TIDMCTT
RNS Number : 7608L
Cattles PLC
12 May 2010
12 May 2010
CATTLES plc
Preliminary announcement of the audited final results
for the year ended 31 December 2008
Key results and balance sheet
· Loss before tax GBP745.2 million (2007 restated: loss before tax GBP96.5
million)
· Loss per share 156.38p (2007 restated: loss per share 23.56p)
· Loan loss charge GBP794.3 million (2007 restated: GBP415.8 million)
following detailed review of the application of impairment policies
· Net loans and receivables GBP2.5 billion (2007 restated: GBP2.6 billion)
· Borrowings GBP2.7 billion (2007 restated: GBP2.3 billion)
Cattles plc ("Cattles" or the "Company") today files its 2008 Annual Report and
Financial Statements with Companies House. These were substantially delayed for
the following reasons:
· On 20 February 2009, a delay was announced 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.
· 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. A great deal of time and energy had to be devoted to stabilising
the Group so that it could negotiate and obtain a standstill agreement with its
key financial creditors.
· On 25 November 2009, it was announced that Cattles had agreed a
Standstill and Equalisation Agreement ("SEA") with its key financial creditors,
and that this should improve the likelihood of Cattles achieving its
restructuring objectives, namely:
· to stabilise the financial position of the Company and its subsidiaries;
and
· against this background, to continue discussions with the Company's key
financial creditors with a view to agreeing a consensual restructuring of the
Group.
· 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 ("Welcome") and that instead the
book should be collected out. This conclusion was announced to shareholders on
16 December 2009.
· In the same period, given the accounting issues faced by the Group, the
Board also 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.
In the light of these significant developments, which affected the Group in
2009, we were unable to prepare the 2008 financial statements until the
resolution of these issues. Grant Thornton started work on the audit of the
2008 financial statements in December 2009.
Furthermore, since the emergence of the accounting issues in February 2009, the
business has been devoting considerable resource to establishing responsibility
for the irregularities that came to light and the Board continues to co-operate
as fully as possible with all interested regulators and to consider with the
Company's legal advisers all possible avenues for potential claims against third
parties.
On 25 November 2009, before our new auditor, Grant Thornton, had started work on
the audit, the Group announced an unaudited loss before tax for 2008 of GBP555.3
million. As well as being described as unaudited, these numbers were also
stated to be subject to material change. Discussions with Grant Thornton
resulted in a number of adjustments including a further increase in impairment
provisions as well as certain other provisions as at 31 December 2008 and in
respect of prior years. The revised audited loss before taxation for 2008
amounts to GBP745.2 million. The adjustments which have been made to the
previously reported numbers are summarised below:
+-------------------------------------------+---------+---------+
| | 2008 | 2007 |
| | GBPm | GBPm |
+-------------------------------------------+---------+---------+
| Unaudited (loss)/profit before taxation | (555.3) | 22.7 |
+-------------------------------------------+---------+---------+
| Further additional loan impairments | (42.6) | (19.0) |
+-------------------------------------------+---------+---------+
| Additional accruals and provisions for | (101.6) | (4.1) |
| liabilities and charges | | |
+-------------------------------------------+---------+---------+
| Impairment of goodwill and other | 74.5 | (91.1) |
| intangibles | | |
+-------------------------------------------+---------+---------+
| Cash flow hedges recycled and reported in | (74.8) | (5.0) |
| net profit | | |
+-------------------------------------------+---------+---------+
| Increase in financial liabilities | (45.4) | - |
| following step up in interest | _______ | _______ |
| | | |
+-------------------------------------------+---------+---------+
| Audited loss before taxation | (745.2) | (96.5) |
| | _______ | _______ |
+-------------------------------------------+---------+---------+
The preparation and audit of the 2009 financial statements is currently ongoing
and the Company intends to announce the results for 2009 in the near future.
Shareholders should be aware that again we will be reporting a significant loss
for the year ended 31 December 2009 and a negative value for shareholders'
funds. As we stated on 16 December 2009, the shares are likely to have little
or no value. Trading in Cattles' shares and bonds remains suspended until
further notice.
ENQUIRIES
Margaret Young, Executive Chairman, Cattles plc
Tel: 020 7269 7252
Jamie Smith, Finance Director, Cattles plc
Paul Marriott, Financial Dynamics
EXECUTIVE CHAIRMAN'S STATEMENT
Introduction and overview of events during 2009
I am obviously very disappointed to have to report our 2008 audited loss before
tax of GBP745.2 million (2007 restated: loss before tax GBP96.5 million) which
gives a loss per share of 156.38p (2007 restated: loss per share 23.56p).
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, we undertook a thorough analysis of the Group's
businesses. This analysis led us to recommend that there should be no further
lending in Welcome and that instead the book should be collected out. This
conclusion was announced to shareholders on 16 December 2009.
In the same period, given the accounting issues faced by the Group, the Board
also 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.
These results are different from the unaudited results previously published in
November 2009. The discussions we have had with our new auditor have 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.
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 with immediate effect,
supported in this role by Robert East our Chief Restructuring Officer, who leads
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. Laura Barlow left the business at the end of
January 2010 at which time I also became Executive Chairman of WFS and David
Lovett joined that board on 25 February 2010; 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.
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 forthcoming 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.
Management of the Group and its operations since 1 July 2009
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 Managing Director of WFS (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 of 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 many 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.
Business unit performance
WFS
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, our car retail operation. Pre-tax loss was GBP746.4
million (2007 restated: pre-tax loss GBP95.0 million). Total net receivables
were GBP2.3 billion (2007 restated: GBP2.3 billion).
Welcome
As noted above, 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 GBP737.3 million (2007 restated:
GBP368.0 million). Total net receivables were GBP2.2 billion (2007 restated:
GBP2.2 billion). Our current estimate of the fair value of Welcome's loans and
receivables is GBP1.4 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 Financial Services (Shopacheck)
Shopacheck, our home collected credit business, reduced its net receivables to
GBP79.8 million (2007: GBP101.3 million). As part of the review of impairment
provisions noted above and subsequent review work, we also increased the loan
loss charge in Shopacheck by an additional GBP9.2 million to GBP54.5 million
(2007: GBP45.3 million).
Welcome Car Finance
Income from Welcome Car Finance grew by 3.9% to GBP110.2 million (2007: GBP106.1
million) as it increased unit sales by 5.1% to 14,461 vehicles (2007: 13,763).
Welcome Car Finance was closed in April 2009 as a result of funding constraints.
The Lewis Group
The Lewis Group reported a pre-tax loss in 2008 of GBP5.2 million (2007: pre-tax
profit GBP10.2 million). This reflected a reduction in cash collections as well
as a more cautious view on 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 GBP14.1 million (2007: upwards revaluation of GBP4.5 million).
Debt purchases during the year totalled GBP75.5 million (2007: GBP74.3 million).
The Lewis Group will refocus its strategy on contingent debt collection and by
the end of 2010 its commitments to acquire further debt will have been
completed.
Cattles Invoice Finance
Income grew 11.3% to GBP23.7 million (2007: GBP21.3 million), and client numbers
remained steady at 727 (2007: 725). Pre-tax profit reduced by 8.0% to GBP2.3
million (2007: GBP2.5 million) largely as a result of further provisions on
three specific accounts noted in 2007. The loan loss charge was GBP2.5 million
(2007: GBP2.5 million). On 14 September 2009, the Group sold this business for
a cash consideration of GBP70.4 million.
Dividends
During 2008 an interim dividend of 6.51p per share (2007: 6.20p per share) was
paid. As a result of the losses for the year, no final dividend will be
declared (2007: 13.10p per share).
Restructuring
On 25 November 2009, we announced that Cattles had agreed a Standstill and
Equalisation Agreement ("SEA") with its key financial creditors, and that this
should improve the likelihood of us achieving our restructuring objectives,
namely:
· to stabilise the financial position of the Company and its subsidiaries;
and
· against this background, to continue discussions with the Company's key
financial creditors with a view to agreeing a consensual restructuring of the
Group.
On 16 December 2009 at the General Meeting called to consider Cattles' serious
loss of capital and the actions taken by the Board, I confirmed that, since the
SEA announcement, we had met with representatives of our financial creditors to
update them on the Group's recent financial performance and to review with them
a range of strategic options. These meetings followed extensive strategic,
operational and financial analysis of the Group's businesses. Based on this
analysis and against the background of the significant losses incurred to date
by Welcome, the directors were unable to recommend a business plan to financial
creditors which would allow Welcome to lend to existing or new customers.
The Board therefore recommended a plan which would focus on collecting out
Welcome's customer loans. It is envisaged that the collection of the Welcome
loan book could take two to three years and, during this period, the Group's
cost base will contract to reflect the reducing size of the book.
The Group's smaller businesses, Shopacheck and The Lewis Group, will carry on
trading as normal. We continue to explore the scope to develop these businesses
further.
