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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cattles | LSE:CTT | London | Ordinary Share | GB0001803666 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 6.88 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMCTT
RNS Number : 9922W
Cattles PLC
29 November 2010
29 November 2010
CATTLES plc
Preliminary announcement of the audited final results
for the year ended 31 December 2009
Cattles plc (Cattles or the Company) today announces its audited annual results for the year ended 31 December 2009.
Key results and balance sheet
-- Loss before tax from continuing operations GBP685.4 million (2008: GBP764.6 million)
-- Loss per share from continuing operations 130.09p (2008: 160.29p)
-- Loan loss charge from continuing operations GBP760.5 million (2008: GBP791.7 million)
-- Net loans and receivables GBP1.4 billion (2008: GBP2.5 billion)
-- Borrowings GBP2.4 billion (2008: GBP2.7 billion)
"In our 2008 Annual Report we described the matters which came to light during 2009 in relation to our main operating business, Welcome Finance, which had a major impact on our 2008 Financial Statements. It is because of the impact of these matters on Welcome Finance's business model and the recoverability of its loan book that we now have to report another year of very substantial losses.
The Group's smaller businesses, Shopacheck Financial Services and The Lewis Group, carry on trading and we continue to explore the scope to develop these businesses further."
Margaret Young
Executive Chairman
ENQUIRIES
Margaret Young, Executive Chairman, Cattles plc Tel: 020 7269 7252
Paul Felton-Smith, Finance Director, Cattles plc
Paul Marriott, Financial Dynamics
EXECUTIVE CHAIRMAN'S STATEMENT
Introduction
In my Chairman's Statement in the 2008 Annual Report I described the matters which came to light during 2009 in relation to our main operating business Welcome Finance (Welcome), which had a major impact on our 2008 Financial Statements. Much of the same detail is repeated below because it is also highly relevant to the 2009 Financial Statements.
Indeed it is because of the impact of these matters on Welcome's business model and on the recoverability of its loan book that I now have to report another year of very substantial losses. The loss before tax from continuing operations for 2009 is GBP685.4 million (2008: loss before tax GBP764.6 million). The loss per share for 2009 is 132.05p (2008: loss per share 156.38p).
Overview of events during 2009
On 20 February 2009, we 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 us 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 we dismissed a number of Cattles plc (Cattles) executive directors and other Welcome Financial Services Limited (WFS) senior executives. At the same time, the Chairman and Chief Executive resigned. It was at this point that I became Executive Chairman of a restructured Board.
The events which unfolded after 20 February led us to the conclusion that we were in breach of covenants under our borrowing arrangements. Our financial creditors therefore had the right to demand immediate repayment of their loans. We decided not to continue lending to our Welcome customers (other than on a minimal renewal basis) during 2009. Instead, we had to devote a great deal of our time and energy to stabilising the Group so that we could negotiate and obtain a standstill agreement with our key financial creditors.
As part of the process of obtaining our creditors' agreement to the standstill, we were required to put out an announcement of our 2008 results on 25 November 2009. These numbers, which were unaudited and described as being subject to material change, showed a very substantial loss for the year ended 31 December 2008. This announcement represented the Board's best estimate of the likely result at that time and reflected the impact of the Impairment Review, which is described in more detail below.
During the second half of 2009, given the accounting issues faced by the Group, the Board considered the issue of whether it was appropriate for PricewaterhouseCoopers LLP (PwC) to audit the Company's and subsidiaries' 2008 Financial Statements. In November 2009, the Board concluded that it was not appropriate and therefore asked PwC to resign as auditor.
Shortly afterwards, Grant Thornton UK LLP (Grant Thornton) was appointed as the Group's statutory auditor. Grant Thornton started work on the audit of the 2008 Financial Statements in December 2009. Following completion of Grant Thornton's audit, we were finally able to announce audited results in May 2010.
These results were different from the unaudited results previously published in November 2009. The discussions we had with our new auditor resulted in a further increase in impairment provisions, and in the need to make certain other provisions as at 31 December 2008 and in respect of prior years.
The Impairment Review
In February 2009, as soon as it became clear that there was an issue with the Group's impairment provision, the Audit Committee commissioned Deloitte LLP (Deloitte) to conduct an independent review of the Group's impairment policies and their application in the Company's accounts (the Impairment Review). Deloitte were instructed to assist the Audit Committee in order to establish the quantum of the impairment provision. Deloitte's principal finding was that, as a result of a breakdown in internal controls, our impairment policies had been incorrectly applied. This resulted in impairment provisions being materially understated and profit materially overstated.
EXECUTIVE CHAIRMAN'S STATEMENT
The Forensic Review
In addition to the Impairment Review, the Audit Committee commissioned an independent Forensic Review (the Forensic Review) which was carried out by Freshfields Bruckhaus Deringer LLP (Freshfields) with the assistance of Deloitte. The predominant reason for the Forensic Review was to enable the Audit Committee to assess and take legal advice on liability and related issues. The Audit Committee also thought the Forensic Review was important for a number of other reasons:
-- to enable the Company to understand what happened and to take steps to ensure it could not happen again;
-- to enable the Company to identify any individuals who either posed a risk to the Company or who were otherwise culpable in what had happened, and to determine what action should be taken against individual employees; and
-- to be able to give an independent account of the matter to the Financial Services Authority (FSA) and any other interested regulatory bodies.
Results of the Forensic Review
The Forensic Review demonstrated that certain of the former executive directors of Cattles and certain of the former senior executives of WFS, over a period of time, had provided incomplete and misleading information and documents and/or failed to escalate matters of concern relating to impairment to the full Board and Audit Committee. The provision of such incomplete and misleading information and documents to the full Board and Audit Committee, in conjunction with the withholding of certain other information and documents, combined to mask the true state of Welcome's loan book and, in particular, the correct level of arrears within that book.
Notwithstanding the Group's reported strong record of growth with stable credit quality and strong earnings performance, the non-executive directors had regularly challenged certain executives about key matters such as the level of cash being generated by the business, the quality of the rapidly expanding loan book and the adequacy of the loan loss provision.
In response to these challenges, certain executives had provided a range of presentations, documents and verbal reassurances to the non-executive directors that everything was entirely as it should have been and that there was no reason for concern. In addition to this robust and consistent reassurance from such executives, the Audit Committee regularly sought and received reassurances on a number of matters, including specific assurance about the adequacy of the loan provision, from the external auditors to the Company's accounts at that time.
Action taken immediately following the conclusion of the Forensic Review
As a result of the Forensic Review, as we announced on 1 July 2009, the employment of each of the six senior executives who had been suspended pending the final outcome of the review was terminated with immediate effect and the Group Treasury & Risk director left the Company, also with immediate effect. None of the departing executives received any compensation for loss of office.
