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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Morses Club Plc | LSE:MCL | London | Ordinary Share | GB00BZ6C4F71 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.21 | 0.20 | 0.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMMCL
RNS Number : 9098C
Morses Club PLC
04 October 2018
4 October 2018
Morses Club PLC
Interim results for the twenty-six weeks ended 25 August 2018
STRONG FINANCIAL PERFORMANCE BASED ON CONTINUED HIGH-QUALITY LING
Morses Club PLC ("the Company" or "Morses Club"), the UK's second largest home collected credit ("HCC") lender, is pleased to announce its interim results for the twenty-six-week period ended 25 August 2018.
The Group's results are being reported under IFRS 9 'Financial Instruments' for the first time following the mandatory adoption of the standard for accounting periods commencing after 1 January 2018. As permitted by IFRS 9, comparative information for FY18 has not been restated.
In order to enable comparisons on a like for like, basis pro forma comparatives have been calculated on an IFRS9 basis, where appropriate, for KPIs and Alternative Performance Measures - full details of these can be found in the glossary.
Highlights
-- Statutory revenue increased by 6.0% to GBP57.5m (H1 FY18: GBP54.2m(2) ). On a like for like, pro forma basis, revenue was up 11.9% (H1 FY18 pro forma: GBP51.4m(3) )
-- Net loan book growth over 12 months of 4.3% to GBP68.0m(1) (H1 FY18: GBP65.2m(2) ) on a like for like, pro forma basis, Net Loan Book growth was 8.4% (H1 FY18 pro forma: GBP62.8m(3) )
-- Impairment as a percentage of revenue(4) for the period was 21.9%(1) (H1 FY18: 26.6%(2) , H1 FY18 pro forma: 21.5%(3) ). On a like for like basis the percentage is consistent, meaning the change from H1 FY18 is in regard to the adoption of IFRS 9 rather than the performance of the loan book.
-- Customer numbers remain stable at 230,000 (H1 FY18: 233,000)
-- 116 territory builds in the period (H1 FY18: 434), reflecting a return to more normalised levels as expected
-- Cost / income ratio of 58.5%(1,,4) (H1 FY18: 56.5%(2) , H1 FY18 pro forma: 59.6%(3) )
-- 27,000 live Morses Club Cards issued, with loan balances of over GBP13.1m (H1 FY18: 11,100 live Morses Club Cards with loan balances of GBP4.6m)
-- Adjusted(4) profit before tax up 20.6% at GBP10.5m(1) (H1 FY18: GBP8.7m(2) , H1 FY18 pro forma: GBP9.2m(3) ); Statutory profit before tax up to GBP10.0m(1) (H1 FY18: GBP6.7m(2) , H1 FY18 pro forma: GBP7.2m(3) )
-- Adjusted(4) EPS 6.6p(1) (H1 FY18: 5.3p(2) , H1 FY18 pro forma: 5.7p(3) ); Basic EPS 6.3p(1) (H1 FY18: 3.9p(2) , H1 FY18 pro forma: 4.3p(3) )
-- Interim dividend 2.6 pence per share(1) an increase of 18.2% (H1 FY18: 2.2 pence per share(2) )
(1) H1 FY19 numbers are reported under IFRS 9
(2) H1 FY18 reported numbers are under IAS 39
(3) H1 FY18 pro forma numbers have been adjusted to incorporate an estimate of IFRS 9 for comparability
(4) Definitions are set out in the Glossary of Alternative Performance Measures
Key performance indicators
Hot Features
Premium
Pro forma
26-week period 26-week period 26-week period
Key performance ended 25 ended 26 ended 26
indicators August 2018 August 2017 % +/- August 2017 % +/-
IFRS 9 IAS 39 IFRS 9
--------------- --------------- ------ ---------------- --------
Revenue GBP57.5m GBP54.2m 6.0% GBP51.4m 11.9%
Net Loan Book GBP68.0m GBP65.2m 4.3% GBP62.8m 8.4%
Adjusted Profit
Before Tax(1) GBP10.5m GBP8.7m 20.6% GBP9.2m 14.1%
Statutory Profit
Before Tax GBP10.0m GBP6.7m 49.15 GBP7.2m 38.9%
Adjusted Earnings
per share 6.6p 5.3p 24.5% 5.7p 15.8%
Statutory Earnings
per Share 6.3p 3.9p 61.5% 4.3p 46.5%
Cost / Income ratio 58.5% 56.5% -3.6% 59.6% 1.9%
Return on Assets 19.0% 12.9% 47.4% n/a(2) n/a(2)
Adjusted Return
on Assets(1) 24.0% 19.4% 23.8% n/a(2) n/a(2)
Return on Equity 25.4% 17.0% 48.9% n/a(2) n/a(2)
Adjusted Return
on Equity(1) 25.2% 26.1% -3.5% n/a(2) n/a(2)
Tangible Equity
/ average receivables(1) 87.6% 90% 2.7% n/a(2) n/a(2)
No of customers
(000's) 230 233 -1.3% 233 1.3%
Number of agents 1,942 2,124 -8.6% 2,124 -8.6%
Credit Issued GBP86.1m GBP82.3m 4.6% GBP82.3m 4.6%
Impairment as %
of Revenue(1) 21.9% 26.6% 17.7% 21.5% -1.9%
1 Definitions are set out in the Glossary of Alternative Performance Measures
2 KPI not quoted as it includes data points which precede the date of IFRS 9 transition
Paul Smith, Chief Executive Officer of Morses Club, commented:
"The success of last year's territory builds has been demonstrated in the first half of this financial year. Our focus on successful integration, the sustainable growth of the loan book and high-quality lending has resulted in a robust performance across all of our key financial metrics and delivered significant earnings growth for investors.
"We expect to benefit from further consolidation as regulatory changes force smaller players out of the market, along with the opportunity to broaden our customer base as we offer customers a greater choice of products to suit their needs going forward.
"Whilst the traditional HCC product remains at our core, we continue to recognise that the needs of our customers are evolving, and we are making good progress in developing our digital offering, using our deep customer insights and advanced technology platform to create products that will add significant value for our customers.
"Our proven ability to successfully integrate territory builds and the progress we are making in developing new products for our customers gives us confidence in the outlook for the full year."
Forward looking statements
This announcement includes statements that are, or may be deemed to be, "forward-looking statements". By their nature, forward-looking statements involve known and unknown risks and uncertainties since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements.
Any forward-looking statements in this announcement reflect Morses Club's view with respect to future events as at the date of this announcement. Save as required by law or by the AIM Rules for Companies, Morses Club undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations or to reflect events or circumstances after the date of this announcement.
