 Freehold land and building £’000 2,536 – – – As at 31 December 2022 2,536 Depreciation As at 1 January 2022 Charge for the year Eliminated on disposal As at 31 December 2022 Net Book Value As at 31 December 2023 As at 31 December 2022 As at 31 December 2021 Office refurbishment 349 58 – 407 2,075 2,129 2,187 3,681 535 (55) 4,161 404 666 (20) 1,050 1,515 397 (262) 1,650 793 505 (261) 1,037 Fixtures & fittings £’000 Computer equipment £’000 1,050 2,903 348 (620) 3,681 823 164 (583) 404 3,111 3,277 227 1,417 326 513 (741) 1,515 1,164 369 (740) 793 613 722 253 Total £’000 7,732 932 (317) 8,347 1,604 1,225 (281) 2,548 Total £’000 5,003 3,229 861 (1,361) 7,732 2,336 591 (1,323) 1,604 5,799 6,128 2,667 During the prior year, the Group undertook a refurbishment project of its head office premises located in Derby costing £2.8m, which is included within Fixtures and fittings. As a result of this project, the Group disposed of assets with an original cost of £1.4m and a net book value of £0.04m for nil consideration. 146 147 13 Right of use assets Leases This note provides information for leases where the Group is a lessee. The consolidated statement of financial position shows the following amounts on leases: Right of use assets As at 1 January 2023 Additions Remeasurement Impairment Depreciation As at 31 December 2023 Lease liabilities As at 1 January 2023 Additions Remeasurement Interest expense Lease payments As at 31 December 2023 Right of use assets As at 1 January 2022 Additions Acquisition of subsidiary Depreciation Disposals As at 31 December 2022 Land and Buildings £’000 Office equipment £’000 3,747 – (317) (423) (821) 2,186 Land and Buildings £’000 3,822 – (317) 102 (973) 2,634 125 13 – (5) (36) 97 Office equipment £’000 125 13 – 5 (41) 102 Land and Buildings £’000 Office equipment £’000 2,457 950 919 (546) (33) 3,747 – – 142 (17) – 125 Total £’000 3,872 13 (317) (428) (857) 2,283 Total £’000 3,947 13 (317) 107 (1,014) 2,736 Total £’000 2,457 950 1,061 (563) (33) 3,872 148 149 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 13 Right of use assets (continued) Leases (continued) Lease liabilities As at 1 January 2022 Additions Acquisition of subsidiary Interest expense Lease payments Disposals As at 31 December 2022 Land and Buildings £’000 2,596 919 874 74 (604) (37) 3,822 Office equipment £’000 – – 142 3 (20) – 125 The present value of the lease liabilities is as follows: 31 December 2023 Lease payments (undiscounted) Finance charges Net present values 31 December 2022 Lease payments (undiscounted) Finance charges Net present values Within 1 year 997 (66) 931 Within 1 year 1,048 (115) 933 1-2 years 792 (37) 755 1-2 years 994 (83) 911 2-5 years 1,005 (36) 969 2-5 years 1,857 (94) 1,763 After 5 years 81 – 81 After 5 years 345 (5) 340 The consolidated statement of comprehensive income shows the following amounts relating to leases: Depreciation of right of use assets Impairment of right of use assets Interest expense Short term lease expense Low value lease expense The total cash flow for leases during the period was £1.1m (2022: £0.7m). 2023 £’000 857 428 107 79 2 Total £’000 2,596 919 1,016 77 (624) (37) 3,947 Total 2,875 (139) 2,736 Total 4,244 (297) 3,947 2022 £’000 563 – 77 40 3 149 148 13 Right of use assets (continued) Variable lease payments One property lease contains variable lease payments linked to current market rental from January 2023, August 2023 and December 2024. A 1% fluctuation in market rent would impact total annual lease payments by approximately £1,000. Extension and termination options During the year, a break clause was exercised on one property. This resulted in a remeasurement of the associated lease liability of £317,000. An impairment assessment of the impacted right of use asset resulted in an impairment of £428,000 recognised in the consolidated statement of comprehensive income. As at 31 December 2023, the carrying amounts of all other lease liabilities are not reduced by the amount of payments that would be avoided from exercising a break clause because it was considered reasonably certain that the Group would not exercise its right to break the lease. Total lease payments of £85,320 are potentially avoidable were the Group to exercise break clauses at the earliest opportunity. 14 Intangible assets Goodwill and identified intangible assets arising on acquisitions are allocated to the cash-generating unit of that acquisition. The Board considers that the Group has only one operating segment and now has five cash-generating units (CGUs). The goodwill relates to the following acquisitions: • Talk Limited in 2012, and in particular its main operating subsidiary Mortgage Talk Limited (“Mortgage Talk”) • First Mortgage Direct Limited (“First Mortgage”) in 2019 • Project Finland Topco Limited (“Fluent”) in 2022 • Vita Financial Limited (“Vita”) in 2022 • Aux Group Limited, and in particular its main operating subsidiary Auxilium Partnership Limited (“Auxilium”) in 2022 Goodwill Cost As at 1 January Acquisition of subsidiaries As at 31 December Accumulated impairment As at 1 January and 31 December Net book value As at 31 December 2023 £’000 54,038 – 54,038 2022 £’000 15,308 38,730 54,038 153 153 53,885 53,885 150 151 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 14 Intangible assets (continued) Where the goodwill allocated to the CGU is significant in comparison with the entity’s total carrying amount of goodwill this is set out below: Goodwill Cost Mortgage Talk £’000 First Mortgage £’000 Fluent £’000 Other1 £’000 Total £’000 As at 1 January and 31 December 2023 4,267 11,041 36,974 1,756 54,038 Accumulated impairment As at 1 January and 31 December 2023 153 – – – 153 Net book value At 31 December 2023 4,114 11,041 36,974 1,756 53,885 1 ‘Other’ comprises Vita and Auxilium. The goodwill is deemed to have an indefinite useful life. Under IAS 36, “Impairment of assets”, the Group is required to review and test its goodwill for impairment annually or in the event of a significant change in circumstances. The impairment reviews conducted at the end of 2023 concluded that there had been no further impairment of goodwill. The key assumptions set out below and used in respect of value in use calculations are those regarding growth rates and anticipated changes to revenues and costs during the period covered by the calculations, based upon management’s expectations, with the discount rates reflecting current market assessments of the time value of money and the risks specific to these assets, based on the Group’s WACC. Revenue growth is based on past performance and management’s expectation of growth rates in the markets in which it operates, and forecast costs are based on management’s expectations of changes to the current structure of each CGU. The terminal value growth rate of 3.5% reflects the Group’s market share growth model. Goodwill arose on the acquisition of Mortgage Talk Limited and has since been allocated to the CGU of the Group as it existed prior to the impact of the subsequent four acquisitions listed above. Impairment testing for this CGU is carried out by determining recoverable amount on the basis of value in use, which is then compared to the carrying value of the assets of the CGU including goodwill. The value in use that has been determined exceeds the £4.1m (2022: £4.1m) carrying value of goodwill for this CGU and therefore no impairment of goodwill is required. Management has estimated future cash flows over a five-year period, which are based on extrapolated budget models which have been approved by the Board, and applied a discount rate of 13.2% (2022: 11.3%) and then applied a terminal value calculation, which assumes a growth rate of 3.5% (2022: 5%) in future cashflows, in order to estimate the present value of those cash flows in determining the value in use. Management believes that any reasonably possible changes to any of the key assumptions applied in determining the value in use would not cause the carrying amount of goodwill to exceed the present value of the estimated future cashflows. 150 151 14 Intangible assets (continued) Goodwill arose on the acquisition of First Mortgage and has since been allocated to this CGU of the Group. Impairment testing for this CGU is carried out by determining recoverable amount on the basis of value in use, which is then compared to the carrying value of the assets of the CGU including goodwill. The value in use that has been determined exceeds the £11.0m (2022: £11.0m) carrying value of goodwill for this CGU and therefore no impairment of goodwill is required. Management has estimated future cash flows over a five-year period, which are based on extrapolated budget models which have been approved by the Board, and applied a discount rate of 13.2% (2022: 20.7%) and then applied a terminal value calculation, which assumes a growth rate of 3.5% (2022: 5%) in future cashflows, in order to estimate the present value of those cash flows in determining the value in use. Management believes that any reasonably possible changes to any of the key assumptions applied in determining the value in use would not cause the carrying amount of goodwill to exceed the present value of the estimated future cashflows. Goodwill arose on the acquisition of Fluent and has since been allocated to this CGU of the Group. Impairment testing for this CGU is carried out by determining recoverable amount on the basis of value in use, which is then compared to the carrying value of the assets of the CGU including goodwill. The value in use that has been determined exceeds the £37.0m carrying value of goodwill for this CGU and therefore no impairment of goodwill is required. Management has estimated future cash flows over a five-year period, which are based on extrapolated budget models which have been approved by the Board, and applied a discount rate of 13.2% and then applied a terminal value calculation, which assumes a growth rate of 3.5% in future cashflows, in order to estimate the present value of those cash flows in determining the value in use. Management believes that any reasonably possible changes to any of the key assumptions applied in determining the value in use would not cause the carrying amount of goodwill to exceed the present value of the estimated future cashflows. The sensitivity of the value in use for all acquisitions to changes in the key assumptions are as follows: Assumption Discount rate Years 1-5 cash flows Long-term growth rate Base assumption Change in base assumption (Decrease) in value in use, £m 13.2% +1.0% (absolute) Various -5.0% (proportionate) 3.5% -1.0% (absolute) (26.8) (42.3) (19.9) 152 153 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 14 Intangible assets (continued) Other intangible assets Internally Generated Technology/ Technology/ Customer Trademarks Other Licences Website Software Software contracts and brands relationships £’000 £’000 £’000 £’000 £’000 £’000 £’000 Total £’000 Cost As at 1 January 2023 Additions Disposals 108 – – 223 133 988 (140) (554) 1,105 16,824 2,337 5,089 34,568 60,254 – – – – – – – – 1,121 (694) As at 31 December 2023 108 216 1,539 16,824 2,337 5,089 34,568 60,681 Accumulated Amortisation As at 1 January 2023 Charge for the year Disposals 108 – – 140 51 610 258 842 1,683 (140) (554) – 797 273 – 680 483 – 1,254 4,431 2,722 5,470 – (694) As at 31 December 2023 108 51 314 2,525 1,070 1,163 3,976 9,207 Other intangible assets Internally Generated Technology/ Technology/ Customer Trademarks Other Licences Website Software Software contracts and brands relationships £’000 £’000 £’000 £’000 £’000 £’000 £’000 Total £’000 Cost As at 1 January 2022 108 Additions Acquisition of subsidiaries Disposals – – – 140 83 – – 571 534 – – – – 16,824 – 1,980 1,470 – – 4,269 617 – 3,619 34,568 55,368 – – – – 357 – As at 31 December 2022 108 223 1,105 16,824 2,337 5,089 34,568 60,254 Accumulated Amortisation As at 1 January 2022 108 140 Charge for the year Disposals – – – – As at 31 December 2022 108 140 399 211 – 610 – 842 – 842 550 247 – 797 368 312 – – 1,565 1,254 2,866 – – 680 1,254 4,431 Net book value As at 31 December 2023 As at 31 December 2022 As at 31 December 2021 – – – 165 1,225 14,299 1,267 3,926 30,592 51,474 83 – 495 15,982 1,540 4,409 33,314 55,823 172 – 1,430 1,102 – 2,704 152 153 14 Intangible assets (continued) Assets which are internally generated are solely within asset categories; Website and Internally Generated Technology/Software. Technology/software contains only acquired technology assets. Other relationships include lender and introducer relationships and member relationships assets. Individually Material Intangible Assets Asset Description NBV as at NBV as at 31 December 31 December Asset Category 2023 £’000 2022 Amortisation End Date £’000 Fluent Money Limited – Technology Technology/Software 14,305 15,988 July 2032 Fluent Mortgages Limited – Introducer Relationships Other relationships 11,149 12,041 July 2036 Fluent Lifetime Limited – Introducer Relationships Other relationships 6,985 7,543 July 2036 Fluent Money Limited – Lender Relationships Other relationships 6,254 6,754 July 2036 Fluent Bridging Limited – Introducer Relationships Other relationships 5,614 6,063 July 2036 Fluent Money Limited – Brand Trademarks and brands 2,997 3,313 July 2033 First Mortgage Direct Limited – Customer Relationships Customer contracts 990 1,210 July 2028 First Mortgage Direct Limited – Brand Trademarks and brands 809 956 July 2029 15 Investments in associates and joint venture The Group holds investments in associates and a joint venture, all of which are accounted for under the equity method, as follows: Company name CO2 Commercial Limited Sort Group Limited Buildstore Limited Registered office Profile House, Stores Road, Derby DE21 4BD Percentage of ordinary shares held Description 49 Property surveyors Burdsall House, London Road, Derby DE24 8UX 43.25 Conveyancing services NSB & RC Lydiard Fields, Great Western Way, Swindon SN5 8UB 25 Provision of financial services Clear Mortgage Solutions Limited 114 Centrum House, Dundas Street, Edinburgh EH3 5DQ 49 Provision of financial services MAB Broker Services PTY Limited Level 5, 2 Elizabeth Plaza, North Sydney, NSW 2060 48.05 Provision of financial services The Mortgage Broker Group Limited Prospect House 1, Prospect Place, Derby, DE24 8HG 25 Provision of financial services Meridian Holdings Group Limited 68 Pullman Road, Wigston, Leicester, LE18 2DB 40 Provision of financial services 154 155 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 15 Investments in associates and joint venture (continued) Company name Evolve FS Ltd Heron Financial Limited Registered office Unit 26-28 Brightwell Barns, Waldringfield Road, Brightwell, Ipswich, Suffolk, IP10 0BJ Moor Park Golf Club, Moor Park, Rickmansworth, Hertfordshire, England, WD3 1QN Percentage of ordinary shares held Description 49 Provision of financial services 49 Insurance agent and broker M & R FM Ltd(1) 14 Kensington Terrace, Gateshead, NE11 9SL 37 Provision of financial services The reporting date for the Group’s associates, as listed in the table above, other than Clear Mortgage Solutions Limited and MAB Broker Services PTY Ltd, is 31 December and their country of incorporation is England and Wales. The reporting date for Clear Mortgage Solutions Limited is 30 December and its country of incorporation is England and Wales. The reporting date for the Group’s joint venture, MAB Broker Services PTY Limited, is 30 June and its country of incorporation is Australia. (1) 37% of the ordinary share capital of M & R FM Ltd is held by First Mortgage Direct Ltd. The investment in associates and the joint venture at the reporting date is as follows: As at 1 January Additions Disposals Credit to the consolidated statement of comprehensive income: Share of profit Dividends received As at 31 December 2023 £’000 11,387 469 – 848 848 (403) 12,301 2022 £’000 12,433 – (848) 712 712 (910) 11,387 The Group is entitled to the results of its associates in equal proportion to its equity stakes. The carrying value of the Group’s joint venture, MAB Broker Services PTY Limited, as at 31 December 2023 is £nil (2022: £nil). In the year ended 30 June 2023, MAB Broker Services PTY Limited reported a profit of AUD0.01m (2022: loss of AUD0.38m). 154 155 15 Investments in associates and joint venture (continued) Acquisitions and disposals 2023 On 26 May 2023, First Mortgage Direct Limited, an 80% owned subsidiary of the Group, acquired a further 12% of M & R FM Limited for a consideration of £469,454, bringing its total stake to 37%. 2022 On 14 April 2022, Mortgage Advice Bureau Limited paid a further £277,600 in contingent consideration in respect of its acquisition of a 49% stake in Heron Financial Limited in November 2021. On 27 April 2022, Mortgage Advice Bureau Limited paid a further £179,252 in contingent consideration in respect of its acquisition of a further 29% interest in Vita Financial Limited in May 2021. On 21 July 2022, Mortgage Advice Bureau Limited paid a further £625,567 in contingent consideration in respect of its acquisition of a 49% stake in Evolve FS Limited in July 2021. On 12 July 2022, Mortgage Advice Bureau Limited acquired a further 26% of Vita Financial Limited having previously held 49% of the share capital of Vita Financial Limited. As a result, the Group now exercises control over Vita Financial Limited and so the investment is considered a subsidiary of the Group. The carrying value of the 49% holding in Vita Financial Limited was £848,022. The fair value of the previously held equity interest was established to be £867,500, therefore a gain of £19,478 is recognised in the consolidated statement of comprehensive income as this previously held interest is treated as though it has been disposed of. On 15 July 2022, First Mortgage Direct Limited, an 80% owned subsidiary of the Group, paid a further £244,858 in contingent consideration in respect of its acquisition of a 25% stake in M & R FM Limited in January 2021. On 19 October 2022, Mortgage Advice Bureau Limited disposed of its 49% stake in Lifetime FS Limited for nil consideration. A total net gain of £884,000 was recognised in the consolidated statement of comprehensive income in respect of the actual contingent consideration paid or expected to be paid on the above associate businesses in 2022. 156 157 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 15 Investments in associates and joint venture (continued) Summarised financial information for associates The tables below provide summarised financial information for those associates and joint ventures that are material to the Group. The information disclosed reflects the amounts presented in the unaudited financial statements or management accounts of the relevant associates and joint ventures and not the Group’s share of those amounts: 2023 Evolve FS Ltd £’000 Meridian Heron Holdings Group Ltd £’000 Financial Ltd £’000 Sort Group Limited £’000 Clear Mortgage Solutions M & R FM Limited £’000 Ltd £’000 Non-current assets Cash balances Current assets (excluding cash balances) Current liabilities 29 420 349 (614) 221 522 1,974 649 24 53 1,076 2,295 1,097 1,073 873 675 567 384 485 (455) (652) (642) (404) (377) Non-current liabilities and provisions (8) (419) (380) (84) (600) (410) Revenue 4,237 2,409 7,129 11,794 4,974 3,874 Profit before taxation Total comprehensive income Carrying value of investment 60 48 600 497 385 289 788 673 507 416 1,000 802 As at 1 January 2023 2,882 2,638 1,497 1,936 864 Increase in investment Profit attributable to Group Dividends received – 23 – – 244 (125) – 69 – – 259 – – 213 (56) 906 469 249 (222) As at 31 December 2023 2,905 2,757 1,566 2,195 1,021 1,402 156 157 15 Investments in associates and joint venture (continued) Summarised financial information for associates (continued) 2022 Non-current assets Cash balances Evolve FS Ltd £’000 45 502 Current assets (excluding cash balances) 356 Current liabilities (493) Non-current liabilities and provisions (7) Heron Financial Ltd £’000 Meridian Holdings Group ltd £’000 Sort Group Limited £’000 183 409 266 (150) (161) 1,927 1,700 166 (868) (740) 592 2,003 605 (1,134) (93) Pinnacle Surveyors (England & Wales) Limited £’000 30 316 708 (569) (49) Revenue 4,792 2,576 6,873 12,042 5,838 (Loss)/profit before taxation Total comprehensive (loss)/income (26) (26) 275 209 (78) (78) 976 820 Carrying value of investments As at 1 January 2022 3,143 2,536 1,541 1,628 (Loss)/profit attributable to Group Dividends received (16) (245) 102 – (44) – 438 (130) As at 31 December 2022 2,882 2,638 1,497 1,936 424 345 464 165 (348)* 281 * These dividends are received from CO2 Commercial Limited, the parent undertaking of Pinnacle Surveyors (England & Wales) Limited. All other information disclosed above relates to Pinnacle Surveyors (England & Wales) Limited. 158 159 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 15 Investments in associates and joint venture (continued) Individually immaterial associates and joint ventures In addition to the interests in associates disclosed above, the Group also has interests in a number of individually immaterial associates and a joint venture that are accounted for using the equity method. The aggregate of the summarised financial information for these associates is shown below, along with the summarised financial information for the joint venture. The information disclosed reflects the amounts presented in the unaudited financial statements or management accounts of the relevant associates and the joint venture and not the Group’s share of those amounts: 2023 2022 2023 2022 Associates Associates Joint Venture Joint Venture £’000 £’000 Non-current assets Cash balances Current assets (excluding cash balances) £’000 991 680 1,295 £’000 413 3,287 1,561 Current liabilities (1,202) (2,155) Non-current liabilities and provisions (794) (1,366) 5 26 1,127 (53) (111) Revenue 8,893 14,470 406 (Loss)/profit before taxation Total comprehensive (loss)/ income (Loss)/profit attributable to Group Dividends received (645) (675) (210) – 424 146 67 188 11 11 – – 42 25 1,167 (74) (109) 486 (267) (213) – – All associates and joint venture prepare their financial statements in accordance with FRS 102 other than MAB Broker Services PTY Limited who prepare their financial statements in accordance with the Australian Accounting Standards. There would be no material difference to the profit attributable to the Group if the accounts of any of the associates were prepared in accordance with IFRS. Unrecognised losses The Group has discontinued recognising its share of losses from its joint venture as these exceed the carrying amount of the investment. The Group had unrecognised profits in the year of £44,186 (2022: losses of £75,948) and cumulative unrecognised losses of £757,458 (2022: 801,644). 158 159 15 Investments in associates and joint venture (continued) Derivative financial instruments The put and call options are carried at fair value through profit or loss. The carrying values for the call options at 31 December 2023 have resulted in a financial asset of £302,319 (2022: £255,994) for Evolve FS Limited (“Evolve”) and £112 (2022: £64,114) for Heron Financial Limited (“Heron”). The carrying value for the put option has resulted in a financial liability of £182,984 (2022: £10,280) for Heron at 31 December 2023. The fair values of the option contracts have been calculated using an option valuation model. The key assumptions used to value the options in the model are the value of shares in the associate, the anticipated growth of the business, the option exercise price, the expected life of the option, the expected share price volatility of similar businesses, forecast dividends and the risk-free interest rate. The gains and losses relating to the derivative financial instruments is included within ‘operating profit’. These financial instruments are categorised as Level 3 within the fair value hierarchy. Contingent Consideration The fair value of contingent consideration at 31 December 2023 was £nil (2022: £nil). During the year, no contingent consideration was paid (2022: £1.3m) and a gain of £nil (2022: £0.9m) has been recognised in the consolidated statement of comprehensive income. 