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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 Apr 2021 to Apr 2024
TIDMMCL
RNS Number : 4620Y
Morses Club PLC
13 May 2021
13 May 2021
Morses Club PLC
Preliminary results for the 52 weeks ended 27 February 2021
Digital Transformation
Morses Club PLC ("the Company" or "the Group"), an established provider of non-standard financial services , is pleased to announce its preliminary results for the 52 weeks ended 27 February 2021.
Operational Highlights:
-- Rapidly reconfigured operating model and existing technology, allowing us to maintain lending and collection activity throughout the pandemic
-- Further re-engineering of our online businesses to build our product offering and take advantage of the opportunity in the wider non-standard credit market
-- Delivered technology enhancements in our HCC business to provide a digital service to customers enabling a virtually paperless documentation process
-- Strong customer satisfaction with further increase to 98% -- 107,000 customers registered for the digital HCC portal (FY20: 78,000) -- 67% of all HCC lending cashless with 80% of cash collections made remotely -- Transformed the Group's estate footprint with 90 properties operationally exited -- Total Group customer numbers: 180,000 (FY20: 255,000)
-- Digital business moved e-money current account services and lending products onto two new operating platforms
-- Continued progress in Group's strategy to become a more complete financial services provider
Financial Highlights:
-- Group:
o Revenue decreased by 25.1% to GBP100.2m (FY20: GBP133.7m) due to Covid-19 impact on demand and inability to lend to new HCC customers during first 5 months of H1
o Total credit issued to all customers of GBP129.0m (FY20: GBP190.3m)
o Net loan book of GBP53.5m, reduced by 26.5% (FY20: GBP72.8m)
o Adjusted profit before tax (1) of GBP6.1m (FY20: GBP13.8m)
o Statutory profit before tax of GBP0.5m (FY20: GBP11.5m)
o Impairment as a percentage of revenue (1) for the period of 20.8% (FY20: 27.2%) evidencing improved quality of loan book
o Adjusted return on assets (1) of 8.9% (FY20: 14.8%)
o Statutory return on assets of 0.3% (FY20: 12.8%)
o Adjusted EPS(1) of 3.9p (FY20: 8.4p)
o Statutory EPS of 0.2p (FY20: 7.3p)
o Final dividend of 2.0p pence per share (FY20: 3.6p) reflecting Group's confidence in its outlook
-- HCC
o Total credit issued to HCC customers 37.0% lower at GBP109.7m (FY20: GBP174.2m)
o Adjusted HCC profit before tax (1) of GBP15.0m, a decrease of 34.2% (FY20: GBP22.8m)
o Statutory HCC profit before tax of GBP11.8m, a decrease of 44.3% (FY20: GBP21.2m)
-- Digital
o Total credit issued to Digital customers up 19.9% to GBP19.3m (FY20: GBP16.1m)
o Adjusted loss before tax(1) in Digital division of (GBP8.9m) (FY20: (GBP9.0m))
o Statutory loss before tax in Digital (GBP11.3m) (FY20: (GBP9.7m)) reflecting continued investment in the division
Alternative Performance Measures & Key Performance Indicators
Hot Features
Premium
52-week 53-week % +/-
period period
ended 27 ended 29
February February
Key performance indicators 2021 2020
Revenue GBP100.2m GBP133.7m (25.1%)
Net Loan Book GBP53.5m GBP72.8m (26.5%)
Adjusted Profit Before
Tax (1) GBP6.1m GBP13.8m (55.8%)
Statutory Profit Before
Tax GBP0.5m GBP11.5m (95.7%)
Adjusted Earnings per share
(1) 3.9p 8.4p (53.5%)
Statutory Earnings per
Share 0.2p 7.3p (97.3%)
Cost / Income ratio 70.9% 60.0% 18.2%
Return on Assets 0.3% 12.8% (97.7%)
Adjusted Return on Assets
(1) 8.9% 14.8% (39.9%)
Return on Equity 0.4% 17.2% (97.7%)
Adjusted Return on Equity
(1) 10.3% 19.9% (48.2%)
Tangible Equity / average
receivables (1) 86.3% 74.4% 16.0%
No of customers (000's) 180 255 (29.4%)
Number of agents 1,385 1,695 (18.3%)
Credit Issued GBP129.0m GBP190.3m (32.2%)
Impairment as % of Revenue
(1) 20.8% 27.2% (23.5%)
---------- ---------- --------
1. Definitions are set out in the Glossary of Alternative Performance Measures on page 35
Paul Smith, Chief Executive Officer of Morses Club, commented:
"The last twelve months have been truly transformative for Morses Club. The Covid-19 pandemic forced us to innovate and accelerate our digital strategy, reconfiguring our operating model to allow us to maintain customer contact and collection activity whilst generating new lending opportunities and transitioning towards being a more complete financial services provider.
"The Group performed resiliently and profitably, despite not being able to lend to new HCC customers for five months of the year. In HCC, we re-commenced lending to existing customers just three weeks after lockdown was announced in March 2020. 67% of lending in our HCC division is now cashless and 80% of cash is collected remotely. Despite the impact of the pandemic, we saw a significant increase in the quality of our lending, with impairment levels well below the guidance range. The fact that customer satisfaction has increased to 98% reflects our customers' positive experience of the new remote lending model. I am very proud and grateful to all of my colleagues for adapting so well and for maintaining our customer service levels, despite the significant changes in the marketplace.
"The Digital division transitioned to two new operating platforms during the year and, despite tightening our lending criteria, the division issued more loans and introduced longer-term lending during the period, which is an encouraging indicator for the future growth of the Digital business and for the achievement of break-even on a run rate basis by the end of FY22. We are experiencing a growing demand from customers for a wider range of digital products and services and we have created a robust digital current account proposition and loans management platform positioned to capture this growth.
"We are seeing robust demand for non-standard finance products as the market reopens, with positive sales trends since the year-end in both divisions and further uptake expected as Government restrictions relax further. A number of our competitors have stepped back from the HCC and digital sectors and, as a result, we expect to benefit from reduced competition within the market. The accelerated shift to digital is permanent and the investment the Group has made in technological infrastructure over a number of years stands us in good stead to continue supporting our customers and meeting their ever-changing financial needs with our broadening suite of financial products."
Sell-side Analyst Presentation
The Company will be holding a virtual sell-side analyst presentation at 10.30 am on Thursday 13th May. Please contact morses@camarco.co.uk if you would like to attend.
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 Paul Smith, Chief Executive Officer 045 0719 Graeme Campbell, Chief Financial Officer Peel Hunt (Nomad) Tel: +44 (0) 20 7418 Andrew Buchanan / James Britton / Rishi 8900 Shah / Duncan Littlejohns (Investment Banking Division) Camarco Tel: +44 (0) 20 3757 Jennifer Renwick / Oliver Head 4994
Notes to Editors
About Morses Club
Morses Club is an established provider of non-standard financial services in the UK. The Group consists of Morses Club, the UK's second largest home collected credit ("HCC") provider, and Shelby Finance Limited, Morses Club's Digital division, which operates under two online brands, Dot Dot Loans, an online lending provider, and U Account, which offers online e-money current accounts. The Group's growing Digital capabilities and scalable, highly invested IT platform has enabled Morses Club to deliver an inc reasingly broad range of financial products and services to the non-standard credit market.
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 electronically, or physically to customers' homes. Repayments are collected either remotely or in person, during weekly follow-up visits to customers' homes.
Morses Club's HCC division is the second largest UK Home Collected Credit (HCC) lender with 151,000 customers throughout the UK. The majority of the Company's customers are repeat borrowers and the HCC division enjoys consistently high customer satisfaction scores of 98% (2) . In 2016, the Morses Club Card, a cashless lending product, was introduced and in 2019 the Company introduced an online customer portal for its HCC customers, which now has over 107,000 registered customers.
The Group's growing Digital division, Shelby Finance Limited, operates under two online brands. Dot Dot Loans provides online instalment loans of up to 60 months to c. 23,000 active customers. U Account is a leading digital current account provider offering an altern ative to traditional banking by providing a fully functional agency banking service. U Account currently has c. 6,000 customers.