For further information please contact:
Morses Club PLC Tel: +44 (0) 330 045 0719
Paul Smith, Chief Executive Officer
Andy Thomson, Chief Financial Officer
Panmure Gordon (UK) Limited (Nomad Tel: +44 (0) 20 7886 2500
and Joint Broker)
Richard Gray / Fabien Holler / Atholl
Tweedie (Corporate Finance)
Charles Leigh-Pemberton (Corporate
Broking)
Tel: +44 (0) 20 7220 0500
finnCap
Jonny Franklin-Adams / Emily Watts
/ Anthony Adams (Corporate Finance)
Tim Redfern / Richard Chambers (Corporate
Broking)
Tel: +44 (0) 20 3757 4984
Camarco
Ed Gascoigne-Pees
Jennifer Renwick
Kimberley Taylor
Note:
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
Analyst presentation
There will be an analyst presentation to discuss the results at 9.30 a.m. today at Panmure Gordon, 1 New Change, London, EC4M 9AF.
Those analysts wishing to attend are asked to contact Kimberley Taylor at Camarco on +44 (0) 20 3757 4999 or kimberley.taylor@camarco.co.uk.
Notes to Editors
About Morses Club
Morses Club is the second largest UK Home Collected Credit (HCC) lender with 230,000 customers and 1,942 agents across 98 locations throughout the UK.
The Company offers a range of loan products to its customers through its extensive self-employed agent network. The majority of the Company's borrowers are repeat customers and the Company enjoys consistently high customer satisfaction with scores of 95% or above(1) .
The Company is using technology to broaden its offering and provide new products to ensure customers can access credit with the flexibility they require. In April 2016, its cashless lending product, the Morses Club Card, was introduced, enabling its customers to buy online as well as on the high street. Dot Dot Loans, the Company's first online instalment product, was launched in March 2017.
Morses Club successfully 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(2) .
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.
Since February 2014, unsecured personal lending has grown from GBP161 billion to GBP209 billion in February 2018(3) .
(1) (Independent Customer Satisfaction Survey conducted by Mustard)
(2) (FCA High Cost Credit Review Technical Annex 1: CRA data analysis of UK personal debt - July 2017)
(3) (Source: Table J Bank of England Money & Credit Report February 2018)
About UK Home Collected Credit
UK HCC is considered to be a specialised segment of the broader UK non-standard credit market. UK HCC loans are typically small, unsecured cash loans delivered directly to customers' homes. Repayments are collected in person during weekly follow-up visits to customers' homes.
UK HCC is considered to be stable and well-established, with approximately 1.6 million(2) people using the services of UK HCC lenders.
(2) (High Cost Credit Review ANNEX 1 - July 2017)
Chief Executive's Statement
Performance
The first half of this year has seen continued strong progress, with revenue increasing by 6.0% to GBP57.5m (H1 FY18: GBP54.2m). On a like for like basis revenue increased by 11.9% (pro forma H1 FY18: GBP51.4m). Total credit issued rose by 4.6% to GBP86.1m (H1 FY18: GBP82.3m).
We achieved net loan book growth over 12 months of 4.4% (H1 FY18: 16.0%). On a like for like basis, net loan book growth was 8.4%. While the proportion of loans attributable to the highest tier of customers* was maintained, reflecting the continued focus on the quality of the loan book and the success of the investment in territory builds in FY18. Customer numbers remained stable at 230,000 (H1 FY18: 233,000), whilst impairments as a percentage of revenue on a like for like basis were consistent year on year. This reflects the positive impact of higher quality customers and our prudent approach to lending.
*High tier customers are those who have made more than 9 of the last 13 payments
Customer Numbers and Territory Builds
FY 2018 was a period of exceptional growth in customer numbers for Morses Club as we capitalised on a unique market opportunity to integrate a significantly higher number of territory builds than in a 'typical' year.
We applied stringent criteria to our selection of agents and the subsequent territory builds have resulted in high quality loan books and loyal customers. The territory builds have been successfully integrated into the business and their success is reflected in the proportion of loans attributable to the best paying customers.
A year on, these territory builds are now profitable and the cost of onboarding and integrating these territory builds has been fully incurred. We expect growth in the number of new territory builds to return to more normalised levels, and the decrease in associated costs to have a positive impact on earnings growth.
Growth of our Core HCC Business
Whilst the number of customers and the dynamics of the HCC sector remain stable, our loan book continues to grow as our agents expand the number of quality customers on their books, and customers who have moved across to Morses Club from other providers run down their loan balances with their previous lender and increase their borrowing with Morses Club.
Increasingly high regulatory standards are likely to make it ever more difficult for some HCC lenders to remain competitive, and we expect to see market consolidation as agents and customers of these businesses move to the larger, well established providers. Whilst this presents a compelling growth opportunity for our business, we will only acquire loan books that will be earnings accretive to our existing business.
Our customers value the face to face interaction with our agents and customer feedback has again shown that satisfaction levels are consistently at 95%(1) and above, underlining the importance of retaining the highest quality agents.
In a competitive market where personal recommendations play an instrumental role in attracting new customers, we recognise the importance of ensuring good customer outcomes which remain at the heart of our business.
(1) Independent Customer Satisfaction Survey conducted by Mustard
Initiatives and Product Development
Whilst the traditional HCC product remains at our core, we recognise that the needs of our customers are evolving, and recent independent research has revealed that over 60% of our customers are interested in accessing associated e-money products through Morses Club.
Our advanced technology platform and deep customer insights have enabled us to develop our digital offering for existing customers and begin to create products relevant to a broader section of potential new customers who are increasingly looking to access more flexible products that address their lending needs.
Interest in our Morses Club Card, the only cashless lending product available in the mainstream HCC sector, continues to grow, with c.27,000 cards in circulation and loan balances of GBP13.1m (H1 FY18: c11,000, GBP4.6m), and we expect this momentum to continue.
In January 2018 we entered a test phase for our Customer Portal which enables our customers to access information regarding their account balance and payment history. We are now in the detailed planning phase for a wider roll-out in 2019.
We continue to refine our plans for Dot Dot Loans, our online instalment product, regarding the product range for this market sector.
Regulatory Update
We welcomed the conclusion of the FCA's high-cost short-term credit review in May and were pleased to see the FCA's broad conclusions regarding the sector.
We are committed to transparency and fair outcomes for all our customers, with forbearance embedded at the heart of our business model. As a fully FCA regulated lender, we aim to adhere to best practice guidelines in the areas the FCA is seeking responses. We do not envisage any significant financial or operational impact on our business when the draft rules are announced later this year.
Dividend
As a result of the strong earnings growth in the first half of the year, the Board is delighted to declare an interim dividend of 2.6p per share (H1 FY18: 2.2p).
The dividend of 2.6p per share will be paid on 19 January 2019 to ordinary shareholders on the register on 28 December 2018.
Outlook
The successful integration of last year's territory builds has delivered improvements to loan book quality and growth, and our conservative risk policy and focus on the sustainable growth of the business, has resulted in earnings growth.
We recognise opportunities for growth through both ongoing consolidation in our core HCC markets, as well as broadening our offering, and we continue to make good progress with our plans for new product development and diversification.