16 Investments in non-listed equity shares As at 1 January Additions Revaluation Write-off of investment Disposals As at 31 December 2023 £’000 – – – – – – 2022 £’000 2,783 – – (2,783) – – The investment at the start of the prior year represented a shareholding of 2.92% in PD Innovations Limited, trading as Boomin, at a value of £2.8m. This investment was classified as Level 3 for the purpose of disclosure in the fair value hierarchy, with any fair value movements taken to the consolidated statement of comprehensive income. Boomin was put into liquidation in October 2022, having not been able to secure new investors in the challenging economic climate, which lead to a £2.8m non-cash write-off of the investment. The Group originally paid cash consideration of £2.5m on 9 April 2021 for a 3.17% stake in PD Innovations Limited. In 2022, contingent consideration of £115,000 was received relating to the sale of Yourkeys Technology Limited on 23 April 2021. This was £58,000 higher than estimated, resulting in a gain recognised in the consolidated statement of comprehensive income. 160 161 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 17 Subsidiaries The subsidiaries of Mortgage Advice Bureau (Holdings) plc at the reporting date have been included in the consolidated financial statements. The trading subsidiaries are as follows: Company name Country of Incorporation Percentage of ordinary shares held (effective holding) Nature of business Mortgage Advice Bureau Limited England and Wales 100 Provision of financial services Mortgage Advice Bureau (Derby) Limited England and Wales 100 Provision of financial services Capital Protect Limited England and Wales 100 Provision of financial services Mortgage Talk Limited England and Wales 100 Provision of financial services MABWM Limited England and Wales 100 Provision of financial services First Mortgage Direct Limited First Mortgage Limited Property Law Centre Limited Scotland Scotland Scotland 80 Provision of financial services 80 Provision of financial services 80 Provision of financial services Talk Limited England and Wales 100 Intermediate holding company Mortgage Advice Bureau Australia (Holdings) PTY Limited Australia 100 Intermediate holding company Mortgage Advice Bureau PTY Limited Australia 100 Holding of intellectual property Vita Financial Limited England and Wales BPR Protect Limited England and Wales 75 75 Provision of financial services Provision of financial services Company Protection Limited England and Wales 56.3 Provision of financial services Aux Group Limited England and Wales Auxilium Partnership Limited England and Wales 75 75 Provision of financial services Provision of financial services Project Finland Topco Limited England and Wales 84.3 Intermediate holding company Project Finland Bidco Limited England and Wales 84.3 Intermediate holding company The Fluent Money Group Limited England and Wales 84.3 Intermediate holding company Fluent Mortgages Holdings Limited England and Wales 84.3 Intermediate holding company Fluent Mortgages Limited England and Wales 84.3 Provision of financial services Fluent Mortgages Horwich Limited England and Wales 84.3 Provision of financial services Fluent Lifetime Limited England and Wales 84.3 Provision of financial services Fluent Money Limited England and Wales 84.3 Provision of financial services Fluent Loans Limited England and Wales 84.3 Provision of financial services Fluent Bridging Limited England and Wales 84.3 Provision of financial services 160 161 17 Subsidiaries (continued) Mortgage Advice Bureau (Holdings) plc also holds a number of dormant subsidiaries which at the reporting date have been included in the consolidated financial statements. The dormant subsidiaries are as follows: Company name Country of Incorporation Percentage of ordinary shares held Mortgage Advice Bureau (UK) Limited England and Wales Mortgage Advice Bureau (Bristol) Limited England and Wales MAB (Derby) Limited England and Wales L&P 137 Limited England and Wales Mortgage Talk (Partnership) Limited England and Wales Financial Talk Limited England and Wales Survey Talk Limited England and Wales L&P 134 Limited England and Wales Loan Talk Limited England and Wales MAB1 Limited England and Wales MAB Private Finance Limited England and Wales MAB Financial Planning Limited England and Wales First Mortgage Shop Limited First Mortgages Limited Fresh Start Finance Limited Scotland Scotland Scotland 100 100 100 100 100 100 100 100 100 100 100 100 80 80 80 Nature of business Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant The registered office for Vita Financial Limited and its subsidiary is 1st Floor Tudor House, 16 Cathedral Road, Cardiff CF11 9LJ. The registered office of Mortgage Advice Bureau Australia (Holdings) PTY Limited and Mortgage Advice Bureau PTY Limited is Norton Rose Fulbright, Level 18, 225 George Street, Sydney, NSW 2000, Australia. The registered office for First Mortgage Direct Limited and its subsidiaries which are incorporated in Scotland is 30 Walker Street, Edinburgh, EH3 7HR. The registered office for Project Finland Topco Limited and its subsidiaries is 102 Rivington House Chorley New Road, Horwich, Bolton, England, BL6 5UE. The registered office for all other subsidiaries of Mortgage Advice Bureau (Holdings) plc is Capital House, Pride Place, Pride Park, Derby, DE24 8QR, United Kingdom. Mortgage Advice Bureau (Holdings) plc holds 100% of the ordinary share capital of Mortgage Advice Bureau Limited and Talk Limited. 162 163 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 17 Subsidiaries (continued) Mortgage Advice Bureau Limited holds 100% of the ordinary share capital of Mortgage Advice Bureau (Derby) Limited, Capital Protect Limited, MABWM Limited and Mortgage Advice Bureau Australia (Holdings) PTY Limited. Mortgage Advice Bureau Australia (Holdings) PTY Limited has a 100% equity stake in Mortgage Advice Bureau PTY Limited and a 48.05% equity stake in MAB Broker Services PTY Limited. On 2 July 2019, Mortgage Advice Bureau Limited acquired 80% of the ordinary share capital of First Mortgage Direct Limited. First Mortgage Direct Limited holds 100% of the ordinary share capital of First Mortgage Limited, Property Law Centre Limited, First Mortgages Limited, First Mortgage Shop Limited, and Fresh Start Finance Limited. On 12 July 2022 Mortgage Advice Bureau Limited acquired 75.4% of the ordinary share capital of Project Finland Topco Limited. On 11 April 2023 Mortgage Advice Bureau Limited increased its stake in Project Finland Topco Limited to 76.2% and further increased its stake on 19 December 2023 to 84.3% (see note 5). Project Finland Topco Limited holds 100% of the ordinary share capital of Project Finland Bidco Limited, which in turn holds 100% of the ordinary share capital of The Fluent Money Group Limited. The Fluent Money Group Limited holds 100% of the issued share capital of Fluent Mortgage Holdings Limited, Fluent Lifetime Limited, Fluent Money Limited, Fluent Loans Limited and Fluent Bridging Limited. Fluent Mortgage Holdings Limited owns 100% of the ordinary share capital of Fluent Mortgages Limited and Fluent Mortgages Horwich Limited. On 12 July 2022 Mortgage Advice Bureau Limited increased its stake in Vita Financial Limited to 75%. Vita Financial Limited holds 100% of the ordinary share capital of BPR Protect Limited and 75% of the ordinary share capital of Company Protection Limited. On 3 November 2022 Mortgage Advice Bureau Limited acquired 75% of the ordinary share capital of Aux Group Limited. Aux Group Limited holds 100% of the ordinary share capital of Auxilium Partnership Limited. Talk Limited holds 100% of the ordinary share capital of Mortgage Talk Limited, L&P 137 Limited, Mortgage Talk (Partnership) Limited, Financial Talk Limited, and Survey Talk Limited. Mortgage Talk Limited holds 100% of the ordinary share capital of Loan Talk Limited. L&P 137 Limited holds 100% of the ordinary share capital of L&P 134 Limited. Three of the Group’s subsidiaries, First Mortgage Limited (SC177681), Property Law Centre Limited (SC348791) and Fluent Mortgages Horwich Limited (14127588) are exempt from the audit of individual accounts under section 479A of the Companies Act 2006. There are no restrictions regarding the utilisation of cash or other resources held by any subsidiary. 162 163 18 Trade and other receivables Trade receivables Less provision for impairment of trade receivables Trade receivables – net Receivables from related parties Other receivables Loans to related parties Less provision for impairment of loans to related parties Total non-derivative financial assets other than cash and cash equivalents classified at amortised costs Prepayments and accrued income Total trade and other receivables Less: non-current portion - Loans to related parties Less: non-current - Trade receivables Current portion Reconciliation of movement in trade receivables to cashflow Movement per trade receivables Accrued interest movement Accrual of contingent consideration for Yourkeys disposal Acquired trade and other receivables Intercompany arising on acquisitions Total movement per cash flow 2023 £’000 2,028 (454) 1,574 – 924 201 (18) 2,681 6,993 9,674 (77) (276) 9,321 2023 £’000 (1,445) 13 – – – (1,432) 2022 £’000 3,029 (476) 2,553 29 962 559 (2) 4,101 7,018 11,119 (305) (526) 10,288 2022 £’000 3,679 (6) 55 (2,710) 299 1,317 The carrying value of trade and other receivables classified at amortised cost approximates fair value. Included within trade receivables are operational business development loans to Appointed Representatives. The non-current trade receivables balance is comprised of loans to Appointed Representatives. 164 165 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 18 Trade and other receivables (continued) Also included in trade receivables are amounts due from Appointed Representatives relating to commissions that are refundable to the Group when policy lapses or other reclaims exceed new business. As these balances have no credit terms, the Board of Directors consider these to be past due if they are not received within seven days. In the management of these balances, the Directors can recover them from subsequent new business entered into with the Appointed Representative or utilise payables that are owed to the same counterparties and included within payables as the Group has the legally enforceable right of set off in such circumstances. These payables are considered sufficient by the Directors to recover receivable balances should they default, and, accordingly, credit risk in this respect is minimal. In light of the above, the Directors do not consider that disclosure of an aging analysis of trade and other receivables would provide useful additional information. Further information on the credit quality of financial assets is set out in note 22. Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. As at 31 December 2023 the lifetime expected loss provision for trade receivables is £0.5m (2022: £0.5m). The movement in the impairment allowance for trade receivables has been included in cost of sales in the consolidated statement of comprehensive income. Impairment provisions for loans to associates are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. In determining the lifetime expected credit losses for loans to associates, the Directors have considered different scenarios for repayments of these loans and have applied percentage probabilities to each scenario for each associate where applicable. A summary of the movement in the provision for the impairment of receivables is as follows: As at 1 January New provisions for impairment losses Increases in existing provisions for impairment losses Impairment provisions no longer required As at 31 December 2023 £’000 476 – – (22) 454 2022 £’000 374 106 – (4) 476 165 164 18 Trade and other receivables (continued) A summary of the movement in the provision for the impairment of loans to related parties is as follows: As at 1 January Increases in existing provisions for impairment losses Impairment provisions no longer required As at 31 December 2023 £’000 2022 £’000 2 16 – 18 2 – – 2 As at 31 December 2023 the lifetime expected loss provision for loans to associates is £0.0m (2022: £0.0m), with 12 month expected credit losses recognised for remaining associates. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above less collateral held as security. Details of security held are given in note 22. 19 Cash and cash equivalents Unrestricted cash and bank balances Bank balances held in relation to retained commissions Cash and cash equivalents 2023 £’000 3,022 18,918 21,940 2022 £’000 7,219 18,243 25,462 Bank balances held in relation to retained commissions earned on an indemnity basis from protection policies are held to cover potential future lapses in Appointed Representatives commissions. Operationally the Group does not treat these balances as available funds. An equal and opposite liability is shown within Trade and other payables (note 20). 20 Trade and other payables Appointed Representatives retained commission Other trade payables Trade payables Social security and other taxes Other payables Accruals Current Non-current 166 2023 £’000 18,918 7,644 26,562 2,116 169 9,020 37,867 2023 £’000 35,225 2,642 37,867 2022 £’000 18,243 8,658 26,901 2,190 208 7,350 36,649 2022 £’000 34,397 2,252 36,649 167 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 20 Trade and other payables (continued) Should a protection policy be cancelled within four years of inception, a proportion of the original commission will be clawed back by the insurance provider. The majority of any such repayment is payable by the Appointed Representative, with the Group making its own liability for its share of any such repayment as set out in note 23. It is the Group’s policy to retain a proportion of commission payable to the Appointed Representative to cover such potential future lapses; these sums remain a liability of the Group. This commission is held in a separate ring-fenced bank account as described in note 19. The non-current portion of trade and other payables relates to Appointed Representative retained commission and accruals (See note 22). As at 31 December 2023 and 31 December 2022, the carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value. Reconciliation of movement in trade payables to cash flow Movement per trade payables Contingent consideration on associates Fair value measurement of contingent consideration Share-based payment accruals Accrued amounts relating to minority interest purchase Acquired trade and other payables Intercompany arising on acquisition Total movement per cash flow 21 Loans and borrowings Bank loans Total loans and borrowings Less: non-current portion – Bank loans Current portion A summary of the maturity of loans and borrowings is as follows: Bank loans Payable in 1 year Payable in 1-2 years Payable in 2-5 years Total bank loans 2023 £’000 1,218 – – (505) (996) – – (283) 2023 £’000 18,250 18,250 (12,426) 5,824 2023 £’000 5,824 3,750 8,676 18,250 2022 £’000 4,723 1,327 884 (656) – (5,192) (253) 833 2022 £’000 23,407 23,407 (16,598) 6,809 2022 £’000 6,809 3,750 12,848 23,407 167 166 21 Loans and borrowings (continued) In connection with the acquisition of Fluent, the Group entered into an agreement on 28 March 2022 with NatWest, in respect of a new term loan for £20m and a revolving credit facility for £15m (the “Facilities Agreement”), in order to part fund the cash consideration payable in relation to the acquisition. It is MAB’s intention to repay the drawn down proportion of the revolving element of this debt facility as soon as practicable. In respect of the new facilities, the Group has given security to NatWest in the form of fixed and floating charges over the assets of Mortgage Advice Bureau Limited, Mortgage Advice Bureau (Derby) Limited, Mortgage Advice Bureau (Holdings) plc, First Mortgage Direct Limited, First Mortgage Limited, Project Finland Bidco Limited, Fluent Money Limited and Fluent Mortgages Limited. Loan covenants Under the terms of the Facilities Agreement, the Group is required to comply with the following financial covenants: • Interest cover shall not be less than 5:1 • Adjusted leverage shall not exceed 2:1 The Group has complied with these covenants since the Facilities Agreement was entered into. 22 Financial instruments – risk management The Group is exposed through its operations to the following financial risks: • Credit risk • Liquidity risk • Market risk In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. Principal financial instruments • Trade and other receivables • Investments in non-listed equity shares • Derivative financial instruments • Cash and cash equivalents • Trade and other payables • Loans and other borrowings A summary of financial instruments held by category is provided below: Financial assets Cash and cash equivalents Trade and other receivables (amortised cost) Derivative financial instruments (FVTPL) Total financial assets 2023 £’000 21,940 2,681 302 24,923 2022 £’000 25,462 4,101 320 29,883 168 169 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 22 Financial instruments – risk management (continued) Principal financial instruments (continued) Financial liabilities Trade and other payables (amortised cost) Loans and borrowings (amortised cost) Accruals (amortised cost) Redemption liability (FVTPL) Clawback liability (FVTPL) Lease liabilities (amortised cost) Derivative financial instruments (FVTPL) Appointed representative retained commission Total financial liabilities 2023 £’000 7,812 18,250 9,020 2,793 10,331 2,736 183 18,918 70,043 2022 £’000 (restated*) 8,866 23,407 7,350 7,186 8,038 3,947 10 18,243 77,047 * The disclosure of financial liabilities incorrectly excluded the clawback liability, which is a financial instrument, and included £2.2m of social security and other taxes, which are not financial instruments. The disclosure is therefore restated to make this correction. The correction has no other impact on these financial statements. General objectives, policies and processes The Board has overall responsibility for the determination of the Group’s risk management objectives and policies, and designs and operates processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Board sets guidelines to the finance team and monitors adherence to its guidelines on a monthly basis. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below. Credit risk Credit risk is the risk of financial loss to the Group if a trading partner or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from loans to its trading partners. It is Group policy to assess the credit risk of trading partners before advancing loans or other credit facilities. Assessment of credit risk utilises external credit rating agencies. Personal guarantees are generally obtained from the Directors of its trading partners. Quantitative disclosures of the credit risk exposure in relation to financial assets are set out below. Further disclosures regarding trade and other receivables are given in note 18. Financial assets - maximum exposure Cash and cash equivalents Trade and other receivables (amortised cost) Derivative financial instruments (FVTPL) Total financial assets 2023 £’000 21,940 2,681 302 24,923 2022 £’000 25,462 4,101 320 29,883 169 168 22 Financial instruments – risk management (continued) Credit risk (continued) The carrying amounts stated above represent the Group’s maximum exposure to credit risk for trade and other receivables. An element of this risk is mitigated by collateral held by the Group for amounts due to them. Trade receivables consist of a large number of unrelated trading partners and therefore credit risk is not concentrated. Due to the large volume of trading partners the Group does not consider that there is any significant credit risk as a result of the impact of external market factors on their trading partners. Additionally, within trade payables are Appointed Representative retained commission amounts due to the same trading partners that are included in trade receivables; this collateral of £0.2m (2022: £0.7m) reduces the credit risk. The Group’s credit risk on cash and cash equivalents is limited because the Group places funds on deposit with National Westminster Bank plc (rated A), The Royal Bank of Scotland plc (rated A+), Barclays plc (rated A), HSBC Bank plc (rated AA-) and Bank of Scotland plc (rated A+). Market risk Interest rate risks The Group’s main interest rate risk arises from borrowings, both short term facilities and long-term debt, with floating interest rates that are linked to SONIA. The Group manages the risk by continually reviewing expected future volatility in UK interest rates and will consider entering into hedges as deemed appropriate to fix the floating interest rate. A maturity analysis of loans and borrowings is set out in Note 21. Foreign exchange risk As the Group does not operate outside of the United Kingdom and has only one investment outside the UK, it is not exposed to any material foreign exchange risk. Liquidity risk Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. 170 171 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 22 Financial instruments – risk management (continued) Liquidity risk (continued) The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The Group’s trade and other payables are repayable within one year from the reporting date and the contractual undiscounted cash flow analysis for the Group’s trade and other payables is the same as their carrying value. The contractual maturities of financial liabilities are as follows: 31 December 2023 (£’000) Within 1 year 1 - 2 years 2 -5 years After 5 years Trade and other payables (amortised cost) Loans and borrowings (amortised cost) Accruals (amortised cost) Redemption liability (FVTPL) Clawback liability (FVTPL) Lease liabilities (amortised cost) Derivative financial instruments (FVTPL) Appointed representative retained commission (amortised cost) 31 December 2022 (£’000) (restated*) Trade and other payables (amortised cost) Loans and borrowings (amortised cost) Accruals (amortised cost) Redemption liability (FVTPL) Clawback liability (FVTPL) Lease liabilities (amortised cost) Derivative financial instruments (FVTPL) Appointed representative retained commission (amortised cost) 7,812 5,825 7,305 – 10,331 997 – 17,991 50,261 Within 1 year 8,866 6,809 5,644 – 8,038 1,048 – 17,697 48,102 – – 3,817 1,046 – – 792 183 49 5,887 1 - 2 years – 3,750 168 – – 994 10 30 4,952 8,608 669 2,793 – 1,005 – 700 13,775 2 - 5 years – 12,848 1,538 169 – 1,857 – 440 16,852 – – – – – 81 – 178 259 After 5 years – – – 7,017 – 345 – 76 7,438 Total 7,812 18,250 9,020 2,793 10,331 2,875 183 18,918 70,182 Total 8,866 23,407 7,350 7,186 8,038 4,244 10 18,243 77,344 * The disclosure incorrectly excluded the clawback liability, which is a financial instrument, and its maturity analysis as at 31 December 2022. The disclosure is therefore restated to make this correction. The correction has no other impact on these financial statements. 