We also made the following changes to the operating structure of the Group and to the composition of both the Board and the board of WFS:
-- I was appointed Executive Chairman of Cattles on 30 June 2009, supported in this role by Robert East who was at the time our Chief Restructuring Officer, leading our discussions with our key financial creditors and James Drummond Smith, who had become our Finance Director in April 2009;
-- the board of WFS was also restructured, with the appointment of Laura Barlow as Executive Chairman in an interim capacity and Paul Mackin as Managing Director. The Risk and Compliance function was strengthened with a number of external senior appointments; and
-- we focused on a programme of action to stabilise the Group's financial position including a controlled process of debt recovery and cash collection and the simplification of the Group's operating model to reduce costs.
EXECUTIVE CHAIRMAN'S STATEMENT
Other Board changes which took place on 30 June 2009
There were two other changes in the composition of the Board on 30 June 2009 to enable the new Board structure described above to be put in place. Norman Broadhurst stepped down as Chairman and as a director of Cattles (the Board having previously announced that Norman Broadhurst would not seek re-election at the 2009 Annual General Meeting of the Company, either as Chairman or as a director of Cattles). David Postings stepped down as Chief Executive and as a director of Cattles and left the Group with immediate effect.
Board changes since 30 June 2009
Laura Barlow left the business at the end of January 2010 at which time I also became Chairman of WFS. David Lovett joined the WFS board as an independent director on 25 February 2010. Paul Mackin resigned on 28 June 2010 when Robert East took over as Managing Director of Group Operations. James Drummond Smith stepped down as Finance Director on 29 June 2010 and was replaced as Finance Director by Paul Felton-Smith. On 6 September 2010, James Drummond Smith was appointed as Chief Restructuring Officer and remains as a director of WFS.
Changes to the management of operations and strengthening of controls
Following the changes to the Board described above, we have taken a number of steps to ensure that the Executive Board members have an appropriate level of information and control over the activities and operations of the business and to ensure that the whole Board has sufficient visibility of these matters. The Board's Executive Directors, together with the Group Risk and Compliance Director and the Group Human Resources Director (together referred to as the Executive Team), have a formal weekly meeting to review management and operational information, and to discuss and approve all significant operating and other decisions. This meeting also receives and reviews a report on risk and compliance issues that may have arisen in the previous week. The same group meets monthly to consider risk and compliance issues and internal control issues and to review progress in the resolution of these issues. The full Board receives copies of the minutes of all these meetings.
The Audit Committee and the Group Risk Committee have met frequently since 1 July 2009. A particular area of focus for both of these committees has been the results of a thorough review of key controls which was carried out by Deloitte in the second half of 2009 on the instruction of the Executive Team. The committees have carefully monitored the Executive Team's progress in dealing with the issues raised by this review and this has created a good framework for the timely resolution of these issues. The Board has met even more frequently than these committees and has also reviewed a full management information pack at these meetings. The non-executive directors continue to provide a very valuable insight and challenge on the many difficult issues we have had to address during this period.
Future strategy
Following the conclusion of the Impairment Review and the Forensic Review, the Board, together with its advisors, conducted an extensive examination of all possible routes to rebuild the lending business of our principal business, Welcome. However, it proved impossible in today's consumer lending environment and economic conditions to construct a viable business model that the Board could ask the Company's lenders to support. The Board therefore recommended to creditors a plan that focuses on collecting out Welcome's customer loans. It was envisaged that the collection of the bulk of the Welcome loan book could take two to three years and, during this period, the Company's cost base would contract to reflect the reducing size of the book.
Without a viable 'go-forward' plan for Welcome and with no overall plan for the business that envisages the Group being able to meet all of its obligations to its financial creditors, the prospect for any recovery in economic value for our shareholders is negligible. For this reason, the Board reported to the General Meeting held on 16 December 2009 that the Company's shares, which have been suspended since 23 April 2009, were likely to have little or no value.
The Group's smaller businesses, Shopacheck Financial Services (Shopacheck) and The Lewis Group, carry on trading and we continue to explore the scope to develop these businesses further.
EXECUTIVE CHAIRMAN'S STATEMENT
Business unit performance
WFS
WFS is Cattles' principal operating subsidiary. During 2009, WFS comprised Welcome and Shopacheck, the Group's non-standard consumer lending businesses, and Welcome Car Finance, our car retail operation, which was closed in April 2009. WFS reported a pre-tax loss of GBP639.5 million (2008: pre-tax loss GBP757.9 million) and total net receivables at 31 December 2009 amounted to GBP1.2 billion (2008: GBP2.3 billion).
Welcome
On 7 January 2009, Cattles announced that, in light of the continuing uncertain funding environment and the need to take decisive action, it was taking a series of steps to reduce costs, preserve liquidity and significantly reshape the Group. It was announced that there would be a reduction in the volume of business that Welcome would write and that, whilst it would continue to write new business in 2009, it was expected in early January that new business volumes in Welcome would be reduced by some 75% compared with 2008.
On 23 February 2009, the Board of Cattles announced that, in order to preserve liquidity in the business, it was temporarily suspending lending to new customers in Welcome with immediate effect. At that time it was decided that Welcome would continue to offer renewal products to existing customers.
During the second half of 2009, a thorough analysis of the Group's businesses was undertaken. This analysis led the Board to announce on 16 December 2009 that there should be no further lending in Welcome and that instead the book should be collected out.
As reported in 2008, the 2009 results again include significant loan loss provisions, which have been the main cause of the large loss reported. Under International Financial Reporting Standards (IFRS), we can only make provisions against incurred losses in the loan book and cannot make provisions for future expected credit losses. Consequently, with no new lending and an ageing book, we will continue to incur trading losses. The loan loss charge for the year was GBP721.9 million (2008: GBP737.3 million). Total net receivables at 31 December 2009 were GBP1.1 billion (2008: GBP2.2 billion). The reduction reflects cash collected in the year of GBP730.9 million with no significant further lending, and further impairment of the book. Our current estimate of the fair value of Welcome's loans and receivables is GBP0.8 billion at 31 December 2009 (2008: GBP1.4 billion), 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
Shopacheck, our home collected credit business, tightened its credit granting criteria in late 2009 to improve credit quality. In addition, the methodology for impairing loans was revised in 2009 at a cost of GBP6.2 million. Shopacheck's net receivables reduced to GBP64.3 million (2008: GBP79.8 million). The loan loss charge in Shopacheck reduced by GBP15.9 million to GBP38.6 million (2008: GBP54.5 million).
Welcome Car Finance
Welcome Car Finance was closed in April 2009 as a result of funding constraints. Consequently its revenue reduced by 88.3% to GBP12.9 million (2008: GBP110.6 million) and unit sales fell to 1,648 vehicles (2008: 14,461).
