(Sharecast News) - Morses Club shares tumbled on Monday after the subprime lender warned on profits due to customer complaints and announced the departure of chief executive Paul Smith.
The company said the cost base of the Home Collected Credit (HCC) division has been hit in recent days by a rapid increase in claim volumes submitted via claims management companies. As a result, costs are expected to rise and dent adjusted pre-tax profit for the year to 26 February, which is now expected to come in around 20% to 30% below current consensus of £7.5m.
Morses also announced that Paul Smith has left his role as CEO and stepped down from the board with immediate effect. Chief operating officer Gary Marshall has been appointed to the role, subject to FCA approval. His current COO role will not be directly replaced.
At 0835 GMT, the shares were down 59% at 17.45p.
Broker Shore Capital said: "Up until today's announcement, Morses Club appeared to have been doing a relatively good job of managing customer complaints when compared to its peers in the home collected credit industry.
"However, we believe today's news is a game changer for the investment case, noting the number of other companies in the non-standard industry that have failed to survive once claims costs have started to spiral out of control (something that is now a distinct possibility for Morses Club). What makes this news even worse, is the revelation that the CEO sold shares only a few days prior to the announcement, something that we are sure the FCA will look closely into."