170 171 22 Financial instruments – risk management (continued) Liquidity risk (continued) Appointed Representative retained commission does not have a definite maturity date and it is not possible to accurately estimate the repayment profile, other than when Appointed Representative firms are in the initial term of their contract. The Directors consider that the disclosed maturity profile is the most appropriate. The Board receives annual 12-month cash flow projections based on working capital modelling as well as information regarding cash balances monthly. At the end of the financial year, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances. Additionally, the Group has financial resource requirements set by its regulator, the Financial Conduct Authority. The Board has set a policy to ensure that adequate capital is maintained to ensure that these externally set financial resource requirements are exceeded at all times. Quarterly reports are made to the Financial Conduct Authority and submission is authorised by the Chief Financial Officer, at which time capital adequacy is re- assessed. Capital management The Group monitors its capital which consists of all components of equity (i.e. share capital, share premium, capital redemption reserve, share option reserve and retained earnings). The Group’s objectives when maintaining capital are: • To safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, • To ensure that capital is maintained at all times to ensure that financial resource requirements set by its regulator, the Financial Conduct Authority, are exceeded at all times, and • To ensure the Group has the cash available to develop the services provided by the Group to provide an adequate return to shareholders. 23 Clawback liability As at 1 January Acquisition of subsidiary Charged to the consolidated statement of comprehensive income As at 31 December 2023 £’000 8,038 – 2,293 10,331 2022 £’000 5,716 935 1,387 8,038 The balance relates to refund liabilities for the estimated cost of repaying commission income received upfront on protection policies that may lapse in the four years following issue. Under the Group’s revenue contracts with protection providers, if the policy is cancelled by the customer within a four-year period after the inception of the policy, then a proportion of the commission received upfront has to be repaid to the protection provider. While the exact timing of any future repayments (termed ‘clawbacks’) within the four-year period is uncertain, it has been estimated based on both data from protection providers and internal commission data that £4.4m (2022: £3.4m) of the liability would be payable after more than one year. The liability is based on the Directors’ best estimate, using industry data where available, of the probability of clawbacks to be made. 172 173 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 23 Clawback liability (continued) A liability is recognised in the financial statements of nine of the Group’s subsidiaries: Mortgage Advice Bureau Limited, Mortgage Advice Bureau (Derby) Limited, Capital Protect Limited, First Mortgage Limited, Fluent Mortgages Limited, Fluent Mortgages Horwich Limited, Vita Financial Limited, BPR Protect Limited and Auxilium Partnership Limited. The clawback liability was incorrectly presented as a non-current liability in the prior year. This has been restated in the consolidated statement of financial position as a current liability. The correction has no other impact on these financial statements. 24 Deferred tax Deferred tax is calculated in full on temporary differences using tax rates of 25% based on when the temporary differences are expected to unwind (2022: 19% and 25%). The movement in deferred tax is shown below: Net deferred tax (liability)/asset – opening balance Acquisition of subsidiary Recognised in the consolidated statement of comprehensive income Deferred tax movement recognised in equity 2023 £’000 (12,862) – 1,715 449 2022 £’000 1,114 (12,820) (389) (767) Net deferred tax (liability) – closing balance (10,698) (12,862) The deferred tax balance is made up as follows: Fixed asset differences Other timing differences Tax losses Share-based payments Net deferred tax (liability) Reflected in the statement of financial position as follows: Deferred tax liability Deferred tax asset Net deferred tax (liability) 2023 £’000 (13,355) 295 1,138 1,224 2022 £’000 (14,659) 312 659 826 (10,698) (12,862) 2023 £’000 (11,417) 719 (10,698) 2022 £’000 (14,659) 1,797 (12,862) Deferred tax liabilities have arisen due to capital allowances which have been received ahead of the depreciation charged in the accounts and the recognition of the fair value of acquired assets in business combinations. 172 173 25 Share capital Issued and fully paid Ordinary shares of 0.1p each Total share capital 2023 £’000 57 57 2022 £’000 57 57 During the year 96,039 ordinary shares of 0.1p each were issued following partial exercise of options issued in 2019 and 2020 at no premium. As at 31 December 2023, there were 57,127,034 ordinary shares of 0.1p in issue (2022: 57,030,995). See also note 30. 26 Reserves The Group’s policy is to maintain an appropriate capital base and comply with its externally imposed capital requirements whilst providing maximum shareholder value. The following describes the nature and purpose of each reserve within equity: Reserve Description and purpose Share premium Amount subscribed for share capital in excess of nominal value. Capital redemption reserve The capital redemption reserve represents the cancellation of part of the original share capital premium of the company at par value of any shares repurchased. Share option reserve Retained earnings The fair value of equity instruments granted by the Company in respect of share-based payment transactions and deferred tax recognised in equity. All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere. There is no restriction on the distribution of retained earnings. 174 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 27 Retirement benefits The Group operates several defined contribution pension schemes for the benefit of its employees and also makes contributions to self-invested personal pensions (“SIPP”). The assets of the schemes and the SIPP are held separately from those of the Group in independently administered funds. The pension expense represents contributions payable by the Group to the SIPP and amounted to £1.7m (2022: £1.4m). There were contributions payable to the SIPP as at 31 December 2023 of £0.3m (2022: £0.2m). 28 Related party transactions The following table shows the total amount of transactions that have been entered into with related parties during year ended 31 December 2023 and 2022, as well as balances with related parties as at 31 December 2023 and 31 December 2022. Commission received/(paid) Balance of retained commissions* Loans owed to MAB 31 December 31 December 31 December 31 December 31 December 31 December 2022 £’000 2023 £’000 2023 £’000 2023 £’000 2022 £’000 2022 £’000 Relationship Buildstore Limited Associate (830) (927) Sort Limited Associate 1,512 1,492 Clear Mortgage Solutions Limited Associate (5,227) (4,550) Evolve FS Ltd Associate (3,976) (2,949) 23 – 595 178 14 – 652 76 Associate (1,555) (1,791) 67 67 The Mortgage Broker Limited Meridian Holdings Group Ltd Associate (3,541) (4,481) M & R FM Ltd Associate (3,332) (2,826) Heron Financial Limited Associate (1,776) Pinnacle Surveyors (England & Wales) Ltd Associate BPR Protect Limited** Associate Vita Financial Limited** Associate MAB Broker Services PTY Limited Joint venture – – – – (4) – (223) (717) – * Balances in relation to retained commissions are to cover future lapses. 550 184 41 – – – – 546 107 – – – – – – – – – 5 81 – – 100 – – 15 – 218 – – 20 319 – – – – – – ** Vita Financial Limited and BPR Protect Limited were associated companies of the Group until they became subsidiaries on 12 July 2022 following Mortgage Advice Bureau Limited’s acquisition of Vita Financial Limited. 175 175 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 28 Related party transactions (continued) During the year the Group received dividends from associated companies as follows: M & R FM Ltd Heron Financial Limited Clear Mortgage Solutions Limited CO2 Commercial Limited Evolve FS Ltd Sort Group Limited Total dividends received 29 Ultimate controlling party There is no ultimate controlling party. 2023 £’000 222 125 56 – – – 403 2022 £’000 187 – – 348 245 130 910 30 Share-based payments Mortgage Advice Bureau Executive Share Option Plan The Group operates two equity-settled share-based remuneration schemes for Executive Directors and certain senior management, one being an approved scheme, the other unapproved, but with similar terms. For options granted before 2023, half of the options are subject to a total shareholder return (TSR) performance condition and the remaining half are subject to an earnings per share (EPS) performance condition. For options granted during 2023, the options are subject to an earnings per share (EPS) performance condition. The outstanding options in the unapproved scheme vest and are exercisable as follows: For options granted during 2018 and outstanding as at 1 January 2023: • 100% based on performance to 31 March 2021, exercisable between 11 April 2021 and 9 April 2026. For options granted during 2019 and outstanding as at 1 January 2023: • 100% based on performance to 31 March 2022, exercisable between 1 July 2022 and 1 July 2027. For options granted during 2020 and outstanding as at 1 January 2023: • 100% based on performance to 31 March 2023, exercisable between 22 April 2023 and 21 July 2028. For options granted during 2021 and outstanding as at 1 January 2023: • 100% based on performance to 31 March 2024, exercisable between 1 April 2024 and 31 March 2029. For options granted during 2022 and outstanding as at 1 January 2023: • 100% based on performance to 31 March 2025, exercisable between 6 April 2025 and 6 June 2030. For options granted during the year: • 100% based on performance to 31 December 2025, exercisable between 1 April 2026 and 30 May 2031. 176 177 30 Share-based payments (continued) Mortgage Advice Bureau Executive Share Option Plan (continued) The number and weighted average exercise prices (WAEP) of, and movements in, share options during the year for the Mortgage Advice Bureau Executive Share Option Plan: Outstanding as at 1 January Granted during the year Exercised Lapsed * Outstanding as at 31 December 2023 WAEP £ 0.001 0.001 0.001 – 0.001 2023 Number 576,003 296,375 (96,039) (20,310) 756,029 2022 WAEP £ 0.001 0.001 0.001 – 0.001 2022 Number 460,380 154,850 (16,851) (22,376) 576,003 * Due to not fully vesting, retirement or leaving the Group. As at 31 December 2023, 756,029 options over ordinary shares of 0.1 pence each in the Company were exercisable with a weighted average exercise price of £0.001. On 31 May 2023, 296,375 options over ordinary shares of 0.1 pence each in the Company were granted to the Executive Directors and senior executives of MAB under the equity-settled Mortgage Advice Bureau Executive Share Option Plan (the “Options”) with a fair value of £6.31 per option. Exercise of the Options is subject to the service conditions and achievement of the performance condition based on earnings per share criteria. Subject to achievement of the performance condition, the Options will be exercisable 2 years and 10 months from the date of grant. The exercise price for the Options is 0.1 pence, being the nominal cost of the Ordinary Shares. Options exercised on 6 and 11 April 2023 resulted in respectively 1,498 and 1,498 ordinary shares being issued at an exercise price of 0.1p per share. The price of the ordinary shares at the time of exercise was respectively £6.80 and £7.05 per share. Options exercised on 19 May 2023 resulted in 93,043 ordinary shares being issued at an exercise price of 0.1p per share. The price of the ordinary shares at the time of exercise was £8.50 per share. For the Options outstanding under the Mortgage Advice Bureau Executive Share Option Plan as at 31 December 2023, the weighted average remaining contractual life is 5.9 years (2022: 5.9 years). This is now calculated on the basis of the final date that the options can be exercised, whereas previously it was disclosed on the basis of the first date the options could be exercised, as it is currently the more relevant figure. 