Trading is in line with the Directors' expectations and we remain confident in the outlook for the full year.
Paul Smith
Chief Executive Officer
Date: 4 October 2018
Financial Review
GBP'm (unless otherwise IFRS 9 IAS 39 Pro forma
stated) IFRS 9
26-week period 26-week period 26-week period
ended 25 August ended 26 August ended 26 August
2018 2017 2017
------------------------------------- ------------------ ------------------ -------------------
Customer numbers ('000's) 230 233 233
Period end receivables 68.0 65.2 62.8
Average receivables 70.4 61.8 n/a(1)
------------------------------------- ------------------ ------------------ -------------------
Revenue 57.5 54.2 51.4
Impairment (12.6) (14.4) (11.1)
Agent Commission (14.1) (13.1) (13.1)
Gross Profit 30.8 26.7 27.2
Administration expenses
(pre-exceptional) (18.7) (16.9) (16.9)
Depreciation (0.8) (0.6) (0.6)
Operating Profit before
exceptional costs and amortisation
of acquisition intangibles 11.3 9.2 9.7
Amortisation of acquisition
intangibles (0.5) (1.0) (1.0)
Exceptional costs - (1.0) (1.0)
Operating profit 10.8 7.2 7.7
Funding costs (0.8) (0.5) (0.5)
Statutory Profit Before
Tax 10.0 6.7 7.2
------------------------------------- ------------------ ------------------ -------------------
Tax (1.9) (1.6) (1.7)
------------------------------------- ------------------ ------------------ -------------------
Profit After Tax 8.1 5.1 5.5
------------------------------------- ------------------ ------------------ -------------------
Basic EPS 6.3p 3.9p 4.3p
------------------------------------- ------------------ ------------------ -------------------
(1) Metric not quoted as it includes data points which precede the date of IFRS 9 transition
Reconciliation of Statutory profit before tax to
Adjusted profit before tax and explanation of Adjusted
EPS
-------------------------------------------------------------------
GBP'm (unless otherwise stated) IFRS 9 IAS 39
26-week 26-week Increase
period ended period ended
25 August 26 August
2018 2017
--------------- ---------------
Statutory Profit Before Tax 10.0 6.7 49.1%
=============== ===============
Exceptional costs including
restructuring costs(2) - 1.0
Amortisation of acquired
intangibles(3) 0.5 1.0
--------------- ---------------
Adjusted Profit Before Tax(1) 10.5 8.7
Tax on Adjusted Profit Before
Tax (2.0) (1.8)
Adjusted Profit After Tax 8.5 6.9
Adjusted EPS(1) 6.6p 5.3p
Adjusted Return on Assets(1) 24.0% 22.9%
Adjusted Return on Equity(1) 25.2% 26.1%
1 Definitions are set out in the Glossary of Alternative Performance Measures
2 Costs incurred in relation to the company's IPO and AIM listing
3 Amortisation of acquired customer lists and agent networks
IFRS 9 IAS 39
Analysis of Underlying Adjusted 26-week 26-week Increase
profit before tax for Home credit period period
ended ended
25 August 26 August
2018 2017
===================================== ----------- ----------- =========
Adjusted Profit Before Tax(1) 10.5 8.7 20.70%
===================================== =========== =========== =========
Start up losses for Dot Dot Loans 0.4 0.3
Adjusted Profit Before Tax - Home
Credit 10.9 9
===================================== =========== =========== =========
Territory Build subsidies 1.3 1.9
----------- -----------
Adjusted Profit Before Tax - Home
Credit excluding Dot Dot Loans and
Territory Build subsidies 12.2 10.9 11.90%
===================================== =========== =========== =========
Tax -2.3 -2.6
----------- -----------
Adjusted Profit After Tax - Home
Credit excluding Dot Dot Loans and
Territory Build subsidies 9.9 8.3
===================================== =========== =========== =========
1 Definitions are set out in the Glossary of Alternative Performance Measures
Statutory profit before tax increased by 49.1% to GBP10.0m (FY18: GBP6.7m). Adjusted IFRS 9 profit before tax increased by 20.6% to GBP10.5m (FY18: GBP8.7m). This includes start-up losses in relation to Dot Dot Loans of GBP0.4m. The adjusted profit before tax excluding Dot Dot Loans and the investment cost of territory builds rose to GBP12.2m (FY18: 10.9m), reflecting an underlying increase of 11.9%.
Revenue for the twenty-six week period ended 25 August 2018 increased by 6.0% to GBP57.5m (H1 FY18: GBP54.2m). This was driven by a 4.6% increase in total credit issued to GBP86.1m (H1 FY18: GBP82.3m), largely related to territory builds. Customer numbers were broadly stable showing a small decrease of 1.3% to 230,000 (H1 FY18: 233,000). Customer numbers showed an increase of c1,000 since the year end 24 February 2018.
The total impairment charge decreased to GBP12.6m and as a ratio to revenue to 21.9% for the period (H1 FY18: 26.6%). This reduction is heavily impacted by the move from IAS39 to IFRS9 equally from a revenue and impairment perspective, with the current half year impairment on a similar IAS39 basis remaining unchanged at 26.6%. This remains within our IAS39 target range of 22.0% to 27.0% of revenue, a range based on more modest growth levels. The contribution from the loan book (Revenue less Impairment) demonstrated very good progress, increasing by 12.8% to GBP44.9m (H1 FY18: GBP39.8m) and compared to the pro forma IFRS9 numbers for last year by 11.4% (H1 FY18 pro forma: GBP40.3m). Year on year the gross loan book and the high quality customer balances both increased by 5.7% as we reach the top of the quality curve . Quality customer balances make up 69.1% of the total gross balances compared to just 56.2% four years ago. The average customer balance of GBP590 has increased by 7.5% from GBP549 twelve months ago as lending is gradually increased to high performing customers introduced through the territory builds in 2017. Customer indebtedness remains within conservative levels with 90% of loans made consuming no more than 25% of the customer's net disposable income (being net income less all living expenses and other debt repayments)
Agent commission (excluding territory build subsidies) was up from GBP13.1m to GBP14.1m, an increase of 7.6% which was lower than the increase in cash collections of 12.2%. This reflects territory build costs decreasing significantly to GBP1.3m (H1 FY18: GBP1.9m) as subsidies to the peak new territories in July and August 2017 declined as they reached their 12 month anniversary. Agent subsidies represent an investment cost to establish quality agents and grow the customer numbers but as is typical in the industry we take the charge to the income statement as incurred. With territory build activity returning to more normalised levels, management would expect this number to continue to decline.
Administration expenses (excluding non-operating costs) increased to GBP19.5m from GBP17.5m, and represents 33.9% of income (H1 FY18: 32.4%). On a like for like IFRS 9 basis this compares to 34.1% for H1 FY18.
Exceptional costs were GBPnil for the period, (H1 FY18: GBP1.0m restructuring of employed agents).