Morses Club 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 (3) and total loan receivables of GBP10.7bn (4) .
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 borrowin g. Approximately 2 million people move annually between standard and non-standard markets (4) .
Since February 2014, unsecured personal lending has grown from GBP161 billion to GBP225 billion in February 2020. It has since contracted to GBP197 billion in March 2021(5) .
(1 High Cost Credit Review ANNEX 1 - July 2017)
(2 Independent Customer Satisfaction Survey conducted by Mustard 3 FCA High Cost Credit Review Technical Annex 1: CRA data analysis of UK personal debt - July 2017 4 Apex Insight - Non-Prime Consumer Credit: UK Market Insight Report - September 2019 5 Table A5.2, Bank of England Money and Credit Bank stats March 2021)
(Review ANNEX 1 - July 2017)
Chief Executive Officer's Review
A transformative year for the business.
"Though FY21 was undoubtedly a year of many challenges, it is one we can look back on with an incredible amount of pride." - Paul Smith, Chief Executive Officer
We have delivered a resilient performance for our stakeholders and made significant progress towards becoming a more complete financial services provider.
The time and resources invested in developing our technology platforms in recent years have been instrumental to our successful response to the Covid-19 crisis. The swift transition to homeworking, including a fully operational virtual call centre system, and the speed with which we were able to restart lending to customers, were testament to our prior investment in digital. As a result, we find ourselves in a very promising position as the country begins to reopen.
In addition to the very high levels of customer satisfaction that we maintained, I feel immense pride in how adaptable and resilient our people have proven to be this year. The sheer doggedness of the whole team to react to our business having to change practically overnight and undertake the work required to produce such a strong performance has been nothing short of outstanding, and my thanks go out to everyone at Morses Club.
Performance
Despite the many positives from the year, Covid-19 has clearly impacted our performance, with customer numbers, credit issued and cash collected all down across the Group. This came as no surprise to us, with periods of lockdown meaning many consumers had little to no requirement for credit services.
Although we've lost customers, the collection percentage of our smaller base remained reasonably steady despite disruption towards the beginning of the pandemic, which is a real achievement and testament to the hard work of our people and systems. We also remain optimistic because we fully expect many customers to come back to us when the economy reopens.
Our successful response to Covid-19 has ensured the Group remains profitable, despite having to reconfigure our operating model and change the way we run our business. The value of new credit issued across the Group fell during the year as a consequence of reduced customer demand for our products during lockdown measures. Despite the economy shutting down for long periods of the year, our HCC division continued to perform strongly and issued new credit of GBP109.7m (FY20: GBP174.2m), closing the year with total loan receivables of GBP48.0m (FY20: GBP67.9m). During the period our digital division grew its loan book and issued new credit of GBP19.3m (FY20: GBP16.1m), closing the year with loan receivables of GBP5.6m (FY20: GBP4.9m). As a consequence of lower demand during the year in periods when the economy was closed, Group receivables fell from GBP72.8m in FY20 to GBP53.5m in FY21, our total number of customers also reduced to 180,000 (FY20: 255,000). Despite the challenges faced by the business, we continued to deliver excellent support and service to our customers, resulting in a 98% customer satisfaction score (FY20: 97%).
HCC
In response to the evolving Covid-19 situation, the HCC division tightened its lending criteria as we deliberately limited our appetite for lending. We sought to identify only the highest quality customer groups, and this resulted in us solely lending to existing customers for a time, before we cautiously expanded our offering to new customers again. We ended the year with customer numbers and lower lending at levels similar to what we forecasted, but the effectiveness of our cautious approach was demonstrated in the final quarter of FY21 as we were able to achieve a cash collections performance matching the same period of FY20, an outstanding result given the market circumstances.
It has also been clear from customer satisfaction surveys that our HCC customers are very happy with our new blend of digital and face-to-face customer service. Though many still value the personal contact of our agents, a significant number have embraced the ease and flexibility provided by the customer portal, and we expect this trend to continue.
Digital
We also tightened our lending criteria within our digital business, however, we still received and approved more applicants, grew our customer base, issued more loans and even managed to improve our collection performance. We believe this excellent performance demonstrates that better decision making is happening as a direct result of the new systems, practices and procedures we have embedded with our new loan management platform, which is hugely encouraging.
Though we expected the digital business to perform well with its established customers, as 27% of our lending has been from existing customers, our ability to achieve growth despite the circumstances has been a real positive of FY21.
In addition, we also rebased our e-money current account services products onto a new platform which offers true banking-grade digital services to our customers and is now truly scalable. This has seen us develop our longer-term, lower cost and revolving credit products, which we plan to offer to our banking customers in Q1 FY22.
External market
Our markets have been radically changed by the pandemic. We see robust demand in the non-standard finance market as Covid-19 recedes and beyond, with a pent-up demand expected to emerge once lockdowns are completely lifted.
We are likely to benefit from reduced competition within the HCC industry. The community of approximately 400 locally-focused and family-owned businesses has sadly been greatly reduced this year to 262, and we would be surprised to see all of those businesses re-emerge in the near future. We also believe that, post pandemic, our starting position is stronger than our national, quoted competitors, due to our successful changes to the way in which products are delivered and our risk appetite with regard to lending.
We are also strongly positioned to benefit from high demand in digital as a number of online lenders have exited the market and left us with far fewer competitors in that space.
Within the digital banking sector, there has been great interest as a growing number of customers migrate away from mainstream lenders to emerging digital banks. We see exciting opportunities for Morses Club to pick up customers as they move away from the mainstream, because the prevalent online disruptors are not focused on either the non-prime sector or on the provision of credit as an integral part of the banking relationship.
During the year, the Group has observed a noticeable increase in the level of complaints received from both Claims Management Companies (CMCs) and Customers. Whilst the increase in complaints is in line with sector-wide volumes, the number of complaints received by the Group is proportionately lower than other lenders in the sector. Many of the complaints received have been submitted by CMCs on behalf of customers, however, the Group is fully committed to reviewing every complaint and has provided sufficient resource to ensure each case is assessed individually and all customers are treated fairly.
Strategy
Our strategic response to the crisis has been focused on exploiting the re-engineering and digitalisation of the business that had been taking place for many years. Our steady evolution had to become a sudden shift, but our existing technology and expertise has enabled us to make good progress. Our new operating model is already lowering operating costs and increasing efficiencies, whilst still providing excellent levels of customer satisfaction, and good customer outcomes.
As we move beyond the pandemic, we are responding to an emerging desire from consumers for a wider range of products and services within the financial services sector. Our strategic pillars are focused on cross-selling our products and supporting all customers with a blend of our traditional, face-to-face DNA and what we believe to be our cutting edge technology solutions. We believe we are well positioned to drive strong volume growth across both divisions going forwards.
People, culture and stakeholders
Throughout the pandemic, our priorities have remained the same: protecting all of our key stakeholders whilst ensuring we could continue to support our customers and maintain high levels of satisfaction. Our deep-rooted culture and values, a key strength of the business, have been central to our response, with customer centricity, honesty, clarity and flexibility all underpinning our approach to helping stakeholders.
The transition to home working has been almost seamless, and I'm proud to say that our people have responded extraordinarily well to the year's many challenges. Our early investments in hardware and equipment have made long-term home working easier and more comfortable for our teams, and this has been reflected in no demonstrable decline in productivity.
Looking forward, we see many benefits of a permanent flexible working model for certain parts of the business. This has allowed us to massively reduce our property estate, including a move of our registered office and the closure of all field-based offices, which will result in cost savings and environmental benefits.
Just as we have prioritised delivering for our customers during a difficult time, our customers have delivered for us. Covid-19 had an initial impact on repayment rates, but these have improved and are now back to pre-Covid-19 levels. Customers have been responsible and cooperative, with our work to build long-term relationships being rewarded. Maintaining these relationships and building new ones going forwards will likely require a new blend of face-to-face and digital service and engagement, but we will always be driven by satisfaction rates and what our customers tell us they want.