The Lewis Group
The Lewis Group reported a pre-tax loss in 2009 of GBP1.8 million (2008: pre-tax loss GBP5.2 million). This reflects the continued cautious view of the outlook for the UK economy and the housing market in particular, which led to a devaluation of the debt portfolios owned by The Lewis Group of GBP15.4 million (2008: devaluation of GBP14.1 million). Debt purchases during the year totalled GBP41.6 million (2008: GBP75.5 million). The Lewis Group has refocused its strategy on contingent debt collection. Its commitments to acquire further debt were completed in 2010.
Cattles Invoice Finance
On 14 September 2009, the Group sold this business for a cash consideration of GBP70.8 million. Revenue to this date amounted to GBP14.8 million (2008: GBP23.7 million), and its profit before tax was GBP5.2 million (2008: GBP7.7 million).
EXECUTIVE CHAIRMAN'S STATEMENT
Dividends
During 2009, no interim dividend was paid (2008: 6.51p per share). As a result of the losses for the year, no final dividend will be declared (2008: Nil).
Restructuring
On 25 November 2009, we announced that the Company had agreed the SEA with its key financial creditors, and that this should improve the likelihood of us achieving our restructuring objectives. Since that date we have continued to engage in discussions with representatives of our key financial creditors in order to progress proposals for a solvent restructuring.
On 29 November 2010, we announced that the Company had received sufficient support from its key financial creditors to enable it to launch a restructuring of the Group and that the Company, WFS, certain other members of the Group and certain of their respective key financial creditors entered into a restructuring and lock-up agreement to support a restructuring of the Group in the following way.
The Company intends to propose a scheme of arrangement under Part 26 of the Companies Act 2006 (a scheme) to its shareholders, pursuant to which the shares in the Company will be acquired by Bovess Limited. Under the terms of that scheme, Cattles shareholders will receive 1p in cash for each Cattles share held by them.
The Company and WFS also each intend to propose a scheme to certain of their respective creditors. Pursuant to those schemes, the claims of those creditors will be compromised in order to facilitate a solvent restructuring of the Company and WFS.
It is currently anticipated that another member of the Group, Ewbanks Mail Order Limited (Ewbanks), will propose a scheme to certain of its creditors, pursuant to which the guarantee obligations of it and certain other members of the Group will be compromised in order to facilitate a solvent restructuring of those entities.
Further, the Company, WFS and certain other members of the Group intend to enter into bilateral agreements with certain other creditors (for example, the pension trustee) in order to facilitate the solvent restructuring.
Each scheme and bilateral agreement will be subject to obtaining the necessary approvals and it will be necessary to satisfy certain conditions precedent prior to the solvent restructuring becoming fully and finally effective in accordance with its terms.
Pursuant to the restructuring and lock-up agreement, the key financial creditors that are party to that agreement have conditionally agreed with the Company, WFS and certain other Group members that they will vote in favour of the schemes to be proposed to them and have agreed promptly to take all actions which they are reasonably requested to take in order to support, facilitate, implement or otherwise give effect to the solvent restructuring. Therefore, we have drawn the conclusion that there is a reasonable expectation that the necessary approvals for the schemes to be proposed to the creditors of the Company, WFS and Ewbanks will be obtained.
Listing
Many shareholders have asked whether the shares will be re--listed. You will recall that the Company's shares were suspended, at the Company's request, in April 2009 when it became clear that the Company would be unable to publish its 2008 Annual Report and Financial Statements within the timeframe required by the UK Listing Authority's Disclosure and Transparency Rules. The filing of the 2008 Annual Report and Financial Statements with Companies House did not affect the current suspension of the listing of the Company's securities. Any lifting of the suspension would require an application by the Company to the UK Listing Authority (UKLA). In light of the prospects for the Group's businesses and its financial circumstances, the Company will not seek to re-list the shares.
EXECUTIVE CHAIRMAN'S STATEMENT
Shareholders
As I said in my introduction to this statement, the further losses that Cattles has incurred in 2009 are an inevitable consequence of the matters which came to light in Welcome in February 2009 and their implications for Welcome's business model and the recoverability of its loan book. I once again repeat that I understand the anger that shareholders feel about the loss of value in their shares and the fact that their interests are subordinated to those of creditors by law. I also share your frustration over the time it is taking to establish responsibility for the events that led to this situation and the legal restrictions which prevent me from being able to comment transparently to you regarding our progress to date. However, I can reassure you that this Board will not turn its back on these challenges or this business; we will continue to act responsibly towards our shareholders, employees and creditors. The current Board is committed to limiting any further damage to these groups.
People
The events that unfolded during 2009 have been extremely difficult for the Group and its employees. As part of our programme to simplify the Group's operations we have had to release a significant number of colleagues during 2009 and again during 2010. Furthermore, at the end of 2009 we had to inform the Welcome employees that we intend to pursue a strategy of collecting out the customer loans over the next two to three years, as a result of which they are unlikely to have a long-term future with the Group.
The work we have had to do to stabilise the business and progress the complex restructuring discussions has been, and remains, intensive. I continue to be impressed by both the professionalism and commitment of our employees in these challenging times and, on behalf of the Board, I would like to thank them for their efforts on behalf of the Group.
