Mighty Craft Limited Annual Report 2021

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FY2021 Annual Report · Mighty Craft Limited

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A transformative year
Annual Report & Accounts
2021

Introduction

Morses Club PLC
is an established,
relationship-driven
consumer finance
provider.

Our purpose

Our vision

Helping to improve the financial
lives of underserved and
excluded individuals.

To build the market-leading
non-standard credit company
in the UK – with the customer
at the heart of our business.

Contents

Strategic Report
1
2
4
6
8
10
12
16
18
20
22
26
27
32
36
38

Highlights
Company Overview
Response to Covid-19
Market Overview
Investment Case
Chairman’s Statement
Chief Executive Officer’s Review
Our Business Model
Our Strategy
Our Strategy in Action
Financial Review
Risk Management
Principal Risks and Uncertainties
Engaging with our Stakeholders
Operating Responsibly
Satisfied Stakeholders

Corporate Governance
41
44
46
54
58
64
67
74
75
80

Board of Directors
Chairman’s Introduction to Governance
Corporate Governance Report
Nominations & Succession Committee
Audit Committee
Risk & Compliance Committee
Directors’ Remuneration Report
Disclosure Committee
Directors’ Report
Directors’ Responsibilities

Financial Statements
82
93
94
95
96
97
99
142

Independent Auditor’s Report
Consolidated Income Statement
Balance Sheet
Consolidated Statements of Changes in Equity
Cash Flow Statements
Notes to the Consolidated Cash Flow Statements
Notes to the Consolidated Financial Statements
Morses Club PLC Information for Shareholders

Strategic Report

Highlights

Strategic Report

Corporate Governance

Financial Statements

Adjusted Profit1 (Before Tax)

Adjusted Earnings Per Share (p)

Operational highlights

22.0

13.6

15.5

13.8

9.5

8.4

6.1

3.9

2019

2020 N

2020 A

2021

2019

2020 N

2020 A

2021

£6.1m
-55.8%

3.9p
-53.6%

Adjusted Return1 On Equity (%)

Adjusted Return1 On Assets (%)

29.6

25.4

22.3

19.9

16.6

14.8

10.3

8.9

2019

2020 N

2020 A

2021

2019

2020 N

2020 A

2021

10.3%
-48.2%

8.9%
-39.9%

Reported Profit (Before Tax)

Basic Earnings Per Share (p)

20.2

12.5

11.5

7.3

2019

2020

0.5
2021

2019

2020

0.2
2021

£0.5m
-95.7%

0.2p
-97.3%

Return on Equity (%)

Return on Assets (%)

27.2

23.4

17.2

12.8

2019

2020

0.4
2021

2019

2020

0.3
2021

0.4%
-97.7%

0.3%
-97.7%

Definitions and reconciliations to the nearest statutory measure are set out in the Glossary
of Alternative Performance Measures on Pages 138 to 141

• Due to Covid-19, we had to

reconfigure our operating model
and existing technology to work
remotely, allowing us to maintain
customer contact and collection
activity whilst generating new
lending

• Development of fully online

Customer Portal, with over 107,000
customers (FY20: 78,000)

•

19,000 Morses Club Card
customers, with £10.3m in loan
balances (FY20: 30,000 customers,
£15.5m loan balances)

• Commenced 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 further technology

enhancements in our HCC business
to provide a digital service to
customers enabling a virtually
paperless documentation process

• Moved our e-money current

account services onto Modulr, and
transferred all our digital credit
products onto a new operating
platform with Equiniti

Alternative performance measures
In reporting financial information, the Group
presents alternative performance measures,
‘APMs’ which are not defined or specified under
the requirements of IFRS. The Group believes
that these APMs, which are not considered to be
asubstitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on
the performance of the business. The APMs are
consistent with how the business performance is
planned and reported within the internal
management reporting to the Board. Some of these
measures are also used for the purpose of setting
remuneration targets. The definition of Adjusted PBT
is outlined in the glossary of APMs on Page 138.
For FY20 an additional measure of Normalised
Adjusted PBT had been adopted to remove the
impact of Covid-19 from the adjusted PBT figure. This
was to illustrate the underlying performance prior to
Covid-19 adjustments, since the pandemic itself did
not have a material impact on the FY20 trading.
Each of the APMs used is set out in the glossary at
the back of the statement on Pages 138 to 141.
Reconciliations are also provided on Page 139 to the
nearest statutory measure. The Group makes certain
adjustments to the statutory measures in order to
derive APMs where relevant. The Group’s policy is to
exclude items that are considered to be significant in
both nature and/or quantum and where treatment
as an adjusted item provides stakeholders with
additional useful information to assess the
year-on-year trading performance of the Group.

Company Overview

Complementary divisions offering a range of credit
and digital e-money current account products.

The Morses Club brand
has a history dating back
130 years, with the current
PLC Group having been
established in May 2016.

We have two divisions offering
distinct forms of non-standard
finance, home collected credit
and digital financial services.
Within our two divisions we
have three brands, which
provide flexible, affordable
and convenient access to
credit for over 180,000
(FY20 255,000) customers
in the UK.

HCC

Operating under the Morses Club
brand, we provide small, short-term
loans to customers who need
affordable credit and are often
unable to access traditional
mainstream lending.

Our model is based on a loan issue
and collection process via agents that
typically live in the same communities
as our customers. Due to Covid-19, we
have adapted our operating model to
work remotely using our existing
technology platform to maintain
customer contact and collection
activity and a new remote lending
process to deliver cashless lending
to new and existing customers.

Customers value the simple, fixed
payment weekly collections model
and the fact that no charges are
levied for arrangement or if payments
are missed.

We ensure that customers are
supported through any short-term
difficulties. HCC products always
consider an element of forbearance
and this was temporarily extended
during the pandemic in line with
government guidelines.

The majority of our borrowers are
repeat customers, and customer
satisfaction rates are consistently
at 97% or above.

We are the second largest UK
Home Collected Credit lender, and
serve customers throughout the UK
through our network of 1,385 (FY20
1,695) self-employed agents.

98%

HCC CUSTOMER
SATISFACTION1

151,000

HCC CUSTOMERS

Independently measured via Mustard research

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Digital

We operate under two digital brands.

U Account is an e-money
current account provider

U Account offers customers online
current account services, based on
two pricing models: pay as you
go or a monthly fee, which includes
a set level of inclusive transactions.
U Account is designed for customers
who may not have access to
mainstream banking or want a
secondary account.

Dot Dot offers online
instalment loans of up
to 48 months

Dot Dot is a fully online lending
provider, which was launched in
March 2017. The product offering
aims to serve the needs of two
segments of the lending market:
short-term 3-6 and 9-month
duration loans serving customers
who want to borrow £100-£1,000,
and loans of £1,500-£5,000 for
those customers who want to borrow
more over a longer term of up to
48 months, with the upper limit for
the latter increased from £4,000 due
to customer demand.

23,000

ONLINE LENDING
CUSTOMERS

6,000

E-MONEY CURRENT
ACCOUNT CUSTOMERS

29,000

CUSTOMERS

Customers are supported through any short-term difficulties. Digital products
always consider an element of forbearance and this was temporarily extended
during the pandemic in line with government guidelines.

Read more on page 16

The
opportunity
for Morses
Club

Market trends support Morses
Club’s strategy

Read more on page 16

Strategic Report

Corporate Governance

Financial Statements

Fig 1 – Key

Fig 2 – Key

Unemployed
Underemployed*

Logbook
Rent-to-own
Pawnbroking
Guarantor
Motor finance
Instalment
HCSTC
Home credit

Fig 1 – Unemployment
and underemployment* (m)

The effects of the pandemic are also
likely to push more prime borrowers
into the non-standard market, with
around 2m people currently moving
between standard and non-standard
markets due to credit scores2.

Unemployment has risen during the
year, and large numbers of adults are
also working part-time while looking
for full-time employment, or are on
zero-hour contracts. A proportion of
the working age population – whether
or not in work – are also reliant on
benefits, which have been reduced

as a result of government austerity
policies since 2010. Insecure work
and the resultant low or fluctuating
income are driving the demand for
non-prime lending.

2 million

MOVE BETWEEN STANDARD/
NON-STANDARD

5
7
3

9
0
2

6
6
.
1

7
0
0
2

8
1
.
5

8
7
2

5
1
.
4

7
3
2

0
4
2

5
1
.
4

9
7
.
1

5
7
3

8
0
0
2

9
0
2

7
3
2

9
0
0
2

The community of small, family-
owned HCC businesses has been
badly hit, with a reduction of
companies in the sector from 400 to
262 during the year. Our customer
engagement has shown us that there
is strong appetite for our blend of
face-to-face and digital service from
our HCC customers.

This trend of digitalising HCC services
is expected to remain post-pandemic
and continue to grow. Our size within
the HCC sector and response to

Covid-19, gives us better economies
of scale to address this market.

The long-term trends within the
digital business centre on the
emergence of digital challenger banks
and the growing number of customers
leaving the High Street for new
alternatives.

262

HCC PROVIDERS

We see strong demand for our new
and established products and
services as we come out of lockdown.
Our more integrated ‘whole of
customer’ approach to offer selected
products and services based on each
customer’s needs, will create
opportunities from both existing and
new customers.

There is expected to be a pent-up
demand for lending in the second half
of 2021 and there are now far fewer
competitors challenging us for that
custom. We are strongly positioned to

benefit from this reduced competition
within the HCC industry, and to
benefit from increasing demand
in digital.

We see opportunities to attract new
customers as they move away from
the mainstream because we are
distinguished from the majority of
online disruptors through our focus
on the non-prime sector and on the
provision of credit.

10m

MARKET POTENTIAL

Sources
1. LEK UK Specialist lending market trends and outlook 2018
2. Company accounts, Apex insights analysis, FCA market statistics

1
8
3

3
4
2

8
3
1
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3

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Fig 2 – Historical and forecast new lending
by segment excluding credit cards (m)

7,835

6,450

300
300
500

6,450

750

300
300
500

750

1,300

750

1,300

347
300
666
7,835

347
1,141
300
666

1,217
1,141

1,217
1,615

1,615

2,500

4,979

370
300
320
680

620

903

4,979

370
300
320
680

620

903

1,736

2016

2018

2016

2018

2021

Sources
Fig 1

ONS, OBR (Note: underemployed defined as workers
who are employed but wish to work more hours)

Fig 2 Apex insight analysis

Investment Case

Our progress in 2021 has
brought us closer to our vision
of becoming a more complete
financial services provider.

Established
market position

#2 Home Collected Credit company in
the UK, and gaining share

180,000 customers across the UK

High levels of customer satisfaction
and repeat business

Read more on page 16

Sound risk
management

Prudent credit risk policy: stringent
criteria applied to every customer,
every loan

Robust balance sheet and
funding model

Read more on page 16

Well positioned
for growth

Roadmap of organic
growth initiatives

Well placed for consolidation
in a fragmented market

Untapped market potential
of c.10m people

Read more on page 16

Proven financial
performance

Despite a 37.0% reduction in Credit
Issued and a 26.5% reduction in the
loan book due to lower demand
during Covid-19, the Group was both
profitable and cash-generative
despite the headwinds that have
affected the sector and
wider economy.

Strong executive
team

Graeme Campbell appointed as Chief
Financial Officer on 1 January 2021

An experienced and stable Executive
team and Board, with relevant sector
knowledge and complementary
capabilities

Final dividend of 2.0p per share

Read more on page 16

Diversify into
complementary
products

Read more on page 16

Continue to work
responsibly and
ethically and in the
interests of our
customers’ needs

Read more on page 39

98%

CUSTOMER
SATISFACTION

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

23,000

ONLINE LENDING
CUSTOMERS

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

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

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

£’m (unless otherwise stated)

Statutory Profit Before Tax
Covid-19 adjustment to impairment

Statutory Profit Before Tax before Covid-19 adjustment
Acquisition, restructuring and non-recurring costs
Exceptional (gain)2
Amortisation of acquisition intangibles3
Gains arising on acquisition

Normalised Adjusted Profit Before Tax1
Covid-19 adjustment to impairment

Adjusted Profit Before Tax1
Tax on Adjusted Profit Before Tax

Adjusted Profit After Tax
Statutory EPS1
Normalised EPS1
Adjusted EPS1
Statutory Return on Assets1
Normalised Return on Assets1
Adjusted Return on Assets1
Statutory Return on Equity1
Normalised Return on Equity1
Adjusted Return on Equity1

FY20

Digital

(9.7)
–

(9.7)
2.6
(2.3)
0.4
–

(9.0)
–

(9.0)
(0.4)

(9.4)

FY21

Digital

(11.3)
–

(11.3)
2.4
–
–
–

(8.9)
–

(8.9)
(0.2)

(9.1)

HCC

11.8
–

11.8
2.9
–
0.3
–

15.0
–

15.0
(0.8)

14.2

22.0%
27.2%
27.2%
18.5%
22.8%
22.8%

Total

0.5
–

0.5
5.3
–
0.3
–

6.1
–

6.1
(1.0)

5.1
0.2p
3.9p
3.9p
0.3%
8.9%
8.9%
0.4%
10.3%
10.3%

HCC

21.2
1.7

22.9
0.9
–
0.8
–

24.5
(1.7)

22.8
(2.4)

20.4

27.5%
31.1%
29.3%
30.1%
34.1%
32.1%

Total

11.5
1.7

13.2
3.5
(2.3)
1.2
–

15.5
(1.7)

13.8
(2.8)

11.0
7.3p
9.5p
8.4p
12.8%
16.6%
14.8%
17.2%
22.3%
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 tax1 of £6.1m (FY20: £13.8m). Statutory profit before tax was £0.5m
(FY20: £11.5m).

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 £48.0m (FY20: £67.9m). This resulted in adjusted profit before tax
of £15.0m (FY20: £22.8m).

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 £13.8m
(FY20: £14.4m). This resulted in an adjusted loss before tax of (£8.9m), compared to FY20 (£9.0m).

Total equity for the Group remained unchanged from £70.7m in FY20 to £70.7m.

Financial Review continued

Trading summary

£’m (unless otherwise stated)

Customer numbers (‘000s)
Credit issued
Period end receivables
Average receivables

Revenue
Impairment
Agent Commission & Other cost of sales

Gross Profit
Administration expenses (pre-exceptional)
Depreciation

Operating Profit before exceptional items and

amortisation of acquisition intangibles

Amortisation of acquisition intangibles
Acquisition, restructuring and non-recurring

costs

Covid-19 adjustment to impairment
Exceptional gain

Operating profit
Funding costs

Statutory Profit Before Tax
Tax

Statutory Profit After Tax

Basic EPS

Group results

52-week period ended 27 February 2021 53-week period ended 29 February 2020

HCC

151
109.7
48.0
52.3

86.4
(13.2)
(20.0)

53.2
(33.8)
(3.6)

15.8
(0.3)

(2.9)
–
–

12.5
(0.7)

11.8
(0.3)

11.5

Digital

29
19.3
5.5
5.2

13.8
(7.6)
(0.6)

5.6
(12.2)
(0.7)

(7.3)
–

(2.4)
–
–

(9.7)
(1.6)

(11.3)
0.1

(11.2)

Total

180
129.0
53.5
57.5

100.2
(20.8)
(20.7)

58.8
(46.0)
(4.3)

8.5
(0.3)

(5.3)
–
–

2.8
(2.4)

0.5
(0.2)

0.2

0.2p

HCC

221
174.2
67.9
69.3

119.3
(27.6)
(27.0)

64.7
(34.4)
(3.6)

26.7
(0.8)

(0.9)
(1.7)
–

23.2
(2.1)

21.2
(2.0)

19.2

Digital

34
16.1
4.9
5.0

14.4
(7.1)
(0.6)

6.6
(13.8)
(0.7)

(7.9)
(0.4)

(2.6)
–
2.3

(8.5)
(1.1)

(9.7)
0.1

(9.7)

Total

255
190.3
72.8
74.3

133.7
(34.7)
(27.6)

71.3
(48.2)
(4.3)

18.8
(1.2)

(3.5)
(1.7)
2.3

14.7
(3.3)

11.5
(2.0)

9.5

7.3p

Credit issued to customers decreased by (32.2%) to £129.0m (FY20: £190.3m) mainly because of the Covid-19 impact on
HCC business. HCC credit issued of £109.7m was a (37.0%) reduction on FY20 (FY20: £174.2m), 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 £19.3m (FY20: £16.1m).

Revenue decreased by (25.1%) to £100.2m (FY20: £133.7m) 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 £86.4m (FY20: £119.3m).
Digital revenue decreased by (4.2%) to £13.8m (FY20: £14.4m) 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 £58.8m (FY20: £71.3m). 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 £20.0m (FY20: £27m), 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 £2.2m to £50.3m (FY20: £52.5m), although as a percentage of revenue they increased
to 50.2% (FY20: 39.3%). A provision of £2m (FY20 £nil) 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 £6.1m from £13.8m 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 £5.3m from £3.5m 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.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Funding costs of £2.4m were (£0.9m) lower than FY20 reflecting the lower level of borrowings throughout FY21.

The statutory profit before tax fell to £0.5m from £11.5m 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 £40m. In May 2021 we successfully reached agreement with a new two lender consortium, for a more
cost efficient and slightly lower £35m 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 £22.5m in December 2020 (December 2019: £40m of the £55m limit).

Balance sheet

The total equity for the Group is unchanged from £70.7m in FY20 to £70.7m. 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 £53.5m.

Summarised balance sheet £’m

Loan book
Goodwill
Bank borrowings
Cash at bank
Other net assets

Total equity

Cash flow

FY21

53.5
12.9
(8.3)
8.3
4.4

70.7

FY20

72.8
13.0
(33.8)
11.9
6.8

70.7

The simplified cash flow statement below illustrates the cash generated by the business. Cash from operating activities
increased by 54.7% to £33.1m (FY20: £21.4m), with net borrowing decreasing by (£25.5m), as a result of the shrinking
loan book.

Summarised cash flow £’m

Cash inflow from operating activities
Net borrowing (decrease)/increase
Net cash outflow from investing activities
Dividends paid
Other net cash flow movements

(Decrease)/Increase in cash and cash equivalents

Outlook

FY21

33.1
(25.5)
(6.4)
(1.3)
3.5

(3.6)

FY20

21.4
19.5
(22.4)
(10.2)
4.3

4.0

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.

Risk Management

Principal risks are a risk or a combination of risks
that, given the Group’s current position, could
seriously affect the performance, prospects or
reputation of the Group in the future.

They include those risks that could
materially threaten our business
model, performance, solvency or
liquidity, or prevent us from delivering
our strategic objectives.

The Board has overall responsibility
for ensuring that risk is managed
appropriately across the Group.

The Board, primarily through its
Risk & Compliance Committee, has
established the Group’s risk appetite
and strategy, and approved its
frameworks, methodologies, policies,
and roles and responsibilities.

The Group has a Head of Internal
Audit who reports to the Interim Chair
of the Audit Committee. The priorities
of the Head of Internal Audit have
been agreed by the Board’s Audit
Committee and Risk & Compliance
Committee, and focus on (i) high
residual risks and (ii) those risks that
have been significantly reduced by
Group actions and procedures.

The Group’s approach to risk
management is underpinned by the
‘Three Lines of Defence’ model which
is summarised in the diagram below.

Responsibility for the First Line of
Defence resides with the front-line
business divisions and functions
(eg Operations and Finance). Line
managers are directly accountable
for identifying and managing the
risks arising in their functional or
business areas.

The Second Line of Defence comprises
the Group’s central and independent
risk management and compliance
functions with responsibility for
oversight, compliance monitoring and
financial crime, reporting to the
Board’s Risk & Compliance Committee
and the Executive Risk Committee.
This is led by the Risk and Compliance
Director, who reports to the Interim
Chair of the Risk & Compliance
Committee and to the CEO.

The Third Line of Defence includes the
Head of Internal Audit, who reports to
the Interim Chair of the Audit
Committee and is independent of the
First and Second Lines of Defence. In
addition, external accountants
undertake a quarterly review on
behalf of the Group’s external lenders.

During the year, the Group has
reviewed its risk management
framework in order to ensure that
priorities are given to the most
important risks.

The Group maintains a risk register
covering the entire business. Risks are
rated according to the probability of
occurrence and potential impact.
Each risk is assigned to an
appropriate individual and all
mitigation and action plans are
recorded. Risks and their status are
reviewed regularly, and the Risk &
Compliance Committee has
performed a robust risk assessment
during the year.

We have adapted our lending and
collection processes to allow
completely remote transactions –
ensuring all Government guidance
relating to Covid-19 is followed. When
lending remotely, we have minimised
the risk of application fraud by making
sure all customers are properly
identified according to Anti-Money
Laundering Regulations and Joint
Money Laundering Steering Group
Guidance. For additional security, the
remote lending procedure requires
customers to log into their own secure
portal account, using unique customer
credentials, in order to execute the
loan and receive their funds.

The report of the Risk & Compliance
Committee on pages 64 to 66 sets
out the procedures used by the Board
to manage the Group’s risks.

1st

2nd

3rd

LINE OF DEFENCE

Responsible for:
• Performance and monitoring of front-line

control activities across the business

•

Identifying and managing the risks
arising in functional or business area

Responsible for:
• The Group’s central and independent risk
management and compliance functions
with responsibility for oversight,
compliance monitoring and financial
crime

• Support and challenge the business via

control activities

•

Independently review the effectiveness
of frontline control activity

Responsible for:
•

Independently assess and assure

•

Internal control framework

• Risk management effectiveness

Ownership
• Field operations – divisional managers,
regional managers, area managers and
customer relationship managers

• Central operations

• Banking and finance

Ownership
• Risk and Compliance Director, reporting

Ownership
• Head of Internal Audit, who reports to

to: Chair of the Risk & Compliance
Committee and the CEO

• Horizon scanning by senior personnel

the Chair of the Audit Committee and is
independent of the First and Second
Lines of Defence

• External accountants undertake a

quarterly audit on behalf of the Group’s
external lenders

Morses Club Annual Report & Accounts 2021

Principal Risks and Uncertainties

Strategic Report

Corporate Governance

Financial Statements

Principal Risks and Uncertainties

R4
R8 R10

R2 R6

R11

R1 R3
R5 R7

h
g
H

T
C
A
P
M

w
o
L

Key

R1
R2
R3
R4
R5

Conduct Risk
Regulatory Risk
Credit Risk
Reputational Risk
Strategic and
Business Risk

R6 Wider Industry
Contagion Risk
Operational Risk
Liquidity Risk
IT and Cyber Risk
Agents’ self-
employed status
Covid-19 pandemic

R7
R8
R9
R10

R11

Low

LIKELIHOOD

High

The principal risks faced by the business by risk category are as shown below and on pages 28 to 30.

Increase

No change

Decrease

RISK
NUMBER

TYPE
OF RISK

DEFINITION

RISK
MITIGATION

RESIDUAL
MOVEMENT
DIRECTION

Conduct
Risk

The risk of poor outcomes for
customers, by:

Treating Customers Fairly is a fundamental part of
the Company’s culture.

• Offering inappropriate

•

products.
Failing to assess
affordability.
Failing to identify
vulnerable customers.
Failing to show
forbearance if customers
struggle with their
repayments.

The risk of legal or regulatory
action resulting in fines,
penalties, censure or other
sanction or legal action arising
from failure to identify or meet
regulatory and legislative
requirements. This also
includes the risk that new
regulation(s) or changes
to the interpretation or
implementation of existing
regulation(s) may affect
the Group’s operations and
cost base.

Comprehensive and verifiable training and oversight
of agents and staff, in both the HCC and Digital
divisions, is undertaken.

First and second-line quality assurance operates
alongside an automated, mobile technology-based
sales & collections process.

During the year, the HCC division has implemented
enhanced affordability procedures incorporating
additional external data. This, together with the new
loan optimisation system, has enhanced our
affordability process and the customer journey for
agents and customers at the point of sale.

The HCC division enhanced the digital loan process
to facilitate remote lending.

The Company has fully embedded the policies and
procedures required by the Senior Managers and
Certification Regime.

A gap analysis is undertaken when any rules or
regulatory guidance changes.

Governance, risk and compliance are independently
and externally reviewed by our lawyers.

We maintain continuous communication with key
external stakeholders and professional contacts to
keep our information updated.

The business is continuing to review its lending
approach in light of the FCA relending study and the
Woolard Review that looked at change and
innovation in the unsecured credit market.

During the year, the Digital division appointed a new
Head of Compliance, reporting to the Group’s Risk &
Compliance Director.

The HCC
sector has
become
under closer
scrutiny from
the FCA
during the
last 12
months.

Regulatory
Risk

Principal Risks and Uncertainties continued

RISK
NUMBER

TYPE
OF RISK

DEFINITION

RISK
MITIGATION

RESIDUAL
MOVEMENT
DIRECTION

Credit Risk

Reputational
Risk

The risk of default on a debt
may arise from a borrower
failing to make the necessary
payments. The primary risk lies
with the lender and includes
lost principal and interest,
disruption to cash flow, and
increased collection costs.

Group policy prescribes business oversight and control.

Weekly management information allows the Group
to monitor the effects of lending decisions.

Regular reviews of policies and outcomes are
undertaken by the Credit Risk Committees of the
HCC and Digital divisions.

Covid-19 had an initial impact on repayment rates,
but these have improved and are now back to
pre-Covid-19 levels.

The risk of loss due to damage
to, or a decline in, the Group’s
reputation, for example
through poor customer
outcomes resulting in a high
level of complaints.

Effective corporate governance provides business
oversight and control.

We undertake independent monitoring, for example
market surveys and mystery shopping. In 2020, we
continued surveys of all types of customer, including
those who benefited from our policy of forbearance.

Strategic
and
Business
Risk

The number and nature of complaints are closely
monitored.

We have widened customer access to online
documentation through a customer portal and
provided customers with a more robust and
customer-centric experience.

A full Committee-based corporate governance
structure operates with Board oversight.

The Board and Executive Team hold an annual
two-day strategy planning meeting.

Detailed strategic planning and oversight are
implemented alongside horizon scanning.

The recruitment application process for additional
staff, prior to interview, is highly automated and
efficient.

We are involved in lobbying through our trade
associations.

During 2020, the Company put into place
contingency plans to minimise the risks to the health
and safety of our customers, employees and agents.
All staff were able to operate from home effectively
and the HCC business is able to lend and collect
both remotely and through doorstep activities.

The risk arising from poor
business decisions,
substandard execution of
decisions, inadequate resource
allocation, and/or from failure
to adapt sufficiently to changes
in the business environment.

Examples could include:

•

Acquisitions stretching
resources beyond
capability.
Failure to maintain the
Company’s
competitiveness in its
markets.
Inadequate corporate
governance.

Wider
Industry
Risk

This risk can arise from
concerted action by Claims
Management Companies
(CMCs) which can lead to a
significant increase in the level of
complaints being raised against
the Group, whether they are
ultimately settled or rejected.

During the year, the Group has seen a noticeable
increase in the level of complaints received from
CMCs. In many cases, these have been spurious or
allegedly sent by individuals who have never been
customers or have been sent without the customer’s
knowledge or consent.

CMCs are now regulated by the FCA and it is hoped
that they will act more responsibly in the future.

The Group is actively engaging with FOS and the
FCA through the sector trade associations.

A change of approach by
the Financial Ombudsman
(FOS) resulting in more
complaints being upheld
without good reason.

The increased cost of each
FOS claim, whether the
complaint is upheld or not.

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.

Morses Club Annual Report & Accounts 2021

Claims
management
companies
are becoming
more active in
the financial
services
sector.

Strategic Report

Corporate Governance

Financial Statements

RISK
NUMBER

TYPE
OF RISK

DEFINITION

RISK
MITIGATION

RESIDUAL
MOVEMENT
DIRECTION

Operational
Risk

The risk of loss arising from
inadequate or failed
procedures, systems or
policies, employee errors,
system failure, fraud, or other
criminal activity – indeed any
event that disrupts business
processes.

Business continuity plan fails to
maintain customer service.

Liquidity
Risk

The risk of the Company being
unable to meet its current and
future financial obligations on
time.

The Group has a comprehensive suite of policies and
procedures covering its operational activities that is
subject to regular review and revision.

All agents and staff participate annually in a
personal safety review and follow our home/remote
working policy.

A comprehensive business continuity policy and
procedure is in place and a third-party disaster
recovery site is now available should it be required.
Disaster recovery tests are performed periodically
on critical systems.

The Group’s business interruption insurance cover
has been maintained, following the increase in cover
negotiated in 2019.

We responded rapidly to the outbreak of Covid-19,
successfully adapting our operating model to enable
all our agents to work from home and replacing
face-to-face customer visits with a remote customer
communication strategy. We made use of our existing
technology platform and payment methods to
maintain customer contact and collection activity.

We launched a new cashless remote lending product,
which is available to all existing Morses Club HCC
customers and is compliant with all regulatory
requirements. All necessary checks and agreements
are transacted via our online Customer Portal,
leveraging our existing technology platform.
Customers using the new remote lending product
can choose to have funds deposited directly into their
bank account or loaded onto a Morses Club Card,
ensuring that existing customers can continue to
access our products and services during this time.
The Digital division reviewed operating practices so
all employees have been working from home.

Assessment of credit risk was also reviewed to
ensure that risk appetite for credit risk and TCF
were maintained.

The Digital division has implemented a number of
new systems during the year, including the
implementation of a new Loan Management System.
These have been subject to rigorous testing and
project management.

During the period we extended our loan facility with
the incumbent three lender consortium to December
2021, reducing the facility limit to £40m. In May
2021 we successfully reached agreement with a
new two lender consortium, for a more cost efficient
and slightly lower £35m 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.

Principal Risks and Uncertainties continued

RISK
NUMBER

TYPE
OF RISK

DEFINITION

RISK
MITIGATION

RESIDUAL
MOVEMENT
DIRECTION

The risk is
seen as
increased
owing to the
increase in
the number
of cyber
attacks
globally, plus
the increase
in the volume
of online
business.

The Group has an ongoing programme to conduct
regular vulnerability assessments against our core
infrastructure services. The Group recognises the
increased relevance of this risk as the move to digitise
the business continues and has plans to increase the
frequency and scope of its testing.

We have a dedicated information security resource
and undertake penetration testing of our external
and internal networks which helps to identify new or
emerging security concerns. During the year, the
Group successfully completed its annual disaster
recovery test, simulating a total loss of data centre
and the successful failover of all production systems
to the disaster recovery site. This covered both of the
HCC and Digital divisions.

Since the outbreak of Covid-19 we have engaged
with suppliers to ensure increased resilience for all
key IT services.

During the year, we have undertaken phishing
exercises in order to educate our staff.

Most of our data is now encrypted at rest.

The Group’s cyber insurance cover has been
increased once more in consultation with the Group’s
insurers.

The business change team closely monitors demand
and resource plans.

The Company carefully monitors the position with its
advisers and conducts an ongoing review of
business processes, systems and contracts in order
to maintain self-employed status for its agents.

During FY21, the Group rapidly developed systems
whereby customers can apply for loans and repay
them remotely – by telephone or through the
customer portal. At the time of writing, all staff are
working from home effectively, including the
customer call centres. The reduction in demand for
loans is addressed by constantly monitoring the cost
base of the business. The decision has been made
to close both office facilities in Birstall, with the
registered office being moved to Nottingham in
April 2021.

For further information see the viability statement
on page 31.

Other future business, economic, political, or newsworthy
events are also highlighted and added to the horizon
scanning process.

Risks identified using these processes are prioritised and
managed following the Group’s established risk processes.
In the vast majority of cases, the Group sees risks change
and develop rather than emerge. However, climate change
can be seen as an emerging risk.

IT and
Cyber Risk

The risk of business
interruption from cyber crime
or system failures.

IT/Cyber risks include:

•

IT systems and networks
can be damaged and/or
information can be lost
owing to third-party
actions.
Data protection/
information security issues
occur or there is a failure
to meet the requirements
of data protection
regulation/legislation
(eg GDPR).
Strategy and architecture
risk arising from
inadequate requirements
and business analysis.
• Outsourced supplier risk

•

R10

Agents’
self-
employed
status

R11

Covid-19
pandemic

arising from the use of
external IT platforms.

• Major change impacts

on daily business and/or
results in poor quality
delivery.

The risk that employment and/
or tax legislation changes to
such an extent that the
Company cannot maintain
self-employed status for its
agents.

The risk that normal business is
significantly affected by
Covid-19 by restricting
face-to-face contact with
customers, reducing the
number of staff working from
offices and reducing the
demand for loans.

Emerging risks

The Company uses proactive risk management in order to
view current and future events and predict where
emerging risks might appear. This horizon scanning is
fundamental to being able to predict business needs and
potential issues and there are numerous techniques for
this process.

Risk identification exercises are performed as part of
general risk management practice within the Group.

Current events are highlighted and analysed, for example,
regulatory fines to other organisations. This is then
reported on at executive level as a horizon scanning item
for Risk Executive reports.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Emerging risk

Commentary

Climate change Climate change is not currently seen as a principal risk to the business, but this is kept under review.

Customers can request loans and make payments under the new customer portal. Technology has been
introduced to allow meetings to be conducted remotely. Both of these initiatives have dramatically
reduced the need to travel. The Company’s SECR report can be seen on page 78. This shows a very
significant reduction in the intensity ratio, due to the reduction in travel and office costs.

As part of our procurement procedures, we undertake a due diligence review of major suppliers, which
includes standard aspects around modern slavery, any environmental policies, as part of ensuring that
any outsourcing arrangements are based on working with suppliers who adhere to our operating
standards.

The Group’s environmental policy is reviewed annually.

Brexit

As a Company operating solely in the UK, with no foreign currency exposure, EU supply chain, or key
dependency on overseas staff, the Company has not identified any adverse direct consequences of
Brexit, now or in the future, directly or through our supply chain. We therefore do not foresee any issues
or changes being made to the business model or any impact on our accounting policies or critical
judgements.

Viability Statement

The directors and the Audit Committee consider a 12 month
horizon as part of the going concern assessment (page 60),
but in addition the directors consider the Groups longer term
viability as part of their continuing programme of monitoring
risk. For the purpose of assessing the future prospects of the
Group, the Directors have selected a 3-year timeframe. This
timeframe has been selected as it corresponds with the
Board’s strategic planning horizon.

The assessment has been made, at the date of signing these
accounts, with reference to:
•

the Group’s financial position for the year ended
27 February 2021.
the Group’s strategy and business plan.
the Board’s risk appetite.
the Group’s principal risks and uncertainties and
how these are identified, managed and mitigated.
the Group’s going concern assessment, and.
the external environment that the Group
operates within.

•
•
•

•
•

The strategy for the Group and its business model are
detailed in the strategic report on pages 16 to 20. HCC is a
long-established offering, and parts of the Group have been
undertaking this business for more than 130 years. The
Group’s Dot Dot Loans is a fully online lending provider, which
was launched in March 2017. The product offering aims to
serve the needs of two segments of the lending market.

The Directors review and renew the 3-year strategic plan at
least annually. Progress against the strategic plan is
reviewed at every meeting by the Board through
presentations from the Executive Management Team on the
performance of their respective business units, the
assessment of market opportunities, and the consideration
by the Board of its ability to fund its strategic ambitions.

In addition to standard internal governance, the Group is also
monitored against key financial covenants tied in with current
funding facilities. These are produced and submitted on a
monthly basis with key schedules included in the monthly
Board papers.

facilities well in advance of this date. Due to the short-term
nature of its products, the Group is well placed to react
promptly to any changes in its liquidity requirements.

Despite numerous challenges presented by Covid-19 and
having to reconfigure its operating model, the Group has
remained resilient and profitable. During the period the
closed economy lowered demand for our services and
caused our customer base and the loan book to shrink,
however the performance of underlying debt and collections
has been very strong.

The Group has observed a noticeable increase in the level of
complaints received from both CMCs and customers during
the year. The increase in complaints encountered by a small
number of other lenders in the sector has triggered signs of
financial stress, prompting applications to the courts for
schemes of arrangements to ensure their businesses remain
viable whilst their customers receive a proportion of redress.
Whilst the Group has seen an increase in complaints
received, the increase is proportionately smaller to other
lenders and the Board remains confident with its business
model and underlying operational resilience.

