Mortgage Advice Bureau Regulatory News (MAB1)

MORTGAGE ADVICE BUREAU (HOLDINGS) PLC

("MAB" or "the Group")

20 March 2018

Final Results for the year ended 31 December 2017

Mortgage Advice Bureau (Holdings) PLC (AIM: MAB1.L) is pleased to announce its final results for the year ended 31 December 2017.

Financial highlights

Operational highlights

Post period end

1 Includes exceptional gain of £2.7m profit on disposal of 49% stake in Capital Private Finance Limited in 2016.

2 Excludes exceptional gain of £2.7m profit on disposal of 49% stake in Capital Private Finance Limited in 2016.

3 Headline cash conversion is cash generated from operating activities adjusted for movements in non-trading items including loans to Appointed Representative firms ("ARs") and loans to associates totalling £0.7m in 2017 (2016: £0.4m) as a percentage of operating profit.

4 Adjusted cash conversion is headline cash conversion adjusted for increases in restricted cash balances of £1.5m in 2017 (2016: £2.1m) and additional cash balances (2017: £nil; 2016: £nil) held due to the timing of the weekly AR commission payment in relation to the period end, as a percentage of operating profit.

5 Based on Average number of Advisers

Peter Brodnicki, Chief Executive commented:

"I am delighted to report another set of excellent results. Strong growth in revenue, up 17% to £108.8m has translated into strong growth in adjusted EPS up 17% to 23.8p. Accordingly, the Board is pleased to propose the payment of an increased final dividend of 11.9p per share, making total proposed ordinary dividends for the year of 21.4p, up 17% on the prior year.

 "MAB continues to deliver on its strategy in all market conditions whilst maintaining a strong financial position. Our mortgage completions increased by 18.5% and our market share increased by 13%. Achievements across the business continue to be recognised by a number of industry awards, including being named Best Mortgage Broker at the 2018 Mortgage Strategy Awards.

"We are focused on delivering sustainable long-term growth and providing the best possible solutions and outcomes for our customers. We plan to continue growing our market share and mortgage completions, whilst leading the evolution of intermediary distribution that we expect to see over the next five years."

Outlook

UK Finance's estimate for gross mortgage lending in 2017 of £258bn, implies market growth of 5% since 2016. UK Finance recently increased its estimate for gross mortgage lending in 2018 to £260bn, as well as publishing a first estimate for 2019 of £271bn. Gross mortgage lending is therefore expected to be relatively flat for 2018 and show a 4% increase for 2019. 

Adviser numbers have increased since the year end to 1,096 at 16 March 2018. We remain confident about our planned growth in adviser numbers in 2018 and beyond, both organically and from new ARs.

We are confident that our strategy, driven by our customers and their changing expectations, will continue to drive growth in MAB's market share year on year and deliver attractive returns to investors. The Board's expectations for the year remain unchanged.

For further information please contact:

Zeus Capital Tel: +44 (0)20 3829 5000

Martin Green

Nicholas How

Pippa Underwood

Canaccord Genuity Tel: +44 (0)20 7523 8350

Andrew Buchanan

Richard Andrews

Media Enquiries:

investorrelations@mab.org.uk

Analyst presentation

There will be an analyst presentation to discuss the results at 08:30am today at Canaccord Genuity Limited, 88 Wood Street, London, EC2V 7QR.

Those analysts wishing to attend are asked to contact investorrelations@mab.org.uk

Copies of this final results announcement are available at investor.mortgageadvicebureau.com

Chief Executive's Review

I am delighted to report another period of strong revenue and profit growth, with our market share increasing by 13% to 4.6% (2016: 4.1%) and our mortgage completions increasing by 18.5% to £11.9bn. Our fintech developments are progressing well and serve to enhance our high-quality business model. Our strategy remains focused on securing further growth through technology, lead generation and specialisation which will increase our market share and the number of mortgage completions in all market conditions, enabling us to continue to deliver strong returns to our investors.

We are just over a year into our three-year plan that is focused on building solutions for the future; this will ensure MAB is able to maintain and build upon its leading position in the intermediary sector. We continue to invest in our core business model with our plans for 2020 and beyond designed to secure sustainable long-term growth whilst continuing to deliver strong results in the meantime.

Market environment

Activity overall in the housing market has remained steady over the last year and was not noticeably affected by the general election in early June. The current house purchase market remains predominantly comprised of those moving home due to non-discretionary lifestyle factors, first time buyers and serious investors. The residential remortgage market has seen 14% growth by loan value on 2016, mostly ahead of the widely anticipated increase in the Bank of England base rate and with strong competition amongst lenders for new business.

Despite increases in first time buyer transactions, housing transaction volumes overall have remained relatively flat as the number of amateur landlords has reduced. Mortgage transactions by both volume and value have increased by 4% and 5% respectively in 2017 driven by both remortgages and first time buyers. UK Finance predicts a relatively flat market for gross mortgage lending for 2018, with a 4% increase for 2019 as the Government continues to manage the UK's exit from the EU. UK Finance also predict that housing transactions will remain flat over the next two years. Intermediary market share1 has remained broadly stable at just over 70%. MAB and its ARs growth is not directly reliant on increasing housing transactions, property prices, or intermediary market share as our continued year on year growth demonstrates.