We are engaged in ongoing discussions with representatives of our key financial
creditors in order to progress proposals for a consensual restructuring. Those
discussions have been constructive and demonstrate continuing progress towards a
consensual restructuring. On this basis, we have concluded that there is a
reasonable expectation that the Company will continue to be able to pay its
operational debts as they fall due for the foreseeable future and that we have a
reasonable prospect of achieving a consensual restructuring. We therefore
continue to adopt the going concern basis in preparing the financial statements.
We intend to announce our results for 2009 in the near future. Shareholders
should be aware that again we will be reporting a significant loss for the year
ended 31 December 2009 and a negative value for shareholders' funds. As we
stated on 16 December 2009, the shares are likely to have little or no value.
The cash collection performance of Welcome's loan book has been as forecast for
the first quarter of 2010. Shopacheck and The Lewis Group have made
satisfactory starts to 2010.
Listing
The filing of the 2008 Annual Report and Financial Statements with Companies
House does not affect the current suspension of the listing of the Company's
securities, which was imposed at the Company's request in April 2009. Any
lifting of the suspension would require the approval of the UK Listing Authority
and could not, in any event, take place before the publication of the 2009
Annual Report and Financial Statements.
Shareholders
As I said in my introduction to this statement, I am very disappointed to have
to report audited losses for 2008, particularly on the scale shown in this
annual report and financial statements.
I know that some of our shareholders had a substantial proportion of their
savings invested in Cattles' shares. Many of you have lost money that you have
told me you could ill afford to lose. These facts make it all the more painful
for me to present this annual report.
I share your anger about what has happened. Like you, I feel very let down by
certain former executives. I also share your frustration about the time that it
is taking to establish responsibility for the problems which we have
experienced. However, these matters are extremely complex and cannot be
resolved quickly. I can only assure you that the current Board continues to
co-operate as fully as possible with all interested regulators and to consider
with our legal advisers all possible avenues for potential claims against third
parties in relation to the impairment problems which finally came to light in
February 2009.
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 people during 2009 and again in
the first quarter of 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 business. I have been impressed
with the professionalism and dedication of our employees in very difficult
circumstances and, on behalf of the Board, I wish to thank them for their
continuing contribution to the business.
Margaret Young
Executive Chairman
11 May 2010
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
+----------------------------+-------+-------------+-------------+
| | | |
+----------------------------+-------+---------------------------+
| | | | Restated |
| | | 2008 | 2007 |
| |Notes | GBPm | GBPm |
+----------------------------+-------+-------------+-------------+
| | | | |
+----------------------------+-------+-------------+-------------+
| Interest income | 3 | 576.9 | 603.9 |
+----------------------------+-------+-------------+-------------+
| Fee and related income | | 151.8 | 179.4 |
+----------------------------+-------+-------------+-------------+
| Revenue from sale of goods | | 110.2 | 110.5 |
+----------------------------+-------+-------------+-------------+
| Other operating income | | 8.1 | 18.4 |
| | | _______ | _______ |
+----------------------------+-------+-------------+-------------+
| Revenue | | 847.0 | 912.2 |
+----------------------------+-------+-------------+-------------+
| | | | |
+----------------------------+-------+-------------+-------------+
| Interest expense | 4 | 286.3 | 137.6 |
+----------------------------+-------+-------------+-------------+
| Purchase of goods | | 67.1 | 68.0 |
+----------------------------+-------+-------------+-------------+
| Loan loss charge | | 794.3 | 415.8 |
+----------------------------+-------+-------------+-------------+
| Staff costs | | 155.2 | 145.3 |
+----------------------------+-------+-------------+-------------+
| Other operating expenses | 5 | 289.3 | 242.0 |
+----------------------------+-------+-------------+-------------+
| | | _______ | _______ |
+----------------------------+-------+-------------+-------------+
| Loss before taxation | | (745.2) | (96.5) |
+----------------------------+-------+-------------+-------------+
| Taxation | 6 | (8.4) | (1.2) |
+----------------------------+-------+-------------+-------------+
| | | _______ | _______ |
+----------------------------+-------+-------------+-------------+
| Loss for the year | | | |
| attributable to equity | | (753.6) | (97.7) |
| holders of the Company | | | |
+----------------------------+-------+-------------+-------------+
| | | _______ | _______ |
+----------------------------+-------+-------------+-------------+
| | | | |
| Loss per share | | | |
| Basic and diluted | 8 | 156.38p | 23.56p |
+----------------------------+-------+-------------+-------------+
| | | _______ | _______ |
+----------------------------+-------+-------------+-------------+
| | | | |
+----------------------------+-------+-------------+-------------+
BALANCE SHEET
AS AT 31 DECEMBER 2008
+----------------------------+-------+-------------+--------------+
| | | |
+----------------------------+-------+----------------------------+
| | | | Restated |
| | | 2008 | 2007 |
| |Notes | GBPm | GBPm |
+----------------------------+-------+-------------+--------------+
| | | | |
| Assets | | | |
+----------------------------+-------+-------------+--------------+
| Non-current assets | | | |
+----------------------------+-------+-------------+--------------+
| Goodwill | | - | - |
+----------------------------+-------+-------------+--------------+
| Other intangible assets | | 1.6 | 6.1 |
+----------------------------+-------+-------------+--------------+
| Property, plant and | | 22.2 | 22.5 |
| equipment | | | |
+----------------------------+-------+-------------+--------------+
| Loans and receivables | 9 | 1,168.4 | 1,610.1 |
+----------------------------+-------+-------------+--------------+
| Deferred tax assets | | 1.6 | 11.3 |
+----------------------------+-------+-------------+--------------+
| Derivative financial | | 17.1 | 2.7 |
| instruments | | | |
+----------------------------+-------+-------------+--------------+
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | 1,210.9 | 1,652.7 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Current assets | | | |
+----------------------------+-------+-------------+--------------+
| Inventories | | 7.0 | 12.6 |
+----------------------------+-------+-------------+--------------+
| Loans and receivables | 9 | 1,336.3 | 946.8 |
+----------------------------+-------+-------------+--------------+
| Current tax assets | | 85.1 | 41.5 |
+----------------------------+-------+-------------+--------------+
| Trade and other | | 13.7 | 44.1 |
| receivables | | | |
+----------------------------+-------+-------------+--------------+
| Derivative financial | | - | 0.6 |
| instruments | | | |
+----------------------------+-------+-------------+--------------+
| Cash and cash equivalents | 10 | 9.7 | 49.8 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | 1,451.8 | 1,095.4 |
+----------------------------+-------+-------------+--------------+
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Total assets | | 2,662.7 | 2,748.1 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | | |
| Liabilities | | | |
+----------------------------+-------+-------------+--------------+
| Current liabilities | | | |
+----------------------------+-------+-------------+--------------+
| Borrowings | 11 | 2,716.7 | 2,317.0 |
+----------------------------+-------+-------------+--------------+
| Derivative financial | | 1.0 | 7.8 |
| instruments | | | |
+----------------------------+-------+-------------+--------------+
| Trade and other payables | | 59.5 | 53.9 |
+----------------------------+-------+-------------+--------------+
| Deferred income | | 33.1 | 27.5 |
+----------------------------+-------+-------------+--------------+
| Provisions | | 16.6 | - |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | 2,826.9 | 2,406.2 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Non-current liabilities | | | |
+----------------------------+-------+-------------+--------------+
| Borrowings | 11 | 28.7 | 6.4 |
+----------------------------+-------+-------------+--------------+
| Derivative financial | | 89.1 | 27.4 |
| instruments | | | |
+----------------------------+-------+-------------+--------------+
| Trade and other payables | | 4.8 | 11.7 |
+----------------------------+-------+-------------+--------------+
| Deferred income | | 29.4 | 45.8 |
+----------------------------+-------+-------------+--------------+
| Provisions | | 80.2 | 2.2 |
+----------------------------+-------+-------------+--------------+
| Retirement benefit | | 15.0 | 14.1 |
| obligation | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | 247.2 | 107.6 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Total liabilities | | 3,074.1 | 2,513.8 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Net (liabilities) / assets | | (411.4) | 234.3 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | | |
+----------------------------+-------+-------------+--------------+
| Shareholders' equity | | | |
+----------------------------+-------+-------------+--------------+
| Share capital | 12 | 52.6 | 36.3 |
+----------------------------+-------+-------------+--------------+
| Share premium account | 12 | 449.4 | 269.5 |
+----------------------------+-------+-------------+--------------+
| Other reserves | 12 | (0.3) | (0.8) |
+----------------------------+-------+-------------+--------------+