As part of its annual planning process, the Group assessed
its business plans and subsequently ran a number of
scenarios around the key areas of sensitivities namely
• Loan volumes
• Collections
• Loan book quality/credit risk
• Cash availability
• Collect out scenario (in accordance with

Regulatory guidance)

As discussed in the Risk Management report, the Board,
primarily through its Risk & Compliance Committee, has
established the Group’s risk appetite and strategy, and
approved its frameworks, methodologies, policies, and roles
and responsibilities. The Group maintains a risk register
covering the entire business. Risks and their status are
reviewed regularly, and the Risk & Compliance Committee
has performed a robust risk assessment during the year.

The Group is profitable and cash generative. It currently has
a revolving debt facility of £35m secured by a debenture on
the assets of the business which expires at the end of
December 2022. It is the Group’s policy to renew its credit

Conclusion
Based on the above, the Board confirms that it expects the
Group will continue to operate and meet its liabilities, as they
fall due, over the 3-year period of assessment.

Engaging with our Stakeholders

Our key stakeholder groups

Customers

The continued performance of our business would
not be possible without understanding our
customers’ needs.

Self-employed
agents

Our network of self-employed agents is our
interface with customers in communities around
the UK, and develops valued relationships
with customers.

Employees

Our experienced, diverse and dedicated
workforce is a key asset of our business.

We continue to seek to create the right environment to
encourage and create opportunities for individuals
and teams to realise their potential and
career aspirations.

Suppliers

Our suppliers are essential to provide our divisions
with the goods and services required to enable us
to continue to meet our customers’ needs. They
play a vital role in our operations so it is important
that we develop strong supplier relationships
with them.

Debt providers

Our providers of debt facilities, along with our
retained earnings, allow us to lend money to
customers at competitive rates.

Shareholders

Our investors provide capital without which we
could not grow and invest for future success.

Morses Club Annual Report & Accounts 2021

Regulator and
government

The nature of our customer base and the market in
which we specialise makes the building and
maintaining of open and trusting dialogue with
policy makers and our regulators, the PRA, FCA
and CBI, critical to a sustainable business model.

Communities
and environment

We are committed to making a positive
contribution to the communities within which we
operate, including through payment of taxes,
reducing our environmental impact and creating
employment opportunities.

Strategic Report

Corporate Governance

Financial Statements

To secure our long-term success, it is
important to engage with our
stakeholders and take account of
their perspectives.

Listening and engaging with
stakeholders helps us to create a
better business and improve
outcomes for customers, society and
the environment. The Board also
proactively engages with
stakeholders including customers,
employees, debt providers and
investors to understand their views
across a range of issues; see pages
34 to 35 for more information.

In the table overleaf we set out our
key stakeholder groups, the material
issues that matter to them and
how we engage with them. By
understanding our stakeholders,
we can factor into boardroom
discussions the potential impact of
our decisions on each stakeholder
group and consider their needs
and concerns.

The Board’s statement on s172

The Board of Directors, in line with
their duties under s172 of the
Companies Act 2006, act in a way
they consider, in good faith, would
be most likely to promote the success
of the Company for the benefit of
its members as a whole, and in doing
so, have regard to a range of matters
when making decisions for the
long term.

Key decisions and matters that are of
strategic importance to the Company
are informed by s172 considerations.
The subjects of s172 and Directors’
duties are included together as a
standing item on the agenda of every
Board meeting.

Through an open and transparent
dialogue with our key stakeholders,
we are able to develop a clear
understanding of their needs, assess
their perspectives and monitor their
impact on our strategic ambition and
culture. As part of the Board’s
decision-making process, the Board
and its Committees consider:

a) Long-term impacts
The likely consequences of any
decision in the long term

b) Our employees
The interests of the Morses Club
employees

c) Our business relationships
The need to foster relationships with
suppliers, customers and others

d) The community and environment
The impact of our operations on the
community and the environment

e) Our reputation
The importance of maintaining a
reputation for high standards of
business conduct

f) Acting fairly
The need to act fairly as between
members of the Company

Engaging with our Stakeholders continued

OUR
STAKEHOLDERS

CUSTOMERS

WHAT STAKEHOLDERS WANT

HOW WE ENGAGE

• Affordable and accessible credit.

• Simple, transparent charging

structure, with no penalties or late
payment fees.

• Support and forbearance during

short-term difficulty.

• Monthly customer satisfaction
survey, the results of which are
reviewed by the Board.

• Quarterly good customer outcomes.

• Survey across a randomised selection
of customers to gather views on how
well the service operates at each stage
of the loan issue and collection service,
as well as the service delivered by
agents. The Company achieved an
overall score of 97% across all nine
regions which moved to six divisions in
November 2020, and the same
performance score has been
maintained.

• Ad hoc surveys, such as customer
views on our online portal. Future
surveys will include customer views
on what they want from an online
e-money current account.

• Mystery shopping.

• We are developing further approaches
to reviewing customer satisfaction
within Shelby Finance Limited for FY22.

SELF-EMPLOYED
AGENTS

• Ability to work flexibly in the

• Regular virtual meetings with field

local community.

managers.

• Support and tools to work efficiently,

effectively and flexibly.

• Competitive remuneration.

EMPLOYEES

• Opportunities for personal
development and career
progression.

• A culture of inclusion and diversity.

• Remuneration and benefits.

• Open, collaborative culture with
regular Company updates and
opportunities for questions and
feedback.

• Annual appraisal process.

• Regular surveys during the year to
check engagement and that the
adaptations to working practices
are in line with our cultural values
and customer service needs.

• Development of a detailed cultural

review for FY22 so that our
approach is tailored to the changes
in ways of working as a result of
Covid-19.

• Whistle-blowing hotline, available

to all employees.

SUPPLIERS

• Professional and

consistent relationship.

• Due diligence conducted for all

suppliers.

• Alignment of business culture and

• Check quality of products and

customer service model.

• Reliable and adhere to
contractual terms.

services.

• Ensure policies and procedures in

place.

• Maintain regular contact through

procurement and account
management approaches.

• Annual reviews of the service and

regular feedback.

Morses Club Annual Report & Accounts 2021

HOW THEY LINK
TO OUR STRATEGY

Non-standard customer
base central to our
products and services
strategy across the Group.

Digitalisation of service and
offering complementary
products based on market
demand and customer
need.

Provide important interface
with customers and
maintain local community
relationships for our target
demographic.

Link to local communities
and to ensure that we offer
best in class service
responsibly and in line with
our customer needs.

Increased cross-functional
working across the Group
to deliver a cohesive
customer service and
digital strategy.

Ensure that our service
model responds to
customer needs, linked to
development of remote and
digital complementary
products.

A range of suppliers used
to support our products
and services.

Ensure that our suppliers
provide products and
services in line with our
customer needs.

Strategic Report

Corporate Governance

Financial Statements

OUR
STAKEHOLDERS

DEBT PROVIDERS

REGULATOR AND
GOVERNMENT

SHAREHOLDERS

COMMUNITIES AND
ENVIRONMENT

WHAT STAKEHOLDERS WANT

HOW WE ENGAGE

•

Financial performance.

• Monthly covenant reporting including

Transparency.

Proactive communication.

Credit rating.

Clear and transparent
communication with the regulator.

Proactive approaches on any
regulatory matters.

Clear TCF approaches in line
with the market sector and
customer needs.

Strong cash generation and
attractive dividend policy.

Responsible, sustainable
and low-risk business model
and strategy.

loan book quality analysis.

• Monthly submission of finance Board
papers and additional schedules.

• Monthly conference calls to discuss
current performance and future
expectations.

• Quarterly independent review of
lending process and loan book
quality.

• Regular dialogue with the regulator.

• Proactive communication with the

regulator regarding our approaches
on lending and remote working due
to Covid-19.

• Respond proactively to feedback

requests.

• Member of the Smaller Business

Practitioner Panel through the CEO.

• Programme of contact with MPs

through the CEO to share insights
and ensure the business model is
fully understood.

• Twice-yearly virtual road shows by
the CEO and CFO at the time of the
interim and annual results.

• Ad hoc queries and feedback from
shareholders, dealt with by the
CFO. The Chairman and the Senior
Independent Director also make
themselves available, and discuss
feedback at Board meetings.

Responsible lending and collecting
of repayments.

Helping local economies by
promoting financial inclusion.

Fundraising for local charities.

• Acting in a fair and responsible
manner is a core element of our
business. Read more on page 37.

• The Company's SECR Report is on

page 78.

• Minimising environmental impact.

HOW THEY LINK
TO OUR STRATEGY

Funding solutions to
support the development
of our overall business
strategy.

Ensure that the business
can expand and offer
complementary products
and services.

Delivery of regulatory
framework which supports
good customer outcomes.

Ensure that our products
and services are delivered
responsibly and ethically.

Support of our ongoing
strategic direction for our
targeted customer
demographic.

Provision of a range of
complementary products
and services to grow the
business in line with
customer demand.

Presence in communities
across the UK to support
the needs of our customers.

Fulfil our strategic direction
of growing the business,
whilst delivering our
commitment to deliver
products and services
responsibly and ethically.

How stakeholders influenced
Board decision-making

We define principal decisions as those
that are material to the Group, but
also to any of our key stakeholder
groups. In making the principal
decisions outlined below, the Board
considered the outcome from its
stakeholder engagement as well as
the need to maintain high standards
of business conduct and to act fairly
between the members of the
Company. The Board’s procedures
have been updated to require a
stakeholder impact analysis to be
completed for all material decisions
requiring its approval that could
impact on one or more of our
stakeholder groups. The stakeholder
impact analysis assists the Directors
in performing their duties under s172
of the Companies Act 2006 and

provides the Board with assurance
that the potential impacts on our
stakeholders are being carefully
considered by management when
developing plans for Board approval.

The principal decisions made during
the year relate primarily to the
Company’s conduct during the height
of the Covid-19 pandemic. All
administrative and support
properties were operationally closed
as part of our duty of care to
employees, and following careful risk
assessment under our Health and
Safety obligations. Remote lending
and collection facilities were rolled out
rapidly in order to continue to serve
our existing customers, prior to
introducing systems that allowed us
to offer loans to new customers. The
Board was made fully aware of staff
and customer feedback as part of the

Company’s highly successful response
to the challenges of the pandemic.
The Board decided that it was not
appropriate, nor necessary, for the
company to put any staff on furlough,
nor apply for any other government
assistance. This followed careful
review of the schemes available.
During the year, the Board also
continued the agreed strategy of the
continued enhancement of our digital
capabilities with regard to e-money
current account services and credit
offerings. This is in line with feedback
from customers as part of our regular
independent customer research.

The Board has agreed to propose a
final dividend based on the
profitability of the Company in FY20
and FY21 and its continued
confidence in the agreed business
strategy.

Operating Responsibly

We strive to have a positive
impact on all of our key
stakeholders.

Lending responsibly to customers

Treating Customers Fairly is the
foundation of our approach. As
outlined on pages 16 to 17, our
business model centres on
responsible lending and collection of
repayments. We assess every
application for credit against
stringent criteria, taking into account
affordability and credit checks. A
complete income and expenditure
check is undertaken for every loan,
and we only lend to customers who
can afford the repayments.

Last year, c. 70% of loan applications
were not progressed. We have a clear,
uncomplicated charging structure,
with no penalties or fees for delays in
repayments, and self-employed
agents are paid in commission based
on collections, not sales.

Supporting our people

Culture
The Group is built on trusted
relationships and shared values that
underpin our commitment to
customers:
• Our customers will always be at
the heart of everything we do.
• We will be honest and transparent
in how we deal with everyone.
• Our systems and processes will be

simple and clear.

• We will show forbearance and

flexibility.

The culture that underlies these
commitments is founded on
behaviours that are honest, fair,
responsible, supportive and
understanding.

Given recent changes to the Group
and as part of our ongoing work to
ensure that we nurture an
appropriate culture for all our
employees, customers and key
stakeholders, we are planning to
undertake a cultural review. This will
assess all aspects of the business,
where possible providing benchmarks
and measures, which together will
form a cultural ‘barometer’ for the
whole organisation.

Learning and development

All employees, from the CEO to the
most recent recruit, undertake
regulatory training each month. In
addition, many of our managers are
involved in an Institute of Leadership
and Management self-learning
programme, which can lead to a
degree level qualification. During FY21
we are planning to deliver further
tailored training to our senior
management. This will subsequently
be cascaded through the
organisation.

Employee engagement

Each year, we give our colleagues the
opportunity to provide feedback and
suggestions on an anonymous basis
via an annual engagement survey.
Due to our teams working from home
throughout this financial year, we
carried out additional employee
engagement surveys in order to

understand more about their
experiences of working from
home during lockdown.

When we went into lockdown, we
engaged with every single employee
to get a broad picture of their health
and wellbeing, working environment
and technology, and their views on
coming out of lockdown, to ensure we
knew how we could best support
them and to help us to plan for a
flexible future.

Our initial lockdown survey in May
2020 showed that employees were
positive about their wellbeing and
working experience, with the majority
finding their work easy or very easy to
do at home (78%), rating the support
from their line manager as good or
excellent (85%) and coping well or
very well working at home in general
(76%). Employees were positive about
the prospect of continuing to work
from home, with 83% confident
Morses Club could effectively
implement that.

With home working extended, we
checked in again in October to see
how things had changed. We found
that satisfaction with working from
home had increased, with large
numbers coping well, a testament
to our ongoing work to help
our employees.

Happy working from home, managing working

hours and workload

May
2020

85.9%

October
2020

89.1%

Agree or strongly agree that they were happy with

84.8%

90.7%

the structure of their working day

Daily contact with other members of their team

94.1%

95.5%

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Transformation
of the Year

HR and Communications Director Tracey Mulligan won the
Transformation of the Year award at the Women In Credit
Awards 2020.

The Awards champion the work of women across credit and
financial services, highlighting the importance of gender
diversity within the industry.

Minimising our impact on the
environment

When changing our property strategy
this year, we sought to balance the
practical needs of our employees and
business with the need to ensure that
environmentally we make changes to
support the UK government target of
being carbon neutral by 2050. By
massively reducing our estate
footprint, we can deliver many
improvements to our environmental
performance, including reducing our
emissions and waste. See our SECR
disclosure on page 78 for more
information on our environmental
performance this year.

Health and safety

Employee shares

The health and safety of our
employees and the self-employed
agents we work with is paramount
to the business. The majority of our
workforce has been at home for the
whole year, but whenever there was
a change in government guidance
during the pandemic, we undertook
risk assessments and introduced
protocols to ensure the safety of
external agents entering
customers’ homes.

Employee wellbeing

Employee wellbeing is important to
us, especially during this year’s
unprecedented circumstances. All our
employees have access to Perkbox, a
platform offering employees rewards
and offers, as well as confidential
advice and assistance. To provide
greater flexibility to employees we
now offer them the opportunity to
buy (and sell) annual leave. These, as
well as the employee share scheme
outlined below and plans to increase
staff training still further, are
examples of initiatives introduced
as a result of suggestions in the
annual employee survey.

Employee share ownership is a key
means of sharing the success of the
business with colleagues. In January
2021, employees received Morses
Club shares following the vesting of
their 2017 share award. The Company
subsequently issued shares to
employees in 2018 and 2019 under
a replacement Share Incentive Plan,
representing 3.25% of base annual
salary in shares. This plan was
recognised by ProShare, winning
one of their awards in 2019. No new
shares were issued during FY21 due
to the Company failing to meet its
FY20 profit target, but the intention
is to repeat the award to qualifying
employees during FY22 and
subsequent years, subject to the
Company’s profitability.

Supporting our communities

In addition to the indirect contribution
we make to communities across the
country by providing financial
inclusion to people who are precluded
from borrowing from mainstream
lenders, and work opportunities for
self-employed agents, we also raise
money for local charities. During the
year, we raised c. £8,000 for local
community initiatives.

Satisfied Stakeholders

Morses Club Annual Report & Accounts 2021

Customers

Delivering consistently positive
customer experiences

As we have transformed the business,
we have been guided by ongoing
customer feedback and our desire to
maintain our consistently high
satisfaction ratings.

98%

CUSTOMER
SATISFACTION

People

Engaging our employees and
prioritising their wellbeing

During an unprecedented year for the
Group, we have increased our
employee engagement in order to
understand and solve their
challenges.

89%

HAPPY WORKING
FROM HOME,
MANAGING
WORKING HOURS
AND WORKLOAD

Strategic Report

Corporate Governance

Financial Statements

98%

SATISFIED WITH MORSES
CLUB’S FLEXIBILITY

97%

I would recommend them to anyone, they’re really
helpful and are there to support you if you need it.

LIKELY TO CONSIDER USING
MORSES CLUB AGAIN IN
THE FUTURE

I have been with them for years and they have
never let me down.

98%

CUSTOMER

SATISFACTION

94%

LIKELY TO RECOMMEND
MORSES CLUB TO FRIENDS
AND FAMILY

They’re always helpful and go above
and beyond.

85%

POSITIVELY RATED
THE SUPPORT
FROM THEIR
LINE MANAGER

78%

FOUND IT EASY TO
WORK FROM HOME

78%

POSITIVE ABOUT
COMMUNICATIONS
FROM THE BUSINESS

I feel a level of trust has been given to me which
makes me feel empowered that I’m trusted to
manage my time and get my work done.

From the CEO down, all higher management have
sent regular communications showing gratitude and
appreciation for our efforts.

The Company has made the job as easy as possible
with the new things that have been introduced.

Corporate Governance

40
40

Corporate
Governance

41
44
46
54
58
64
67
74
75
80

Morses Club Annual Report & Accounts 2021
Morses Club Annual Report & Accounts 2021

Board of Directors

Strategic Report

Corporate Governance

Financial Statements

Board of Directors

The Board and its committees are considered
to have an appropriate balance of skills,
experience, independence and knowledge
to enable them to discharge their respective
duties and responsibilities effectively.

Paul Smith
Chief Executive
Officer

Date of appointment
20 January 2015

Stephen Karle
Chairman and
Non-Executive Director

Date of appointment
20 January 2015

Graeme Campbell
Chief Financial
Officer

Date of appointment
1 January 2021

Background and career
Paul has experience in mobile payment
technology as Managing Director of EZ-Pay
Limited, a pre-paid MasterCard organisation.
Beginning his career in the global software
market, he later joined Phones4U in 1998,
where he became MD and was an integral
member of the management team until the
firm’s sale for £1.4bn in 2006. On 1 May 2018,
Paul was appointed a member of the FCA’s
Smaller Business Practitioner Panel to
represent the consumer credit sector, and on
1 March 2021 he was appointed as a Board
Director of the Consumer Credit Trade
Association.

Areas of expertise
Paul has been responsible for growing the
Company organically and by acquisition. His
expertise in software and technology has been
invaluable in driving efficiencies while
maintaining excellent customer service levels.

Background and career
Stephen is a Director of Karle & McCleery
Limited, a strategic advisory and executive
coaching business operating across and
beyond the financial services sector. For four
years to 2015 he served as Chairman of BCRS
Business Loans Limited, an SME lending
company supporting regional business growth.
He is a former CEO of West Bromwich Building
Society and a (non-practising) solicitor.

Areas of expertise
Stephen’s financial services sector experience
includes executive, general management and
board roles. He represents Morses Club PLC on
the Executive Committee of the Consumer
Credit Association.

Background and career
Graeme was previously the Chief Financial
Officer of BrightHouse (a trading name of
Caversham Finance Limited) which provided
rent-to-own and cash lending services to the UK
consumer market. Graeme became the CFO of
BrightHouse in 2018. He joined BrightHouse in
2011 and held a number of roles including
Director of Finance as well as Strategy and
Digital Director, and Chief Information Officer,
during which he spearheaded the financial, IT
and emerging digital strategy of the business.
Prior to this, he held senior finance roles at
Virgin Media and Thresher Group.

Areas of expertise
Graeme brings a wealth of highly relevant
sector and financial experience, along with
broader digital and commercial skills, which will
be invaluable to Morses Club as the Company
develops.

Board of Directors continued

Gary Marshall
Chief Operating
Officer

Sir Nigel Knowles
Senior Independent
Director

Joanne Lake
Independent Non-Executive
Director

Date of appointment
22 July 2019 as COO.
1 May 2021 as Executive Director

Date of appointment
14 April 2016

Background and career
Since joining the Company, Gary has been
responsible for leading the integration and
development of the digital business, Shelby
Finance Limited, including the delivery of new
platforms which can effectively meet customer
demand as the business grows. Gary has also
taken on overall responsibility for the Group’s IT
and Change functions.

Prior to joining the Company, Gary was Interim
COO of Sainsbury’s Bank, a role he held
for almost two years, with a focus on IT,
information security, call centres, operations
and business change. Prior to this, he held
various roles at Aviva plc, including Interim
COO of Aviva Ireland and Interim Managing
Director of Aviva Life & Pensions Ireland where
he quickly digitised the business, turning it
around to become the fastest growing insurer
in Ireland.

Areas of expertise
Gary has wide-ranging financial services
experience, having worked at senior levels in
organisations including Egg plc, GE Capital,
Aon Ltd, Santander Plc, Vertex, Anglo Irish
Bank and Northern Rock. He has extensive
expertise in both developing and delivering
digitised product offerings, with significant
customer-focused experience often in
challenging regulatory and market conditions.

Background and career
Sir Nigel is a solicitor and CEO of global legal
business DWF Group PLC.

Sir Nigel is the former Global Co-Chairman and
Senior Partner of DLA Piper, having served as
Global Co-CEO and Managing Partner for
nearly 20 years. He is credited with DLA Piper’s
remarkable growth, leading the firm through
a series of mergers and taking the firm from
its regional origins to the global firm that it
is today.

He received a knighthood in 2009 in
recognition of his services to the legal industry.

Legal Business awarded Sir Nigel a ‘Lifetime
Achievement Award’ in 2015 and he was given
the Financial News’ ‘Editor’s Choice’ award for
lifetime achievement in 2016. Sir Nigel is special
advisor on international trade and investment
to the City of Sheffield’s Mayor, Dan Jarvis, and
served as the High Sheriff of Greater London
from 2016 to 2017. Until recently Sir Nigel was
on the Council of The Prince’s Trust.

Areas of expertise
Sir Nigel has immense experience of building
and leading a worldwide regulated services
business.

Background and career
Joanne is a Chartered Accountant and a
Fellow of the Chartered Institute for Securities
& Investment, and of the ICAEW, and is a
member of the ICAEW’s Corporate Finance
Faculty. With over 30 years’ experience in
accountancy and investment banking, Joanne
has worked at Panmure Gordon, Evolution
Securities, Williams de Broe and Price
Waterhouse. She is Chairman of wealth
management and employee benefits
specialists Mattioli Woods PLC, Deputy
Chairman of main market listed Henry Boot
PLC, and a Non-Executive Director of Gateley
(Holdings) PLC and Honeycomb Investment
Trust PLC.

Areas of expertise
Joanne’s financial services experience
includes board level roles focusing on
strategy and governance, as well as lead
advisory corporate finance roles on listings,
other public market transactions and
continuing obligations.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Peter Ward
Non-Executive
Director

Date of Appointment
1 March 2015

Background and career
Peter is the Co-Founder of RCapital
Partners LLP and retired as an
active Partner in 2016. In 2001 he
co-founded his own corporate
advisory business, Three V Corporate
Venturing LLP, to provide fundraising
and interim management services.
He had previously held senior
management positions within the UK
commercial and banking division of
Royal Bank of Scotland Group for
23 years.

Areas of expertise
Peter has extensive experience of
working with management teams
across a broad range of
business sectors.

Sheryl Lawrence
Independent Non-Executive
Director

Michael Yeates
Independent Non-Executive
Director

Andy Thomson
Non-Executive
Director

Date of appointment
1 May 2021

Background and career
Sheryl is a Chartered Accountant
(FCA), and holds an LLM from the
Institute of Advanced Legal Studies
and an MBA from London Business
School. She has held senior executive
roles at Barclays, Lloyds Bank,
Santander, Coventry Building Society,
Nationwide Building Society and
Provident Financial Group. Sheryl
began her banking career at NatWest
Bank in 1996, after 11 years of
multi-sector experience with Coopers
& Lybrand (now PwC).

Sheryl has been an Independent
Non-Executive Director of RCI Bank
UK since January 2019, where she is
Chair of the Board Audit Committee
and Chair of the Nomination and
Remuneration Committee.

Areas of expertise
Sheryl has extensive experience
of designing, integrating, and
embedding governance, risk and
compliance into the culture,
commercial strategies and operations
at banks, building societies and
consumer lending firms.

Background and career
Michael is a career banker and has
over 40 years’ experience in the
financial services industry, serving in
the building society, retail bank and
investment bank sectors. He has
extensive executive, board and
NED experience.

Throughout his career he has been
heavily involved in business
transformation as both an employed
executive and then as an independent
board consultant advising 40 or so
boards. He has international and
cross-industry experience and has
been involved in policy development for
HM Government. Earlier, Michael spent
17 years at Cheltenham & Gloucester
Plc, culminating in the position of
General Manager, helping to grow C&G
from the 16th largest building society
into a Global 100 bank and the UK’s
third largest lender.

Areas of expertise
Michael brings extensive experience
of the retail banking sector. He is a
change leader with a career track
record of leading significant business
transformations who has consistently
driven double-digit revenue growth
and profitability. One of his personal
objectives is to make financial services
accessible to a wider, less well served,
sector of society.

Date of appointment
1 March 2009 (Non-Exec Finance
Director), 1 March 2016 (CFO)
Interim CFO from 17 March 2020 to
31 December 2020. Non-Executive
Director from 1 January 2021

Background and career
After graduating from Warwick
University (accounting and financial
analysis) and qualifying as a
Chartered Management Accountant
at Cadbury Schweppes and Tesco,
Andy held a variety of senior finance
roles in SMEs where he has been the
most senior finance professional
continuously since 1996. Involved in
the RCapital acquisition of Morses
Club in March 2009, he remained on
the Board as a Non-Executive
Director with responsibility for
financial management. Andy led the
finance function during the acquisition
and integration of Shopacheck
Financial Services in 2014/15, before
his appointment as full-time CFO
in 2016.

On 1 July 2019, Andy retired from his
role as CFO and remained on the
Board as a Non-Executive Director.
On 17 March 2020, Andy took on the
position as Interim CFO before
returning to the role of Non-Executive
Director on 1 January 2021.

Areas of expertise
Andy’s analytical skills, expert
knowledge of the sector and
independent-mindedness are key to
providing continuity and protecting
shareholder interests.

Chairman’s Introduction to Governance

Dear Shareholder,
I am pleased to present our
2021 Corporate Governance
Report for the Group which
includes reports from the
Audit, Risk & Compliance,
Remuneration & Corporate
Social Responsibility,
Nominations & Succession
and Disclosure Committees
on pages 46 to 74.

Stephen Karle
Chairman

The Board has always been
committed to applying the highest
standards of corporate governance
and has adopted the main principles
of the 2018 UK Corporate
Governance Code (the Code),
although as an AIM-listed Company,
we are not required to comply. At
27 February 2021, the only
exceptions were (i) the Directors’
Remuneration Report which has been
prepared in accordance with AIM
Rule 19 and (ii) Provision 11 of the
2018 Code which relates to the
proportion of Non-Executive
Directors whom the Board considers
to be independent. However, the
Board is satisfied that the
arrangement regarding the
proportion of non-independent
Non-Executive Directors is correct for
the business at this time and will keep
the matter under review.

The Directors believe that this general
approach is a firm foundation for
good governance and clarifies not
only the appropriate allocation of
duties, authority, and responsibilities
but also the way the Group meets its
legal and regulatory obligations. I
have also included a statement on
pages 10 to 11 of the Strategic Report.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

45
11

Board of Directors

Much work was done five years ago to first establish
a Board equipped with the experience and expertise
to drive forward the Group’s future direction, strategy,
and culture prior to the Company’s admission to AIM.
During this financial year, Board membership has evolved
considerably. I welcome the appointments of Sheryl
Lawrence and Michael Yeates as Independent
Non-Executive Directors, replacing Baroness Simone Finn
and Les Easson as Independent and non-independent
Non-Executive Directors respectively. The Company has
also recruited Graeme Campbell as CFO, allowing Andy
Thomson to return to his previous role as Non-Executive
Director, and appointed Gary Marshall, the Company’s COO
since July 2019, as Executive Director. The Board currently
comprises six Non-Executive Directors and three Executive
Directors, whose biographies are presented on pages 41
to 43. All Directors submit themselves for re-election or
election at each Annual General Meeting in accordance with
the provisions of the Code.

As Chairman, I carried out a formal Board evaluation
process between January and March 2021. The
performance of the other Non-Executive Directors was
assessed against the quality of the discharge of their
supervisory and stewardship roles. Their personal
contributions at Board, in Committee and more widely,
were considered, and the collective performance of the
entire Board was reviewed, and any personal development
areas identified. In addition, the progress of each individual
against their 2021 objectives was reviewed, and objectives
for 2022 were set and agreed.

My conclusion was that the Group has a Board that is
engaged, has a wide variety of relevant experience, and
is focused on outcomes – for customers, investors,
employees, self-employed agents, and other stakeholders.
The Board operates on a unitary basis, and we value the
views of the Executive Management team whose
members attend some Board meetings to
provide specialist knowledge and experience.

I look forward to another year where the
Group continues to develop, with a strong
and experienced Board at its heart.

Stephen Karle
Chairman
13 May 2021

Corporate Governance Report

At the heart of the Code are five main principles that
emphasise the value of good corporate governance to
long-term sustainable success. By applying the principles,
following the more detailed provisions, and using the
associated guidance, a company can demonstrate through
its reporting how the governance of the company
contributes to its long-term sustainable success and
achieves wider objectives.

The five main principles of the Code are as follows:

A. A successful company is led by an effective and

entrepreneurial board, whose role is to promote the
long-term sustainable success of the company,
generating value for shareholders and contributing to
wider society.

B. The board should establish the company’s purpose,

values, and strategy, and satisfy itself that these and
its culture are aligned. All directors must act with
integrity, lead by example, and promote the desired
culture.

C. The board should ensure that the necessary

resources are in place for the company to meet its
objectives and measure performance against them.
The board should also establish a framework of
prudent and effective controls, which enable risk to be
assessed and managed.
In order for the company to meet its responsibilities to
shareholders and stakeholders, the board should
ensure effective engagement with, and encourage
participation from, these parties.

E. The board should ensure that workforce policies and

practices are consistent with the company’s values
and support its long-term sustainable success. The
workforce should be able to raise any matters of
concern.

Application of the UK Corporate Governance Code

The 2018 Corporate Governance Code can be found in the
Corporate Governance Code section of the FRC website,
www.frc.org.uk.

From the date of the Initial Public Offering in May 2016,
the Directors have generally adopted the principles and
provisions of the Code, although, being AIM listed, the
Group is not obliged to comply with this.

Except as stated in this paragraph, throughout the year
ended 27 February 2021, the Company has complied with
the provisions set out in the Code. The two exceptions are
(i) the Directors’ Remuneration Report, where the
Company does not comply with Provisions 36, 40 or 41 as
a result of it having been prepared in accordance with AIM
Rule 19, and (ii) the Provision 11 of the 2018 Code that
relates to the proportion of Non-Executive Directors whom
the Board considers to be independent. In May 2021,
subject to regulatory approval, the Company appointed
two new Independent Non-Executive Directors, bringing
the total to four. Although not compliant with the Code, the
Board believes that this is an appropriate arrangement for
the time being for a company of the size of Morses Club.
This will be kept under review.

As required by AIM Rule 26, details of the Company’s
adherence to the Code is shown on its website. The
Directors have been fully briefed about the requirements
of the Code, and the Company Secretary continually
monitors the Company’s adherence to it.

Principle A – Effective Board

Role of the Board
The Company is headed by an effective Board that is
collectively responsible for the long-term success of the
Company.

The Board’s role is to provide entrepreneurial leadership of
the Group within a framework of prudent and effective
controls that enables risk to be assessed and managed.

The Board sets the Group’s strategic aims, ensuring that
the necessary financial and human resources are in place
for the Group to meet its objectives, and reviews
management performance.

The Board has established a sub-committee structure
comprising Audit, Risk & Compliance, Remuneration &
Corporate Social Responsibility, Nominations & Succession,
and Disclosure Committees, and has appointed a Senior
Independent Director, Sir Nigel Knowles.

Opportunities and risks to the future success of the
business are considered and addressed at each Board
meeting, with the CEO highlighting the challenges and
successes in each report to the Board. In the past, when
specific risks are highlighted, for example relating to a
potential acquisition, the Risk & Compliance Committee
has held special meeting(s) to consider the matter before
the Board has made a final decision. During 2020, the
challenges posed by the Covid-19 pandemic were
addressed by the Board as a whole.

In Q1 2021, the Board’s Risk & Compliance Committee
reviewed and reassessed the Group’s risk appetite
statements and target residual ratings for each of the
principal risks, all of which are included within the risk
management system. Details of the Company’s principal
risks are included on pages 27 to 30.

The Executive Management Committee, comprising all of
the Executive Managers and the Executive Directors,
reports to the Board.

Division of responsibilities
There is a clear division of responsibilities at the head of
the Company between the running of the Board and the
responsibility of the Executives for the running of the
Company’s business. In this way, no individual has
unfettered powers of decision.

The Board has a formal schedule of matters reserved to it
and is usually scheduled to hold eight formal meetings
each year, including one that concentrates solely on
strategy. In addition, two calls are convened each year in
order to agree the final and interim results and dividend.
Further teleconferences are arranged, when required.
During FY21, the Board held six scheduled meetings, but
supplemented these with 12 additional Board calls, many

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

relating to the Company’s response to the Covid-19
pandemic and the restructuring of the business that
resulted from this. Some members of the Executive Team
have been invited to the formal meetings as attendees.
The Board is responsible for overall Group strategy,
acquisition and divestment policy, approval of major
capital expenditure projects and consideration of
significant financing matters.

It monitors the exposure to key business risks and reviews
the strategic direction of the business. This includes its
code of conduct, annual budgets, progress towards
achievement of those budgets and capital expenditure
programmes.

The Board meeting agenda normally comprises a review
of management financial statements and operational
performance, a CEO review of activity, reports from the
Executive Team, a review of potential acquisitions and
other growth opportunities, a review of relevant Board
sub-committee minutes and reports, together with an
update on the progress of the Company’s other strategic
objectives.

The Chairman
The Chairman is mainly responsible for the leadership of
the Board and ensuring its effectiveness concerning all
aspects of its role. His duties include ensuring that all
Directors receive sufficient relevant information on
financial, business, and corporate issues prior to meetings.
The Chairman regularly reviews the contents of the
information pack sent out prior to Board meetings in order

to ensure that important issues are prioritised and each
pack is kept to a manageable size. The Chairman
encourages and promotes critical discussion and
appropriate challenge. He ensures that Board decisions
are taken on a sound and well-informed basis.

Chief Executive Officer
The CEO provides leadership and direction for the Group.
He chairs the Executive Committee and is Chairman of the
management team of the Shelby Finance Limited
subsidiary. The CEO makes decisions on matters affecting
the operation, performance, and strategy of the Group’s
business. He develops and recommends strategy and
long-term objectives of the Group for approval by the
Board and is responsible for the day-to-day management
of the Group. As Chairman of the Risk Executive
Committee, the CEO is also responsible for ensuring that
there are appropriate risk management and internal
controls in place.

Non-Executive Directors
As part of their role as members of a unitary Board,
Non-Executive Directors are active at providing
constructive challenge and helping develop proposals on
strategy. They have also used their experience from other
organisations, including public companies, to provide
advice to many areas of the business.

Sir Nigel Knowles has been appointed the Senior
Independent Director to provide a sounding board for the
Chairman and serve as an intermediary for the other
Directors and shareholders.

Board structure

The Board has established a sub-
committee structure comprising Risk &
Compliance, Audit, Nominations &
Succession, Remuneration & Corporate
Social Responsibility and Disclosure
Committees.

The Executive Management
Committee, comprising all of the
Executive Managers and the Executive
Directors, reports to the full Board.

Board
Board

Risk &
Compliance
Committee

Audit
Committee

Nominations
& Succession
Committee

Disclosure
Committee

Remuneration
& Corporate
Social
Responsibility
Committee

Credit
Committee

Executive
Management
Committee

Risk
Executive
Committee

Health
& Safety
Committee

Board and Board Committees

Management Committees

Corporate Governance Report continued

Principle B – Values and culture

Pages 18 and 19 of the Strategic Report deal with the
subject of purpose, strategy, and culture.

