Doorstep lending is getting tech savvy, and Morses Club (MCL) hopes to lead the way. The subprime lender invested heavily in equipping its home credit agents with tablet devices during its first year of trading as a public company. This helped improve the efficiency of writing loans and collecting payments. The result was a two percentage point drop in the cost-to-income ratio to 56.9 per cent. And online instalment lender Dot Dot Loans was launched post year-end.
The lender is growing in scale by recruiting more agents to its home credit business. It hired 105 new agents during the year, many from its rivals. Chief executive Paul Smith pointed to Provident Financial's (PROV) recent decision to reduce its home credit business as a source of new recruits. The benefits of scaling-up were a 9 per cent increase in customer numbers and 8 per cent growth in the net loan book to £61.2m.
However, this came at a price. Morses Club pays new agents a subsidy during the first year of their employment to maintain their income, resulting in an uptick in commission costs. Mr Smith says these costs will begin to fall away by the end of the first half of the 2018 financial year.
Analysts at house broker Numis expect adjusted pre-tax profit of £19.3m during the 12 months to February 2018, giving EPS of 11.9p (from £17.7m and 10.8p in FY2016).
MORSES CLUB (MCL) | ||||
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ORD PRICE: | 137p | MARKET VALUE: | £177m | |
TOUCH: | 135-137p | 12-MONTH HIGH: | 137p | LOW: 84p |
DIVIDEND YIELD: | 3.1% | PE RATIO: | 21 | |
NET ASSET VALUE: | 47p | NET DEBT: | 10% |
Year to 25 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2014* | 21.1 | 3.54 | na | na |
2015* | 22.5 | 58.6 | na | na |
2016* | 90.6 | 10.4 | 6.1 | na |
2017 | 99.6 | 11.2 | 6.6 | 4.3 |
% change | +10 | +8 | +9 | - |
Ex-div: 22 Jun Payment: 21 Jul *Pre-IPO figures |