Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Mortgage Advice Bureau chief says technological shake-up will create opportunities

Early adopters of new digital systems such as MAB should flourish, says chief executive Peter Brodnicki
man at a computer
The company the company has invested heavily in state-of-the-art systems fit for a world that is increasingly becoming automated

The last annual results marked the eighth consecutive year of 20% profit growth for the Mortgage Advice Bureau (LON:MAB1).

The achievement is all the more remarkable given the market backdrop, which has been far from easy.

It has survived and thrived through the financial crisis and one of the worst recessions in living memory, while latterly uncertainty has been caused by Brexit, a root and branch overhaul of the buy to let market and a snap election.

Currently, transactions in the £250bn-a-year mortgage industry are flat with property inflation providing modest growth.

WATCH: All change in the mortgage market

“There’s no point in stressing about the market,” says chief executive Peter Brodnicki, who founded what is now the UK’s largest mortgage intermediary business more than 17 years ago.

So how has MAB achieved the very impressive performance outlined above?

The short answer is growth has tracked the expansion of its network of advisors, which at the last update totalled over 1,000 (though it also works with builders and estate agents).

In the six months leading up to September’s interim results it brought around 70 new mortgage advisers under its umbrella, and historically it has expanded at an annual rate of around at least 15% a year.

Growing network

A little like the franchise system, MAB’s network members gain leverage from the economies of scale of being part of a large and well-established operation. Branding is also key, as is access to market-leading mortgage technology.

That last point is an important one which we’ll come back to – both for the MAB network and for the company itself.

The last results showed the company generates revenues from three major sources – mortgage procurement fees, protection and general insurance commissions and client fee payments.

The fastest-growing part of the business currently is protection, which in the first six months of the financial year expanded by almost a quarter. It will continue to be a “key growth area”, according to CEO Brodnicki.

Plan to more than double market share

Looking ahead, the medium-term plan is to expand the company’s share of the mortgage intermediary market to 10% from 4.4% currently.

Aiding this process is the technological change taking place within the industry and at the forefront of which is MAB.

Brodnicki said the company has invested heavily in state-of-the-art systems fit for a world that is increasingly becoming automated.

“Technology will enhance face-to-face and telephone advice offerings significantly, but it also opens the door for some robo-advice options in the future,  which will form part of the choices our customers will receive,” the CEO explains.

Technology-led, yes. But still a multi-channel operator

It should be stated at this stage that MAB is and will remain a multi-channel strategy letting the customer decide how they wish to transact.

So its network isn’t eschewing face-to-face client meetings and calls in favour of a technology-driven solution for in doing so it would be ignoring a long tail of business.

Practically, what does the digitisation of the mortgage intermediary market mean?

Early adopters such as MAB should flourish, says Brodnicki as the wheels of the industry turn in its favour.

But for the traditionalists, and there are a lot of them out there, the writing is already on the wall.

Many of the smaller operators could flounder and fail

“If you are only starting to have the technology conversation around the boardroom table now, forget about it,” Brodnicki says.

The systems now in place and being developed at MAB should allow its network to be faster and more efficient, cutting costs.

Ultimately MAB’s approach will allow partner firms to be more productive.

Brodnicki sees a point where the uplift in productivity could have a more pronounced impact on the profit and loss account than expansion of its network of mortgage advisers.

It means investment made recently will really only start paying dividends several years down the line when the “technology dots really start to join”, the MAB boss said. So the benefits of this spending are yet to really accrue.

Asset-light and cash generative

It is perhaps worth bearing this in mind when you look at the current valuation of the business, which sits on a fairly racy price-to-earnings multiple.

It is also worth noting the company is an asset light, cash generative business that last year converted 90% of those funds into dividends.

The payout has almost doubled in the three years since MAB’s IPO, meaning investors have received a yield of around 4%.

And while past performance is never a reliable guide to future trajectory of a business, it is still worth reminding ourselves that this is a company that, irrespective of the state of the housing market, has grown at an impressive rate over the last eight years.

“The message is we are prudent, consistent; but we have ambitious plans and are working on increasing our market share during a period of significant [technological] disruption,” said Brodnicki.

View full MAB1 profile View Profile

Mortgage Advice Bureau (Holdings) PLC Timeline

January 09 2018

Related Articles

Russia picture
June 04 2018
The bulk of overall exposure is in credit and government bonds followed closely by equities
International currencies in bundles
September 04 2018
A number of key acquisitions and new products have attracted a raft of new customers towards the firm's platform as it seeks to challenge established forex providers
Care worker
August 10 2018
The stock consistently trades above its net asset value per share, which could have something to do with the dividend yield of more than 6%

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use