Morses Club results beat expectations

The Birstall-based company, which is the UK’s second largest home collected credit lender after Provident Financial, said revenue increased to £117m from £100m in the year to February 24.

The group has seen a 6 per cent increase in customer numbers to 229,000.

The firm's CEO Paul Smith said the group has taken on a lot of agents and managers from Provident Financial after the latter switched from self-employed door-to-door agents to full time employees.

Morses Club said adjusted pre-tax profit rose 8.5 per cent to £19.2m over the year.

Total credit issued increased by 21 per cent to £174.4m, driven primarily by new territory builds and the net loan book rose 19 per cent to £72.8m.

Impairment as a percentage of revenue for the period was 26 per cent, up from 24 per cent, but within the group's target range. The group is increasing its final dividend from 4.3p to 4.8p.

The group now has 21,000 Morses Club Card customers, with £10.6m in loan balances up from £3.9m the previous year.

Mr Smith said: “We are very pleased to report that full year 2018 was an even stronger year for Morses Club, reflecting our continued success in serving our core home collected credit market, delivering good customer outcomes and careful implementation of our prudent credit policy.

"We have seen 19 per cent growth in our loan book whilst keeping our impairments within our guidance range, testament to our focus on high quality lending."

He said the group's advanced digital platform has improved customer experience and streamlined the lending process, reducing operating cost ratio and enhancing regulatory compliance.

Analyst Jeremy Grime at FinnCap said: "Full year results are ahead of our expectations, with 17.1 per cent revenue growth exceeding our expectations by 6 per cent.

"This was driven by larger average loan size combined with lower impairments, pointing to an increasingly high quality loan book as the company indicated in the pre-close trading update.

"For now, we keep our estimates unchanged, noting that the company tends to under promise and over deliver. We are confident our price target of 175p will be reached in the short term."

The group said it is very focused on its core home collected credit business and serving customers in the traditional manner via a network of self-employed agents.

"We believe this is the most appropriate way to serve customers in this part of the market," said Mr Smith.

"We have a 14.6 per cent share of the known traditional market. Our primary objective remains to strengthen our home collected credit business, to make it more efficient and profitable, seeking growth via acquisition as well as by organic means."