Cattles Plc has reported a pre-tax loss of £745.2 million for 2008 (2007 restated: loss before tax £96.5 million) which gives a loss per share of 156.38p (2007 restated: loss per share 23.56p).
Welcome Financial Services Limited (WFS) is Cattles’ principal operating subsidiary. During 2008, WFS comprised Welcome and Shopacheck, the Group’s non-standard consumer lending businesses, and Welcome Car Finance, its car retail operation. Pre-tax loss was £746.4 million (2007 restated: pre-tax loss £95.0 million). Total net receivables were £2.3 billion (2007 restated: £2.3 billion).
The key feature of the 2008 results is the significant increase in loan loss provisions, which has been the main cause of the large loss reported. The loan loss charge increased to £737.3 million (2007 restated: £368.0 million). Total net receivables were £2.2 billion (2007 restated: £2.2 billion).
Cattles’ current estimate of the fair value of Welcome’s loans and receivables is £1.4 billion at 31 December 2008, which is calculated by discounting expected future cash flows from the loans and receivables. Loans and receivables have continued to impair post year end as the business is in run-off.
Shopacheck, Cattles’ home collected credit business, reduced its net receivables to £79.8 million (2007: £101.3 million). As part of the review of impairment provisions Cattles also increased the loan loss charge in Shopacheck by an additional £9.2 million to £54.5 million (2007: £45.3 million).
On 20 February 2009, Cattles announced a delay in the release of the Group’s 2008 Preliminary Results. This announcement marked the beginning of a process, including an Impairment Review and a Forensic Review, which led to the discovery of a very significant shortfall in the Group’s impairment provisions. As a result of the circumstances surrounding this very material shortfall in the level of impairment provisions, on 30 June 2009 the board dismissed a number of Cattles executive directors and other WFS senior executives. At the same time, the chairman and chief executive resigned.
The events which unfolded after 20 February led to the conclusion that the Company was in breach of covenants under its borrowing arrangements. Its financial creditors therefore had the right to demand immediate repayment of their loans.
On 25 November 2009, Cattles agreed a Standstill and Equalisation Agreement with its key financial creditors.
During the second half of 2009, the board undertook a thorough analysis of the Group’s businesses. This analysis led the board to recommend that there should be no further lending in Welcome Finance and that instead the book should be collected out. This conclusion was announced to shareholders on 16 December 2009.