| Retained earnings | 12 | (913.1) | (70.7) |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Total equity | 12 | (411.4) | 234.3 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 31 DECEMBER 2008
+----------------------------+-------+-------------+--------------+
| | | |
+----------------------------+-------+----------------------------+
| | | | Restated |
| |Notes | 2008 | 2007 |
| | | GBPm | GBPm |
+----------------------------+-------+-------------+--------------+
| | | | |
| Loss for the year | 12 | (753.6) | (97.7) |
+----------------------------+-------+-------------+--------------+
| | | | |
+----------------------------+-------+-------------+--------------+
| Cash flow hedges: | | | |
+----------------------------+-------+-------------+--------------+
| Fair value losses, net | 12 | - | (3.1) |
| of tax | | | |
+----------------------------+-------+-------------+--------------+
| Recycled and reported in | 12 | - | (1.1) |
| net profit | | | |
+----------------------------+-------+-------------+--------------+
| Actuarial (losses) / gains | 12 | (9.9) | 5.6 |
| on defined benefit pension | | | |
| scheme | | | |
+----------------------------+-------+-------------+--------------+
| Reversal of deferred tax | 12 | (6.3) | (3.9) |
| previously recognised | | | |
+----------------------------+-------+-------------+--------------+
| | | _______ | _______ |
+----------------------------+-------+-------------+--------------+
| Expense recognised directly in | (16.2) | (2.5) |
| equity | | |
+------------------------------------+-------------+--------------+
| | | _______ | _______ |
+----------------------------+-------+-------------+--------------+
| Total recognised expense for | | |
| the year | (769.8) | (100.2) |
| attributable to equity holders | | |
| of the Company | | |
+------------------------------------+-------------+--------------+
| | | _______ | _______ |
+----------------------------+-------+-------------+--------------+
| | | | |
+----------------------------+-------+-------------+--------------+
| Effect of prior period | | - | (148.4) |
| errors | | | |
+----------------------------+-------+-------------+--------------+
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
+----------------------------+-------+-------------+--------------+
| | | |
+----------------------------+-------+----------------------------+
| | | 2008 | 2007 |
| |Notes | GBPm | GBPm |
+----------------------------+-------+-------------+--------------+
| | | | |
| Cash flows from operating | | | |
| activities | | | |
+----------------------------+-------+-------------+--------------+
| Cash outflow from | 13 | (434.0) | (537.4) |
| operations | | | |
+----------------------------+-------+-------------+--------------+
| Tax paid | | (46.6) | (37.6) |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Net cash outflow from | | (480.6) | (575.0) |
| operating activities | | | |
| | | | |
+----------------------------+-------+-------------+--------------+
| Cash flows from investing | | | |
| activities | | | |
+----------------------------+-------+-------------+--------------+
| Disposal of subsidiary | | - | (0.6) |
| undertakings | | | |
| (net of cash and | | | |
| overdrafts transferred and | | | |
| contingent consideration | | | |
| repaid) | | | |
+----------------------------+-------+-------------+--------------+
| Purchase of property, | | (1.6) | (2.2) |
| plant and equipment | | | |
+----------------------------+-------+-------------+--------------+
| Proceeds from sale of | | 0.9 | 1.1 |
| property, plant and | | | |
| equipment | | | |
+----------------------------+-------+-------------+--------------+
| Purchase of intangible | | (15.1) | (20.7) |
| assets | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Net cash outflow from | | (15.8) | (22.4) |
| investing activities | | | |
+----------------------------+-------+-------------+--------------+
| | | | |
+----------------------------+-------+-------------+--------------+
| Cash flows from financing | | | |
| activities | | | |
+----------------------------+-------+-------------+--------------+
| Proceeds from issue of | 12 | 208.9 | 133.2 |
| share capital | | | |
+----------------------------+-------+-------------+--------------+
| Costs incurred in relation | 12 | (12.7) | (4.3) |
| to the issue of equity | | | |
| shares | | | |
+----------------------------+-------+-------------+--------------+
| Purchase of own shares | | (0.5) | - |
+----------------------------+-------+-------------+--------------+
| Issue of new borrowings | | 381.4 | 679.0 |
+----------------------------+-------+-------------+--------------+
| Repayment of borrowings | | (37.5) | (131.5) |
+----------------------------+-------+-------------+--------------+
| Dividends paid to | 7 | (71.1) | (65.3) |
| shareholders | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Net cash inflow from | | 468.5 | 611.1 |
| financing activities | | | |
+----------------------------+-------+-------------+--------------+
| | | | |
+----------------------------+-------+-------------+--------------+
| Net (decrease) / increase | | (27.9) | 13.7 |
| in cash and cash | | | |
| equivalents | | | |
+----------------------------+-------+-------------+--------------+
| Cash and cash equivalents | | 35.8 | 22.1 |
| at 1 January | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | | |
| Cash and cash equivalents | | 7.9 | 35.8 |
| at 31 December | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | | |
+----------------------------+-------+-------------+--------------+
| For the purposes of the | | | |
| cash flow statement, | | | |
| cash and cash equivalents | | | |
| comprise: | | | |
+----------------------------+-------+-------------+--------------+
| Cash at bank and in hand | | 6.8 | 20.6 |
+----------------------------+-------+-------------+--------------+
| Short-term bank deposits | | 2.9 | 29.2 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| Cash and cash equivalents | | 9.7 | 49.8 |
+----------------------------+-------+-------------+--------------+
| Bank overdrafts included | | (1.8) | (14.0) |
| within borrowings | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | | |
| | | 7.9 | 35.8 |
| | | ________ | ________ |
+----------------------------+-------+-------------+--------------+
| | | | |
+----------------------------+-------+-------------+--------------+
NOTES ON THE FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2008
Group information
Cattles plc (the "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 2008 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 accounting policies adopted for use in the
preparation of the consolidated financial statements for the year ended 31
December 2008 and the financial information included in this preliminary
announcement are disclosed in the 2008 Annual Report and Financial Statements on
pages 37 to 90.
The financial information set out in this preliminary announcement does not
include all the disclosures required by IFRS or the Companies Act 1985 and
accordingly it does not itself comply with IFRS or the Companies Act 1985,
consequently this preliminary announcement does not constitute the Company's
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The financial information for the year ended 31 December 2008 has been extracted
from the consolidated financial statements for the year ended 31 December 2008
on which the auditor has given an unqualified opinion. The auditor's report on
the consolidated financial statements for the year ended 31 December 2008
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 237(2) or 237(3) of the Companies Act 1985.
The 2007 comparative financial information included in this preliminary
announcement has been derived from the Group's consolidated financial statements
for the year ended 31 December 2007 as restated following the events outlined in
the Executive Chairman's Statement. Details of this restatement are given in
note 1.
The Group's consolidated financial statements for the year ended 31 December
2007 have been delivered to the Registrar of Companies and received an
unqualified audit report which did not contain statements under Sections 237(2)
or 237(3) of the Companies Act 1985.
Going concern
On 25 November 2009, Cattles announced that it had agreed a Standstill and
Equalisation Agreement ("SEA") with its key financial creditors, and that this
should improve the likelihood of Cattles achieving its restructuring objectives,
namely:
· to stabilise the financial position of Cattles and its subsidiaries; and
· against this background, to continue discussions with Cattles' key
financial creditors with a view to agreeing a consensual restructuring of the
Cattles group.
Cattles, WFS and the other members of the Cattles group do not currently
anticipate that the key financial creditors will demand repayment from Cattles,
WFS or the other members of the Cattles group because the key financial
creditors have agreed in the SEA not to do so while that agreement continues.
Cattles and WFS are engaged in discussions with their key financial creditors
and others in order to progress proposals for a consensual restructuring of the
Cattles group. While these discussions are progressing, a material uncertainty
exists as to their outcome. The complexity and number of issues on which it is
necessary to reach agreement, the interests which must be taken into account in
doing so and the number of stakeholders with whom those agreements are necessary
make the achieving of a consensual restructuring uncertain. 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 the financial creditors of
the Cattles' group and the progress being made with them and others in
furtherance of the achievement of a consensual restructuring. However, as these
discussions are ongoing there is a material uncertainty that may cast
significant doubt upon the Group's ability to continue as a going concern.
In addition, 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 Cattles of GBP2.9 billion. However,
Cattles is also party to the standstill contained within the SEA and Cattles has
agreed not to demand repayment of the inter-company liability while the SEA
continues.