In terms of wider stakeholders, during the year we have increasingly moved away from our reliance on external technology suppliers. Bringing many of these facilities in-house will have many financial benefits going forwards, and we're grateful to our partners for their help in this transition.
Outlook
As the economy gradually reopens throughout the first half of 2021, our priorities remain the health, safety and wellbeing of our key stakeholders. Though we appreciate many people are keen to return to the office as soon as possible, we will remain cautious in our own unlocking. With large parts of the economy set to remain closed until at least June, we are also cautious about our results for the first half of FY22.
However, the UK economy is widely predicted to rapidly recover over the coming year, and driven by pent-up demand across both of our divisions and a greatly reduced competitive landscape, we are optimistic about achieving year-on-year growth in the second half of the year. Should the UK suffer a longer-term economic downturn as a result of either the pandemic or Brexit or both, our sector has proven resilient in the past and we would remain confident in steady customer demand.
Overall, there are many reasons to be excited about our future growth prospects. Our HCC customer base should recover and expand as a result of welcoming customers back and welcoming new customers from competitors that no longer exist. Increased cross-selling will introduce existing HCC customers to a broader range of digital products, which will drive performance and satisfaction improvements for both divisions. In our digital division, volume growth and profitability will be delivered through attracting a wide range of new customers.
Taking full advantage of these opportunities will provide the bedrock for delivering attractive growth in the coming years once the pandemic has fully receded.
Paul Smith
Chief Executive Officer
13 May 2021
Chief Financial Officer's Operational and Financial Review
"The Group delivered an encouraging financial performance in FY21, overcoming the many challenges presented by Covid-19 to remain profitable whilst transforming our operating model." - Graeme Campbell, Chief Financial Officer
Overview
The results for the Group for the 52 weeks ended 27 February 2021 reflect an encouraging financial performance, overcoming the many challenges presented by Covid-19 to remain profitable while transforming our operating model.
Though the closed economy has lowered demand for our services and caused our customer base and the loan book to shrink, our underlying debt and collection performance has been very strong and we have trimmed costs to mitigate the impact as much as possible. We also decided not to take any government support or furlough any staff.
On a personal level, I'm delighted to have joined the Group and have been very impressed by the progress achieved during the year. We are well placed to grow both sides of the business as the economy reopens and customer demand returns.
Reconciliation of Statutory profit before tax to Adjusted profit before tax and explanation of Adjusted EPS
FY21 FY20
------------------------------------------- --------------------- ---------------------
GBP'm (unless otherwise stated) HCC Digital Total HCC Digital Total
------------------------------------------- ----- ------- ----- ----- ------- -----
Statutory Profit Before Tax 11.8 (11.3) 0.5 21.2 (9.7) 11.5
------------------------------------------- ----- ------- ----- ----- ------- -----
Covid-19 adjustment to impairment - - - 1.7 - 1.7
------------------------------------------- ----- ------- ----- ----- ------- -----
Statutory Profit Before Tax before
Covid-19 adjustment 11.8 (11.3) 0.5 22.9 (9.7) 13.2
------------------------------------------- ----- ------- ----- ----- ------- -----
Acquisition, restructuring and
non-recurring costs 2.9 2.4 5.3 0.9 2.6 3.5
------------------------------------------- ----- ------- ----- ----- ------- -----
Exceptional (gain)(2) - - - - (2.3) (2.3)
------------------------------------------- ----- ------- ----- ----- ------- -----
Amortisation of acquisition intangibles(3) 0.3 - 0.3 0.8 0.4 1.2
------------------------------------------- ----- ------- ----- ----- ------- -----
Gains arising on acquisition - - - - - -
------------------------------------------- ----- ------- ----- ----- ------- -----
Normalised Adjusted Profit Before
Tax(1) 15.0 (8.9) 6.1 24.5 (9.0) 15.5
------------------------------------------- ----- ------- ----- ----- ------- -----
Covid-19 adjustment to impairment - - - (1.7) - (1.7)
------------------------------------------- ----- ------- ----- ----- ------- -----
Adjusted Profit Before Tax(1) 15.0 (8.9) 6.1 22.8 (9.0) 13.8
------------------------------------------- ----- ------- ----- ----- ------- -----
Tax on Adjusted Profit Before
Tax (0.8) (0.2) (1.0) (2.4) (0.4) (2.8)
------------------------------------------- ----- ------- ----- ----- ------- -----
Adjusted Profit After Tax 14.2 (9.1) 5.1 20.4 (9.4) 11.0
------------------------------------------- ----- ------- ----- ----- ------- -----
Statutory EPS(1) 0.2p 7.3p
------------------------------------------- ----- ------- ----- ----- ------- -----
Normalised EPS(1) 3.9p 9.5p
------------------------------------------- ----- ------- ----- ----- ------- -----
Adjusted EPS(1) 3.9p 8.4p
------------------------------------------- ----- ------- ----- ----- ------- -----
Statutory Return on Assets(1) 22.0% 0.3% 27.5% 12.8%
------------------------------------------- ----- ------- ----- ----- ------- -----
Normalised Return on Assets(1) 27.2% 8.9% 31.1% 16.6%
------------------------------------------- ----- ------- ----- ----- ------- -----
Adjusted Return on Assets(1) 27.2% 8.9% 29.3% 14.8%
------------------------------------------- ----- ------- ----- ----- ------- -----
Statutory Return on Equity(1) 18.5% 0.4% 30.1% 17.2%
------------------------------------------- ----- ------- ----- ----- ------- -----
Normalised Return on Equity(1) 22.8% 10.3% 34.1% 22.3%
------------------------------------------- ----- ------- ----- ----- ------- -----
Adjusted Return on Equity(1) 22.8% 10.3% 32.1% 19.9%
------------------------------------------- ----- ------- ----- ----- ------- -----
1 Definitions are set out in the Glossary of Alternative Performance Measures on pages 138 to 141.
2 Release of contingent consideration in relation to the U Holdings Limited acquisition
3 Amortisation of acquired customer lists and agent networks
In FY21 we achieved an adjusted profit before tax(1) of GBP6.1m (FY20: GBP13.8m). Statutory profit before tax was GBP0.5m (FY20: GBP11.5m).
As expected, Covid-19 impacted demand within HCC with closing customers down by a third to 151,000 (FY20: 221,000) and period end receivables decreasing by 29.3% to GBP48.0m (FY20: GBP67.9m). This resulted in adjusted profit before tax of GBP15.0m (FY20: GBP22.8m).
As with HCC, the Digital division was impacted by reduced demand due to lockdown measures and a tightening of lending criteria. Closing customers reduced by (14.7%) to 29,000 (FY20: 34,000) and revenue declined (4.2%) to GBP13.8m (FY20: GBP14.4m). This resulted in an adjusted loss before tax of (GBP8.9m), compared to FY20 (GBP9.0m).
Total equity for the Group remained unchanged from GBP70.7m in FY20 to GBP70.7m.
