Morses Club (MCL) spent the first six months of its financial year building scale, buying smaller sub-prime lenders and growing its home credit agent numbers. The group made three acquisitions during the reported period, and another two in September. These added a total of 18,500 customers and £6.5m in gross receivables. This strategy seems to be working, with total credit issued growing almost a fifth to £66m.
Management has been building its geographical network of agents by attracting employees from competing lenders. The benefit is these agents often bring their borrowers with them once the term of their existing loan has expired. Morses Club pays these agents a subsidy during the first year of their employment to maintain their income. This pushed commission costs up almost a fifth and took a bite out of pre-tax profit.
Digital development is also high up the agenda. An online lending platform is slated for launch during the fourth quarter, while the group's home credit agents are now all equipped with tablets to improve efficiency. More than 5,000 Morses Club cards have now been issued, which allow customers without access to a debit or credit card from mainstream lenders to spend online or in store.
Analysts at Numis expect pre-tax profit of £17.4m during the year to February 2017 and EPS of 10.6p (from £9.2m and 10.3p in FY2016).
MORSES CLUB (MCL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 118p | MARKET VALUE: | £153m | |
| TOUCH: | 115-120p | 12-MONTH HIGH: | 120p | LOW: 84p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 45p | NET DEBT: | 5% | |
| Half-year to 27 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015* | 43.6 | 6.41 | 3.7 | na |
| 2016 | 47.2 | 4.56 | 2.7 | 2.1 |
| % change | +8 | -29 | -28 | - |
Ex-div: 20 Oct Payment: 18 Nov *Pre-IPO figures | ||||