After making enquiries regarding the circumstances outlined above, the directors
have concluded that there is a reasonable expectation that Cattles and its
subsidiaries can continue to pay their operational debts as they fall due for
the foreseeable future (taking into account the expectations of Cattles and its
subsidiaries in relation to the ongoing discussions with key financial
creditors, as referred to above). 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 Reconciliation of restatement of prior period errors
Following the events outlined in the Executive Chairman's Statement, a number of
items have been restated in the Group's 31 December 2007 financial statements,
details of which are provided in the table below:
+--------------------------+------+-----------+-------------+----------+
| | | As | Restatement | Restated |
| | | published | amount | 2007 |
| | | 2007 | 2007 | GBPm |
| |Note | GBPm | GBPm | |
+--------------------------+------+-----------+-------------+----------+
| Income statement | | | | |
+--------------------------+------+-----------+-------------+----------+
| Interest income | a. | 700.0 | (96.1) | 603.9 |
+--------------------------+------+-----------+-------------+----------+
| Fee and related income | b. | 125.9 | 53.5 | 179.4 |
+--------------------------+------+-----------+-------------+----------+
| Interest expense | c. | 132.6 | 5.0 | 137.6 |
+--------------------------+------+-----------+-------------+----------+
| Loan loss charge | d. | 296.9 | 118.9 | 415.8 |
+--------------------------+------+-----------+-------------+----------+
| Other operating expenses | e. | 146.8 | 95.2 | 242.0 |
+--------------------------+------+-----------+-------------+----------+
| Profit / (loss) before | | 165.2 | (261.7) | (96.5) |
| taxation | | | | |
+--------------------------+------+-----------+-------------+----------+
| Taxation | f. | 50.5 | (49.3) | 1.2 |
+--------------------------+------+-----------+-------------+----------+
| Profit / (loss) for the | | 114.7 | (212.4) | (97.7) |
| year | | | | |
+--------------------------+------+-----------+-------------+----------+
| | | | | |
+--------------------------+------+-----------+-------------+----------+
| Balance sheet | | | | |
+--------------------------+------+-----------+-------------+----------+
| Goodwill | e. | 39.5 | (39.5) | - |
+--------------------------+------+-----------+-------------+----------+
| Other intangible assets | e. | 57.7 | (51.6) | 6.1 |
+--------------------------+------+-----------+-------------+----------+
| Loans and receivables | | | | |
+--------------------------+------+-----------+-------------+----------+
| Non-current | g. | 1,778.5 | (168.4) | 1,610.1 |
+--------------------------+------+-----------+-------------+----------+
| Current | g. | 1,065.6 | (118.8) | 946.8 |
+--------------------------+------+-----------+-------------+----------+
| Borrowings | h. | 2,319.3 | 4.1 | 2,323.4 |
+--------------------------+------+-----------+-------------+----------+
| Current tax assets | i. | - | 41.5 | 41.5 |
+--------------------------+------+-----------+-------------+----------+
| Current tax liabilities | i. | (53.4) | 53.4 | - |
+--------------------------+------+-----------+-------------+----------+
| Deferred income | | | | |
+--------------------------+------+-----------+-------------+----------+
| Non-current | j. | - | 45.8 | 45.8 |
+--------------------------+------+-----------+-------------+----------+
| Current | j. | - | 27.5 | 27.5 |
+--------------------------+------+-----------+-------------+----------+
| Other reserves | k. | (5.8) | 5.0 | (0.8) |
+--------------------------+------+-----------+-------------+----------+
| Retained earnings | l. | 295.1 | (365.8) | (70.7) |
| | | _______ | _______ | _______ |
+--------------------------+------+-----------+-------------+----------+
| | | | | |
+--------------------------+------+-----------+-------------+----------+
Summary of restatement items
a. Interest income
There is a requirement under IAS 39 for interest recognised on an effective
interest rate basis to be reduced where underlying loans become impaired.
Interest income has been restated after the carrying value of the loans was
reduced following additional loan loss charges.
b. Fee and related income
Payment protection insurance commission income has been reclassified from
interest income to fee and related income.
c. Interest expense
As a result of the breach of the Group's borrowing covenants, the Company's
hedging instruments were ineffective in 2007. The amount of GBP5.0 million
reflects the adjustments required to the income statement in accordance with the
Company's accounting policies.
d. Loan loss charge
As described in the Executive Chairman's Statement, the Group's impairment
policies had been incorrectly applied. This has resulted in the restatement of
the loan loss charge for the year ended 31 December 2007 by GBP118.9 million
and, for the years ended 31 December 2006 and prior, a total of GBP135.4 million
of additional provision has been made to the 1 January 2007 retained earnings.
The method of calculating the IBNR provision was first established as at 31
December 2008 following a review by the Board while assessing the change in
economic circumstances. It has not been practicably possible without the use of
hindsight, to calculate the amount required at 31 December 2007. The cost of
establishing the IBNR provision has therefore all been charged in the 2008
income statement.
e. Other operating expenses
As a result of the loss before taxation incurred in 2007, it has been necessary
to revise the cash flows used in calculating the previous estimates of value in
use. This has led to a reduction in the carrying values of the goodwill (GBP39.5
million), other intangible assets (GBP51.6 million), and other costs (GBP4.1
million).
f. Taxation
Tax charges have been restated and agreed with HM Revenue and Customs ("HMRC")
to reflect the effect of the increased loan loss charge and other impairment
charges.
g. Loans and receivables
Loans and receivables balances have been restated to reflect the additional loan
loss provisions (note d.) and deferred income (note j.). This also results in
the substantial restatement of the credit risk disclosures outlined in note 18
of the Group 2008 Annual Report and Financial Statements.
h. Borrowings
As a result of the breach of loan covenants, it was necessary to reclassify the
majority of borrowings as current and to write off certain issue costs, which
had not previously been expensed through the effective interest method.
i. Current tax assets / liabilities
The increased loan loss charge, an allowable expense for tax purposes, has
resulted in the restatement and recognition of a current tax asset in the Group
of GBP41.5 million, which has been subsequently recovered from HMRC.
j. Deferred income
Loans and receivables have been grossed up by GBP73.3 million with the
adjustment being shown as deferred income.
k. Other reserves
The Group other reserves related to the cumulative fair value gain / (loss) of
the Group hedging instruments. As a result of the revised ineffectiveness test
outlined in c. above, this adjustment relates to those fair value movements,
which are subsequently chargeable to the income statement through interest
expense in accordance with the Group's accounting policy.
l. Retained earnings
Previously stated retained earnings have been restated to reflect the impact of
the above items and the related tax effect.
m. It has not been practicably possible, without the use of
hindsight, to calculate the amount of impairment of investments in subsidiary
undertakings and intra group loans required at 31 December 2007.
2 Segmental reporting
The segmental income and results for the year ended 31 December 2008 are as
follows:
+----------+-------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | | | Consumer | Debt | Corporate | | | | |
| | | | credit | recovery | services | Central | Eliminations | Group | |
| | | | GBPm | GBPm | GBPm | GBPm | | GBPm | |
| | | | | | | | GBPm | | |
+----------+-------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | | | | | | | | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| Revenue | | 810.0 | 13.3 | 23.7 | - | - | 847.0 | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| Inter-segment income | | - | 2.9 | - | - | (2.9) | - | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| Interest expense | | (270.8) | (10.1) | (5.4) | - | - | (286.3) | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | | _______ | _______ | ________ | ________ | ________ | ________ | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | | 539.2 | 6.1 | 18.3 | - | (2.9) | 560.7 | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | | _______ | _______ | ________ | ________ | ________ | ________ | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| |
| Inter-segment sales are entered into under normal arm's length commercial terms and conditions. |
+----------------------------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| Result | | | | | | | | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| Segment result | | (715.1) | (5.2) | 2.3 | (6.1) | - | (724.1) | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | | ________ | _______ | ________ | ________ | ________ | | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| Central expenses | | | | | | | (21.1) | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | | | | | | | ________ | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| Loss before taxation | | | | | | | (745.2) | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| Taxation | | | | | | | (8.4) | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | | | | | | | ________ | |
+------------------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | Loss for the year attributable to equity holders of the Company | (753.6) | |
+----------+------------------------------------------------------------------------------------+-------------------------------------------+--+
| | | | | | | | | ________ | |
+----------+-------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
| | | | | | | | | | |
+----------+-------------+----------+----------+----------+-----------+----------+--------------+-------------------------------------------+--+
The segmental income and results for the year ended 31 December 2007 are as
follows:
+----------+-------------+----------+----------+----------+-------------+----------+--------------+------------+----------+
| | | | Restated | | Corporate | | | | |
| | | | Consumer | Debt | services | Restated | | Restated | |
| | | | credit | recovery | GBPm | Central | Eliminations | Group | |
| | | | GBPm | GBPm | | GBPm | | GBPm | |
| | | | | | | | GBPm | | |
+----------+-------------+----------+----------+----------+-------------+----------+--------------+------------+----------+
| | | | | | | | |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| Revenue | | 859.0 | 31.9 | 21.3 | - | - | 912.2 |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| Inter-segment income | | - | 1.8 | - | - | (1.8) | - |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| Interest expense | | (129.8) | (6.3) | (4.4) | 2.9 | - | (137.6) |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| | | _______ | _______ | ________ | ________ | ________ | ________ |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| | | 729.2 | 27.4 | 16.9 | 2.9 | (1.8) | 774.6 |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| | | _______ | _______ | ________ | ________ | ________ | ________ |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| | |
| Inter-segment sales are entered into under normal arm's length commercial terms and conditions. | |
