Mortgage Advice Bureau rolls with the punches

You did not have to look hard at the results for Mortgage Advice Bureau (MAB1) – a rare instance of a company’s name reflecting its core activity – to understand why the share price has halved over the past 12 months. Uncertainty over the state of the housing market, the fall out from the 'mini' Budget” and higher interest rates putting borrowers under pressure combined to reinforce much of the negative sentiment around the company. However, while MAB can do little over the macro state of the market, its basic operations were sound under the circumstances.

Apart from the flat state of mortgage approvals – new mortgages were down 13 per cent at £9bn, while completions were flat at £12.1bn – it was largely one-off charges that combined to floor the reported pre-tax profits.

The mortgage advice market has been consolidating as conditions have worsened and MAB acquired advisory companies Fluent and Vita during the period. Unfortunately, this affected its one-off operating costs, which rose by 67 per cent to £23.7mn as the company integrated 129 advisors from Fluent. On an organic basis, costs were 23 per cent higher, reflecting MAB’s ongoing investment in the business, particularly in technology. Total number of advisers stayed stable at 2,114, reversing a previous decline.

Despite clear headwinds, the company is still registering growth and it may be worth going against sentiment at a Peel Hunt designated price/earnings ratio of 13 – a considerable discount compared with last year. The business is in the position where its needs to maintain its operating presence while waiting for the broader market to stabilise. Speculative buy.

Last IC View: Hold, 851p, 27 Sep 2022