Trading summary
52-week period ended 53-week period ended
27 February 2021 29 February 2020
------------------------------------------ ------------------------ ------------------------
GBP'm (unless otherwise stated) HCC Digital Total HCC Digital Total
------------------------------------------ ------- ------- ------ ------- ------- ------
Customer numbers ('000s) 151 29 180 221 34 255
------------------------------------------ ------- ------- ------ ------- ------- ------
Credit issued 109.7 19.3 129.0 174.2 16.1 190.3
------------------------------------------ ------- ------- ------ ------- ------- ------
Period end receivables 48.0 5.6 53.5 67.9 4.9 72.8
------------------------------------------ ------- ------- ------ ------- ------- ------
Average receivables 52.3 5.2 57.5 69.3 5.0 74.3
------------------------------------------ ------- ------- ------ ------- ------- ------
Revenue 86.4 13.8 100.2 119.3 14.4 133.7
------------------------------------------ ------- ------- ------ ------- ------- ------
Impairment (13.2) (7.6) (20.8) (27.6) (7.1) (34.7)
------------------------------------------ ------- ------- ------ ------- ------- ------
Agent Commission & Other
cost of sales (20.0) (0.6) (20.7) (27.0) (0.6) (27.6)
------------------------------------------ ------- ------- ------ ------- ------- ------
Gross Profit 53.2 5.6 58.8 64.7 6.6 71.3
------------------------------------------ ------- ------- ------ ------- ------- ------
Administration expenses (pre-exceptional) (33.8) (12.2) (46.0) (34.4) (13.8) (48.2)
------------------------------------------ ------- ------- ------ ------- ------- ------
Depreciation (3.6) (0.7) (4.3) (3.6) (0.7) (4.3)
------------------------------------------ ------- ------- ------ ------- ------- ------
Operating Profit before exceptional
items and amortisation of
acquisition intangibles 15.8 (7.3) 8.5 26.7 (7.9) 18.8
------------------------------------------ ------- ------- ------ ------- ------- ------
Amortisation of acquisition
intangibles (0.3) - (0.3) (0.8) (0.4) (1.2)
------------------------------------------ ------- ------- ------ ------- ------- ------
Acquisition, restructuring
and non-recurring costs (2.9) (2.4) (5.3) (0.9) (2.6) (3.5)
------------------------------------------ ------- ------- ------ ------- ------- ------
Covid-19 adjustment to impairment - - - (1.7) - (1.7)
------------------------------------------ ------- ------- ------ ------- ------- ------
Exceptional gain - - - - 2.3 2.3
------------------------------------------ ------- ------- ------ ------- ------- ------
Operating profit 12.5 (9.7) 2.8 23.2 (8.5) 14.7
------------------------------------------ ------- ------- ------ ------- ------- ------
Funding costs (0.7) (1.6) (2.4) (2.1) (1.1) (3.3)
------------------------------------------ ------- ------- ------ ------- ------- ------
Statutory Profit Before Tax 11.8 (11.3) 0.5 21.2 (9.7) 11.5
------------------------------------------ ------- ------- ------ ------- ------- ------
Tax (0.3) 0.1 (0.2) (2.0) 0.1 (2.0)
------------------------------------------ ------- ------- ------ ------- ------- ------
Statutory Profit After Tax 11.5 (11.2) 0.2 19.2 (9.7) 9.5
------------------------------------------ ------- ------- ------ ------- ------- ------
Basic EPS 0.2p 7.3p
------------------------------------------ ------- ------- ------ ------- ------- ------
Group results
Credit issued to customers decreased by (32.2%) to GBP129.0m (FY20: GBP190.3m) mainly because of the Covid-19 impact on HCC business. HCC credit issued of GBP109.7m was a (37.0%) reduction on FY20 (FY20: GBP174.2m), reflecting both the reduced demand due to multiple national and regional Covid-19 lockdowns during the year and stricter lending criteria to protect the quality of the loan book. Credit issued in Digital was impacted by Covid-19 lockdowns and tighter lending criteria, but despite this, credit issued increased by 19.9% to GBP19.3m (FY20: GBP16.1m).
Revenue decreased by (25.1%) to GBP100.2m (FY20: GBP133.7m) due to the Covid-19 impact on demand and the temporary inability in HCC during H1 to lend to new customers. HCC revenue decreased by (27.6%) to GBP86.4m (FY20: GBP119.3m). Digital revenue decreased by (4.2%) to GBP13.8m (FY20: GBP14.4m) as a result of the collection of the acquired CURO Transatlantic Limited loan book inflating the numbers in FY20.
Gross profit decreased by (17.5%) to GBP58.8m (FY20: GBP71.3m). The gross profit percentage increased to 58.7% from FY20 53.3%. The HCC impairment charge as a percentage of revenue of 15.3% is below our guidance range of 21% to 26% of revenue. This is due to the favourable impact from a shrinking loan book under IFRS9, tighter lending criteria and the high proportion of lending to existing customers. The Digital impairment charge as a percentage of revenue of 55.1% is at the upper end of our guidance range of 45-55% of revenue.
HCC agent commission costs decreased by (25.9%) to GBP20.0m (FY20: GBP27m), while as a percentage of revenue they increased to 23.1% from 22.6% in FY20 as a result of the loan book reducing during Covid-19. Administration expenses and depreciation decreased by GBP2.2m to GBP50.3m (FY20: GBP52.5m), although as a percentage of revenue they increased to 50.2% (FY20: 39.3%). A provision of GBP2m (FY20: GBPnil) for customer redress and Financial Ombudsman (FOS) fees has been recognised in recognition of outstanding complaints at the end of the period. Due to significantly lower complaint volumes in FY20 a prior year provision was immaterial and therefore not recognised. In estimating the FY21 provision, management have incorporated historical company information for the average percentage of complaints which are upheld, the average value of compensation claims paid out and the number of outstanding complaints that remained unresolved at the balance sheet date.
Adjusted profit before tax decreased to GBP6.1m from GBP13.8m in FY20. HCC adjusted return on assets decreased from 29.3% in FY20 to 27.2% in FY21.
Acquisition, restructuring and non-recurring costs increased to GBP5.3m from GBP3.5m in FY20. These costs consist of a restructure within the HCC field team to align them to the new operating model, IT system transition costs and the settlement of the historic Ffrees court case which was disclosed in the FY20 accounts.
Funding costs of GBP2.4m were (GBP0.9m) lower than FY20 reflecting the lower level of borrowings throughout FY21.
The statutory profit before tax fell to GBP0.5m from GBP11.5m in FY20.
Earnings per share
The adjusted earnings per share for FY21 was 3.9p, a decrease of 53.6% relative to the adjusted earnings per share of 8.4p for FY20. The reported earnings per share for FY21 was 0.2p, a decrease of 97.3% relative to the reported earnings per share of 7.3p for FY20.
Dividend
Subject to shareholder approval at the Annual General Meeting on 22 June 2021, the Board proposes to pay a final dividend of 2.0p per Ordinary Share (FY20: 1.0p) payable on 30 July 2021 to shareholders on the register at the close of business on 2 July 2021.
The payment is in addition to the interim payment dividend already paid of 1.0p per Ordinary Share on 9 April 2021, making a total dividend for the year of 3.0p per Ordinary Share (FY20: 3.6p). This dividend payment reflects the Board's confidence in the Group's prospects.
Funding
During the period we extended our loan facility with the incumbent three lender consortium to December 2021, reducing the facility limit to GBP40m. In May 2021 we successfully reached agreement with a new two lender consortium, for a more cost efficient and slightly lower GBP35m facility, extended to December 2022. The new facility will continue funding our existing HCC products, but crucially, it will unlock funding for our Dot Dot loan products and help the business achieve its immediate strategic objectives.
As anticipated, the impact of Covid-19 resulted in reduced lending volumes, a smaller loan book and lower levels of borrowing. In FY21 borrowing peaked at GBP22.5m in December 2020 (December 2019: GBP40m of the GBP55m limit).
Balance sheet
The total equity for the Group is unchanged from GBP70.7m in FY20 to GBP70.7m. The Group's main asset is our loan book, which due to the Covid-19 impact on lending volumes decreased on a net basis by (26.5%) to GBP53.5m.
Summarised balance sheet GBP'm FY21 FY20 ------------------------------- ----- ------ Loan book 53.5 72.8 ------------------------------- ----- ------ Goodwill 12.9 13.0 ------------------------------- ----- ------ Bank borrowings (8.3) (33.8) ------------------------------- ----- ------ Cash at bank 8.3 11.9 ------------------------------- ----- ------ Other net assets 4.4 6.8 ------------------------------- ----- ------ Total equity 70.7 70.7 ------------------------------- ----- ------
Cash flow
The simplified cash flow statement below illustrates the cash generated by the business. Cash from operating activities increased by 54.7% to GBP33.1m (FY20: GBP21.4m), with net borrowing decreasing by (GBP25.5m), as a result of the shrinking loan book.
