Morses Club PLC (LON:MCL), an established provider of non-standard financial services, today provided the following trading update for the 53-week period ended 29 February 2020.
The performance of the Home Collect Credit (HCC) division during the period has been very strong in a sector that continues to face headwinds and is expected to maintain like-for-like profitability. Total credit issued of £174.2m was slightly lower at -2.4% year-on-year (FY 2019: £178.5m). We continue to make operational efficiencies as a result of our investment in technology and agent recruitment over the last four years. As anticipated, the change in the FCA regulations on the non-solicitation of loans has had a minimal impact on our business, demonstrating the prudent and tight credit controls employed by Morses Club.
Total HCC customer numbers are marginally lower at 224,000 (FY 2019: 235,000). The gross loan book has reduced slightly by -2.4% (FY 2019: 7% growth). Impairments are anticipated to be at the lower end of our normal range. Our diversification strategy in digitising aspects of the customer offering in HCC continues to gather momentum, with over 78k of our customers using our online customer portal launched in February 2019 and £22.9m of loan balances on our Morses Club Card (FY 2019: £15.5m).
2019 was a year of significant change for the Group’s Digital division, following substantial acquisition activity, incorporating Dot Dot Loans and U Account. The businesses have undergone significant re-engineering and are now better positioned to take advantage of the opportunity in the wider non-standard credit market. Although losses in the Digital division have been higher than initially expected, we have focused on ensuring that we ultimately create a customer journey with high quality lending and operational routines, resulting in a digital product set that is best suited to our addressable market. The Digital division is still on track to deliver a substantial improvement in losses during FY21, and to reach run-rate break-even during H2 FY21, reflecting the significant investment Morses Club has made in line with its strategy of diversifying its product offering.
Although we anticipate a robust overall profit performance, the adjusted profit before tax for the Group will be reduced by 18% – 23% against consensus. The Company intends to maintain its existing dividend policy.
Paul Smith, Chief Executive Officer of Morses Club, said:
“This year for the Group has been transformational in terms of diversification and product offering. The strong financial performance of the HCC division ensures that we have a strong financial bedrock to enhance our strategic plan. The business is undergoing a significant development phase which is necessary to deliver a broader offering to our customers. The strong customer response to the introduction of key initiatives in HCC, such as the customer portal, is testament to our long-term strategic approach.
“In our Digital division, we have looked holistically at our recently acquired digital businesses so that we create an end-to-end customer platform that is wholly relevant to Morses Club’s existing and future customers. Whilst the re-engineering of these businesses has taken longer than we initially anticipated, we continue to meet the strategic milestones we have set ourselves and the diversification of our business puts us in a strong position to benefit from demand from the wider non-standard credit market.
“The growth potential for our Digital division is significant. Whilst we intend to continue our investment phase to ensure that we provide our customers with an expanded and complementary offering to our core HCC offering, we are confident in the long-term strength of the business and continue to look for opportunities to grow both our HCC business and digital offering.”
Notice of Full Year Results
Morses Club will be announcing its full year results for the period ended 29 February 2020 on Thursday 30 April 2020. There will be an analyst presentation to discuss the results at 9.30am at finnCap, 60 New Broad St, London, EC2m 1JJ. Those analysts wishing to attend are asked to contact Jake Thomas at Camarco on +44 (0)20 3781 8337 or at jake.thomas@camarco.co.uk.
