Morses Club confident after swing to statutory loss

Non-standard credit provider Morses Club reported an 11.2% improvement in full-year revenue on Thursday, to £111.4m.

The AIM-traded firm said in its preliminary results that total credit issued to all customers was ahead 15.7% at £149.3m, while its net loan book stood at £55.8m - an increase of 4.3%.

Adjusted profit before tax totalled £4.6m for the 52-week period ended 26 February, down from £6.1m year-on-year, while it swung to a statutory loss before tax of £42.9m from a profit of £0.5m, mainly due to exceptional relating to its home-collected credit redress claim liability.

Impairment as a percentage of revenue for the period was 32.3%, rising from 20.8%, which the board put down to the sales increase in its digital division, and the complaints write-off of £3.5m.

Morses Club said its adjusted return on assets improved to 10.1% from 8.9%, while its statutory return on assets tumbled to -57.4% from 0.3%.

Adjusted earnings per share came in at 4.4p, up from 3.9p, and the statutory loss per share was 25p, swinging from earnings of 0.2p in 2021.

The board said it had not recommended a final dividend for the 2022 financial year.

“The last 12 months have been challenging for the company, and we fully recognise the current challenges we as a group still face,” said chief executive officer Gary Marshall.

“However, we are deeply committed to the sector and the customers who require our services more than ever due to the current macroeconomic environment.

“The underlying operational performance of our credit business was stable and consistent throughout the period.”

Marshall said the firm’s digital lending division, Shelby Finance, had a “particularly strong” year, with total credit issued more than doubling to £41.3m.

The division returned an adjusted profit before tax in January and February, which the CEO described as a “key” milestone.

“The overall long-term outlook for the group is positive - we have made significant strides to reshape the group and there will be more to do as we continue our discussions with the Financial Conduct Authority to progress on a potential scheme of arrangement.

“Any potential scheme would remove the uncertainty of continued redress claims and remove the risk of ongoing liabilities with regard to volatility in the level of complaints.

“I am confident that we can work through this in a constructive way, as it is vital that our customer demographic continues to be served by a provider which understands the market and operates in a socially conscious way.”

The group's management team, which Gary Marshall said had “significant experience” in transitioning businesses, understood the need to operate at pace, with a “renewed momentum” on transforming the company to produce sustained development in both divisions.

“We remain focused on continuing to build the trading position of the group and are convinced that the reshaping of our business will help the company move forward from the challenges it currently faces.

“Our position as the only remaining home-collected credit lender of scale in the UK and the commitment we have to the sector, along with our core expertise in serving customers in this market will help secure our longer-term future, despite the impact on profitability for the period as well as into 2023.”

At 1001 BST, shares in Morses Club were up 3.45% at 6p.

Reporting by Josh White at Sharecast.com.