176 177 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 30 Share-based payments (continued) Mortgage Advice Bureau Executive Share Option Plan (continued) The following information is relevant in the determination of the fair value of options granted during the year under the equity-settled share-based remuneration scheme operated by the Group. Equity-settled Option pricing model – EPS Option pricing model – TSR Exercise price Expected volatility Expected dividend yield Risk-free interest rate 2023 2022 Black-Scholes Black-Scholes – Stochastic £0.001 n/a(1) 3.98% n/a(1) £0.001 41.66% 2.70% 1.78% (1) For option awards that are not subject to market conditions, expected volatility and the risk-free interest rate have no impact on the valuation The options granted during 2023 are subject to performance criteria based solely on earnings per share performance. They have a vesting period of 2 years and 10 months from the date of grant and the calculation of the share-based payment is based on this vesting period. Expected volatility is a measure of an amount by which the share price is expected to fluctuate during a period. Dividends paid on shares reduce the fair value of an award as a participant does not receive the dividend income on these shares. The Options offer participants the opportunity to benefit from increasing per share value without risking the current per share price. The risk-free rate used is the rate of interest obtainable from UK government securities as at the date of grant over the expected term. MAB AR Option Plan The Group operates an equity-settled share plan, the AR Option Plan, to reward selected Appointed Representative (“AR”) of the Group. The AR Option Plan provides for options which have a nominal exercise price of 0.01 pence per share (or, for any individual AR, not less than £1 on each occasion of exercise) to acquire Ordinary Shares subject to performance conditions. Certain criteria must be met in order for ARs to be eligible, including using the Mortgage Advice Bureau brand and being party to an AR Agreement which provides for an initial contract term of at least five years at the date of grant. The AR Options will normally become exercisable following the fifth anniversary of grant subject to the satisfaction of performance conditions based on financial and other targets, including quality of consumer outcomes, compliance standards and continued use of the Mortgage Advice Bureau brand. There were no options outstanding under the AR Option Plan at 1 January 2023 and there have been no grants of options during the year. 178 179 30 Share-based payments (continued) Share-based remuneration expense The share-based remuneration costs for the year are made up as follows: Charge for equity settled schemes National Insurance on equity settled schemes Share incentive plan costs Free shares awarded to employees Charge for equity settled acquisition options Charge for cash settled acquisition options Total costs 2023 £’000 177 (13) 143 293 3,203 626 4,429 2022 £’000 763 324 147 186 1,064 499 2,983 As a result of Fluent minority interest purchases during the period, accelerated equity settled charges of £1.8m and additional cash settled charges of £0.4m relating to the acquisition options were recognised in the consolidated statement of comprehensive income. Options exercised during the period resulted in a transfer from the Share option reserve to Retained earnings of £0.4m (2022: £0.1m) reflected in the consolidated statement of changes in equity. In addition, £1.9m was transferred from the Share option reserve to Retained earnings for the cancelled acquisition options as a result of the Fluent minority interest purchase. 31 Non-controlling interests (NCI) Set out below is summarised financial information for each subsidiary that has a non-controlling interest that is material to the Group. The amounts disclosed for each subsidiary are their consolidated financial information before inter-company eliminations with Mortgage Advice Bureau Limited. 2023 Summarised balance sheet Current assets Current liabilities Current net assets/(liabilities) Non-current assets Non-current liabilities Non-current net assets Net Group assets on consolidation Net assets Accumulated NCI First Mortgage Direct Limited (“First Mortgage”) 2023 £’000 Project Finland Topco Limited (“Fluent”) 2023 £’000 14,585 (7,125) 7,460 3,281 (1,410) 1,871 1,349 10,680 2,386 2,278 (3,605) (1,327) 11,021 (1,805) 9,216 35,218 43,107 1,289 Total 2023 £’000 16,863 (10,730) 6,133 14,302 (3,215) 11,087 36,567 53,787 3,675 179 178 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 31 Non-controlling interests (NCI) (continued) 2023 (continued) Summarised statement of comprehensive income Revenue £’000 22,602 Profit/(loss) for the period and total comprehensive income 3,731 Profit/(loss) allocated to NCI Dividends paid to NCI Summarised cash flows Cash flows from operating activities Cash flows used in investing activities Cash flows used in financing activities Net (decrease) in cash & cash equivalents 781 692 £’000 3,251 (516) (3,909) (1,174) £’000 37,521 (7,772) (1,345) – £’000 550 (594) (875) (919) £’000 60,123 (4,041) (564) 692 £’000 3,801 (1,110) (4,784) (2,092) Net Group assets on consolidation included above relate to acquired intangible assets and associated deferred tax liabilities. The profit/(loss) for the period and total comprehensive income includes the amortisation of these acquired intangible assets and the associated movements in deferred tax. 2022 Summarised balance sheet (restated*) Current assets Current liabilities Current net assets/(liabilities) Non-current assets Non-current liabilities Non-current net assets/(liabilities) Net Group assets on consolidation Net assets/(liabilities) Accumulated NCI First Mortgage Direct Limited (“First Mortgage”) 2022 £’000 Project Finland Topco Limited (“Fluent”) 2022 £’000 12,443 3,721 Total 2022 £’000 16,164 (5,213) 7,230 3,213 (1,838) 1,375 1,630 10,235 2,297 (27,395) (32,608) (23,674) (16,444) 19,094 (764) 18,330 38,478 33,134 4,654 22,307 (2,602) 19,705 40,108 43,369 6,951 180 181 31 Non-controlling interests (NCI) (continued) 2022 (continued) Summarised statement of comprehensive income Revenue £’000 18,220 Profit/(loss) for the period and total comprehensive income 2,534 Profit/(loss) allocated to NCI Dividends paid to NCI Summarised cash flows Cash flows from operating activities Cash flows used in investing activities Cash flows used in financing activities Net increase in cash & cash equivalents 507 415 £’000 6,201 (730) (1,659) 3,812 £’000 21,883 (8) (2) – £’000 1,261 (1,319) (1,725) (1,783) £’000 40,103 2,526 505 415 £’000 7,462 (2,049) (3,384) 2,029 * The disclosure has been restated to disclose clawback liabilities within current liabilities, which were incorrectly included within non-current liabilities. The correction has no other impact on these financial statements. 32 Contingent liabilities The Group had no contingent liabilities as at 31 December 2023 or 31 December 2022. 33 Events after the reporting date There were no material events after the reporting period, which have a bearing on the understanding of these consolidated financial statements. 34 Notes supporting statement of cash flows Cash and cash equivalents for purposes of the statement of cash flows comprises: Cash at bank available on demand Bank balances held in relation to retained commissions Total cash and cash equivalents 2023 £’000 3,022 18,918 21,940 2022 £’000 7,219 18,243 25,462 180 181 Financial statements | Notes to the consolidated financial statements (continued) for the year ended 31 December 2023 34 Notes supporting statement of cash flows (continued) A reconciliation of liabilities from financing transactions is set out as follows: Balance as at 1 January 2022 Cash flows: Principal loan amounts Loan arrangement fees Loans and borrowings £’000 – 23,200 (282) Settlement of loan notes and accrued interest on acquisition (21,891) Repayment of borrowings Principal lease payments Non-cash flows: Acquisition of subsidiaries New leases Accrued interest Unwinding of loan arrangement fees Disposals (1,500) – 23,391 – 426 63 – Balance as at 31 December 2022 and 1 January 2023 23,407 Cash Flows: Repayment of borrowings Principal lease payments Non-cash flows: New leases Accrued Interest Unwinding of loan arrangement fees Lease remeasurement (5,350) – – 116 77 – Balance as at 31 December 2023 18,250 Leases £’000 2,596 – – – – (547) 1,016 919 – – (37) 3,947 – (907) 13 – – (317) 2,736 Total £’000 2,596 23,200 (282) (21,891) (1,500) (547) 24,407 919 426 63 (37) 27,354 (5,350) (907) 13 116 77 (317) 20,986 182 183 Financial statements | Company statement of financial position as at 31 December 2023 The following parent entity financial statements are prepared under FRS 102 and relate to the Company and not to the Group. The statement of accounting policies which have been applied to these accounts can be found on page 80. The Company is a non-trading holding company and has no employees. As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for the year. The Company reported a profit for the financial year of £16.0m (2022: £16.0m). Note 2023 £’000 2022 £’000 Fixed assets Investments Current assets Debtors Net assets Capital and reserves Called up share capital Share premium account Capital redemption reserve Retained earnings 3 4 5 6 6 6 8,565 5,361 45,341 53,906 57 48,155 20 5,674 53,906 45,341 50,702 57 48,155 20 2,470 50,702 The notes on pages 182 to 187 form part of these financial statements. The financial statements were approved by the Board of Directors on 19 March 2024. P Brodnicki Director L Tilley Director 182 183 Financial statements | Company statement of changes in equity for the year ended 31 December 2023 Share capital £’000 Share premium £’000 Capital redemption reserve £’000 Balance as at 1 January 2022 53 9,778 20 Profit for the year Total comprehensive income Transactions with owners Issue of shares Share-based payments Dividends paid Transactions with owners – – 4 – – 4 – – 38,377 – – 38,377 – – – – – – Balance as at 31 December 2022 and 1 January 2023 57 48,155 20 Profit for the year Total comprehensive income Transactions with owners Issue of shares Share-based payments Dividends paid Transactions with owners – – – – – – – – – – – – – – – – – – As at 31 December 2023 57 48,155 20 Retained earnings £’000 1,406 16,023 16,023 – 1,064 (16,023) (14,959) 2,470 16,038 16,038 – 3,204 (16,038) (12,834) 5,674 Total Equity £’000 11,257 16,023 16,023 38,381 1,064 (16,023) 23,422 50,702 16,038 16,038 – 3,204 (16,038) (12,834) 53,906 184 185 Financial statements | Notes to the Company statement of financial position as at 31 December 2023 1 Accounting policies ■ Basis of preparation The separate financial statements of the Company are presented as required by the Companies Act 2006 and have been prepared under the historical cost convention and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland. The FRS 102 reduced