+--------------------------------------------------------------------------------------------------------------+----------+
| | | | | | | | |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| Result | | | | | | | |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| Segment result | | (59.7) | 10.2 | 2.5 | (5.0) | - | (52.0) |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| | | ________ | _______ | ________ | ________ | ________ | |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| Central expenses and | | | | | | | (44.5) |
| goodwill impairment | | | | | | | |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| | | | | | | | ________ |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| Loss before taxation | | | | | | | (96.5) |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| Taxation | | | | | | | (1.2) |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| | | | | | | | ________ |
+------------------------+----------+----------+----------+-------------+----------+--------------+-----------------------+
| | Loss for the year attributable to equity holders of | | | (97.7) | |
| | the Company | | | | |
+----------+------------------------------------------------------------+----------+--------------+------------+----------+
| | | | | | | | | ________ | |
+----------+-------------+----------+----------+----------+-------------+----------+--------------+------------+----------+
| | | | | | | | | | |
+----------+-------------+----------+----------+----------+-------------+----------+--------------+------------+----------+
3 Interest income
+------------------------------+---------------+---------------+
| | | Restated |
| | 2008 | 2007 |
| | GBPm | GBPm |
+------------------------------+---------------+---------------+
| | | |
+------------------------------+---------------+---------------+
| Loans and receivables | 576.3 | 602.4 |
+------------------------------+---------------+---------------+
| Cash equivalents | 0.6 | 1.5 |
+------------------------------+---------------+---------------+
| | ________ | ________ |
+------------------------------+---------------+---------------+
| | 576.9 | 603.9 |
+------------------------------+---------------+---------------+
| | ________ | ________ |
+------------------------------+---------------+---------------+
4 Interest expense
+------------------------------+---------------+---------------+
| | | Restated |
| | 2008 | 2007 |
| | GBPm | GBPm |
+------------------------------+---------------+---------------+
| | | |
+------------------------------+---------------+---------------+
| Interest expense on bank | 94.6 | 65.9 |
| borrowings | | |
+------------------------------+---------------+---------------+
| Interest expense on debt | 115.9 | 64.4 |
| securities in issue and | | |
| other borrowings | | |
+------------------------------+---------------+---------------+
| Fair value movements on | | |
| derivative instruments: | | |
+------------------------------+---------------+---------------+
| Interest rate swaps | 43.0 | 16.7 |
+------------------------------+---------------+---------------+
| Cross-currency swaps | (1.9) | (0.1) |
+------------------------------+---------------+---------------+
| Other | 34.7 | (9.3) |
+------------------------------+---------------+---------------+
| | ________ | ________ |
+------------------------------+---------------+---------------+
| | 286.3 | 137.6 |
+------------------------------+---------------+---------------+
| | ________ | ________ |
+------------------------------+---------------+---------------+
5 Other operating expenses
+------------------------------+---------------+---------------+
| | | Restated |
| | 2008 | 2007 |
| | GBPm | GBPm |
+------------------------------+---------------+---------------+
| | | |
+------------------------------+---------------+---------------+
| Administrative expenses | 56.3 | 42.0 |
+------------------------------+---------------+---------------+
| Occupancy costs | 21.6 | 18.4 |
+------------------------------+---------------+---------------+
| Agents' commission | 12.8 | 13.4 |
+------------------------------+---------------+---------------+
| Advertising costs | 13.2 | 12.1 |
+------------------------------+---------------+---------------+
| Collection costs | 18.5 | 8.6 |
+------------------------------+---------------+---------------+
| Motor and travel expenses | 6.7 | 5.3 |
+------------------------------+---------------+---------------+
| Depreciation and | 20.9 | 10.2 |
| amortisation costs | | |
+------------------------------+---------------+---------------+
| Impairment of goodwill and | 10.3 | 91.1 |
| intangibles | | |
+------------------------------+---------------+---------------+
| Provisions costs | 94.6 | - |
+------------------------------+---------------+---------------+
| Other | 34.4 | 40.9 |
+------------------------------+---------------+---------------+
| | _______ | _______ |
+------------------------------+---------------+---------------+
| | 289.3 | 242.0 |
+------------------------------+---------------+---------------+
| | _______ | _______ |
+------------------------------+---------------+---------------+
6 Taxation
+----------------------------------+-------------+------------+
| | | Restated |
| Tax credit in the income | 2008 | 2007 |
| statement | GBPm | GBPm |
+----------------------------------+-------------+------------+
| | | |
+----------------------------------+-------------+------------+
| Current tax: | | |
+----------------------------------+-------------+------------+
| UK corporation tax at 28.5% | - | 0.8 |
| (2007: 30%) | | |
+----------------------------------+-------------+------------+
| Adjustments in respect of | 5.0 | (0.1) |
| previous years | | |
+----------------------------------+-------------+------------+
| | _______ | _______ |
+----------------------------------+-------------+------------+
| Total current tax charge / | 5.0 | 0.7 |
| (credit) | | |
+----------------------------------+-------------+------------+
| | | |
+----------------------------------+-------------+------------+
| Deferred tax: | | |
+----------------------------------+-------------+------------+
| Origination and reversal of | (1.5) | (0.1) |
| temporary differences | | |
+----------------------------------+-------------+------------+
| Adjustments in respect of | 4.9 | - |
| previous years | | |
+----------------------------------+-------------+------------+
| Change in tax rate | - | 0.6 |
| | _______ | _______ |
+----------------------------------+-------------+------------+
| Total deferred tax charge | 3.4 | 0.5 |
| | _______ | _______ |
+----------------------------------+-------------+------------+
| Total tax charge in the income | 8.4 | 1.2 |
| statement | _______ | _______ |
| | | |
+----------------------------------+-------------+------------+
+----------------------------------+-------------+------------+
| Current tax on items credited to | | |
| equity | | |
+----------------------------------+-------------+------------+
| Relating to share-based payments | (0.1) | (0.4) |
+----------------------------------+-------------+------------+
| | _______ | _______ |
+----------------------------------+-------------+------------+
| | (0.1) | (0.4) |
+----------------------------------+-------------+------------+
| | _______ | _______ |
+----------------------------------+-------------+------------+
| | | |
| Deferred tax on items debited to | | |
| equity | | |
+----------------------------------+-------------+------------+
| Relating to cash flow hedges | - | - |
+----------------------------------+-------------+------------+
| Relating to retirement benefit | - | 2.4 |
| obligation | | |
+----------------------------------+-------------+------------+
| Prior year adjustment charged to | 6.3 | 3.9 |
| equity | | |
+----------------------------------+-------------+------------+
| Change in tax rate | - | 0.2 |
+----------------------------------+-------------+------------+
| | _______ | _______ |
+----------------------------------+-------------+------------+
| | 6.3 | 6.5 |
+----------------------------------+-------------+------------+
| | _______ | _______ |
+----------------------------------+-------------+------------+
The rate of tax for the year is 28.5% (2007: 30%) and represents a blended tax
rate following the reduction in the rate of corporation tax from 30% to 28%,
which was effective from 1 April 2008.
The tax charge for the year is more than the tax on profit on ordinary
activities at the standard rate for the reasons set out in the following
reconciliation:
+----------------------------------+-------------+------------+
| | 2008 | Restated |
| | GBPm | 2007 |
| | | GBPm |
+----------------------------------+-------------+------------+
| | | |
+----------------------------------+-------------+------------+
| Loss before taxation | (745.2) | (96.5) |
| | _______ | _______ |
+----------------------------------+-------------+------------+
| | | |
+----------------------------------+-------------+------------+
| Tax on loss at the standard rate | (212.1) | (29.0) |
| of 28.5% (2007: 30%) | | |
+----------------------------------+-------------+------------+
| Factors affecting charge for the | | |
| year: | | |
+----------------------------------+-------------+------------+
| Expenses not deductible for tax | 2.4 | 14.0 |
| purposes | | |
+----------------------------------+-------------+------------+
| Adjustments to tax charge in | 9.9 | (0.8) |
| respect of previous years | | |
+----------------------------------+-------------+------------+
| Change in tax rate | - | 0.6 |
+----------------------------------+-------------+------------+
| Movement in unprovided deferred | 208.2 | 16.4 |
| tax | _______ | _______ |
| | | |
+----------------------------------+-------------+------------+
| Total tax charge for the year | 8.4 | 1.2 |
| | _______ | _______ |
+----------------------------------+-------------+------------+
7 Dividends
+-----------------------------------+-------------+------------+
| | | Restated |
| | 2008 | 2007 |
| | GBPm | GBPm |
+-----------------------------------+-------------+------------+
| | |
| Amounts recognised as distributed to equity | |
| holders in the year: | |
+-------------------------------------------------+------------+
| Interim dividend for the year | | |
| ended 31 December 2008 of 6.51p | 23.6 | 22.4 |
| (2007: 6.20p) | | |
+-----------------------------------+-------------+------------+
| Final dividend for the year ended | | |
| 31 December 2007 of 13.10p (2006: | 47.5 | 42.9 |
| 11.85p) | | |
+-----------------------------------+-------------+------------+
| | _______ | _______ |
+-----------------------------------+-------------+------------+
| | 71.1 | 65.3 |
| | _______ | _______ |
+-----------------------------------+-------------+------------+
At the time of the payments of the 2007 final and 2008 interim dividends, the
directors were of the opinion that the Company had sufficient distributable
reserves from which to distribute the dividends. Subsequently, as a result of
the events outlined in the Executive Chairman's Statement, it has transpired
that the Company did not have sufficient distributable reserves to make these
distributions.
The directors are not proposing a final dividend for the year ended 31 December
2008 (2007: 13.10p per share).
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.
The weighted average number of ordinary shares in issue and the own shares held
in respect of the year ended 31 December 2007 has been restated to reflect the
bonus element associated with the rights issue which took place on 4 June 2008.
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.