Intermediaries previously had limited access to the product switching market, where customers change products with their existing lender. However, the vast majority of lenders now provide intermediaries with full access to their switching products. The UK Finance industry data on gross mortgage lending currently excludes product switches with the same lender, but we expect UK Finance to confirm the size of the product switching market later on this year.  Whilst it is still relatively early to assess the impact of this increased access to product switches, we expect product switches will typically deliver lower overall income per transaction compared to a remortgage, with this mostly offset by switches having a much lower dropout to completion. In addition, we expect product switches to deliver banked income in a shorter timeframe.

Looking ahead, we expect client fees to become increasingly dependent upon the type and complexity of the mortgage transaction, as well as the delivery channel. This will lead to a broader spread of client fees on mortgage transactions, which, by their nature, are our lowest margin revenue stream.

Recent RICS2 commentary on house prices suggests that on a national level, house prices have resumed a modest growth trajectory. However, the national figure conceals diverging trends across different parts of the UK, with London and, to a lesser extent, the South East, East Anglia and the North East experiencing pressure on prices, whereas house prices are quite firmly on an upward trend in other areas, including the North West, Northern Ireland and Wales.

1 excluding Buy-To-Let, where intermediaries have a higher market share, and product switches with the same lender 

2 Royal Institution of Chartered Surveyors

Delivering on our strategy

Fintech developments

We continue developing our technology solutions which are at the centre of our plans to further enhance our unique business model. This will enable us to increase our market share and gross mortgage completions both by delivering what our customers will rightly start to expect and by enabling our AR partners and advisers to continue competing at the highest level. These fintech developments will play an ever-increasing role in customer acquisition and conversion, as well as retention, by allowing advisers to identify future engagement opportunities with their customers more accurately and efficiently.

We are embracing fintech developments to enhance both face to face advice and our newer fast-growing and highly scalable telephony advice model. This will enable us to access a wider range of lead sources and provide greater choice to the consumer in how they research, receive advice and transact. As a result, we believe MAB's proportion of telephone advice is likely to increase, complementing the face to face advice that remains highly valued by consumers. Both these channels will continue to be supported by increasingly streamlined digital processes.

To allow us to capitalise fully upon our fintech developments we will consider investments in selected technology propositions where these can accelerate the development of our customer proposition and lead generation solutions. In addition, we expect our IT capital expenditure and IT costs to increase by a modest amount.

Driving income opportunities

MAB is focused on securing long term sustainable growth and providing the best possible solutions and outcomes to its customers. Against the backdrop of a changing consumer landscape, we will look to increase the range of services offered to our customers by adopting new developments in technology and working closely with lenders.

One of our key objectives is to maximise protection opportunities by achieving even higher levels and consistency of protection advice. To help facilitate this we were delighted to appoint Andy Walton to the new role of Proposition Director, Protection last year.

Our plans for direct-to-consumer marketing are progressing well, and we expect to be in a controlled testing phase during Q2 2018. Whilst MAB will use a range of media to target as many channels as possible, we expect to see the degree of digital content grow in line with the increasingly digital solutions that will be bought to all stages of the client journey.

We invested a further £0.2m in on-line conveyancing business, Sort Group Limited, towards the end of 2017, increasing our ownership from 33.25% to 43.25%. Every mortgage requires conveyancing and this further investment reflects the importance we place on technology in delivering a seamless and fully integrated end-to-end service for MAB's customers across their entire purchase and remortgage processes. Our plans with Sort Group Limited include developing a far closer association between conveyancing and mortgages to provide a more seamless service for consumers as well as enhancing lead generation. Sort Group Limited has two main trading subsidiaries, Sort Limited and Sort Legal Limited. Whilst Sort Limited had a record year and continues to grow strongly, Sort Legal Limited is a major new initiative that brings ownership of legal services into Sort Group Limited, considerably increasing its distribution and capacity. As a result of this, Sort Limited results were offset by the start-up costs in Sort Legal Limited during 2017.

Our joint venture in Australia, MAB Broker Services, is trading in line with our expectations. We continue to review progress and are in the early stages of implementation of a structure similar to our UK network partner initiative in Australia, having identified potential key partners.

MAB continually looks for where the biggest growth sectors may be for intermediaries in the future. We believe that lending into retirement represents one of the clear growth opportunities and, as such, are in the early stages of building the foundations of solutions for this market; equity release being one of these solutions, a market which is currently dominated by specialist intermediaries.

Summary

We are just over a year into our three-year plan that is focused on building solutions for the future; this will ensure MAB is able to maintain and build upon its leading position in the intermediary sector. We continue to invest in our core business model with our plans for 2020 and beyond designed to secure sustainable long-term growth whilst continuing to deliver strong results in the meantime. From a resource and technology perspective we have been focussed on being ready for GDPR for quite some time, and consider ourselves to be well positioned and prepared for GDPR.