The Board has been active in promoting the development
of purpose, strategy, and culture within the business.

The Group’s mission is to provide tailored digital and
face-to-face financial services for under served
communities across the UK. During Q1 2021, the Group
commissioned an independent innovation and
transformation consultancy to assist it to develop its digital
offering, whilst complementing its HCC origins. This work
will culminate in an updated purpose statement during
summer 2021.

The Company has an excellent, customer-centric culture:
• The customer satisfaction surveys undertaken by

independent market research during the year showed:
• Overall customer satisfaction with Morses Club –

98%.

• Likelihood of the customer recommending Morses

Club – 94%.

• The Company’s complaints handling process has been

independently certified to the ISO 10002:2014
standard.

Further details about customer satisfaction are shown on
page 2 of the Strategic Report.

Across the organisation, the four words which were
strongly used to encapsulate the Company culture were:
• Customer (and customer focus) – as shown by the

customer satisfaction rates.

• Friendly – all staff strive to be friendly in their
approach, both to customers and colleagues.

• Fair – Treating Customers Fairly forms the basis of how

the Company operates.

• Driven – colleagues are determined to achieve success

for both themselves and the Company.

As part of its comprehensive response to the Covid-19
pandemic, the Company undertook surveys of all of its
staff in both May and October 2020, in order to ensure
that they were able to work effectively and safely at home.
After the initial survey in May, the Company supplied
additional equipment to employees based on their
responses. In October, the survey was designed to assess:
• Each employee’s wellbeing
• Their work-life balance
• Contact with their colleagues and teams
• Their work area and equipment they use
• The technology and IT equipment they use

89% of staff confirmed that they were happy working from
home, managing working hours and workload, and 92%
agreed or strongly agreed that overall, they were coping
well with working from home.

Morses Club Annual Report & Accounts 2021

In July 2020, the Board agreed the creation of a Cultural
Barometer in order to regularly measure key indicators of
the Group’s culture. This showed:
• Employee-related measures, including employee
engagement, conduct, compliance with the SMCR
regime, diversity, and reward

• Agent-related measures, including engagement and

turnover of individuals;

• Customer-related measures, including customer

satisfaction and Good Customer Outcome surveys;
• Vision and values – these are reviewed during the

Board’s annual strategy meeting

The Board approves the annual schedule for regulatory,
health & safety and HR training modules that every
individual is required to undertake on a monthly basis
and pass an examination at the end of it. Incentives have
been made available to encourage employees to take
part in the required training during the first seven days
in each month.

Principle C – Effectiveness

Composition of the Board
As at 27 February 2021, the Board comprised six
Non-Executive Directors and two Executive Directors,
whose biographies are included on pages 41 to 43. This
follows the resignation of Baroness Simone Finn as an
Independent Non-Executive Director on 12 February 2021
with immediate effect to take up a new position within
Government as Deputy Chief of Staff to the Prime Minister.

The Board considers two of the Non-Executive Directors
(Joanne Lake and Sir Nigel Knowles) to be independent in
character and judgement because while they may own
shares in the Company, they all have significant other
business interests and activities. In February 2021, the
Nominations & Succession Committee engaged in
recruitment activity leading to the recent appointment of
two new independent Non-Executive Directors, Sheryl
Lawrence and Michael Yeates.

The Chairman was originally considered to be independent
upon his appointment as Chairman in 2015. The Board as
a whole considers the Non-Executive Directors’ existing
shareholdings in the Company to be advantageous to
shareholders, since in addition to meeting their fiduciary
duties, their interests are aligned with shareholders in
general. Non-Executive Directors are not entitled to
share options as part of their package and there are
no cross-directorships between Executive and Non-
Executive Directors.

Peter Ward has been appointed by the Group’s major
shareholder, Hay Wain Group Limited, and so is not
considered to be independent. Andy Thomson and Les
Easson were previously part of the Company’s Executive
Team and are also not considered to be independent.

Changes to the Board
Andrew Hayward left the Company as CFO on
16 March 2020, and on 17 March Andy Thomson,
then a Non-Executive Director, took on the position
of Interim CFO. On 1 January 2021, Andy returned
to his role as Non-Executive Director, as a result of the
appointment of Graeme Campbell as CFO with effect from
the same date.

Strategic Report

Corporate Governance

Financial Statements

As mentioned above, on 12 February 2021, Baroness
Simone Finn resigned as an Independent Non-Executive
Officer.

On 17 March 2021, Les Easson resigned as Non-Executive
Director.

On 1 May 2021, the Company appointed Sheryl Lawrence
and Michael Yeates as Independent Non-Executive
Directors, and its COO, Gary Marshall, as an Executive
Director.

Following these changes, there are four Non-Executive
Directors who have served for four to six years, two who
have served for less than one year, and one who has been
on the Board both as an Executive and a Non-Executive
Director for a total of 12 years.

Further information about the appointment process and
succession planning is contained in the report of the
Nominations & Succession Committee on pages 54 to 57.

Commitment
The Group appreciates the benefits that are brought by a
Board with a range of business backgrounds. The Board is
satisfied that each Non-Executive Director has sufficient
capacity to discharge their responsibilities effectively. This
is demonstrated by the 100% attendance at Board
meetings during the year, and also 100% attendance
during the previous year. Their record of attendance at
meetings is shown on page 52, and they have also
demonstrated their commitment by the work and advice
provided throughout the year.

Following guidance contained in the 2018 Code, members
of the Board are now required to give prior approval to the
Directors for any new appointments.

Diversity
The Board and its Committees are considered to have an
appropriate balance of skills, experience, independence,
and knowledge to enable them to discharge their
respective duties and responsibilities effectively. The
Directors have a wide range of backgrounds and extensive
knowledge of a variety of areas of expertise.

The Company does not have a formal diversity policy at
present but is committed to promoting equal opportunities
in employment. Following the appointment of Sheryl
Lawrence on 1 May 2021, there were two women on the
Board once more, after the resignation of Baroness
Simone Finn.

Development
The Board also ensures that Directors receive relevant
training upon appointment and then subsequently as
appropriate.

During the last 15 months, Directors have received
briefings from the Company’s Nomad, Peel Hunt; a
detailed review of its HCC division from the Operations
Director; a detailed review of the Digital division from the
Chief Operating Officer; a demonstration of the customer
portal from the Group Marketing Manager; and a detailed
review of the customer service function, especially in the
light of the operational changes required by Covid-19.

Information and support
The Board considers that it is supplied in a timely manner
with information in a form and of a quality appropriate to
enable it to discharge its duties.

Our Non-Executive Directors receive full updates on
Company progress and relevant issues and bring their
experience and sound judgement to bear on matters
arising.

Board packs are provided to Directors in a timely fashion.
Where a decision is required, this is clearly flagged. All
Directors are encouraged to make a contribution. On the
rare occasion that a Director has a potential conflict of
interest, they remind the meeting that this is the case and
absent themselves in the event of a vote being taken.

The Company Secretary is available to provide advice and
services to all Board members and is responsible for
ensuring Board procedures are followed. All Directors are
also able to take independent advice to enable them to
fulfil their duties if necessary.

Board evaluation
Our CEO has been regularly appraised by the Chairman.
One discussion centred on the circumstances, and the
lessons learned, following the profit warning in March
2020. During the year, the Chairman has undertaken a
formal internal Board evaluation, looking especially at
Board chemistry, and undertaken individual Director
appraisals and consultations in line with Senior Manager &
Certification Regime (SM&CR) requirements. Nigel
Knowles, the Senior Independent Director, has appraised
the Chairman after consultation with the other Directors.

This evaluation concluded that the whole Board is
consistently engaged, bringing a wide range of
perspectives and experiences to discussions. The
Non-Executive Directors are able to reflect on insights
gained from their other activities and bring valuable
input to meetings.

Following the evaluation, it was agreed to provide
additional training for the Directors about matters specific
to the business. Details of the training provided are shown
in the Development section above.

Following the Board evaluation, the Nominations &
Succession Committee agreed that the roles of Chair of
the Audit Committee and Chair of the Risk & Compliance
Committee should be separated and the Board acted
upon this in its appointments of two new Independent
Non-Executive Directors in May.

The Nominations & Succession Committee also agreed
that having a diverse Board was important and built this
aspiration into the specification for the executive
recruitment firm in its search for the two new Independent
Non-Executive Directors. As a result, there was a diverse
range of candidates.

The Chairman has set clear, written objectives for the two
new Independent Non-Executive Directors.

Corporate Governance Report continued

Re-election of Directors
Following the recommendation of the July 2018 edition
of the Code, at the Company’s AGM in September 2020,
all of the continuing Directors submitted themselves
for re-election, and will continue to do so at each
subsequent AGM.

Through the Risk & Compliance Committee, the Board
reviews the risk management framework and the key risks
facing the business. The Finance Department is
responsible for preparing the Group financial statements
and ensuring that accounting policies are in accordance
with International Financial Reporting Standards.

All financial information published by the Group is subject
to the approval of the Audit Committee.

The Board, with advice from both of the Audit and the Risk
& Compliance Committees, is satisfied that a system of
internal controls and risk management is in place that
enables the Company to identify, manage and evaluate
risks, including emerging risks. The report of the Audit
Committee on pages 58 to 63 demonstrates how the
Board has established formal and transparent
arrangements for considering how it should apply the
corporate reporting and risk management and internal
control principles, and for maintaining an appropriate
relationship with the Company’s auditor. The Audit
Committee is also responsible for the Company’s Internal
Audit function.

These processes have been in place for the year under
review and up to the date of approval of the report and
financial statements. They are regularly reviewed by the
Board and accord with the guidance in the 2018 Code.

The Board intends to keep its risk control procedures under
constant review, particularly as regards the need to
embed internal control and risk management procedures
further into the operations of the business and to deal with
areas of improvement that come to the attention of
management and the Board.

Audit Committee and its auditors

The Board is required to establish formal and transparent
arrangements for considering how they should apply the
corporate reporting, risk management and internal control
principles, and for maintaining an appropriate relationship
with the Company’s auditor. The Audit Committee is also
responsible for looking after the Group’s Internal Audit
function.

Principle D – Stakeholder engagement

The s172 statement in the Strategic Report on page 33
provides a summary of the Group’s engagement with its
various stakeholders.

In this part of the Annual Report, we believe it is important
to demonstrate still further the excellent engagement the
Company has with its shareholders.

Accountability

Financial and business reporting
The Board believes that it is presenting a fair, balanced,
and understandable assessment of the Company’s
position and prospects.

Reviews of the performance and financial position of the
Group are included in the Strategic Report within pages 1
to 39 and present a balanced and understandable
assessment of the Group’s position and prospects. The
Directors’ responsibilities in respect of the financial
statements are described on page 80 and those of the
auditor on page 90.

Risk management and internal control
The Board acknowledges that it is responsible for
determining the nature and extent of the significant risks it
is willing to take in achieving its strategic objectives. The
Group maintains sound risk management and internal
control systems, and these are described in the Risk
Management section on pages 26 to 31. Such systems are
designed to manage rather than eliminate the risk of
failure to achieve the Group’s overall business objectives
and can only provide reasonable, not absolute, assurance
against material misstatement or loss.

The Group’s internal control systems, including financial,
operational and compliance controls, are reviewed
regularly with the aim of continuous improvement. Whilst
the Board acknowledges its overall responsibility for
internal control, it believes strongly that senior
management within the Group’s operating businesses
should also contribute in a substantial way and this has
been built into the process.

The Board discharges its duties in this area through:
•

the review of financial performance including budgets,
key performance indicators, and forecasts on a
monthly basis;
the receipt of regular reports that provide an
assessment of key risks and controls and how
effectively they are working;
scheduling annual Board reviews of strategy including
reviews of the material risks and uncertainties facing
the business;
the receipt of reports from senior management on
the risk and control culture within the Group;
the presence of a clear organisational structure with
defined hierarchy and clear delegation of authority; and

•

• ensuring that there are documented policies and

procedures in place.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Dialogue with shareholders

Principle E – Workforce engagement

The Board is responsible for ensuring that there is a
dialogue with shareholders based on the mutual
understanding of objectives. The Board as a whole has
responsibility for ensuring that a satisfactory dialogue with
shareholders takes place.

The Strategic Report on pages 18 and 19 provides a
summary of the Company’s work on developing its
purpose and values, and ensuring that workforce policies
and procedures are consistent with these.

The Group communicates with institutional and private
investors and responds promptly to all queries received
verbally or in writing. All shareholders have at least 20
working days’ notice of the AGM at which all Directors,
including Committee Chairs, are usually present and
available to answer questions. In 2020, the AGM was held
virtually, with shareholders encouraged to ask questions
prior to the meeting. The Board is aware of the importance
of maintaining close relations with investors and analysts.
Twice-yearly roadshows are usually conducted by the CEO
and CFO when the performance and future strategy of the
Group are discussed with larger shareholders. During
FY21, updates were provided in a virtual environment to
analysts and shareholders.

These meetings usually cover any matters arising from the
analyst presentations, the market in which the Group is
operating, its dealings with the Regulator, together with
the Group’s financial performance and future strategy.
Queries from shareholders are dealt with by the CFO. In
addition, members of the Board receive regular feedback
from major shareholders and discuss this at Board
meetings. The Chairman and the Senior Independent
Director are also named and make themselves available,
should an investor wish to express any views to them.

In January 2020, the Board appointed Les Easson,
formerly the Company’s Operations Director, as the
Designated Director for employee engagement. This role
has been developed during 2020, in association with the
Company’s continuing work on culture and values. In view
of the dramatic changes to the Group’s operations, and
especially working from home, the Designated Director
took a close interest in the revised arrangements, and the
Company’s efforts to ensure the health and well being of
its employees.

Information about the Company is provided through a
number of methods, including regular business updates on
the Company’s intranet, videos made available to all
employees, and presentations by the CEO.

As also noted in the Directors’ Report, the Company has a
very robust whistle-blowing policy and procedures. The
Company has consistently highlighted to its staff the FCA’s
whistle-blowing hotline as well as providing both an
internal contact telephone number and email address,
together with the contact details of one of our Independent
Non-Executive Directors.

Corporate Governance Report continued

Board Committees and Directors’ attendance at meetings

Board Committees
The terms of reference of all of the Board Committees are available on the Group’s website at www.morsesclubplc.com.

Copies of the service contracts and letters of agreement of each of the Directors are available at the Group’s registered
office during business hours and are available for inspection at each AGM at which shareholders can be present for at
least 15 minutes prior to and until the conclusion of the AGM.

During the year, the Board has continued its policy that all Non-Executive Directors are invited to attend meetings of the
Audit, Risk & Compliance, Nominations & Succession and Disclosure Committees in order to maintain a full appreciation
and understanding of the Company.

Details of attendance at Scheduled Board and Committee meetings during the year are shown below:

Meetings

Stephen Karle

Non-Executive Chairman

Paul Smith

Chief Executive Officer

Graeme Campbell Chief Financial Officer

from 1/1/2021

Sir Nigel Knowles Senior Independent

Director

Joanne Lake

Non-Executive Director

Peter Ward

Non-Executive Director

Andy Thomson

Non-Executive Director/

Interim CFO

Simone Finn

Non-Executive Director to

12/2/2021

Les Easson

Non-Executive Director

Board

1/1

Andrew Hayward Chief Financial Officer to

0/0

16/3/2020

Committees

Risk &
Compliance
Committee

Audit
Committee

Remuneration
& Corporate
Social
Responsibility
Committee

Nominations
& Succession
Committee

Disclosure
Committee

–

3/3

5/5

–

0/0

The Board held several additional ad hoc meetings during the year, primarily relating to the Company’s response to the
Covid-19 pandemic and the restructuring that resulted from this.

On 17 March 2020, Andy Thomson was appointed to the position of Interim CFO, following the departure of
Andrew Hayward on 16 March 2020. Following the appointment of Graeme Campbell as Chief Financial Officer on
1 January 2021, Andy reverted to his earlier role as Non-Executive Director.

Simone Finn resigned as an Independent Non-Executive Director on 12 February 2021.

Les Easson resigned as a Non-Executive Director on 17 March 2021.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Membership of Committees
Membership of the Committees during the year is shown below:

C = Chair

M = Member

UA = Upon appointment

Position

Stephen Karle

Non-Executive Chairman

Paul Smith

Chief Executive Officer

Graeme Campbell Chief Financial Officer

(from 1/1/2021)

Sir Nigel Knowles Senior Independent

Director

Joanne Lake

Independent

Non-Executive Director

Peter Ward

Non-Executive Director

Baroness Simone

Independent

Finn

Andy Thomson

Non-Executive Director
(to 12/2/2021)

Non-Executive Director
to 16/3/2020; Interim
CFO 17/3/2020 –
31/12/2020;
Non-Executive Director
from 1/1/2021

Les Easson

Non-Executive Director

(to 17/3/2021)

Andrew Hayward Chief Financial Officer

(to 16/3/2020)

Risk &
Compliance
Committee

Audit
Committee

Remuneration
& Corporate
Social
Responsibility
Committee

Nominations
& Succession
Committee

Disclosure
Committee

Considered
Independent

–

On 13 February 2021, Joanne Lake became the Interim Chair of the Audit and the Risk & Compliance Committees.

On 1 May 2021, the Company appointed Sheryl Lawrence and Michael Yeates as Independent Non-Executive Directors,
and its COO, Gary Marshall, as an Executive Director.

Membership of the Committees from 14 May 2021, or once regulatory approval is received for the appointment of Sheryl
Lawrence as Chair of the Audit Committee, and Michael Yeates as Chair of the Risk & Compliance Committee (if later), is
shown below:

C = Chair

M = Member

UA = Upon appointment

Position

Stephen Karle

Non-Executive Chairman

Paul Smith

Chief Executive Officer

Graeme Campbell Chief Financial Officer

Gary Marshall

Chief Operating Officer

Sir Nigel Knowles Senior Independent

Director

Joanne Lake

Independent

Non-Executive Director

Peter Ward

Non-Executive Director

Andy Thomson

Non-Executive Director

Sheryl Lawrence Independent

Non-Executive Director

Michael Yeates

Independent

Non-Executive Director

Risk &
Compliance
Committee

Audit
Committee

Remuneration
& Corporate
Social
Responsibility
Committee

Nominations
& Succession
Committee

Disclosure
Committee

Considered
Independent

–

Nominations & Succession Committee

Dear Shareholder,
I am pleased to present the
report of the Nominations &
Succession Committee
which covers the year ended
27 February 2021.

The report provides insight
into the composition of the
Committee and the work that
it undertakes.

We continue to assist the
Board in the assessment of
the appropriate skills and in
developing succession plans
to ensure we continue to
deliver against our strategy.

COMMITTEE MEMBERS

• Stephen Karle (Chairman)

• Baroness Simone Finn (to 12 February 2021)

• Sir Nigel Knowles

• Joanne Lake

• Peter Ward

Morses Club Annual Report & Accounts 2021

WHAT DOES THE COMMITTEE DO?

1. Ensures that the Board has a
formal and transparent
appointments procedure and that
the balance of Directors on the
Board remains appropriate as the
Group develops in order to ensure
that the business can compete
effectively in the marketplace.

2. Identifies and nominates

candidates to fill Board vacancies
as and when they arise.

3. Evaluates the balance of skills,
knowledge, experience and
diversity of the Board in order to
ensure an optimum mix.

4. Considers the succession planning
for Directors, Executives and
senior managers to ensure that
any succession is managed
smoothly.

The Committee comprises all of the
Group’s Independent Non-Executive
Directors, the Board Chairman, and
Peter Ward. It held four meetings
during the year.

The Committee’s terms of reference
are available on the Group’s website.

Strategic Report

Corporate Governance

Financial Statements

Diversity

Activities during the year

The Group recognises the importance of diversity both at
Board level and throughout the whole organisation.

During the year, the Committee has:
• undertaken an exercise to look at Executive succession

The Board remains committed to increasing diversity.
Consequently, diversity is taken into account during each
recruitment and appointment process, working to attract
outstanding candidates with diverse backgrounds, skills,
ideas and culture.

The Company has an established policy of promoting
equal opportunities in employment, ensuring that
discrimination does not take place, and everyone receives
equal treatment regardless of age, disability, gender
reassignment, marital or civil partner status, pregnancy or
maternity, race, colour, nationality, ethnic or national origin,
religion or belief, sex or sexual orientation. As part of this
policy, the Company has put in place a number of steps
that aim to address the possibility of unconscious bias
during the recruitment process. In 2020, the Company
introduced a system of anonymised CVs whereby the
personal details of the candidates (name, gender) are
initially hidden, thereby ensuring that shortlists are
selected based solely on skills and experience. The
Committee will review the results of this new process
during the year.

Prior to the resignation of Baroness Finn on 12 February
2021, two members of the Board, and two-thirds of
the independent Directors, were women. Following the
appointment of Sheryl Lawrence in May 2021 (see page
57), two members of the Board and 50% of the
Independent Non-Executive Directors, are again women.

As at 27 February 2021, the Executive Management Team
and Company Secretary comprised eight men and one
woman. Their direct reports consisted of 23 men and
10 women.

•

planning;
reviewed the composition of the Board and its
sub-Committees;

• undertaken an annual internal evaluation process for

both the Chairman and the Board as a whole;

• concluded that the Board works effectively, both as a
group and in its individual committees, bringing a
wealth of relevant experience to the Company; and
• made a number of recommendations in relation to

appointments to the Board, namely the CFO, COO and
two Independent Non-Executive Directors.

Internal Board evaluation
In terms of the evaluation of Board members, the Board
succession planning process is set out in a clear, written
policy which ensures consistency and rigour. It is
underpinned by a Board profile matrix, in which the skills,
competences and diversity needs of the Board are
mapped against current composition. The matrix helps
the Board focus its search and write relevant role
descriptions that are Senior Manager & Certification
Regime (SM&CR) compliant for the selection of any new
Non-Executive Directors.

A further measure involves annual effectiveness reviews
of individual Non-Executive Directors, led by the Chairman,
but with the Chairman being assessed by the Senior
Independent Director with input from all Directors.
The Committee has given consideration to a future
evaluation by external consultants, to assist the Board in
understanding its collective effectiveness and to help
inform Non-Executive Directors of their strategic
relevance to the Company. It is envisaged that this form
of external evaluation would then be undertaken every
three years.

Where changes to Board composition are considered
necessary, the Committee defines the Board’s needs,
identifies the talent required, and engages independent,
reputable search consultants and/or key advisers to assist
in the search for high-calibre candidates, submitting its
recommendations to the full Board for consideration.

Nominations & Succession Committee continued

Changes to the Board during the year

There have been a number of changes to the Board during
the year.

Andy Thomson
The Committee unanimously agreed to recommend to the
Board that it appoint Andy Thomson to the position of
Interim CFO, following the departure of Andrew Hayward
on 16 March 2020.

Following the appointment of Graeme Campbell as Chief
Financial Officer on 1 January 2021, Andy reverted to his
earlier role as Non-Executive Director.

The Committee was aware that recent experience
elsewhere in the Home Collected Credit sector has
demonstrated that a loss of expertise at main Board level
in relation to this specific form of consumer lending can
potentially lead to financial problems that are adverse to
the interests of all stakeholders.

The Committee was therefore determined to retain the
expert knowledge and deep HCC experience of Andy
Thomson, having worked in the sector for the last 12 years.
He served as a Non-Executive Director of the Company
prior to becoming the Executive CFO at the time of its IPO
and has been a shareholder throughout the period since
the IPO; hence the Committee believed that he was well
placed to protect shareholder interests in his role as a
Non-Executive Director.

Graeme Campbell
Graeme Campbell was appointed CFO on 1 January 2021
following approval by the FCA and the announcement of
the interim FY21 results. Graeme was previously the Chief
Financial Officer of BrightHouse (a trading name of
Caversham Finance Limited) which provided rent-to-own
and cash lending services to the UK consumer market.
Graeme became CFO of BrightHouse in 2018. He joined
that company in 2011 and held a number of roles including
Director of Finance as well as the Strategy and Digital
Director, and Chief Information Officer, during which he
spearheaded the financial, IT and emerging digital
strategy of the business. Prior to this, he held senior
finance roles at Virgin Media and Thresher Group.

Graeme brings a wealth of highly relevant sector and
financial experience, along with broader digital and
commercial skills, which will be invaluable to the Group as it
looks to grow its business during the coming years.

The Company engaged the independent executive search
and selection specialists, Argent Services Limited, for this
appointment. Argent, whose founder has 15 years of
experience in executive search, has no other relationship
with the Group and had been used by the Company to fill a
number of its senior roles in the past. Graeme undertook
formal selection interviews with the Chairman, CEO and
CFO, as well as an informal session with the HR Director.
This was followed by a full interview with this Committee.

Following the internal evaluation, the Committee
concluded that:
•

the Board remains focused on outcomes – for
customers, investors, employees, self-employed agents
and stakeholders. This can be demonstrated by the
management information requested by and produced
to the Board at each Board meeting;
the Board consistently considers the relevance of its
capabilities to meet the challenges ahead. This is
debated at the Nominations & Succession Committee;
the culture at the Board table encourages wide, deep
and relevant participation;
the Board is consistently engaged. All Non-Executive
Directors add value in maximising the leverage and
quality of their third-party relationships;

•

• Board colleagues bring a wide range of perspectives to
the Board table. Non-Executive Directors reflect on
insights gained from their other activities and bring
valuable input to meetings;

• additional training should be provided to the Directors

on topics specifically related to the Group’s activities.
During the year, the Directors have received
comprehensive briefings on the HCC division from its
Operations Director; on the Digital division from the
Chief Operations Officer; on potential mergers and
acquisitions from the Company’s Nomad, Peel Hunt; on
the highly important customer portal from the Group
Marketing Manager; and on the response of the whole
business, and in particular the customer service
function, since the onset of the Covid-19 pandemic.
the Board agenda and management information are
continually reviewed to ensure that concise and
relevant information is made available at an
appropriate time.

•

As a result of the Board evaluation, the Committee has
concluded that the Board works effectively as a group
in its current form, although this will remain under
annual review.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Baroness Simone Finn
On 12 February 2021, Baroness Finn resigned as an
independent Non-Executive Director to take up a new
position within Government as Deputy Chief of Staff to the
Prime Minister. During her period in office, her insights
were invaluable to the Company’s ongoing journey to
become a leading technology-enabled provider of a wide
range of non-standard financial services.

Changes to the Board after the end of the year
Les Easson
On 17 March 2021, Les Easson resigned as Non-Executive
Director. Les had been appointed a Non-Executive
Director upon his retirement as Operations Director
following 36 years at the Company. The support he has
given to ensure his replacement had a smooth transition
into the Operations Director role has been extremely
valuable and Les felt that after 18 months, it was the right
time to relinquish his mentoring role.

Recruitment of new Non-Executive Directors
As a result of the resignations of Baroness Finn and Les
Easson, the Committee agreed to commence an exercise
to recruit two new Independent Non-Executive Directors.
The Company again engaged the independent executive
search and selection specialists, Argent Services Limited,
for both appointments.

Prospective candidates were interviewed by the Chairman
and were provided with a briefing about the Company by
the CEO. Following this process, the Committee met and
subsequently recommended the appointment of two new
Independent Non-Executive Directors, Sheryl Lawrence
and Michael Yeates. Both bring significant experience in
the financial services sector and their appointments as
Committee Chairs will be subject to regulatory approval.
Their biographies are included on page 43.

Appointment of additional Executive Director
The Committee also recommended the appointment of
Gary Marshall as an Executive Director. Since he joined the
Group as Chief Operating Officer in July 2019, Gary has
been responsible for successfully leading the integration
and development of the digital business, Shelby Finance.
Gary has also taken on overall responsibility for the
Group’s IT and Change functions. His biography is included
on page 42.

Corporate Governance Code
The Committee is aware that following these
appointments, the Group does not comply with
Provision 11 of the 2018 Corporate Governance Code
which relates to the proportion of Non-Executive Directors
whom the Board considers to be independent. However,
at the date of this Annual Report, the Company has four
Independent Non-Executive Directors, which the Board
believes is an appropriate number for its current size and
stage of development.

Succession planning
The Company has developed a policy for both Board and
Executive succession planning that sets out a process
by which the Nominations & Succession Committee
plans ahead for the replacement of Executive and
Non-Executive Board members and the Chair, either
because of a vacancy or a possible future vacancy.
This process looks at the medium term and longer term,
together with potential contingencies.

The plan has been developed to ensure:
• continuity in key roles;
•
sustainability of the Company’s performance;
• high standards of corporate governance; and
• appropriate investor dialogue.

It addresses the issues of competence, integrity,
transparency, diversity and independence by seeking to
define the shape of the Board and Executive teams by
assessing on an ongoing basis:
•

the required levels of knowledge, skills, experience and
specific expertise;
the proportion of the Board that should be composed
of Independent Non-Executive Directors;
the issue of diversity in the widest sense of the word,
especially gender diversity;
the effectiveness of Board refreshment through the
periodic appointment of new members and the
scheduled retirement of incumbent Directors, the
primary aim being to align skill sets with the Company’s
evolving strategic direction; and

•

• whether effective risk management is in place to

minimise the vulnerability to narrow ‘group thinking’.

Board service is strictly contingent on individual Director
performance and annual re-election, founded upon
satisfactory evaluations of his or her contribution to
the Board.

The position will be kept under close review by the
Nominations & Succession Committee alongside the
delivery of the Company’s strategy.

Approval

On behalf of the Nominations & Succession Committee

Stephen Karle
Chairman
13 May 2021

Audit Committee

Dear Shareholder,
As the Interim Chair of the
Audit Committee, I am pleased
to present the Committee’s
report for the year ended
27 February 2021.

The report provides insight
into the composition of the
Committee and the work that
it undertakes.

In essence, we ensure the
integrity of the financial
reporting, the robustness
of internal operational and
financial controls and the
independence of the external
auditor.

COMMITTEE MEMBERS

• Joanne Lake (Interim Chair from 13 February 2021)

• Sir Nigel Knowles

• Baroness Simone Finn (Chair to 12 February 2021)

Morses Club Annual Report & Accounts 2021

WHAT DOES THE COMMITTEE DO?

The key objective of the Committee is
to provide assurance to the Board as
to the effectiveness of the Company’s
internal controls and the integrity of
its financial records and externally
published results.

The Committee monitors and reviews
the Group’s financial reporting from
information provided by management
and the auditor. The Committee
reports to the Board on the Group’s
full and half-year results, having
examined the accounting policies on
which they are based and ensured
compliance with relevant accounting
standards.

The Committee’s terms of reference
are available on the Group’s website.

The Committee held four scheduled
meetings during the year, in alignment
with its terms of reference. It also held
two meetings to approve the FY20
final results and the FY21 interim
results, plus two additional meetings
to review the impact of Covid-19 on
the financial results of the business
during calendar year 2020.

The Committee acknowledges and
embraces its role in protecting the
interests of shareholders and is
committed to monitoring the integrity
of the Group’s reporting.

The Committee performed reviews of
the full-year, interim and trading
update announcements, and the
Annual Report and Accounts and
half-yearly financial statements.

Strategic Report

Corporate Governance

Financial Statements

Joanne Lake is a Chartered Accountant with extensive
experience within the financial services sector, whilst Sir
Nigel Knowles is the CEO of global legal business DWF plc,
having been a Managing Partner at the global law firm
DLA Piper for nearly 20 years.

approach being taken by management. The result is that
the audit plan and the preliminary judgement papers can
be reviewed and agreed at the most appropriate times in
the audit process.

Composition and governance

As a Chartered Accountant, the Board considers that
Joanne Lake has recent and relevant financial experience.
All the independent Non-Executive Directors are members
of this Committee and have been since the Group’s IPO in
May 2016. Following the resignation of Baroness Finn, the
Nominations Committee agreed to recruit two additional
Independent Non-Executive Directors, with the
expectation that one will become the new Chair of the
Committee. In the meantime, the Board believes that the
current members have sufficient skills, qualifications and
experience to discharge their duties in accordance with the
Committee’s terms of reference.

The other Directors are also invited to attend meetings,
as are senior representatives of the external auditor,
together with appropriate members of the Executive
team, in order to ensure that all relevant information is
available to the Committee.

The Committee meets with the external auditor without
the presence of Executive Management twice each year to
discuss matters relating to its remit and any issues relating
to the audit. The Committee also meets each of the Risk &
Compliance Director and the Head of Internal Audit
individually on an annual basis without the presence of
other Executive Management.

The Committee has direct and unrestricted access to both
internal and external audit functions. As the Interim Chair, I
also have regular contact with the external auditor, the
Chief Financial Officer, the Risk & Compliance Director, and
the Head of Internal Audit outside the formal meetings to
ensure that any areas for discussion are dealt with in a
timely manner.

How the Committee discharged its responsibilities

The Audit Committee held four scheduled meetings during
the year in alignment with its terms of reference and with
the Group’s financial reporting timetable.

A self-assessment internal review of the performance of
the Committee concluded that it had discharged its
responsibilities during the year. This was achieved by
comparing the Committee’s terms of reference with the
Committee’s actions and considerations during the year.

Following an earlier review, a separate meeting was
scheduled in late January with the sole purpose of
reviewing the proposed 2021 audit plan. Initial judgement
papers were presented to the Committee in February in
order that the Committee could review the general

Significant areas of judgement

The external auditor has scoped the audit appropriately
and subjected significant areas of judgement to robust
challenge.

The Committee considers there to be four significant areas
of judgement and these are detailed below.

At the January 2021 Audit planning meeting, the
Committee reviewed the effects of the revised auditing
standard on the subject of Auditing Accounting Estimates
and Related Disclosures (ISA UK 540) in the context of
what should be included within the management
judgement papers.

Due to materiality, the significant areas of judgement in
FY21 relate to the HCC division.

1. Loan loss provisioning
IFRS 9 requires management to record impairment
provisions based on the stage of credit impairment. The
recording of a provision requires management to make
complex judgements/estimates. Management has
adopted an approach to IFRS 9 impairment modelling,
based on discounting expected future cash flows whereby
the probability of default and loss given default are
assessed as a single combined measure.

The key judgement/estimate is around the estimation of
expected future cash flows used to determine the
provision.

The Committee regularly challenges the appropriateness
of management’s judgements, estimates and assumptions
underlying the impairment provision calculations and
concluded that the provisions held against the loan book
are reasonable.

The management approach to loan loss provisioning was
reviewed with the Committee and the external auditors
at one of the Committee’s scheduled meetings. This
underlying approach of using cash collection curves for the
previous five individual year-end snapshots of data with
three years forward-looking cash flows (in this case,
2015-2019 – see below) has remained consistent with
the previous year. However, in FY21, the Committee has
carefully considered the best way to deal with the impact
of Covid-19 on the impairment provision and income
recognition. It believed that continuing to use a flat
five-year average of the cash curves and EIR calculation
would materially understate the provision. It therefore
decided to use a weighting of the individual cash curves
to give more prominence to the most recent cohort.

Audit Committee continued

In this way, the cash collection curves have been weighted
to give prominence to the 2019 cohort using a weighting
of 60%, with a 10% weighting for each of the other four
cohorts. Management and the Committee feel that
weighting the selection of data towards the 2019 data,
which was impacted by the experiences of the Covid-19
pandemic, will give a closer fit to the performance of the
end of year loan book than the other years in the data
set. This approach was used for both the interim and
full-year results.

The overlay specifically used for the Covid-19 provision in
the FY20 results has been discontinued, and provisions
are being handled at an aggregate level.

After discussion with management and the external auditor,
the Committee considered the 2015-19 cash curves to be
appropriate for the purposes of determining the base level
of impairment provision required at year end in order to
establish the normalised adjusted profit before tax.
• The adoption of multiple cohorts to construct the cash
curves remained consistent with the Company’s IFRS 9
policy. The impact of transitioning from 2014-18 cash
curves used in FY20 to the 2015-19 weighted curves
used in FY21 was £1.4m. If the weighting had not been
applied and the curves were updated to the 2015-19
curves with equal weighting, the impact would have
been £0.8m

• FY21 actual cash collections were within c0.5% of those

forecast in the FY20 year-end provision.

