Morses Club : Interim Results 2021

7 October 2021

Morses Club PLC

Interim results for the 26 weeks ended 28 August 2021

Steady growth and continued business transformation

Morses Club PLC ("the Company" or "the Group"), an established provider of non-standard financial services, is pleased to announce its interim results for the 26 weeks ended 28 August 2021.

Operational Highlights:

• 100% growth in lending customer numbers in Digital division since the year end
• Quality of lending in Digital division remains high alongside growth in customer numbers
• Continued adaptation to a structurally changing HCC sector driven by customer demand
• Digital HCC offering remains popular - 65% of all lending and 86% of payments now cashless
• Over 75% of HCC customers are registered for the customer portal
• Customer satisfaction in HCC maintained at 98%
• Total Group customer numbers: 196,000 (H1 FY21: 205,000)
• Continued progress in the plan to restructure the Group

Financial Highlights:

• Revenue increased by 4.4% to £52.4m (H1 FY21: £50.2m)
• Total credit issued to all customers increased by 29.2% to £77.8m (H1 FY21: £60.2m)
• Total credit issued to HCC customers 3.9% higher at £53.1m (H1 FY21: £51.1m)
• Total credit issued to Digital customers 172.5% higher at £24.8m (H1 FY21: £9.1m)
• Net loan book of £60.3m, increase of 8.5% (H1 FY21: £55.6m)
• Statutory profit before tax of £1.8m (H1 FY21: £0.8m)
• Adjusted profit before tax1 of £2.6m (H1 FY21: £2.3m)
• Statutory HCC profit before tax of £6.5m, an increase of 16.1% (H1 FY21: £5.6m)
• Adjusted HCC profit before tax1 of £7.3m, an increase of 7.4% (H1 FY21: £6.8m)
• Statutory loss before tax in Digital division (£4.7m) (H1 FY21: (£4.8m))
• Adjusted loss before tax1 in Digital division of (£4.7m) (H1 FY21: (£4.5m)) with profits held back by additional IFRS9 provisioning as a result of 188% increase in loan book
• Impairment as a percentage of revenue1 for the period 31.5% (H1 FY21: 23.5%) as a result of IFRS9 costs on a growing loan book in H1 FY22 in comparison to a declining loan book in H1 FY21
• Statutory return on assets of 2.0% (H1 FY21: 7.0%)
• Adjusted return on assets1 of 9.3% (H1 FY21: 9.9%)
• Statutory EPS of 1.1p (H1 FY21: 0.5p)
• Adjusted EPS1 of 1.6p (H1 FY21: 1.3p)
• Proposed interim dividend of 1.0p per share (H1 FY21: 1.0p)

1. Definitions are set out in the Glossary of Alternative Performance Measures on page 37

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Alternative Performance Measures & Key Performance Indicators

1. Definitions are set out in the Glossary of Alternative Performance Measures on page 37

Paul Smith, Chief Executive Officer of Morses Club, commented:

"Our resilience as a business underpins continued growth in our digital division which has experienced a 172.5% increase in credit issued and a significant increase in customer numbers in the period. The HCC division has performed well, despite the challenges brought about by the pandemic, and this has given us a strong foundation to address market demand, particularly in our lending products. We continue to maintain our position as one of the market leaders for customers who face financial challenges in accessing lending products. Our levels of customer satisfaction, allied with the engagement levels from our teams, are testament to our strategy of putting customers at the very heart of our day-to-day operations."

Sell-side Analyst Presentation

The Company will be holding a virtual sell-side analyst presentation at 9:30am on Thursday 7th October. Please contact morses@camarco.co.ukif you would like to attend.

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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.

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 largest home collected credit ("HCC") provider1, 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 increasingly 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' homes. Repayments are collected in person during weekly follow-up visits to customers' homes.

Morses Club's HCC division is the largest UK Home Collected Credit (HCC) lender1 with 144,000 customers throughout the UK. 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 108,000 registered customers.

The Group's growing Digital division, Shelby Finance, operates under two online brands. Dot Dot Loans provides online instalment loans of up to 48 months to c. 47,000 active customers. U Account is a

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leading digital current account provider offering an alternative to traditional banking by providing a fully functional agency banking service. U Account currently has c. 5,000 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 consumers3 and total loan receivables of £9.6bn4.

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. Approximately 2 million people move annually between standard and non-standard markets4.

Since February 2014, unsecured personal lending has grown from £161 billion to £225 billion in February 2020. It has since contracted to £197 billion in August 20215.

1 Based on Net Loan Book of £45.3m as at 28 August 2021

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 - December 2020 5 Table A5.2, Bank of England Money and Credit Bank stats August 2021

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Chief Executive Officer's Statement

Overview

The first half of FY22 has been a period of steady and sustained growth which has accompanied innovation across a number of our products. The Group continues to build on the accelerated move towards digital lending that resulted from addressing the challenges presented by the Covid-19 pandemic.

We are particularly pleased by the uptake of our lending products in the Digital division during the period. Customer numbers in the Digital division for both short-term and long-term lending have increased 100% since the end of the last financial year following a period of business transformation, including developments to our technology platform. Processes around our digital loan products are now well established and the roll out of our new products and loan management platform, along with increased marketing and strong broker relationships, mean that Digital customers stood at over 52,000 at the end of the period for both lending and e-money current accounts. In addition to growth, we have maintained a focus on high quality lending in the Digital division and as a result, collections have continued to perform well.

Despite a lifting of Government restrictions, many of our HCC customers have displayed a preference for our cashless lending and remote collections model and our customer portal had over 108,000 customers as at 28 August 2021. Whilst we have recommenced face-to-face lending and collection activity in customer homes, remote lending now represents 65% of HCC loans issued in the first half of the financial year as an increasing number of customers are choosing to utilise Morses Club's remote lending product.

Total credit issued across all products increased by 29.3% to £77.8m (H1 FY21: £60.2m) and revenue

increased by 4.4% to £52.4m (H1 FY21: £50.2m).

The Group has implemented a flexible working policy among employees and employee support for continued home working remains very high. We place great emphasis on delivering exceptional service and I am delighted that customer satisfaction in our HCC division remains at the increased level of 98% for the period.

Digital

The Digital division made good progress in the first half as customer numbers for both short-term and long-term lending rose to 47,000 at the end of the period, an increase of 100% since the end of FY21.

Increased marketing spend and a new loan management platform have driven growth in the Digital division. Furthermore, our relationship with brokers and lead generators has enabled the division to increase customer numbers significantly. We expect customer numbers to continue to increase at a steady rate in H2 FY22, albeit at a lower rate than in H1 FY22.

Credit issued has increased by 173%, from £9.1m (H1 FY21) to £24.8m (H1 FY22). The net loan book was £15.0m as at 28 August 2021, an increase of 188% against the H1 FY21.

The quality of lending in the Digital division remains high, with collection to terms being 11.9% higher than H1 FY21. The product mix in Dot Dot Loans continues to move towards longer-term products of 6-months or more. Longer-term loans of 18 to 48 months have seen significantly increased demand.

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