As technology allows us to have more consistent and targeted interaction with our customers and when artificial intelligence/machine learning allows us to identify how different consumer groups behave and the services they require, this will give us opportunities in the medium and long term to identify future new revenue sources and ensure continued and diversified growth.

Having made a number of key strategic investments, MAB continues to consider further investments where there is a close alignment with our strategic objectives. Whilst our investments to date have been relatively modest in size, we will consider making larger investments to help accelerate the development of our customer proposition, lead generation and distribution. However, given our strong financial position and prospects for growth, we do not expect any such investment to adversely affect our payout ratio or the future growth in dividends.

Our plans for the future also include broadening the Executive Board due to the growth and widening range of opportunities for MAB.

Business Review of the year

I am pleased to report further strong growth in revenue of 17% to £108.8m with profit before tax (and exceptional gain in 2016) rising by 16% to £14.5m. MAB's gross mortgage lending increased by 18.5% to £11.9bn in 2017 (2016: £10.0bn) with the average number of Advisers increasing by 14%. MAB's overall share of UK new mortgage lending increased by 13% to 4.6% (2016: 4.1%).

Industry data and trends

Mortgage lending activity in 2017 grew by 5% to £258bn (2016: £246bn). UK Finance recently increased its estimate for gross mortgage lending for 2018 to £260bn, as well as publishing a first estimate for 2019 of £271bn; gross mortgage lending growth is therefore expected to be relatively flat for 2018 and show a 4% increase for 2019. We are confident that our strategy, driven by our customer's future direction of travel, will continue to drive growth in our market share and mortgage completions year on year and deliver attractive returns to investors. 

UK property transactions by volume for 2017 were c. 1% lower than in 2016. The spike in buy-to-let ("BTL") transactions ahead of the stamp duty changes in April 2016 is evident in the graph below.

http://www.rns-pdf.londonstockexchange.com/rns/2130I_2-2018-3-19.pdf

Source: HM Revenue and Customs

UK property inflation of 4.8%(1) and an increase in remortgage volumes of 11% and first time buyer transactions of 8% more than offset the slight reduction in UK property transactions and the 10% reduction in BTL transactions, leading to an increase in UK mortgage lending of 5% overall, as illustrated in the graph below.

(1) Land Registry House Price Index

http://www.rns-pdf.londonstockexchange.com/rns/2130I_1-2018-3-19.pdf

Source: UK Finance Regulated Mortgage Survey (excludes product transfers with the same lender), Bank of England, UK Finance BTL data (used for further analysis)

UK gross mortgage lending in 2017 for home-owner purchases (including first time buyers) and remortgages grew by 9% and 14% respectively. UK gross mortgage lending in 2017 for BTL purchases and BTL remortgages reduced by 28% and 4% respectively.

Just over 70% of UK mortgage transactions (excluding BTL, where intermediaries have a higher market share, and product switches with the same lender) were via an intermediary in 2017, which is broadly stable compared to 2016 and MAB expects intermediary market share to remain broadly stable going forward.

Financial review

We measure the development, performance and position of our business against a number of key indicators.

http://www.rns-pdf.londonstockexchange.com/rns/2130I_-2018-3-19.pdf

Revenue

Revenue increased by 17% to £108.8m (2016: £92.8m). A key driver of revenue is the average number of Advisers during the period. Our business model continues to attract forward thinking ARs who are seeking to expand and grow their own market share. Average adviser numbers increased by 14% to 1,008 (2016: 888) due to a combination of expansion by existing ARs and the recruitment of new ARs.

The Group generates revenue from three core areas, summarised as follows:

MAB's revenue, in terms of proportion, is split as follows:

All income sources continued to grow strongly with the average number of Advisers in the year increasing by 14%. We have seen an increase in average revenue per adviser of 3%, demonstrating the anticipated return to growth in productivity following the lull in activity in the housing and mortgage markets surrounding the EU referendum in 2016.

With MAB's gross mortgage completions increasing by 18.5% in 2017, mortgage procuration fees increased by 19%; and protection and general insurance commission grew by 18%. Client fees, which are not linked to the mortgage value, grew by 12%, reflecting an increase in remortgaging and product switching where fees are generally lower. Looking ahead, we expect to see a broader spread of client fees on mortgage transactions, which, by their nature, are our lowest margin revenue stream.

Gross profit margin

Gross profit margin was broadly maintained at 23.8% (2016: 23.9%). The Group typically receives a slightly reduced margin as its existing ARs grow their revenue organically through increasing their Adviser numbers. In addition, larger new ARs typically join the Group on lower than average margins due to their existing scale, which therefore impacts upon the Group's gross margin.

Going forward, we expect to see some further erosion of gross profit margin due to the continued growth of our existing ARs and the addition of new larger ARs.

Overheads

Overheads as a percentage of revenue were 10.9% (2016: 11.1%). This reduction in underlying overheads as a percentage of revenue demonstrates the scalable nature of the cost base. Certain costs, primarily those relating to compliance, which represent approximately 40% of our cost base, are closely correlated to the growth in the number of Advisers, due to the high standards we demand and the requirement to maintain regulatory spans of control. The remainder of MAB's costs typically rise at a slower rate than revenue which will, in part, counter the expected erosion of gross margin as the business continues to grow. 