Based on the review described above, the Committee
concluded that the underlying provisions held against the
loan book are reasonable.

2. Revenue recognition
IFRS 9 requires management to recognise interest using
the effective interest rate (EIR) method based on the stage
of credit impairment.

In order to arrive at the average expected life for each
product type, management has taken an average of the
expected lives of loans within the December 2015-2019
cohorts. These expected lives were adjusted where
appropriate to reflect any changes. However, in FY21, the
cohorts have been weighted to give prominence to the
2019 cohort using a weighting of 60%, with a 10%
weighting for each of the other four cohorts. This approach
was used for both the interim and full-year results. This
approach is deemed reasonable given the data sets align
with those used to construct the cash collection curves for
loan loss provisioning purposes (as described above),
thereby resulting in consistency across management’s
IFRS 9 modelling methodology. The Committee has
reviewed the expected life assumptions and
management’s judgement paper.

The management treatment of revenue recognition was
reviewed with management and the external auditors at
one of the Committee’s scheduled meetings. This
treatment has remained consistent with the previous year,
with the exception of the use of weightings to give
prominence to the most recent year, as described above.
The Committee has also challenged the expected life of

products by reference to both historical and forecast data
and comparability with the contractual life under IFRS 9.
As a result of this review, the Committee has concluded
that the Group’s treatment of this is reasonable.

3. Goodwill impairment
A third significant area of judgement/estimation is that of
goodwill impairment, following the acquisition of U
Holdings Limited in June 2019.

Management is required by accounting standards to
perform an annual impairment review for goodwill
balances. Assessment of impairment involves estimating
the fair value less costs to sell and value in use of certain
intangible assets at each reporting period. This requires an
assessment of whether there are any impairment triggers
which, given the nature of the assets, focuses on
performance and cash flows.

The Committee has reviewed the forecast cash flows in
the goodwill impairment model for U Holdings Limited. In
the short-term these are based on the expectations within
the current business plan, which are the key assumptions
in driving the first three years of projections. Longer terms
growth rates, which are at a lower level, reflect a level of
anticipated maturity, which together with the discount rate
used, are also key factors underpinning the forecast in
later years. The Company used a pre-tax weighted
average cost of capital (WACC) of 13.36% in order to
discount future cash flows. The WACC used to model the
discount future cash flows in FY20 was 13.22%. If this rate
was applied to the current model the headroom over the
discount future cash flows would increase by £1.97m. The
Committee was mindful that the price of the acquisition of
U Holdings Limited was set in a competitive bid and that
the price paid, whether measured in price per customer or
multiple of revenue, represented a significant discount to
the valuations placed on some of U Holdings Limited’s
larger mainstream competitors.

In considering the future projected cash flows, the
Committee reviewed the current performance of the
business and through the use of sensitised scenarios,
including a ‘Collect Out’ scenario as recommended by
the Regulator, is satisfied that performance is at a
sufficient level and that there was no requirement to
impair the goodwill that arose from the acquisition of
U Holdings Limited.

4. Going concern
At the January 2021 Audit planning meeting, the
Committee reviewed the advice provided by the auditors
regarding the effects of the new auditing standard (ISA
UK 570) which has come into force in respect of going
concern reviews. The new auditing standard requires
increased scrutiny of not only the outputs but the controls
and processes around the going concern review.

In addition to the usual elements of the going concern
review of viability, liquidity, risk assessment and funding,
there is an additional requirement for management and
the Directors to consider a more wide-ranging view of the
going concern review which includes not just a focus on the
numerical approach but also on the process.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

The cash collections covenant was reduced for the
remainder of the 2020 calendar year to reflect the
reduced performance during the early weeks of lockdown.
Since early May 2020 our collections performance was
already back to a level that exceeded the original covenant
and at no point in time was the original covenant
breached. The interest cover ratio covenant (EBITDA/
interest cost), previously reported x5.0, automatically
reduced on expiry of the mezzanine facility to x3.25.
We agreed with the funders to carry out this calculation
on a rolling 12-month basis rather than a 6-month rolling
basis because the impact of Covid-19 on month-to-month
impairments performance can be more volatile than is
normal. We also agreed, once the magnitude of the
Covid-19 adjustment to impairment was understood, to
define this as an exceptional item in accordance with the
facility agreement and therefore exclude it from the
interest cover calculation.

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 £35m, all in the
Revolving Credit Facility (RCF), compared to the £40m
funding commitment previously in place until December
2021. 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. The Committee believes
that to achieve this in such an economic and societal
upheaval for which there is no historic comparison, showed
great confidence by our lending syndicate in the
robustness of our business model.

The Committee is pleased that there are no going concern
issues for the Group. We have adequate headroom in our
facilities to meet our projected cash flows, have never
breached a loan covenant and our forecasts based on
current performance metrics do not lead to any
forecasted breach. Additional comfort is taken from the
debt balance at the end of February 2021 being £8.5m
which compares to £19.5m forecast in the Covid-19
business plan provided to the funders and £34m of drawn
down debt at the same point last year.

Critical accounting judgements/estimates and key sources
of estimation uncertainty

There are both critical accounting judgements/estimates
and key sources of estimation uncertainty contained
within this Annual Report. Further details can be found on
page 107.

Strategic Report Corporate Governance
Financial Statements

The Committee assessed the Group’s business plan and
subsequently ran a number of scenarios around the key
areas of sensitivities, namely:
•
• collections;
•
• cash availability.

loan book quality/credit risk; and

loan volumes;

In addition to the auditing requirements, the Group has
committed to the Regulator as part of its approach to
financial resilience, to document its approach to going
concern reviews and to include scenarios along the lines
described above.

As the Covid-19 pandemic developed during 2020, the
business had to quickly react to the new challenges facing
it. This was particularly the case in the HCC division where
pre-Covid-19 lockdown, 100% of loan sales and c.60% of
collections were dependent on human interaction. As it
became clearer that offices might be closed, the Company
had to redesign parts of its operations.

The Committee was reassured by the operational
resilience demonstrated by the Company as customer
loan repayments moved to being made remotely, and for
FY21 as a whole around 80% were made remotely mainly
through remote debit card payments and the portal. The
Company also rapidly developed a remote sales
application with the ability to deliver funds to customers
through direct bank transfers. During the whole of FY21,
62% of all loan sales were arranged remotely, with 67%
done this way in February 2021. Remote loan sales used
the same stringent affordability checks as loans arranged
face to face, with additional ID and bank validation checks
when the Company used a system of faster payments to
provide the loan directly into the customer’s bank account.
In addition, our customer support staff were equipped
with laptop computers and set up to work from home
through remote telephony.

The timing of the impact of Covid-19 on the Group, being
just three weeks into the new financial year, meant that
the budgets and management goals put in place for the
year were no longer relevant. At the same time, we were in
discussions with our funders to extend the existing debt
facility from August 2020 to the end of November 2021.
We therefore had to prepare a revised business plan
taking into consideration the adverse impacts of the
national lockdown and subsequent impacts of a post-
Covid-19 world such as the likely move to a more digital
relationship with our customers. The assumptions for this
were agreed with the funding syndicate and then
modelled during late March/early April.

This Covid-19 scenario was then used to assess our going
concern status and long-term viability of the business.
During the negotiations to extend the facility, the Covid-19
scenario was used in order to give the funding syndicate
sufficient assurance about the security of the asset as
this stressed the cash flows and covenant performance
metrics to the full. As a result of this stress test, the
funders agreed to make changes to two covenants in
the agreement:

Audit Committee continued

Meetings of the Committee

The Committee held four scheduled meetings during the
year ending 27 February 2021. It also held two meetings
to approve the FY20 final results and the FY21 interim
results, plus two additional meetings to review the impact
of Covid-19 on the financial results of the business.

Attendance records can be found on page 52.

The work undertaken by the Committee included the
following activities:
• A review of the full-year results including the Annual
Report and Accounts, preliminary results, and the
external auditor’s report. Providing advice (where
requested by the Board) on whether the Annual
Report and Accounts, taken as a whole, is fair,
balanced and understandable, and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy.
In reviewing these documents and determining
whether they were fair, balanced, and understandable,
the Committee also considered the work and
recommendations of management.

•

• An interim results’ review.
• A consideration of the appropriateness of accounting

policies and critical accounting estimates and
judgements/estimates, including a review of
information from the Chief Financial Officer and
reports from the external auditor setting out its views
on the accounting treatments and judgements/
estimates in the financial statements.

• A review of the external auditor’s control observations
arising from their external audit of the Company’s
2020 accounts, and the management’s response to
the recommendations included within it.

• A consideration of the level of non-audit work carried
out for the Group by the external auditor seeking
confirmation from the auditor that it maintains suitable
policies and processes to ensure independence. The
Committee has a non-audit work policy which is
reviewed annually.

• Overseeing the activities of the Group’s internal audit
function, including its resourcing, its planning, and the
output of its audit work.

• Approving the budgets for internal and external audit

activities.

• Reviewing the adequacy and effectiveness of the

Group’s internal audit function and the robustness of
the Group’s internal operational and financial controls.

• Reviewing access controls, and especially the

procedure to cover employee joiners, leavers and
reassignments.

• A review of the going concern assumptions when

considering interim and final results statements and
long-term viability in the case of the Annual Report &
Accounts, taking into account internal financial
projections.

Morses Club Annual Report & Accounts 2021

Review of the 2021 Annual Report and Financial
Statements

At the request of the Board, the Committee considered
whether, in its opinion, the 2021 Annual Report and
Financial Statements, taken as a whole, are fair, balanced,
and understandable and provide the necessary
information for the reader to assess the Group’s position
and performance, business model and key audit matters.

Process
In justifying this statement, the Committee considered the
process in place to create the Annual Report and Financial
Statements including:
•

the timely involvement of the Committee in the
preparation of the Annual Report and Financial
Statements which enabled it to provide input into the
overall messages and tone;
the input provided by Group senior management and
the process of review, evaluation, and verification to
ensure balance, accuracy and consistency;
the regular review of the Group’s internal audit reports
which are presented at Committee meetings and the
opportunity for the Non-Executive Directors to meet
both the external auditors and the Head of Internal
Audit without any executive of the Group being present
via the private sessions of the Committee;
the Committee meetings reviewed and considered the
draft Annual Report and Financial Statements in
advance of the final sign-off; and
the final sign-off process by the Board.

•

When forming its opinion, the Committee reflected on the
information it had received and its discussions through the
year. In particular, the Committee considered whether:

The report is fair
• Are the key messages in the narrative reporting

reflective of the financial reporting;

• Are the KPIs disclosed appropriate to understanding

the underlying performance of the Group?

The report is balanced
•

Is there a good level of consistency between the
narrative reporting and the financial reporting and is
the messaging in each consistent when read
independently of each other?

• Are both the statutory and adjusted financial

measures explained clearly and given equal priority
and prominence?

• Are the key judgements/estimates referred to in the

narrative reporting and the significant issues reported
in this Audit Committee Report consistent with the
disclosures and critical judgements/estimates set out in
the financial statements?

• How do these judgements/estimates and issues

compare with the risks that the external auditor will
include in its report?

The report is understandable
•

Is there a clear and understandable structure to
the report?

• Are the important messages highlighted appropriately
and consistently throughout the document with clear
signposting to where additional information can
be found?

Strategic Report

Corporate Governance

Financial Statements

•

Is the narrative within the Annual Report and Financial
Statements straightforward and transparent?

This assessment was also underpinned by the following:
• The papers on critical accounting judgements/

estimates and key sources of estimation uncertainty
presented by management to the Audit Committee
which documents the approach taken to the critical
accounting judgements/estimates and key sources of
estimation uncertainty documented in the financial
statements on Page 107. The assumptions and the
going concern statement were challenged by the
Committee as part of the year-end process.

• The consistency between the risks identified and the

issues that are of concern to the Committee.

• The comprehensive reviews of the Annual Report and
Financial Statements 2021 undertaken at different
levels in the Group which aims to ensure consistency
and overall balance.

• The external auditor’s report on the Annual Report and

Financial Statements 2021.

Conclusion
Following its review, and having taken into account all the
matters considered by the Audit Committee and brought
to their attention during the year, the Committee reported
to the Board that it was satisfied that the Annual Report
and Accounts, taken as a whole, are fair, balanced and
understandable.

External audit

The Group’s external auditor is Deloitte LLP.

The Committee is responsible for reviewing the objectivity,
independence and cost-effectiveness of the external
auditor.

The Committee also reviews the performance of the
auditor, taking into account the services and advice
provided to the Group and the fees charged for these
services. The CFO, Finance Director and other senior
executives provide feedback to the Board and Audit
Committees, on a regular basis regarding the services
received from the external auditor.

During the year, the Committee reviewed its non-audit
work policy which is designed to mitigate any risks
threatening, or appearing to threaten, the external
auditor’s independence and objectivity.

As part of the Committee’s remit, we monitor the level of
non-audit work carried out by the external auditor. During
the year to 27 February 2021, the level of audit fees
amounted to £312k (FY20: £410k), and non-audit fees
amounted to £35k (FY20: £85k). The ratio of non-audit
fees to audit fees was 11.2% (FY20: 20.7%). The non-audit
work carried out during FY21 related to the review of the
interim results.

Deloitte LLP was first appointed as auditor of Morses Club
Limited with effect from 1 March 2009 as a result of a
competitive audit tender. Being on AIM, the Company is
not a Public Interest Entity and therefore is not required to
review its external auditor after 10 years.

Following consultation with the management team, and
especially the Finance Department, the Committee agreed
to retain Deloitte for the FY21 audit. Deloitte has
significant experience and expertise within the Home
Collected Credit market. On this basis, the Committee has
recommended to the Board that Deloitte be proposed for
reappointment at the forthcoming Annual General
Meeting. Deloitte has indicated its willingness to continue in
office. The Committee confirms that there are no
contractual obligations that restrict the Committee’s
choice of external auditor in the future.

Internal Audit function

The Group has an internal audit function headed by an
experienced and highly qualified Head of Internal Audit
who reports directly to me, as Interim Chair of the Audit
Committee. The Internal Audit function objectively reviews
the Group’s internal control processes using a risk-based
internal audit plan and audit charter approved annually by
the Committee. The plan is based primarily on output from
the risk management process, but it is flexible and may
include ad hoc investigations and other assurance work
agreed by the Committee. Specialist technical knowledge
and resources are sourced externally when required.

During the year, the Internal Audit delivered a diverse
selection of reviews. This year saw assurance work on
areas such as credit referencing and underwriting,
supplier resilience, and information security. Internal
Audit also managed penetration testing to provide
assurance over technical infrastructure controls. This work
was performed by an experienced specialist technical
testing provider.

The Committee closely reviews the reports of the Internal
Audit function. Its work is primarily risk-based, utilising the
Group’s risk registers and consultation with the Executive
team to identify key risks which are then prioritised. The
Committee has found the reports to be both incisive and
timely, and presented in a way that is well articulated.

The Head of Internal Audit is invited to attend all of the
Committee’s meetings and meets the Committee
members on an annual basis without management
present. As Interim Chair of the Committee, I hold one-to-
one meetings every month with the Head of Internal Audit.

The Committee annually assesses the effectiveness of the
Internal Audit function and has satisfied itself that the
quality, independence, experience and expertise of the
function is appropriate for the business.

FRC Corporate Reporting Review team

There was no interaction with the FRC’s Corporate
Reporting Review team during the year.

Approval

On behalf of the Audit Committee

Joanne Lake
Interim Chair
13 May 2021

Risk & Compliance Committee

Dear Shareholder,
As Interim Chair of the Risk &
Compliance Committee, I am
pleased to present my report
which covers the year ended
27 February 2021.

The report provides insight
into the composition of the
Committee and the work that it
undertakes to ensure that:

• the Group remains compliant

with the FCA’s prevailing
rules, regulations and
guidance;

• the Group’s risk management
policies and procedures are
fit for purpose; and

• the Group’s risk management

framework is operating
effectively.

COMMITTEE MEMBERS

• Joanne Lake (Interim Chair from 13 February 2021)

• Sir Nigel Knowles

• Baroness Simone Finn (Chair to 12 February 2021)

Morses Club Annual Report & Accounts 2021

WHAT DOES THE COMMITTEE DO?

The principal purpose of the Risk &
Compliance Committee is to assist the
Board in its oversight of risk and regulatory
compliance within the Group with particular
focus on the FCA’s developing
requirements, risk appetite, risk profile and
the effectiveness of the Group’s internal
controls and risk management systems. The
Committee ensures that there is an ongoing
process for identifying, evaluating and
managing the principal risks faced by the
Company.

The Board and its Committees discharges
its duties in this area through:
• the review of financial performance

including budgets, KPIs, forecasts and
debt covenants on a monthly basis;
• the receipt of regular reports which

provide an assessment of key risks and
controls and how effectively they are
working;

• scheduling annual Board reviews of

business strategy, including reviews of
the material risks and uncertainties
facing the business;

• the receipt of reports from senior

management on the risk and control
framework as well as culture within the
Group; and

• the presence of a clear organisational
structure with defined hierarchy and
clear delegation of authority.

These arrangements are regularly
reviewed by the Committee and have been
in place for the year under review and up to
the date of approval of the Annual Report
and Accounts. Reports are also received
from management in respect of key
controls as set out in the Compliance
Monitoring Plan and reviewed on a regular
basis. The Committee closely monitors any
areas where a requirement for
improvement has been highlighted. These
are addressed by an improvement to
policies and procedures supported by the
introduction of enhanced technology for the
agents and operational management. The
Committee’s terms of reference are
available on the Group’s website.

The Committee held four meetings during
the year.

Strategic Report

Corporate Governance

Financial Statements

Composition and governance

In addition to my role as Interim Chair of the Risk &
Compliance Committee, I am also Interim Chair of the
Audit Committee. The Committee consists of all of the
independent Non-Executive Directors.

The other Directors are also invited to attend meetings,
together with appropriate members of the Executive team
in order to ensure that all relevant information is available
to the Committee.

How the Committee discharged its responsibilities

The Committee held four meetings during the year in
accordance with its terms of reference.

Both the Risk Executive Committee and the Credit Risk
Committee of the Morses Club division have reported
directly to this Risk & Compliance Committee and a
summary of their minutes are sent to all members of
this Committee. In addition, the Committee also receives
reports and updates from the Shelby Finance Limited
subsidiary.

A self-assessment internal review of the performance of
the Committee concluded that it had discharged its
responsibilities during the year. It also confirmed that it
was satisfied with the effectiveness of the Company’s risk
management function. As Chair, I am satisfied with the
functioning of the Committee, and the management
information provided by the Company.

The Morses Club strapline is ‘Putting You First’; customers
are at the heart of the Group’s culture, vision and values. In
recent years, the level of public and regulatory scrutiny of
the Group’s marketplace has grown. The Board recognises
the importance to the business of risk and compliance, and
the need to devote time and energy to these vital areas.

The Committee is responsible for reviewing and reporting
to the Board on a number of topics, including:
•

the Group’s risk appetite (the extent and categories of
risk regarded by the Board as acceptable for the
Group to bear);
the Group’s risk management and internal controls
framework (its principles, policies, methodologies,
systems, processes, procedures and people);

•

• processes and procedures to ensure that the Group
operates in compliance with external regulators, for
example, the FCA and the ICO;
the arrangement for the identification, assessment,
monitoring, management and oversight of risk with
regard to processes and procedures;
the effectiveness of the Group’s internal controls,
compliance monitoring and risk management systems;
and
the Group’s procedures for preventing and detecting
money laundering and fraud.

•

The Committee has a formal schedule for matters to be
discussed at the various meetings. These include a regular
review of:
•
•

the work done by the Executive Team’s Risk Committee;
the work done by the Executive Team’s Credit Risk
Committee;
the Money Laundering Reporting Officer’s (MLRO)
Report;
the Group’s assessment and management of conduct
risk;
the Group’s policies and practices for treating
customers fairly and ensuring consistently good
customer outcomes;
the Group’s compliance monitoring activities;
information and cyber security, including adherence to
GDPR;

•

•
•

• business continuity and disaster recovery plan and

testing thereof;
the Group’s overall levels and types of insurance.

•
• customer complaints;
•
financial crime;
• whistle-blowing; and
•

regulatory matters, including those relating to the FCA.

Activities during the year

During the year, some of the key topics addressed by the
Committee included cyber security and data protection,
Treating Customers Fairly, regulatory matters, customer
complaints, the implementation of new processes in order
to allow the HCC business to continue operating, and
further enhancements to our system for checking each
customer’s affordability.

Identifying risks

The Committee regularly reviews the procedures adopted
by the Company to manage its risk. The Committee and
the Board take a generally low-risk approach to risk. Risks
with a relatively high likelihood and/or impact are kept
under regular review.

Defined risk analysis criteria enable the Internal Audit
function to identify areas of focus on the Board Risk
Register. In consultation with the Audit Committee, the risk
analysis criteria have been set as the following:
• A significant variance between inherent and residual
risk. A large variance indicates where the business is
placing significant reliance on controls to be designed
and operating effectively to bring the risk to an
acceptable level.

• A high inherent rating. Within the business’s risk

registers, all risks with a high inherent rating have the
possibility of causing significant harm to the business if
mitigations are ineffective.

Using the above criteria, Internal Audit has been able to
identify focus areas on the Board Risk Register.

Risk & Compliance Committee continued

Cyber security and data protection

Cyber security has been a major topic for the Committee.
During the year, the Group continued to perform
penetration testing using external specialists. Regular
phishing exercises are conducted in order to maintain
employee vigilance against genuine attacks. Most data is
now encrypted at rest.

Regulatory matters

The Committee has been actively involved in the Group’s
continuing constructive dialogue with the FCA. The Group
has engaged proactively with the FCA throughout the
pandemic, from a lending, collections and forbearance
approach. We have also been involved with their wider
consumer credit thematic work into Covid-19, both from a
forbearance and financial resilience perspective. The
Group has submitted data to the FCA’s Covid-19 team
regarding financial resilience and operational matters on a
regular basis.

Treating Customers Fairly

At each meeting, the Committee reviews the Company’s
dashboard for Conduct Risk and Treating Customers
Fairly.

During the year, the HCC division has implemented further
enhanced affordability procedures incorporating
additional external data. This, together with a new loan
optimisation initiative, has enhanced our affordability
process and the customer journey for agents and
customers at the point of sale.

Whistle-blowing

During the year, the Committee reviewed the Company’s
whistle-blowing procedures. The subject has been
included in two online training courses which are
mandatory for staff to complete. They have also featured
on the staff intranet. The Company has consistently
highlighted to its staff the FCA’s whistle-blowing hotline as
well as providing both an internal contact telephone
number and email address, together with the contact
details of one of our Independent Non-Executive Directors.
During the year, there have been no reportable breaches
and no whistle-blowing instances.

Customer complaints

The Group generates excellent customer satisfaction rates
(as shown on page 17). The Committee continues to play a
part in ensuring that management maintains its clear
focus on Treating Customers Fairly and good customer
outcomes. The Committee always invites the Group’s
Customer Experience Director to its meetings.

The Committee noted the high standards achieved by the
complaints handling team following accreditation of the
new ISO 10002:2018. It was particularly pleasing to read
comments supporting the business ethos of continual
improvement, whilst satisfying stakeholder and customer
needs. Management systems and processes were found to
be effectively implemented in line with the spirit and
requirements of the new certification.

The Committee has also closely monitored the level of
complaints brought by claims management companies
and the developing approach of the Financial Ombudsman
Service. More details on this are contained in the Principal
Risks section on page 28.

Business continuity

The Committee was pleased to see that the Group has
continued to operate successfully since the start of the
Covid-19 pandemic. Morses Club was able to restart
lending to existing customers in April 2020 and
subsequently recommence lending to new customers in
July 2020.

The future

The Committee intends to initiate an external review of the
Group’s Financial Crime and Risk & Compliance functions
during the next 2 years. This will bring an outside
perspective which can be valuable every few years. A
section on the Group risks can be found on pages 26 to 31.

Covid-19
The Committee has been kept fully informed of the actions
taken by the Company in response to the unprecedented
effects of the Covid-19 virus. It reviewed these actions and
was very encouraged by the speed of response and the
diligence of the Company and its employees to the
challenges posed by this pandemic. Further details are
included on pages 4 to 5.

Covid-19 features in the Group’s risk register and the
Committee will continue to monitor the wellbeing of the
business, its customers, agents, staff and other
stakeholders, particularly in light of changes that are or
might be required as a result of any longer-term new ways
of working.

Approval

On behalf of the Risk & Compliance Committee

Joanne Lake
Interim Chair
13 May 2021

Morses Club Annual Report & Accounts 2021

Directors’ Remuneration Report

Strategic Report

Corporate Governance

Financial Statements

Directors’ Remuneration Report

The approach to Directors’ remuneration
has been completed taking account of
the market, regulatory environment, the
need to deliver shareholder return and
individual role responsibilities.

The Directors’ Remuneration Statement deals with the remuneration for those Directors in place during
the year to 27 February 2021. There have been a number of changes to the Executive team during the
year. The Non-Executive Director, Andy Thomson, agreed to become the Interim CFO on 17 March 2020
following the departure of Andrew Hayward. Andy then reverted to his role as NED on 1 January 2021
upon the appointment of Graeme Campbell as CFO.

Remuneration & Corporate Social Responsibility
Committee

The Board has appointed a Remuneration Committee (the
Committee) which is chaired by Joanne Lake (Independent
NED), and comprises Sir Nigel Knowles (Senior
Independent NED) and Stephen Karle (Chairman). Dave
Belmont (Company Secretary) also attends all meetings.

The Committee was established as a direct consequence
of the Company’s successful listing on the AIM Market in
May 2016.

The terms of reference for the Committee are available
online at www.morsesclubplc.com. The Committee has
studied Section B of the Best Practice provisions annexed
to the Listing Rules of the UK Listing Authority and has
voluntarily disclosed the information given below.

This Committee’s principal function is to determine the
Company’s policy on executive remuneration. No Director
plays any part in formal decisions about their own
remuneration. The HR & Communications Director and
Chief Financial Officer provide relevant updates on
financial and general Company remuneration matters as
invited individuals only. The Committee meets periodically
when it has proposals to consider – generally three times a
year. In any event, the Committee would meet no less than
twice a year.

The Committee’s policy aims primarily to attract, retain
and motivate high-calibre individuals via a competitive
remuneration package designed to suit the market, taking
account of regulatory requirements and the need to
create an appropriate mix between fixed and variable
rewards (both short and long term) for Directors.
Executives’ remuneration comprises basic salary,
performance-related bonus, pension benefits, other
benefits in kind and a deferred share plan granted
pursuant to the Morses Club PLC Group.

This Remuneration Report is due for approval at the
Annual General Meeting on 22 June 2021. Remuneration
proposals are supported by external benchmarking to

determine external market trends and to ensure that
Director remuneration is proportionate and in line with
individual and business performance.

Executive remuneration policy

As the organisation continues to grow and develop, we
expect that the remuneration policy will be reviewed.
However, the Executive team and the Committee continue
to be committed to continued diligence in setting executive
remuneration to ensure market relevance, and the delivery
of shareholder value as well as continuing to embed the
Company’s strategy.

Executive remuneration continues to be balanced against
the remuneration of the rest of the organisation. Our
remuneration policy is underpinned by core principles as
outlined below.
• Remuneration is determined within the Company’s risk
appetite, and is subject to oversight and approval by
the Remuneration Committee.

• Key FCA principles, including the principles of Treating

Customers Fairly apply throughout. Although all
employees should contribute towards a commercial
result, remuneration is designed to drive a ‘balanced
scorecard’ approach, based on responsible lending
principles and outstanding individual performance.
Delivery of good customer outcomes is central to the
Company’s remuneration approach.

• Remuneration structures will be developed in line with
the appropriate regulatory environment, including the
SMCR and the Company’s values.

• A blend of short-term and long-term incentives will

support the long-term security of the Company and its
employees.

• For key roles, remuneration will take account of pay
structures in the external market. Remuneration
structures will reflect the size and the scope of any
given role.

• Remuneration will be driven by Company as well as

individual performance, with a foundation of fairness
and ability to pay.

• We will communicate policies clearly and in a timely

manner.

Directors’ Remuneration Report continued

Business context and Committee decisions on remuneration

The Company successfully listed on AIM in May 2016. As detailed in the report, key elements of the Company’s business
strategy with regard to technology and acquisitions have been delivered. The Company has undergone a transformation
in the HCC division, with a large increase in the levels of remote lending and collections due to restrictions imposed by the
Covid-19 pandemic. The HCC division was able to restart lending to its existing customers from April 2020, and
subsequently to new customers from July 2020. The Digital division has made excellent progress in developing
foundations upon which to build in future years.

Directors’ remuneration

Base
Salary

Allowance
and Benefits

Pension
Contribution

Bonus

Deferred
Share Plan

Expenses

Total
Remuneration

Total
Fixed Pay

Total
Variable Pay

Name

Role

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

Paul

Smith1

CEO 302,940 301,950 18,813 34,513 17,040 14,603

– 155,925 140,483

77,306 3,313 21,702 482,589

605,999 338,793 351,066 143,796 254,933

Andrew

CFO 106,449 121,551

4,406 28,206

1,108

5,542

–

459 4,143 112,422

159,442 111,963 155,299

459

4,143

Hayward2

Andy

CFO 170,984

82,468

7,588

5,724 12,033

5,313

– 119,543 107,699

56,776

1517 2,227 299,821

272,051 190,605

93,505 109,216 178,546

Thomson3

Graeme

CFO 36,667

Campbell5

–

2,000

–

1,833

–

– 40,500

–

40,500

–

Total

617,040 505,969 32,807 68,443 32,014 25,458

– 275,468 248,182 134,082 5,289 28,072 935,332 1,037,492 681,861 599,870 253,471 437,622

Non-Executive Directors

Name

Role

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

2021
£

2020
£

Base
Salary

Allowance
and Benefits

Expenses

Total
Remuneration

Total
Fixed Pay

Total
Variable Pay

Stephen Karle Chairman

120,000

–

Sir Nigel

Knowles

Senior

Independent
NED

50,000

7,500

583

333

4,754

120,583

124,754

120,000

1,318

57,833

58,818

57,500

583

333

4,754

1,318

Joanne Lake NED, Chair of

50,000

7,500

–

57,500

–

Remuneration
Committee and
Interim Chair of
Audit and Risk
& Compliance
Committees

Peter Ward

NED

50,000

–

1,015

1,557

51,015

51,557

50,000

1,015

1,557

Baroness

Simone Finn6

NED and Chair of
Audit and Risk
& Compliance
Committees

Andy

NED

Thomson3,4

Les Easson7 NED

Patrick

Storey8

Total

NED and Chair of
Audit and Risk
& Compliance
Committees

47,756

41,090

9,551

8,218

–

2,514

57,307

51,822

57,307

49,308

–

2,514

12,500

33,333

50,000

25,000

–

8,910

–

2,673

–

12,500

33,364

12,500

33,333

761

591

50,000

25,761

50,000

25,000

–

12,174

–

11,583

–

761

591

380,256

378,333

24,551

25,891

1,931

11,526

406,738

415,750

404,807

404,224

1,931

11,526

1 P Smith is the highest paid Director.
2 A Hayward was appointed as CFO on 1 July 2019 and resigned on 16 March 2020. His base salary for 2021 of £106,449 includes £90,615 notice pay.
3 A Thomson stepped down as a NED on 17 March 2020 and became CFO on the same date.
4 A Thomson stepped down as CFO on 1 January 2021 and became a NED on the same date.
5 G Campbell was appointed as CFO on 1 January 2021.
6 S Finn was appointed as a NED on 5 May 2019 and resigned on 12 February 2021.
7 L Easson was appointed as a NED on 1 September 2019 and resigned on 17 March 2021.
8 P Storey stepped down as a NED on 4 May 2019.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Directors’ remuneration policy

Service contracts
All Executive Directors were reissued with a revised service contract as part of the arrangements for the IPO. Service
contracts cover a continuous period (ie, not a fixed term) and a notice period of six months applies to both the Company
and to individuals. There are no compensation payments for loss of office.

Letters of appointment
Non-Executive Directors do not have service contracts but are appointed under letters of appointment which have been
updated in line with the requirements of the Senior Manager & Certification Regime.

The appointments are for three years but they are subject to annual re-election. All new appointments would be made
following recommendations by the Nominations & Succession Committee. No compensation is payable in the event of
early termination except during the notice period.

Allowances and benefits
Taxable benefits received in the period include company cars or car allowances, fuel allowances and private medical
insurance. These apply to Directors only. The Chairman and Non-Executive Directors do not receive any allowances or
benefits.

Life assurance
In line with all employees, Executive Directors are entitled to life assurance equivalent to four years’ salary.

Holidays
Executive Directors are entitled to 30 days’ paid holiday in addition to UK public bank holidays. The holiday year runs
from January to December. In addition, Directors can purchase an additional 10 days’ holiday in each calendar year.

Pension
Executive Directors are enrolled into the Company pension scheme. Personal contributions are matched by the Company
up to a maximum of 7%. This level of Company contribution is the same for all employees and Directors, and therefore
complies with Provision 38 of the 2018 Corporate Governance Code recommendations regarding executive pensions.

Annual bonus
The annual bonus is the value of the bonus earned within the year and can be up to 100% of salary, based on the
performance conditions outlined below. Any earned bonus is payable in August following the year end in February,
conditional on independent audit and confirmation by the Committee.

No bonus was paid to the Directors in the year ended 27 February 2021.

Performance bonus conditions
The performance bonus is payable if the Executive Director has delivered key objectives, including targeted adjusted
profit before tax1, promoting good-quality customer outcomes (ie, Treating Customers Fairly), maintenance of headline
customer satisfaction score and completing key strategic projects and acquisitions, all underpinned by regulatory
compliance.

1 Definitions are set out in the Glossary of Alternative Performance Measures on pages 138 to 141.

Directors’ Remuneration Report continued

Deferred share plan (this section is subject to audit)

Executive Directors may participate in a deferred share plan, a three-year plan (commencing 2016/17) awarded through
an annual deed of grant, subject to the discretion of the Remuneration Committee. There have been no variations to the
terms and conditions or performance criteria for share options during the financial year. Awards under the Deferred
Share Plan (DSP) may be in the form of:
• A conditional right to acquire Ordinary Shares at no cost to the participant, or an option to acquire Ordinary Shares
at no cost to the participant or a right to receive a cash amount relating to the value of a certain number of notional
Ordinary Shares.

• Share awards will be subject to performance conditions which are: delivery of targeted adjusted profit before tax1,

total shareholder return (measured over a period of one year’s satisfactory audits), compliance training, and
individual executive performance.

• Awards will be granted on an annual basis.
• Awards will vest on the third anniversary following the grant date (unless determined otherwise by the Remuneration

Committee). Awards will lapse should an individual leave employment and are not transferable.

2018/19 Award
The table below details the maximum earnings from the deferred share plan in 2018/19. The share price at the date of
the award was £1.54.

Name

Paul Smith
Andy Thomson

Role

CEO
CFO

Percentage
of Salary

100
100

Share
Award

213,400
163,600

2019/20 Award
No shares were awarded for 2019/20 since the TSR performance condition measure was not met.

2020/21 Award
The table below details the maximum earnings from the deferred share plan in 2020/21. The issue price of the shares
was £0.622.

Name

Paul Smith
Andy Thomson
Graeme Campbell

Role

CEO
Interim CFO
CFO

Percentage of
Salary

100
100 pro rata
100 pro rata

Share Award

222,162
120,744
53,779

1 Definitions are set out in the Glossary of Alternative Performance Measures on pages 138 to 141.
2 The Committee was unwilling to offer a share award to the Executives based on the reduced share price as at May 2020. The award was therefore

granted using a deemed share price of £1.36 which was the average share price for the awards in the previous four years.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

2017 vesting
The Committee confirmed that the performance conditions for the 2017 scheme were satisfied and the awards due
vested in January 2021. The vesting was delayed pending the announcement of the Company’s final FY20 results and
the 2021 interim results in late November and December 2020 respectively. The CEO exercised only that element of the
option to satisfy HMRC obligations (sell to cover).

In addition, Andy Thomson and Les Easson, who were both Executives at the time that the award was granted in
May 2017 also exercised only that element of their options to satisfy HMRC obligations. No further shares have been
exercised.

