The UK’s second largest home collect credit lender, Morses Club (MCL) released a trading update for the year ended 29 February 2020, warning that adjusted pre-tax profit would be 18% to 23% below market expectations.
This comes as reorganisation of the business proves more time-consuming and costly than expected.
Analysts had penciled in pre-tax profit of £20.9m, so the downgraded guidance implies a range of between £16m and £17m.
Rather than waiting for the finer details on 30 April when the full-year results are released, the shares were pummelled 30% to 73.8p. The shares have lost 60% of their value over the last 12 months.
Chief executive Paul Smith put on a brave face. He said: ‘The business is undergoing a significant development phase which is necessary to deliver a broader offering to our customers.
'The strong customer response to the introduction of key initiatives in HCC, such as the customer portal, is testament to our long-term strategic approach.’
HOME COLLECT CREDIT (HCC)
The regulator’s banning of non-solicitation of loans had little impact on the business which continued to see ‘like-for-like profitability’ despite a fall (2.4%) in total issued credit of £174.2m.
Customer numbers fell 5% to 224,000 while the gross loan book of business contracted by 2.4% compared with 7% growth in 2019. The good news is that impairments are also anticipated to be at the lower end of the normal range.
DIGITAL
There has been significant change in the way the company engages with its customers on the digital side of the business after the purchase of online instalment loan provider, Shelby Finance and UHL in June 2019.
Losses from the new division have been larger than initially expected, although the company is guiding for a ‘substantial improvement in losses in the next financial year’, and to achieve run-rate break-even in the second half of 2021.
Smith said that the growth potential of the digital division is significant and gives the company confidence in the long-term strength of the overall business.