disclosure framework has been applied and the Company meets the definition of a qualifying entity. The principal accounting policies are summarised below. They have all been consistently applied to all years presented. The preparation of financial statements in accordance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the company’s accounting policies. Given the nature of the Company’s business there are no critical accounting estimates or areas of judgement required in the preparation of the financial statements. ■ Cash flow statement The cash flows of the Company are included in the consolidated cash flow statement of Mortgage Advice Bureau (Holdings) plc which is included in this annual report. Consequently, the Company is exempt under the terms of FRS 102 from publishing a cash flow statement. ■ Going concern After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in the accounts. ■ Investments Investments in subsidiaries are held at historical cost less provision for impairment. The carrying values of investments are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Where the Company will settle a share-based payment transaction in respect of future consideration payable by a subsidiary for the purchase of a minority stake relating to an acquisition the cost of the share-based payment is capitalised. ■ Share capital Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a financial liability. The Company’s ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of new shares are shown in share premium as a deduction from proceeds. ■ Dividends Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when they are paid. In the case of final dividends, this is when they are approved by the shareholders. ■ Financial Instruments The Company makes little use of financial instruments other than intercompany balances and so its exposure to credit risk and cash flow risk is not material for the assessment of the assets, liabilities, financial position, and profit of the Company. The Directors consider that there is no credit risk on intercompany balances. 184 185 Financial statements | Notes to the Company statement of financial position (continued) as at 31 December 2023 2 Profit for the year During the year the Company’s only income was dividends receivable from its subsidiaries. The auditor’s remuneration for audit and other services is disclosed in note 6 to the consolidated financial statements for the Group. Remuneration for the audit of the Company financial statements is borne by a subsidiary entity. 3 Investments Cost As at 1 January 2023 Additions As at 31 December 2023 Net book value As at 31 December 2023 As at 31 December 2022 Subsidiary undertakings £’000 5,361 3,204 8,565 8,565 5,361 The subsidiaries of Mortgage Advice Bureau (Holdings) plc at the reporting date have been included in the consolidated financial statements. The trading subsidiaries are as follows: Company name Country of Incorporation Percentage of ordinary shares held Nature of business Mortgage Advice Bureau Limited England and Wales 100 Provision of financial services Mortgage Advice Bureau (Derby) Limited England and Wales 100 Provision of financial services Capital Protect Limited England and Wales 100 Provision of financial services Mortgage Talk Limited England and Wales 100 Provision of financial services MABWM Limited England and Wales 100 Provision of financial services First Mortgage Direct Limited First Mortgage Limited Property Law Centre Limited Scotland Scotland Scotland 80 80 80 Provision of financial services Provision of financial services Provision of financial services Talk Limited England and Wales 100 Intermediate holding company Mortgage Advice Bureau Australia (Holdings) PTY Limited Australia 100 Intermediate holding company Mortgage Advice Bureau PTY Limited Australia 100 Holding of intellectual property Vita Financial Limited BPR Protect Limited England and Wales England and Wales 75 75 Provision of financial services Provision of financial services Company Protection Limited England and Wales 56.3 Provision of financial services 186 187 3 Investments (continued) Company name Aux Group Limited Country of Incorporation England and Wales Auxilium Partnership Limited England and Wales Percentage of ordinary shares held Nature of business 75 75 Provision of financial services Provision of financial services Project Finland Topco Limited England and Wales 84.3 Provision of financial services Project Finland Bidco Limited England and Wales 84.3 Provision of financial services The Fluent Money Group Limited England and Wales 84.3 Provision of financial services Fluent Mortgages Holdings Limited England and Wales 84.3 Provision of financial services Fluent Mortgages Limited England and Wales 84.3 Provision of financial services Fluent Mortgages Horwich Limited England and Wales 84.3 Provision of financial services Fluent Lifetime Limited England and Wales 84.3 Provision of financial services Fluent Money Limited England and Wales 84.3 Provision of financial services Fluent Loans Limited England and Wales 84.3 Provision of financial services Fluent Bridging Limited England and Wales 84.3 Provision of financial services Mortgage Advice Bureau (Holdings) plc also holds a number of dormant subsidiaries which at the reporting date have been included in the consolidated financial statements. The dormant subsidiaries are as follows: Company name Country of Incorporation Percentage of ordinary shares held Mortgage Advice Bureau (UK) Limited England and Wales Mortgage Advice Bureau (Bristol) Limited England and Wales MAB (Derby) Limited L&P 137 Limited England and Wales England and Wales Mortgage Talk (Partnership) Limited England and Wales Financial Talk Limited Survey Talk Limited L&P 134 Limited Loan Talk Limited MAB1 Limited England and Wales England and Wales England and Wales England and Wales England and Wales MAB Private Finance Limited England and Wales MAB Financial Planning Limited England and Wales First Mortgage Shop Limited First Mortgages Limited Fresh Start Finance Limited Scotland Scotland Scotland 100 100 100 100 100 100 100 100 100 100 100 100 80 80 80 Nature of business Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant 187 186 Financial statements | Notes to the Company statement of financial position (continued) as at 31 December 2023 3 Investments (continued) The registered office for Vita Financial Limited is 1st Floor Tudor House, 16 Cathedral Road, Cardiff CF11 9LJ. The registered office of Mortgage Advice Bureau Australia (Holdings) PTY Limited and Mortgage Advice Bureau PTY Limited is Norton Rose Fulbright, Level 18, 225 George Street, Sydney, NSW 2000, Australia. The registered office for First Mortgage Direct Limited and its subsidiaries which are incorporated in Scotland is 30 Walker Street, Edinburgh, EH3 7HR. The registered office of Project Finland Topco Limited and its subsidiaries is 102 Rivington House, Chorley Road, Bolton, BL6 5UE. The registered office for all other subsidiaries of Mortgage Advice Bureau (Holdings) plc is Capital House, Pride Place, Pride Park, Derby, DE24 8QR, United Kingdom. Mortgage Advice Bureau Australia (Holdings) PTY Limited has a 100% equity stake in Mortgage Advice Bureau PTY Limited and also a 48.05% equity stake in MAB Broker Services PTY Limited. Mortgage Advice Bureau (Holdings) plc holds 100% of the ordinary share capital of Mortgage Advice Bureau Limited and Talk Limited. Mortgage Advice Bureau Limited holds 100% of the ordinary share capital of Mortgage Advice Bureau (Derby) Limited, Capital Protect Limited, MABWM Limited and Mortgage Advice Bureau Australia (Holdings) PTY Limited. On 2 July 2019, Mortgage Advice Bureau Limited acquired 80% of the ordinary share capital of First Mortgage Direct Limited. First Mortgage Direct Limited holds 100% of the ordinary share capital of First Mortgage Limited, Property Law Centre Limited, First Mortgages Limited, First Mortgage Shop Limited and Fresh Start Finance Limited. On 12 July 2022 Mortgage Advice Bureau Limited acquired 75.4% of the ordinary share capital of Project Finland Topco Limited. On 11 April 2023 Mortgage Advice Bureau Limited increased its stake in Project Finland Topco Limited to 76.2% and further increased its stake on 19 December 2023 to 84.3% (see note 5). Project Finland Topco Limited holds 100% of the ordinary share capital of Project Finland Bidco Limited, which in turn holds 100% of the ordinary share capital of The Fluent Money Group Limited. The Fluent Money Group Limited holds 100% of the issued share capital of Fluent Mortgage Holdings Limited, Fluent Lifetime Limited, Fluent Money Limited, Fluent Loans Limited and Fluent Bridging Limited. Fluent Mortgage Holdings Limited owns 100% of the ordinary share capital of Fluent Mortgages Limited and Fluent Mortgages Horwich Limited. On 12 July 2022 Mortgage Advice Bureau Limited increased its stake in Vita Financial Limited to 75%. Vita Financial Limited holds 100% of the ordinary share capital of BPR Protect Limited and 75% of the ordinary share capital of Company Protection Limited. On 3 November 2022 Mortgage Advice Bureau Limited acquired 75% of the ordinary share capital of Aux Group Limited. Aux Group Limited holds 100% of the ordinary share capital of Auxilium Partnership Limited. Talk Limited holds 100% of the ordinary share capital of Mortgage Talk Limited, L&P 137 Limited, Mortgage Talk (Partnership) Limited, Financial Talk Limited, and Survey Talk Limited. Mortgage Talk Limited holds 100% of the ordinary share capital of Loan Talk Limited. L&P 137 Limited holds 100% of the ordinary share capital of L&P 134 Limited. Three of the Group’s subsidiaries, First Mortgage Limited (SC177681), Property Law Centre Limited (SC348791) and Fluent Mortgages Horwich Limited (14127588) are exempt from the audit of individual accounts under section 479A of the Companies Act 2006. There are no restrictions regarding the utilisation of cash or other resources held by any subsidiary. 188 189 4 Debtors Amounts due from Group undertakings 2023 £’000 45,341 2022 £’000 45,341 Amounts due from Group undertakings are unsecured, interest free and have no fixed repayment term. 5 Share capital Issued and fully paid Ordinary shares of 0.1p each Total share capital 2023 £’000 57 57 2022 £’000 57 57 During the year 96,039 ordinary shares of 0.1p each were issued following partial exercise of options issued in July 2019 and July 2020 at no premium. As at 31 December 2023, there were 57,127,034 ordinary shares of 0.1p in issue (2022: 57,030,995). 6 Reserves The following describes the nature and purpose of each reserve within equity. Reserve Description and purpose Share premium Amount subscribed for share capital in excess of nominal value. Capital redemption reserve The capital redemption reserve represents the cancellation of part of the original share capital premium of the Company at par value of any shares repurchased. Retained earnings All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere. There is no restriction on the distribution of retained earnings. 7 Financial instruments and risk The only financial asset of the Company is an amount due from other Group undertakings and therefore the Company is exposed to minimal financial risks. Details of the Group’s management of the financial risks to which it is exposed are set out in note 22 to the financial statements for the Group. 8 Related party transactions The Company has taken advantage of the exemption in s33.1A of FRS102 not to disclose transactions with group companies which are 100% owned. 188 189 Glossary of Alternative Performance Measures (“APMs”) for the Group report and financial statements Certain numerical information and other amounts and percentages presented have been subject to rounding adjustments. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables may not conform exactly to the total figure given for that column or row or the sum of certain numbers presented as a percentage may not conform exactly to the total percentage given. APM Closest equivalent statutory measure Definition and purpose Income statement measures Net revenue Gross profit Net revenue is revenue less commissions paid to Appointed Representative firms and payments to Fluent affinity partners. £m Revenue Commissions paid Payments to Fluent affinity partners Net revenue 2023 239.5 2022 230.8 (130.9) (142.8) (14.5) 94.1 (8.0) 80.0 Administrative None Calculated as administrative expenses (which exclude amortisation expenses ratio of acquired intangibles, acquisition costs incurred in the year and non-cash operating expenses relating to put and call option agreements) divided by revenue. Adjusted EBITDA None Calculated as EBITDA before charges associated with acquisition and investments, and other adjusting items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner. Charges associated with acquisition or investments in businesses include: • non-cash charges such as amortisation of acquired intangibles and the effect of fair valuation of acquired assets, • non-cash operating expenses relating to put and call option agreements and cash charges including transaction costs, • fair value movements on contingent consideration, and • fair value movements on derivative financial instruments. £m Gross Profit Administrative expenses Depreciation Amortisation of other intangibles Share of profits from associates Adjusted EBITDA 2023 70.2 2022 62.9 (46.7) (36.0) 2.1 0.3 0.8 26.7 1.2 0.3 0.7 29.1 190 191 APM Closest equivalent statutory measure Definition and purpose Adjusted None Calculated as Adjusted EBITDA divided by revenue. EBITDA margin Adjusted Operating profit Calculated as operating profit before charges associated with operating profit acquisition and investments, and other adjusting items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner. Charges associated with acquisition or investments in businesses include: • non-cash charges such as amortisation of acquired intangibles and the effect of fair valuation of acquired assets, • non-cash operating expenses relating to put and call option agreements and cash charges including transaction costs, • fair value movements on deferred consideration, and • fair value movements on derivative financial instruments. £m Operating profit Acquisition of acquired intangibles Acquisition costs Non-cash operating expenses relating to put and call option agreements Impairment losses Non-cash fair value losses/(gains) on financial instruments Restructuring Costs Rounding difference 2023 14.0 5.2 0.2 4.3 – 0.2 0.5 – Adjusted operating profit 24.4 2022 18.5 2.6 2.8 2.0 2.8 (0.9) – (0.1) 27.7 191 190 Glossary of Alternative Performance Measures (“APMs”) for the Group report and financial statements (continued) APM Closest equivalent statutory measure Definition and purpose Adjusted profit Profit before tax Calculated as profit before tax before charges associated with before tax acquisition and investments, and other adjusting items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner. Charges associated with acquisition or investments in businesses include: • non-cash charges such as amortisation of acquired intangibles and the effect of fair valuation of acquired assets, • non-cash operating expenses relating to put and call option agreements and cash charges including transaction costs, • fair value movements on contingent consideration, and • fair value movements on derivative financial instruments. £m Profit before tax Amortisation of acquired intangibles Acquisition costs Non-cash operating expenses relating to put and call option agreements Impairment losses Non-cash fair value losses/(gains) on financial instruments Restructuring costs Unwinding of redemption liability Rounding difference Adjusted profit before tax 2023 16.2 5.2 0.2 4.3 – 0.2 0.5 (3.3) (0.1) 23.2 2022 17.4 2.6 2.8 2.0 2.8 (0.9) – 0.6 (0.1) 27.2 Adjusted profit None Calculated as Adjusted profit before tax divided by revenue. before tax margin Adjusted Basic earnings per Calculated as basic earnings per share before charges (net of tax) earnings per share associated with acquisition and investments, and other adjusting share items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner. 192 193 APM Closest equivalent statutory measure Definition and purpose Adjusted fully Diluted earnings per Calculated as diluted earnings per share (basic EPS, adjusting for diluted earnings share the effects of potentially dilutive share options) before charges per share (net of tax) associated with acquisition and investments, and other adjusting items that the Group deems, by their nature, require adjustment in order to show more accurately the underlying business performance of the Group from period to period in a consistent manner. Cash flow measures Headline cash None Headline cash conversion is cash generated from operating activities conversion adjusted for movements in non-trading items, including loans to AR firms and associates and cash transaction costs as a percentage of adjusted operating profit. £m Cash generated from operating activities Acquisition costs Restructuring costs Decrease in loans to AR firms and associates 2023 29.7 0.2 0.5 2022 28.5 2.8 – (0.8) (0.8) Headline cash generated 29.6 30.5 Adjusted cash None Adjusted cash conversion is headline cash conversion adjusted for conversion increases in restricted cash balances as a percentage of adjusted operating profit. £m Headline cash generated Increase in restricted cash balances Rounding differences Adjusted cash generated 2023 29.6 (0.7) 0.1 29.0 2022 30.5 (1.4) – 29.1 Balance sheet measures Net debt None Loans and borrowings less unrestricted cash balances. 192 193 Glossary of terms AI Artificial Intelligence Appointed Representative, An intermediary firm or person who is party to an agreement with a FCA AR, or AR firm regulated firm permitting them to carry out certain regulated activities AR Agreement Agreement governing the terms of the commercial relationship between MAB and an AR firm, and setting out how income from products sold by Advisers of the AR is split between MAB and the AR Adviser A person employed or engaged by an AR firm, carrying out mortgage and/or general or protection insurance advisory services to customers Base Rate The Bank of England base rate is the interest rate that the Bank of England charges banks for secured overnight lending. It is the UK Government’s key interest rate for enacting its monetary policy Bridging Finance Short-term borrowing used to bridge a gap in funding until a property transaction completes Clawbacks The right of insurers to reclaim some or all of the commission paid to an intermediary in the event premiums are not paid by the policy holder in the period during which the policy holder pays monthly premiums, typically 48 months for protection products for MAB Client fee A fee paid by the consumer to the intermediary who has arranged the consumer’s mortgage with a lender Consumer Duty The policy statement published by the FCA in July 2022, which aims to set higher and clearer standards of consumer protection Corporate Social Responsibility A type of business self-regulation that aims to contribute to societal goals by engaging in or supporting ethically-oriented practices (e.g. fundraising for charity) Directly Authorised An entity that is directly authorised by the FCA to carry out regulated activities ESG Environmental, Social and Governance Execution only Refers to a customer entering into a regulated mortgage contract without being given advice, or where the advice given by a firm has been rejected. This is effectively a self-service process Financial Conduct Authority The Financial Services Compensation Scheme is the UK’s statutory deposit insurance and investors compensation scheme for customers of authorised financial services firms First Time Buyer The General Data Protection Regulation, a regulation in EU law on data protection and privacy FCA FSCS FTB GDPR 194 195 General insurance Buildings and contents insurance and certain other non-life insurance products Gross mortgage lending New mortgage lending and product transfers but excluding protection Help-to-Buy UK Government incentives that aim to help first time buyers and those looking to move homes purchase a residential property. Help-to-Buy schemes include Equity Loans and Shared Ownership schemes Intermediary, intermediary A firm or individual who arranges mortgages with lenders on behalf of firm, or mortgage customers, (as opposed to a lender that the customer approaches directly). intermediary An intermediary is either directly authorised by the FCA or is an appointed representative of a directly authorised firm IMLA The Intermediary Mortgage Lenders Association is a trade association that represents the views and interests of UK mortgage lenders who are involved in the generation of mortgage business via professional financial intermediaries Insurance or insurance Includes protection and general insurance products IR35 The UK’s anti-avoidance tax legislation designed to tax disguised employment at a rate similar to employment Later Life Lending Refers to mortgage products aimed at those approaching or already in retirement, who are looking to release some of the equity in their home for a variety of reasons Lifetime Mortgage A type of Later Life Lending whereby no capital or interest repayments are made. Compounded interest is added to the capital throughout the term of the loan, which is then repaid by selling the property when the borrower dies or moves out Mortgage Advice and Selling Policy statement issued by the FCA in February 2020 which sets out a package Standards of remedies aiming to help consumers make better informed choices with regard to mortgages Mortgages Market Study Market study conducted by the FCA in 2019 as a precursor to the Mortgage Advice and Selling Standards policy statement Mortgage panel or lender A panel of mortgage lenders used by intermediaries panel New build Encompasses properties built by developers, custom build, self-build and affordable housing New mortgage lending Lending resulting from a mortgage completion in connection with a house purchase or a re-mortgage with a different lender to the customer’s existing lender 194 195 Glossary of terms (continued) PCW PPC Price Comparison Website Pay-Per-Click Procuration fee, or Mortgage A fee paid by a lender to the intermediary who has arranged a mortgage with procuration fee the lender Product transfer The process of switching an existing mortgage product to a new one with the same lender Protection insurance Life insurance (including critical illness), family income protection and certain other insurance products (but excluding general insurance) Secured Personal Loan A loan that uses a property as security, also known as second charge mortgage Service centres or telephone MAB’s regional telephone service centres operated by certain AR firms. centres The services provided by these centres include reviews of mortgage and related insurance products on an on-going basis with replacement or new products offered to customers, as appropriate SM&CR The Senior Manager and Certification Regime, a regime that aims to raise standards of governance, increase individual accountability and help restore confidence in the financial services sector 196 ffiMortgage \IJ Advice Bureau Designed and by: printed perivan.com MIX ('; '1 -uJ Paper I Supporting £I� FSC® C022913 responsible forestry Mortgage Advice Bureau (Holdings) plc Capital House Pride Place Derby DE24 8QR
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