Name

Paul Smith
Andy Thomson
Les Easson

Role

CEO
NED
NED

Directors’ shareholdings

Shares Vested

239,732
183,787
137,615

Sell to
Cover

(115,071)
(88,217)
(66,055)

Shares
Retained

124,661
95,950
71,560

The table below details the shareholdings and other share interests of the Directors as at 27 February 2021.

Name

Paul Smith
Graeme Campbell
Andy Thomson
Stephen Karle
Peter Ward
Les Easson1
Sir Nigel Knowles
Joanne Lake

Role

CEO
CFO
NED
Chairman
NED
NED
Ind NED
Ind NED

Ordinary
Shares

Percentage
Shareholding

579,074
40,000
3,229,691
227,991
400,000
156,221
55,148
23,148

0.44
0.03
2.44
0.18
0.31
0.12
0.04
0.02

1 Les Easson holds an interest through Hay Wain Ltd and subsequently resigned on 17 March 2021.

All employee remuneration

In setting the remuneration policy for Directors, the pay and conditions of other employees are considered along with
any increases in salary. The Committee is provided with data on the remuneration structure for those management level
tiers below the Executive Directors; it uses this information to ensure a consistent approach to remuneration throughout
the Company.

There is no formal consultation with employees regarding the remuneration of Executive Directors.

All Morses Club employees have the opportunity to participate in our key benefits such as life assurance, private health
and the Company pension scheme.

The Company issues shares to Morses Club employees under the framework of the approved employee share option
scheme. No employee shares were awarded in FY21, as the performance conditions in FY20 were not met.

Directors’ Remuneration Report continued

Changes in Directors’ pay in relation to all employees

The table below shows the percentage change in remuneration of the Directors and employees of the Group between
the 2020 and 2021 financial years.

Employees1,2

Executive Directors

Paul Smith3

Andrew Hayward4

Andy Thomson5

Graeme Campbell6

Non-Executive Directors

Stephen Karle

Sir Nigel Knowles

Joanne Lake

Peter Ward

Simone Finn7

Andy Thomson5

Leslie Easson8

Salary or
Base Fee

Benefits

(8)%

N/A

108%

N/A

19%

(62)%

100%

(61)%

N/A

15%

N/A

(88)%

(75)%

(35)%

(100)%

Bonus3

(69)%

(40)%

N/A

(39)%

N/A

The strict legal requirement is to only provide details of employees of Morses Cub PLC, so we have decided to voluntarily disclose in respect of all Group
employees.

2 Note that calculation is on a FTE basis.
3 No annual performance bonuses were paid in 2021.
4 A Hayward was appointed as CFO on 1 July 2019 and resigned on 16 March 2020.
5

A Thomson stepped down as a NED on 17 March 2020 and became CFO on the same date. On 1 January 2021, he stepped down as CFO and became a
NED on the same date. The increase in his salary as an Executive Director was primarily caused by the additional period worked compared to 2020. The
decrease in his salary as a Non-Executive Director was caused by the related reduction in the period worked compared to 2020.

6 G Campbell was appointed as CFO on 1 January 2021.
7

S Finn was appointed as a NED on 5 May 2019 and resigned on 12 February 2021. The increase in her fee as a Non-Executive Director was solely the
result of the additional period worked compared to 2020.
L Easson was appointed as a NED on 1 September 2019 and resigned on 17 March 2021. The increase in his fee as a Non-Executive Director was solely
the result of the additional period worked compared to 2020.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

CEO pay ratio
We have detailed the CEO pay ratio below.

The updated CEO pay ratios which now include the value of shares vested in the period are:

FY21

Percentile

25th
Median
75th

FY20

Percentile

25th
Median
75th

Value CEO Pay Ratio

£28,915.15
£32,521.68
£42,067.51

17:1
15:1
11:1

Value CEO Pay Ratio

£26,715.78
£32,734.00
£41,702.56

31:1
25:1
20:1

The variation from the ratio in FY20 is due to the absence of any bonus payments during the year.

Relative importance of spend on pay

The total pay (including performance bonuses) for all Morses Club PLC employees for FY21 is £22,599,004 compared to
£20,325,025 for FY20. The total pay for Shelby Finance Limited for FY21 is £5,293,110 (FY20: £6,753,487).

Corporate Social Responsibility (CSR)

Due to Covid-19 restrictions, the Company has run a limited CSR programme during FY21. Staff raised more than
£7,500 for a local hospice by taking part in a virtual sponsored 10k event, and the Company donated 50 surplus monitors
and other IT equipment to a local college, as well as small charitable donations for other local causes.

Joanne Lake
Chair – Remuneration & Corporate Social Responsibility Committee
13 May 2021

Disclosure Committee

The Company is required to make timely and accurate disclosure of
all information required to meet the legal and regulatory obligations
and requirements arising from its listing on the London Stock
Exchange under the Market Abuse Regulations (MAR).

COMMITTEE MEMBERS

Stephen Karle (Chairman)

The Disclosure Committee exists to help the Company meet these
requirements. The Committee’s responsibilities include determining
the timely disclosure of material information, and assisting in the
design, implementation and periodic evaluation of disclosure controls
and procedures.

Sir Nigel Knowles

Joanne Lake

Baroness Simone Finn (resigned

12 February 2021)

Peter Ward

Andy Thomson

Les Easson (resigned 17 March 2021)

Paul Smith (CEO)

Graeme Campbell (CFO) (from 1

January 2021)

Although AIM-listed companies are no longer required to maintain
insider lists, there is still an obligation to take all reasonable steps to
ensure that people with access to inside information acknowledge
their legal and regulatory duties, and a company must be able to
provide the FCA with an insider list, upon request. In practice, this
means Morses Club has chosen to retain an up-to-date insiders’ list.

During the year, the Board sought advice from its Nomad as to
whether the Company had a disclosure obligation either under MAR
or the AIM Rules. It was confirmed that there was no such obligation
at the time.

The Risk & Compliance Committee, the Audit Committee, and
ultimately the Board itself were all heavily involved in discussions
and the continuing disclosures regarding Covid-19. The Disclosure
Committee did not therefore believe it was appropriate to duplicate
this effort.

The Committee held one meeting during the year.

Approval

On behalf of the Disclosure Committee

Stephen Karle
Chairman
13 May 2021

Morses Club Annual Report & Accounts 2021

Directors’ Report

Strategic Report

Corporate Governance

Financial Statements

Directors’ Report

The Directors present their report and audited
consolidated financial statements for the year
ended 27 February 2021 and up to the date of
signing the financial statements.

The Corporate Governance Statement set out on pages 46 to 74 forms part of this report.

Information about the use of financial instruments by the Company and its subsidiaries is given in Note 26 to the
financial statements.

DIRECTORS

The Directors of the Company who served during the year ended 27 February 2021, and up to the date of this report, are:

Stephen Karle Non-Executive Chairman

Sir Nigel Knowles Senior Independent Director

Joanne Lake Independent Non-Executive Director

Peter Ward Non-Executive Director

Paul Smith Chief Executive Officer

Andrew Hayward Chief Financial Officer until 16 March 2020

Andy Thomson Non-Executive Director until 17 March 2020; Interim Chief Financial Officer from 17 March to

31 December 2020; Non-Executive Director since 1 January 2021

Baroness Simone Finn Independent Non-Executive Director until 12 February 2021

Les Easson Non-Executive Director until 17 March 2021

Graeme Campbell Chief Financial Officer from 1 January 2021

Sheryl Lawrence Independent Non-Executive Director from 1 May 2021

Michael Yeates Independent Non-Executive Director from 1 May 2021

Gary Marshall Executive Director (Chief Operating Officer) from 1 May 2021

Details of the remuneration, service agreements and interests in the share capital of the Company of the Directors are
given in the Remuneration Report on pages 67 to 73.

Biographical details of the current Directors are given on pages 41 to 43. As recommended by the July 2018 edition
of the UK Corporate Governance Code, all continuing Directors stand for re-election at the Company’s Annual
General Meetings.

Directors’ Report continued

Dividend

Information contained in other sections

The Directors have a general policy of assessing dividend
payments in the context of consolidation opportunities,
new product investment requirements and the broader
growth strategy of the Company. Under normal
circumstances, the Board intends to distribute between
50% and 60% of adjusted earnings after tax to
shareholders as dividends.

In due course, the Board may also consider increasing the
dividend payout ratio should the funding structure of the
Company enable an increase in gearing and/or the
Company finds itself with surplus cash over and above its
investment opportunities.

On at least an annual basis, and before proposing a
dividend payout, the Directors will assess the Company’s
going concern assumptions through a detailed review of
the future capital and liquidity requirements that support
longer-term strategic plans. This assessment ensures that
the Company will be able to continue in operation and
meet the needs of its shareholders and other stakeholders,
beyond a proposed dividend payout. Further details of this
review can be found in the Viability statement on page 31.

Following detailed reviews of the performance of the
business and its working capital requirements, and taking
into consideration that the Group has not furloughed any
staff, deferred any liabilities to HMRC or taken advantage
of any government-backed loan scheme during the
Covid-19 pandemic, the Board has concluded that it is able
to make a final dividend payment. Therefore, 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 payable on 30 July 2021 to
Shareholders on the register at close of business on 2 July
2021. This would represent a total dividend of 3.0p per
Ordinary Share for 2021 (2020: 3.6p).

The Company’s principal risks and uncertainties, together
with any emerging risks, that are required to be included
within the Report of the Directors, can be found within the
Strategic Report on pages 27 to 31.

The Company’s environmental policies and actions are
contained in the Strategic Report on page 37.

Anti-bribery and corruption

The corporate policies reflect the requirements of the
Bribery Act and a corporate hospitality register is
maintained using a risk-based approach. Although the
risks for the Group arising from the Bribery Act 2010
continue to be assessed as low, all parts of the business
are required to undergo appropriate training and
instruction to ensure that they have effective anti-bribery
and corruption policies and procedures in place. Every
staff member receives regular and relevant training on
bribery and corruption using the Company’s internal
training system. Compliance is regularly monitored by the
Executive Risk Committee and is subject to periodic review
by the Group’s Internal Audit function.

Whistle-blowing

The Company has a very robust whistle-blowing policy
and procedures. The Board monitors this on a regular
basis through reports from the Risk & Compliance
Committee. The Company has consistently highlighted to
its staff the FCA’s whistle-blowing hotline as well as
providing both an internal contact telephone number and
email address, together with the contact details of one of
our Independent Non-Executive Directors. The subject is
included in online training courses which are mandatory
for staff to complete and is also featured on staff
screensavers and the staff intranet.

Capital structure

Directors’ and officers’ insurance

Details of the authorised and issued share capital, together
with details of any movements in the Company’s issued
share capital during the year, are shown in Note 22.

As at 27 February 2021, the Company had
132,530,539 Ordinary Shares of 1 pence each in issue
(2020: 131,244,444).

The Company has throughout the year maintained
directors’ and officers’ insurance for the benefit of the
Company, the Directors and its officers. The Company also
provides qualifying third-party indemnity arrangements
for the benefit of all of its Directors in a form and a scope
which comply with the requirements of the Companies
Act 2006.

The Company’s issued Ordinary Share capital comprises a
single class of Ordinary Shares which carry no right to
fixed income. The rights attached to the Ordinary Shares
are set out in the Articles of Association. Each share
carries the right to one vote at general meetings of
the Company.

With regard to the appointment and replacement of
Directors, the Company is governed by its Articles of
Association, the Companies Act and related legislation.
The Articles themselves may be amended by special
resolution of the shareholders. The powers of Directors are
described in the Main Board terms of reference, copies of
which are available on request, and the Corporate
Governance Statement on pages 46 and 47.

Employees

It is our policy to make adequate provision for the
wellbeing, health and safety of our employees and
self-employed agents. We are committed to offering
equal opportunities for all employees, irrespective of age,
gender, ethnicity, race, religion, belief, sexual orientation,
disability, marital status and civil partnership. All
employees are treated fairly and equally.

Morses Club treats applications for employment from
disabled persons in the same way as those from
non-disabled applicants and selects on the basis of
individual ability, experience and role requirements.
Where existing employees become disabled, we
endeavour to offer them continuing suitable work within
the Company, offering retraining where necessary.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

We encourage our employees to engage with the
development of our organisation. To promote this, the
Chief Executive Officer and the Executive team publish
regular updates on important or topical issues and
highlight these via Teams meetings, informal briefings,
videos and our intranet.

functional representatives, removing field representatives
and introducing new channels including regular employee
surveys, Teams channels and other feedback mechanisms
to ensure everyone is involved. At the time of writing, all
employees continue to work from home, in accordance
with government guidelines.

The Company uses an online Learning Management
System (LMS) to train and assess all employees and it can
be easily accessed from any location, including at home.
Everything from induction programmes, regulatory
training modules and management development
programmes are available on the LMS.

All employees and self-employed agents undertake
monthly regulatory training modules. These monthly
modules are compulsory for all and completion is
monitored and reported at Board level. This ongoing
training and assessment cycle ensures that our employees
have the necessary skills to work in this highly regulated
industry, providing great customer service and treating
customers fairly. This has continued uninterrupted
throughout the pandemic.

Morses Club provides development programmes that are
endorsed by the Institute of Leadership & Management
(ILM), the UK’s leading provider of leadership, coaching
and management qualifications and training. These
programmes are designed around each role and relate to
work-based activities designed to improve a manager’s
skills and assist with career progression. The online
programme consists of six courses with a work-based
project and assessment. There are 21 employees currently
on the programme and a further seven employees who
have already successfully completed it.

During the year, the two Company training teams (Morses
Club and Shelby) were merged into a single Group
function. This has allowed us to share management
development programmes and resources to provide a
consistent approach to development for employees across
the Group.

The majority of employees wanted a holiday purchase
scheme whereby they can buy or sell their holidays. As a
result, a holiday purchase scheme was launched to all
employees for the 2020 holiday year.

The Company offers a defined contribution pension
scheme, matching employee contributions up to a
maximum of 7% of salary.

The Company has had a Health & Safety Committee for
many years. Its monthly reports are reviewed at each
Board meeting. Prior to Covid-19, the Health & Safety
Committee contained a significant number of
representatives from our HCC field network. During
lockdown, with everyone working remotely, these
representatives did not come into contact with other
employees on a daily basis. In order to keep in touch with
all employees who are currently working from home, we
have reconstituted the Committee, keeping a core of key

Employee Share Schemes

The Group first introduced an unapproved share option
scheme on 19 October 2017 and awarded share options
to all of its employees who had been employed for a
minimum of 12 months at 1 October 2017. These shares
vested in January 2021, following the announcement of
the Company’s final FY20 and interim FY21 results in
November 2020 and December 2020 respectively, and
participants were able to purchase their Morses Club
shares at the nominal price of 1p each.

In February 2018, Hay Wain Group Limited ceased to be a
majority shareholder of the Company, and as a result, the
Company was permitted to implement an HMRC tax
advantaged plan for the first time. In November 2018, the
Company created a new Share Incentive Plan (the SIP).
In late 2019, the SIP was presented with an award in the
<500 employees category by ProShare, the voice of the
employee share ownership industry in the UK. In December
2018 and 2019, all eligible employees applied to
participate in the SIP and have each been given shares in
the Company representing approximately 3.25% of their
salary (based on the average share price during the few
days prior to the award).

The free SIP shares are held in trust for a minimum holding
period of three years, and employees who participate will
lose their award if they resign or are dismissed from their
employment during this three-year period.

During the time that the shares are held in the Trust,
employees are able to vote at the AGM and receive
dividends, so giving them a real stake in the business in
which they work.

Regrettably, due to the Company failing to meet its profit
targets in FY20, no award was made to employees in
December 2020. However, providing the Company
achieves its profitability targets, the Group intends to
continue to award shares under the SIP to its employees
annually in future years.

Employee engagement

The Directors regard employee involvement as essential to
the healthy development of the business.

Since the Company’s IPO in May 2016, the Company’s
objective has been clear and resolute – to ensure that as
many Morses Club employees hold shares as possible.

Following the share awards described above, 100% of the
Company’s employees who were employed prior to
October 2018 hold shares under the Share Incentive Plan.

Directors’ Report continued

Energy efficiency action
During the financial period, the organisation has reduced
its property estate from c. 90 properties to one, which
has had a direct impact on energy impact and usage.
Reduced travel has also resulted in a significant reduction
in carbon emissions.

Substantial interests in shares

As at 28 April 2021, the Company has been notified of the
following substantial interests of 3% or more in its Ordinary
Shares:

Hay Wain Group

Premier Miton Investors

Number of
Shares

% Issued
Capital

47,683,640

35.98

16,558,127

12.49

Artemis Investment Management

11,213,960

Amati Global Investors

J O Hambro Capital Management

9,554,948

9,527,666

Hargreaves Lansdown Stockbrokers

5,355,073

Janus Henderson Investors

5,331,310

8.46

7.21

7.19

4.04

4.02

Relationship with our controlling shareholder

As a result of the IPO on 5 May 2016, the shareholding of
the controlling shareholder in the Company, Hay Wain
Group Limited, reduced from 100% to 51%.

On 21 February 2018, Hay Wain Group Limited sold 14.2%
of the shares in the Company and at 27 February 2021
continues to hold 35.99% of the shares in the Company.

Hay Wain Group Limited has entered into a relationship
agreement which contains provisions to ensure that, inter
alia, there is no interference with the independent
operation of the Board and that the Company’s
transactions with Hay Wain Group Limited are effected at
arm’s length and on a normal commercial basis.

Hay Wain Group Limited can, subject to applicable laws
and regulation, appoint one Director to the Board for as
long as it holds more than 20% of the rights to vote at a
General Meeting of the Company. The Director appointed
under this right is Peter Ward. The Board confirms that,
since the admission of the Company’s shares on to AIM,
the Company has complied with the independence
provisions included in the relationship agreement and that,
so far as the Company is aware, Hay Wain Group Limited
and its associates have also complied with such provisions.

The Company has also introduced Perkbox to all of its
employees which provides access to hundreds of perks
and discounts.

Under the 2018 Corporate Governance Code, the Board
is expected to engage with the workforce using one or a
combination of the following three methods:
• A Director appointed from the workforce.
• A formal workforce advisory panel.
• A designated Non-Executive Director.

After considering the options, the Board unanimously
appointed Les Easson as the Company’s Designated
Director responsible for employee engagement, with
effect from January 2020. As Operations Director for
many years, Les had been responsible for engaging with,
and motivating, the large Operations team, and is
therefore the ideal person to fulfil this role. On 17 March
2021, Les resigned as a Director and the Nominations &
Succession Committee has started the task of selecting a
replacement. As a result, the Company will not comply with
the Code until a replacement Designated Director is
appointed.

Energy and carbon reporting

FY21 is the first year we are required to report under
the Streamlined Energy & Carbon Reporting (SECR)
framework. The Company has gathered data regarding
scope 1 and scope 2 carbon emissions (as defined
by the GHG Protocol) for the financial year spanning
1 March 2020 to 27 February 2021.

Emissions and energy usage

Emissions source

Scope 1 (tCO2e) Natural gas

Fuel for transport

purposes

2020-
2021

2019-
2020

117

309

1,216

335

1,333

Total Scope 1

(tCO2e)

Total Scope 2

(tCO2e)

Intensity ratio
– tCO2e per
number of
employees

Electricity

121

0.74

2.53

Methodology
The organisation has taken guidance from the UK
Government Environmental Reporting Guidelines
(March 2019), the GHG Reporting Protocol – Corporate
Standard, and from the UK Government GHG Conversion
Factors for Company Reporting document for calculating
carbon emissions.

Morses Club Annual Report & Accounts 2021

Strategic Report

Corporate Governance

Financial Statements

Political donations

Our auditor

The Company made no political donations in 2021
(2020: £nil).

Post balance sheet events

On 1 May 2021, the Company appointed Sheryl Lawrence
and Michael Yeates as Independent Non-Executive
Directors, and its COO, Gary Marshall, as an Executive
Director.

Funding

During the period we extended our loan facility with the
incumbent lender consortium to December 2021, reducing
the facility limit to £40m. In May 2021 we successfully
reached agreement with a new two lender consortium,
for a more cost efficient and slightly lower £35m facility,
extended to December 2022.

The new facility limit was reduced from £40m to £35m to
better match the needs of the business post Covid-19. The
new facility also unlocks access to funding for our Dot Dot
loan products in addition to ongoing support of our HCC
products. By reducing the facility, non-utilisation charges
for any given level of borrowing will be reduced and
therefore the overall cost of funding.

Disclosure of information to the auditor

Deloitte LLP has expressed its willingness to continue in
office as auditor and a resolution will be proposed at the
Annual General Meeting to reappoint Deloitte LLP as the
Company’s auditor and to give the Directors the authority
to determine the auditor’s remuneration.

Notice of Annual General Meeting

The notice convening the Annual General Meeting to be
held virtually on 22 June 2021, together with an
explanation of the resolutions to be proposed at the
meeting, is contained on the Company’s website at
www.morsesclubplc.com/investors. Shareholders may
join the AGM by contacting the Company in advance at
investors@morsesclubplc.com.

By order of the Board

Dave Belmont
Company Secretary
13 May 2021

The Directors confirm that:
•

•

so far as each Director is aware, the auditor is aware of
all relevant audit information; and
the Directors have taken all necessary steps that they
ought to have taken as Directors in order to make
themselves aware of any relevant audit information,
and to establish that the auditor is aware of that
information.

This confirmation is given and should be interpreted in
accordance with the provisions of s418 of the Companies
Act 2006.

Directors’ Responsibilities

The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.

Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the group financial
statements in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006. Under company law, the Directors
must not approve the accounts unless they are satisfied
that they give a true and fair view of the state of affairs
of the Company and of the profit or loss of the Company
for that period. In preparing these financial statements,
International Accounting Standard 1 requires that
Directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in

a manner that provides relevant, reliable, comparable
and understandable information;

• provide additional disclosures when compliance with
the specific requirements in IFRS are insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the
entity’s financial position and financial
performance; and

• make an assessment of the Company’s ability

to continue as a going concern.

The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.

The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ
from legislation in other jurisdictions.

Directors’ responsibility statement

We confirm that to the best of our knowledge:
a) the financial statements, prepared in accordance

with International Financial Reporting Standards as
adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and
profit or loss of the Company and the undertakings
included in the consolidation taken as a whole;
b) the Strategic Report includes a fair review of the

development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties
that they face; and
the Annual Report and financial statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy.

This responsibility statement was approved by the Board
of Directors on 13 May 2021 and is signed on its
behalf by:

Paul Smith
Director
13 May 2021

Graeme Campbell
Director
13 May 2021

Morses Club Annual Report & Accounts 2021

Financial Statements

Strategic Report

Corporate Governance

Financial Statements

Financial
Statements

82
93
94
95
96
97
99
142

Independent Auditor’s Report

Independent Auditor’s Report
To the Members of Morses Club PLC

Report on the audit of the financial statements

1. Opinion
In our opinion the financial statements of Morses Club PLC (the ‘parent company’) and its subsidiaries (the ‘group’):
• give a true and fair view of the state of the group’s and of the parent company’s affairs as at 27 February 2021 and

of the group’s profit for the year then ended;

• have been properly prepared in accordance with international accounting standards in conformity with the

requirements of the Companies Act 2006; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise:
•
•
•
•
•

the consolidated income statement;
the consolidated and parent company balance sheet;
the consolidated and parent company statement of changes in equity;
the consolidated and parent company cash flow statements; and
the related notes 1 to 31.

The financial reporting framework that has been applied in their preparation is applicable law and international
accounting standards in conformity with the requirements of the Companies Act 2006.

2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.

We are independent of the group and the parent company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical
Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Corporate Governance

Financial Statements

3. Summary of our audit approach

Key audit
matters

The key audit matters that we identified in the current year were:
Going concern;
Loan impairment provisions;
Revenue recognition;
Impairment of goodwill; and
Contingent liability.

Within this report, key audit matters are identified as follows:

Newly identified

Increased level of risk

Similar level of risk

Decreased level of risk

Materiality

The materiality that we used for the group financial statements was £724,000 which was determined
on the basis of 1% net assets.

Scoping

The group is made up of Morses Club PLC which is the main trading entity and its four subsidiaries
being Shopacheck Financial Services Limited, Shelby Finance Limited, U Holdings Limited and
U Accounts Limited.

Our full audit scope covered 100% of revenue, 100% of profit before tax and 100% of net assets across
the group.

Significant
changes in our
approach

We have expanded our key audit matter around loan impairment provisioning and revenue recognition
to include cohort weightings as management’s methodology has changed since prior year; in previous
years management weighted each annual cohort of data equally (20%) however in FY21 cohort
weightings have been applied to give prominence (60%) to the most recent 2019 cohort, encapsulating
the Covid-19 performance of the loan book, and 10% for each of the four previous cohorts.

Due to the noticeable increase in complaints raised by Claims Management Companies (“CMC’s”)
within both the company and the wider home collect credit industry, we have identified a new key audit
matter around the consequent impact of the volume of complaints on the group’s contingent liabilities.

4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.

Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going
concern basis of accounting is discussed in section 5.1.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the group’s and parent company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.

5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.

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Independent Auditor’s Report continued

5.1. Going concern

Key audit
matter
description

The ongoing uncertainty surrounding the impact of Covid-19 and the continuing attention of regulators
and CMC’s on the home collect credit sector, has continued to increase the complexity associated with
the Directors’ assessment of the group’s and company’s ability to continue as a going concern over
a period of at least 12 months from the date of approval of the financial statements. In addition,
there is an increased risk associated with the appropriateness of disclosures over the going concern
assessment in light of an enhanced focus from CMC’s on the home collect credit sector.

How the scope
of our audit
responded to
the key audit
matter

In making their assessment, the Directors consider that the going concern basis of accounting is
appropriate and that there is no material uncertainty related to going concern. The Directors have
disclosed their explanations and conclusions on the going concern basis and the key matters
considered, including judgements in relation to (i) the ongoing confidence in the group’s and company’s
profitability, liquidity and funding positions, particularly in light of the extension of the borrowing facility
to December 2022, as well as (ii) the capability of the operational resilience and supplier viability
framework in place over the assessment period.

Due to the increased audit effort and level of judgements involved in the going concern assessment we
have considered the going concern assessment and related disclosures as a key audit matter.

Management’s associated consideration of the company’s and group’s ability to continue as a going
concern are detailed on page 100 within note 1 to the financial statements.

We obtained an understanding of the relevant controls over management’s going concern assessment.

We challenged and assessed management’s evaluation of forecast profitability, liquidity and funding
position, as well as operational resilience:

Profitability, liquidity and funding

We assessed the internal governance process followed by management in order to prepare the
budget and also a worst-case scenario assessment.

We challenged the forecast changes to the group’s and company’s profitability and liquidity plan, with
reference to the group’s and company’s internal risk appetite, given current market conditions. We
tested the accuracy of the calculations underpinning the forecasts, and also challenged the
reasonableness of the forecasts by assessing the key assumptions adopted and reviewing
management’s historical forecasting accuracy.

We inspected the terms and conditions of the renewed borrowing facility and assessed compliance
with the covenant conditions attached to the borrowing facility. We also tested the forecast covenant
compliance.

Operational resilience and supplier viability

We assessed management’s internal monitoring processes in order to monitor the operational impact
of Covid-19 on a regular basis.

We assessed management’s oversight of service providers’ operational and financial resilience, or
where necessary, the contingency plans in place where a supplier has been deemed at risk.

Disclosures

We have evaluated the disclosures made by management in relation to going concern, to assess
whether they appropriately reflect the impact on the group and evaluated the consistency of the
disclosures with our knowledge of the group based on our audit.

We read the most recent Board minutes and regulatory correspondence to identify items of interest
and assess the completeness of the disclosures.

Key
observations

Based on the work performed, having taken account of the assumptions and other matters disclosed
in the Going Concern Statement made by the directors and elsewhere in the accounts, we concurred
with the directors’ conclusion over the company’s and group’s ability to continue as a going concern
over a period of at least twelve months from the date of approval of the financial statements.

We also concluded that the disclosures in relation to going concern are appropriate.

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Financial Statements

5.2. Loan impairment provisions

Key audit
matter
description

The group held loan impairment provisions of £32.6m (2020: £44.9m), against gross loan carrying
amounts of £80.5 million (2020: £112.8 million) within the home collect credit business.

How the scope
of our audit
responded to
the key audit
matter

Amounts receivable from customers are valued using collections curves to estimate the twelve month
and lifetime expected future losses on cohorts of loans exhibiting similar risk characteristics, including
the number of missed payments in the previous 13 weeks. These collections curves are based on
collections levels from outstanding amounts receivable from customers over 2015-2019. The collection
curve methodology has changed since prior year; in previous years management weighted each
annual cohort equally (20%) however in FY21 cohort weightings have been applied to give prominence
(60%) to the most recent 2019 cohort, encapsulating the Covid-19 performance of the loan book, and
10% for each of the four previous cohorts.

We have determined our key audit matter to be the estimation of future cash flows, including cohort
weightings, used to determine the provision given that the impairment provision is highly sensitive to
this assumption and it requires the highest degree of judgement.

Given the degree of judgement involved in determining key assumptions, we also identified that there is
a potential for fraud through possible manipulation of this balance.

The modelling approach taken by management is partly automated, in relation to the extraction of
loan data from the lending system and the application of provisioning rates to loan balances.

Management’s associated accounting policies are detailed on pages 99 to 108 with detail about
judgements in applying accounting policies and critical accounting estimates on page 107 and within
the Audit Committee report on page 59 to 62. The trade and other receivables note is on page 118.

We obtained an understanding of the relevant controls over the estimation of future cash flows and
management’s judgement paper.

We involved internal IT specialists to review the methods used by management to extract loan data
from the lending system. Additionally, we assessed the application of the provisioning rates to the loan
balances within the loan impairment provisioning model.

We specifically challenged the appropriateness of the cash collection curves used to determine the
impairment provision, which included a review of the updated methodology used to construct the
curves, involving our IT specialists to independently reconstruct the curves, and performing an
assessment of whether the historic collections data and the updated methodology being used by
management is an appropriate basis upon which to predict future recoveries in the current economic
environment.

We performed a retrospective review comparing weighted forecasted cash collections for FY21
against actual cash collections, including an assessment of the impact of any differences on the validity
of managements modelling.

We involved our IT specialists to test the mechanical accuracy and completeness of the impairment
models by recalculating the provision in accordance with the approved provisioning policy.

We challenged the defined staging triggers as these are the other key assumption driving the
impairment calculation. This involved analysis of the group’s historical cash collection experience and
benchmarking to peers and external economic and industry data.

We reconciled the loan impairment provision to the general ledger, assessed compliance of the
modelling approach and provisioning policy with the requirements of IFRS 9 and substantively tested a
sample of loans back to signed source documentation to assess whether the data used in the provision
calculation was complete and accurate.

We also challenged management on the lack of macroeconomic overlays and performed an
assessment over the potential requirement for a macroeconomic overlay.

Key
observations

We concluded that the impairment models were working as intended.

We concluded that the estimation of future cash flows within the models and the updated cohort
weighting methodology were reasonable and thus the impairment provision recorded was appropriate.

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Independent Auditor’s Report continued

5.3. Revenue recognition

Key audit
matter
description

The group recognised revenue of £86.4m (2020: £119.3m) against amounts receivable from home
collect credit customers during the year ended 27 February 2021.

The recognition of revenue on amounts receivable from customers under IFRS 9 requires the use of an
effective interest rate method. Judgement is applied by management to determine key assumptions
related to the expected lives of loans.

We have determined our key audit matter to be the formulation of the expected lives assumptions,
including cohort weightings, given these are the key judgements underpinning the calculation of the
revenue balance. The expected lives are determined from the same data set used to construct the
cash collection curves used in loan impairment provisioning.

Given the degree of judgement involved in determining key assumptions, we also identified that there is
a potential for fraud through possible manipulation of this balance.

The modelling approach taken by management is partly automated, in relation to the extraction of
loan data from the lending system and the application of expected lives to the revenue balance.

We obtained an understanding of the relevant controls over the determination of the expected lives
and management’s judgement paper.

We involved internal IT specialists to review the methods used by management to extract loan data
from the lending system.

How the scope
of our audit
responded to
the key audit
matter

We involved our IT specialists to independently reconstruct the expected lives using historical data and
then challenged the lives by reference to both historical and forecast data and comparability with the
contractual life under IFRS 9.

We tested the mechanical accuracy and completeness of the revenue recognition models by agreeing
a sample of model inputs back to underlying source data.

We recalculated the effective interest rates for each type of product and independently determined
for a sample of customers the accuracy of the revenue earned during the year ended 27 February
2021.

Key
observations

We concluded that the revenue recognition models were working as intended.

The underlying assumptions applied within the models, specifically in respect of the expected lives used
in the calculation of the revenue balance, were found to be appropriate.

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Financial Statements

5.4. Impairment of goodwill

Key audit
matter
description

Upon acquiring U Holdings Limited, Morses Club PLC recognised a goodwill balance of £9.4m. We have
identified a key audit matter in relation to impairment of goodwill based on the size of the goodwill
balance, the inherent judgement involved in determining goodwill impairment and the fact that the
performance of U Holdings Limited to date has been lower than expected.

Management is required by IAS 36 to perform an annual impairment review for goodwill balances.
Estimation is involved in assessing the fair value less costs to sell and value in use of certain intangible
assets at each reporting period for assessment of impairment. This requires an assessment of
whether there are any impairment triggers which, given the nature of the assets, focuses on business
performance and cash flows. Management concluded that no impairment of goodwill was required
based on an assessment of relevant impairment triggers.

We have identified a key audit matter around the forecast cash flows in the goodwill impairment model
for U Holdings Limited, in particular the growth rates and discount rate used given these are the key
assumptions underpinning the forecast.

Given the degree of judgement involved in determining key assumptions, we also identified that there is
a potential for fraud through possible manipulation of this balance.

Management’s associated accounting policies are detailed on pages 93 to 108 with detail about
judgements in applying accounting policies and critical accounting estimates on page 107 and within
the Audit Committee report on page 59 to 62. The goodwill note is on page 113.

We obtained an understanding of the relevant controls over the determination of the growth rates and
discount rate and management’s judgement paper.

We evaluated the forecast cash flows used in the model against the historical trading of the Digital
division and challenged the assumptions underpinning the forecast, including review of the long term
and short-term growth rates and discount rate used.

We involved our valuation specialists to independently determine an estimate of the discount rate in
order to challenge the rate selected by management.

We assessed the appropriateness of the short-term growth rates through challenging the key
assumptions underpinning the forecast growth, with peer benchmarking used to assess the
appropriateness of the long-term growth rate.

As we expect consistency between the two management assessments, we tested the accuracy and
completeness of the impairment model by comparing to the forecasts used in the going concern
assessment.

How the scope
of our audit
responded to
the key audit
matter

Key
observations

We concur that the growth rates and discount rate applied are appropriate and also with
management’s conclusion that no impairment of goodwill was required.

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Independent Auditor’s Report continued

5.5. Contingent liability

Key audit
matter
description

Due to the noticeable increase in complaints raised by CMCs within both the company and the wider
home collect credit industry, we have identified a new key audit matter around the consequent impact
of the volume of complaints on the group’s contingent liabilities.

Whilst an IAS 37 provision has been raised within the FY21 results for unresolved complaints at the
balance sheet date, this key audit matter is focused upon the possibility of a significant increase in
complaints being received by the company after the year end and the necessity for consideration of a
contingent liability disclosure in the FY21 financial statements.

Under the requirements of IAS 37 a contingent liability should be recognised for a possible obligation
that arises from past events and whose existence will be confirmed only by the occurrence or non-
occurrence of one or more uncertain future events not wholly within the control of the entity; an entity
should not recognise but disclose a contingent liability, unless the possibility of an outflow of resources
embodying economic benefits is remote.

Management has disclosed a contingent liability in response to complaints raised by CMCs but are
unable to quantify the possible impact on the financial statements at this time.

How the scope
of our audit
responded to
the key audit
matter

Management’s associated accounting policies are detailed on pages 93 to 108 with the contingent
liability note on page 137.

We obtained an understanding of the relevant controls over the consideration of whether a contingent
liability was required.

We assessed whether the requirements of IAS 37 had been applied appropriately, whilst also holding
discussions with our regulatory specialists on any additional areas of concern or risk based on the
complaints received to date.

