Kensington posted profits of 17% today and announced it was selling its loss making direct-to-consumer arm The Mortgage Lender for an undisclosed sum.
Consumer appetite for direct business has dwindled since KMC first bought the business in 2002 while the cost of advertising has rocketed.
As a result mortgage originations from TML for 2006 reduced to 189m from 322m in 2005 – representing less than 5% of total completions for the group.
John Maltby, Kensington Group chief executive, says: Over the past 18 months the contribution of TML to the Kensington Group has been reducing and in 2006 it generated less than 5% of our new business.
As a result, following a strategic review, we decided to sell the business and TML will become a direct-to-consumer broker. We wish the TML team well, they have been important to the success of Kensington and we look forward to working with them in the future.
Kensington bought TML in 2002, as a direct to consumer distributor of specialist mortgages, using high profile TV and press advertising to generate enquiries for residential mortgages.
But as the structure of the mortgage broking market in the UK changed, TMLs cost-base was reduced significantly over 2005 and 2006.
A recent strategic review of the requirements and priorities for Kensington led to a decision to focus on its core business priorities in the UK and Europe.
Maltby adds: We expect the UK specialist mortgage market to remain competitive during 2007 and that Kensington will see lower levels of profit growth in 2007 when compared to the growth seen in 2006.
Kensington enters 2007 as a lower-cost group with improved credit performance and a new business offer pipeline at the end of the financial year that, at over 500m, was over 20% higher than 12 months before.
Kensington will pay a final dividend of 16p, making a total of 24p for the year and representing an increase of 12% compared to 2005.