Margaret Young
Executive Chairman
29 November 2010
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2009
Hot Features
Premium
2009 2008
Notes GBPm GBPm
----------------------------------- ------ --------- ---------
Interest income 2 427.9 568.2
Fee and related income 76.2 136.8
Revenue from sale of goods - 1.5
7.6 6.2
Other operating income _______ _______
Revenue 1 511.7 712.7
Interest expense 3 123.6 286.3
Purchase of goods - 1.2
Loan loss charge 760.5 791.7
Staff costs 136.7 137.4
Other operating expenses 4 176.3 260.7
_______ _______
Loss before taxation 1 (685.4) (764.6)
Taxation 5 1.2 (7.9)
_______ _______
Loss for the year from continuing
operations (684.2) (772.5)
(Loss) / profit for the
year from discontinued
operations 6 (10.3) 18.9
_______ _______
Loss for the year attributable
to equity
holders of the Company (694.5) (753.6)
_______ _______
Loss per share
Basic and diluted:
Loss from continuing operations 130.09p 160.29p
Loss / (profit) from discontinued
operations 1.96p (3.91)p
_______ _______
8 132.05p 156.38p
_______ _______
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2009
2009 2008
GBPm GBPm
---------------------------------- -------- --------
Loss for the year (694.5) (753.6)
_______ _______
Other comprehensive income
Actuarial losses on defined
benefit pension scheme (7.6) (9.9)
Reversal of deferred tax
previously recognised - (6.3)
_______ _______
Other comprehensive income for
the year net of tax (7.6) (16.2)
_______ _______
Total comprehensive income for
the year attributable to equity
holders of the parent (702.1) (769.8)
_______ _______
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2009
Share Own shares
Share premium held Retained Total
capital account reserve earnings equity
GBPm GBPm GBPm GBPm GBPm
--------------- ----------- ---------- ------------ ---------- ----------
At 1 January
2008 36.3 269.5 (0.8) (70.7) 234.3
Dividends - - - (71.1) (71.1)
Employee
share-based
payment
options - - - (1.5) (1.5)
Issue of share
capital 16.3 179.9 - - 196.2
Purchase of
own shares - - (0.5) - (0.5)
Vesting of
shares - - 1.0 - 1.0
________ ________ ________ ________ ________
Transactions
with owners 16.3 179.9 0.5 (72.6) 124.1
Loss for the
year - - - (753.6) (753.6)
Other
comprehensive
income
Actuarial
losses on
defined
benefit
pension
scheme - - - (9.9) (9.9)
Reversal of
deferred tax
previously
recognised - - - (6.3) (6.3)
________ ________ ________ ________ ________
Total
comprehensive
income for
the year - - - (769.8) (769.8)
________ ________ ________ ________ ________
At 1 January
2009 52.6 449.4 (0.3) (913.1) (411.4)
Elimination of
own shares - - 0.3 - 0.3
________ ________ ________ ________ ________
Transactions
with owners - - 0.3 - 0.3
Loss for the
year - - - (694.5) (694.5)
Other
comprehensive
income
Actuarial
losses on
defined
benefit
pension
scheme - - - (7.6) (7.6)
________ ________ ________ ________ ________
Total
comprehensive
income for
the year - - - (702.1) (702.1)
________ ________ ________ ________ ________
At 31 December 52.6 449.4 - (1,615.2) (1,113.2)
2009 ________ ________ ________ ________ ________
GROUP BALANCE SHEET
AS AT 31 DECEMBER 2009
2009 2008
Notes GBPm GBPm
---------------------------------- ------ ---------- ----------
Assets
Non-current assets
Intangible assets 1.1 1.6
Property, plant and equipment 10.6 22.2
Loans and receivables 9 814.6 1,168.4
Trade and other receivables 1.7 -
Tax assets 2.4 1.6
Derivative financial instruments - 17.1
________ ________
830.4 1,210.9
________ ________
Current assets
Inventories - 7.0
Loans and receivables 9 536.5 1,336.3
Trade and other receivables 7.0 13.7
Tax assets - 85.1
81.8 9.7
Cash and cash equivalents 10 ________ ________
625.3 1,451.8
________ ________
1,455.7 2,662.7
Total assets ________ ________
Liabilities
Current liabilities
Borrowings 11 2,365.6 2,716.7
Derivative financial instruments - 1.0
Trade and other payables 34.7 59.5
Deferred income 12.4 33.1
48.6 16.6
Provisions ________ ________
2,461.3 2,826.9
________ ________
Non-current liabilities
Borrowings 11 20.2 28.7
Derivative financial instruments - 89.1
Trade and other payables 4.5 4.8
Deferred income 11.1 29.4
Provisions 54.2 80.2
17.6 15.0
Retirement benefit obligation ________ ________
107.6 247.2
________ ________
2,568.9 3,074.1
Total liabilities ________ ________
(1,113.2) (411.4)
Net liabilities ________ ________
Shareholders' equity
Share capital 52.6 52.6
Share premium account 449.4 449.4
Other reserves - (0.3)
Retained earnings (1,615.2) (913.1)
________ ________
Total equity (1,113.2) (411.4)
________ ________
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2009
2009 2008
Notes GBPm GBPm
---------------------------------- ------ ---------- ----------
Cash flows from continuing
operations
Cash inflow/(outflow) from
operations 12 371.4 (472.7)
85.5 (45.9)
Tax repaid/(paid) ________ ________
Net cash inflow/(outflow)
from continuing operations 456.9 (518.6)
Cash flows from investing
operations
Proceeds from disposal of
subsidiary undertakings 68.2 -
Purchase of property, plant
and equipment (2.8) (1.3)
(4.0) (15.0)
Purchase of intangible assets ________ ________
Net cash inflow/(outflow)
from investing operations 61.4 (16.3)
Cash flows from financing
operations
Proceeds from issue of share
capital - 208.9
Costs incurred in relation
to the issue of equity shares - (12.7)
Purchase of own shares - (0.5)
Issue of new borrowings 25.0 419.2
Repayment of borrowings (464.1) (37.4)
- (71.1)
Dividends paid to shareholders 7 ________ ________
Net cash (outflow)/inflow
from financing operations (439.1) 506.4
Net increase/(decrease) in
cash and cash equivalents
from continuing operations 79.2 (28.5)
Net cash flows from discontinued (5.3) 0.6
operations 6 ________ ________
Net increase/(decrease) in
cash and cash equivalents 73.9 (27.9)
Cash and cash equivalents 7.9 35.8
at 1 January ________ ________
Cash and cash equivalents 81.8 7.9
at 31 December ________ ________
For the purposes of the cash
flow statement,
cash and cash equivalents
comprise:
Cash at bank and in hand 10 78.5 6.8
3.3 2.9
Short-term bank deposits 10 ________ ________
Cash and cash equivalents 10 81.8 9.7
Bank overdrafts included - (1.8)
within borrowings ________ ________
81.8 7.9
________ ________
NOTES ON THE FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2009
Group information
Cattles plc (the Company), the Group's ultimate parent company, is a public limited company incorporated and domiciled in the UK. Its shares are listed on the London Stock Exchange, although its shares were suspended from listing on 23 April 2009 and remain suspended at the date of this preliminary announcement. The consolidated Financial Statements of the Company for the year ended 31 December 2009 comprise the Company and its subsidiaries (together referred to as the Group).
Basis of preparation
The Group prepares its annual consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and its interpretations issued by the International Accounting Standards Board as adopted by the European Union. The consolidated financial statements have also been prepared in accordance with the Companies Act 2006 as applicable to companies reporting under IFRS. The accounting policies adopted for use in the preparation of the consolidated financial statements for the year ended 31 December 2009 and the financial information included in this preliminary announcement are disclosed in the 2009 Annual Report and Financial Statements on pages 41 to 91.
The financial information set out in this preliminary announcement does not include all the disclosures required by IFRS or the Companies Act 2006 and accordingly it does not itself comply with IFRS or the Companies Act 2006, consequently this preliminary announcement does not constitute the Company's statutory accounts within the meaning of Section 435 of the Companies Act 2006.
The financial information for the year ended 31 December 2009 has been extracted from the consolidated financial statements for the year ended 31 December 2009 on which the auditor has given an unqualified opinion. The auditor's report on the consolidated financial statements for the year ended 31 December 2009 contained an emphasis of matter paragraph, which draws attention to the material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern, as referred to below. The auditor's report did not contain statements under Sections 498(2) or (3) of the Companies Act 2006.
The 2008 comparative financial information included in this preliminary announcement has been derived from the Group's consolidated financial statements for the year ended 31 December 2008.
