Morses Club PLC (LON:MCL), an established provider of non-standard financial services, has announced its preliminary results for the 52 weeks ended 27 February 2021.
Operational Highlights:
· Rapidly reconfigured operating model and existing technology, allowing us to maintain lending and collection activity throughout the pandemic
· Further re-engineering of our online businesses to build our product offering and take advantage of the opportunity in the wider non-standard credit market
· Delivered technology enhancements in our HCC business to provide a digital service to customers enabling a virtually paperless documentation process
· Strong customer satisfaction with further increase to 98%
· 107,000 customers registered for the digital HCC portal (FY20: 78,000)
· 67% of all HCC lending cashless with 80% of cash collections made remotely
· Transformed the Group’s estate footprint with 90 properties operationally exited
· Total Group customer numbers: 180,000 (FY20: 255,000)
· Digital business moved e-money current account services and lending products onto two new operating platforms
· Continued progress in Group’s strategy to become a more complete financial services provider
Financial Highlights:
· Group:
o Revenue decreased by 25.1% to £100.2m (FY20: £133.7m) due to Covid-19 impact on demand and inability to lend to new HCC customers during first 5 months of H1
o Total credit issued to all customers of £129.0m (FY20: £190.3m)
o Net loan book of £53.5m, reduced by 26.5% (FY20: £72.8m)
o Adjusted profit before tax1 of £6.1m (FY20: £13.8m)
o Statutory profit before tax of £0.5m (FY20: £11.5m)
o Impairment as a percentage of revenue1 for the period of 20.8% (FY20: 27.2%) evidencing improved quality of loan book
o Adjusted return on assets1 of 8.9% (FY20: 14.8%)
o Statutory return on assets of 0.3% (FY20: 12.8%)
o Adjusted EPS1 of 3.9p (FY20: 8.4p)
o Statutory EPS of 0.2p (FY20: 7.3p)
o Final dividend of 2.0p pence per share (FY20: 3.6p) reflecting Group’s confidence in its outlook
· HCC
o Total credit issued to HCC customers 37.0% lower at £109.7m (FY20: £174.2m)
o Adjusted HCC profit before tax1 of £15.0m, a decrease of 34.2% (FY20: £22.8m)
o Statutory HCC profit before tax of £11.8m, a decrease of 44.3% (FY20: £21.2m)
· Digital
o Total credit issued to Digital customers up 19.9% to £19.3m (FY20: £16.1m)
o Adjusted loss before tax1 in Digital division of (£8.9m) (FY20: (£9.0m))
o Statutory loss before tax in Digital (£11.3m) (FY20: (£9.7m)) reflecting continued investment in the division
Alternative Performance Measures & Key Performance Indicators
| Key performance indicators | 52-week period ended 27 February 2021 | 53-week period ended 29 February 2020 | % +/- |
| Revenue | £100.2m | £133.7m | (25.1%) |
| Net Loan Book | £53.5m | £72.8m | (26.5%) |
| Adjusted Profit Before Tax1 | £6.1m | £13.8m | (55.8%) |
| Statutory Profit Before Tax | £0.5m | £11.5m | (95.7%) |
| Adjusted Earnings per share1 | 3.9p | 8.4p | (53.5%) |
| Statutory Earnings per Share | 0.2p | 7.3p | (97.3%) |
| Cost / Income ratio | 70.9% | 60.0% | 18.2% |
| Return on Assets | 0.3% | 12.8% | (97.7%) |
| Adjusted Return on Assets1 | 8.9% | 14.8% | (39.9%) |
| Return on Equity | 0.4% | 17.2% | (97.7%) |
| Adjusted Return on Equity1 | 10.3% | 19.9% | (48.2%) |
| Tangible Equity / average receivables1 | 86.3% | 74.4% | 16.0% |
| No of customers (000’s) | 180 | 255 | (29.4%) |
| Number of agents | 1,385 | 1,695 | (18.3%) |
| Credit Issued | £129.0m | £190.3m | (32.2%) |
| Impairment as % of Revenue1 | 20.8% | 27.2% | (23.5%) |
1. Definitions are set out in the Glossary of Alternative Performance Measures on page 35
Paul Smith, Chief Executive Officer of Morses Club, commented:
“The last twelve months have been truly transformative for Morses Club. The Covid-19 pandemic forced us to innovate and accelerate our digital strategy, reconfiguring our operating model to allow us to maintain customer contact and collection activity whilst generating new lending opportunities and transitioning towards being a more complete financial services provider.
“The Group performed resiliently and profitably, despite not being able to lend to new HCC customers for five months of the year. In HCC, we re-commenced lending to existing customers just three weeks after lockdown was announced in March 2020. 67% of lending in our HCC division is now cashless and 80% of cash is collected remotely. Despite the impact of the pandemic, we saw a significant increase in the quality of our lending, with impairment levels well below the guidance range. The fact that customer satisfaction has increased to 98% reflects our customers’ positive experience of the new remote lending model. I am very proud and grateful to all of my colleagues for adapting so well and for maintaining our customer service levels, despite the significant changes in the marketplace.
“The Digital division transitioned to two new operating platforms during the year and, despite tightening our lending criteria, the division issued more loans and introduced longer-term lending during the period, which is an encouraging indicator for the future growth of the Digital business and for the achievement of break-even on a run rate basis by the end of FY22. We are experiencing a growing demand from customers for a wider range of digital products and services and we have created a robust digital current account proposition and loans management platform positioned to capture this growth.
“We are seeing robust demand for non-standard finance products as the market reopens, with positive sales trends since the year-end in both divisions and further uptake expected as Government restrictions relax further. A number of our competitors have stepped back from the HCC and digital sectors and, as a result, we expect to benefit from reduced competition within the market. The accelerated shift to digital is permanent and the investment the Group has made in technological infrastructure over a number of years stands us in good stead to continue supporting our customers and meeting their ever-changing financial needs with our broadening suite of financial products.”
Sell-side Analyst Presentation
The Company will be holding a virtual sell-side analyst presentation at 10.30 am on Thursday 13th May. Please contact morses@camarco.co.uk if you would like to attend.
