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SMALL CAP SHARE IDEAS: Mortgage Advice Bureau bets on technology and robot-advice as profits rise 20%

By Ian Lyall At Proactive Investors For Thisismoney.co.uk

Published: 07:09 EDT, 15 January 2018 | Updated: 09:11 EDT, 15 January 2018


The last annual results marked the eighth consecutive year of 20 per cent profit growth for the Mortgage Advice Bureau.

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

‘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 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 chief executive Brodnicki.

MAB at a Glance

Ticker: MAB1

Market value: £310million

Share price: 610p

12-month high: 610p

Low: 328p

Looking ahead, the medium-term plan is to expand the company’s share of the mortgage intermediary market to 10 per cent from 4.4 per cent currently. MAB said robo-advice is one of the the choices their customers will receive

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.

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.

It is also worth noting the company is an asset light, cash generative business that last year converted 90 per cent 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 per cent.

‘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.
 


Small Cap Ideas: Mortgage Advice Bureau bets on technology