+------------------+------------------+----------+----------+----------+----------+----------+
| | 2008 | 2007 |
+ +----------------------------------------+--------------------------------+
| | | | | | Restated | |
| | | Weighted | | | Weighted | |
| | | average | | | average | Restated |
| | | number | Loss | | number | Loss per |
| | Earnings | of | per | Earnings | of | share |
| | GBPm | shares | share | GBPm | shares | pence |
| | | 'm | pence | | 'm | |
+------------------+------------------+----------+----------+----------+----------+----------+
| | | | | | | |
+------------------+------------------+----------+----------+----------+----------+----------+
| Shares in issue | | 482.2 | | | 415.5 | |
| during the year | | | | | | |
+------------------+------------------+----------+----------+----------+----------+----------+
| Own shares held | | (0.3) | | | (0.8) | |
| | | _______ | | | _______ | |
+------------------+------------------+----------+----------+----------+----------+----------+
| Basic and | (753.6) | 481.9 | (156.38) | (97.7) | 414.7 | (23.56) |
| diluted EPS | | | | | | |
+------------------+------------------+----------+----------+----------+----------+----------+
| | | _______ | | | _______ | |
+------------------+------------------+----------+----------+----------+----------+----------+
9 Loans and receivables
Loans and receivables are analysed as follows:
+----------------------------------+-------------+--------------+
| | | Restated |
| | 2008 | 2007 |
| | GBPm | GBPm |
+----------------------------------+-------------+--------------+
| | | |
+----------------------------------+-------------+--------------+
| Welcome | 2,184.4 | 2,223.3 |
+----------------------------------+-------------+--------------+
| Shopacheck | 79.8 | 101.3 |
+----------------------------------+-------------+--------------+
| Cattles Invoice Finance | 86.6 | 99.4 |
| | _______ | _______ |
+----------------------------------+-------------+--------------+
| Originated loans and receivables | 2,350.8 | 2,424.0 |
+----------------------------------+-------------+--------------+
| Purchased debt - The Lewis Group | 153.9 | 132.9 |
| | _______ | _______ |
+----------------------------------+-------------+--------------+
| Total loans and receivables | 2,504.7 | 2,556.9 |
+----------------------------------+-------------+--------------+
| Debt purchase commitments | 58.6 | 93.3 |
| | _______ | _______ |
+----------------------------------+-------------+--------------+
| | 2,563.3 | 2,650.2 |
| | _______ | _______ |
+----------------------------------+-------------+--------------+
| | | |
+----------------------------------+-------------+--------------+
| Comprising: | | |
| Current assets | 1,336.3 | 946.8 |
+----------------------------------+-------------+--------------+
| Non-current assets | 1,168.4 | 1,610.1 |
+----------------------------------+-------------+--------------+
| | _______ | _______ |
+----------------------------------+-------------+--------------+
| | 2,504.7 | 2,556.9 |
| | _______ | _______ |
+----------------------------------+-------------+--------------+
The estimated fair value of Group loans and receivables at 31 December 2008 is
GBP1.6 billion. Fair value has been calculated by discounting expected future
cash flows from the loans and receivables at 10%, being the Group's cost of
capital plus costs of collection effective at the balance sheet date.
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 2008 and 2007:
+------------------------------+-----------+------------+---------+-----------+
| 2008 | | Shopacheck | Cattles | |
| | Welcome | GBPm | Invoice | Total |
| | | | Finance | GBPm |
| | GBPm | | GBPm | |
+------------------------------+-----------+------------+---------+-----------+
| Neither past due nor | 1,423.2 | 29.3 | 82.1 | 1,534.6 |
| impaired | | | | |
+------------------------------+-----------+------------+---------+-----------+
| Past due | 797.1 | 67.8 | 3.2 | 868.1 |
+------------------------------+-----------+------------+---------+-----------+
| Impaired | 1,356.0 | 65.8 | 2.9 | 1,424.7 |
| | _______ | _______ | _______ | _______ |
+------------------------------+-----------+------------+---------+-----------+
| 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 |
+------------------------------+-----------+------------+---------+-----------+
| Loan loss provision | (1,224.1) | (54.5) | (1.3) | (1,279.9) |
| | _______ | _______ | _______ | _______ |
+------------------------------+-----------+------------+---------+-----------+
| Originated loans and | 2,184.4 | 79.8 | 86.6 | 2,350.8 |
| receivables | _______ | _______ | _______ | |
| | | | | |
+------------------------------+-----------+------------+---------+-----------+
| Purchased debt - The Lewis | | | | 153.9 |
| Group | | | | _______ |
| | | | | |
+------------------------------+-----------+------------+---------+-----------+
| Total loans and receivables | | | | 2,504.7 |
| | | | | _______ |
+------------------------------+-----------+------------+---------+-----------+
+------------------------------+----------+------------+---------+----------+
| 2007 | Restated | Shopacheck | Cattles | Restated |
| | Welcome | GBPm | Invoice | Total |
| | GBPm | | Finance | GBPm |
| | | | GBPm | |
+------------------------------+----------+------------+---------+----------+
| Neither past due nor | 1,572.4 | 32.4 | 95.5 | 1,700.3 |
| impaired | | | | |
+------------------------------+----------+------------+---------+----------+
| Past due | 601.2 | 71.5 | 2.4 | 675.1 |
+------------------------------+----------+------------+---------+----------+
| Impaired | 886.7 | 75.6 | 4.8 | 967.1 |
| | _______ | _______ | _______ | _______ |
+------------------------------+----------+------------+---------+----------+
| Outstanding customer balance | 3,060.3 | 179.5 | 102.7 | 3,342.5 |
+------------------------------+----------+------------+---------+----------+
| Unamortised fees and costs | (186.1) | (30.2) | (0.4) | (216.7) |
| and accrued interest | _______ | _______ | _______ | _______ |
| | | | | |
+------------------------------+----------+------------+---------+----------+
| Gross loans and receivables | 2,874.2 | 149.3 | 102.3 | 3,125.8 |
+------------------------------+----------+------------+---------+----------+
| Loan loss provision | (650.9) | (48.0) | (2.9) | (701.8) |
| | _______ | _______ | _______ | _______ |
+------------------------------+----------+------------+---------+----------+
| Originated loans and | 2,223.3 | 101.3 | 99.4 | 2,424.0 |
| receivables | _______ | _______ | _______ | |
| | | | | |
+------------------------------+----------+------------+---------+----------+
| Purchased debt - The Lewis | | | | 132.9 |
| Group | | | | _______ |
| | | | | |
+------------------------------+----------+------------+---------+----------+
| Total loans and receivables | | | | 2,556.9 |
| | | | | _______ |
+------------------------------+----------+------------+---------+----------+
Past due balances relate to loans which are contractually overdue. However,
Welcome's contractually overdue loans are not specifically impaired unless the
customer is 120 days in contractual arrears.
Loans and receivables - past due
+---------------------------+-----------+-----------+-----------+
| | Welcome | Cattles | |
| 2008 | GBPm | Invoice | |
| | | Finance | Total |
| | | 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 |
+---------------------------+-----------+-----------+-----------+
| Past due 120 days or more | - | 1.1 | 1.1 |
| | _______ | _______ | _______ |
+---------------------------+-----------+-----------+-----------+
| | 797.1 | 3.2 | 800.3 |
| | _______ | _______ | |
+---------------------------+-----------+-----------+-----------+
| Shopacheck | | | 67.8 |
| | | | _______ |
+---------------------------+-----------+-----------+-----------+
| Total | | | 868.1 |
| | | | _______ |
+---------------------------+-----------+-----------+-----------+
As at 31 December 2008, the Group had an IBNR provision of GBP150 million.
+---------------------------+-----------+-----------+-----------+
| | Restated | Cattles | |
| 2007 | Welcome | Invoice | Restated |
| | GBPm | Finance | Total |
| | | GBPm | GBPm |
+---------------------------+-----------+-----------+-----------+
| Past due up to 29 days | 143.1 | 0.8 | 143.9 |
+---------------------------+-----------+-----------+-----------+
| Past due 30-59 days | 221.3 | 0.2 | 221.5 |
+---------------------------+-----------+-----------+-----------+
| Past due 60-89 days | 139.0 | 0.1 | 139.1 |
+---------------------------+-----------+-----------+-----------+
| Past due 90-119 days | 97.8 | 0.2 | 98.0 |
+---------------------------+-----------+-----------+-----------+
| Past due 120 days or more | - | 1.1 | 1.1 |
| | _______ | _______ | _______ |
+---------------------------+-----------+-----------+-----------+
| | 601.2 | 2.4 | 603.6 |
| | _______ | _______ | |
+---------------------------+-----------+-----------+-----------+
| Shopacheck | | | 71.5 |
| | | | _______ |
+---------------------------+-----------+-----------+-----------+
| Total | | | 675.1 |
| | | | _______ |
+---------------------------+-----------+-----------+-----------+
10 Cash and cash equivalents
+--------------------------------------+-----------+------------+
| | 2008 | 2007 |
| | GBPm | GBPm |
+--------------------------------------+-----------+------------+
| | | |
+--------------------------------------+-----------+------------+
| Cash at bank and in hand | 6.8 | 20.6 |
+--------------------------------------+-----------+------------+
| Fixed interest bank deposits | 2.9 | 29.2 |
| | ________ | ________ |
+--------------------------------------+-----------+------------+
| | 9.7 | 49.8 |
| | ________ | ________ |
+--------------------------------------+-----------+------------+
All bank deposits have a maturity of one month.