IFRS 9
IFRS 9 'Financial instruments' was mandatory for the first time for the accounting period starting 25 February 2018 and replaces IAS 39 'Financial instruments: Recognition and measurement'. IFRS 9 significantly changes the recognition of impairment on customer receivables by introducing an expected loss (EL) model. Under the EL approach, impairment provisions are recognised on inception. This differs from the incurred loss model under IAS 39 where impairment provisions are only reflected when there is objective evidence of a credit-affecting event, such as a missed payment.
The resulting effect is that impairment provisions under IFRS 9 are recognised earlier. This has resulted in a one-off adjustment to receivables and reserves on adoption and results in the delayed recognition of profits. Distribution of profits are affected by the business' seasonality and will be lower in times of growth due to higher day 1 provisioning.
The group made an opening balance sheet adjustment of GBP2.8m at 25 February 2018 but will not restate its 2018 prior year comparatives as permitted by IFRS 9 in its statutory accounts. This is due to the IFRS 9 requirement in respect of the de-recognition of a financial asset which would require loans terminated prior to 25 February 2018 to remain under IAS 39 in the prior year.
The impact of this adjustment to the opening balance sheet as at 25 February 2018 was a reduction in the net loan book of 4.7%, well within the guidance issued at year end of a reduction between 4% to 6%.
Full details of the transitional adjustment can be found in the Notes to the Condensed Financial Statements.
Balance sheet
On a like for like IFRS 9 basis Net Assets increased by 12.5% to GBP65.9m (H1 FY18: GBP58.6m) and are also 8.0% higher than the Net Assets as measured under IAS 39 of GBP61.0m as at H1 FY18.
Regulatory Update
Morses Club has been operating under full Financial Conduct Authority ("FCA") authorisation since May 2017.
Funding
On 18 August 2017, the Company announced that it had increased its loan facility from GBP25.0m to GBP40.0m with the addition of a major high street bank alongside Shawbrook Bank. In the same announcement, the Company confirmed that the expiry of the facility had been extended from March 2019 to August 2020.
As at 25 August 2018, the Company had drawn GBP12.0m of this facility (26 August 17: GBP17.0m). The Directors expect this to increase during the second half of the year in the run-up to Christmas, which is the peak lending and therefore borrowing period.
Principal Risks and Uncertainties
There are a number of potential risks and uncertainties which could have a material impact on the Company's performance over the remaining 26 weeks of the financial year and could cause results to differ materially from expected and historical results. The Directors do not consider that the principal risks and uncertainties have changed since the publication of the annual report for the 52 weeks ended 24 February 2018. These should be read in the context of the cautionary statement regarding forward looking statements at the beginning of these Interim Results. A detailed explanation of the risks summarised below, and how the Company seeks to mitigate the risks, can be found on page 26 of the annual report which can be found at www.morsesclubplc.com/investors/.
The Company's principal financial assets are loan book receivables, cash and other receivables.
Liquidity Risk
The Directors monitor liquidity closely. From August 2018 the Company has access to a GBP40.0m revolving asset based credit facility (H1 FY18: GBP40.0m), which the Directors believe provides sufficient headroom to manage the business and meet its strategic objectives. The Company does not use any complex financial instruments.
Credit Risk
The Company is involved in the provision of consumer credit and a key risk for the Company is the credit risk inherent in amounts receivable from customers which is principally controlled through credit control policies supported by regular impairment reviews. The amounts presented in the balance sheet are net of provisions for impairments.
Operational Risk
The Directors are confident that they have mitigated operational risk through an embedded control environment with the use of integrated technology and in-depth Management Information reporting data. The Company has a strong compliance culture, with robust systems and controls and provides regular regulatory training to all employees and agents.
Regulation
The Company is fully committed to working with the regulator in an open and on-going dialogue through its regular supervisory regime. The Group does carry a risk and uncertainty which may arise through changes to regulation or a failure to comply with existing rules and regulations.
The Company is also subject to legislative regulatory changes within the consumer credit sector and stays in touch with changes through its compliance and credit risk functions via the Consumer Credit Association and regular dialogue with the FCA.
Related Party Transactions
Related party transactions are disclosed in note 11 of these financial statements.
By order of the board:
Andy Thomson
Chief Financial Officer
Date: 4 October 2018
Registered Office:
Kingston House
Centre 27 Business Park
Woodhead Road
Birstall
Batley
West Yorkshire
WF17 9TD
INDEPENT REVIEW REPORT TO MORSES CLUB PLC
We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the 26 weeks ended 25 August 2018 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 11. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.
Scope of the audit of the financial statements
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the 26 weeks ended 25 August 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.
Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
Date: 4 October 2018
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE 26 WEEK PERIODED 25 August 2018
IFRS 9 IAS 39 IAS 39
26 weeks 26 weeks 52 weeks
ended ended ended
25.8.18 26.8.17 24.2.18
Note GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
REVENUE
Existing operations 57,459 54,223 116,576
Cost of sales (26,648) (27,495) (58,350)
------------ ------------ ----------
GROSS PROFIT 30,811 26,728 58,226
Administration expenses (20,061) (19,570) (40,637)
OPERATING PROFIT BEFORE AMORTISATION
OF ACQUISITION INTANGIBLES AND EXCEPTIONAL
ITEMS 11,246 9,176 19,569
Amortisation of acquisition
intangibles 7 (496) (969) (2,051)
Exceptional items - (1,049) 71
--------------------------------------- ------ ------------ ------------ ----------
OPERATING PROFIT
Existing operations 10,750 7,158 17,589
Finance costs (753) (475) (1,456)
PROFIT BEFORE TAXATION 9,997 6,683 16,133
Taxation 4 (1,899) (1,595) (3,041)
PROFIT AFTER TAXATION 8,097 5,088 13,092
25.8.18 26.8.17 24.2.18
EARNINGS PER SHARE Pence Pence Pence
Basic 6 6.25 3.93 10.11
------------ ------------ ----------
Diluted 6 6.17 3.90 10.02
------------ ------------ ----------
All results derive from continuing operations. A Statement of Comprehensive Income is not included as there is no other income or losses, other than those presented in the Income Statement.
