Morses Club on acquisition path with Hays deal
Lender makes second buy of the year
DOORSTEP LENDER Morses Club has completed its second acquisition of 2019 with the takeover of Hays Credit, a home collected credit lender based in the North East.
Batley-based Morses Club said Hays is a family-run business which has been operating since 1957, providing loans to 2,700 customers across the North East of England.
The deal follows the acquisition of North West-based home credit lender Eccles Savings & Loans two weeks ago.
Morses Club, which is the UK’s second largest home collected credit lender after Bradfordbased Provident Financial, said Hays has outstanding balances of £1.6m. Paul Smith, chief executive of Morses Club, said: “I am delighted to announce this acquisition and welcome Hays’ customers to Morses Club.
“Hays is a high-quality business and further expands our offering for clients in the North East.
“Home collected credit is the fundamental core of our business and our recent acquisitions demonstrate our commitment to both continuing to grow our home collected credit capabilities, as well as diversifying our broader online product offering.”
Morses Club said the deal will complement the recent acquisition of Eccles Savings & Loans, a North West-based home collected credit business with 3,000 customers.
Hays is regulated by the Financial Conduct Authority and is a member of the Consumer Credit Association.
Analyst Gary Greenwood, at Shore Capital, said: “These acquisitions are consistent with the group’s strategy of acquiring small home credit businesses as and when their owners decide to exit the market, often due to retirement or due to the increasing regulatory burden facing the industry.
“No details have been provided
of the price paid, but we expect both acquisitions to have a minor positive impact to earnings in the year to February 2020. Given their immaterial nature, we leave our forecasts unchanged for now, thus leaving upside risk.
“We reiterate our ‘buy’ stance on Morses Club with a fair value of 170p, but continue to see even better value in its faster growing and more diversified peer, NonStandard Finance.“
Analyst Nik Lysiuk, at FinnCap, added: “We keep numbers unchanged at present but suggest a net increase in the region of £200,000 to pre-tax profits when we revisit estimates at full year 2019.”
Morses Club has said it expects to benefit from consolidation as regulatory changes force smaller players out of the market.
Mr Smith said smaller players could be forced out because many of them still use paper to do business rather than digitally.
“Smaller players are still very paper-centric, which is prone to mistakes and omissions,” he said.
“The FCA has a mantra – if you can’t prove something happened, it didn’t happen.”
Morses Club reported a 6 per cent rise in revenue to £57.5m in the six months to August 25.
The company said it is reaping the success of previous territory builds.
In addition to consolidation as smaller players are forced out of the market, the group expects to broaden its customer base as it offers customers a greater choice of products to suit their needs going forward.
Mr Smith said: “Whilst the traditional home collected credit product remains at our core, we continue to recognise the needs of our customers are evolving, and we are making good progress in developing our digital offering.”
Morses Club is looking at longer term, higher value loans for a different demographic.
“These are people with a salaried income, earning £35,000 a year and they own their own homes,” said Mr Smith.
“They have some form of impairment on their credit.”
The group will also launch a full service account which will give customers a debit card. The account will be launched between March and July under a new brand name.
On a like for like, pro forma basis, revenue rose 12 per cent in the six months to August 25. The group said customer numbers remained stable at 230,000, down from 233,000 in the same period in 2017. The firm said 27,000 live Morses Club Cards were issued, with loan balances of over £13.1m.