Summarised cash flow GBP'm FY21 FY20 ------------------------------------------------- ------ ------ Cash inflow from operating activities 33.1 21.4 ------------------------------------------------- ------ ------ Net borrowing (decrease)/increase (25.5) 19.5 ------------------------------------------------- ------ ------ Net cash outflow from investing activities (6.4) (22.4) ------------------------------------------------- ------ ------ Dividends paid (1.3) (10.2) ------------------------------------------------- ------ ------ Other net cash flow movements 3.5 4.3 ------------------------------------------------- ------ ------ (Decrease)/Increase in cash and cash equivalents (3.6) 4.0 ------------------------------------------------- ------ ------
Outlook
Due to much of the economy being closed for the majority of this financial year, we're yet to see the financial benefits of our HCC operating model transformation. There are economic uncertainties ahead, with the UK currently in the process of emerging from lockdown. We remain cautious about the first half of FY22, however, strong foundations have been laid and we're excited for what can be achieved in the future and confident in the growth opportunities that will be created by our new operating model.
The Digital division implemented two new IT platforms in the year to strengthen the existing loans management system and to create a robust banking proposition. The Digital division is now primed for growth and we are now focusing on scaling the business and achieving run-rate profitability by the end of FY22.
Graeme Campbell
Chief Financial Officer
13 May 2021
CONSOLIDATED INCOME STATEMENT
FOR THE 52 WEEK PERIODED 27 FEBRUARY 2021
52 weeks 53 weeks
ended ended
27.2.21 29.2.20
Notes GBP'000 GBP'000
Revenue 100,234 133,651
Impairment on financial assets (20,794) (36,358)
Cost of sales (20,657) (27,669)
--------- ---------
GROSS PROFIT 58,783 69,624
Administration expenses (55,967) (54,918)
---------
Operating profit before amortisation
of intangibles and exceptional items 3,161 13,593
Amortisation of acquisition intangibles (345) (1,222)
Exceptional items - 2,335
----------------------------------------- ------ --------- ---------
Operating Profit 2,816 14,706
Finance costs (2,360) (3,255)
--------- ---------
Profit before taxation 2 456 11,451
Tax on profit on ordinary activities 3 (239) (1,974)
--------- ---------
Profit after taxation 217 9,477
--------- ---------
27.2.21 29.2.20
Earnings per share Pence Pence
Basic 5 0.17 7.26
-------- ------------------
Diluted 5 0.17 7.21
-------- ------------------
All results derive from continuing operations. A Statement of Comprehensive Income is not included as there are no other gains or losses, other than those presented in the Income Statement.
BALANCE SHEET
AS AT 27 FEBRUARY 2021
Group
---------------------
Assets Notes 27.2.21 29.2.20
Non-current assets GBP'000 GBP'000
Goodwill 6 12,854 12,981
Other intangible assets 7 8,863 7,362
Investment in Subsidiaries - -
Property, plant &
equipment 734 818
Right-of-Use Assets 1,696 2,783
Deferred Tax 9 581 659
Amounts receivable
from customers 8 82 657
24,810 25,260
--------- ----------
Current Assets
Amounts receivable
from customers 8 53,408 72,171
Taxation receivable 1,387 501
Other receivables 4,927 4,256
Cash at bank 8,258 11,868
67,980 88,796
--------- ----------
Total assets 92,790 114,056
--------- ----------
Liabilities
Current Liabilities
Trade and other payables (10,039) (6,723)
Complaints provision 11 (2,012) -
Lease liabilities (790) (1,286)
(12,841) (8,009)
--------- ----------
Non-current liabilities
Bank and other borrowings 10 (8,302) (33,838)
Lease Liabilities (994) (1,553)
(9,296) (35,391)
--------- ----------
Total liabilities (22,137) (43,400)
--------- ----------
NET ASSETS 70,653 70,656
--------- ----------
Equity
Called up share capital 1,325 1,312
Group reconstruction - -
reserve
Retained Earnings 69,328 69,344
TOTAL EQUITY 70,653 70,656
========= ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEK PERIODED 27 FEBRUARY 2021
Called Retained Total
up
share capital Earnings Equity
Group GBP'000 GBP'000 GBP'000
As at 23 February 2019 1,298 69,835 71,133
-------------------- -------------------- -------------------
Profit for year - 9,477 9,477
-------------------- -------------------- -------------------
Total comprehensive income
for the period - 9,477 9,477
Deferred Tax on Acquisitions - 39 39
Share issue 14 - 14
Share based payments charge - 155 155
Dividends paid - (10,162) (10,162)
As at 29 February 2020 1,312 69,344 70,656
-------------------- -------------------- -------------------
Profit for year - 217 217
-------------------- -------------------- -------------------
Total comprehensive income
for the period - 217 217
Share issue 13 - 13
Share based payments charge - 1,079 1,079
Dividends paid - (1,312) (1,312)
As at 27 February 2021 1,325 69,328 70,653
==================== ==================== ===================
CASH FLOW STATEMENTS
FOR THE 52 WEEK PERIODED 27 FEBRUARY 2021
Group
----------------- -------------------
27.2.21 29.2.20
Notes GBP'000 GBP'000
Net cash inflow from operating
activities 33,054 21,418
Cash flows used in financing
activities
Dividends Paid 4 (1,312) (10,162)
Proceeds from additional long-term
debt 11,500 36,000
Repayment of long-term debt (37,000) (16,500)
Principal paid under lease liabilities (1,499) (1,385)
Interest received - 13
Interest paid (1,622) (2,533)
Interest paid (lease liabilities) (353) (472)
Net cash inflow/(outflow) from
financing activities (30,286) (4,961)
Cash flows used in investing
activities
Purchase of intangibles (5,282) (4,277)
Purchase of property, plant and
equipment including RoU Assets (1,096) (2,180)
Additional investment in subsidiary - -
Acquisitions - (15,947)
Net cash (outflow) from investing
activities (6,378) (22,404)
(Decrease)/Increase in cash and
cash equivalents (3,610) 3,975
================= ===================
Reconciliation of increase in
cash and cash equivalents
Movement in cash and cash equivalents
in the period (3,610) 3,975
Cash and cash equivalents, beginning
of year 11,868 7,893
================= ===================
Cash and cash equivalents, end
of year 8,258 11,868
================= ===================
NOTES TO CONSOLIDATED CASH FLOW STATEMENT
RECONCILIATION OF PROFIT BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Group
----------------- --------------
27.2.21 29.2.20
GBP'000 GBP'000
--------------------------------------------- ----------------- --------------
Profit before tax and exceptional
items 456 9.116
Exceptional gains - 2.335
----------------- --------------
Profit before taxation 456 11,451
Interest received included
in financing activities - (13)
Interest paid included in financing
activities 2,006 3,006
Share issue 13 14
Depreciation charges 1,915 2,436
Share based payments charge 1,079 155
Impairment of goodwill 126 16
Amortisation of intangibles 2,811 3,136
Write off of Right-of-Use Assets 261 142
Loss on disposal of Tangible 92 -
Assets
Loss on disposal of Intangible 969 -
Assets
Decrease/(increase) in debtors 18,667 6,702
Increase/(decrease) in creditors 5,849 (1,466)
33,788 14,217
Taxation paid (1,190) (4,160)
----------------- --------------
Net cash inflow from operating
activities 33,054 21,418
================= ==============
Notes to consolidated financial statements
1. ACCOUNTING POLICIES
Basis of preparation
Basis of preparation
The preliminary announcement has been prepared in accordance with the Listing Rules of the FCA and is based on the consolidated financial statements for the period ended 27 February 2021 which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared on a going concern basis under the historical cost convention. In preparing the financial statements, the Directors are required to use certain critical accounting estimates and are required to exercise judgement in the application of the Group and Company's accounting policies.
Shopacheck Financial Services Limited qualifies for an exemption to audit under the requirements of Section 480 of the Companies Act 2006. Shelby Finance Limited and U Holdings Limited both qualify for an exemption to audit under the requirements of Section 479A of the Companies Act 2006. As such, no audit has been conducted for these companies in the current financial year. As such, no audit has been conducted for these companies in the period ending 27 February 2021.
