UK house prices might look wobbly, but it’s worth bearing in mind two facts about the current residential property market. First, dogged competition between mortgage providers has created a borrowers’ market. Second, although housing transactions have dipped for two consecutive years, they are ahead of the 10-year average.
That goes some way to explaining how Mortgage Advice Bureau (MAB1) continues to hold its own. Underpinned by a strategy to grow adviser numbers and market share, the group succeeded in lifting gross profits 9 per cent to £14.2m in the first half of 2019. Margins, adjusted for acquisition costs, are on the up.
The strategy is also delivering its stated aims. In the six months to June, the group completed 6 per cent more mortgages compared with 2018, thereby increasing its market share by 7 per cent. This was aided by an army of advisers that was on average 13 per cent larger, all before the addition of 90 personnel who arrived via the post-period acquisition of broker First Mortgage Direct.
That deal has taken the current adviser headcount to 1,433, equivalent to an increase of 30 per cent in 15 months. It has also reduced the cash pile by an initial £16.5m, resulting in a trim of the dividend payout ratio from 90 to 75 per cent of net profits, although First Mortgage’s greater profitability should boost group-level pre-tax margins.
Consensus forecasts are for earnings of 28.7p a share this year, rising to 36.9p in 2020.
MORTGAGE ADVICE BUREAU (MAB1) | ||||
ORD PRICE: | 570p | MARKET VALUE: | £294m | |
TOUCH: | 556-570p | 12-MONTH HIGH: | 650p | LOW: 470p |
DIVIDEND YIELD: | 4.2% | PE RATIO: | 22 | |
NET ASSET VALUE: | 42p | NET CASH: | £24m |
Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2018 | 57.9 | 6.96 | 11.7 | 10.6 |
2019 | 60.9 | 7.20 | 11.9 | 11.1 |
% change | +5 | +3 | +2 | +5 |
Ex-div: | 3 Oct | |||
Payment: | 25 Oct | |||