We assessed the trend in complaints observed during the year and up until the date of signing,
evaluated the level of complaints raised in comparison to that observed at peers, using publicly
available information, and reviewed any correspondence with regulators.

Key
observations

We concur with the contingent liability disclosed by management, in light of the groups’ complaints
experience to date.

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Financial Statements

6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Materiality

£724k (2020: £706k)

£688k (2020: £670k)

Group financial statements

Parent company financial statements

Basis for determining
materiality

1% of net assets (2020: 1% of
net assets)

Rationale for the
benchmark applied

We considered both a profit and net assets based measure as benchmarks for determining
materiality. As the pandemic has increased the volatility of pre-tax profits, we have again
used net assets as a more stable benchmark and basis for materiality. Net assets is
considered to be a more stable basis on which to determine materiality going forward and is
a relevant benchmark to users of the annual report and accounts.

Net assets
£70.7m

Net assets

Group materiality

Group materiality
£724k

Component
materiality range
£688k to £362k

Audit Committee
reporting threshold
£36k

6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.

Group financial statements

Parent company financial statements

Performance
materiality

65% (2020: 70%) of group
materiality

65% (2020: 70%) of parent
company materiality

Basis and rationale
for determining
performance
materiality

We have set performance materiality at a level lower than materiality to reduce the
probability that, in aggregate, uncorrected and undetected misstatements exceed the
materiality for the financial statements as a whole. Performance materiality was set at 65%
of materiality for the 2021 audit (2020: 70%). In determining performance materiality we
considered our risk assessment, including our assessment of the group and parent
company’s overall control environment and the increased control risks inherent within the
business given it is operating in a Covid-19 environment.

6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £36k
(2020: £35k), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation
of the financial statements.

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Independent Auditor’s Report continued

7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide
controls, and assessing the risks of material misstatement at the group level.

The group is made up of the main trading and parent entity of Morses Club PLC and four subsidiaries being Shopacheck
Financial Services Limited, Shelby Finance Limited, U Holdings Limited and U Accounts Limited. These companies
account for 100% of the group’s net assets, 100% of the group’s revenue and 100% of the group’s pre-tax profit; this is
consistent with the approach in prior year. We performed testing over the consolidation which is prepared at the group
level only.

All entities in the group are within our full audit scope and the audit procedures for these entities are performed directly
by the group audit team.

7.2. Our consideration of the control environment
We identified key IT systems for the group in respect of the financial reporting system and lending system. With the
involvement of our IT specialist we performed testing of the general IT controls (‘GITCs’) associated with these systems
and relied upon IT controls across the systems identified.

We adopted a controls reliance approach in relation to the lending business cycle within the home collect credit business.
We tested the relevant automated and manual controls for the business cycle where a control reliance approach was
planned. We adopted a controls reliance approach across the lending cycle when performing our substantive audit
procedures.

8. Other information
The other information comprises the information included in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of our audit, or otherwise appears to
be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact.

We have nothing to report in this regard.

9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.

10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

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Financial Statements

11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-
compliance with laws and regulations, we considered the following:
•

the nature of the industry and sector, control environment and business performance including the design of the
group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
results of our enquiries of management, internal audit and the Audit Committee about their own identification and
assessment of the risks of irregularities;

•

• any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures

relating to:
•

identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance;

• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or

•

alleged fraud;
•
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
the matters discussed among the audit engagement team and relevant internal specialists, including tax, IT,
valuations and analytics specialists regarding how and where fraud might occur in the financial statements and any
potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation
for fraud and identified the greatest potential for fraud in the following areas: loan impairment provisioning, revenue
recognition and impairment of goodwill. In common with all audits under ISAs (UK), we are also required to perform
specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the group and company operates in,
focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts
and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK
Companies Act and tax legislation etc.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the group’s ability to operate or to avoid a material
penalty. These included the regulation set by the Financial Conduct Authority, which are fundamental to the group’s
ability to continue as a going concern

11.2. Audit response to risks identified
As a result of performing the above, we identified loan impairment provisioning, revenue recognition and impairment
of goodwill as key audit matters related to the potential risk of fraud. The key audit matters section of our report
explains the matters in more detail and also describes the specific procedures we performed in response to those key
audit matters.

In addition to the above, our procedures to respond to risks identified included the following:
•

reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the financial statements;

• enquiring of management and the Audit Committee concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of

•

material misstatement due to fraud;
reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing
correspondence with the Financial Conduct Authority and HMRC;
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal
entries and other adjustments; assessing whether the judgements made in making accounting estimates are
indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or
outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team
members including internal specialists and remained alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.

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Independent Auditor’s Report continued

Report on other legal and regulatory requirements

12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•

the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

•

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in
the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.

13. Corporate Governance Statement
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained
during the audit:
•

the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identified;
the directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and why
the period is appropriate;
the directors’ statement on fair, balanced and understandable;
the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks;
the section of the annual report that describes the review of effectiveness of risk management and internal control
systems; and
the section describing the work of the Audit Committee

•

•
•
•

•

14. Opinion on other matter prescribed by our engagement letter
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance
with the provisions of the Companies Act 2006 that would have applied were the company a quoted company.

15. Matters on which we are required to report by exception
15.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not

been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns.

•

We have nothing to report in respect of these matters.

15.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’
remuneration have not been made.

We have nothing to report in respect of this matter.

16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.

Kieren Cooper (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
13 May 2021

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN SectionConsolidated Income Statement

Strategic Report

Corporate Governance

Financial Statements

Consolidated Income Statement
For the 52-week period ended 27 February 2021

Revenue

Impairment on financial assets
Cost of sales

Gross profit
Administration expenses

Operating profit before amortisation of intangibles and exceptional items
Amortisation of acquisition intangibles
Exceptional items

Operating profit
Finance costs

Profit before taxation
Tax on profit on ordinary activities

Profit after taxation

Earnings per share

Basic
Diluted

52 weeks
ended
27.2.21
£000

52 weeks
ended
29.2.20
£000

Notes

100,234

133,651

(20,794)
(20,657)

58,783
(55,967)

3,161
(345)
–

2,816
(2,360)

456
(239)

217

27.2.21
Pence

0.17
0.17

(36,358)
(27,669)

69,624
(54,918)

13,593
(1,222)
2,335

14,706
(3,255)

11,451
(1,974)

9,477

29.2.20
Pence

7.26
7.21

2, 4

12
3

4
7

9
9

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.

C_GEN_PageL2C_GEN SectionBalance Sheet

Balance Sheet
As at 27 February 2021

Registered Number: 06793980

Assets
Non-current assets
Goodwill
Other intangible assets
Investment in subsidiaries
Property, plant and equipment
Right-of-use assets
Deferred tax
Amounts receivable from customers

Current assets
Amounts receivable from customers
Taxation receivable
Other receivables
Cash at bank

Total assets

Liabilities
Current liabilities
Trade and other payables
Complaints provision
Lease liabilities

Non-current liabilities
Bank and other borrowings
Lease liabilities

Total liabilities

Net assets

Equity
Called up share capital
Group reconstruction reserve
Retained earnings

Total equity

Group

Company

Notes

27.2.21
£000

29.2.20
£000

27.2.21
£000

29.2.20
£000

11
12
14
13
15
21
16

17
29
19

22
23
23

12,854
8,863
–
734
1,696
581
82

24,810

53,408
1,387
4,927
8,258

67,980

92,790

(10,039)
(2,012)
(790)

(12,841)

(8,302)
(994)

(9,296)

(22,137)

70,653

1,325
–
69,328

70,653

12,981
7,362
–
818
2,783
659
657

25,260

72,171
501
4,256
11,868

88,796

3,293
5,092
23,011
129
1,113
671
–

33,309

47,952
1,387
23,900
6,616

79,855

3,293
5,606
11,011
196
2,113
797
586

23,602

67,294
501
22,159
9,585

99,539

114,056

113,164

123,141

(6,723)
–
(1,286)

(8,009)

(33,838)
(1,553)

(35,391)

(43,400)

70,656

1,312
–
69,344

70,656

(9,858)
(2,012)
(740)

(12,610)

(8,302)
(343)

(8,645)

(21,255)

91,909

1,325
(9,276)
99,860

91,909

(6,629)
–
(1,228)

(7,857)

(33,838)
(848)

(34,686)

(42,543)

80,598

1,312
(9,276)
88,562

80,598

The Parent Company’s profit for the financial period was £11,531 489 (2020: £18,705,113). The consolidated and
Company financial statements of Morses Club PLC were approved by the Board of Directors on 13 May 2021.

As permitted by Section 408 of the Companies Act 2006, the income statement of the Parent Company is not
presented as part of these financial statements.

Signed on behalf of the Board of Directors

Paul Smith
Director

Graeme Campbell
Director

Morses Club Annual Report & Accounts 2021

C_GEN_PageL2C_GEN Section

Consolidated Statements of Changes in

Equity

Strategic Report

Corporate Governance

Financial Statements

Consolidated Statements of Changes in Equity
For the 52-week period ended 27 February 2021

Group

As at 24 February 2019

Profit for year

Total comprehensive income for
Deferred tax on acquisitions
Share issue
Share-based payments charge
Dividends paid

As at 29 February 2020

Profit for year

Total comprehensive income for
Share issue
Share-based payments charge
Dividends paid

As at 27 February 2021

Company

As at 24 February 2019

Profit for year

Total comprehensive income for the period
Share issue
Share-based payments charge
Dividends paid

As at 29 February 2020

Profit for year

Total comprehensive income for the period
Share issue
Share-based payments charge
Dividends paid

As at 27 February 2021

Notes

Called Up
Share Capital
£000

1,298

–

–
–
14
–
–

1,312

–

–
13
–
–

27
8

Retained
Earnings
£000

69,835

9,477

9,477
39
–
155
(10,162)

69,344

217

217
–
1,079
(1,312)

Total
Equity
£000

71,133

9,477

9,477
39
14
155
(10,162)

70,656

217

217
13
1,079
(1,312)

1,325

69,328

70,653

Called Up
Share Capital
£000

Group
Reconstruction
Reserve
£000

Notes

1,298

(9,276)

–

–
14
–
–

–

–
–

1,312

(9,276)

–

–
13
–
–

–

–
–
–
–

27
8

Retained
Earnings
£000

79,864

18,705

18,705
–
155
(10,162)

88,562

11,531

11,531
–
1,079
(1,312)

1,325

(9,276)

99,860

Total
Equity
£000

71,886

18,705

18,705
14
155
(10,162)

80,598

11,531

11,531
13
1,079
(1,312)

91,909

C_GEN_PageL2C_GEN SectionCash Flow Statements

Cash Flow Statements
For the 52-week period ended 27 February 2021

Notes

Net cash inflow from operating activities

Cash flows used in financing activities
Dividends paid
Proceeds from additional long-term debt
Repayment of long-term debt
Principal paid under lease liabilities
Interest received
Interest paid
Interest paid (lease liabilities)

Net cash (outflow)/inflow from financing activities

Cash flows used in investing activities
Purchase of intangibles
Purchase of property, plant and equipment including

RoU assets

Additional investment in subsidiary
Acquisitions

Net cash (outflow) from investing activities

(Decrease)/Increase in cash and cash equivalents

Reconciliation of increase in cash and cash equivalents
Movement in cash and cash equivalents in the period
Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Group

Company

27.2.21
£000

33,054

(1,312)
11,500
(37,000)
(1,499)
–
(1,622)
(353)

(30,286)

29.2.20
£000

21,418

(10,162)
36,000
(16,500)
(1,385)
13
(2,533)
(472)

4,961

27.2.21
£000

40,071

(1,312)
11,500
(37,000)
(1,435)
1,544
(1,622)
(251)

(28,576)

29.2.20
£000

7,234

(10,162)
36,000
(16,500)
(1,433)
1,067
(2,533)
(399)

6,040

(5,282)

(4,277)

(1,625)

(2,511)

(1,096)
–
–

(6,378)

(3,610)

(3,610)
11,868

8,258

(2,180)
–
(15,947)

(22,404)

3,975

3,975
7,893

11,868

(839)
(12,000)
–

(14,464)

(2,969)

(2,969)
9,585

6,616

(347)
(8,150)
(439)

(11,447)

1,827

1,827
7,758

9,585

Morses Club Annual Report & Accounts 2021

C_GEN_PageL2C_GEN SectionNotes to the Consolidated Cash Flow

Statements

Strategic Report

Corporate Governance

Financial Statements

Notes to the Consolidated Cash Flow Statements
For the 52-week period ended 27 February 2021

1. Reconciliation of profit before taxation to net cash inflow from operating activities

Profit before tax and costs
Exceptional gains

Profit before taxation

Interest received included in financing activities
Interest paid included in financing activities
Share issue
Depreciation charges
Share-based payments charge
Impairment of goodwill
Amortisation of intangibles
Write-off of right-of-use assets
Loss on disposal of tangible assets
Loss on disposal of intangible assets
Decrease/(increase) in debtors
Increase/(decrease) in creditors

Taxation paid

Net cash inflow from operating activities

Group

Company

27.2.21
£000

456
–

456

–
2,006
13
1,915
1,079
126
2,811
261
92
969
18,667
5,849

33,788

(1,190)

33,054

29.2.20
£000

9,116
2,335

11,451

(13)
3,005
14
2,436
155
16
3,136
142
–
–
6,702
(1,466)

14,217

(4,160)

21,418

27.2.21
£000

11,818
–

11,818

(1,544)
1,904
13
1,646
1,079
–
2,139
261
–
–
18,186
5,759

29,443

(1,190)

40,071

29.2.20
£000

20,755
–

20,755

(1,067)
2,932
14
1,896
155
16
2,188
142
–
–
(14,631)
(1,006)

(9,361)

(4,160)

7,234

C_GEN_PageL2C_GEN Section98

Notes to the Consolidated Cash Flow Statements continued
For the 52-week period ended 27 February 2021

2. Reconciliation of liabilities arising from financial activities

Long-term
Borrowings
£000

14,075

Lease
Liabilities
£000

3,391

263
(2,533)

(16,500)
36,000
–
2,533

33,838

(36)
(1,622)

(37,000)
11,500
–
1,622

8,302

–
(472)

(1,385)
–
833
472

2,839

–
(353)

(1,499)
–
444
353

1,784

Long-term
Borrowings
£000

14,075

Lease
Liabilities
£000

3,391

263
(2,533)

(16,500)
36,000
–
2,533

33,838

(36)
(1,622)

(37,000)
11,500
–
1,622

8,302

–
(399)

(1,433)
–
118
399

2,076

–
(251)

(1,435)
–
442
251

1,083

Total
£000

17,466

263
(3,005)

(17,885)
36,000
833
3,005

36,677

(36)
(1,975)

(38,499)
11,500
444
1,975

10,086

Total
£000

17,466

263
(2,932)

(17,933)
36,000
118
2,932

35,914

(36)
(1,873)

(38,435)
11,500
442
1,873

9,385

Group

At 23 February 2019
Non-cash changes
– Amortised fees
– Interest
Cash flows:

– Repayments
– Drawdown
– Lease additions & disposals
– Interest

At 29 February 2020
Non-cash changes
– Amortised fees
– Interest
Cash flows:

– Repayments
– Drawdown
– Lease additions & disposals
– Interest

At 27 February 2021

Company

At 23 February 2019
Non-cash changes
– Amortised fees
– Interest
Cash flows:

– Repayments
– Drawdown
– Lease additions & disposals
– Interest

At 29 February 2020
Non-cash changes
– Amortised fees
– Interest
Cash flows:

– Repayments
– Drawdown
– Lease additions & disposals
– Interest

At 27 February 2021

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN SectionNotes to the Consolidated Financial

Statements

Strategic Report

Corporate Governance

Financial Statements

Notes to the Consolidated Financial Statements
For the 52-week period ended 27 February 2021

1. Accounting policies

General information
The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is
Building 1, The Phoenix Centre, 1 Colliers Way, Nottingham NG8 6AT.

Basis of preparation
The financial statements 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.

The Group and Company’s principal accounting policies under IFRS have been consistently applied to all the
years presented.

Adoption of new accounting policies
There are no other new IFRSs or International Financial Reporting Interpretations (IFRIC) that are effective for the first
time for the 52 weeks ended 27 February 2021 which have a material impact on the Group.

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective and have
been adopted by the EU:

New amended standard or interpretation

Amendments to IFRS 17 and IFRS 4, ‘Insurance contracts’ deferral of IFRS 9

Effective date – for accounting
periods beginning on or after

1 January 2021

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective and have
not been adopted by the EU:

New amended standard or interpretation

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform

Amendments to IAS 1, ‘Presentation of financial statements’ on classification of liabilities

Narrow scope amendments to IFRS 3, IAS 16, IAS 17 and some annual improvements on
IFRS 1, IFRS 9, IAS 41 and IFRS 16

IFRS 17, ‘Insurance contracts’

Effective date – for accounting
periods beginning on or after

1 January 2021

1 January 2022

1 January 2023

There is not any known or reasonably estimable information relevant which suggests that the impact of applying the
new standards will materially impact the financial statements in the initial period of application.

Going concern
The Directors have considered the appropriateness of adopting the going concern basis in preparing these consolidated
financial statements.

The Group has prepared a three-year business plan which is a continuation of its strategy of generating growth through
organic and acquisitive means.

In addition to standard internal governance, the Group is also monitored against key financial covenants tied in with the
current funding facilities. These are produced and submitted on a monthly basis, with key schedules included in the
monthly Board papers.

C_GEN_PageL2C_GEN Section100

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

1. Accounting policies continued

Going concern continued
The Group is subject to a number of risks and uncertainties which arise as a result of the current economic environment.
In determining that the Group is a going concern these risks, which are described in the principal risks and uncertainties
section, have been considered by the Directors. The Directors have considered these risks in the Group’s forecasts and
projections which highlight continued profitability for the foreseeable future. After making enquiries, the Directors have a
reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.

With regards to a going concern review or a three-year viability period, the major challenge for the business will be one
of Financial and operational resilience through a period of change and adapting to the demands of a post-Covid-19
world, whilst maintaining good customer outcomes, appropriate oversight and financial prudence.

The Group has observed a noticeable increase in the level of complaints received from both CMCs and customers during
the year. The increase in complaints encountered by a small number of other lenders in the sector has triggered signs of
financial stress, prompting applications to the Courts for schemes of arrangements to ensure their businesses remain
viable whilst their customers receive a proportion of redress. Whilst the Group has seen an increase in complaints
received, the increase is proportionately smaller to other lenders and the Board remains confident with its business
model and underlying operational resilience.

As part of its annual planning process, the Group assessed its business plans and subsequently ran a number of
scenarios around the key areas of sensitivities namely:
• Loan volumes
• Collections
• Loan book quality/credit risk
• Cash availability
• Collect out scenario (in accordance with regulatory guidance)

These comments do not represent management’s confirmed actions – they represent a number of possible mitigants
which may need to be implemented if the worst case transpires. The resilience and ability to adapt the business model
the business has shown during the last 12 months give management additional confidence in assessing ongoing viability.

The Committee believes that to achieve this in such an economic and societal upheaval for which there is no historic
comparison, showed great confidence by our lending syndicate in the robustness of our business model.

IFRS 16 Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a
right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee,
except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets.
For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the
term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits
from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the
Group uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise:
•
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the

fixed lease payments (including in-substance fixed payments), less any lease incentives;

commencement date;
the amount expected to be payable by the lessee under residual value guarantees;
the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

•
•
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate

the lease.

The lease liability is presented as a separate line in the consolidated statement of financial position.

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN SectionStrategic Report

Corporate Governance

Financial Statements

101

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
• The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case

the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which case the lease liability is remeasured by discounting the revised lease payments using the
initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a
revised discount rate is used).

• A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the

lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

The Group recognised such adjustments for vehicles during the current period in light of lease term extensions that
were enacted.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or
before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is
located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is
recognised and measured under IAS 37. The costs are included in the related right-of-use asset, unless those costs are
incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a
lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to
exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The
depreciation starts at the commencement date of the lease. The Group does not have any leases that include purchase
options or transfer ownership of the underlying asset.

The right-of-use assets are presented within the same line item as that within which the corresponding underlying assets
would be presented if they were owned – for the Group this is property, plant and equipment.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability
and the right-of-use asset. The Group does not have any lease payments which fall under the definition of variable
lease payments.

For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as personal computers and
office furniture), the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This
expense is presented within administrative expenses in the consolidated income statement.

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any
lease and associated non-lease components as a single arrangement. The Group has used this practical expedient for
property leases for which the business rate is included in the lease contract.

Basis of consolidation
The Group financial statements drawn up to 27 February 2021 consolidate the financial statements of the Company and
its subsidiary undertakings from the date control passes to the Group until the date control ceases. Control is achieved
when the Group:
• has power over the investee;
•
• has the ability to use its power to affect returns.

is exposed, or has rights, to variable returns from its involvement with the investee; and

All intra-Group transactions, balances and unrealised gains on transactions between Group companies are eliminated
on consolidation. The accounting policies of subsidiaries are consistent with the accounting policies of the Group.

C_GEN_PageC_GEN_PageL2C_GEN Section102

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

1. Accounting policies continued

Revenue recognition
Under IFRS 9, all receivables are recognised within Stage 1 on inception of the loan. A customer will then move to Stage 2
when there has been a significant increase in credit risk through a deterioration in their payment performance. Stage 3
represents a customer in default. Revenue recognition is recognised on the gross receivable in Stages 1 and 2 and on the
net receivable in Stage 3. A customer can only move to or back out of Stage 3 for revenue recognition purposes at the
Group’s interim or year end.

Stage 1 – Accounts at initial recognition. Revenue is recognised on the gross receivable before impairment provision.
Stage 2 – Accounts which have suffered a significant deterioration in credit risk but have not defaulted. Revenue is
recognised on the gross receivable before impairment provision.
Stage 3 – Accounts which have defaulted. Revenue is recognised on the net receivable after impairment provision.

Under IFRS the amount of revenue recognised is capped at the contractual amount due.

Digital revenue for recurring monthly management fees in relation to current accounts is recognised in accordance with
IFRS 15. Fees and commissions receivable and payable are recognised when the service is provided, or when
transactions are processed on an accruals basis.

See Critical accounting judgements and key sources of estimation uncertainty on page 107 for more information.

Net loan book
All customer receivables are initially recognised at the amount loaned to the customer ie, fair value. After initial
recognition the amounts receivable from customers are subsequently measured at amortised cost.

The Directors assess on an ongoing basis whether there is evidence that a loan asset or Group of loan assets is impaired
and requires an additional deduction for impairment. Impairment is calculated using models which use historical
payment performance to calculate the estimated amount and timing of future cash flows from each arrears stage.
Impairment is then calculated by estimating the future cash flows for such impaired loans, discounting the cash flows to
a present value using the original effective interest rate (EIR) and comparing this figure with the balance sheet carrying
value. All such impairments are charged to the income statement.

Stage 1 – Accounts at initial recognition. The impairment provision is based on 12-month expected losses, based on
historic performance. Under IFRS 9, all receivables are recognised within Stage 1 on inception of the loan.

Stage 2 – Accounts which have suffered a significant deterioration in credit risk but have not defaulted. The impairment
provision is based on lifetime losses, based on historic performance. A customer will then move to Stage 2 when there
has been a significant increase in credit risk through a deterioration in their payment performance, represented in HCC
by two missed weekly payments in a 13-week period and in digital by any single missed monthly payment.

Stage 3 – Accounts which have defaulted. The impairment provision is based on lifetime losses, based on historic
performance. Stage 3 represents a customer in default, equivalent in HCC to 10 missed payments in a 13-week period. In
digital Stage 3 is represented by more than two missed monthly payments.

Impairment provisions under IFRS 9 are calculated based on historic loan experience as a basis for estimating the
expected credit loss and considers the outlook for macro-economic conditions.

Key assumptions in ascertaining whether a loan asset or group of loan assets is impaired include information regarding
the probability of any account going into default and information regarding the likely eventual loss including recoveries.
These assumptions for estimating future cash flows are based upon observed historical data and updated as
management considers appropriate to reflect current and future conditions. All assumptions are reviewed regularly to
take account of differences between previously estimated cash flows on impaired debt and the eventual losses.

Payment performance and missed payments are used as indicators to identify loans with no reasonable expectation of
recovery and these loans are subsequently written off.

Write-off policy
A customer’s balance is fully written off in HCC at the point the customer has gone 17 weeks without any payment and in
digital when more than 3 payments are missed during the life of the loan. Before this point the balance is heavily
provided for in accordance with IFRS 9. When a debt is sold and the cash is received for the debt, the recoveries are
credited to the income statement.

See Critical accounting judgements and key sources of estimation uncertainty on page 107 for more information.

Morses Club Annual Report & Accounts 2021

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Financial Statements

103

Macro-economic overlay
Through involvement in the Regional CBI, Morses Club PLC receives good insight into the current macro-economic
landscape. Most economic analysis from the Bank of England and HM Treasury recognises the likelihood of a downturn in
the economy as a result of Covid-19, with a recession and increased levels of unemployment. In terms of the impact of
increased unemployment, the home credit sector has historically been quite resilient in periods where unemployment
has been increasing, due in part to the HCC customer base typically having a mixture of wages and benefits within
household incomes

After carefully considering the economic factors impacting the Group’s loan receivables balance, and reviewing historical
customer payment behaviours, management has concluded that sufficient loan impairment provisions have already
been recognised in the financial statements, and a macro-economic overlay adjustment is therefore not required.

Business combinations
Acquisitions are accounted for using the acquisition method. Acquisition costs are expensed to the income statement.
The consideration transferred in a business combination is measured at fair value with the fair value of deferred
contingent consideration determined by considering the expected payment, discounted to present value using a
risk-adjusted discount rate. The expected payment is determined separately in respect of each individual earn-out
agreement taking into consideration the expected level of profitability of each acquisition. Post acquisition the
discounted consideration is unwound on an EIR basis as a finance cost before being physically paid in line with the share
purchase agreement.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value
except that deferred tax assets or liabilities are recognised and measured in accordance with IAS 12 Income Taxes.

Classification and measurement of financial liabilities
The Group’s financial liabilities include borrowings and trade and other payables.

Trade payables are obligations to pay for goods or services that have been acquired from suppliers in the ordinary
course of business and are classified as current liabilities if payment is due within one year or less, otherwise they are
presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.

Borrowings are recognised initially at fair value, being issue proceeds less any transaction costs incurred. Borrowings are
subsequently stated at amortised cost; any difference between proceeds less transaction costs and the redemption
value is recognised in the income statement over the expected life of the borrowings using the effective interest rate.
Borrowings are classified as current liabilities unless the Group or Company has an unconditional right to defer
settlement of the liability for at least 12 months after the balance sheet date.

Goodwill
Goodwill arising on the acquisition of business combinations, representing any excess of fair value of the consideration
given over the fair value of the identifiable assets and liabilities acquired, is capitalised and reviewed for impairment at
least annually.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of
cash-generating units) expected to benefit from the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro rata based on the carrying amount of each asset in the unit. An impairment loss recognised
for goodwill is not reversed in a subsequent period.

Gains on acquisition arising on the purchase of a business are recognised directly in the income statement.

See Critical accounting judgements and key sources of estimation uncertainty on page 107 for more information.

C_GEN_PageC_GEN_PageL2C_GEN Section
104

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

1. Accounting policies continued

Other intangible assets
Other intangible assets include acquisition intangibles in respect of customer relationships and agent networks as well as
software, servers and licences.

The fair value of customer relationships on acquisition has been estimated by discounting the expected future cash flows
from the relationships over their estimated useful economic lives of 10 years, such estimate being based on previous
experience of similar acquisitions. The assets will be amortised over their estimated useful lives in line with the realisation
of their expected benefits. Due to the behavioural profile of our customers, this will naturally result in a greater
amortisation charge in the early years with a corresponding reduction in later years.

The fair value of agent networks on acquisition is calculated based on the estimated cost of developing a similar network
organically. The assets are amortised over their estimated useful economic lives of 10 years, such estimate being based
on previous experience of similar acquisitions, in line with the realisation of their expected benefits arising from the
customer relationships associated with the agent network.

Software and licences are stated at cost, net of amortisation and any provision for impairment. Amortisation is provided
at the following annual rates in order to write off the cost less estimated residual value of each asset over its estimated
useful life.

Software and licences

– 20%-33% on cost

Amortisation is included within administration expenses. Other intangible assets are valued at cost less subsequent
amortisation and impairment, and are tested at least annually. An impairment loss is recognised for the amount by
which the asset’s carrying value exceeds the higher of the asset’s value in use and its fair value less costs to sell.

Property, plant and equipment
Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment. Depreciation
is provided at the following annual rates in order to write off the cost less estimated residual value of each asset over its
estimated useful life.

Computers and tablets
Fixtures and fittings

– 20%-33% on cost
– 20% on cost

Impairment of fixed assets
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount
of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with an indefinite useful life are tested for impairment at least annually and whenever there is an
indication at the end of a reporting period that the asset may be impaired.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the
carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease, and to the extent that the impairment loss is greater than the
related revaluation surplus, the excess impairment loss is recognised in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been recognised for the asset (or
cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss to the
extent that it eliminates the impairment loss which has been recognised for the asset in prior years.

Right-of-use assets are tested for impairment annually whenever there is an indication at the end of the reporting
period that the asset may be impaired.

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Financial Statements

105

Investments in subsidiaries
Subsidiaries are entities over which the Company has power to govern the financial and operating policies so as to
obtain benefits from its activities. Subsidiaries are consolidated from the date on which control is transferred to the
Company. They are deconsolidated from the date on which control ceases.

Investments in subsidiaries are stated at cost less any provision for impairment. The investments in subsidiaries are
considered for impairment on a biannual basis.

Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand with maturities of three months or less. Bank overdrafts
are presented in current liabilities to the extent that there is no right of offset with cash balances.

Pension costs and other post-retirement benefits
The Group operates a defined contribution pension scheme. Contributions payable to the Group’s pension scheme are
charged to the income statement in the period to which they relate.

Intercompany
Intercompany transactions are recorded at fair value on initial recognition and then amortised cost to enable recognition
of any expected credit losses. Expected credit losses on intercompany balances are assessed at each balance sheet
date. The probability of default (PD) and loss given default (LGD) are determined for each loan based on the subsidiary’s
available funding and cash flow forecasts.

Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred
tax is valued at the prevailing rates at which it is expected to unwind.

Deferred tax liabilities are generally recognised for all taxable temporary differences.

Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable
that taxable profits will be available against which those deductible temporary differences can be utilised.

Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition
(other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor
the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the
initial recognition of goodwill.

Finance costs
Finance costs comprise the interest expense on external borrowings which are recognised in the income statement in the
period in which they are incurred and the funding arrangement fees which were prepaid and are being amortised to the
income statement over the length of the funding arrangement. Finance costs also include interest on lease liabilities.

Leasehold
Costs incurred in refurbishing or fitting out leasehold properties are capitalised and depreciated over the length of the
relevant lease. At period end these assets had a £nil carrying value, having been fully depreciated in prior periods.

C_GEN_PageC_GEN_PageL2C_GEN Section106

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

1. Accounting policies continued

Group restructuring reserve
The Group reconstruction reserve was created within the Company balance sheet during the financial year ending
28 February 2015. This was required following the Company’s acquisition of 100% of the Ordinary Share capital of
Shopacheck Financial Services Limited (SFS) from its then Parent Company, and the subsequent hive up of the trade
and assets of SFS into the Company at carrying value.

The Group reconstruction reserve was initially accounted for using merger accounting, with the assets and liabilities of
SFS therefore being transferred into the Company at carrying value rather than fair value. The difference between the
carrying value of the assets and liabilities transferred and the consideration paid was taken directly to the Group
reconstruction reserve.

There has been no change to the balance held within this reserve since it was initially recognised and this is due to the
Company continuing to own 100% of the Ordinary Share capital of SFS.

Share-based payments
The Company operates three equity-settled share-based compensation schemes for Directors and three for employees.

The fair value of the share options granted is recognised over the vesting period to reflect the achievement of
performance conditions over time. The charge relating to grants to employees of the Company is recognised as an
expense in the income statement.

The fair value of the share options granted, excluding the impact of any non-market vesting conditions, is calculated using
established option pricing models, being Monte Carlo simulation or Black-Scholes. The probability of meeting non-market
vesting conditions, which include profitability targets, is used to estimate the number of share options which are likely to vest.

Exceptional items
Exceptional items are items that are unusual because of their size, nature or incidence and which the Directors consider
should be disclosed separately to enable a full understanding of the Group’s results. Exceptional income and costs are
recognised in the income statement in the period they are incurred.

Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of
the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of
those cash flows (when the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably

Contingent liabilities
Contingent liabilities are possible obligations depending on whether some uncertain future event occurs, or present
obligations where an economic outflow of resources is not probable, or the amount cannot be measured reliably.
Contingent liabilities are not recognised in the balance sheet, but relevant information is disclosed, unless the possibility
of an outflow of economic resources is remote.

Morses Club Annual Report & Accounts 2021

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Financial Statements

107

Segment reporting
IFRS 8 Operating Segments requires segments to be identified on the basis of internal reports that are regularly
reviewed by the Chief Operating Decision Maker (CODM). The Chief Operating Decision Maker is the Executive
Committee (ExCo).

The accounting policies of the reportable segments are consistent with the accounting policies of the Group as a whole.
Segment profit represents the profit earned by each segment. This is the measure of profit that is reported to the Board
of Directors for the purpose of resource allocation and the assessment of segment performance.

When assessing segment performance and considering the allocation of resources, the Board of Directors review
information about segment assets and liabilities. For this purpose, all assets and liabilities are allocated to reportable
segments with the exception of intangible assets and current and deferred tax assets and liabilities.

Critical accounting judgements and key sources of estimation uncertainty
The following areas are the critical judgements and key sources of estimation uncertainty that the Directors have made
in applying the Group’s accounting policies:

Critical accounting judgements
There are no critical accounting judgements.

Key sources of estimation uncertainty
Impairment
Under IFRS 9 an impairment provision is recognised for expected credit losses on financial assets measured at
amortised cost based on expected future credit losses. At the reporting date £36.6m (2020: £48.1m) was recognised as
an impairment provision against amounts receivable from customers.

The Group is required to estimate the quantum and timing of cash flows that will be recovered, which are discounted to
present value based on the EIR of the loan. Receivables are impaired when the cumulative amount of two or more
contractual weekly payments have been missed in the previous 13 weeks, since only at this point do the expected future
cash flows from loans deteriorate significantly. Impairment is calculated using models which use historical payment
performance to generate the estimated amount and timing of future cash flows from each arrears stage. Management
use a combination of historical cash performance curves to estimate future cash flows. These estimations are revised
annually and approved by management.

A key estimate within the impairment provision is the collection curves. Management have considered the best way to
deal with the Covid-19 event and its impact on the impairment provision and income recognition. It was determined that
continuing to use a flat five year average of the cash curves would materially understate the provision. A weighting of
the individual cash curves to give more prominence to the most recent cohort was adopted.

Option 1
Option 2
Option 3
Option 4

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

20%
15%
10%
0%

20%
40%
60%
100%

Impairment
Provision

(£32.1m)
(£32.3m)
(£32.6m)
(£33.1m)

Deferred
Income

(£20.8m)
(£21.4m)
(£21.4m)
(£21.4m)

Management believes that weighting option 3 is this most reflective of the impact of Covid-19 on the Group’s revenue
and impairment.

Please note that the remote lending and collection model of our Digital lending business has resulted in a smaller
Covid-19 impact, and therefore management have not applied this weighting to the Digital Division. The impairment
numbers above are for Home Collect Credit only.

The following sensitivities are in relation to HCC only given Digital is not materially sensitive in this area.

Based on past experience, actual cash collections could vary by up to 5% from this estimate. If cash collections were 5%
higher/lower than this estimate, the impact on the impairment provision would be £4.4m (2020: £11.0m) higher/lower.
The prior year impact was measured on a 10% variation on the estimate of cash collections.

Another key estimate is the determination of whether there has been a significant increase in credit risk on financial
assets since initial recognition which determines whether 12-month or lifetime expected credit losses are recognised. If
lifetime expected credit losses were recognised on all assets this would result in an increase in expected credit losses of
£0.5m (2020: £0.5m). The sensitivity is of a small magnitude due to the short-term nature of the products.

