Morses Club plc (LON:MCL) Chief Executive Officer Paul Smith caught up with DirectorsTalk for an exclusive interview to discuss their latest trading update, changes implemented during COVID-19, digitalisation and how he sees the rest of the year for the company.
Q1: A trading update just out, Paul, how has Morses Club performed since lockdown in March?
A1: It’s been a very pleasing performance, the whole company adapted to the homeworking set of circumstances extremely well. One, I think, of the major reasons for that is because we’d spent the last four to five years investing properly in the digital platform upon which the business was based and that gave us a more fleet of foot ability than most of our competitors to switch over to a new way of working very quickly.
So, all of the key performance indicators of customer satisfaction, of profitable lending year to date of good, strong, solid collections in both home collect credit and our digital businesses and the ability to very quickly move back into adopting new customers. In our digital business, this is something that we never stopped, we carried on lending to brand new customers, ever since locked down. All of those things were within our gift to embrace almost immediately following the government’s announcements.
Q2: So, I imagine that you’ve had to change your way in which you operate, what changes have you had to implement?
A2: Some of the things that we had to do, clearly, agents couldn’t go out and visit customers right from the word go which meant that we very quickly had to convert customers into using our online portal and the total number of customers using that now is 109,000. At the end of the financial year, which is the end of February 2020, there was 78,000 people using that portal.
We were able to collect repayments via the portal, we were able to direct our customers to pay point stores to manage collections through that channel and then as soon as the government permitted, we were able to go out and lend to existing customers.
The quality of that existing customer lending has been extraordinarily strong because the vast majority, something in a region of 19% of those customers are sitting in our very top performing repayment bands, what we call Bands A, B & C, people that we would happily relend to again in the future.
So we focussed very quickly on our collections to make sure that that cash was still flowing into the business, we leveraged our technology to do that, as I’ve said via the customer portal and via pay point and then as soon as it was permissible by the UK government, our agents were given the option, and the vast majority of them took the option up, to start visiting their customers again.
Those customers that really only could because of technological capability or just out of personal choice, repay using cash and that’s strengthened our cash receipts performance and also customers that wanted to borrow in cash and that has boosted our performance in terms of relending.
There was a very strong uptake, a very strong coming together between our agents, our customers and another good example of the symbiotic relationship that exists between those two groups.
We’ve had some structural challenges in the business, obviously, including staff working from home, but also we’ve reviewed our property portfolio and we’ve looked at new and innovative ways of embracing call centre technology, which is something that we were said we would do before COVID really hoved into view. We’d spotted problems with our dialler system and we were in pursuit of mending those & importing a new dialler system into the mix.
That’s really allowed tremendous efficiencies in both home collect credit and digital and has led to a performance in home collect credits where we think, that coming into the end of August 2020, we should be back to pre-COVID collection kind of numbers. In our digital business, we’re exceeding our COVID plan by 20% so we’re operating at 120% of planned plan collections.
So, all of those changes have really impacted both sides of our business in a tremendously positive way and with no impact on customer satisfaction. We’ve continued to talk to customers all the way to this process, we’re still scoring 97% in terms of customer satisfaction with us as an organisation and when we asked the customers how satisfied they are with the agent force, they’re scoring 99% satisfaction with them, which bearing in mind the backdrop that we have here, is a tremendous performance.
Q3: It sounds like you’ve had a really busy period and it’s actually paying off, has this period accelerated company shift towards digitalisation?
A3: Undoubtedly. The digital offering within home collect credit has helped us to lift and shift a lot of that technology and a lot of the security behind it and a lot of the engagement routines over into home collect much sooner than we had envisaged.
We’ve been delighted with our customers reception of that, as I’ve said 109,000 customers now actively using the portal, which is very much more than 50% of our whole customer base now, given that we’ve shrunk our customer base down in home collecting credit to 184,000 customers which is a 16% reduction from the last year end. That’s only to be expected really because you’re not doing any new customer lending, initially, although we are now of course, we’ve only just started to reengage on that level.
What that means is that you’re collecting out customers on certain customers are going into impaired status and default status through no fault of their own, being impacted by the COVID problem, and therefore there’s bound to be a shrinkage but that acceleration from 78,000 customers on the portal to 109,000 in a very short space of time is testament to how intuitive that system is and how easy to understand.
We’ve continued with our restructuring of Shelby and the diversification strategy that we exposed all the way back to our original IPO in May 2016 and the results there I’m extraordinarily pleased with. Sales are pretty much bang on, with where we budgeted in our COVID plan and, as I’ve already mentioned, our collections are 120% of plan so the quality of that lending is undeniably strong as it is in our home collect credit business.
Q4: Paul, how do you see the rest of the year for Morses Club?
A4: I’m very pleased with where we’ve got to right now and, as our statements says, we’ve been profitably trading year to date and we’ve accepted no government funding, we haven’t furloughed anybody and obviously we will continue along that path.
What I’m expecting is that home collect credit now that we’re lending to new customers and we’ve restarted our marketing engine, will continue to grow, and prosper and bring on new customers. I think that there will be an influx of customers that used to just about qualify for prime lending potentially coming into our market which will swell our available market in home collected credit. I think that we need to still have a careful approach to that and make sure that it’s prudent lending and that it is compliant lending and commercially sensible, which of course we’re doing.
In the digital business, we’ve employed that that methodology all the way through that business’s development and we’ve made some technological tweaks which, as the statistics I’ve already quoted testify to, have had a major positive impact.
So, I think both home collect credit will now grow and prosper and start to journey back towards its pre-COVID and in digital, I think that that will go from strength to strength and its development will be very much more accelerated than had been previously climbed. That is because of that social demographic shift that has been imposed upon society since COVID struck, people are now much more comfortable with arm’s length transacting and having more digital interplay with providers and that they take that as the new norm.
Soo the way in which we’re developing that business for banking and for unsecured credit, I think fits right in with people’s new view of how commerce is transacted in the new world.