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 25 August 2018
IFRS 9 IAS 39 IAS 39
Note 25.8.18 26.8.17 24.2.18
ASSETS (Unaudited) (Unaudited) (Audited)
Non-current assets GBP'000 GBP'000 GBP'000
Goodwill 2,834 2,834 2,834
Other intangible assets 7 5,312 6,089 5,520
Property, plant & equipment 523 749 822
Amounts receivable from customers 8 211 557 265
Deferred tax 927 - -
9,807 10,229 9,441
------------ ------------ ----------
Current Assets
Amounts receivable from customers 8 67,757 64,644 72,563
Other receivables 2,074 2,305 2,039
Cash and cash equivalents 5,812 7,074 4,868
75,643 74,023 79,470
------------ ------------ ----------
Total assets 85,450 84,252 88,911
------------ ------------ ----------
LIABILITIES
Current Liabilities
Trade and other payables (7,885) (6,224) (6,695)
(7,885) (6,224) (6,695)
------------ ------------ ----------
Non-current liabilities
Bank and other borrowings 9 (11,677) (16,432) (15,552)
Deferred tax - (617) (144)
(11,677) (17,049) (15,969)
Total liabilities (19,562) (23,273) (22,291)
NET ASSETS 65,888 60,979 66,520
------------ ------------ ----------
EQUITY
Called up share capital 1,295 1,295 1,295
Retained Earnings 64,593 59,684 65,225
TOTAL EQUITY 65,888 60,979 66,520
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 26 WEEK PERIODED 25 August 2018
Called up
share Retained Total
capital Earnings Equity
GBP'000 GBP'000 GBP'000
As at 25 February 2017 (Audited) 1,295 60,083 61,378
---------- --------- --------
Profit for period - 5,088 5,088
---------- --------- --------
Total comprehensive income for the
period - 5,088 5,088
Share based payment charge - 82 82
Dividends paid - (5,569) (5,569)
As at 26 August 2017 (Unaudited) 1,295 59,684 60,979
---------- --------- --------
Profit for period - 8,004 8,004
---------- --------- --------
Total comprehensive income for the
period - 8,004 8,004
Deferred tax adjustment - 11 11
Research and development credit adjustment - 26 26
Share based payment charge - 349 349
Dividends
paid - (2,849) (2,849)
As at 24 February 2018 (Audited) 1,295 65,225 66,520
---------- --------- --------
Unaudited impact of adoption of IFRS
9 'Financial instruments' - (2,874) (2,874)
---------- --------- --------
At 25 February 2018 (Unaudited) 1,295 62,351 63,646
---------- --------- --------
Profit for period - 8,097 8,097
---------- --------- --------
Total comprehensive income for the
period - 8,097 8,097
Share based payment charge - 361 361
Dividends paid - (6,216) (6,216)
As at 25 August 2018 (Unaudited) 1,295 64,593 65,888
---------- --------- --------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE 26 WEEK PERIODED 25 August 2018
IFRS 9 IAS 39 IAS 39
25.8.18 26.8.17 24.2.18
(Unaudited) (Unaudited) (Audited)
Note GBP'000 GBP'000 GBP'000
Net cash inflow from operating
activities 1 12,576 2,807 7,239
Cash flows used in financing
activities
Dividends paid (6,216) (5,569) (8,418)
Proceeds from additional long-term
debt - 10,500 6,000
Repayment of long-term debt (4,000) (3,500) -
Arrangement costs associated
with additional funding - - (448)
Interest paid (580) (475) (1,456)
------------ ------------ ----------
Net cash inflow/(outflow) from
financing activities 1,780 956 (4,322)
Cash flows used in investing
activities
Purchase of intangibles (836) (426) (1,412)
Purchase of property, plant and
equipment - (248) (622)
Net cash outflow from investing
activities (836) (674) (2,034)
Increase in cash and cash equivalents 944 3,089 883
============ ============ ==========
Movement in cash and cash equivalents
in the period 944 3,089 883
Cash and cash equivalents, beginning
of period 4,868 3,985 3,985
Cash and cash equivalents, end
of period 5,812 7,074 4,868
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE 26 WEEK PERIODED 25 August 2018
1 RECONCILIATION OF PROFIT BEFORE TAXATION TO NET CASH INFLOW
FROM OPERATING ACTIVITIES
IFRS 9 IAS 39 IAS 39
25.8.18 26.8.17 24.2.18
GBP'000 GBP'000 GBP'000
Profit before taxation 9,997 6,683 16,133
Interest paid included in
financing activities 753 475 1,456
Depreciation charges 299 262 563
Share based payments expense 361 82 431
Amortisation of intangibles 1,044 1,395 2,950
Decrease/(increase) in debtors 318 (4,416) (11,604)
Increase in creditors 912 494 1,846
Taxation paid (1,108) (2,168) (4,536)
Net cash inflow from operating
activities 12,576 2,807 7,239
-------- -------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 26 WEEK PERIODED 25 AUGUST 2018
1. ACCOUNTING POLICIES
General information
The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Kingston House, Centre 27 Business Park, Woodhead Road, Birstall, Batley, West Yorkshire, WF17 9TD.
The information for the year ended 24 February 2018 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The report of the auditor on those financial statements was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The unaudited condensed interim financial statements for the 26 weeks ended 25 August 2018 have been reviewed, not audited, and were approved by the Board of Directors on [4 October 2018].
Going concern
The Directors have considered the appropriateness of adopting the going concern basis in preparing these Condensed financial statements.
The Group has prepared a three-year business plan which is a continuation of its strategy of generating growth through organic and acquisitive means.
In addition to standard internal governance, the Group is also monitored against key financial covenants tied in with the current funding facilities. These are produced and submitted on a monthly basis, with key schedules included in the monthly Board Papers.
The Group is subject to a number of risks and uncertainties which arise as a result of the current economic environment. In determining that the Group is a going concern these risks, which are described in the principal risks and uncertainties section, have been considered by the Directors. The Directors have considered these risks in the Group's forecasts and projections which highlight continued profitability for the foreseeable future.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.
Accounting convention
The statutory annual financial statements of Morses Club PLC are prepared under International Financial Reporting Standards (IFRS) adopted by the European Union. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.
Accounting policies
New and amended standards and interpretations need to be adopted in the first interim financial statements issued after their effective date (or date of early adoption). Other than IFRS 9, already disclosed, there are no other new IFRSs or International Financial Reporting Interpretations (IFRIC) that are effective for the first time for the 26 weeks ended 25 August 2018 which have a material impact on the Group. As such the accounting policies applied in preparing the unaudited condensed interim financial statements are consistent with those used in preparing the statutory financial statements for the year ended 24 February 2018, other than the implications of adopting IFRS 9.
IFRS 9 has been adopted without restating comparative information. The reclassifications and the adjustments arising from the new impairment rules are therefore not reflected in the balance sheet as at 24 February 2018, but are recognised in the opening balance sheet on 25 February 2018. As prior periods have not been restated, changes in impairment of financial assets in the comparative periods remain in accordance with IAS 39 and are therefore not necessarily comparable to the loss provisions reported for the current period.
IFRS 9
IFRS 9 'Financial instruments' was mandatory for the first time for the accounting period starting 25 February 2018 and replaces IAS 39 'Financial instruments: Recognition and measurement'.
Classification and measurement
In adopting IFRS 9 the Group firstly considered the three available classifications of Financial Assets for businesses
-- Hold to collect - the asset is held to collect contractual cash flows
-- Hold to collect and sell - the asset is held to collect contractual cash flows but may sell them at some future point
-- Hold to sell - an asset is originated with the intention of disposing of it
The most appropriate classification for the Group for all financial assets is Hold to collect, which requires assets to be held at amortised cost, as the Group has no intention of selling the assets which it originates. This is subject to the contractual cash flows for loans being only repayments of principal and interest, of which they are.