11 Borrowings
+-------------------------------------+-----------+------------+
| | | Restated |
| | 2008 | 2007 |
| | GBPm | GBPm |
+-------------------------------------+-----------+------------+
| Current | | |
+-------------------------------------+-----------+------------+
| Bank borrowings and overdrafts | 1,683.2 | 1,351.4 |
+-------------------------------------+-----------+------------+
| Other borrowings | 1,029.4 | 963.6 |
+-------------------------------------+-----------+------------+
| Obligations under finance leases | 4.1 | 2.0 |
| and hire purchase contracts | ________ | ________ |
+-------------------------------------+-----------+------------+
| | 2,716.7 | 2,317.0 |
| | ________ | ________ |
+-------------------------------------+-----------+------------+
| Non-current | | |
+-------------------------------------+-----------+------------+
| Bank borrowings | - | - |
+-------------------------------------+-----------+------------+
| Other borrowings | 21.9 | 2.4 |
+-------------------------------------+-----------+------------+
| Obligations under finance leases | 6.8 | 4.0 |
| and hire purchase contracts | ________ | ________ |
+-------------------------------------+-----------+------------+
| | 28.7 | 6.4 |
| | ________ | ________ |
+-------------------------------------+-----------+------------+
| | | |
+-------------------------------------+-----------+------------+
| Total borrowings | 2,745.4 | 2,323.4 |
| | ________ | ________ |
+-------------------------------------+-----------+------------+
Following the breaches of covenants relating to a number of the above
borrowings, all related borrowings at 31 December 2008 and 31 December 2007
became repayable on demand. As a result the 2007 balances have been restated.
12 Statement of changes in equity
+--------------------+----------+----------+----------+----------+----------+----------+
| | | Share | | Own | Restated | Restated |
| | | premium | Restated | shares | Retained | Total |
| | Share | account | Hedging | held | earnings | equity |
| | capital | GBPm | reserve | reserve | GBPm | GBPm |
| | GBPm | | GBPm | GBPm | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| At 1 January 2007 | 33.0 | 143.9 | 4.2 | (3.1) | 89.4 | 267.4 |
| - restated | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
| Actuarial gains on | - | - | - | - | 5.6 | 5.6 |
| defined benefit | | | | | | |
| pension scheme, | | | | | | |
| net of tax | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Fair value losses | - | - | (3.1) | - | - | (3.1) |
| on cash flow | | | | | | |
| hedges, net of tax | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Transfers to | - | - | (1.1) | - | - | (1.1) |
| profit or loss for | | | | | | |
| the year | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Reversal of | - | - | - | - | (3.9) | (3.9) |
| deferred tax | | | | | | |
| previously | | | | | | |
| recognised | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| | ________ | ________ | ________ | ________ | ________ | ________ |
+--------------------+----------+----------+----------+----------+----------+----------+
| Net (losses) / | - | - | (4.2) | - | 1.7 | (2.5) |
| gains recognised | | | | | | |
| directly in equity | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Loss for the year | - | - | - | - | (97.7) | (97.7) |
+--------------------+----------+----------+----------+----------+----------+----------+
| | ________ | ________ | ________ | ________ | ________ | ________ |
+--------------------+----------+----------+----------+----------+----------+----------+
| Total recognised | - | - | (4.2) | - | (96.0) | (100.2) |
| income and expense | | | | | | |
| for year | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Share-based | | | | | | |
| payments: | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Value of | - | - | - | - | 4.9 | 4.9 |
| services provided | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Settlement of | - | - | - | - | (4.1) | (4.1) |
| share awards | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Tax on | - | - | - | - | 0.4 | 0.4 |
| share-based | | | | | | |
| payments | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Vesting of shares | - | - | - | 2.3 | - | 2.3 |
+--------------------+----------+----------+----------+----------+----------+----------+
| Dividends | - | - | - | - | (65.3) | (65.3) |
+--------------------+----------+----------+----------+----------+----------+----------+
| Issue of equity - | 3.3 | 129.7 | - | - | - | 133.0 |
| placing | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Costs incurred in | - | (4.3) | - | - | - | (4.3) |
| share issue | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Issue of equity - | - | 0.2 | - | - | - | 0.2 |
| exercise of | | | | | | |
| options | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| | ________ | ________ | ________ | ________ | ________ | ________ |
+--------------------+----------+----------+----------+----------+----------+----------+
| At 1 January 2008 | 36.3 | 269.5 | - | (0.8) | (70.7) | 234.3 |
+--------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
| Actuarial losses | - | - | - | - | (9.9) | (9.9) |
| on defined benefit | | | | | | |
| pension scheme | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Reversal of | - | - | - | - | (6.3) | (6.3) |
| deferred tax | | | | | | |
| previously | | | | | | |
| recognised | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| | ________ | ________ | ________ | ________ | ________ | ________ |
+--------------------+----------+----------+----------+----------+----------+----------+
| Net losses | - | - | - | - | (16.2) | (16.2) |
| recognised | | | | | | |
| directly in equity | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Loss for the year | - | - | - | - | (753.6) | (753.6) |
+--------------------+----------+----------+----------+----------+----------+----------+
| | ________ | ________ | ________ | ________ | ________ | ________ |
+--------------------+----------+----------+----------+----------+----------+----------+
| Total recognised | - | - | - | - | (769.8) | (769.8) |
| income and expense | | | | | | |
| for year | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Share-based | | | | | | |
| payments: | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Value of | - | - | - | - | 2.0 | 2.0 |
| services provided | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Settlement of | - | - | - | - | (3.6) | (3.6) |
| share awards | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Tax on | - | - | - | - | 0.1 | 0.1 |
| share-based | | | | | | |
| payments | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Purchase of own | - | - | - | (0.5) | - | (0.5) |
| shares | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Vesting of shares | - | - | - | 1.0 | - | 1.0 |
+--------------------+----------+----------+----------+----------+----------+----------+
| Dividends | - | - | - | - | (71.1) | (71.1) |
+--------------------+----------+----------+----------+----------+----------+----------+
| Issue of equity - | 16.3 | 192.6 | - | - | - | 208.9 |
| rights issue | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| Costs incurred in | - | (12.7) | - | - | - | (12.7) |
| share issue | | | | | | |
+--------------------+----------+----------+----------+----------+----------+----------+
| | ________ | ________ | ________ | ________ | ________ | ________ |
+--------------------+----------+----------+----------+----------+----------+----------+
| At 31 December | 52.6 | 449.4 | - | (0.3) | (913.1) | (411.4) |
| 2008 | ________ | ________ | ________ | ________ | ________ | ________ |
+--------------------+----------+----------+----------+----------+----------+----------+
13 Reconciliation of loss before taxation to cash outflow from operations
+----------------------------------+--------------+--------------+
| | | Restated |
| | 2008 | 2007 |
| | GBPm | GBPm |
+----------------------------------+--------------+--------------+
| | | |
+----------------------------------+--------------+--------------+
| Loss before taxation | (745.2) | (96.5) |
+----------------------------------+--------------+--------------+
| Adjustments for: | | |
+----------------------------------+--------------+--------------+
| Depreciation of property, plant | 11.8 | 6.6 |
| and equipment | | |
+----------------------------------+--------------+--------------+
| Profit on disposal of property, | (0.5) | (0.1) |
| plant and equipment | | |
+----------------------------------+--------------+--------------+
| Loss on disposal of intangible | 0.2 | - |
| assets | | |
+----------------------------------+--------------+--------------+
| Amortisation of intangible | 19.4 | 94.7 |
| assets | | |
+----------------------------------+--------------+--------------+
| Share-based payments | (0.6) | 3.1 |
+----------------------------------+--------------+--------------+
| Fair value movements on | 41.1 | 0.4 |
| derivatives | | |
+----------------------------------+--------------+--------------+
| Decrease/(increase) in loans and | 52.2 | (568.8) |
| receivables | | |
+----------------------------------+--------------+--------------+
| Decrease/(increase) in | 5.6 | (5.4) |
| inventories | | |
+----------------------------------+--------------+--------------+
| Decrease in trade and other | 30.4 | 3.8 |
| receivables | | |
+----------------------------------+--------------+--------------+
| (Decrease)/increase in trade and | (10.3) | 13.8 |
| other payables | | |
+----------------------------------+--------------+--------------+
| Increase in borrowings | 78.1 | 19.0 |
+----------------------------------+--------------+--------------+
| Increase in provisions | 94.6 | 0.4 |
+----------------------------------+--------------+--------------+
| Decrease in deferred income | (10.8) | (8.4) |
+----------------------------------+--------------+--------------+
| | _______ | _______ |
+----------------------------------+--------------+--------------+
| Cash outflow from operations | (434.0) | (537.4) |
| | | |
| | | |
+----------------------------------+--------------+--------------+
| | _______ | _______ |
+----------------------------------+--------------+--------------+
The amount of interest paid and received (excluding that recognised in interest
income) during the year was as follows:
+---------------------------------+--------------+--------------+
| | | Restated |
| | 2008 | 2007 |
| | GBPm | GBPm |
+---------------------------------+--------------+--------------+
| | | |
+---------------------------------+--------------+--------------+
| Interest paid | (168.7) | (123.4) |
+---------------------------------+--------------+--------------+
| Interest received | 4.3 | 4.4 |
+---------------------------------+--------------+--------------+
14 Post balance sheet events
On 7 January 2009 the Company announced that in light of the continuing
uncertain funding environment, new business volumes in Welcome in 2009 would be
reduced by some 75% on 2008 and collective consultation had begun with employees
over a reduction of around 1,000 jobs within the Group. Annualised cost savings
were estimated at GBP40 million and the costs of delivering these savings are
expected to be GBP20 million.
