TIDMMCL
RNS Number : 2543B
Morses Club PLC
30 September 2022
30 September 2022
Morses Club PLC
Trading Update
Morses Club PLC ("Morses Club", the "Company" or, together with
its subsidiary undertakings, the "Group"), an established provider
of non-standard credit services, provides the following update on
trading for the 26-week period ending 27 August 2022.
Trading
Following the Company announcements on 20 July 2022 and 11
August 2022 regarding the Board's decision to pursue the potential
use of a Scheme of Arrangement (the "Scheme") to deal with customer
redress claims for unaffordable lending against the Company and the
steps taken to pause the processing of all new redress claims for
unaffordable lending from 11 August in the Home Collected Credit
("HCC") division, the Company's trading performance has continued
to be impacted by the level of claims in the HCC division made
prior to 11 August. This has meant that the Company continues to be
materially loss-making, with the additional impact of constraining
available cash to generate future revenue. This has led to a
reduction in lending volumes and customer numbers in both the HCC
and Digital divisions in order to ensure that the Company can
continue to operate as a going concern whilst it pursues a
potential Scheme of Arrangement with its stakeholders to ensure the
most equitable outcome for its customers.
Digital
Customer numbers in the Digital division for short-term and
long-term lending products have decreased by 37% since the
beginning of the financial year and the customer base now stands at
c. 24,500 (FY22: 39,000). The credit issued in the period was
GBP10.2m, which is 64% below the same period in the prior year. As
a consequence, the gross loan book has reduced to GBP14.3m (FY22
GBP23.8m) which is 40% lower than at FY22 year-end. However,
lending volumes in H1 FY23 were at 32.1k (HY22: 30.6k), 5% ahead of
prior year. Although the lending levels were reduced, collection
performance was strong at 5% ahead of the same period in the prior
year. Impairment as a percentage of revenue was 42%, which is below
the guidance range of 45% - 55% of revenue (FY22 67.6%) due to the
reduction in the size of the loan book. The customer experience
score for the division has increased to 94% (FY22: 92%).
Home Collected Credit
The HCC division has continued to adapt to a digitalised and
structurally changing HCC sector. Customer numbers have reduced to
c. 116,000 (FY22: 143,000), a reduction of 19%. Despite the
reduction in customer numbers, credit issued for the division was
GBP34.9m (HY22: GBP53.1m) which is 34% below the same period in the
prior year. Sales volumes for H1 were 72.8k, (HY22: 134.2k). The
gross loan book now stands at GBP67.7m, which is a reduction of 30%
from FY22 year-end, (FY22: GBP96.7m). This is due to a further
tightening of credit policy in H1 and the continued focus on
ensuring quality of lending, despite the continued challenge of
previous claim levels for the division. Collection performance has
remained strong at 73% (FY22: 76%), and impairment at 15% is below
the guidance range of 21% - 26% due to the reduction in the size of
the loan book. 69% of all lending in the division is now cashless
(FY22: 66%) and 82% of the HCC division customers are registered
for the online customer portal (FY22: 81%), an increase from 70%
against H1 in FY22 . Customer satisfaction for the period is at 95%
(FY22: 97%).
Gary Marshall, Chief Executive Officer of Morses Club,
commented:
" The level of previous claims in our HCC division continues to
impact the overall trading performance of the business, which means
we are materially loss-making as a result and has the additional
impact of constraining the cash available to generate future
revenue. Although the business continues to be a going concern, the
material uncertainty of the trading position of the Group means
that it is increasingly imperative that we make substantive
progress regarding a potential Scheme of Arrangement. We continue
to pause the processing of customer claims received from 11 August
pursuant to DISP 1.6.2R (2). We continue to work with all our key
stakeholders to make formal progress on a potential Scheme of
Arrangement, to avoid the Company having to seek protection from
insolvency, which would lead to a materially worse outcome for
customers."
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014. The
person responsible for this announcement is Graeme Campbell, Chief
Financial Officer.
For further information please contact:
Morses Club PLC Tel: +44 (0) 330
Gary Marshall, Chief Executive Officer 045 0719
Graeme Campbell, Chief Financial Officer
Peel Hunt (Nominated Adviser) Tel: +44 (0) 20
Paul Shackleton / Andrew Buchanan / Sam Milford 7418 8900
(Investment Banking Division)
Camarco Tel: +44 (0) 20
Jennifer Renwick / Charlotte Hollinshead 3757 4994
Notes to Editors
About Morses Club
Morses Club is an established provider of non-standard credit
services in the UK. The Group consists of Morses Club, the UK's
largest home collected credit ("HCC") provider(1) , and Shelby
Finance Limited, Morses Club's Digital division, which operates
under the online brand of Dot Dot Loans, an online lending
provider. The Group's growing Digital capabilities and scalable,
highly invested IT platform has enabled Morses Club to deliver a
range of lending products to the non-standard credit market.
UK HCC is considered to be a specialised segment of the broader
UK non-standard credit market. UK HCC loans are typically small,
unsecured loans delivered directly to customers either remotely or
in their homes.
Morses Club's HCC division is the largest UK Home Collected
Credit (HCC) lender(1) with 143,000 customers throughout the UK.
The HCC division enjoys consistently high customer satisfaction
scores of 97%(2) . In 2019 the Company introduced an online
customer portal for its HCC customers, used by 81% of
customers.
The Group's growing Digital division, Shelby Finance, operates
under the online brand Dot Dot Loans which provides online
instalment loans of up to 48 months to c. 39,000 active
customers.
Morses Club listed on AIM in May 2016.
About the UK non-standard credit market
The UK non-standard credit market, of which UK HCC is a subset,
consists of both secured and unsecured lending and is estimated to
comprise around 10 million consumers (3) and total loan receivables
of GBP9.6bn (4) .
Non-standard credit is the provision of secured and unsecured
credit to consumers other than through mainstream lenders. Lenders
providing non-standard credit principally lend on an unsecured
basis and the market is characterised by high frequency borrowing.
Approximately 2 million people move annually between standard and
non-standard markets (4) .
Since February 2014, unsecured personal lending has grown from
GBP161 billion to GBP225 billion in February 2020. It has since
contracted to GBP197 billion in August 2021 (5) .
(1 Based on Net Loan Book of GBP45.3m as at 28 August 2021)
(2 Independent Customer Satisfaction Survey conducted by Mustard
3 FCA High Cost Credit Review Technical Annex 1: CRA data analysis
of UK personal debt - July 2017 4 Apex Insight - Non-Prime Consumer
Credit: UK Market Insight Report - December 2020 5 Table A5.2, Bank
of England Money and Credit Bank stats August 2021)
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END
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