As a result of MAB's IT plans, we expect our amortisation on IT capital expenditure and IT costs to increase by a modest amount.

Profit before tax and margin thereon

Profit before tax rose by 16% to £14.5m (2016: £12.5m, excluding an exceptional £2.7m profit on disposal of 49% stake in Capital Private Finance Limited) with the margin thereon being 13.4% (2016: 13.5%).

Net finance revenue 

Net finance revenues of £0.04m (2016: £0.07m) reflect continued low interest rates. 

Taxation

The effective rate of tax fell to 17.2% (2016: 18.4%), principally due to the tax deduction arising following the exercise of the first tranche of employee share options since IPO. Going forward we expect our effective tax rate to be marginally below the prevailing UK corporation tax rate subject to the continued availability of tax credits for MAB's research and development expenditure on our continued development of MIDAS Pro, MAB's proprietary software, and further tax deductions arising from the exercise of share options.

Earnings per share and dividend

Adjusted earnings per share rose by 17% to 23.8 pence (2016: 20.3 pence1).

The Board is pleased to propose a final dividend for the year ended 31 December 2017 of 11.9 pence per share (2016: 10.5 pence per share), amounting to a cash cost of £6.0m. Following payment of the dividend, the Group will continue to maintain significant surplus regulatory reserves. This proposed final dividend represents circa 90% of the Group's post-tax profits for H2 2017 and reflects our ongoing intention to distribute excess capital. MAB requires circa 10% of its profit after tax to fund increased regulatory capital and other regular capital expenditure.

The record date for the final dividend is 27 April 2018 and the payment date is 22 May 2018. The ex-dividend date will be 26 April 2018.

Cash flow and cash conversion

The Group's operations produce positive cash flow. This is reflected in the net cash inflow from operating activities of £14.5m (2016: £13.4m).

Headline cash conversion (1) was:

The Group's operations are capital light with our most significant ongoing capital investment being in computer equipment. Only £0.1m of capital expenditure on office and computer equipment was required during the period (2016: £0.3m). Group policy is not to provide company cars, and, other than on IT as indicated above, no significant capital expenditure is foreseen in the coming year. All development work on MIDAS Pro is treated as revenue expenditure.

The Group had no bank borrowings at 31 December 2017 (2016: £nil) with unrestricted bank balances of £13.2m (31 December 2016: £10.8m).

The Group has a regulatory capital requirement amounting to 2.5% of regulated revenue. At 31 December 2017 this regulatory capital requirement was £2.5m (31 December 2016: £2.1m), with the Group having a surplus of £9.5m.

The following table demonstrates how cash generated from operations was applied:

The Group's treasury strategy is to reduce risk by spreading deposits over a number of institutions rather than to seek marginal improvements in returns.

1 Excludes the exceptional gain of £2.7m profit on disposal of 49% stake in Capital Private Finance Limited in 2016.

2 Headline cash conversion is cash generated from operating activities adjusted for movements in non-trading items including loans to Appointed Representative firms ("ARs") and loans to associates totalling £0.7m in 2017 (2016: £0.4m) as a percentage of operating profit.

3Adjusted cash conversion is headline cash conversion adjusted for increases in restricted cash balances of £1.5m in 2017 (2016: £2.1m) and additional cash balances (2017: £nil; 2016: £nil) held due to the timing of the weekly AR commission payment in relation to the period end, as a percentage of operating profit.

Outlook

UK Finance's estimate for gross mortgage lending in 2017 of £258bn, implies market growth of 5% since 2016. UK Finance recently increased its estimate for gross mortgage lending in 2018 to £260bn, as well as publishing a first estimate for 2019 of £271bn. Gross mortgage lending is therefore expected to be relatively flat for 2018 and show a 4% increase for 2019. 

Adviser numbers have increased since the year end to 1,096 at 16 March 2018. We remain confident about our planned growth in adviser numbers in 2018 and beyond, both organically and from new ARs.

We are confident that our strategy, driven by our customers and their changing expectations, will continue to drive growth in MAB's market share year on year and deliver attractive returns to investors. The Board's expectations for the year remain unchanged.

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MORTGAGE ADVICE BUREAU (HOLDINGS) PLC

Opinion

We have audited the financial statements of Mortgage Advice Bureau (Holdings) plc (the "parent company") and its subsidiaries (the 'group') for the year ended 31 December 2017 which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position and the company statement of financial position, the consolidated statement of changes in equity and the company statement of changes in equity, the consolidated statement of cash flows and the notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial 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).

In our opinion:

• the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2017 and of the group's profit for the year then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the parent company financial statements have been 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.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are 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 with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

Key audit matters

Key audit matters are those matters that, in our professional judgment, 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) 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

Our application of materiality

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 on the basis of the financial statements.

