Morses Club PLC – Preliminary results

Morses Club PLC – Preliminary results

Morses Club PLC, the UK’s second largest home collected credit lender, is pleased to announce its preliminary results for the 52 weeks ended 23 February 2019.

The Group’s results are being reported under IFRS 9 ‘Financial Instruments’ for the first time following the mandatory adoption of the standard for accounting periods commencing after 1 January 2018. As permitted by IFRS 9, comparative information for FY18 has not been restated.

In order to enable comparisons on a like-for-like basis, pro forma comparatives have been calculated on an IFRS 9 basis, where appropriate, for KPIs and Alternative Performance Measures – full details of these can be found in the glossary. 

Financial Highlights

  • Revenue increased by 0.3% to £117.0m (FY18: £116.6m1). On a like-for-like, pro forma basis, revenue was up 6.0% (FY18 pro forma: £110.4m2)
  • Total credit issued increased by 2.4% to £178.5m (FY18: £174.4m)
  • Net loan book growth over 12 months of 0.3% to £73.0m (FY18: £72.8m1). On a like-for-like, pro forma basis, net loan book growth was 6.0% (FY18 pro forma: £68.9m2)
  • Adjusted profit before tax increased by 14.6% to £22.0m (FY18: £19.2m1, FY18 pro forma: £18.6m2); Statutory profit before tax up 25.5% to £20.2m (FY18: £16.1m1; FY18 pro forma: £15.5m2
  • Impairment as a percentage of revenue3 for the period was 22.4% (FY18: 26.1%1, FY18 pro forma: 22.5%2), within our revised target range of 21% – 26% (previously 22% – 27%)
  • A 2.6% increase in customer numbers to 235,000 (FY18: 229,000)
  • Secured additional funding in November 2018 to increase overall revolving facility from £40m to £55m to allow for sufficient capacity to execute on acquisition pipeline
  • Adjusted3 EPS increased by 16.2% to 13.6p (FY18: 11.7p1, FY18 pro forma: 11.3p2); Reported EPS of 12.5p (FY18: 10.1p1, FY18 pro forma: 9.6p2)
  • Proposed final dividend of 5.2 pence per share, an increase of 8.3% (FY18: 4.8p)

1 FY18 reported numbers are under IAS 39
2 FY18 pro forma numbers have been adjusted to incorporate an estimate of IFRS 9 for comparability
3 Definitions are set out in the Glossary of Alternative Performance Measures

Operational Highlights

  • The purchase of the loan books of two well-established HCC regional businesses in line with our strategy
  • 30,000 Morses Club Card customers, an increase of 42.8%, with £15.5m in loan balances (FY18: £10.6m)
  • Technology continues to enhance Morses Club’s offering, with a new Customer Portal launched during the year, which complements the agent relationship by providing a digitally enabled, end-to-end customer journey
  • Introduction of Good Customer Outcomes surveys, with an overall result of 97%, as well as continued high levels of customer, agent and employee satisfaction
  • Post period-end, completed the acquisition of the business and certain assets of CURO Transatlantic Limited, a provider of online loans in the non-standard credit market

Alternative Performance Measures & Key performance indicators

Key performance indicators 

52-week period ended 23 February 2019

52-week period ended 24 February 2018

% +/-

Pro forma 52-week period ended 24 February 2018

 

% +/-

IFRS 9

IAS 39

IFRS 9

Revenue

£117.0m

£116.6m

0.3%

£110.4m

6.0%

Net Loan Book

£73.0m

£72.8m

0.3%

£68.9m

6.0%

Adjusted Profit Before Tax1

£22.0m

£19.2m

14.6%

£18.6m

18.3%

Statutory Profit Before Tax

£20.2m

£16.1m

25.5%

£15.5m

30.3%

Adjusted Earnings per Share

13.6p

11.7p

16.2%

11.3p

20.4%

Basic Earnings per Share

12.5p

10.1p

23.8%

9.6p

30.2%

Proposed Dividend per Share

7.8p

7.0p

11.4%

7.0p

11.4%

Cost / Income ratio

57.4%

56.2%

-2.1%

59.4%

3.4%

Return on Assets

23.4%

19.7%

18.8%

n/a2

n/a2

Adjusted Return on Assets1

25.4%

22.9%

10.9%

n/a2

n/a2

Return on Equity

27.2%

22.9%

18.8%

n/a2

n/a2

Adjusted Return on Equity1

29.6%

26.5%

11.7%

n/a2

n/a2

Tangible Equity / average receivables1

85.9%

92.6%

7.2%

n/a2

n/a2

No of customers (000’s)

235

229

2.6%

229

2.6%

Number of agents

2,050

2,030

1.0%

2,030

1.0%

Credit Issued

£178.5m

£174.4m

2.4%

£174.4m

2.4%

Impairment as % of Revenue1

22.%

26.1%

14.2%

22.5%

0.4%

 1 Definitions are set out in the Glossary of Alternative Performance Measures
2 KPI not quoted as it includes data points which precede the date of IFRS 9 transition

 Paul Smith, Chief Executive Officer of Morses Club, commented:

“FY19 has been a strong year for Morses Club as we have continued to develop our core offering which is increasingly enabled through our complementary technology platform, grown cashless lending through the Morses Club Card, and made a number of acquisitions. These have all contributed to the sustainable growth of the loan book, customer numbers, increased levels of revenue and profit, as well as the maintenance of a base of high quality lending. We are delighted by the robust performance of the Group across all our key financial metrics as we continue to deliver consistent returns for our shareholders, whilst keeping customers and their needs at the heart of the business.

“Technology remains an important enabler for our strategy.  The introduction of a customer portal, with full rollout in 2019/20, means that the end-to-end customer journey is digital at the points that the customer wants and not a replacement of the agent service they have come to know and trust. We believe that it is precisely this kind of ability that will assist us in keeping the home collected credit numbers in scope whilst others in the market may struggle with growth following the FCA’s changes to the way in which home collected credit sales can be enacted. Indeed, trading conditions in the home collected credit market for the current year are challenging and whilst Morses Club is equipped to steer a steady course in such conditions, it remains to be seen whether or not smaller players will have the ability or appetite to do so.

“On behalf of the Board, I would like to thank our dedicated team of employees, as well as the network of agents, who have worked hard to deliver another year of strong performance. Our proven ability to develop new products and services for our customers, as well as the continued opportunities for growth both organically and through acquisition, give us confidence in the outlook for the full year.”

Forward looking statements

This announcement includes statements that are, or may be deemed to be, “forward-looking statements”. By their nature, forward-looking statements involve known and unknown risks and uncertainties since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements.

Any forward-looking statements in this announcement reflect Morses Club’s view with respect to future events as at the date of this announcement. Save as required by law or by the AIM Rules for Companies, Morses Club undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations or to reflect events or circumstances after the date of this announcement.

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