The preliminary announcement has been prepared on a going concern basis consistent with the basis of preparation of the statutory financial statements for the period ended 27 February 2021.
The preliminary announcement does not constitute the statutory financial statements of the Group within the meaning of Section 434 of the Companies Act 2006.
The preliminary announcement has been agreed with the Company's auditor for release.
2. PROFIT BEFORE TAX
The operating profit is stated after charging:
52 weeks 53 weeks
ended ended
29.2.21 29.2.20
GBP'000 GBP'000
------------------------------------ -------------- --------------
Depreciation - owned assets 329 740
Amortisation of intangibles 2,811 3,135
Depreciation of right-use-asset 1,586 1,696
Impairment of financial
assets 20,794 36,358
Operating lease rentals - Motor
vehicles 205 339
Operating lease rentals - Property 443 710
-------------------------------------- -------------- --------------
Directors' and key management personnel remuneration
includes the following expenses:
52 weeks 53 weeks
ended ended
27.2.21 29.2.20
GBP'000 GBP'000
Short-term employee benefits 1,055 979
Post-employment benefits 32 25
Long-term benefits - 275
Share-based payments 248 134
1,335 1,413
================= =================
The number of directors to whom retirement benefits
were accruing was as follows:
Money purchase schemes 4 3
================= =================
Information regarding the highest
paid director is as follows:
52 weeks 53 weeks
ended ended
27.2.21 29.2.20
GBP'000 GBP'000
Emoluments 462 570
Pension contributions to money
purchase schemes 17 15
================= =================
3. TAXATION
Analysis of the tax charge
The tax charge on profit before
tax for the period was as follows:
52 weeks 53 weeks
ended ended
27.2.21 29.2.20
GBP'000 GBP'000
Current tax:
UK corporation tax 318 1,866
Adjustment in respect of prior
years 24 (3)
--------- ---------
Total current tax 342 1,863
Origination and temporary timing
differences (103) 124
Adjustment in respect of prior
years - 1
Effect of change of tax rates - (14)
Total deferred tax (103) 111
Tax on profit on ordinary activities 239 1,974
========= =========
The tax assessed for the period is lower than the standard rate of corporation tax in the UK.
The difference is explained
below:
52 weeks 53 weeks
ended Ended
27.2.21 29.2.20
GBP'000 GBP'000
Profit before exceptional costs 456 9,116
Exceptional gains - 2,335
Profit on ordinary activities
before tax 456 11,451
========= =========
Effects of:
Profit on ordinary activities
multiplied by the standard
rate of corporation tax
in the UK of 19% (2019 - 19%) 87 2,176
Effects of:
Expenses not deductible for
tax purposes 233 85
Release of deferred consideration - (290)
Adjustment in respect of prior
periods 24 13
Rate difference - deferred
tax (67) (13)
Movement in amounts not provided
in deferred tax 9 3
Tax losses surrendered by another (52) -
group company
Fixed asset differences 5 -
Tax on profit on ordinary activities 239 1,974
========= =========
The standard rate of corporation tax applicable for the period ended 27 February 2021 is 19% (2020: 19%).
4. DIVID PER SHARE
52 weeks 53 weeks
Ended ended
27.2.21 29.2.20
Dividend (GBP'000) 1,312 10,162
Weighted average number of shares
(000's) 131,383 130,531
Per share amount (pence) 1.00 7.78
================= ==================
Subject to shareholder approval at the General Meeting on 22 June 2021, the Board proposes to pay a final dividend of 2.0 pence per Ordinary Share payable on 30 July 2021 to all shareholders on the register at the close of business on 2 July 2021.
5. EARNINGS PER SHARE
52 weeks 53 weeks
ended ended
27.2.21 29.2.20
Earnings (GBP'000) 218 9,477
========= =========
Number of shares
Weighted average number of shares (000's) 131,383 130,531
Effect of dilutive potential ordinary shares
through share options ('000s) 200 843
Weighted average number of shares for the
purposes of diluted earnings per share ('000s) 131,583 131,374
========= =========
Basic earnings per share amount (pence) 0.17 7.26
========= =========
Diluted earnings per share amount (pence) 0.17 7.21
========= =========
Diluted earnings per share calculates 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 Plans. 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.
6. GOODWILL
Group
Goodwill
COST GBP'000
At 23 February 2019 3,834
Additions 2019/20 9,496
At 29 February 2020 13,330
Additions 2020/21 -
At 27 February 2021 13,330
---------------------
Impairment
At 23 February 2019 (333)
Impairment loss for the period (16)
---------------------
At 29 February 2020 (349)
Impairment loss for the period (127)
At 27 February 2021 (476)
---------------------
Net Book Value
At 27 February 2021 12,854
=====================
At 29 February 2020 12,981
=====================
At 23 February 2019 3,501
=====================
Key assumptions used in goodwill impairment review
The market share price of the Company at 27 February 2021 was GBP0.631, reflecting the market's view of the current and future value of the Group. This share price results in a market capitalisation value for the Company of GBP83.6m which is below the Company's net asset value of GBP91.5m and therefore, an indicator of possible impairment. As a result, we have assessed the recoverable amount of both the Company's goodwill and its investment in subsidiary. The recoverable amount has been calculated using the value in use method. Goodwill is tested for impairment annually or more frequently if there are indications that goodwill might be impaired. Determining whether goodwill is impaired requires an estimation of the discounted future cash flows of the Company using a discount rate of 13% (FY20: 13%) and an initial growth rate over the first three years of 47% (FY20: 22%) followed by a terminal value based on a minimum future growth rate of 2% (FY20: 2%).
The future cash flows take into account management's view of the impact from Covid-19 on future performance. The Group has conducted a sensitivity analysis on the goodwill impairment assessment and believes that there are no reasonably possible changes to the key assumptions in the next year which would result in the carrying value of goodwill exceeding the recoverable amount. The key assumptions used in the value in use calculation are the growth rates and the discount rates adopted. The growth rates are based on the most recent financial budgets approved by the Group Board for the next three years. The discount rates which reflect the time value of money and the risks specific to the financial services sector are sourced from an independent third party. No reasonably foreseeable reduction in the assumptions would give rise to an impairment and therefore no further sensitivity analysis has been presented. The same assumptions have been applied to the goodwill impairment review in both CGUs. The impairment loss for the period of GBP126,260 arose due to the CURO Transatlantic Limited loan book now being fully settled.
The carrying amount of goodwill has been allocated to cash-generating units as follows:
52 weeks 53 weeks
ended ended
27.2.21 29.2.20
GBP'000 GBP'000
HCC 3,293 3,293
Digital 9,561 9,688
12,854 12,981
================== =================
7. OTHER INTANGIBLE ASSETS
Software Customer Agent
Group & Licences Lists Networks Totals
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 23 February 2019 8,864 21,241 874 30,979
Additions 3,897 380 - 4,277
At 29 February 2020 12,761 21,621 874 35,256
Additions 5,282 - - 5,282
Disposals (3,085) - - (3,085)
At 27 February 2021 14,958 21,621 874 37,453
----------- --------- --------- ---------
Accumulated Amortisation
At 23 February 2019 4,226 19,724 808 24,758
Charge for the period 1,914 1,191 31 3,136
At 29 February 2020 6,140 20,915 839 27,894
Charge for the period 2,428 329 16 2,773
Eliminated on disposal (2,115) - - -(2,115)
Impairment losses - 38 - 38
At 27 February 2021 6,453 21,282 855 28,590
----------- --------- --------- ---------
Net Book Value
At 27 February 2021 8,505 339 19 8,863
=========== ========= ========= =========
At 29 February 2020 6,621 706 35 7,362
=========== ========= ========= =========
At 23 February 2019 4,638 1,517 66 6,221
=========== ========= ========= =========
Impairment losses relate to the Hays Customer List amounting to GBP38,133.
Research and development expenditure expensed during the year was GBPnil (2020: nil).
