Non-standard loans provider Morses Club (MCL) managed to increase the size of its loan book in the year to February 2018 without any material compromise to the quality of its loan book. A total of 463 new territories were built, with most of the new agents signing up in July and August last year. This is important because new agents are subsidised until they build up their loan books. This usually takes about a year, which means that subsidy payments will soon cease.
Total credit issued rose by 21 per cent to £174.4m, mainly as a result of the new territory builds, while impairment rates remained within the company’s target range at 26.1 per cent. However, in order to avoid agents making inappropriate loans, commission is paid on repayments, rather than loans initiated.
A considerable amount of forbearance is built into the business model, so that there are no additional charges if a client takes longer than expected to repay a loan. And while customer numbers grew by 6 per cent to 229,000, the number of loans made to top-tier borrowers (in terms of repayment quality) rose by 18 per cent.
Morses is now looking to expand its offering though its club card launched in 2016. The card allows customers to make purchases online, and bank accounts for better payers are set to be introduced in the second half of the year. In addition, March 2017 saw the launch of Dot Dot Loans. This is designed to appeal to more affluent customers because, on top of the 1.6m people using the home collected credit market, there are a further 8m to 9m non-standard credit consumers using other products and services.
Analysts at Shore Capital are forecasting adjusted pre-tax profits for the year to February 2019 of £23m and EPS of 14.3p (from £19.2m and 11.7p in 2018).
MORSES CLUB (MCL) | ||||
ORD PRICE: | 142p | MARKET VALUE: | £184m | |
TOUCH: | 138.5-144p | 12-MONTH HIGH: | 161p | LOW: 105p |
DIVIDEND YIELD: | 4.9% | PE RATIO: | 14 | |
NET ASSET VALUE: | 51p | NET DEBT: | 17% |
Year to 24 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2014* | 21.1 | 3.5 | na | na |
2015* | 22.5 | 58.6 | na | na |
2016* | 90.6 | 10.4 | 6.1 | na |
2017 | 96.2 | 11.2 | 6.6 | 6.4 |
2018 | 117 | 16.1 | 10.1 | 7 |
% change | +21 | +44 | +52 | +9 |
Ex-div: | 28 Jun | |||
Payment: | 27 Jul | |||
*Pre-IPO figures |