Interim Management Statement (8251U)

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RNS Number : 8251U

Cattles PLC

22 October 2010

22 October 2010

CATTLES plc

INTERIM MANAGEMENT STATEMENT

INTRODUCTION

Cattles plc ("Cattles") today provides its Interim Management Statement covering the period since 30 June 2010.

Cattles announced its audited results for 2008 on 12 May 2010 and intends to announce its audited results for 2009 in the near future. The finalisation of the 2009 Annual Report and Financial Statements is closely linked to the progress made on the restructuring of the Group, which is set out below.

As referred to in the previous Interim Management Statement on 19 May 2010, shareholders should be aware that Cattles will be reporting a significant loss for the year ended 31 December 2009 and a negative value for shareholders' funds. Cattles continues to believe that its financial creditors are likely to suffer an aggregate loss of around GBP1 billion. Consequently, as previously stated on a number of occasions, Cattles continues to believe that the shares have little or no value.

The cash collection performance of the Welcome Finance ("Welcome") loan book has met forecast for the first nine months of 2010. Shopacheck and The Lewis Group have continued to make satisfactory progress during 2010.

CURRENT TRADING

A summary of the performance in 2010 for each of the Group's three businesses is set out below. All financial information for the nine months ended 30 September 2010 and as at 30 September 2010 and 31 December 2009 is unaudited.

Welcome

Welcome has historically provided direct repayment loans to more than half a million customers from a nationwide branch network. On 16 December 2009, the Cattles Board announced to shareholders that there would be no further lending in Welcome and that instead, the business would focus on a plan of collecting out Welcome's customer loans.

Welcome has been successful in implementing this cash collections strategy during 2010 and cash collected from customers in the first nine months of 2010 at GBP396.6 million met management's expectations.

Welcome has also taken steps to reduce its cost base:

-- On 5 February 2010, the closure of 65 Local Management Branches and Local Collections Units was announced with a reduction in staff of 382

-- On 7 May 2010, the closure of 18 branches was announced with a contraction in the current operations management and their support staff in line with the smaller number of branches. As a result, 139 employees left the business

-- On 2 September 2010, a further 15 branches were closed and changes made to the administration of customer service. As a result, 64 employees have left the business, with a further 76 still at risk of redundancy

Welcome now operates from 102 branches and had a total workforce of 1 331 at 30 September 2010 (31 December 2009: 2,284).

Welcome's net book value of loans and receivables at 30 September 2010 amounted to GBP0.8 billion (31 December 2009: GBP1.1 billion).

Shopacheck

Shopacheck provides short-term home collected loans through a nationwide branch network and at 30 September 2010 had 223,000 customers (31 December 2009: 227,000 customers).

Shopacheck continues to lend to both new and existing customers, but in late 2009 it tightened its credit issuance criteria to improve credit quality in anticipation of the deteriorating economic environment. Despite lower volumes as a result of this decision, Shopacheck has made good progress during 2010 concentrating on growing its agency base and opening a number of new branches to be able to better serve its customers. Key performance indicators, which are in line with management's expectations, are as follows:

-- 53,000 new customers during the first nine months of 2010

-- New loans for the nine months ended 30 September 2010 were GBP67.3 million

-- Collections for the nine months ended 30 September 2010 were GBP114.5 million

-- Net book value of loans and receivables at 30 September 2010 was GBP54.0 million (31 December 2009: GBP64.3 million)

The business is now well placed to serve its customers and meet demand during the seasonal peak period.

The Lewis Group

The Lewis Group provides debt recovery and investigation services to external clients and both Welcome and Shopacheck.

In 2010, The Lewis Group has refocused its strategy on contingent debt collection. During 2009, The Lewis Group ceased acquiring debt portfolios, other than on forward flow contractual arrangements. Its commitment to acquire further debt was completed in August 2010. Key performance indicators are as follows:

-- Cash collections in the nine months to 30 September 2010 were ahead of management's expectations at GBP76.3 million (2009: GBP70.9 million)

-- Debt purchases in the nine months ended 30 September 2010 were GBP13.6 million (2009: GBP41.6 million)

-- Purchased debt balances at 30 September 2010 were GBP130.8 million (31 December 2009: GBP145.2 million)

The Lewis Group has made progress in developing its contingent debt collection business during 2010 although this market remains highly competitive.

RESTRUCTURING

As previously announced, the Courts have finally determined that Cattles' claim against Welcome for its inter company debt ranks behind the claims of certain bank creditors. Clarification of this very important issue allowed all parties to accelerate their discussions about the restructuring of the Group's balance sheets.

Cattles, Welcome Financial Services Limited and other members of the Group continue to engage in discussions with representatives of certain of their key financial creditors and other stakeholders in order to progress proposals for a consensual restructuring.

Discussions presently envisage that, as part of a restructuring, Cattles would compromise its subordinated inter company claims against Welcome Financial Services Limited and other subsidiaries in the Group for not less than GBP39 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 Welcome Financial Services Limited) for a nominal payment to Cattles (with no offer to Cattles' shareholders), in either case, together with a creditor scheme of arrangement of Welcome Financial Services Limited. Cattles would use the payment of not less than GBP39 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 GBP2.8bn).

Those discussions remain constructive and demonstrate continuing progress towards a consensual restructuring of the Group although there remain a number of commercial, legal and regulatory issues to be resolved before any such restructuring can be finalised.

ENQUIRIES

Margaret Young, Executive Chairman, Cattles plc Tel: [phone]

Paul Felton-Smith, Finance Director, Cattles plc

Georgina Turner, Financial Dynamics Tel: [phone]

This information is provided by RNS

The company news service from the London Stock Exchange

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