Impairment of amounts receivable from customers
IFRS 9 significantly changes the recognition of impairment on customer receivables by introducing an expected loss (EL) model. Under the EL approach, impairment provisions are recognised on inception. This differs from the incurred loss model under IAS 39 where impairment provisions are only reflected when there is objective evidence of a credit-affecting event, such as a missed payment.
The resulting effect is that impairment provisions under IFRS 9 are recognised earlier. This has resulted in a one-off adjustment to receivables and reserves on adoption and results in the delayed recognition of profits.
Provisions are based on historical default and collection performance which are reviewed at each reporting period. Based on considerable sector experience management consider the impact of macro-economic indicators in the home credit industry to be minimal and therefore no overlay has been applied.
There will be a small shift in distribution of profit between H1 & H2 with a slightly higher profit in H1 and a slightly lower profit in H2. Distribution of profits are affected by the business' seasonality and will be lower in times of growth due to higher day 1 provisioning.
The Group has adopted the standard 3 banding profile for customer accounts receivable as outlined in the standard and classifies customer receivables into the following categories;
Stage 1 - Low Credit Risk
Stage 2 - Significant Increase in Credit Risk
Stage 3 - Credit Impaired
From the date of adoption the Group applies the following income and impairment methodologies for the amounts receivable from customers
Income Recognition Impairment
Stage 1 Income recognised on 12 month expected
the gross carrying value losses
of the asset (amortised
cost)
--------------------------- ------------------
Lifetime Expected
Stage 2 Income recognised on Losses
the gross carrying value
of the asset (amortised
cost)
--------------------------- ------------------
Lifetime Expected
Stage 3 Income recognised on Losses
the net carrying value
of the asset i.e. gross
carrying value less
impairment provision
(amortised cost)
--------------------------- ------------------
Revenue recognition
In addition to earlier recognition of impairments through the expected loss model there is also a change to revenue recognition. Interest income, for receivables in Stage 1 and Stage 2 is calculated on gross carrying value, using the EIR method. The EIR is calculated using estimated cash flows, based on contractual cash flows adjusted for early settlement and late repayments. Income on loans in Stage 3 is now being calculated on the net carrying value i.e. gross carrying value less impairment provision.
Impact of adoption
The following table shows the adjustments required in the key Balance Sheet areas at adoption on 25 February 2018
24 Feb 2018
As originally 25 Feb 2018
presented IFRS 9 Adjustment Restated
GBPm GBPm GBPm
Current assets
Amounts receivable
from customers 72.6 (3.4) 69.2
--------------- ------------------ ------------
Non current liabilities
Deferred tax (liability)/asset (0.1) 0.6 0.5
--------------- ------------------ ------------
Equity
Retained earnings 66.5 (2.8) 63.7
--------------- ------------------ ------------
The IFRS 9 adjustment, as shown in the table above, is the net impact after consideration of both the revenue recognition and impairment criteria under the new standard.
The only IFRS 9 adjustment is in respect of the changes in the measurement of net receivables and the resulting impact on taxation.
At the IFRS 9 conversion date of 25 February 2018 the amounts receivable from customers analysed across the 3 Stages are as follows;
Stage 1 Stage 2 Stage 3 Total
GBPm GBPm GBPm GBPm
---------- -------- -------- ------
Gross Carrying
Amount 56.8 30.9 21.1 108.8
---------- -------- -------- ------
Impairment Provision (8.3) (14.4) (18.2) 40.9)
---------- -------- -------- ------
Net Amounts Receivable 48.5 16.5 2.9 67.9
---------- -------- -------- ------
2. SEASONALITY
The Group's peak period of lending to customers is in the run-up to Christmas in the second half of the financial year. Typically approximately 54% of the loans issued are made in the second half of the financial year and the peak lending and collections period leads the Group to operate with a materially higher draw down on debt facilities in December. In addition, the Group's accounting policies relating to revenue and impairment are an important influence on the recognition of the Group's profit between the first and second halves of the financial year.
3. RESTRUCTURING COSTS
Following the acquisitions within the prior periods and their subsequent integration within Morses Club PLC, GBPnil (H1 FY18 - GBP1,020,000) (YE 18 - GBP1,020,000) of restructuring costs were incurred and these form the majority of the exceptional items. These have been included within administration expenses.
4. TAXATION
The tax charge for the period has been calculated by applying the directors' best estimate of the effective tax rate for the financial year of 19% (H1 FY17 - 23.87%) (YE FY18 - 19%), to the profit before tax for the period. The tax rate reflects the reduction in the mainstream UK corporation tax rate from 20% to 19% which was effective from 1 April 2017.
5. DIVIDS
26 weeks 26 weeks 52 weeks
Ended ended Ended
25.8.18 26.8.17 24.2.18
GBP'000 GBP'000 GBP'000
Amounts recognised as distributions
to equity holders in the
period:
Final dividend for the 52
weeks ended 24 February 2018 6,216 5,569 8,418
6,216 5,569 8,418
========= ========= =========
The directors have declared an interim dividend in respect of the 26 weeks ended 25 August 2018 of 2.6p per share (H1 FY18 - 2.2p) (YE FY18 - 6.5p) This dividend is not reflected in the balance sheet as it was declared after the balance sheet date. It will result in a total half year dividend pay-out of approximately GBP3.4m (H1 FY18 - GBP2.9m) (YE FY18 - GBP8.4m). A dividend of GBP6.2m (H1 FY18 - GBP5.6m) was paid during the period.
6. EARNINGS PER SHARE
26 weeks 26 weeks 52 weeks
Ended ended Ended
25.8.18 26.8.17 24.2.18
Earnings (GBP'000) 8,097 5,088 13,092
========= ========= =========
Number of shares
Weighted average number of
shares for the purposes of
basic earnings per share
('000s) 129,500 129,500 129,500
Effect of dilutive potential
ordinary shares through share
options ('000s) 1,684 614 1,133
Weighted average number of
shares for the purposes of
diluted earnings per share
('000s) 131,184 130,114 130,633
========= ========= =========
Basic per share amount (pence) 6.25 3.93 10.11
========= ========= =========
Diluted per share amount
(pence) 6.17 3.91 10.02
========= ========= =========
Adjusted basic earnings per
share
Basic earnings 8,097 5,088 13,092
Amortisation of acquisition
intangibles 496 969 2,051
Exceptional costs - 1,049 (71)
Tax effect of the above (94) (383) (376)
-------- -------- --------
Adjusted earnings 8,499 6,723 14,696
======== ======== ========
Weighted average number of
shares for the purposes of
basic earnings per share
('000s) 129,500 129,500 129,500
======== ======== ========
Adjusted basic per share
amount (pence) 6.6p 5.3p 11.3p
======== ======== ========
Diluted earnings per share calculated the effect on earnings per share assuming conversion of all dilutive potential ordinary shares. Dilutive potential ordinary shares are calculated for awards outstanding under performance related share incentive schemes such as the Deferred Share Plan. The number of dilutive potential ordinary shares is calculated based on the number of shares which would be issuable if the performance targets have been met.
