Final Results and Board Changes

Notes to the financial statements
for the year ended 31 December 2014

1.   Accounting policies

New Standards, interpretations and amendments not yet effective

 

The following new standards, interpretations and amendments which will or may have an effect on the Group, are effective for annual periods beginning on or after 1 January 2015 and have not yet been applied in preparing these financial statements. None of these new standards or interpretations are expected to have a material impact on the financial statements of the Group.

 

·      IFRS 9 will eventually replace IAS 39 in its entirety. However, the process has been divided into three main components (classification and measurement, impairment and hedge accounting). This standard becomes effective for accounting periods beginning on or after 1 January 2018.  Its adoption may result in changes to the classification and measurement of the Group's financial instruments, including any impairment thereof.

 

·   IFRS 15 'Revenue from Contracts with Customers' 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 2017.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.

 

·   Amendments to IFRS11 "Accounting for Acquisitions of Interests in Joint Operations" provides guidance on how to account for the acquisition of joint operations that constitute a business as defined in IFRS 3 Business Combinations. It is effective for accounting periods beginning on or after 1 January 2016.

 

·   Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of Depreciation and Amortisation". The amendment to IAS 16 prohibits entities from using a revenue-based depreciation method for items of property, plant and equipment. The amendment to IAS 38 introduces a rebuttable presumption that revenue is not an appropriate basis for amortisation of intangible assets. It is effective for accounting periods beginning on or after 1 January 2016.

 

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.

 

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

 

-        The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights

-        Substantive potential voting rights held by the company and by other parties

-        Other contractual arrangements

-        Historic patterns in voting attendance.

 

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 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 its expected useful lives, as follows:

 

Fixtures and fittings        20%

Computer equipment      33%

 

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 the cost of a business combination over, in the case of business combinations completed prior to 1 January 2011, the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. For business combinations completed after 1 January 2011, the 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 are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to 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 is provided on licences at 16.7% 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.

 

Unquoted investments

 

Unquoted investments are shown at cost less provision for impairment.

 

Financial assets

 

The Group classifies its financial assets as loans or receivables. The classification depends on the purpose for which the financial assets were acquired. Loans and receivables are non-derivative financial assets with fixed or determinable payments which arise principally through the provision of services (e.g. trade receivables). These are recognised at original fair value cost, less appropriate provision for impairment.

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

 

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 administrative expenses 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

 

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 and fees receivable. Commissions 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 earned are accounted for when 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 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, except where the period to the review date on which the rent is first expected to be adjusted to the prevailing market is shorter than the full lease term, in which case the shorter period is used.

 

Finance income

 

Finance income comprises interest receivable on cash at bank. Interest income is recognised in statement of comprehensive incomeas it accrues.

 

 

Exceptional items

 

As permitted by IAS 1 'Presentation and disclosure' certain items are presented separately in the statement of comprehensive income 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 costs which may give rise to disclosure as exceptional items include asset impairments and costs associated with acquiring new businesses.

 

Taxation

 

Income tax comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that 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 probably 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.

 

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.

 

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.

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 following estimates and judgements that have the most significant effect on the carrying amounts of assets and liabilities within the financial statements are discussed 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 9.

 

(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 or 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.

 

(c)        Clawback Provision

The provision relates to the estimated cost of repaying commission received 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 11.

 

3    Revenue

The Group operates in one segment being that of the provision of financial services in the UK.

Revenue is derived as follows:

		2014		2013
		£		£
Mortgage related products		32,148,696		21,594,777
Insurance and other protection products		23,702,415		17,667,253
Conveyancing and survey fees and other income		726,502		804,689
		56,577,613			40,066,719

 

4    Cost of sales

 Costs of sales are as follows:

		2014	2013
		£	£
Commissions paid		41,886,947	28,159,716
Wages and salary costs		1,045,443	1,525,202
		42,932,390	29,684,918

 

5          Exceptional costs

The following items have been included in arriving at profit before tax:

	2014 £	2013 £
Costs incurred in relation to the IPO	746,053	-
Provision against loan	347,891	-
Total	1,093,944	-

In November 2014, the Group was listed on the Alternative Investment Market ("AIM"). The costs charged to the consolidated statement of comprehensive income relate to costs incurred as a result of the listing. These costs include such items as marketing expenditure and legal and professional fees relating to work performed for the listing.

At 31 December 2014 there was a loan outstanding to Client Data Systems Group Limited of £347,891 (2013: £347,891), a company in which Mortgage Advice Bureau Limited had a 7% shareholding. The loan was fully provided for in the year.