C_GEN_PageC_GEN_PageL2C_GEN Section108

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

1. Accounting policies continued

Key sources of estimation uncertainty continued
Revenue recognition
Under IFRS 9 interest income is recognised by applying the EIR to the carrying value of a loan. The EIR is calculated at
inception and represents the rate which exactly discounts the future contractual cash receipts from a loan to the amount
of cash advanced under that loan.

Management determined that continuing to use a flat five year average of the average lives would materially understate
the provision. A weighting of the individual cash curves to give more prominence to the most recent cohort was adopted.
Details of the weightings considered can be found on page 107.

The following sensitivities are in relation to HCC only given Digital is not materially sensitive in this area.

If the expected life of the loan lengthens by two weeks, as has been seen under Covid-19, it is estimated that revenue
would be approximately £0.6m (2020: £0.8m) lower. The maximum movement in the average life year on year
for the last five years has been two weeks, therefore this is considered to be a reasonable basis for the sensitivity
analysis performed.

Impairment of non-financial assets and goodwill
In assessing impairment, management estimates the recoverable amount of each asset or cash-generating unit based
on expected future cash flows and uses a weighted average cost of capital (WACC) of 13% to discount them. The
absolute headroom for Shelby Finance Ltd is £154.7m. The annual growth rate in year one is -138%, year two is 308%,
year three is 58% and every +/- 1% change in the annual growth rate results in a +/- £0.1m change to the cumulative
discounted cash flow over the same period. Every +/- 1% change in the discount rate results in a +/- £12.9m change in
the estimated recoverable amount. The terminal growth rate used in the calculation is 2% and every +/- 0.5% change
in the terminal growth rate results in a +/- £7.0m change to the recoverable amount. Estimation uncertainty relates to
assumptions about future operating results and the determination of a suitable discount rate and future growth rates.

2. Staff costs

Wages and salaries
Social security costs
Other pension costs

Total staff costs

Redundancy costs

Total staff costs

Group

Company

52 weeks
ended
27.2.21
£000

22,059
2,588
979

25,626

1,172

26,798

53 weeks
ended
29.2.20
£000

22,519
2,589
1,038

26,146

933

27,079

52 weeks
ended
27.2.21
£000

17,453
2,171
770

20,394

1,122

21,516

53 weeks
ended
29.2.20
£000

16,772
2,026
792

19,590

734

20,324

Redundancy costs are a combination of post-acquisition integration costs and business as usual restructuring costs. The
table above excludes the network of self-employed agents.

The average monthly number of employees during the period was as follows:

Management
Clerical & field staff

Group

Company

52 weeks
ended
27.2.21

53 weeks
ended
29.2.20

52 weeks
ended
27.2.21

53 weeks
ended
29.2.20

218
382

600

201
439

640

182
289

471

164
335

499

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109

3. Exceptional gains

Deferred consideration on acquisition

Total exceptional gain

52 weeks
ended
27.2.21
£000

–

53 weeks
ended
29.2.20
£000

2,335

In 2020 exceptional items were made up of the release of deferred consideration in relation to the acquisition of U
Holdings Limited amounting to £2,335,000.

4. Profit before tax

The operating profit is stated after charging:

Depreciation – owned assets
Amortisation of intangibles
Depreciation of right-of-use asset
Impairment of financial assets
Operating lease rentals – motor vehicles
Operating lease rentals – property

Directors’ and key management personnel remuneration includes the following expenses:

Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments

The number of Directors to whom retirement benefits were accruing was as follows:
Money purchase schemes

Information regarding the highest paid Director is as follows:

Emoluments
Pension contributions to money purchase schemes

The analysis of auditor’s remuneration is as follows:

Fees payable to the Company’s auditors for the audit of the Group’s annual accounts

Total audit fees

Audit-related assurance services
Corporate finance services

Total non-audit fees

52 weeks
ended
27.2.21
£000

329
2,811
1,586
20,794
205
443

53 weeks
ended
29.2.20
£000

740
3,135
1,696
36,358
339
710

52 weeks
ended
27.2.21
£000

53 weeks
ended
29.2.20
£000

1,055
32
–
248

1,335

979
25
275
134

1,413

52 weeks
ended
27.2.21
£000

462
17

53 weeks
ended
29.2.20
£000

570
15

52 weeks
ended
27.2.21
£000

53 weeks
ended
29.2.20
£000

312

35
–

410

30
55

C_GEN_PageC_GEN_PageL2C_GEN Section110

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

5. Segment reporting

IFRS 8 requires segment reporting to be determined by the internal financial and operational information reported to
the Chief Operating Decision Maker. The Group’s Chief Operating Decision Maker is deemed to be the ExCo whose
primary responsibility is to support the CEO in managing the Group’s day-to-day operations and trading performance.
On this basis the Group has determined it has two cash generating units for the purposes of segmental reporting
comprising Home Collected Credit (Morses Club) and Digital (Shelby Finance Limited and U Holdings Limited). These two
cash generating units are then assessed for impairment, see note 11. The Group’s operations are all located in the United
Kingdom and all revenue is attributable to customers in the United Kingdom.

Revenue

Profit/(loss) before taxation

52 weeks
ended
27.2.21
£000

86,430
13,804

53 weeks
ended
29.2.20
£000

119,269
14,382

52 weeks
ended
27.2.21
£000

14,050
(10,512)

53 weeks
ended
29.2.20
£000

22,940
(11,225)

100,234

133,651

–
–
–
–

3,538

36
–
(3,118)
–

11,715

750
(213)
(3,136)
2,335

100,234

133,651

456

11,451

Group

Home Collected Credit
Digital

Total Group before amortisation of acquisition intangibles and

exceptional items

Intra-Group elimination*
Group acquisition costs
Amortisation of intangibles
Exceptional items

Total Group

Group

Home Collected Credit
Digital

Segment assets

Segment liabilities

Net assets/(liabilities)

27.2.21
£000

114,485
23,260

29.2.20
£000

124,462
21,145

27.2.21
£000

(21,255)
(23,976)

29.2.20
£000

(42,543)
(22,691)

27.2.21
£000

93,230
(716)

29.2.20
£000

81,919
(1,546)

Total before intra-Group elimination

137,745

145,607

(45,231)

(65,234)

92,514

80,373

Eliminations*
Intra-Group elimination

Total Group

(25,290)
(19,665)

(11,103)
(20,448)

3,429
19,665

1,386
20,448

(21,861)
–

(9,717)
–

92,790

114,056

(22,137)

(43,400)

70,653

70,656

* Group assets includes fixed asset investment of £23,011,415 (2020: £11,011,415), a tax asset of £40,000 (2020: £72,000) which are offset by intangible
assets on acquisition £Nil (2020: £380,000), goodwill on acquisition £Nil (2019: £192,000) and inter-company provision £786,000 (2020: £750,000)
which are not attributable to a specific segment.

Group

Home Collected Credit
Digital

Total Group

Capital expenditure

Depreciation

Amortisation

27.2.21
£000

1,727
3,891

5,618

29.2.20
£000

27.2.21
£000

29.2.20
£000

2,586
2,872

5,458

170
159

329

257
483

740

27.2.21
£000

2,101
710

2,811

29.2.20
£000

2,186
950

3,136

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111

6. Finance costs

Lease liabilities
Other interest payable

Total interest payable

7. Taxation

Analysis of the tax charge
The tax charge on profit before tax for the period was as follows:

Current tax
UK corporation tax
Adjustment in respect of prior years

Total current tax

Origination and temporary timing differences
Adjustment in respect of prior years
Effect of change of tax rates

Total deferred tax

Tax on profit on ordinary activities

52 weeks
ended
27.2.21
£000

353
2,007

2,360

53 weeks
ended
29.2.20
£000

472
2,783

3,255

52 weeks
ended
27.2.21
£000

53 weeks
ended
29.2.20
£000

318
24

342

(103)
-
-

(103)

239

1,866
(3)

1,863

124
1
(14)

111

1,974

Factors affecting the tax charge
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
ended
27.2.21
£000

53 weeks
ended
29.2.20
£000

Profit before exceptional costs
Exceptional gains

Profit on ordinary activities before tax

Profit on ordinary activities before exceptional items
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of

19% (2020: 19%)

Effects of:
Expenses not deductible for tax purposes
Release of deferred consideration
Adjustment in respect of prior periods
Rate difference – deferred tax
Movement in amounts not provided in deferred tax

Tax losses surrendered by another group company

Fixed asset differences

Tax on profit on ordinary activities

456
-

456

9,116
2,335

11,451

2,176

233
-
24
(67)
9

(52)

239

85
(290)
13
(13)
3

–

1,974

The standard rate of corporation tax applicable for the period ended 27 February 2021 is 19% (2020: 19%), the effective
tax rate is 52% (2020: 17%). Deferred tax is calculated in full on temporary differences under the liability method using a
rate of 19% (2020: 17%). The increase in the main rate of corporation tax was substantively enacted on 17 March 2020.
The rate of 19% is applicable from 1 April 2020, rather than the previously enacted reduction of 17%. An increase to the
main rate of corporation tax in the UK to 25% was announced in the 2021 Budget, and is expected to come into effect in
2023. This will increase the future tax charge accordingly.

C_GEN_PageC_GEN_PageL2C_GEN Section

112

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

8. Dividend per share

Dividend (£000)
Weighted average number of shares (000’s)

Per share amount (pence)

52 weeks
ended
27.2.21
£000

1,312
131,383

1.00

53 weeks
ended
29.2.20
£000

10,162
130,531

7.78

Subject to shareholder approval at the Annual 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.

9. Earnings per share

Earnings (£000)

Number of shares
Weighted average number of shares
Effect of dilutive potential Ordinary Shares through share options (‘000s)

Weighted average number of shares for the purposes of diluted earnings per share (‘000s)

Basic earnings per share amount (pence)

Diluted earnings per share amount (pence)

52 weeks
ended
27.2.21

218

53 weeks
ended
29.2.20

9,477

131,383
200

131,583

0.17

130,531
843

131,374

7.26

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.

10. Profit of Parent Company

As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Parent Company is not
presented as part of these financial statements.

The Parent Company’s profit for the financial period was £11,531,489 (2020: £18,705,000).

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN SectionStrategic Report

Corporate Governance

Financial Statements

113

11. Goodwill

Cost
At 23 February 2019
Additions 2019/20

At 29 February 2020
Additions 2020/21

At 27 February 2021

Impairment
At 23 February 2019

Impairment loss for the period

At 29 February 2020

Impairment loss for the period

At 27 February 2021

Net book value
At 27 February 2021

At 29 February 2020

At 23 February 2019

Note

Group
Goodwill
£000

Company
Goodwill
£000

3,834
9,496

13,330
–

13,330

(333)

(16)

(349)

(127)

(476)

12,854

12,981

3,501

3,642
–

3,642

(333)

(16)

(349)

–

(349)

3,293

3,309

Key assumptions used in goodwill impairment review
The market share price of the Company at 27 February 2021 was £0.631, 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 £83.6m which is
below the Company’s net asset value of £91.5m and therefore, an indicator of possible impairment. As a result we have,
assessed the recoverable amount of both the Company’s goodwill and 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 £126,260 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 see Note 5 as follows:

HCC
Digital

52 weeks
ended
27.2.21
£000

3,293
9,561

12,854

53 weeks
ended
29.2.20
£000

3,293
9,688

12,981

C_GEN_PageC_GEN_PageL2C_GEN Section114

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

12. Other intangible assets

Group

Cost
At 23 February 2019
Additions

At 29 February 2020
Additions
Disposals

At 27 February 2021

Accumulated amortisation
At 29 February 2019
Charge for the period

At 29 February 2020
Charge for the period
Eliminated on disposal
Impairment losses

At 27 February 2021

Net book value
At 27 February 2021

At 29 February 2020

At 29 February 2019

Company

Cost
At 23 February 2019
Additions

At 29 February 2020
Additions
Disposals

At 27 February 2021

Accumulated amortisation
At 29 February 2019
Charge for the period

At 29 February 2020
Charge for the period
Eliminated on disposal
Impairment losses

At 27 February 2021

Net book value
At 27 February 2021

At 29 February 2020

At 29 February 2019

Software &
Licences
£000

Customer
Lists
£000

Agent
Networks
£000

8,864
3,897

12,761
5,282
(3,085)

14,958

4,226
1,914

6,140
2,428
(2,115)
–

6,453

8,505

6,621

4,638

21,241
380

21,621
–
–

21,621

19,724
1,191

20,915
329
–
38

21,282

339

706

1,517

874
–

874
–
–

874

808
31

839
16
–
–

855

Software &
Licences
£000

Customer
Lists
£000

Agent
Networks
£000

8,687
2,511

11,198
1,625
(1,633)

11,190

4,171
1,734

5,905
1,969
(1,633)
–

6,241

4,949

5,293

4,516

3,689
–

3,689
–
–

3,689

2,957
438

3,395
124
–
38

3,557

132

294

732

154
–

154
–
–

154

119
16

135
8
–
–

143

Total
£000

30,979
4,277

35,256
5,282
(3,085)

37,453

24,758
3,136

27,894
2,773
(2,115)
38

28,590

8,863

7,362

6,221

Total
£000

12.530
2,511

15,041
1,625
(1,633)

15,033

7,247
2,188

9,435
2,101
(1,633)
38

9,941

5,092

5,606

5,283

Impairment losses relate to the Hays Customer List amounting to £38,000.
Research and development expenditure expensed during the year was £nil (2020: £nil).

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN SectionStrategic Report

Corporate Governance

Financial Statements

115

IAS 38.122 requires the Group to disclose the carrying value and remaining amortisation period of individually material
intangible assets. The table below includes all intangible assets that are considered to be individually material as at
27 February 2021, at both Group and Company level. Intangibles from acquisition activities represent the estimated fair
value arising on the point of acquisition. The amounts in respect of customer lists and broker relationships are calculated
on the discounted cash flows associated with the specific business area and based on the realisation of the expected
benefits from these relationships. These amounts are amortised over the maximum useful life of 10 years from the date
of acquisition.

Significant Group intangible assets

Group

Intangible assets

Carrying Value as at
27 February 2021
£000

Carrying Value as at
29 February 2020
£000

Amortisation
period
Years

Morses Club acquired customer lists
Morses Club IT software development (CAP/MAP)
Shelby IT software development (Anchor/Sentinel)

339
4,949
3,287

706
5,293
1,056

10 years
Various at 20% – 33% PA
Various at 20% – 33% PA

Company

Intangible assets

Carrying Value as at
27 February 2021
£000

Carrying Value as at
29 February 2020
£000

Amortisation
period
Years

Morses Club acquired customer lists
Morses Club IT software development (CAP/MAP)

132
4,949

294
5,293

10 years
Various at 20% – 33% PA

13. Property, plant and equipment

Group

Cost
At 23 February 2019
Additions

At 29 February 2020
Additions
Disposals

At 29 February 2021

Depreciation
At 23 February 2019
Charge for the period

At 29 February 2020
Charge for the period
Eliminated on disposal

At 27 February 2021

Net book value
At 27 February 2021

At 29 February 2020

At 23 February 2019

Computers &
Tablets
£000

Fixtures &
Fittings
£000

Leasehold
£000

2,453
688

3,141
165
(736)

2,570

2,106
673

2,779
201
(669)

2,311

259

362

347

168
492

660
171
(77)

754

137
67

204
128
(53)

279

475

456

3
–

3
–
(3)

–

3
–

3
–
(3)

–

Totals
£000

2,624
1,180

3,804
336
(816)

3,324

2,246
740

2,986
329
(725)

2,590

734

818

378

C_GEN_PageC_GEN_PageL2C_GEN Section116

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

13. Property, plant and equipment continued

Company

Cost
At 23 February 2019
Additions

At 29 February 2020
Additions
Disposals

At 29 February 2021

Depreciation
At 23 February 2019
Charge for the period

At 29 February 2020
Charge for the period
Eliminated on disposal

At 27 February 2021

Net book value
At 27 February 2021

At 29 February 2020

At 23 February 2019

14. Investment in subsidiaries

Cost
At 23 February 2019
Additions – Shelby share issue

At 29 February 2020
Additions – Shelby share issue

At 29 February 2021

Computers &
Tablets
£000

Fixtures &
Fittings
£000

Leasehold
£000

2,045
64

2,109
103
(290)

1,922

1,698
240

1,938
153
(290)

1,801

121

171

347

157
11

168
–
(43)

125

126
17

143
17
(43)

117

–
–

–
–
–

–

–
–

–
–
–

–

Totals
£000

2,202
75

2,277
103
(333)

2,047

1,824
257

2,081
170
(333)

1,918

129

196

378

Company
£000

2,861
8,150

11,011
12,000

23,011

The Company owns 100% of the Ordinary Share capital of the following subsidiary undertakings, which are included in
the Group’s consolidation:
• Shopacheck Financial Services Limited (SFS), a company registered in England and Wales (company number:
07067456) with Registered Office: Building 1, The Phoenix Centre, 1 Colliers Way, Nottingham NG8 6AT, whose
principal activity was the provision of consumer credit and is currently non-trading.

• Shelby Finance Limited (SFL), a company registered in England and Wales (company number: 08117620) with

Registered Office: Building 1, The Phoenix Centre, 1 Colliers Way, Nottingham NG8 6AT, whose principal activity is the
provision of consumer credit.

As the net assets of SFL are insufficient to cover the investment value, a review of the investment carrying value in
Shelby and the exposure of intercompany loans has been performed using forecast future cash flows of the Digital
business. As the discounted future cash flows equate to a multiple of the investment value with headroom, no provision
for impairment has been made. See Note 12 on page 114.

Shopacheck Financial Services Limited and U Holdings Limited both qualify for an exemption to audit under the
requirements of section 480 of the Companies Act 2006. Shelby Finance Limited qualifies 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.

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN SectionStrategic Report

Corporate Governance

Financial Statements

117

15. Right-of-use assets

Group

Right-of-use assets
At 29 February 2020
Additions
Disposals

At 27 February 2021

Accumulated depreciation
At 29 February 2020
Charged to the income statement
Disposals

At 27 February 2021

Net book value
At 27 February 2021

At 29 February 2020

Company

Right-of-use assets
Cost
At 29 February 2020
Additions
Disposals

At 27 February 2021

Depreciation
At 29 February 2020
Charged to the income statement
Disposals

At 27 February 2021

Net book value
At 27 February 2021

At 29 February 2020

Building
£000

Equipment
£000

Vehicles
£000

1,888
98
(612)

1,374

515
474
(393)

596

778

1,373

970
427
(25)

1,372

328
451
(16)

763

609

642

1,537
235
(314)

1,458

769
661
(281)

1,149

309

768

Building
£000

Equipment
£000

Vehicles
£000

1,161
75
(565)

671

458
365
(347)

476

195

703

970
427
(25)

1,372

328
451
(16)

763

609

642

1,537
235
(314)

1,458

769
661
(281)

1,149

309

768

Total
£000

4,395
760
(951)

4,204

1,612
1,586
(690)

2,508

1,696

2,783

Totals
£000

3,668
737
(904)

3,501

1,555
1,477
(644)

2,388

1,113

2,113

C_GEN_PageC_GEN_PageL2C_GEN Section118

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

16. Trade and other receivables

Amounts receivable from customers

Amounts falling due within one year:
Net receivable from advances to customers
Amounts falling due after one year:
Net receivable from advances to customers

Net loan book

Other debtors
Intercompany funding
Prepayments

Group

Company

27.2.21
£000

29.2.20
£000

27.2.21
£000

29.2.20
£000

53,408

72,171

47,952

67,294

53,490

2,880
–
3,434

657

72,828

1,718
–
3,039

59,804

77,585

–

47,952

2,046
20,987
2,254

73,239

586

67,880

1,167
19,698
1,795

90,540

Within the Company, an impairment provision of £0.8m (2020: £0.8m) is held against amounts owed by Group
undertakings due in less than one year. The Company has assessed the estimated credit losses representing the
probability of default and loss given default for these intercompany loans by considering the forecast future cash flows
of the Digital business, as a result of which, there has been a £0.0m charge to the Company income statement in 2021
(2020: £0.8m).

Amounts receivable from customers

Analysis by future date due
– due within one year
– due in more than one year

Amounts receivable from customers

Analysis by security
Other loans not secured

Amounts receivable from customers

Group

Company

27.2.21
£000

53,490

53,408
82

53,490

29.2.20
£000

72,828

72,171
657

72,828

27.2.21
£000

47,952

47,952
–

47,952

29.2.20
£000

67,880

67,294
586

67,880

53,490

72,828

47,952

67,880

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:

Gross carrying amount
Impairment provision

Net amounts receivable

Group

Company

27.2.21
£000

90,063
(36,573)

53,490

29.2.20
£000

120,946
(48,118)

72,828

27.2.21
£000

80,529
(32,577)

47,952

29.2.20
£000

112,773
(44,893)

67,880

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN Section

Strategic Report

Corporate Governance

Financial Statements

119

Amounts receivable from Group customers can be reconciled as follows:

Group

Gross carrying amount
At 29 February 2020
New financial assets originated
Net transfers and changes in credit risk:
From Stage 1 to Stage 2
From Stage 1 to Stage 3
From Stage 2 to Stage 1
From Stage 2 to Stage 3
From Stage 3 to Stage 1
From Stage 3 to Stage 2
Write-offs
Collections
Revenue
Other Movements

At 27 February 2021

Loan loss provision account
At 29 February 2020
Movements through income statement:
New financial assets originated
Net transfers and changes in credit risk:
From Stage 1 to Stage 2
From Stage 1 to Stage 3
From Stage 2 to Stage 1
From Stage 2 to Stage 3
From Stage 3 to Stage 1
From Stage 3 to Stage 2
Remeasurements within existing stage
Reversal of Covid-19 overlay

Total movements through income statement
Other movements
Write-offs
Other movements

Loan loss provision account at 27 February 2021

Reported amounts receivable from customers at

27 February 2021

Reported amounts receivable from customers at

29 February 2020

Ref

Stage 1
£000

Stage 2
£000

Stage 3
£000

Total
£000

2
2
2
2
2
2
3
4
5
6

2
2
2
2
2
2
3
8

3
6

60,345
129,004

(30,617)
(9,314)
2,147
–
90
–
(9,310)
(185,567)
90,973
1,012

34,602
4

30,617
–
(2,147)
(10,415)
–
2,755
(9,224)
(34,351)
8,730
(6)

25,999
–

–
9,314
–
10,415
(90)
(2,755)
(15,581)
(7,216)
531
118

120,946
129,008

–
–
–
–
–
–
(34,115)
(227,134)
100,234
1,124

48,763

20,565

20,735

90,063

9,110

16,887

22,121

48,118

18,834

(12,539)
(7,271)
318
–
25
–
10,181
(1,134)

8,414

(9,310)
–

8,214

–

14,166
–
(351)
(8,666)
–
1,758
(3,379)
(461)

3,069

(9,224)
–

10,732

–
7,841
–
8,666
(28)
(1,758)
(3,295)
(75)

11,351

(15,581)
(264)

17,627

18,836
–
1,627
570
(33)
–
(3)
–
3,507
(1,670)

22,834

(34,115)
(264)

36,573

40,549

9,833

3,108

53,490

51,235

17,715

3,878

72,828

* References above indicate what each line of the table demonstrates:

(1) New loans issued in the year
(2) Staging movements of new loans issued and existing debt brought forward
(3) Net write-offs per stage
(4) Collections per stage
(5) Revenue per stage
(6) Other movements, including acquisitions
(7) Impairment provision associated with new loans issued in the year
(8) Covid-19 overlay - This was applied to the 2019/20 impairment provision in respect of the impact of Covid-19 on trading activity and in particular, future

cash flows as a result of, and a consequence of, the Covid-19 outbreak.

C_GEN_PageC_GEN_PageL2C_GEN Section
120

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

16. Trade and other receivables continued

Group

Gross carrying amount
At 23 February 2019
New financial assets originated
Net transfers and changes in credit risk:
From Stage 1 to Stage 2
From Stage 1 to Stage 3
From Stage 2 to Stage 1
From Stage 2 to Stage 3
From Stage 3 to Stage 1
From Stage 3 to Stage 2
Write-offs
Collections
Revenue
Other movements

At 29 February 2020

Loan loss provision account
At 23 February 2019

Movements through income statement:
New financial assets originated
Net transfers and changes in credit risk:
From Stage 1 to Stage 2
From Stage 1 to Stage 3
From Stage 2 to Stage 1
From Stage 2 to Stage 3
From Stage 3 to Stage 1
From Stage 3 to Stage 2
Remeasurements within existing stage
Covid-19 overlay

Total movements through income statement
Other movements:
Write-offs
Other movements:

Loan loss provision account at 29 February 2020

Ref*

Stage 1
£000

Stage 2
£000

Stage 3
£000

58,305
190,293

35,190
5

22,041
14

(51,735)
(18,309)
2,031
–
51
–
(6,111)
(242,302)
121,149
6,974

51,735
–
(2,031)
(11,679)
–
1,849
(7,763)
(44,722)
11,930
88

–
18,309
–
11,679
(51)
(1,849)
(18,787)
(7,086)
572
1,156

2019/20
IFRS 9
Total
£000

115,536
190,312
–
–
–
–
–
–
–
(32,661)
(294,110)
133,651
8,218

60,345

34,602

25,999

120,946

8,179

15,949

18,362

42,490

31,747

(19,497)
(11,160)
401
–
10
–
2,310
1,134

22,263
–
(447)
(9,826)
–
1,142
(5,025)
461

–
14,148
–
9,826
(11)
(1,142)
(51)
75

31,747

2,766
2,988
(46)
–
(1)
–
(2,766)
1,670

4,945

8,568

22,845

36,358

(6,111)
2,097

9,110

51,235

50,126

(7,763)
133

16,887

17,715

19,241

(18,787)
(299)

22,121

3,878

3,679

(32,661)
1,931

48,118

72,828

73,046

2
2
2
2
2
2
3
4
5
6

2
2
2
2
2
2
3
8

3
6

Reported amounts receivable from customers at 29 February 2020

Reported amounts receivable from customers at 23 February 2019

* References above indicate what each line of the table demonstrates:

(1) New loans issued in the year
(2) Staging movements of new loans issued and existing debt brought forward
(3) Net write-offs per Stage
(4) Collections per Stage
(5) Revenue per Stage
(6) Other movements, including acquisitions
(7) Impairment provision associated with new loans issued in the year
(8) Covid-19 overlay - This was applied to the 2019/20 impairment provision in respect of the impact of Covid-19 on trading activity and in particular, future

cash flows as a result of, and a consequence of, the Covid-19 outbreak.

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN Section
Strategic Report

Corporate Governance

Financial Statements

121

A breakdown of the gross receivable by internal credit risk rating is shown below:

2020/21

Group credit risk grade

Very good
Good
Satisfactory
Lower quality

Total

2019/20

Group credit risk grade

Very good
Good
Satisfactory
Lower quality

Total

Stage 1
£000

32,285
14,330
1,719
431

48,765

Stage 1
£000

39,037
18,918
1,924
467

60,346

Stage 2
£000

8,910
9,833
1,340
481

Stage 3
£000

9,407
8,628
622
2,077

20,564

20,734

Stage 2
£000

13,770
17,492
2,586
754

34,602

Stage 3
£000

10,861
10,230
1,426
3,481

25,998

Gross
Carrying
Value
£000

50,602
32,791
3,681
2,989

90,063

Total
£000

63,668
46,640
5,936
4,702

120,946

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.

17. Trade and other payables

Trade creditors
Amounts owed to Group undertakings
Social security and other taxes
Other creditors
Customer complaints provision
Accrued expenses

18. Bank and other borrowings: amounts falling due after one year

Bank loans
Unamortised arrangement fees

Group

Company

27.2.21
£000

3,842
–
925
778
2,012
4,494

12,051

29.2.20
£000

3,331
–
571
537
–
2,284

6,723

27.2.21
£000

2,956
1,321
925
740
2,012
3,916

11,870

29.2.20
£000

2,887
1,321
571
522
–
1,328

6,629

Group and Company

27.2.21
£000

8,500
(198)

8,302

29.2.20
£000

34,000
(162)

33,838

In November 2018 the Company signed a £10,000,000 loan facility to bring its total revolving credit facilities to
£50,000,000. In addition, the Company also signed a £15,000,000 mezzanine facility, of which £5,000,000 is
committed and £10,000,000 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 £55m committed to £40m to better match the needs of the business post Covid-19. By reducing this unused
headroom and repaying the £5m mezzanine layer, non-utilisation charges for any given level of borrowing will be
reduced and therefore so too will the overall cost of funding.

C_GEN_PageC_GEN_PageL2C_GEN Section122

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

18. Bank and other borrowings: amounts falling due after one year continued

In May 2021 we successfully reached agreement with a new two lender consortium, for a more cost efficient and
slightly lower £35m 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 £22.5m in December 2020 (December 2019: £40m). The bank loan is made up
of a revolving credit facility held with Shawbrook Bank Limited, a major high street bank and a private equity firm. Under
the terms of the loan covenants, the loan book is held as collateral against the funds borrowed. The net carrying value of
the loan book at the reporting date was £53,490,135 (2020: £72,827,727).

19. Leases

Current
Non-current

Existing:
Within one year
Between one and five years
In more than five years

Group
27.2.21
£’000

790
994

1,784

Group
29.2.20
£’000

1,286
1,553

2,839

Company
27.2.21
£’000

Company
29.2.20
£’000

740
343

1,083

1,228
848

2,076

Other operating leases

Land & buildings

Total

Group
27.2.21
£000

Company
27.2.21
£000

Group
27.2.21
£000

Company
27.2.21
£000

Group
27.2.21
£000

Company
27.2.21
£000

686
291
–

977

686
291
–

977

104
335
368

807

54
52
–

106

790
626
368

740
343
–

1,784

1,083

Other operating leases

Land & buildings

Total

Group
29.2.20
£’000

Company
29.2.20
£’000

Group
29.2.20
£’000

Company
29.2.20
£’000

Group
29.2.20
£’000

Company
29.2.20
£’000

909
575
–

377
533
445

1,484

1,355

319
267
6

592

1,286
1,108
445

2,839

1,228
842
6

2,076

The total cash outflow from leases in the 52 weeks ended 27 February 2021 amounted to £1,851,976 for the Group
including short-term lease cash outflows of £12,949. At the end of the period, the Group is also committed to £Nil for
short-term leases. Total cash outflows for the Company amounted to £1,685,719.

20. Operating lease commitments

The following lease obligations fall outside of the scope of IFRS 16. The amounts committed to be paid under the terms of
these lease agreements are as follows:

Group and Company

Existing:
Within one year
Between one and five years

Morses Club Annual Report & Accounts 2021

Land & buildings

27.2.21
£000

29.2.20
£000

35
9

158
45

203

C_GEN_PageC_GEN_PageL2C_GEN Section

Strategic Report

Corporate Governance

Financial Statements

123

21. Deferred tax

Fixed asset temporary differences
Other temporary differences

Deferred tax asset

Group

Company

27.2.21
£000

29.2.20
£000

27.2.21
£000

29.2.20
£000

(142)
723

581

(165)
824

659

(46)
717

671

(165)
962

797

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.

Group
£000

Company
£000

Balance as at 29 February 2020
Accelerated capital allowances
Deferred tax charge in profit and loss account for period – CY
Deferred tax charge in profit and loss account for period – PY
Deferred tax rate change

Short-term timing differences
Deferred tax charge in profit and loss account for period – CY
Deferred tax charge in profit and loss account for period – PY

Deferred tax rate change

Intangibles
Deferred tax charge in profit and loss account for period – CY
Deferred tax charge in profit and loss account for period – PY
Deferred tax rate change

Share-based payments
Deferred tax charge in profit and loss account for period – CY
Deferred tax charge in profit and loss account for period – PY

Deferred tax rate change
Deferred tax charge on share-based payments

Balance as at 27 February 2021

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

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

Total value of assets on which deferred tax has not been recognised

659

(9)
99
14

(51)
-

29
(136)
(31)

97
-

6
(145)

581

797

(31)
103
22

(72)
-

(61)
(90)
(17)

97
-

6
(145)

671

Group
£000

Company
£000

508

554

508

128

636

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.

22. Called up share capital

Authorised, allotted, issued and fully paid:

Number:

129,500,000

292,100

1,452,400

1,286,095

Class:

Ordinary

Nominal
Value:

£0.01

27.2.21
£000

1,295

29.2.20
£000

1,295

–

1,325

1,312

C_GEN_PageC_GEN_PageL2C_GEN Section

124

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

23. Reserves

Group

At 23 February 2019
Impact of adoption of IFRS 16

At 24 February 2019

Profit for the period
Deferred tax on acquisitions
Share-based payment charge
Dividends paid

At 29 February 2020

Profit for the period
Share-based payment charge
Dividends paid

At 27 February 2021

Company

At 23 February 2019
Impact of adoption of IFRS 16

At 24 February 2019

Profit for the period
Share-based payment charge
Dividends paid

At 29 February 2020

Profit for the period
Share-based payment charge
Dividends paid

At 27 February 2021

24. Retirement benefit schemes

Retained
earnings
£000

69,681
154

69,835

9,477
39
155
(10,162)

69,344

217
1,079
(1,312)

Total
£000

69,681
154

69,835

9,477
39
155
(10,162)

69,344

217
1,079
(1,312)

69,328

Group
reconstruction
reserve
£000

(9,276)
–

(9,276)

–
–
–

(9,276)

–
–
–

(9,276)

Retained
earnings
£000

79,710
154

79,864

18,705
155
(10,162)

88,562

11,531
1,079
(1,312)

99,860

Total
£000

70,434
154

70,588

18,705
155
(10,162)

79,286

11,531
1,079
(1,312)

90,584

Defined contribution schemes
The Group operates defined contribution retirement benefit schemes for all qualifying employees. The assets of the
schemes are held separately from those of the Group in funds under the control of the pension provider. Where there are
employees who leave the schemes prior to vesting fully in the contributions, the contributions payable by the Group are
reduced by the amount of forfeited contributions.

The total cost charged of £979,110 (2020: £1,012,918) represents contributions payable to these schemes by the Group
at rates specified in the rules of the plans. Contributions payable to the schemes at the year end were £186,943
(2020: £181,195).

25. Ultimate parent company

The Directors consider there to be no ultimate parent company.

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN SectionStrategic Report

Corporate Governance

Financial Statements

125

26. Financial instruments

The Group and the Company’s principal financial instruments are amounts receivable from customers, cash, bank
overdrafts and bank loan.

The Group and the Company’s business objectives rely on maintaining a well spread customer base of carefully
controlled quality by applying strong emphasis on good credit management, both through strict lending criteria at the
time of underwriting a new credit facility and continuous monitoring of the collection process.

As at 27 February 2021 the Company and Group’s indebtedness amounted to £8.5m (2020: £34m).

Currency risk
The Group has no exposure to foreign currency risk.

Credit risk
Credit risk is the risk that the Group will suffer loss in the event of a default by a customer or a bank counterparty.
A default occurs when the customer or bank fails to honour repayments as they fall due.

The Group has not disclosed impairment allowance split by risk rating as this split is not used internally by the Group to
monitor loan book performance.

(i) Amounts receivable from customers
The Group’s maximum exposure to credit risk on amounts receivable from customers as at 27 February 2021 is the
carrying value of amounts receivable from customers of £53,490,135 (2020: £72,827,727).

The Company’s maximum exposure to credit risk on amounts receivable from customers as at 27 February 2021 is the
carrying value of amounts receivable from customers of £47,952,408 (2020: £67,880,532).

Home Collected Credit
Credit risk is managed using a combination of lending policy criteria, credit scoring (including behavioural scoring),
policy rules, individual lending approval limits, central underwriting and a home visit to make a decision on applications
for credit.

The loans offered to customers are short-term, typically a contractual period of between 22 and 53 weeks
(2020: between 22 and 52 weeks), with an average value of approximately £396 (2020: £355). The loans are
underwritten in the customers’ home by an agent following a full affordability assessment and eligibility against credit
policy. Once a loan has been made, the agent visits the customer weekly to collect repayments. The agent is well placed
to identify signs of strain on a customer’s income and can moderate lending accordingly. Equally, the regular contact and
professional relationship that the agent has with the customer allows them to manage customers’ repayments
effectively even when the household budget is tight. This can be in the form of taking part-payments, allowing missed
payments or occasionally restructuring the debt in order to maximise cash collections.