The Group's consolidated financial statements for the year ended 31 December 2008 have been delivered to the Registrar of Companies. The auditor's report on the consolidated financial statements for the year ended 31 December 2008 contained an emphasis of matter paragraph, which drew attention to the material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern, as referred to below. The auditor's report did not contain statements under Sections 498(2) or (3) of the Companies Act 2006.
Going concern basis
On 25 November 2009, the Company announced that it had agreed the SEA with its key financial creditors, and that this should improve the likelihood of the Company achieving its restructuring objectives. Since that date, we have continued to engage in discussions with representatives of our key financial creditors in order to progress proposals for a solvent restructuring.
On 29 November 2010, we announced that the Company had received sufficient support from its key financial creditors to enable it to launch a restructuring of the Group. Further details of the key elements of that restructuring are set out in the Executive Chairman's Statement under the heading 'Restructuring'.
Each scheme, including the shareholders' scheme, will be subject to obtaining the necessary approvals and the solvent restructuring will be subject to the satisfaction of certain conditions precedent. Therefore, a material uncertainty exists as to whether the solvent restructuring will become fully and finally effective in accordance with its terms. However, the Directors presently believe that a reasonable prospect of restructuring so as to avoid insolvent liquidation exists. The Directors' belief is, primarily, based on the level of support that continues to be provided by certain of the key financial creditors of the Cattles Group, including in particular under a restructuring and lock-up agreement and the progress being made with them and others in furtherance of the implementation and conclusion of a solvent restructuring. Under the restructuring and lock-up agreement, certain of the key financial creditors have conditionally agreed to vote in favour of the schemes and support, facilitate, implement or otherwise give effect to the solvent restructuring. However, for the reasons set out above, there is a material uncertainty that may cast significant doubt upon the Group's ability to continue as a going concern.
However, the Directors continue to believe the Company and the Group will not cease trading in the foreseeable future, as Welcome focuses on collecting out its customers' loans, with Shopacheck and The Lewis Group continuing to trade as normal. WFS owes an inter-company liability to the Company of GBP2.7 billion (2008: GBP2.9 billion). However, the Company is also party to the standstill contained within the SEA and the Company has agreed not to demand repayment of the inter-company liability while the SEA continues. Further, as part of the scheme to be proposed by WFS, the Company has agreed to compromise the inter-company liability for either (i) GBP49 million or (ii) between GBP30 million and GBP39 million, depending on the circumstances.
After making enquiries regarding the circumstances outlined above, the Directors have concluded that there is a reasonable expectation that the Company and its subsidiaries can continue to pay their operational debts as they fall due for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Financial Statements. The Financial Statements do not include the adjustments that would result if the Group and the Company were unable to continue as a going concern.
1 Segmental reporting
Group segmental income and results from continuing operations for the year ended 31 December 2009 and segment assets as at that date are as follows:
The Lewis
Welcome Shopacheck Group Other Total
GBPm GBPm GBPm GBPm GBPm
-------------------- --------- ----------- ---------- --------- ---------
Revenue
Revenue from
external customers
as originally
reported 560.8 69.8 23.3 - 653.9
Adjustments to
derecognise
interest on
impaired loans (179.3) 9.4 - - (169.9)
Other adjustments
to revenue 17.1 3.7 6.9 - 27.7
________ ________ ________ ________ ________
Total segmental
revenue 398.6 82.9 30.2 - 511.7
________ ________ ________ ________ ________
(Loss)/profit
before taxation
As originally
reported (409.2) 11.5 (2.8) (83.5) (484.0)
Other adjustments
to revenue 14.1 - - - 14.1
Increase in loan
loss provision (263.7) (6.2) - - (269.9)
Administrative
expenses 10.2 - 3.3 (1.2) 12.3
Adjustments to
interest expense 2.7 - (1.8) 41.2 42.1
Inter-segmental
transactions 10.9 (9.8) (0.5) (0.6) -
________ ________ ________ ________ ________
Total segmental
loss before
taxation (635.0) (4.5) (1.8) (44.1) (685.4)
________ ________ ________ ________ ________
Assets
As originally
reported 1,567.7 87.6 160.1 21.8 1,837.2
Increase in loan
loss provision (321.0) (6.2) - - (327.2)
Impairment charges (21.1) - - (2.9) (24.0)
Increase in tax
assets - - 6.7 - 6.7
Adjustments to
other assets (30.2) - - (6.8) (37.0)
________ ________ ________ ________ ________
Total segmental
assets 1,195.4 81.4 166.8 12.1 1,455.7
________ ________ ________ ________ ________
(1) As a consequence of the events outlined in the Executive Chairman's Statement, interest income has been reduced following the additional loan loss charges identified after the issue of management information. In addition, adjustments to administrative expenses and interest expense have been made as a consequence of the events outlined in the Executive Chairman's Statement.
2 Inter-segment sales are subject to arm's length commercial terms and conditions.
Group segmental income and results from continuing operations for the year ended 31 December 2008 and segment assets as at that date are as follows:
The
Lewis
Welcome Shopacheck Group Other Total
GBPm GBPm GBPm GBPm GBPm
--------------------- --------- ----------- --------- --------- ---------
Revenue
Revenue from
external customers
as originally
reported 804.9 76.4 42.0 - 923.3
Adjustments to
derecognise
interest on
impaired loans (153.7) 17.0 - - (136.7)
Other adjustments to
revenue (57.4) - (16.5) - (73.9)
________ ________ ________ ________ ________
Total segmental
revenue 593.8 93.4 25.5 - 712.7
________ ________ ________ ________ ________
Profit/(loss) before
taxation
As originally
reported 142.4 12.1 16.6 (12.4) 158.7
Other adjustments to
revenue (57.4) - (16.5) - (73.9)
Increase in loan
loss provision (593.5) (14.8) - - (608.3)
Amortisation and
administrative
expenses (155.5) 0.9 (3.5) 131.1 (27.0)
Additional
provisions costs (93.9) - - - (93.9)
Cessation of hedge
accounting - - - (28.7) (28.7)
Adjustment to
interest expense 1.8 - (1.8) (91.5) (91.5)
________ ________ ________ ________ ________
Total segmental loss
before taxation (756.1) (1.8) (5.2) (1.5) (764.6)
________ ________ ________ ________ ________
Assets
As originally
reported 3,234.8 104.7 181.2 189.5 3,710.2
Increase in loan
loss provision (909.6) (14.8) (21.4) - (945.8)
Impairment of
intangible assets (65.9) (7.9) - (24.8) (98.6)
Impairment of
tangible fixed
assets - - - (3.0) (3.0)
Increase/(decrease)
in tax assets 81.2 - 6.1 (40.7) 46.6
Other adjustments (25.7) 3.3 14.5 (38.8) (46.7)
________ ________ ________ ________ ________
Total segmental
assets 2,314.8 85.3 180.4 82.2 2,662.7
________ ________ ________ ________ ________
(1) As a consequence of the events outlined in the Executive Chairman's Statement, interest income has been reduced following the additional loan loss charges identified after the issue of management information. In addition, adjustments to administrative expenses and interest expense have been made as a consequence of the events outlined in the Executive Chairman's Statement.