Based on our professional judgement, we determined materiality for the group to be £700,000 (2016: £790,000) which represents 5% of profit before tax. We have used profit before tax as a benchmark given the importance of profit as a measure for shareholders in assessing the performance of the Group. We have then set the performance materiality at 75% (2016:75%) due to few identified misstatements in the past.

We determined materiality for the parent to be £192,000 (2016: £165,000) which represents 5% of net assets. We have used net assets as the parent acts as a holding company only. We have then set the performance materiality at 75% (2016:75%) due no identified misstatements in the past.

We agreed with the audit committee that we would report to the committee all individual audit differences identified during the course of our audit in excess of £14,000 (2016: £16,000) for the group and £4,000 (2016: £3,000) for the parent. We also agreed to report differences below these thresholds that, in our view warranted reporting on qualitative grounds

An overview of the scope of our audit

Our audit approach was scoped by obtaining an understanding of the group's activities, the key functions undertaken by the Board and the overall control environment. Based on this understanding we assessed those aspects of the group's transactions and balances which were most likely to give rise to a material misstatement at a group level.

The audit of the group was conducted by BDO LLP directly at group level as the group's accounting system records all transactions as a group with each transaction marked with a company code to enable financial statements to be produced for each subsidiary when required.

The audit of the parent company was conducted by BDO LLP after its financial statements were deconsolidated from the group accounting system,

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the 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.

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:

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group's and the parent company's ability to continue as a going 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 operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

This report is made solely to the 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 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 company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high 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 on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Leigh Treacy (Senior Statutory Auditor)For and on behalf of BDO LLP, Statutory AuditorLondon

19 March 2018

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Consolidated statement of comprehensive incomefor the year ended 31 December 2017

The notes that follow form part of these financial statements.

Consolidated statement of financial positionas at 31 December 2017

The notes that follow form part of these financial statements.

The financial statements were approved by the Board of Directors on

Consolidated statement of changes in equityfor the year ended 31 December 2017

The notes that follow form part of these financial statements.

Consolidated statement of cash flowsfor the year ended 31 December 2017

The notes that follow form part of these financial statements

Notes to the consolidated financial statementsfor the year ended 31 December 2017

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, which is also the Group's functional currency. All amounts are rounded to the relevant thousands, unless otherwise stated.

These financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union (EU) (EU "adopted IFRSs") and with those parts of the Companies Act 2006 that are applicable to companies that prepare financial statements in accordance with IFRSs.

The preparation of financial statements in compliance with adopted EU IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report as set out earlier in this announcement. The financial position of the Group, its cash flows and liquidity position are described in these financial statements.

The Group made an operating profit of £14.5m during 2017 (2016: £12.5 million) and had net current assets of £10.5m at 31 December 2017 (31 December 2016: £8.6m) and equity attributable to owners of the Group of £18.2m (31 December 2016: £15.2m).

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

Changes in accounting policies

New standards, interpretations and amendments effective for the year ended 31 December 2017

The following new standards, interpretations and amendments are effective for annual periods beginning on or after 1 January 2017 and have been applied in preparing these financial statements. None of these new standards or interpretations have a significant impact on the annual consolidated financial statements of the Group.

· IAS 7 Disclosure Initiative - Amendments to IAS 7. The amendments to IAS 7 Statement of Cash Flows are part of the IASB's Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after 1 January 2017, with early application permitted. Application of the amendments has had no impact on the Group.

· IAS 12 Income Taxes Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12. The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference related to unrealised losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.

Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognised in the opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact. These amendments are effective for annual periods beginning on or after 1 January 2017 with early application permitted. If an entity applies the amendments for an earlier period, it must disclose that fact. Application of the amendments has had no impact on the Group.

· Annual Improvements Cycle - 2014-2016

Amendments to IFRS 12 - Disclosure of interest in other entities. The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10-B16, apply to an entity's interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. These amendments did not affect the Group's financial statements.

New standards, interpretations and amendments not yet effective

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

· IFRS 9 Financial Instruments.  The group has identified that the adoption of IFRS 9, which replaces IAS 39 Financial Instruments: Recognition and Measurement from 1 January 2018, could impact its consolidated financial statements in one key area:

The Group will need to apply an expected credit loss model when calculating impairment losses on its trade and other receivables and its cash and cash equivalents. This may result in increased impairment provisions and greater judgement due to the need to factor in forward looking information when estimating the appropriate amount of provisions. In applying IFRS 9 the Group must consider the probability of a default occurring over the contractual life of its trade receivables on initial recognition of those assets. Under the new model applied to all trade and other receivables, the amount of impairment losses as at 31 December 2017 is not material, resulting in an immaterial increase in the impairment provision as at 1 January 2018 under IFRS 9 compared to IAS 39.

· IFRS 15 Revenue from Contracts with Customers. This was issued by the IASB on 28 May 2014 and applies to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2018. It sets out the requirements for recognising revenue that apply to contracts with customers, except for those covered by standards on leases, insurance contracts and financial instruments. This standard is not expected to have any impact on the Group.

· IFRS 2 Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2. The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled.

On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after 1 January 2018, with early application permitted. These amendments are not expected to have any impact on the Group.