Agents are paid commission for what they collect and not for what they lend, so their main focus is on ensuring loans are
affordable at the point of issue and then on collecting cash. Affordability is reassessed by the agent each time an
existing customer is re-served. This normally takes place within 12 months of the previous loan because of the short-term
nature of the products.

Write off is when a customer has made no payments on their account for 17 weeks and the account is transferred out of
field operations to customer support.

Arrears management is a combination of central letters, central telephony, and field activity undertaken by field
management. This will often involve a home visit to discuss the customer’s reasons for non-payment and to agree a
suitable resolution.

During the period, loans to the contractual value of £198,346,704 (2020: £298,061,173) were provided to customers.

Digital
The loans provided by Dot Dot Loans are only available online with applications coming directly through the website or
via brokers; c.90% of new customer loans come via broker applications.

Credit risk is managed using a combination of lending policy criteria, credit scoring (including behavioural scoring for
returning customers), policy rules, full income and expenditure validation leading to individual lending approval limits.
Only 7% of applications received are accepted through the lending rules. There is a central underwriting team who
review applications with discrepancies, prior to funding, on approximately 25% of the loans.

C_GEN_PageC_GEN_PageL2C_GEN Section126

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

26. Financial instruments continued

Digital continued
The loans offered to customers are short-term, typically a contractual period of between three months and nine months
(2020: between three and nine months), with an average value of approximately £363 (2020: £333). Once a loan has
been made, the customer makes monthly repayments.

The primary repayment method is via direct debit, however, repayments can also be made by a card payment or online
transfer to the Company.

Write off is when a customer has missed 4 monthly payments and the account is transferred to customer support.

Arrears management is a combination of central letters, central telephony, emails and SMS text messages. This will
often involve a phone call to discuss the customer’s reasons for non-payment and to agree a suitable resolution. Where
customers cannot make the monthly repayments our Collections team may discuss an appropriate payment plan to help
ensure the loan repayments are manageable for the customer. We do not charge missed payment or late fees. The
Collections team are not paid commission on what they collect.

During the period, loans to the contractual value of £35,339,405 (2020: £27,552,501) were provided to customers.

(ii) Bank counterparties
The Group’s maximum exposure to credit risk on bank counterparties as at 27 February 2021 was £8,257,930
(2020: £11,868,037).

Counterparty credit risk arises as a result of cash deposits placed with banks.

Counterparty credit risk is managed by the Board of Directors which ensures that the Group’s cash deposits are only
made with high-quality counterparties with the level of permitted exposure to a counterparty firmly linked to the
strength of its credit rating.

Liquidity risk
Liquidity risk is the risk that the Group will have insufficient liquid resources available to fulfil its operational plans and/or
to meet its financial obligations as they fall due.

Liquidity risk is the risk that the Group will have insufficient liquid resources available to fulfil its operational plans and/or
to meet its financial obligations as they fall due. Liquidity risk is managed by daily monitoring of expected cash flows and
ensuring that the Group maintains headroom on its committed borrowing facilities to fund growth and contractual
maturities for at least the following 12 months.

In the year, funding was available through a £40m revolving asset-based credit facility and a separate £5m asset-based
mezzanine credit facility. The Group’s liquidity risk is shown in the following tables which measure the cumulative liquidity
gap. Most of the Group’s financial assets are repayable within one year which results in a positive liquidity position.

Following FY20 year-end, an initial extension to the funding arrangement from August 2020 to the end of November
2021 was signed with the incumbent lender consortium, and subsequently followed up with a further extension to
December 2021. The facility limit was reduced from £55m committed to £40m to better match the needs of the business
post Covid-19. By reducing this unused headroom and repaying the £5m mezzanine layer, non-utilisation charges for any
given level of borrowing will be reduced and therefore so too will the overall cost of funding. Post year end the existing
£40m facility has been reduced to a £35m facility, with the inclusion of funding for the digital loan book, with a maturity
date of December 2022 (see note 31 on page 137)

Group
At 27 February 2021

Financial assets
Other assets
Cash at bank and in hand

Total assets

Shareholders’ funds
Other liabilities
Total liabilities and

shareholders’ funds

Cumulative position

Less than
1 year
£000

54,795
4,927
8,258

67,980

–
(12,841)

(12,841)

55,139

Morses Club Annual Report & Accounts 2021

More than
1 year but not
more than
2 years
£000

More than
2 years but not
more than
5 years
£000

More than
5 years
£000

No fixed
maturity
date
£000

–
24,728
–

24,728

Total
£000

54,877
29,655
8,258

92,790

(70,653)
–

(70,653)
(22,137)

(70,653)

(92,790)

–
–
–

–

–
–

–

–
–
–

–

–
–

–

45,925

–

82
–
–

–
(9,296)

(9,296)

45,925

C_GEN_PageC_GEN_PageL2C_GEN SectionStrategic Report

Corporate Governance

Financial Statements

127

More than
1 year but not
more than
2 years
£000

More than
2 years but not
more than
5 years
£000

More than
5 years
£000

46,053

–

More than
1 year but not
more than
2 years
£000

More than
2 years but not
more than
5 years
£000

More than
5 years
£000

Group
At 29 February 2020

Financial assets
Other assets
Cash at bank and in hand

Total assets

Shareholders’ funds
Other liabilities
Total liabilities and

shareholders’ funds

Cumulative position

Company
At 27 February 2021

Financial assets
Other assets
Cash at bank and in hand

Total assets

Shareholders’ funds
Other liabilities
Total liabilities and

shareholders’ funds

Cumulative position

Company
At 29 February 2020

Financial assets
Other assets
Cash at bank and in hand

Total assets

Shareholders’ funds
Other liabilities
Total liabilities and

shareholders’ funds

Cumulative position

Less than
1 year
£000

72,672
4,256
11,868

88,796

–
(8,009)

(8,009)

80,787

Less than
1 year
£000

49,339
23,900
6,616

79,855

–
(12,610)

(12,610)

67,245

Less than
1 year
£000

67,794
22,159
9,585

99,538

–
(7,857)

(7,857)

91,681

657
–
–

657

–
(35,391)

(35,391)

46,053

–
–
–

–

–
(8,644)

(8,644)

58,601

586
–
–

586

–
(34,686)

(34,686)

57,581

No fixed
maturity
date
£000

–
24,603
–

24,603

Total
£000

73,329
28,859
11,868

114,056

(70,656)
–

(70,656)
(43,400)

(70,656)

(114,056)

No fixed
maturity
date
£000

–
33,309
–

33,309

Total
£000

49,339
57,209
6,616

113,164

(91,910)
–

(91,910)
(21,254)

(91,910)

(113,164)

No fixed
maturity
date
£000

–
23,017
–

23,017

Total
£000

68,380
45,176
9,585

123,141

(80,598)
–

(80,598)
(42,543)

(80,598)

(123,141)

–
–
–

–

–
–

–

–
–
–

–

–
–

–

–
–
–

–

–
–

–

–
–
–

–

–
–

–

–
–
–

–

–
–

–

–
–
–

–

–
–

–

58,601

–

More than
1 year but not
more than
2 years
£000

More than
2 years but not
more than
5 years
£000

More than
5 years
£000

57,581

–

Interest rate risk
The Group’s activities do not expose it to significant financial risks of changes in interest rates. There is considered to be
no material interest rate risk in cash, trade and other receivables or trade and other payables.

The Group is exposed to movements in LIBOR rates on its external borrowings. A 1% movement in the interest rate
applied to financial liabilities during 2021 would not have had a material impact on the Group’s results for the year.

C_GEN_PageC_GEN_PageL2C_GEN Section128

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

26. Financial instruments continued

Capital risk management
The Board of Directors assesses the capital needs of the Group on an ongoing basis and approves all capital
transactions ensuring these adhere to the criteria set out in the external loan facility.

The Group’s policy is to maintain a strong equity and reserves base so as to maintain investor and market confidence
and to sustain future development of the business. Management monitors the return on equity and return on assets and
strives to deliver a progressive dividend policy for shareholders.

While the Group was not previously subject to any externally imposed capital requirements, it entered into a new funding
arrangement during the period which limited capital expenditure in any given period. The limit of this expenditure is £5m ,
with an allowance to carry forward any unutilised headroom from the previous period.

The Board of Directors recognises the balance required between maximising shareholder return and maintaining a
prudent balance sheet. To this end the Group has a formal gearing policy. The Group defines gearing as Total Debt/Total
Equity and has a preferred average level of gearing of less than 1.0.

The Group’s gearing at 27 February 2021 was:

Gross debt
Equity
Gearing

27.2.21
£000

8,500
70,653
0.12

29.2.20
£000

34,000
70,656
0.48

Existing loan facilities are subject to a number of bespoke financial covenants such as interest cover which are monitored
internally and submitted on a monthly basis to funders. There were no breaches of any of these covenants in the period
to 27 February 2021.

Any changes to existing or adding of new loan facilities requires the approval of the PLC Board.

Fair values of financial assets and liabilities
The Group has adopted the following fair value hierarchy in relation to its financial instruments that are carried in the
balance sheet at the fair values at the year end:
• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 – inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either

directly (as prices) or indirectly (derived from prices); and

• Level 3 – inputs for the asset or liability not based on observable market data (unobservable inputs).

The fair values of amounts receivable from customers, bank loans and overdrafts and other assets and liabilities are
considered to be materially different from their book values. Fair values which are recognised or disclosed in these
financial statements are determined in whole or in part using a valuation technique based on assumptions that are
supported by prices from observable current market transactions in the same instrument (ie, without modification or
repackaging) and based on available observable market data. The fair value hierarchy is derived in accordance with
IFRS 13 as follows: Level 1 for cash, Level 2 for borrowings and Level 3 for loan book, normal trade receivables, other
payables and lease liabilities.

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN Section

Strategic Report

Corporate Governance

Financial Statements

129

The following table sets out the carrying value of the Group’s financial assets and liabilities in accordance with the
categories of financial instruments:

Group
At 27 February 2021

Assets:
Cash and cash equivalents
Amounts receivable from customers
Trade and other receivables
Property, plant and equipment
Right-of-use asset
Goodwill
Deferred tax assets
Other intangible assets

Total assets

Liabilities:
Bank and other borrowings
Trade and other payables
Customer complaints provision

Lease liabilities

Total liabilities

Company
At 27 February 2021

Assets:
Cash and cash equivalents
Amounts receivable from customers
Trade and other receivables
Property, plant and equipment
Right-of-use asset
Goodwill
Investment in subsidiary
Deferred tax assets
Other intangible assets

Total assets

Liabilities:
Bank and other borrowings
Trade and other payables
Customer complaints provision

Lease liabilities

Total liabilities

Financial
assets
measured at
amortised cost
£000

Financial
liabilities
measured at
amortised cost
£000

Non-financial
assets/
liabilities
£000

8,258
53,490
2,880
–
–
–
–
–

64,628

–
–
–
–
–
–
–
–

–

–
–
–

–

(8,302)
(4,621)

–

(1,784)

(14,707)

6,616
47,952
23,033
–
–
–
–
–
–

77,601

–
–
–
–
–
–
–
–
–

–

–
–
3,434
734
1,696
12,854
581
8,863

28,162

–
(5,418)
(2,012)

–

–
–
2,254
129
1,113
3,293
23,011
671
5,092

(7,430)

(22,137)

Financial
assets
measured at
amortised cost
£000

Financial
liabilities
measured at
amortised cost
£000

Non-financial
assets/
liabilities
£000

Total
£000

8,258
53,490
6,314
734
1,696
12,854
581
8,863

92,790

(8,302)
(10,039)
(2,012)

(1,784)

Total
£000

6,616
47,952
25,287
129
1,113
3,293
23,011
671
5,092

35,563

113,164

–
–
–

–

(8,302)
(5,018)

–

(1,083)

(14,403)

–

(4,840)
(2,012)

–

(8,302)
(9,858)
(2,012)

(1,083)

(6,852)

(21,255)

C_GEN_PageC_GEN_PageL2C_GEN Section

130

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

Total
£000

11,868
72,828
4,757
818
2,783
659
12,981
7,362

Total
£000

9,585
67,880
22,660
196
2,113
3,293
11,011
797
5,606

Financial
assets
measured at
amortised cost
£000

Financial
liabilities
measured at
amortised cost
£000

Non-financial
assets/
liabilities
£000

11,868
72,828
1,718
–
–
–
–
–

86,414

–
–
–
–
–
–
–
–

–

–
–
3,039
818
2,783
659
12,981
7,362

27,642

114,056

–
–
–

–

(33,838)
(3,868)
(2,839)

(40,545)

–
(2,855)
–

(33,838)
(6,723)
(2,839)

(2,855)

(43,400)

Financial
assets
measured at
amortised cost
£000

Financial
liabilities
measured at
amortised cost
£000

Non-financial
assets/
liabilities
£000

9,585
67,880
20,865
–
–
–
–
–
–

98,330

–
–
–
–
–
–
–
–
–

–

–
–
1,795
196
2,113
3,293
11,011
797
5,606

24,811

123,141

–
–
–
–

–

(33,838)
(4,731)
(2,076)
–

(40,645)

–
(1,898)
–
–

(33,838)
(6,629)
(2,076)
–

(1,898)

(42,543)

26. Financial instruments continued

Fair values of financial assets and liabilities continued

Group
At 29 February 2020

Assets:
Cash and cash equivalents
Amounts receivable from customers
Trade and other receivables
Property, plant and equipment
Right-of-use asset
Goodwill
Deferred tax assets
Other intangible assets

Total assets

Liabilities:
Bank and other borrowings
Trade and other payables
Lease liabilities

Total liabilities

Company
At 29 February 2020

Total assets

Liabilities:
Bank and other borrowings
Trade and other payables
Lease liabilities
Deferred tax liabilities

Total liabilities

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN Section

Strategic Report

Corporate Governance

Financial Statements

131

The tables below show the fair value of financial assets and liabilities not presented at fair value in the balance sheet.

Group

Assets:
Cash and cash equivalents
Amounts receivable from customers
Trade and other receivables

Total assets

Liabilities:
Bank and other borrowings
Trade and other payables
Lease liabilities

Total liabilities

Company

Assets:
Cash and cash equivalents
Amounts receivable from customers
Trade and other receivables

Total assets

Liabilities:
Bank and other borrowings

Trade and other payables
Lease liabilities

Total liabilities

27.2.21

29.2.20

Fair Value
£000

Book Value
£000

Fair Value
£000

Book Value
£000

8,258
72,764
2,880

83,902

8,258
53,490
2,880

64,628

11,868
98,857
1,718

112,443

11,868
72,828
1,718

86,414

(8,500)
(4,621)
(1,784)

(8,302)
(4,621)
(1,784)

(14,905)

(14,707)

(34,000)
(3,868)
(2,839)

(40,707)

(33,838)
(3,868)
(2,839)

(40,545)

27.2.21

29.2.20

Fair Value
£000

Book Value
£000

Fair Value
£000

Book Value
£000

6,616
64,195
23,033

93,844

(8,500)

(5,018)
(1,083)

6,616
47,952
23,033

77,601

9,585
91,338
20,865

121,788

9,585
67,880
20,865

98,330

(8,302)

(5,018)
(1,083)

(34,000)

(33,838)

(4,731)
(2,076)

(14,601)

(14,403)

(40,807)

(40,645)

Key considerations in the calculation of fair values of those financial assets and liabilities not presented at fair value in
the balance sheet are set out below. Where there is no significant difference between carrying value and fair value no
additional information has been presented. Fair value of amounts receivable from customers has been derived by
discounting expected future cash flows (net of collection costs) at the credit risk-adjusted discount rate at the balance
sheet date. They are categorised within Level 3 as the expected future cash flows and discount rate are deemed to be
significant unobservable inputs.

C_GEN_PageC_GEN_PageL2C_GEN Section

132

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

26. Financial instruments continued

Fair values of financial assets and liabilities continued

Group
At 27 February 2021

Trade and other payables
Tax liabilities
Accruals and deferred income
Customer complaints provision
Bank loans
Lease liabilities

At 27 February 2021

Company
At 27 February 2021

Trade and other payables
Tax liabilities
Accruals and deferred income
Customer complaints provision
Bank loans
Lease liabilities

At 27 February 2021

Group
At 29 February 2020

Trade and other payables
Tax liabilities
Accruals and deferred income
Bank loans
Lease liabilities

At 29 February 2020

Company
At 27 February 2020

Trade and other payables
Tax liabilities
Accruals and deferred income
Bank loans
Lease liabilities

At 29 February 2020

Repayable
on demand
£000

Less than
1 year
£000

More than
1 year but not
more
than 2 years
£000

More than
2 years but not
more
than 5 years
£000

More than
5 years
£000

–
–
–
–
–
–

–

3,842
–
6,197
2,012
–
790

12,841

–
–
–
–
–
284

284

–
–
–
–
8,302
342

8,644

–
–
–
–
–
368

368

Repayable
on demand
£000

Less than
1 year
£000

More than
1 year but not
more
than 2 years
£000

More than
2 years but not
more
than 5 years
£000

More than
5 years
£000

–
–
–
–
–
–

–

2,956
–
6,902
2,012
–
740

12,610

–
–
–
–
–
227

227

–
–
–
–
8,302
116

8,418

–
–
–
–
–
–

–

Repayable
on demand
£000

Less than
1 year
£000

More than
1 year but not
more
than 2 years
£000

More than
2 years but not
more
than 5 years
£000

More than
5 years
£000

–
–
–
–
–

–

3,331
–
3,392
–
1,286

8,009

–
–
–
–
721

721

–
–
–
33,838
387

34,225

–
–
–
–
445

445

Repayable
on demand
£000

Less than
1 year
£000

More than
1 year but not
more
than 2 years
£000

More than
2 years but not
more
than 5 years
£000

More than
5 years
£000

–
–
–
–
–

–

2,887
–
3,742
–
1,228

7,857

–
–
–
–
671

671

–
–
–
–
7

Total
£000

3,842
–
6,197
2,012
8,302
1,784

22,137

Total
£000

2,956
–
6,902
2,012
8,302
1,083

21,255

Total
£000

3,331
–
3,392
33,838
2,839

43,400

Total
£000

2,887
–
3,742
33,838
2,076

42,543

–
–
–
33,838
170

34,008

29.2.20
£000

–
6,482
509
(4,491)
(2,500)

–

Company

27.2.21
£000

29.2.20
£000

–
–
–
–
–

–

–
–
–
–
–

–

The table below summarises the movement in contingent consideration.

Contingent consideration

As at 29 February 2020
Contingent consideration arising on acquisitions
Unwind of discount on contingent consideration
Paid
Written off

As at 27 February 2021

Morses Club Annual Report & Accounts 2021

Group

27.2.21
£000

–
–
–
–
–

–

C_GEN_PageC_GEN_PageL2C_GEN SectionStrategic Report

Corporate Governance

Financial Statements

133

27. Share-based payments

The Deferred Share Plan (DSP) – Senior Management Team
The Company introduced this share option plan on 26 April 2016 with 1,002,310 share options being issued under the
plan on admission to AIM (Admission). A second share option plan was granted on 5 May 2017 when 989,700 share
options were issued, and a third share option plan granted on 5 May 2018 when 964,100 share options were issued.
No shares were awarded for 2019/20 since the TSR performance conditions were not met. Subsequent share
options are granted to Executive Directors and senior managers on a rolling annual basis at the discretion of the
Remuneration Committee.

During the period covered by this report, share options were issued as follows:

Grant date

28 January 2021

Share options
issued

1,100,252

January 2021 was the earliest month in which awards could be made in an open period for share dealing, following the
announcement of the Group’s FY20 annual results. The performance period started on 21 May 2020.

Share awards are subject to performance conditions which are: delivery of total shareholder return, targeted profits,
compliance training, and individual executive performance. The first of these conditions assessing the Company’s
absolute total shareholder return (TSR), over a twelve-month period. 25% of the award will vest for an increase in TSR
of 7.5%, rising on a straight-line basis to 100% vesting for 12.6% annual TSR growth, subject to the other performance
conditions referred to below.

Notwithstanding the satisfaction of the TSR performance condition referred to above, any vesting of these share
awards will also be subject to the satisfaction of further performance conditions measured up to the end of the financial
year ending February 2022. In order for these Awards to vest, the Company will have to achieve the targeted level of
profit before tax for the financial year ending in February 2021. The vesting of the initial Awards is also conditional on
the Remuneration Committee determining that, over the period finishing at the end of the financial year ending in
February 2023:
•
•
•

the Company’s internal and external audits and compliance training delivery have been satisfactory;
the Company has retained all relevant FCA authorisation for the carrying on of its business; and
the participant has not been subject to any disciplinary action and their personal performance has been satisfactory.

For any subsequent annual grants, the Remuneration Committee will set any performance conditions by reference to
the Company’s long-term strategy, which may include total shareholder return and/or financial metrics and/or key
strategic goals to support long-term value creation. It is the Remuneration Committee’s current intention that the
vesting of any Awards granted to the Company’s senior management team in respect of the financial years ending
February 2022 and 2023 will at least in part be subject to the Company’s TSR performance.

Any performance condition may be amended or substituted if one or more events occur which cause the Remuneration
Committee to consider that an amended or substituted performance condition would be more appropriate and not
materially less difficult to satisfy.

Awards will not be granted to a participant under the DSP over Ordinary Shares with a market value (as determined by
the Remuneration Committee) in excess of 100% of salary in respect of any financial year.

As of the balance sheet date, the estimated market value of each share option granted is £0.63 (2020: £1.08). This has
resulted in a charge to the profit or loss account of £847,654 (2020: £156,594) during the year.

The market value of the shares at the grant date is calculated using a Monte Carlo simulation. The assumptions used in
the calculation are set out below:

Grant date

Expected volatility
Expected term
Risk-free rate
Dividend yield

8 May
2016

26%
1
0.34%
0%

5 May
2017

45%
1
0.34%
0%

5 May
2018

30%
1
0.34%
0%

DSP

5 May
2019

30%
1
1.05%
0%

1 July
2019

31%
0.83
0.88%
0%

22 July
2019

33%
0.75
0.88%
0%

1 Sept
2019

35%
0.67
0.88%
0%

28 Jan
2021

90%
0.42
0.80%
0%

C_GEN_PageC_GEN_PageL2C_GEN Section134

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

27. Share-based payments continued

The Deferred Share Plan (DSP) – Senior Management Team continued
Expected volatility is calculated based on movements in the Company’s share price in the 12 months preceding the grant
date. In prior years this was based on the volatility in the share prices for the Company’s peer group due to the lack of
historical data in relation to the Company’s own share price.

Outstanding at 29 February 2020
Awarded/granted
Lapsed
Exercised

Outstanding at 27 February 2021

Exercisable as at 27 February 2021

Weighted
Average
Exercise
Price
(£)

–
–
–
–

–

Number

1,302,533
1,751,519
–
(989,700)

2,064,352

–

For the share options outstanding at 27 February 2021, the weighted average remaining contractual life is 8.3 years
(2020: 8.1 years).

All options are expected to be equity settled. The estimated amount to be transferred to the tax authority to settle the
employers’ tax obligations is £176,910.

The Share Option Plan (SOP) – Employees
On 19 October 2017 the Company introduced its first share option plan that entitles employees to purchase shares in the
Company at an exercise price of £0.01 per share. 238,097 share options were issued under the plan.

The fair value of the employee share options has been measured using the Black-Scholes valuation method. Service and
non-market performance conditions were not taken into account in measuring fair value.

As of the balance sheet date, the estimated market value of each share option granted is £0.63 (2020: £1.08). This has
resulted in a charge to the profit or loss account of £37,650 (2020: £77,549) during the year.

The market value of the shares at the grant date is calculated using the Black-Scholes valuation method. The
assumptions used in the calculation are set out below:

Grant date

Expected volatility
Expected term
Risk-free rate
Dividend yield

SOP

19 October
2017

5 December
2018

5 December
2019

40%
1
0.75%
4.75%

40%
1
0.68%
5.21%

36%
1
0.98%
6.14%

Expected volatility is calculated based on movements in the Company’s share price in the 12 months preceding the
grant date.

Outstanding at 29 February 2020
Awarded/granted
Lapsed
Exercised

Outstanding at 27 February 2021

Exercisable as at 27 February 2021

Number

245,797
–
(21,341)
(90,387)

134,069

–

For the share options outstanding at 27 February 2021, the weighted average remaining contractual life is 7.2 years.
(2020: 7.9 years).

All options are expected to be equity settled. The estimated amount to be transferred to the tax authority to settle the
employers’ tax obligations is £11,489.

Morses Club Annual Report & Accounts 2021

Weighted
Average
Exercise
Price
(£)

0.01
0.01
0.01
0.01

0.01

–

C_GEN_PageC_GEN_PageL2C_GEN Section

Strategic Report

Corporate Governance

Financial Statements

135

Share Incentive Plan (SIP) – Employees
On 5 December 2018 the Company introduced an approved share incentive scheme (SIP) for all employees and issued
292,122 Ordinary Shares with a nominal value of £0.01. The shares are held by an independent trust for the duration of
the holding period and subsequent share options are granted to employees on a rolling annual basis at the discretion of
the Remuneration Committee and subject to the Company’s profit performance in the previous financial year.

The fair value of the employee share options has been measured using a Black-Scholes option pricing model. Service
and non-market performance conditions were not taken into account in measuring fair value.

As at the balance sheet date, the estimated market value of each share option granted is £0.63 (2020: £1.08). This has
resulted in a charge to the profit or loss account of £238,048 (2020: £100,375) during the period.

Grant date

Expected volatility
Expected term
Risk-free rate
Dividend yield

SIP

5 December
2018

5 December
2019

41%
1
0.68%
0%

36%
1
0.98%
6.14%

As there are no market-based performance conditions attached to this scheme the expected volatility is deemed to
be neutral.

Outstanding at 29 February 2020
Awarded/granted
Lapsed

Outstanding at 27 February 2021

Exercisable as at 27 February 2021

Weighted
Average
Exercise
Price
(£)

–
–
–

–

Number

554,973
–
(18,952)

536,021

–

For the share options outstanding at 27 February 2021, the weighted average remaining contractual life is 8.3 years
(2020: 9.3 years).

All options are expected to be equity settled. The estimated amount to be transferred to the tax authority to settle the
employers’ tax obligations is £41,521.

C_GEN_PageC_GEN_PageL2C_GEN Section
136

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

28. Related party transactions

Hay Wain Holdings Limited (formerly FCAP Four Limited) is the immediate parent undertaking of Hay Wain Group Limited.

The Company undertook the following transactions with its former parent and subsidiaries during the period:

52 weeks ended 27 February 2021
Hay Wain Holdings Limited
Hay Wain Group Limited
Shopacheck Financial Services Limited
Shelby Finance Limited

53 weeks ended 29 February 2020
Hay Wain Holdings Limited
Hay Wain Group Limited
Shopacheck Financial Services Limited
Shelby Finance Limited

At the period end the following balances were outstanding:

Hay Wain Holdings Limited
Hay Wain Group Limited
Shopacheck Financial Services Limited
Shelby Finance Limited

Amounts owed from/(to) related parties

Dividends
Received/
(Paid)
£000

Interest
Recharge
£000

Professional
Fees
Recharged
£000

–
(477)
–
–

(477)

–
(3,719)
–
–

(3,719)

–
–
–
1,544

1,544

–
–
–
1,055

1,055

–
–
–
–

–

–
–
–
–

–

27.2.21
£000

–
–
(1,321)
21,773

20,452

29.2.20
£000

–
–
(1,321)
20,448

19,127

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No
provisions have been made for doubtful debts in respect of the amounts owed by related parties.

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN Section

Strategic Report

Corporate Governance

Financial Statements

137

29. Provisions

Group

At 29 February 2020
Additional Provisions in the year

At 27 February 2021

Group

Analysed as:
Current liabilities
Non-current liabilities

Customer
Complaints
£’000

–
2,012

2,012

Other
£’000

–
–

–

Total
£’000

–
2,012

2,012

27.2.21
£’000

29.2.20
£’000

2,012
–

2,012

–
–

–

Complaints provision
The complaints provision represents management’s best estimate of the group’s liability in 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. The full provision is recorded
in the accounts of Morses Club PLC.

30. 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 in regards to irresponsible lending and referrals to FOS has risen significantly across the sector. Although
proportionately lower than other lenders in the home 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.

31. Post balance sheet events

C_GEN_PageC_GEN_PageL2C_GEN Section138

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

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.

APM

Closest
Statutory
Measure

Definition and Purpose

Income statement measures

Impairment as % of Revenue
(%)

None

Agent Commission as % of
Revenue (%)

None

Cost/Income Ratio or
Operating Cost Ratio (%)

None

Credit Issued (£m)

Sales Growth (%)

None

Gross Profit before Covid-19
adjustment

Profit Before
Tax

Statutory Profit Before Tax
before Covid-19 adjustment

Profit Before
Tax

Normalised Adjusted Profit
Before Tax (£m)

Profit Before
Tax

Adjusted Profit Before Tax
(£m)

Profit Before
Tax

Adjusted Profit Before Tax
(underlying HCC)

Profit Before
Tax

Impairment as a percentage of revenue is 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, which is included in 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.

The cost/income ratio is cost of sales and administration expenses,
excluding 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 is the principal value of loans advanced to customers and is
an important measure of the level of lending in the business.

Sales growth is the period-on-period change in credit issued.

Gross Profit per the Income statement adjusted for the Covid-19 overlay.
This is used to provide a measure of gross profit before the impact of
Covid-19.

Profit Before Tax per the Income statement adjusted for the Covid-19
overlay. This is used to provide a measure of business performance before
the impact of Covid-19.

Profit Before Tax per the Income statement adjusted for the Covid-19
impairment, exceptional items, non-recurring costs and amortisation of
goodwill and acquisition intangibles. This is used to measure ongoing
business performance.

Profit before tax per the income statement adjusted for exceptional items,
non-recurring costs and amortisation of goodwill and acquisition
intangibles. This is used to measure ongoing business performance.

Profit before tax per the income statement adjusted for exceptional items,
non-recurring costs and amortisation of goodwill and acquisition
intangibles, territory build subsidies and losses of Digital CGU.

Normalised Earnings Per
Share

Earnings Per
Share

Normalised Adjusted Profit After Tax divided by the weighted average
number of shares. This gives a better reflection of underlying earnings
generated for shareholders.

Adjusted Earnings Per Share Earnings Per

Adjusted profit after tax divided by the weighted average number of
shares. This gives a better reflection of underlying earnings generated for
shareholders.

Morses Club Annual Report & Accounts 2021

C_GEN_PageC_GEN_PageL2C_GEN SectionStrategic Report

Corporate Governance

Financial Statements

139

Reconciliation of statutory profit before tax to adjusted profit before tax and explanation of adjusted EPS

£’m (unless otherwise stated)

Statutory Profit Before Tax
Covid-19 adjustment to impairment

Statutory Profit Before Tax before Covid-19 adjustment
Acquisition, restructuring and non-recurring costs
Exceptional gain2
Amortisation of acquisition intangibles3

Normalised Adjusted Profit Before Tax1
Covid-19 adjustment to impairment

Adjusted Profit Before Tax1
Tax on Adjusted Profit Before Tax

Adjusted Profit After Tax
Statutory EPS1
Normalised EPS1
Adjusted EPS1

Statutory Return on Assets1
Normalised Return on Assets1
Adjusted Return on Assets1
Statutory Return on Equity1
Normalised Return on Equity1
Adjusted Return on Equity1

FY20

Digital

(9.7)
–

(9.7)
2.6
(2.3)
0.4

(9.0)
–

(9.0)
(0.4)

(9.4)

FY21

Digital

(11.3)
–

(11.3)
2.4
–
–

(8.9)
–

(8.9)
(0.2)

(9.1)

HCC

11.8
–

11.8
2.9
–
0.3

15.0
–

15.0
(0.8)

14.2

22.0%
27.2%
27.2%
18.5%
22.8%
22.8%

Total

0.5
–

0.5
5.3
–
0.3

6.1
–

6.1
(1.0)

5.1
0.2p
3.9p
3.9p

0.3%
8.9%
8.9%
0.4%
10.3%
10.3%

HCC

21.2
1.7

22.9
0.9
–
0.8

24.5
(1.7)

22.8
(2.4)

20.4

27.5%
31.1%
29.3%
30.1%
34.1%
32.1%

Total

11.5
1.7

13.2
3.5
(2.3)
1.2

15.5
(1.7)

13.8
(2.8)

11.0
7.3p
9.5p
8.4p

12.8%
16.6%
14.8%
17.2%
22.3%
19.9%

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.

Adjusted basic earnings per share
Basic earnings
Amortisation of acquisition intangibles
Non-recurring (income)/costs
Tax effect of the above

Adjusted earnings

Covid-19 adjustments to impairment

Tax effect of the above

Adjusted earnings

52 weeks
ended
27.2.21
£000

53 weeks
ended
29.2.20
£000

217
345
5,339
(799)

5,102

9,477
1,222
2,822
(1,180)

10,989

(1,669)

317)

5,102

10,989

Weighted average number of shares for the purposes of basic earnings per share (’000s)

131,383

130,531

Normalised adjusted earnings per share amount (pence)

Adjusted earnings per share amount (pence)

3.9p

9.5p

8.4p

C_GEN_PageC_GEN_PageL2C_GEN Section

140

Notes to the Consolidated Financial Statements continued
For the 52-week period ended 27 February 2021

ALTERNATIVE PERFORMANCE MEASURES continued

APM

Closest
Statutory
Measure

Definition and Purpose

Balance sheet and returns measures

Tangible Equity (£m)

Equity

Net assets less intangible assets less acquisition intangibles.

Normalised Return on Equity
(%)

None

Adjusted Return on Equity
(%)

None

Normalised Return on
Assets (%)

None

Adjusted Return on Assets
(%)

None

Calculated as normalised adjusted profit after tax 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 annual report
as the Directors believe they are more representative of the underlying
operations of the business.

Calculated as adjusted profit after tax 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 annual report as the Directors believe they are more
representative of the underlying operations of the business.

Calculated as normalised adjusted profit after tax 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 annual
report as the Directors believe they are more representative of the
underlying operations of the business.

Calculated as adjusted profit after tax 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 annual report as the Directors believe
they are more representative of the underlying operations of the business.

Tangible Equity/Average
Receivables Ratio (%)

None

Net Assets less intangible assets less acquisition intangibles divided by
12-month average receivables. This calculation has been adjusted to an
IFRS 9 basis.

Adjusted return on assets and adjusted return on equity

£’m

Normalised Adjusted Profit After Tax (Rolling 12 months)
Adjusted profit after tax (rolling 12 months)
12-month average net loan book

Normalised adjusted return on assets

Adjusted return on assets

12-month average equity

Normalised adjusted return on equity

Adjusted return on equity

Morses Club Annual Report & Accounts 2021

52 weeks
ended
27.2.21
FY21

53 weeks
ended
29.2.20
FY20

5.1
5.1
57.5

12.3
11.0
74.3

8.87%

16.61%

8.87%

14.79%

48.1

55.3

10.29%

22.32%

10.29%

19.87%

C_GEN_PageC_GEN_PageL2C_GEN Section

Strategic Report

Corporate Governance

Financial Statements

141

APM

Other measures

Customers

Agents

Closest
Statutory
Measure

None

Definition and Purpose

Customers who have an active loan and from whom we have received a
payment of at least £3 in the last 17 weeks.

Agents are self-employed individuals who represent the Group’s
subsidiaries and are engaged under an agency agreement.

Cash from Operations
(excluding investment in loan
book) (£m)

Cash from
Operations

Cash from operations (excluding investment in the loan book) is cash from
operations excluding the growth in the loan book due 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 (£m)

None

Cash from funding is the increase/(decrease) in the bank loan balance.

C_GEN_PageC_GEN_PageL2C_GEN SectionMorses Club PLC Information for

Shareholders

142

Morses Club PLC
Information for Shareholders

Financial Calendar 2021

22 June 2021
2 July 2021
30 July 2021
October 2021

Annual General Meeting
FY21 ex-dividend date
FY21 final dividend paid
FY22 half-year results announced