6.  Income Tax

	2014 £		2013 £
Current tax expense
UK corporation tax charge on profit for the year	1,555,390		1,138,516
Adjustments for over provision in prior years	(77,323)		(62,109)
Total current tax	1,478,067		1,076,407
Deferred tax expense
Origination and reversal of timing differences	9,355		12,522
Effect of change in tax rate on opening liability	(2,380)		1,715
Total Deferred Tax  (see note 12)	6,975		14,237
Total tax expense	1,485,042		1,090,644
The reasons for the difference between the actual charge for the year and the standard rate of corporation tax in the United Kingdom of 21.5% (2013: 23.25%) applied to profit for the year is as follows:
	2014 £		2013 £
Profit for the year before tax	6,876,245		5,235,133
Expected tax charge based on corporation tax rate	1,478,393		1,217,168
Expenses not deductible for tax purposes amortisation and impairment	184,838		14,742
Utilisation of tax losses	-		(5,377)
Adjustments to tax charge in respect of prior periods	(77,323)		(62,109)
Profits from associate	(98,486)		(75,495)
Rate change on deferred tax liability	(2,380)		1,715
Total tax expense	1,485,042		1,090,644

 

Changes in the taxation rate

The standard rate of corporation tax in the United Kingdom changed from 24% to 23% with effect from 1 April 2013 and from 23% to 21% from 1 April 2014. Further changes have also been enacted which reduced the main rate of corporation tax to 21% from 1 April 2015 and so the deferred tax balance has been calculated at that enacted rate.

7. Earnings Per Share

 

a) Earnings per share
	2014		2013
Basic earnings per share	£		£
Profit for the year attributable to the owners of the parent	5,391,203		4,144,489
Weighted average number of shares in issue  (see note below)	56,009,100		69,960,000
Basic earnings per share (in pence per share)	9.626p		5.924p
For diluted earnings per share, the weighted average number of ordinary shares in existence is adjusted to include all dilutive potential ordinary shares arising from share options.
	2014		2013
Diluted earnings per share	£		£
Profit for the year attributable to the owners of the parent	5,391,203		4,144,489
Weighted average number of shares in issue  (see note below)	56,229,933		69,960,000
Basic earnings per share (in pence per share)	9.588p		5.924p
b) Adjusted earnings per share
	2014		2013
	£		£
Profit for the year attributable to the owners of the parent	5,391,203		4,144,489
Adjusted for the following items net of tax:
Exceptional costs	1,019,147		-
Adjusted earnings net of tax	6,410,350		4,144,489
Weighted average number of shares in issue	56,009,100		69,960,000
Adjusted basic earnings per share (in pence per share)	11.445p		5.924p
Adjusted diluted earnings per share (in pence per share)	11.400p		5.924p

Until 11 November 2014 the Company's share capital comprised ordinary shares of £1 each, at which point these were subdivided into 0.1 pence shares each.  To allow comparability, the weighted average has therefore been restated based on shares being 0.1 pence shares throughout both 2014 and 2013

8. Dividends

		2014		2013
Dividends paid during the year		£		£
On A ordinary shares at £nil per share (2013: £60)		-		240,000
On B ordinary shares at £52.078 per share (2013: £8)		2,083,154		320,000
On C ordinary shares at £10 per share (2013: £nil)		24,600		-
On D ordinary shares at 0.0p per share (2013: 0.0578p)		-		780
On E ordinary shares at £nil per share (2013: £8)		-		80,000
On ordinary shares at £36.625 per share (2013: £nil)		1,849,998		-
		3,957,752			640,780

9. Intangible Assets

 

Goodwill			2014 £	2013 £
Cost
At 1 January			4,267,453	4,267,453
At 31 December			4,267,453	4,267,453
Accumulated impairment
At 1 January			153,346	153,346
At 31 December			153,346	153,346
Net book value
At 31 December			4,114,107	4,114,107

 

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 2014 concluded that there had been no impairment of goodwill.

 

The Board considers that it now has only one operating segment, 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 unit continues to bring to the Group. The forecast on-going profits generated by the acquisition of Mortgage Talk Limited significantly exceed the value of goodwill and therefore no impairment of the goodwill is required.  On this basis it has not been possible to apply a discount rate to these calculations.  Management has considered forecast profits over a three year period in determining the value in use.  Management believes that any reasonably possible change 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.