· IFRS 16 Leases. IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees - leases of 'low-value' assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expenses on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g. a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under IFRS 16 is substantially unchanged from today's accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases.

IFRS 16 also requires lessees and lessors to make more extensive disclosures than IAS 17.

IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard's transition provisions permit certain reliefs. This standard is not expected to have any impact on the Group.

· IFRIC Interpretation 23 - Uncertainty over income tax treatments. The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The interpretation specifically addresses the following:

An entity must determine whether to consider each uncertain tax treatment separately or together with one or more uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. The interpretation is effective for annual reporting periods beginning on or after 1 January 2019, but certain transition reliefs are available. The Group will apply this interpretation and it may affect its consolidated financial statements and the required disclosures.

In addition, the Group may need to establish processes and procedures to obtain information that is necessary to apply the Interpretation on a timely basis.

· IFRS 17 - Insurance contracts. IFRS 17, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure was issued in May 2017. Once effective, IFRS 17 will replace IFRS 4. IFRS 17 applies to all types of insurance contracts, regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. The objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers.

IFRS 17 is effective for reporting periods beginning on or after 1 January 2021, with comparative figures required. Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17. This standard is not applicable to the Group.

· Amendments to IFRS 10 and IAS 28: Sale or contribution of Assets between an Investor and its Associate or Joint Venture. The amendments address the conflict between IFRS 10, Consolidated Financial Statements and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognised in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognised only to the extent of unrelated investors' interests in the associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively. The Group will apply these amendments when they become effective.

Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

All other assets are classified as non-current.

Assets included in current assets which are expected to be realised within twelve months after the reporting date are measured at fair value which is their book value. Fair value for investments in unquoted equity shares is the net proceeds that would be received for the sale of the asset where this can be reasonably determined.

Basis of consolidation

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.

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at 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.

Entities that are not subsidiaries but where the Group has significant influence (i.e. the power to participate in the financial and operating policy decisions) are accounted for as associates. The results and assets and liabilities of the associates and joint venture are included in the consolidated accounts using the equity method of accounting.

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 at rates calculated to write off the cost of each asset on a straight line basis over their expected useful lives, as follows:

Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised in the income statement. The Directors reassess the useful economic life of the assets annually.

Goodwill

Goodwill represents the excess of a cost of a business combination over the Group's interest in the fair value of identifiable assets under IFRS 3 Business Combinations.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the 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.

Other intangible assets

Intangible assets other than goodwill acquired by the Group comprise licences and the website and are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the statement of comprehensive income within administrative expenses on a straight line basis over the period of the licence agreements. Assets are tested annually for impairment or more frequently if events or circumstances indicate potential impairment.

Amortisation, which is reviewed annually, is provided on licences at 16.7% per annum and the website at 33.3% per annum, calculated to write off the cost of the asset on a straight line basis over its expected useful life. 

Impairment of non-financial assets

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their 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 fair value less costs to sell), the asset is written down 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.

Financial assets

In the consolidated statement of financial position, the Group classifies its financial assets as loans, trade receivables and cash and cash equivalents. The classification depends on the purpose for which the financial assets were acquired. Loans and trade receivables are non-derivative financial assets with fixed or determinable payments which arise principally through the Group's trading activities. These are recognised at original fair value less appropriate provision for impairment and subsequently measured at amortised cost.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance 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.

Cash and cash equivalents include cash in hand and deposits held at call with banks with an original maturity of three months or less.

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently carried at amortised cost.

Retirement benefits: Defined contribution schemes

Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.

Provisions

A provision is recognised in the statement of financial 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 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 the proceeds.

Revenue

Revenue comprises commissions, client fees and other income. Commissions and client fees are included at the gross amounts receivable by the Group in respect of all services provided. Commissions payable to trading partners in respect of their share of the commissions earned are included in cost of sales.

Commissions and client fees earned are accounted for when received or guaranteed to be received, as until received it is not possible to be certain that the transaction will be completed. In the case of life commissions there is a possibility for a period after the inception of the policy that part of the commission earned may have to be repaid if the policy is cancelled during this period. A provision is made for the expected level of commissions repayable.

Other income comprises income from ancillary services such as survey and conveyancing fees and is credited to the statement of comprehensive income partly on an accruals basis.

Leased assets

Rentals under operating leases are charged on a straight line basis over the lease term, even if the payments are not made on such a basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight line basis over the lease term.

Finance income

Finance income comprises interest receivable on cash at bank and interest recognised on loans to associates. Interest income is recognised in the statement of comprehensive income as it accrues.

Exceptional items

As permitted by IAS 1 'Presentation and disclosure' - certain items are presented separately in the income statement as exceptional where, in the judgement of the Directors, they need to be disclosed by virtue of their nature, size or incidence in order to obtain a clear and consistent presentation of the Group's underlying business performance. Examples of material and non-recurring items which may give rise to disclosure as exceptional items include asset impairments, costs associated with acquiring new businesses and profits on the disposal of investments.

