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