2 Interest income
2009 2008
GBPm GBPm
----------------------- --------- ---------
Loans and receivables 427.9 567.6
Cash equivalents - 0.6
________ ________
427.9 568.2
________ ________
3 Interest expense
2009 2008
GBPm GBPm
------------------------------------- --------- ---------
Interest expense on bank borrowings 54.8 94.6
Interest expense on debt securities
in issue and other borrowings 63.5 115.9
Fair value movements on derivative
instruments:
Interest rate swaps (2.2) 31.7
Cross-currency swaps 17.3 (1.9)
(Gain)/loss on exchange rate
differences on borrowings (9.8) 46.0
________ ________
123.6 286.3
________ ________
4 Other operating expenses
2009 2008
GBPm GBPm
--------------------------------- -------- --------
Administrative expenses 84.5 53.8
Occupancy costs 14.2 18.3
Agents' commission 10.1 12.8
Advertising costs 1.5 4.6
Collection costs 21.4 19.3
Motor and travel expenses 1.7 5.2
Depreciation and amortisation
costs 15.4 20.9
Impairment of intangible assets - 10.3
Provisions costs 6.0 94.6
Other 21.5 20.9
_______ _______
176.3 260.7
_______ _______
5 Taxation
2009 2008
GBPm GBPm
--------------------------------------- ---------- ---------
Current tax
UK corporation tax at 28% (2008:
28.5%) - -
Adjustments in respect of previous
years - 4.5
_______ _______
Total current tax charge - 4.5
Deferred tax
Origination and reversal of temporary
differences - (1.5)
Current year (0.5) -
Adjustments in respect of previous (0.7) 4.9
years _______ _______
Total deferred tax (credit)/charge (1.2) 3.4
_______ _______
Total tax (credit)/charge in the (1.2) 7.9
income statement _______ _______
Current tax on items credited
to other comprehensive income
Relating to share-based payments - (0.1)
_______ _______
- (0.1)
_______ _______
Deferred tax on items debited
to equity
Prior year adjustment charged
to equity - 6.3
_______ _______
- 6.3
_______ _______
The rate of tax for the year is 28% (2008: 28.5%).
The tax (credit)/charge for the year is more than the tax (credit)/charge on ordinary activities at the standard rate for the reasons set out in the following reconciliation:
2009 2008
GBPm GBPm
-------------------------------------- --------- ---------
Loss from continuing operations (685.4) (764.6)
before taxation _______ _______
Tax on loss at the standard rate
of 28% (2008: 28.5%) (191.9) (217.9)
Factors affecting (credit)/charge
for the year:
Expenses not deductible for tax
purposes 13.3 2.4
Effect of gains 0.1 -
Adjustments to tax charge in respect
of previous years (0.7) 9.9
Movement in unprovided deferred 178.0 213.5
tax _______ _______
Total tax (credit)/charge for the (1.2) 7.9
year _______ _______
6 Discontinued operations
On 14 September 2009 the Cattles Invoice Finance business was sold. On 30 April 2009, Welcome Car Finance, a trading division of Welcome Financial Services Limited, was closed. Revenue and expenses, gains and losses relating to these operations have been eliminated from the Group's continuing operations in the Income Statement and have been shown as a single line on the face of the Group Income Statement. Prior to their disposals, Welcome Car Finance was included within the Welcome segment and Cattles Invoice Finance was a separate business segment.
The operating statements until the sale and discontinuation for each of the discontinued operations are detailed below:
Cattles Invoice
Finance Welcome Car Finance
2009 2008 2009 2008
GBPm GBPm GBPm GBPm
-------------------------------- --------- --------- ---------- ----------
Interest income 4.5 8.7 - -
Fee and related income 10.3 15.0 - -
Revenue from sale of goods - - 12.8 108.7
- - 0.1 1.9
Other operating income _______ _______ _______ _______
14.8 23.7 12.9 110.6
Revenue _______ _______ _______ _______
Purchase of goods - - 8.0 65.9
Loan loss charge (0.4) 2.5 - -
Staff costs 6.5 8.6 3.1 9.2
3.5 4.9 14.3 23.8
Other operating expenses _______ _______ _______ _______
Profit/(loss) before taxation 5.2 7.7 (12.5) 11.7
Taxation - (0.5) - -
_______ _______ _______ _______
Profit/(loss) for the year 5.2 7.2 (12.5) 11.7
_______ _______ _______ _______
Loss before tax on (3.0) - - -
disposal/closure
Taxation - - - -
_______ _______ _______ _______
Total (loss)/profit on (3.0) - - -
disposal/closure _______ _______ _______ _______
Profit/(loss) for the year 2.2 7.2 (12.5) 11.7
on discontinued operations _______ _______ _______ _______
Total loss arising from discontinued operations in the year amounted to GBP10.3 million (2008: profit GBP18.9 million).
Disposal of subsidiary undertakings
On 14 September 2009 the Group sold Cattles Invoice Finance Limited. Cattles Invoice Finance Limited was not classified as held for sale in 2008. The net assets of the business on disposal were as follows:
GBPm
---------------------------------------------------- ---------
Assets
Property, plant and equipment 0.6
Loans and advances to customers 75.6
Trade and other receivables 1.8
2.6
Cash and cash equivalents _______
80.6
Total assets _______
Liabilities
6.8
Trade and other payables _______
6.8
Total liabilities _______
73.8
Net assets _______
Consideration received in cash (net of transaction
costs) 70.8
Cash and cash equivalents sold (2.6)
_______
Net cash received 68.2
_______
On closure of Welcome Car Finance all assets and liabilities were transferred to Welcome.
Cattles Invoice
Finance Welcome Car Finance
2009 2008 2009 2008
GBPm GBPm GBPm GBPm
------------------------------ --------- --------- ---------- ----------
Cash flows from discontinued
operations
Operating operations 7.0 14.6 (6.9) 17.7
Investing operations (11.2) (0.3) - 0.7
Financing operations - (14.3) 5.8 (17.8)
_______ _______ _______ _______
Cash (outflows)/inflows from (4.2) - (1.1) 0.6
discontinued operations _______ _______ _______ _______
Net cash outflows arising from discontinued operations amounted to GBP5.3 million (2008: inflow GBP0.6 million).
7 Dividends
2009 2008
GBPm GBPm
------------------------------------- ---------- ---------
Amounts recognised as distributed to equity
holders in the year:
Interim dividend for the year ended
31 December 2009 of nil p (2008:
6.51p) - 23.6
Final dividend for the year ended
31 December 2008 of nil p (2007:
13.10p) - 47.5
_______ _______
- 71.1
_______ _______
8 Loss per share
Basic loss per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding own shares held, which are treated, for this purpose, as being cancelled.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares, being all options under the Group's Sharesave and Executive Share Option Schemes. The number of potentially dilutive share options has been adjusted and restated to reflect the bonus element associated with the rights issue.
Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.
2009 2008
--------------
Weighted Weighted
average average Loss /
number Loss number (profit)
of per of per
Earnings shares share Earnings shares share
GBPm 'm pence GBPm 'm pence
-------------- --------- --------- -------- --------- --------- ---------
Shares in
issue in the
year 526.0 482.2
Own shares
held (0.1) (0.3)
Basic and
diluted EPS
Continuing
operations (684.2) 525.9 130.09 (772.5) 481.9 160.29
Discontinued (10.3) 525.9 1.96 18.9 481.9 (3.91)
operations _______ _______ _______ _______ _______ _______
Total (694.5) 525.9 132.05 (753.6) 481.9 156.38
_______ _______ _______ _______ _______ _______
9 Loans and receivables
Loans and receivables are analysed as follows:
2009 2008
GBPm GBPm
---------------------------------------- --------- ---------
Welcome 1,141.5 2,184.4
Shopacheck 64.3 79.8
- 86.6
Cattles Invoice Finance _______ _______
Originated loans and receivables 1,205.8 2,350.8
145.3 153.9
Purchased debt - The Lewis Group _______ _______
Total loans and receivables 1,351.1 2,504.7
15.6 58.6
Debt purchase commitments _______ _______
1,366.7 2,563.3
_______ _______
Total loans and receivables comprises:
Non-current 814.6 1,168.4
Current 536.5 1,336.3
_______ _______
1,351.1 2,504.7
_______ _______
The estimated fair value of loans and receivables at 31 December 2009 is GBP1.0 billion (2008: GBP1.6 billion). Fair value has been calculated by discounting expected future cash flows from the loans and receivables at 8.4% (2008: 10.0%), being the Group's cost of capital plus costs of collection effective at the Balance Sheet date. Management regards this rate to be the most appropriate current market rate to use for this type of asset, given the difficulty in obtaining recent market data. The discount rate used is based on the limited market data that exists. If the fair value was calculated by discounting the expected future cash flows from the loans and receivables at their effective interest rate, the estimated fair value would be GBP0.8 billion (2008: GBP1.2 billion).
The estimated fair value of the receivables is less than the carrying value as the fair value calculation takes account of future expected credit losses in addition to incurred losses.
Debt purchase commitments relate to certain contracts with third parties in which subsidiary undertakings are committed to acquire debt. These commitments are not included in the loans and receivables detailed in the Balance Sheet.
Credit quality
A summary of the arrears status of the Group's loans and receivables by class is shown below as at 31 December 2009 and 2008:
Welcome Shopacheck Total
2009 GBPm GBPm GBPm
---------------------------------- ---------- ----------- ----------
Neither past due nor impaired 814.8 29.9 844.7
2,184.6 107.5 2,292.1
Past due and impaired _______ _______ _______
Outstanding customer balance 2,999.4 137.4 3,136.8
Unamortised fees and costs (86.8) (22.6) (109.4)
and accrued interest _______ _______ _______
Gross loans and receivables 2,912.6 114.8 3,027.4
(1,771.1) (50.5) (1,821.6)
Loan loss provision _______ _______ _______
1,141.5 64.3
Originated loans and receivables _______ _______ 1,205.8
Purchased debt - The Lewis 145.3
Group _______
Total loans and receivables 1,351.1
_______
Cattles
Invoice
Welcome Shopacheck Finance Total
2008 GBPm GBPm GBPm GBPm
------------------------------ ---------- ----------- --------- ----------
Neither past due nor impaired 1,423.2 29.3 82.1 1,534.6
2,153.1 133.6 6.1 2,292.8
Past due and impaired _______ _______ _______ _______
Outstanding customer balance 3,576.3 162.9 88.2 3,827.4
Unamortised fees and costs (167.8) (28.6) (0.3) (196.7)
and accrued interest _______ _______ _______ _______
Gross loans and receivables 3,408.5 134.3 87.9 3,630.7
(1,224.1) (54.5) (1.3) (1,279.9)
Loan loss provision _______ _______ _______ _______
Originated loans and 2,184.4 79.8 86.6
receivables _______ _______ _______ 2,350.8
Purchased debt - The Lewis 153.9
Group _______
Total loans and receivables 2,504.7
_______
Past due and impaired balances relate to loans which are contractually overdue. However, Welcome's contractually overdue loans are not impaired to their full expected loss unless the customer is 120 days in contractual arrears.
The credit quality of Welcome and Shopacheck's financial assets that are neither past due nor impaired are reflective of those loans typically made within the non-standard or sub-prime market, which is Welcome and Shopacheck's key focus.
Loans and receivables - past due and impaired
Welcome Total
2009 GBPm GBPm
--------------------------- --------- ---------
Past due up to 29 days 188.1 188.1
Past due 30-59 days 145.6 145.6
Past due 60-89 days 120.7 120.7
Past due 90-119 days 106.4 106.4
1,623.8 1,623.8
Past due 120 days or more _______ _______
2,184.6
_______ 2,184.6
Shopacheck 107.5
_______
Total 2,292.1
_______
Cattles
Invoice
Welcome Finance Total
2008 GBPm GBPm GBPm
--------------------------- --------- --------- ---------
Past due up to 29 days 282.4 1.0 283.4
Past due 30-59 days 230.5 0.2 230.7
Past due 60-89 days 158.7 0.1 158.8
Past due 90-119 days 125.5 0.8 126.3
1,356.0 4.0 1,360.0
Past due 120 days or more _______ _______ _______
2,153.1 6.1
_______ _______ 2,159.2
Shopacheck 133.6
_______
Total 2,292.8
_______
With minimal new business being written since February 2009 and a decision taken on 16 December 2009 to collect out the Welcome loans and receivables, management has assessed the behaviour of the Welcome loan book and refined the impairment calculation method, for the year ended 31 December 2009, to calculate a specific provision on all past due loans. Provisions against the arrears bands 1-119 days were previously included in what was previously referred to as an IBNR provision.
10 Cash and cash equivalents
2009 2008
GBPm GBPm
------------------------------ ---------- ----------
Cash at bank and in hand 78.5 6.8
Fixed interest bank deposits 3.3 2.9
________ ________
81.8 9.7
________ ________
All fixed interest bank deposits have a maturity of one month.
Cash and cash equivalents in 2008 included GBP7.9 million which related to subsequently discontinued operations.
