Mortgage networks under the spotlight
With the demise of several high-profile mortgage networks in 2009, Paul Thomas puts the balance sheets of some of the remaining distributors under scrutiny.
It is difficult to get an up-to-date picture of the state of mortgage distributors’ finances as most have only recently filed their accounts for 2008 but the figures act as a useful pointer to the financial position for some networks and big distributors.
Personal Touch Holdings posted a £4m loss for 2008. It is paying an escalating rate of interest on £7.7m loan notes from Lloyds Development Capital, which this year will reach 9.5 per cent. PTFS, however, posted a £2.5m profit for 2008. In 2009, PTFS lost 83 appointed representatives, the total dropping from 1,055 to 973.
But group sales director Dev Malle believes the business is well placed to take advantage of the consolidation of inter-mediary markets in 2010.
He says: “In 2009, PTFS network remained profitable every month and there was a substantial improvement in the group position. The business remains cash-positive.
“This puts us in an enviable position in the market and allows us to take advantage of the consolidation we believe will continue to take place in 2010.”
Pink Home Loans listed as Advance Mortgage Funding at Companies House saw a 47 per cent drop in revenue from 2007 to 2008, from £38.6m to £20.6m. It made a loss of £3.6m for 2008 after a £1.6m profit in 2007.
It also wrote down £2m on the value of BDS which it acquired during the year.
Pink managing director David Copland claims “exceptional costs”, including redundancies as a result of the credit crunch, contributed to the losses in 2008. “We had a business with high fixed costs and marginal income. During that period, mortgage lending dropped, appointed representative productivity dropped and it hurt us a lot more than it did the year before.”
But over 2009, the number of ARs at Pink rose to 412 from 355.
Mortgage Advice Bureau recorded a profit of just £6,913 in 2008 compared with £1.5m the year before. Company chief executive Peter Brodnicki says a decision to retain resources meant it was able to maintain service levels. Following an indifferent 2008, he believes the firm is looking at a significant profit for 2009.
Mortgageforce ended 2009 with a profit of £12,125. after a profit of £300,510 in 2008. Total revenue was down from £4.9m in 2008 to £3m in 2009.
’Any broker in business 12 months from now will be extremely well posit - ioned to do as well, if not better, than in 2006/07’
Managing director Kevin Duffy says tough market conditions mean that registering a profit is an achievement in itself and those who survive 2010 will benefit from a reduction in competition as more intermediaries go out of business.
He says: “Any broker in business 12 months from now will be extremely well positioned to do as well, if not better, than in 2006/07.”
Openwork grew its number of ARs by 106 in 2009, from 962 to 1,068, and improved on its £6.4m loss in 2007 with a £591,546 loss in 2008.
Home of Choice saw 37 of its ARs leave the company over 2009 and accounts for the year ended March 31, 2009 saw a loss of £54,874, an improvement on the previous year’s £1.2m loss.
Home of Choice chief executive Gerry O’Brien says many networks lost reps due to “a combination of the harsh economic climate and especially in the mortgage sector a lack of lending supply, which many advisers were reliant upon”.
He adds that the year ahead will remain difficult and distributors are hoping the general election will bring political stability.
He says: “We have come through the toughest two years that distributors have ever been through and conditions can only improve.”
Intrinsic Financial Services posted a pre-tax loss of £3.6m for 2008, although on an earnings before tax depreciation and amortisation basis it made a profit of £1.9m. It saw AR numbers increase in 2009 from 301 to 338.
Sesame Group made a £10m profit for 2008. However, 216 ARs left between January and December 2009, with total adviser numbers going from 1,783 to 1,567.
Which Network director Paul Day says: “We have seen some high-profile casualties and questions raised over the validity of the mortgage network model and even mortgage and protection-only advisers.
“However, there can be no doubt that if the mortgage network model was removed as a result of the past 18 months’ business failings, the resulting drop in competition would prove damaging to the entire industry and, ultimately, to the consumer.