Taxation

Income tax comprises current and deferred tax. Income tax is recognised in profit or loss other than if it relates to items recognised in other comprehensive income in which case it is recognised in other comprehensive income.

Current tax is the expected tax payable on the 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.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.

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.

Segment Reporting

An operating segment is a distinguishable segment of an entity that engages in business activities from which it may earn revenues and incur expenses and whose operating results are reviewed regularly by the entity's chief operating decision maker (CODM). The Board reviews the Group's operations and financial position as a whole and therefore considers that it has only one operating segment, being the provision of financial services operating solely within the UK. The 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.

Operating profit is the profit measure, as disclosed on the face of the combined income statement that is reviewed by the CODM.

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.

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.

Share-based payments

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 into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

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 the modification, is also charged to the statement of comprehensive income over the remaining vesting period.

2 Critical Accounting Estimates and Judgements

The Group makes certain estimates and assumptions 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) Impairment of goodwill

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 12.

(b) Impairment of trade and other receivables

Judgement is required when determining if there is any impairment to the trade and other receivable balances. Trade receivables are reviewed for impairment if they are past due and are not repaid within the terms of the contracts. Other receivables, which include loans, are reviewed for impairment when there are any indications that they may not be recoverable and that security held against the balance may be inadequate to fully cover the amount outstanding. A provision for impairment will be made if following review of the balances, the Group considers it unlikely that any balance will be recovered. More information is included in note 15.

(c) Clawback Provision

The provision relates to the estimated value of repaying commission received up front on life assurance policies that may lapse in a period of up to four years following inception. The provision is calculated using a model that has been developed over several years. The model uses a number of factors including the total unearned commission at the point of calculation, the age profile of the commission received, the Group's proportion of any clawback, likely future lapse rates, and the success of the Group's team that focuses on preventing lapses and/or generating new income at the point of a lapse. More information is included in note 19.

(d) Freehold building

The freehold building is depreciated over its useful life. The useful life is based on management's estimate of the period that the asset will generate revenue and will be reviewed annually for continued appropriateness. The carrying value will be tested for impairment when there is an indication that the value of the asset might be impaired. When carrying out an impairment test this would be based on future cash flow forecasts and these forecasts would be based on management judgement. No such indication of impairment has been noted.

(e) Deferred tax assets

Deferred tax assets include temporary differences related to the issue and exercise of share options. Recognition of the deferred tax assets assigns an estimate of proportion of options likely to vest and assumes share options will have a positive value at the date of vesting, which is greater than the exercise price. The carrying amount of deferred tax assets at 31 December 2017 was £0.9m.

3 Revenue

The Group operates in one segment being that of the provision of financial services in the UK. Revenue is derived as follows:

4 Cost of sales

 Costs of sales are as follows:

5 Profit from operations

Profit from operations is stated after charging the following:

Other administrative expenses are incurred in the ordinary course of the business and do not include any non-recurring items.

Profits from associates are disclosed as part of the operating profit as this is the operational nature of the Group.

6 Staff costs

Staff costs, including executive and non-executive directors' remuneration, were as follows:

Key management compensation

Key management are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. These are the directors of Mortgage Advice Bureau (Holdings) Plc.

During the year retirement benefits were accruing to 1 director (2016: 1) in respect of defined contribution pension schemes.

The total amount payable to the highest paid director in respect of emoluments was £598,738 (2016: £619,873). The value of the Group's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £nil (2016: £nil).

7 Finance income

8 Income Tax

For the year ended 31 December 2017 the deferred tax, relating to unexercised share options, recognised in equity was £799,387 (2016: £nil).

Changes in the taxation rate

Legislation to reduce the main rate of corporation tax to 19% from 1 April 2017 and to 17% from 1 April 2020 has been enacted and so the deferred tax balance has been calculated at 17% (2016: 17%).

9 Earnings Per Share

a) 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.

The share data used in the basic and diluted earnings per share computations are as follows:

b) Adjusted earnings per share

10 Dividends

The record date for the final dividend is 27 April 2018 and the payment date is 22 May 2018.The ex-dividend date will be 26 April 2018.

11 Property, Plant and Equipment

12 Intangible Assets

The goodwill relates to the acquisition of Talk Limited in 2012, and in particular its main operating subsidiary Mortgage Talk Limited. The goodwill is deemed to have an indefinite useful life. It is currently carried at cost and is reviewed annually for impairment.

Under IAS 36, "Impairment of assets", the Group is required to review and test its goodwill annually each year or in the event of a significant change in circumstances. The impairment review conducted at the end of 2017 concluded that there had been no impairment of goodwill.

The Board considers that it has only one operating segment and therefore one cash generating unit so accordingly it is necessary to assess the impact of the acquisition of Mortgage Talk Limited to the Group. The value in use of Mortgage Talk Limited has therefore been estimated based on the improvements in net profits which that acquisition continues to bring to the Group. The forecast ongoing profits generated by the acquisition of Mortgage Talk Limited significantly exceed the value of goodwill and therefore no impairment of the goodwill is required. A discount rate of 10% has been applied to these calculations. Management has considered forecast profits over a three year period in determining the value in use. Management believes that any 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 forecast ongoing profits.