7. OTHER INTANGIBLE ASSETS
Software, Acquired
Servers Customer Acquired
& Licences Lists Agent Networks Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 25 February 2017 5,041 20,766 850 26,657
Additions 426 - - 426
At 26 August 2017 5,467 20,766 850 27,083
Additions 986 - - 986
At 24 February 2018 6,453 20,766 850 28,069
Additions 836 - - 836
At 25 August 2018 7,289 20,766 850 28,205
------------ ---------- ---------------- --------
ACCUMULATED AMORTISATION
At 25 February 2017 2,143 16,767 689 19,599
Charge for period 426 931 38 1,395
At 26 August 2017 2,569 17,698 727 20,994
Charge for period 472 1,042 41 1,555
------------ ---------- ---------------- --------
At 24 February 2018 3,041 18,740 768 22,459
Charge for period 548 476 20 1,044
At 25 August 2018 3,589 19,216 788 23,593
------------ ---------- ---------------- --------
NET BOOK VALUE
At 25 August 2018 3,700 1,550 62 5,312
At 24 February 2018 3,412 2,026 82 5,520
============ ========== ================ ========
At 26 August 2017 2,898 3,068 123 6,089
At 25 February 2017 2,898 3,999 161 7,058
8. TRADE AND OTHER RECEIVABLES
Amounts receivable from customers
25.8.18 26.8.17 25.2.18
GBP'000 GBP'000 GBP'000
IFRS9 IAS 39 IAS 39
Amounts falling due within
one year:
Net receivable from advances
to customers 67,757 64,644 72,563
Amounts falling due after
one year:
Net receivable from advances
to customers 211 557 265
-------- -------- --------
Net loan book 67,968 65,201 72,828
Other debtors 803 646 429
Prepayments 1,271 1,659 1,610
-------- -------- --------
Trade and other receivables 70,042 67,506 74,867
-------- -------- --------
25.8.18 26.8.17 25.2.18
GBP'000 GBP'000 GBP'000
IFRS9 IAS 39 IAS 39
Gross Carrying Amount 108,821 98,643 106,737
Provision movement:
At 24 February 2018 (IAS 39) 33,909 34,754 34,754
Impact of IFRS 9 adoption 6,815 - -
--------- --------- ---------
At 25 February 2018 (IFRS
9) 40,724
Charge 23,227 17,577 24,452
Amounts written off (12,482) (12,762) (24,946)
Unwind of discount (10,616) (6,127) (351)
--------- --------- ---------
At period end 40,852 33,442 33,909
--------- --------- ---------
Net Amounts Receivable 67,968 65,201 72,828
--------- --------- ---------
9. BANK AND OTHER BORROWINGS
Group and Company
--------------------
25.8.18 26.8.17
GBP'000 GBP'000
Bank loans 12,000 17,000
Unamortised arrangement fees (323) (568)
--------- ---------
11,677 16,432
========= =========
In August 2017, the Company signed a GBP15,000,000 loan facility to bring its total revolving credit facilities to GBP40,000,000.
Total bank and other borrowings, including unamortised arrangement fees, are GBP11,677,000 as at 25 August 2018 (H1 FY18: GBP16,432,000).
Repayments of loans amounting to GBP4,000,000 were made during the period, in line with repayment terms.
10. RESERVES
Details of the movements in reserves are set out in the statement of changes in equity. Share capital as at 25 August 2018 amounted to GBP1,295,000 (H1 FY18: GBP1,295,000).
11. RELATED PARTY TRANSACTIONS
Up until 21 February 2018 the Company was a 51% subsidiary of Hay Wain Group Limited. Hay Wain Group Limited's shareholding reduced on 23 February 2018 to 36.8% and as such it no longer holds a controlling interest in the Company. From 24 February 2018 the Directors consider there to be no ultimate Parent Company. Shelby Finance Limited and Shopacheck Financial Services Limited are subsidiaries of Morses Club PLC.
The Company undertook the following transactions with Hay Wain Group Limited and Shelby Finance Limited during the period:
Dividends Received / (Paid)
GBP'000
26 Weeks ended 25 August 2018
Hay Wain Group Limited (2,287)
(2,287)
============================
26 Weeks ended 26 August 2017
Hay Wain Group Limited (2,840)
2,840)
============================
52 Weeks ended 24 February 2018
Hay Wain Group Limited (4,293)
(4,239)
============================
At the period-end the following balances were outstanding:
25.8.18 26.8.17 24.2.18
GBP'000 GBP'000 GBP'000
Shopacheck Financial Services Limited (1,321) (1,321) (1,321)
Shelby Finance Limited 337 82 319
Amounts owed from / (to) Related Parties (984) (1,239) (1,002)
======== ======== ========
Alternative performance measures
This Interim Report and Financial Statements provides alternative performance measures (APMs) which are not defined or specified under the requirements of International Financial Reporting Standards. We believe these APMs provide readers with important additional information on our business. To support this we have included a reconciliation of the APMs we use where relevant and a glossary indicating the APMs that we use, an explanation of how they are calculated and why we use them.
Closest
Statutory
APM Measure Definition and Purpose
------------------------ ----------- ---------------------------------------------------
Income Statement
Measures
------------------------ ----------- ---------------------------------------------------
Impairment as None Impairment as a percentage of revenue is
% of Revenue (%) reported impairment divided by reported
revenue and represents a measure of credit
quality that is used across the business
and within the sector.
------------------------ ----------- ---------------------------------------------------
Agent Commission None Agent commission, which is included in
as % of Revenue cost of sales, divided by reported revenue.
(%) This calculation is used to measure operational
efficiency and the proportion of income
generated which is paid to agents
------------------------ ----------- ---------------------------------------------------
Cost / Income None The cost-income ratio is cost of sales
Ratio or Operating and administration expenses, excluding
Cost ratio (%) exceptional items, finance costs and amortisation
divided by reported revenue. This is used
as another efficiency measure of the company's
cost base.
------------------------ ----------- ---------------------------------------------------
Credit Issued None Credit issued is the principal value of
(GBPm) loans advanced to customers and is an important
measure of the level of lending in the
business.
------------------------ ----------- ---------------------------------------------------
Sales Growth (%) None Sales growth is the period-on-period change
in Credit Issued
------------------------ ----------- ---------------------------------------------------
Adjusted Profit Profit Profit Before Tax per the Income statement
Before Tax (GBPm) Before adjusted for exceptional costs, non-recurring
Tax costs and amortisation of goodwill and
acquisition intangibles. This is used to
measure ongoing business performance.