8. TRADE AND OTHER RECEIVABLES
Amounts receivable from Group
customers
------------------------------------
27.2.21 29.2.20
GBP'000 GBP'000
Amounts falling due within
one year:
Net receivable from advances
to customers 53,408 72,171
Amounts falling due after
one year:
Net receivable from advances
to customers 82 657
----------------- -----------------
Net loan book 53,490 72,828
Other debtors 2,880 1,718
Intercompany funding - -
Prepayments 3,434 3,039
----------------- -----------------
59,804 77,585
================= =================
Amounts receivable from customers
Group
------------------
27.2.21 29.2.20
GBP'000 GBP'000
Amounts receivable from
customers 53,490 72,828
-------- --------
Analysis by future date
due
- due within one year 53,408 72,171
- due in more than one
year 82 657
-------- --------
Amounts receivable from
customers 53,490 72,828
======== ========
Analysis by security
Other loans not secured 53,490 72,828
-------- --------
Amounts receivable from
customers 53,490 72,828
======== ========
Impairment provisions are recognised on inception of a loan based on the expected 12-month losses or the lifetime losses of the loan. Further details can be found on page 102 of the Annual Report and Accounts .
At 27 February 2021 the amounts receivable from customers are as follows:
Group
--------------------
27.2.21 29.2.20
GBP'000 GBP'000
Gross Carrying Amount 90,063 120,946
Impairment Provision (36,573) (48,118)
Net Amounts Receivable 53,490 72,828
========= =========
Amounts receivable from Group customers can be reconciled as follows:
2020/21
IFRS
9
Stage Stage Stage Total
Ref* 1 2 3
Group GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ----- ---------- -------------- ---------------- ----------
Gross carrying amount
At 29 February 2020 60,345 34,602 25,999 120,946
New financial assets
originated 1 129,004 4 - 129,008
Net transfers and changes -
in credit risk:
From Stage 1 to Stage
2 2 (30,617) 30,617 - -
From Stage 1 to Stage
3 2 (9,314) - 9,314 -
From Stage 2 to Stage
1 2 2,147 (2,147) - -
From Stage 2 to Stage
3 2 - (10,415) 10,415 -
From Stage 3 to Stage
1 2 90 - (90) -
From Stage 3 to Stage
2 2 - 2,755 (2,755) -
Write-offs 3 (9,310) (9,224) (15,581) (34,115)
Collections 4 (185,567) (34,351) (7,216) (227,134)
Revenue 5 90,973 8,730 531 100,234
Other movements 6 1,012 (6) 118 1,124
At 27 February 2021 48,763 20,565 20,735 90,063
----------------------------- ----- ---------- -------------- ---------------- ----------
Loan loss provision account
At 29 February 2020 9,110 16,887 22,121 48,118
----------------------------- ----- ---------- -------------- ---------------- ----------
Movements through income statement:
New financial assets
originated 7 18,834 2 - 18,836
Net transfers and changes
in credit risk:
From Stage 1 to Stage
2 2 (12,539) 14,166 - 1,627
From Stage 1 to Stage
3 2 (7,271) - 7,841 570
From Stage 2 to Stage
1 2 318 (351) - (33)
From Stage 2 to Stage
3 2 - (8,666) 8,666 -
From Stage 3 to Stage
1 2 25 - (28) (3)
From Stage 3 to Stage
2 2 - 1,758 (1,758) -
Remeasurements within
existing stage 3 10,181 (3,379) (3,295) 3,507
Prior Year Covid-19 Overlay
Reversal 8 (1,134) (461) (75) (1,670)
Total movements through income
statement 8,414 3,069 11,351 22,834
Other movements:
Write-offs 3 (9,310) (9,224) (15,581) (34,115)
Other movements: 6 - - (264) (264)
Loan loss provision account
at 27 February 2021 8,214 10,732 17,627 36,573
------------------------------------ ---------- -------------- ---------------- ----------
Reported amounts receivable
from customers at 27 February
2021 40,549 9,833 3,108 53,490
------------------------------------
Reported amounts receivable
from customers at 29 February
2020 51,235 17,715 3,878 72,827
------------------------------------ ---------- -------------- ---------------- ----------
*References above indicate what each line of the table
demonstrates:
(1) New loans issued in (5) Revenue per Stage
the year
(2) Staging movements of (6) Other Movements, including
new loans issued and existing acquisitions
debt brought forward
(3) Net write-offs per Stage (7) Impairment provision
associated with new loans
issued in the year
(4) Collections per Stage (8) Covid-19 overlay
A breakdown of the gross receivable by internal credit risk rating is shown below:
2020/21
Group Credit Risk Grade Stage 1 Stage 2 Stage 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -------- --------
Very Good 32,285 8,910 9,407 50,602
Good 14,330 9,833 8,628 32,791
Satisfactory 1,719 1,340 622 3,681
Lower Quality 431 481 2,077 2,989
Total 48,765 20,564 20,734 90,063
------------------------- -------- -------- -------- --------
Internal credit risk rating reflects the internal credit risk grade of customers at the year end. The table above illustrates the split of the gross carrying value at the year-end by the latest customer credit scores at the time of issue. Customers are re-scored if they decide to renew.
9. DEFERRED TAX
Group
27.2.21 29.2.20
GBP'000 GBP'000
-------- --------
Fixed asset temporary
differences (142) (165)
Other temporary differences 723 824
Deferred tax asset 581 659
======== ========
Group
GBP'000
--------
Balance as at 29 February 2020 659
Accelerated Capital Allowances
Deferred Tax charge in profit and loss account
for period - CY (9)
Deferred Tax charge in profit and loss account
for period - PY 99
Deferred Tax rate change 14
Short Term Timing Differences
Deferred Tax charge in profit and loss account
for period - CY (51)
Deferred Tax rate change 49
Intangibles
Deferred Tax charge in profit and loss account
for period - CY 29
Deferred Tax charge in profit and loss account
for period - PY (136)
Deferred Tax rate change (31)
Share based payments
Deferred Tax charge in profit and loss account
for period - CY 97
Deferred Tax rate change 6
Deferred Tax charged in the statement of
total recognised gains and losses (145)
Balance as at 27 February 2021 581
========
GBP'000
--------
Asset values for which deferred tax has not
been recognised in relation to the Tax Written
Down Value of intangible fixed assets which
is not available to deduct against profits
until the intangibles are realised. 508
Asset values for which deferred tax has not
been recognised in relation to tax losses
carried forward which are available to offset
against future taxable profits from the same
trade. 46
Total value of assets on which deferred tax
has not been recognised 554
========
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences where the directors believe it is probable that these assets will be recovered.
10. BANK AND OTHER BORROWINGS: AMOUNTS FALLING DUE AFTER ONE YEAR
Group
------------------
27.2.21 29.2.20
GBP'000 GBP'000
Bank loans 8,500 34,000
Unamortised arrangement fees (198) (162)
-------- --------
8,302 33,838
======== ========
In November 2018 the Company signed a GBP10,000,000 loan facility to bring its total revolving credit facilities to GBP50,000,000. In addition, the Company also signed a GBP15,000,000 mezzanine facility, of which GBP5,000,000 is comitted and GBP10,000,000 is uncommitted.
In April 2020 an extension of the funding arrangement from August 2020 to the end of November 2021 was signed with the incumbent lender consortium, and subsequently further extended to December 2021. The facility limit was reduced from GBP55m committed to GBP40m to better match the needs of the business post Covid-19. By reducing this unused headroom and repaying the GBP5m mezzanine layer, non-utilisation charges for any given level of borrowing will be reduced and therefore so too will the overall cost of funding.
In May 2021 we successfully reached agreement with a new two lender consortium, for a more cost efficient and slightly lower GBP35m facility, extended to December 2022. The new facility will continue funding our existing HCC products, but crucially, it will unlock funding for our Dot Dot loan products and help the business achieve its immediate strategic objectives.