  

Licences			2014 £	2013 £
Cost
At 1 January			108,461	108,461
At 31 December			108,461	108,461
Accumulated Amortisation
At 1 January			45,296	25,248
Charge for the year			18,047	20,048
At 31 December			63,343	45,296
Net book value
At 31 December			45,118	63,165

 

10.  Cash and cash equivalents

		2014 £		2013 £
	Unrestricted cash and bank balances	5,281,117		6,702,642
	Bank balances held in relation to retained commissions	3,988,889		2,685,511
	Cash and cash equivalents	9,270,006		9,388,153

Bank balances held in relation to retained commissions are held to cover potential future lapses in AR commissions.  Operationally, the Group does not treat these balances as available funds.  An equal and opposite liability is shown within Trade Payables.

11.  Provisions

Clawback provision	2014 £	2013 £
At 1 January	588,783	609,744
Charged/(released) to the statement of comprehensive income	161,896	(20,961)
At 31 December	750,679	588,783

 

The provision relates to the estimated cost of repaying commission income received on life assurance policies that may lapse in the four years following issue. Provisions are held in the financial statements of three of the group's subsidiaries: Mortgage Advice Bureau Limited, Mortgage Advice Bureau (Derby) Limited and Mortgage Talk Limited. The exact timing of any clawbacks is uncertain and the provision was based on the directors' best estimate, using industry data where available, of the probability of clawbacks to be made.

12.  Deferred Tax Liability

Deferred tax liability is calculated in full on temporary differences under the liability method using the tax rates enacted. The reduction in the main rate of corporation tax as set out in note 6 has been applied to deferred tax balances which are expected to reverse in the future.

The movement in deferred tax is shown below:

	2014		2013
	£		£
Deferred tax liability - opening balance	18,146		3,909
Recognised in the statement of comprehensive income	6,975		14,237
Deferred tax liability - closing balance	25,121		18,146

 

The deferred tax liability is made up as follows:

	2014		2013
	£		£
Accelerated capital allowances	25,121		18,146

Deferred tax liabilities have arisen due to capital allowances which have been received ahead of the depreciation charged in the accounts.

13. Share Capital

Issued and fully paid

	2014 £		2013 £
A Ordinary shares of £1 each	-		4,000
B Ordinary shares of £1 each	-		40,000
C Ordinary shares of £1 each	-		2,460
D Ordinary shares of £1 each	-		13,500
E Ordinary shares of £1 each	-		10,000
Ordinary shares of 0.001p each	50,510		-
Total share capital	50,510		69,960

 

The holders of the A Ordinary shares were entitled to a dividend in preference to any dividend voted to any other class of share and were redeemable at the option of the company. The A Ordinary shares were entitled to priority of proceeds upon a winding up or return of capital and carried voting rights totalling 5%.

The B Ordinary shares were not entitled to dividends other than at the discretion of the board but not if there were any arrears on the A dividends or if there remained any A shares to be bought back after the 1 January 2019. In the event of a winding up or return of capital the proceeds were payable to the holders of the B shares after any amounts paid to the A and C shareholders. The B shares with the E shares carried voting rights totalling 65%.

The C Ordinary shares were not entitled to dividends other than at the discretion of the board. The C shares were repayable at par upon a winding up or return of capital and did not carry voting rights.

The D Ordinary shares were not entitled to dividends other than at the discretion of the board but not if there were any arrears on the A dividends or if there remain any A shares to be bought back after the 1 January 2019. The D shares were repayable at par upon a winding up or return of capital. The D shares carried voting rights totalling 30%.

The E Ordinary shares were not entitled to any dividends other than at the discretion of the board but not if there were any arrears on the A dividends or if there remained any A shares to be bought back after the 1 January 2019. In the event of a winding up or return of capital the proceeds were payable to the holders of the E shares after any amounts paid to the A shareholders. The E shares with the B shares carried voting rights totalling 65%.

On 3 January 2014 all 4,000 A Ordinary shares of £1 in issue were purchased by the company and cancelled for a total consideration of £4,521,816.   On the same date 4,500 D Ordinary shares of £1 were purchased by the company and cancelled for a total consideration of £4,500.

On 25 June 2014, 1,188 of the E Ordinary shares of £1 were redesignated as B Ordinary shares of £1 and the 2,460 C Ordinary shares of £1 were converted to B Ordinary shares of £1 at the rate of 1 B Ordinary share for every 3.56 C Ordinary shares held. On the same date the remaining 9,000 D Ordinary shares of £1 were purchased by the company and cancelled for a total consideration of £9,000.

On 8 September 2014 217 Ordinary shares of £1 each were purchased by the company and cancelled for a consideration of £217.