------------------------ ----------- ---------------------------------------------------
Adjusted Profit Profit Profit Before Tax per the Income statement
Before Tax (underlying Before adjusted for exceptional costs, non-recurring
HCC) (GBPm) Tax costs and amortisation of goodwill and
acquisition intangibles, Territory Build
subsidies and losses of Dot Dot Loans.
------------------------ ----------- ---------------------------------------------------
Adjusted Earnings Earnings Adjusted Profit After Tax divided by the
Per Share Per Share weighted average number of shares. This
gives a better reflection of underlying
earnings generated for shareholders
------------------------ ----------- ---------------------------------------------------
Closest
Statutory
APM Measure Definition and Purpose
----------------------- ----------- ----------------------------------------------------
Balance sheet
and returns measures
----------------------- ----------- ----------------------------------------------------
Tangible Equity Equity Net Assets less intangible assets less
(GBPm) acquisition intangibles.
----------------------- ----------- ----------------------------------------------------
Adjusted Return None Calculated as adjusted profit after tax
on Equity (%) divided by rolling 12 month average of
tangible equity. This calculation has been
adjusted to an IFRS 9 basis. It is used
as a measure of overall shareholder returns
adjusted for exceptional items. This is
presented within the interim report as
the directors believe they are more representative
of the underlying operations of the business
----------------------- ----------- ----------------------------------------------------
Adjusted Return None Calculated as adjusted profit after tax
on Assets (%) divided by 12 month average Net Loan Book.
This calculation has been adjusted to an
IFRS 9 basis. It is used as a measure of
profitability generated from the loan book.
Net Loan Book is Amounts owing from customers
less provisions for deferred income and
impairments. This is presented within the
interim report as the directors believe
they are more representative of the underlying
operations of the business
----------------------- ----------- ----------------------------------------------------
Tangible Equity None Net Assets less intangible assets less
/ Average Receivables acquisition intangibles divided by 12 months
Ratio (%) average receivables. This calculation has
been adjusted to an IFRS 9 basis.
----------------------- ----------- ----------------------------------------------------
Adjusted Return on Assets and Adjusted IFRS 9 IAS 39
Return on Equity
GBPm to Aug 18 to Aug 17
----------
Adjusted Profit After Tax (Rolling 12
months)(1,2) 16.2 14.0
---------- ----------
12 month average Net Loan Book(2,3) 67.5 72.2
---------- ----------
Adjusted Return on Assets 24.0% 19.4%
---------- ----------
12 month average Equity(2) 64.1 66.4
---------- ----------
Adjusted Return on Equity 25.2% 26.1%
---------- ----------
1 Adjusted PAT for each interim period has been reconciled on page 8
2 The 12 month average for PAT, the net loan book and tangible equity figures cannot be directly traced back to the primary statements
3 The definition of Adjusted Return on Net Assets changed between August 2017 and August 2018 from adjusted profit after tax divided by 12 month average Total Assets excluding Intangibles to adjusted profit after tax divided by 12 month average Net Loan Book. If the new methodology was used for H1 FY17, the rate would be 22.9%.
Other measures
----------------------- ------------ -----------------------------------------------
Customers None Customers who have an active loan and from
whom we have received a payment of at least
GBP3 in the last 17 weeks.
----------------------- ------------ -----------------------------------------------
Agents None Agents are self-employed individuals who
represent the Group's subsidiaries and
are engaged under an agency agreement.
----------------------- ------------ -----------------------------------------------
Cash from Operations Cash from Cash from Operations (excluding investment
(excluding investment Operations in the loan book) is Cash from Operations
in loan book) excluding the growth in the loan book due
(GBPm) to either acquisition or movement in the
net receivable otherwise (see reconciliation
below).
----------------------- ------------ -----------------------------------------------
Adjusted Net Margin None Adjusted Profit before tax (which excludes
amortisation of intangibles on acquisitions,
the one-off costs of the IPO and other
non-operating costs) divided by reported
revenue. This is used to measure overall
efficiency and profitability.
----------------------- ------------ -----------------------------------------------
Cash from funding None Cash from Funding is the increase / (decrease)
(GBPm) in the Bank Loan balance.
----------------------- ------------ -----------------------------------------------
Key Performance Indicators - Like for Like IFRS9 and IAS39
The table is present to enable users to understand the key performance indicators on a like for like basis
IFRS 9 IFRS 9 IAS 39 IAS 39
to Aug to Aug to Aug to Aug
18 17 % +/- 18 17 % +/-
--------- ------ --------- --------- ------
Revenue GBP57.5m GBP51.4m 11.9% GBP60.8m GBP54.2m 12.2%
Net Loan Book GBP68.0m GBP62.8m 8.4% GBP71.2m GBP65.2m 9.2%
Adjusted Profit Before
Tax GBP10.5m GBP9.2m 14.1% GBP10.2m GBP8.7m 17.2%
Statutory Profit Before
Tax GBP10.0m GBP7.2m 38.9% GBP9.7m GBP6.7m 44.8%
Adjusted Earnings per
share 6.6p 5.7p 14.1% 6.4p 5.3p 18.5%
Statutory Earnings per
Share 6.3p 4.3p 44.7% 6.1p 3.9p 56.4%
Cost / Income ratio 58.5% 59.6% 1.9% 55.3% 56.5% 2.1%
Return on Assets 19.0% n/a(1) n/a 18.0% 12.9% 36.5%
Adjusted Return on Assets 24.0% n/a(1) n/a 23.9% 19.4% 23.3%
Return on Equity 25.4% n/a(1) n/a 23.7% 16.7% 41.9%
Adjusted Return on Equity 25.2% n/a(1) n/a 27.4% 26.1% 5.0%
Tangible Equity / average
receivables 87.6% n/a(1) n/a 91.0% 90.0% -1.1%
No of customers (000's) 230 233 -1.3% 230 233 -1.3%
Number of agents 1,942 2,124 -8.6% 1,942 2,124 -8.6%
Credit Issued GBP86.1m GBP82.3m 4.6% GBP86.1m GBP82.3m 4.6%
Impairment as % of Revenue 21.9% 21.5% -1.9% 26.6% 26.6% 0.0%
--------- --------- ------ --------- --------- ------
1 KPI not quoted as it includes data points which precede the date of IFRS 9 transition
Reconciliation of IAS39 to IFRS9 for IAS 39 IFRS 9 IFRS 9
metrics stated above
to Aug Effective to Aug
17 Credit 17
GBPm Loss Adjustment
----------------- -------
Revenue 54.2 (2.8) 51.4
Impairment (14.4) 3.3 (11.1)
Sub-total 0.5
Statutory Profit Before Tax 6.7 0.5 7.2
Adjusted Profit Before Tax 8.7 0.5 9.2
Net Loan Book 65.2 (2.4) (1) 62.8
------- ----------------- -------
(1) Net Loan Book IFRS 9 ECL adjustment includes the transitional adjustment
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR MJBRTMBJMBTP
(END) Dow Jones Newswires
October 04, 2018 02:00 ET (06:00 GMT)
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