11. PROVISIONS
Customer
Group Complaints Other Total
GBP'000 GBP'000 GBP'000
At 29 February 2020 - - -
Additional provisions in
the year 2,012 - 2,012
At 27 February 2021 2,012 - 2,012
=========== ======== ========
Group
Analysed as: 27.2.21 29.2.20
Current liabilities 2,012 -
Non-current liabilities - -
2,012 -
======== ========
Complaints provision
The complaints provision represents management's best estimate of the group's liability with regard to outstanding customer complaints that remained unresolved as at the balance sheet date. In estimating the provision, management have incorporated historical company information for the average percentage of complaints which are upheld, and the average value of compensation claims paid out. The provision represents the present value of management's best estimate of the future outflow of cash required to settle the complaints and FOS fees in full.
12. CONTINGENT LIABILITIES
The non-standard lending sector has continued to experience the impact of CMC's and high-profile publicity campaigners promoting the potential for customers to claim redress from their lenders. As a result, the number of complaints with regard to irresponsible lending and referrals to FOS has risen significantly across the sector. Although proportionately lower than other lenders in the home collect credit sector, the Group has experienced an increase in complaints and FOS referrals during the period. The Group has recognised a provision for the cost of fully settling complaints and FOS fees in relation to outstanding complaints at the balance sheet date. However, should the final outcome of these complaints differ materially to management's best estimates, the cost could be higher than expected. It is however not possible to estimate this increase reliably.
13. POST BALANCE SHEET EVENTS
In May 2021, the Group agreed a new loan facility with a consortium of two lenders, which secured funding for our HCC and digital products through to December 2022. This was at a reduced commitment level of GBP35m, all in the Revolving Credit Facility (RCF), compared to the GBP40m funding commitment previously in place until December 2021.
14. ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures
This Annual 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 Ratio None The cost/income ratio is cost of sales
or Operating Cost and administration expenses, excluding
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 (GBPm) None Credit issued is the principal value of
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.
------------------------ ------------- ---------------------------------------------------
Gross Profit before Gross Profit Gross Profit per the Income statement adjusted
Covid-19 adjustment for the Covid-19 overlay.
This is used to provide a measure of gross
profit before the impact of
Covid-19.
------------------------ ------------- ---------------------------------------------------
Statutory Profit Profit Profit Before Tax per the Income statement
Before Tax Before adjusted for the Covid-19
before Covid-19 Tax overlay. This is used to provide a measure
adjustment of business performance
before the impact of Covid-19.
------------------------ ------------- ---------------------------------------------------
Normalised Adjusted Profit Profit Before Tax per the Income statement
Profit Before adjusted for the Covid-19
Before Tax (GBPm) Tax impairment, exceptional items, non-recurring
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 (GBPm) Before adjusted for exceptional
Tax items, non-recurring 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
HCC) Tax items, non-recurring costs and amortisation
of goodwill and acquisition
intangibles, Territory Build subsidies
and losses of Digital CGU.
------------------------ ------------- ---------------------------------------------------
Normalised Earnings Earnings Normalised Adjusted Profit After Tax divided
Per Per Share by the weighted average
Share number of shares. This gives a better reflection
of underlying earnings
generated for shareholders.
------------------------ ------------- ---------------------------------------------------
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.
------------------------ ------------- ---------------------------------------------------
Reconciliation of Statutory profit before tax to Normalised and Adjusted profit before tax and explanation of Normalised and Adjusted EPS
FY21 FY20
GBP'm (unless otherwise
stated) HCC Digital Total HCC Digital Total
Statutory Profit Before
Tax 11.8 (11.3) 0.5 21.2 (9.7) 11.5
Covid-19 adjustment to impairment - - - 1.7 - 1.7
----------------------------------- ------ -------- ------ ------ -------- ------
Statutory Profit Before
Tax before Covid-19 adjustment 11.8 (11.3) 0.5 22.9 (9.7) 13.2
Acquisition, restructuring
and non-recurring costs 2.9 2.4 5.3 0.9 2.6 3.5
Exceptional (gain)(2) - - - - (2.3) (2.3)
Amortisation of acquisition
intangibles(3) 0.3 - 0.3 0.8 0.4 1.2
Normalised Adjusted Profit
Before Tax(1) 15.0 (8.9) 6.1 24.5 (9.0) 15.5
Covid-19 adjustment to impairment - - - (1.7) - (1.7)
----------------------------------- ------ -------- ------ ------ -------- ------
Adjusted Profit Before Tax(1) 15.0 (8.9) 6.1 22.8 (9.0) 13.8
Tax on Adjusted Profit Before
Tax (0.8) (0.2) (1.0) (2.4) (0.4) (2.8)
----------------------------------- ------ -------- ------ ------ -------- ------
Adjusted Profit After Tax 14.2 (9.1) 5.1 20.4 (9.4) 11.0
Statutory EPS(1) 0.2p 7.3p
Normalised EPS(1) 3.9p 9.5p
Adjusted EPS(1) 3.9p 8.4p
----------------------------------- ------ -------- ------ ------ -------- ------
Statutory Return on Assets(1) 22.0% 0.3% 27.5% 12.8%
Normalised Return on Assets(1) 27.2% 8.9% 31.1% 16.6%
Adjusted Return on Assets(1) 27.2% 8.9% 29.3% 14.8%
Statutory Return on Equity(1) 18.5% 0.4% 30.1% 17.2%
Normalised Return on Equity(1) 22.8% 10.3% 34.1% 22.3%
Adjusted Return on Equity(1) 22.8% 10.3% 32.1% 19.9%
----------------------------------- ------ -------- ------ ------ -------- ------
52 weeks 53 weeks
ended 27.2.21 ended 29.2.20
GBP'000 GBP'000
--------------- ---------------
Adjusted basic earnings per share
Basic earnings 217 9,477
Amortisation of acquisition intangibles 345 1,222
Non-recurring (income)/costs 5,339 1,153
Tax effect of the above (799) (863)
Adjusted earnings 5,102 10,989
=============== ===============
Weighted average number of shares for the
purposes of 131,383 130,531
=============== ===============
basic earnings per share ('000s)
=============== ===============
Normalised Adjusted earnings per share amount
(pence) 3.9p 9.5p
=============== ===============
Adjusted earnings per share amount (pence) 3.9p 8.4p
=============== ===============
1 Definitions are set out in the Glossary of Alternative Performance Measures on Pages 138 to 141 of the Annual Report and Accounts
2 Release of contingent consideration in relation to the U Holdings Limited acquisition
3 Amortisation of acquired customer lists and agent networks
Closest
Statutory
APM Measure Definition and Purpose
----------------------- ----------- ----------------------------------------------------
Balance sheet
and returns measures
----------------------- ----------- ----------------------------------------------------
Tangible Equity Equity Net Assets less intangible assets less
(GBPm) acquisition intangibles.
----------------------- ----------- ----------------------------------------------------
Normalised Return None Calculated as normalised adjusted profit
on after tax divided by rolling 12-month average
Equity (%) 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 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.
----------------------- ----------- ----------------------------------------------------
Normalised Return None Calculated as normalised adjusted profit
on after tax divided by 12-month average Net
Assets (%) 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.
----------------------- ----------- ----------------------------------------------------
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-month
Ratio (%) average receivables. This calculation has
been adjusted to an IFRS 9 basis.
----------------------- ----------- ----------------------------------------------------
Adjusted Return on Assets and Adjusted 52 weeks ended 53 weeks
Return on Equity 27.2.21 ended 29.2.20
GBP'm FY21 FY20
---------------------------------------- --------------- ---------------
Normalised Adjusted Profit After Tax
(Rolling 12 months) 5.1 12.3
Adjusted Profit After Tax (Rolling 12
months) 5.1 11.0
12-month average Net Loan Book 57.5 74.3
Normalised Adjusted Return on Assets 8.87% 16.61%
Adjusted Return on Assets 8.87% 14.79%
12-month average Equity 48.1 55.3
Normalised Adjusted Return on Equity 10.29% 22.32%
----------------------------------------- --------------- ---------------
Adjusted Return on Equity 10.29% 19.87%
----------------------------------------- --------------- ---------------
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.
----------------------- ------------ ----------------------------------------------
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.
----------------------- ------------ ----------------------------------------------
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