Trading Update

11 March 2020

Morses Club PLC

Trading update

Morses Club PLC ("Morses Club" or the "Group"), an established provider of non-standard financial services, provides 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.

This announcement constitutes inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No 596/2014.

 For further information please contact:

Notes to Editors 

About Morses Club

Morses Club is an established non-standard financial services provider, consisting of Morses Club, the UK's second largest home collected credit ("HCC") provider, and Shelby Finance Limited which operates online lending through its Dot Dot brand and online e-money current accounts through its U Account brand.

UK HCC is considered to be a specialised segment of the broader UK non-standard credit market. UK HCC loans are typically small, unsecured cash loans delivered directly to customers' homes. Repayments are collected in person during weekly follow-up visits to customers' homes. UK HCC is considered to be stable and well-established, with approximately 1.6 million¹ people using the services of UK HCC lenders.

The HCC division is the second largest UK Home Collected Credit (HCC) lender with 224,000 customers and 1,695 agents across 90 locations throughout the UK. The majority of the Company's customers are repeat borrowers and the HCC division enjoys consistently high customer satisfaction scores of 97%². In April 2016 its cashless lending product Morses Club Card was introduced, enabling its customers to buy online as well as on the high street. In February 2019, the Company introduced an online customer portal for its HCC customers, which now has over 78,000 registered customers.

Shelby Finance, via the Dot Dot brand has 37,000 active customers and via the U Account brand, has c.18,000 customers using the online e-money product. Dot Dot is a provider of 3 - 9 month short-term online loans and 18 - 48 month online loans in the non-standard credit market.

Morses Club successfully listed on AIM in May 2016.

About the UK non-standard credit market

The UK non-standard credit market, of which UK HCC is a subset, consists of both secured and unsecured lending and is estimated to comprise around 10 million consumers³ and total loan receivables of £10.7bn⁴.

Non-standard credit is the provision of secured and unsecured credit to consumers other than through mainstream lenders. Lenders providing non-standard credit principally lend on an unsecured basis and the market is characterised by high frequency borrowing. Approximately 2 million people move annually between standard and non-standard markets⁴.

Since February 2014, unsecured personal lending has grown from £161 billion to £216 billion in February 2019⁵.

^{1 High Cost Credit Review ANNEX 1 - July 2017
2 Independent Customer Satisfaction Survey conducted by Mustard
3 FCA High Cost Credit Review Technical Annex 1: CRA data analysis of UK personal debt - July 2017
4 Apex Insight - Non-Prime Consumer Credit: UK Market Insight Report - September 2019
5 Table A5.2, Bank of England Money and Credit Bank stats February 2019}