The Board reported on 10 March 2009 that, based on information received to that
date, and subject to completion of its external audit, it believed that the
Group had incurred a significant loss before tax for the year ended 31 December
2008, and that it would be necessary to restate the Group's financial statements
for the year ended 31 December 2007. The Board also reported on 10 March 2009
that it believed Cattles was in breach of covenants under its borrowing
arrangements.
On 1 April 2009, the Company announced that a report by Deloitte estimated that
the Group would need to make a provision of around GBP700 million in excess of
that originally anticipated with respect to the value of customer loans held as
at 31 December 2008. At that date, the amount of this provision that should be
reflected in the profit and loss account for the year ended 31 December 2008
versus earlier years still remained to be determined. However, the Board
believed that such a provision would result in the Group reporting a significant
loss before tax for the year ended 31 December 2008 and in the requirement to
restate the Group's financial statements for the year ended 31 December 2007.
On 1 April 2009, the Board also reported that it was considering whether to
include an additional IBNR provision consistent with accounting standard IAS39.
Based on work carried out to that date, the Board believed that the adoption of
such a policy would result in an IBNR impairment provision of approximately
GBP150 million with respect to the value of customer loans held as at 31
December 2008.
On 23 April 2009, Cattles announced it was not in a position to publish its
report and accounts for the year ended 31 December 2008 by 30 April 2009 as
required by DTR 4.1.3. In those circumstances, the Company believed that the
FSA would ordinarily require the suspension of trading of the Company's shares
and bonds with effect from 1 May 2009. Therefore, in order to avoid a
disorderly market and to protect investors, Cattles requested an immediate
suspension of trading in its securities pending publication of its audited
report and accounts for the year ended 31 December 2008, which was granted.
On 30 April 2009, the Group closed its car retail operation, Welcome Car
Finance.
On 2 September 2009, Cattles announced the closure of 30 Welcome branches to
better align the network with reduced levels of lending and deliver efficiencies
in line with Cattles' commitment to manage the business through cost-efficient
operations and improved cash collection processes. 510 employees received
notice that they were at risk of redundancy and subsequently 266 left the
business.
On 14 September 2009 the Company's subsidiary undertaking, Cattles Invoice
Finance Limited, was sold to ABS FS Limited for a total consideration of GBP70.4
million. The Company's share of this consideration was used to repay Cattles
group bank indebtedness.
On 29 October 2009, the High Court of Justice heard 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 application was brought as part of consensual discussions
between all parties. On 14 December 2009, the High Court delivered a decision
that interpreted the cross-guarantee documentation to mean that the Company will
be prevented from making claims against relevant trading company subsidiaries
for money lent until the claims of the relevant bank creditors against those
subsidiaries and the Company have been satisfied in full. After judgment was
handed down, permission was sought to appeal this decision to the Court of
Appeal. The High Court granted such permission to the Royal Bank of Scotland
Plc and Party A (being a representative member of the Bondholders). The Court
of Appeal hearing is presently listed for 12 or 13 May 2010.
On 25 November 2009, Cattles announced that it had agreed a formal SEA with its
key financial creditors. At the same time, Cattles also agreed certain
modifications to the terms of its bank facilities, private placement notes and,
subsequently, its bonds.
The signing of the SEA and these modifications was expected to improve the
likelihood of Cattles achieving its restructuring objectives, namely:
· to stabilise the financial position of Cattles and its subsidiaries; and
· against this background, to continue discussions with Cattles' key financial
creditors with a view to agreeing a consensual restructuring of the Group.
The SEA was signed by Cattles, WFS, certain other members of the Cattles group
and, among others, lenders of certain syndicated and bilateral facilities to
Cattles ("Banks"), certain guaranteed hedging counterparties ("Guaranteed
Hedging Counterparties"), certain unguaranteed hedging counterparties
("Unguaranteed Hedging Counterparties") and holders of certain private placement
notes issued by Cattles ("Noteholders").
The SEA became effective on 17 December 2009 (the "Effective Date") following
the formal approval of the amendments to the bonds by holders of the 2014 and
2017 bonds ("Bondholders").
The key provisions of the SEA include:
· Standstill: A formal agreement by the key financial creditors to 'stand
still' and therefore agree not to take enforcement action against Cattles, WFS
or other members of the Group for a limited period of time.
· Cash distributions: Obligations on WFS to distribute the majority of cash
generated by the Group to the key financial creditors, subject to the right of
WFS to forecast and retain a provision for working capital requirements and
other contingencies. The SEA expressly provides that this forecast will be
prepared on a conservative basis to provide ongoing liquidity for the Cattles
group.
· Cash management: Obligations on Cattles, WFS and other members of the Group
to ensure that the majority of cash generated by the Group, which is currently
subject to rights of set off in favour of certain key financial creditors,
continues to be maintained in bank accounts that are subject to such rights of
set off in favour of such key financial creditors.
The period of standstill is linked to the litigation process relating to certain
intra Group subordination arrangements (as set out in Cattles' announcement of
11 August 2009) (the "Litigation"). The Banks, the Noteholders and the
Guaranteed Hedging Counterparties are required to stand still during an initial
standstill period from (and including) the Effective Date and ending on the
earlier of:
(i) 30 June 2011;
(ii) the date on which the relative entitlements of the creditors to Interim
Distributions paid after the conclusion of the Litigation have been finally
determined by the Entity Priority Accountant; and
(iii) the occurrence of the date on which the SEA is terminated,
unless the Banks and the Guaranteed Hedging Counterparties whose claims against
the Group represent at least 75% of the aggregate claims of the Banks and the
Guaranteed Hedging Counterparties against the Group and the Noteholders whose
claims against the Group represent at least 75% of the aggregate claims of the
Noteholders against the Group decide that the standstill applicable to the Banks
and the Guaranteed Hedging Counterparties and the Noteholders should be
terminated.
During the period after 30 June 2011 or after the date on which the relative
entitlements of the creditors to Interim Distributions paid after the conclusion
of the Litigation have been finally determined by the Entity Priority
Accountant, the standstill can be terminated (i) in the case of the standstill
applicable to the Banks and Guaranteed Hedging Counterparties, by the Banks and
Guaranteed Hedging Counterparties whose claims against the Group represent at
least 75% of the aggregate claims of the Banks and Guaranteed Hedging
Counterparties against the Group; and (ii) in the case of the Noteholders, by
the Noteholders whose claims against the Group represent at least 75% of the
aggregate claims of the Noteholders against the Group.
With respect to the Bondholders and the Unguaranteed Hedging Counterparties, the
initial standstill period (which began on the Effective Date) has been extended
following the appeal of the first instance judgment to the Court of Appeal. The
Court of Appeal hearing is presently listed for 12 or 13 May 2010. There will
be a further automatic extension of such standstill period following any appeal
of the Court of Appeal judgement, provided that a relevant majority of the
Banks, the Noteholders and the Guaranteed Hedging Counterparties agree that WFS
shall fund the legal costs of any appeal (up to a maximum amount of
GBP1,500,000). The standstill period for the Bondholders and the Unguaranteed
Hedging Counterparties shall terminate where: (i) a relevant majority of the
Banks, the Noteholders and the Guaranteed Hedging Counterparties do not agree
that WFS shall fund such costs; or (ii) the SEA is terminated.
On 16 December 2009, Cattles announced that it was unable to recommend a
business plan to financial creditors which would allow Welcome to lend to
existing or new customers. The Board therefore recommended a plan which would
focus on collecting out Welcome's customer loans. It is envisaged that the
collection of the Welcome loan book could take two to three years and, during
this period, the Group's cost base will contract to reflect the reducing size of
the book.
In 2009 all derivative assets and liabilities were converted into on-demand
loans of GBP85.7 million with bank counterparties.
On 5 February 2010, Cattles announced the closure of circa 70 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 will leave the business.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ATMATMBJBMPM
Cattles (LSE:CTT)
Graphique Historique de l'Action
De Fév 2025 à Mar 2025
Cattles (LSE:CTT)
Graphique Historique de l'Action
De Mar 2024 à Mar 2025