13 Investments in Associates and Joint Venture

Investment 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:

The reporting date for the Group's associates, as listed in the table above, is 31 December and their 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.

The investment in associates and the joint venture at the reporting date is as follows:

The Group was entitled to 49% of the results for Capital Private Finance Limited up to 30 June 2016. The Group is also entitled to 49% of the results of CO2 Commercial Limited, and MAB Wealth Management Limited by virtue of its 49% equity stakes. CO2 Commercial Limited is a dormant holding company, and trades through its wholly owned subsidiary, Pinnacle Surveyors (England & Wales) Limited. The Group is entitled to 45% of the results of MAB Broker Services PTY Limited by virtue of its 45% equity stake, 35% of the results of Freedom 365 Mortgage Solutions Limited by virtue of its 35% equity stake, 25% of the results of Buildstore Limited and Clear Mortgage Solutions Limited by virtue of its 25% equity stakes and 20% of the results of Vita Financial Limited by virtue of its 20% equity stake.

On 20 November 2017, the Group acquired a further 10% equity stake in Sort Group Limited. At 31 December 2017 the Group was entitled to 43.25% of the results of Sort Group Limited by virtue of its 43.25% equity stake. Mortgage Advice Bureau Limited's effective holding in Sort Limited and Sort Technology Limited at 31 December 2017 was 30%. Mortgage Advice Bureau Limited's effective holding in Sort Limited at 31 December 2017 was 28%.

The carrying value of the Group's joint venture, MAB Broker Services PTY Limited, at 31 December 2017 is £nil (2016: £nil). In the period ended 30 June 2017, MAB Broker Services PTY reported a loss of AUD0.5m.

Acquisitions and disposals

2017: The Group acquired a further 10% interest in Sort Group Limited on 20 November 2017 at a cost of £183,817.

2016: During the year ended 31 December 2016, the Group acquired a 25% interest in Clear Mortgage Solutions Limited at a cost of £50,000 plus contingent consideration of up to £50,000 which was paid in full in 2017. Also during 2016 the Group acquired a 20% interest in Vita Financial Limited at a cost of £150,000, a 35% interest in Freedom 365 Mortgage Solutions Limited at a cost of £350 and a 45% interest in MAB Broker Services PTY Limited at a cost of £2,666 (AUD4,500).

On 31 July 2016, the Group disposed of its 49% holding in Capital Private Finance Limited for sale proceeds of £2.7m which resulted in a net profit on sale of £2.69m.

As the associates are private companies published share prices are not available. The aggregate amounts of certain financial information of the associates is summarised as follows:

All associates prepare their financial statements in accordance with FRS 102 other 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 accounts of any of the associates other than Sort Group Limited if these were prepared in accordance with IFRS. For Sort Group Limited amortisation of £86,981 (2016: £86,981) has been charged for the year on goodwill arising on consolidation, no amortisation would be charged under IFRS and goodwill instead be tested for impairment at the balance sheet date.

* 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.Other investments

Unlisted investment

The unlisted investment represents a 0.05% shareholding in Twenty7tec Group Limited, a company that licenses certain mortgage sourcing software. The net book value of the investment at 31 December 2017 was £150 (2016: £150).

14 Subsidiaries

The subsidiaries of Mortgage Advice Bureau (Holdings) Plc at the reporting date have been included in the consolidated financial statements. The subsidiaries are as follows:

The registered office for all of the subsidiaries of Mortgage Advice Bureau (Holdings) plc, as listed in the table above, is Capital House, Pride Place, Pride Park, Derby, DE24 8QR, United Kingdom, , other than for the two subsidiaries incorporated in Australia for which the registered office is Norton Rose Fulbright, Level 18, 225 George Street, Sydney, NSW 2000, Australia.

Acquisitions

On 8 December 2016 the Group acquired a 100% interest in Mortgage Advice Bureau Australia (Holdings) PTY Limited which was a newly incorporated entity. Mortgage Advice Bureau Australia (Holdings) PTY Limited has a 100% equity stake in Mortgage Advice Bureau PTY Limited and also a 45% 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.

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.

There are no restrictions regarding the utilisation of cash or other resources held by any subsidiary.

15 Trade and Other Receivables

Trade and other receivables are all current and the book value is the same as their fair value. Trade receivables are reviewed for impairment if they are past due and are not repaid within the terms of the contracts.

Trade receivables include advances granted to Appointed Representatives, which have contractual repayment terms. These advances are considered to be past due when there is a delinquency in interest or principal payments.

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 past due but not impaired receivables would provide useful additional information. The Group has not recognised a provision for impairment of these balances because there is no objective evidence that they are impaired. Further information on the credit quality of financial assets is set out in note 18.

A summary of the movement in the provision for the impairment of receivables is as follows:

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 18.

No other balances are past due or impaired.

16 Cash and cash equivalents

Bank balances held in relation to retained commissions earned on an indemnity basis in relation to life 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 Payables (note 17).

17 Trade and Other Payables