Stamp duty of £22,635 was incurred on the cancellation of the shares referred to above.

On 31 October 2014 all remaining shares were redesignated as Ordinary shares and the 50,474 Ordinary shares of £1 each were redesignated as 50,474,000 Ordinary shares of 0.001p each. All shares rank pari passu in all respects.

On 4 November 2014, 35,600 Ordinary shares of 0.1 pence were issued for a total consideration of £53,400.

14. Reserves

The following describes the nature and purpose of each reserve within equity

Reserve	Description and purpose
Share premium	Amount subscribed for share capital in excess of nominal value.
Capital redemption reserve       Share option reserve	The capital redemption reserve represents the cancellation of part of the original share capital premium of the company at par value of any shares repurchased.   The fair value of equity instruments granted by the Company in respect of share based payment transactions.
Retained earnings	All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

There is no restriction on the distribution of retained earnings.

15.  Related Party Transactions

On 3 January 2014 all 4,000 A Ordinary shares of £1 in issue were purchased by the company and cancelled for a total consideration of £4,521,816.   On the same date 4,500 D Ordinary shares of £1 were purchased by the company and cancelled for a total consideration of £4,500.  The recipients of all of this consideration were directors of the company at this date. 

On 25 June 2014 9,000 D Ordinary shares of £1 were purchased by the company and cancelled for a total consideration of £9,000.  The recipients of £4,500 of this consideration were directors of the company at this date. 

On 8 September 2014 217 Ordinary shares of £1 each were purchased by the company and cancelled for a consideration of £217. The recipient of this consideration was a director of the company at this date. 

At 31 December 2014 included in other receivables there was an amount of £1,000,000 (2013: £nil) due to the Group from HBB Bridging Loans Limited, a company in which S Blunt and D Preece are directors and shareholders. This loan is secured, by a fixed and floating charge over the assets of the company and personal guarantees from certain directors of HBB Bridging Loans Limited. It accrues interest at a rate of 9.5% per annum above RBS bank base rate and has no fixed repayment date, although three months' notice to terminate can be given by either party.

At 31 December 2013 included in other receivables there was an amount of £906,563 due to the Group from House Buyer Bureau Limited, a company in which S Blunt is a director and shareholder. This loan was unsecured, accrued interest at a rate of 8.75% per annum and had no fixed repayment date. The loan was repaid in full in January 2014.

The Group made purchases of £45,283 (2013: £46,046) and sales of £2,606 (2013: £4,781) to BriefYourMarket Limited. At 31 December 2014 there was an amount of £521 due to the Group by BriefYourMarket Limited (2013: £488,926), and £4,627 (2013: £1,448) was due to BriefYourMarket Limited, a company in which R Palmer, P Robinson and P Brodnicki are or were directors and are shareholders. The amount due at 31 December 2013 of £488,926 included in other receivables represented an unsecured loan, which accrued interest at a rate of 8.75% per annum and had no fixed repayment date. The loan was repaid in full in January 2014.

At 31 December 2014 there was a loan outstanding by Client Data Systems Group Limited included in other receivables of £347,891 (2013: £347,891), a company in which Mortgage Advice Bureau Limited had a 7% shareholding. This loan is secured by personal guarantees and on the freehold property owned by one of the guarantors. The loan attracts interest at a rate of 10% per annum and has no fixed repayment date. The loan was fully provided for in the year.

Accounting services were provided to the Group by Robconsult Limited, a company in which P Robinson is a director and shareholder. Services supplied were on an arm's length basis and amounted to £9,065 plus VAT during the year (2013: £19,078 plus VAT). At the year-end £nil (2013: £1,813) was owing to Robconsult Limited included in trade payables in respect of these transactions.

During the year the Group made purchases from Astute Insurance Solutions Limited of £5,514 (2013: £3,535), a company in which P Robinson is a shareholder and was a director.

During the year the Group received introducer fees of £34,038 (2013: £26,267) from Capital Private Finance Limited, an associated company. At 31 December 2014 there was a balance due from Capital Private Finance Limited of £3,566 (2013: £3,410) included in trade receivables.

At 31 December 2014 there was a loan outstanding by Pinnacle Surveyors (England & Wales) Limited an associated company, of £15,000 (2013: £18,600) included in trade receivables.

At 31 December 2014, Buildstore Limited, an associated company owed £114,000 (2013: £nil) included in trade receivables.

