Morses Club performs 'resiliently' in 2020

Non-standard financial services provider Morses Club said on Thursday that it performed “resiliently and profitably” in the year ended 27 February, accelerating its digital strategy in response to the Covid-19 pandemic.

The AIM-traded firm said it quickly moved to a remote Home Collect Credit (HCC) lending model, which was made possible by its previous investment in its digital capability, with the board explaining that its digital platform enabled the company to restart lending to existing customers three weeks after lockdown was announced in March 2020.

It said 64% of lending in its HCC division was now cashless and transacted through its portal, with customers signed up to the portal rising by around 70% during the period.

Customer satisfaction remained “very high”, unchanged at 97%, which Morses Club said in part reflected its customers' positive experience of the new remote lending model.

The board said it expected that to be a permanent shift in customer behaviour, with its research indicating that both customers and agents saw digital lending as “the future” of the HCC market.

Morses Club said it had focussed on the quality of lending since the start of the pandemic, with strong collection rates and levels of impairment reflecting that.

The collection-to-terms performance within HCC had continued to improve, with the third quarter at 95% of historical expectations and the fourth quarter rising to 100% of historical expectations.

Total credit issued within HCC reduced by 37.0% to £109.7m year-on-year, which the company said reflected reduced demand due to various national and regional lockdowns during the year, along with its stricter lending criteria to protect the quality of the loan book.

The HCC gross loan book reduced by 28.6% to £102.1m, and total customer numbers within HCC fell to 152,000 from 221,000.

Morses Club said the “confidence and support” of its funding partners provided further validation of its strategy, as it secured an extension of its revolving credit facility in April 2020.

The digital division implemented two new platforms over the period, creating a “robust” banking proposition and strengthening its existing loans management system.

As with HCC, the company said that total credit issued and customer numbers within the digital division were impacted by reduced demand due to lockdown measures along with the group's tightening of lending criteria to maintain high quality lending.

Total credit issued increased 21.4% to £19.3m, and customer numbers were 29,000, down from 33,000.

The division was now primed for growth, the board said, with new platforms and a significant target market.

It said the division's strong collection figures demonstrated the platform's capabilities, with the firm now focused on scaling the business and achieving run-rate breakeven by the end of the current 2022 financial year.

Morses Club said it also implemented a number of other structural changes to the business during the year, supporting employees and agents working from home, and restructuring its property portfolio, which was now largely complete with all 89 branches operationally closed on a permanent basis.

The company noted that it had not furloughed any staff or sought any government assistance throughout the period.

Subject to an audit review, the board said it expected group profit before tax for the 2021 financial year would be ahead of current market expectations, adding that it intended to pay a dividend for the year.

“Last year was a challenging yet transformational year for Morses Club, during which we demonstrated the robustness of our business model,” said chief executive officer Paul Smith.

“The pandemic has resulted in the acceleration of our digital strategy, vindicating our previous investment, and as a result, we have made a number of permanent changes to our offering to meet changing customer behaviour.”

Smith said the company’s “strong” new operating platforms, increasing suite of services and customer service ensured the group was well-placed to capitalise on opportunities going forward.

“We are encouraged by evidence of pent-up demand for our growing number of products as lockdown eases and we look forward to making further progress in facilitating financial inclusion across the UK as the economy gradually rebounds during 2021.”

At 1124 GMT, shares in Morses Club were up 2.9% at 71p.