Morses Club sees a boost from its club card operation

The Batley-based firm said that trading conditions in the home collected credit market are challenging, but it has found ways to overcome them.

CEO Paul Smith said the firm had rightly predicted that the FCA’s high cost, short term credit review would examine the solicitation of loans.

“One thing we did understand was that they would probably examine - quite robustly - repeat lending,” said Mr Smith.

“Normally in our market place, a customer will get very close to the end of their loan and then they’ll pay off the last few weeks of the loan by taking out their next loan, so then a small proportion of the outstanding loan gets repaid and carried forwards.

“We knew the FCA would be examining that so we were prepared for it and we built in some pretty neat solutions to our software platform.

“Our rivals are struggling with their sales numbers because they are no longer allowed to promote to the customer that their loans are due for renewal, face to face in the customer’s house. What you can do is promote to the customers using a centralised means so you can contact them by email, but you have to have a very sophisticated portal like ours.”

Morses reported a “very small” dip in sales as a result of the changes, but sales are now recovering, in line with customers adopting Morses’ new portal technology.

The comments come at a tumultuous time for the doorstep lending market as market leader Provident Financial fights off a hostile £1.3bn takeover bid from rival Non-Standard Finance (NSF) in a battle which has become increasingly bitter.

The takeover tussle has raised questions as to who might buy NSF’s home credit business, which it will sell if it buys Provident.

Analyst Gary Greenwood at Shore Capital said: “We expect bolt-on acquisitions in the home credit space to remain a core element of Morses Club’s strategy.

“However, we think it is possible that the group could consider a larger acquisition should the opportunity arise, noting that Non-Standard Finance plans to spin off its Loans at Home operation should it be successful in its bid to acquire Provident Financial.“

When asked if Morses could buy NSF’s Loans at Home operation or whether it would be too big an acquisition, Mr Smith said: “No, it wouldn’t be too big a move for us. However, we have scope to grow our online lending business.

“We’ll wait and see what happens between Provident and NSF and if anything presents itself as an opportunity, we’ll react then, but we’re not planning anything.”

Morse said it now has 30,000 Morses Club Card customers, an increase of 43 per cent, with £15.5m in loan balances.

Mr Smith said: “The Club card was introduced for three reasons.

“Firstly, customers told us they wanted it because they wanted to able to spend money digitally and they couldn’t do that with the £20 notes given to them on the doorstep.

“Secondly, we saw it as a precursor for our banking product that we want to get into eventually. All of the data points that we get from customer usage really gives us a tremendous insight in terms of how to develop the services and the technology platform that our customers are likely to use. We want to be at the forefront of digital banking and not just a kind of me-too service, but really an exemplary service.

“Then finally it was a logistical thing for us so that at pinch points like Christmas, when you’ve got to serve over 200,000 customers in loans, to be able to do that and distribute the money from a centralised platform without carrying the cash around the streets of the UK is a tremendous benefit for us and much lower cost of distribution and much safer as well.“

On a like-for-like, pro forma basis, the firm said revenue rose 6 per cent to £117m in the year to February 23 and total credit issued increased by 2.4 per cent to £178.5m.

Adjusted pre-tax profit increased by 15 per cent to £22m following a 2.6 per cent increase in customer numbers to 235,000.