During the year the Group received dividends from associated companies as follow:

	2014 £	2013 £
CO2 Commercial Limited	191,100	117,967
Capital Private Finance Limited	213,150	127,400
Total	404,250	245,367

16.  Share based payments

The Group operates two equity-settled share based remuneration schemes for executive directors and certain senior management, one being an approved scheme, the other unapproved, but with similar terms.  Half of the options are subject to a total shareholder return ("TSR") performance condition and the remaining half is subject to an earnings per share ("EPS") performance condition. The options in both schemes vest as follows:

·   25% based on performance to 31 March 2017, exercisable between that date and 11 November 2022,

 

·   25% based on performance to 31 March 2018, exercisable between that date and 11 November 2022,

 

·   25% based on performance to 31 March 2018, exercisable between 31 March 2019 and 11 November 2022,

 

·   25% based on performance to 31 March 2018, exercisable between 31 March 2020 and 11 November 2022.

	Weighted average exercise price 2014 £	2014 £
Outstanding at 1 January	-	-
Granted during the year	1.60	1,325,000
Outstanding at 31 December	1.60	1,325,000

 

Of the total number of options outstanding at 31 December 2014, none had vested.  There were no options exercised during the year.  For the share options outstanding as at 31 December 2014, the weighted average remaining contractual life is 3.75 years (2013: not applicable).

The following information is relevant in the determination of the fair value of options granted during the year under the equity-settled share based remuneration scheme operated by the Group.

 

 

 

	2014	2013
Equity settled
Option pricing model - EPS	Black-Scholes	-
Option pricing model - TSR	Stochastic	-
Exercise price	£1.60	-
Expected volatility	30%	-
Expected dividend yield	5.4%	-
Risk free interest rate	0.81 - 1.58%	-

Expected volatility is a measure of an amount by which the share price is expected to fluctuate during a period.  As the Company has only recently listed historical data is not available. Management have therefore used a proxy volatility figure based on the median volatilities, of dividend paying FTSE AIM 100 companies over each of the expected terms.

Dividends paid on shares reduce the fair value of an award as participant does not receive the dividend income on these shares.  For the purpose of these valuations we have used a dividend yield of 5.4%, being the dividend projected by Canaccord Genuity Limited  for investors at IPO.

The Options offer participants the opportunity to benefit from increasing per share value without risking the current per share price. The risk-free rate used is the rate of interest obtainable from UK government securities as at the date of grant over the expected terms

The option has vesting period of 2.38, 3.38, 4.48 or 5.39 years from the date of grant and the calculation or the share based payment is based on these vesting periods.

The share-based remuneration expense comprises the equity-settled schemes of £10,553 and also a payment of £53,400 into a Share Incentive Plan - Free Share Award.  The Free Share award consisted of 35,600 new ordinary shares issued on 4 November 2014 into the Share Incentive Plan for all employees.  Every employee employed by the Group at 1 January 2014 and still employed by the Group on 2 December 2014 was each awarded 400 free shares.

The Group did not enter into any share-based payment transactions with parties other than employees during the current or previous period.

17. Contingent Liabilities

The group had no contingent liabilities at 31 December 2014 or 31 December 2013.

18. Events after the Reporting Date

Financial Services Compensation Scheme levy

On 19 March 2015 the Financial Services Compensation Scheme ("FSCS") confirmed a £20m interim levy for life and pensions intermediaries in respect of the year to 31 March 2015, driven by an unexpected increase in the cost of claims relating to bad advice by certain financial advisers to transfer funds from existing pension schemes into self-invested personal pensions. MAB does not provide pension scheme advice, but the levy is made on the class of intermediaries to which MAB belong. This interim levy will cover the costs of compensation claims until the next annual levy becomes available in July 2015.

MAB will contribute £89,449 to the interim levy. No provision has been made in these financial statements for this or any additional FSCS levies that may be raised during the year ending 31

19 . Distribution of the annual report and accounts to members

The announcement set out above does not constitute a full financial statement of the Group's affairs for the year ended 31 December 2014.  The Group's auditors have reported on the full accounts of each year and have accompanied them with an unqualified report.  The accounts have yet to be delivered to the Registrar of Companies. 

The annual report and accounts will be posted to shareholders in due course, and will be available on our website (www.investor.mortgageadvicebureau.com) and for inspection by the public at the Group's head office address: Capital House, Pride Place, Pride Park, Derby DE24 8QR during normal business hours on any weekday.  Further copies will be available on request. 

The Company's annual general meeting will take place on 20 May 2015 at the offices of Canaccord Genuity Limited, 88 Wood Street, London EC2V 7QR.