11 Borrowings
2009 2008
GBPm GBPm
---------------------------------- ---------- ----------
Current
Bank borrowings and overdrafts 1,405.4 1,683.2
Other borrowings 954.6 1,029.4
Obligations under finance leases 5.6 4.1
and hire purchase contracts ________ ________
2,365.6 2,716.7
________ ________
Non-current
Other borrowings 15.1 21.9
Obligations under finance leases 5.1 6.8
and hire purchase contracts ________ ________
20.2 28.7
________ ________
Total borrowings 2,385.8 2,745.4
________ ________
Following the breaches of covenants relating to a number of the above borrowings, all related borrowings at 31 December 2009 and 31 December 2008 became repayable on demand.
12 Reconciliation of loss before taxation to cash flow from continuing operations
2009 2008
GBPm GBPm
----------------------------------------- -------- --------
Loss before taxation (685.4) (764.6)
Adjustments for:
Depreciation of property, plant
and equipment 12.7 11.3
Loss/(profit) on disposal of property,
plant and equipment 0.5 (0.5)
Loss on disposal of intangible
assets 1.8 0.2
Amortisation of intangible assets 2.7 19.3
Share-based payments - (0.6)
Fair value movements on derivatives 15.1 41.1
Decrease in loans and receivables 1,067.0 39.4
Decrease in trade and other receivables 3.1 30.0
Decrease in trade and other payables (12.9) (10.2)
Movement in accrued interest payable 4.8 78.1
Increase in provisions 6.0 94.6
Decrease in deferred income (39.0) (10.8)
Contributions to retirement benefit
obligation (5.0) -
_______ _______
Cash inflow/(outflow) from operations 371.4 (472.7)
_______ _______
The amount of interest paid and received (excluding that recognised in interest income) during the year was as follows:
2009 2008
GBPm GBPm
------------------- ------ ------
Interest paid 99.2 168.7
Interest received 3.1 4.3
13 Post balance sheet events
On 5 February 2010, Cattles announced the closure of 65 Local Management Branches and Local Collections Units nationwide. Welcome entered into a consultation process from that date with staff affected by the proposals of whom approximately 450 received notice that they were at risk of redundancy and subsequently 382 left the business.
On 5 March 2010, Welcome sold GBP0.4 billion of heavily impaired debt to a third party.
On 6 April 2010, Fitch upgraded Cattles' Long-term and Short-term Issuer Default Ratings to 'C' from 'Restricted Default' (RD). The upgrade reflected the standstill agreement in place between Cattles and its creditors, which became effective on 17 December 2009. Fitch stated that conditions that are indicative of a Long-term rating of 'C' include an issuer that has entered into a standstill agreement following a payment default.
On 7 May 2010, Cattles announced a proposal to close 18 branches nationwide and a contraction in the current operations management and their support staff in line with the smaller number of branches. Welcome entered into a consultation process from that date, with staff affected by the proposals, of whom approximately 155 received notice that they were at risk of redundancy and subsequently 139 left the business.
On 12 May 2010, the Court of Appeal heard the appeal of Party A and the subsequent cross-appeal of the Royal Bank of Scotland Plc of the decision of the High Court on the application of Cattles to seek a determination in relation to whether the terms contained within certain cross-guarantee documentation operate to subordinate the Company's claims against its subsidiaries, including WFS, to the claims of certain bank creditors. This appeal and a cross-appeal were brought as part of consensual discussions between all parties. On 13 May 2010, the Court of
Appeal unanimously handed down a decision that upheld the decision of the High Court which was explained in the Company's announcement dated 14 December 2009. The cross-appeal in relation to the Cherry v Boultbee issues was stayed. After judgment was handed down, Party A sought permission from the Court of Appeal to appeal this decision to the Supreme Court. The Court of Appeal did not give such permission and Party A had 28 days to appeal to the Supreme Court for permission to appeal the Court of Appeal's decision.
On 2 June 2010, the Company announced that one of the options being discussed with representatives of its key financial creditors concerning a consensual restructuring of its liabilities includes a proposal under which a newly incorporated company, formed and managed by a corporate services provider and ultimately owned by a charitable trust, would make an offer to acquire the entire issued share capital of Cattles (which would be effected by a shareholder scheme of arrangement). The Company added that, given the existing deficit in shareholders' funds and the significant losses Cattles' financial creditors will incur, Cattles would not expect any payment to shareholders to exceed 1p per share. Any such offer would be likely to comprise solely cash consideration. However, there can be no certainty that any offer will ultimately be made or as to the terms or timing of any offer. The making of any such offer is subject to a number of matters, including obtaining all necessary approvals.
On 28 July 2010, the Company was notified that, on 26 July 2010, the Supreme Court ordered that permission to appeal the Court of Appeal's decision be refused because the application to appeal 'does not raise an arguable point of law of general public importance which ought to be considered by the Supreme Court at this time, bearing in mind that the case has already been the subject of judicial decision and reviewed on appeal'. Consequently, the application of the Company was finally determined to the effect that the Company's claims against its subsidiaries are subordinated to the claims of certain bank creditors.
On 15 September 2010, the Company announced that it had been informed by the advisers to the steering committees of the bondholder creditors of Cattles (which Cattles understands hold approximately one third of the nominal value of the outstanding bonds) that such steering committees and their advisers have ceased and do not intend to re-instigate negotiations with Cattles' other key financial creditors in respect of any solvent restructuring of Cattles. Notwithstanding this, Cattles believes that it remains in the interests of all parties to reach an agreement. Therefore, Cattles and its advisers continue to engage in ongoing constructive discussions with representatives of certain of its key financial creditors still with a view to achieving a consensual restructuring of Cattles' liabilities, including an offer to acquire the share capital of Cattles at up to 1p per share.
On 22 October 2010, Cattles announced that it continued to engage in discussions with representatives of certain of its key financial creditors and other stakeholders in order to progress proposals for a consensual restructuring which then envisaged that, as part of a restructuring, Cattles would compromise its subordinated inter-company claims against WFS and other subsidiaries in the Group for not less than GBP39.0 million. Such compromise would occur in the event of a sale to a newly incorporated company of either: (i) the entire issued share capital of Cattles (at a price of up to 1p per share); or (ii) certain of its subsidiaries (including WFS) for a nominal payment to Cattles (with no offer to Cattles' shareholders), in either case, together with a creditor scheme of arrangement of WFS. Cattles would use the payment of not less than GBP39.0 million to meet its own costs and to compromise amounts it owes to its creditors (which at the last audited Balance Sheet date of 31 December 2008 totalled GBP2.8 billion).
On 22 November 2010, Cattles announced that it had been informed by representatives of certain of the key financial creditors of WFS that they continue to support proposals for a consensual restructuring including a compromise of Cattles' subordinated inter-company claims against WFS and other subsidiaries in the Group, however, for an amount which may be less than GBP39.0 million. Cattles also announced that it was continuing to discuss this matter further with WFS and the representatives of those key financial creditors.
On 29 November 2010, we announced that the Company had received sufficient support from its key financial creditors to enable it to launch a restructuring of the Group. Further details of the key elements of that restructuring are set out in the Executive Chairman's Statement under the heading 'Restructuring'.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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