Annual report and accounts - Cattles Limited

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8 Cattles plc Annual Report and Financial Statements 2004 Chief Executive’s Review continued 2004, contributing to an increase of over 8% in the consumer division’s total hire purchase sales for the year. Dial4aloan, our specialist consumer credit broker, remains focused on the secured loan market and continues to be one of the principal providers of new business to the consumer division. The FLA has reported that secured lending in the UK grew by only 4.5% in 2004, with a sharp decline in lending of 11.4% being experienced in the final quarter, compared with growth in excess of 20% in each of the previous two years. In common with the general UK broker market, Dial4aloan has experienced a noticeable decline in the level of new business enquiries, particularly as brokers and consumers become accustomed to the changed style of advertising required by the new regulations. In a year of considerable regulatory change, it is therefore pleasing to report that Dial4aloan originated over £40 million of new secured and unsecured loans for the consumer division, an increase of 41% over the previous year. Successful referrals from Dial4aloan now represent 18% of all broker introduced secured loan business to the consumer division and this has contributed to an increase of 15% in the division’s total secured lending during the year. Shopacheck continues to offer a home collected product to customers who require small value, short term advances (typically £300). The number of home collected customers reduced by 73,000 during the year to 337,000 at 31 December 2004, as we continue to disengage from those sectors of this market which we regard as being uneconomic. Home collected receivables have accordingly been reduced in the year by £22 million to £196 million at 31 December 2004, and now represent around 11% (2003: 15%) of total consumer division receivables. We shall continue to review the on-going suitability and cost effectiveness of our branch network, particularly as short term property leases expire and, where appropriate, amalgamate smaller, less profitable branches with their nearest neighbours. At 31 December 2004, the consumer division operated from 294 locations across the UK. Feedback on the quality of our products and services is important to us and this continues to be obtained by independent consultants on a monthly basis each year. Their latest report in February 2005 shows a consistently high position with over 80% of our customers being satisfied with our services. Insurance Progressive Insurance, our reinsurance company, continues to perform successfully and managed funds at 31 December 2004 stood at £75.0 million. These funds, which are invested in fixed interest bank deposits, are held, primarily, against potential future claims and cannot be applied to finance other parts of the group or repay group borrowings. Debt Recovery Lewis, the group’s debt recovery specialist, has had another successful year, increasing its profits by 19.0% to
Cattles plc Annual Report and Financial Statements 2004 9 £4.4 million. Lewis provides a full debt recovery service for external clients which accounts for around 85% of their commission based debt collection activities, an increase from 75% in 2003. Third party commission income increased by 4% in the year to £6.5 million. The purchase of default debt portfolios continues to be an important part of Lewis’ operations and it has developed sophisticated pricing models and processes to assess the economic value of such portfolios. This has enabled Lewis to remain selective in the portfolios it purchases, particularly when prices harden, as has been the case in the second half of 2004. The amount invested in the purchase of such portfolios in the year was £21 million, an increase of 55% on 2003. These portfolios, which, at 31 December 2004, amounted to receivables of £34.4 million, continue to perform ahead of our expectations. Corporate Division The corporate division has reported another set of strong results with profits before tax of £7.8 million, representing an increase of 11.6% on the £7.0 million achieved last year. The division’s net customers’ accounts receivable at 31 December 2004 amounted to £131.7 million, an increase of 2.0% in the year. Credit quality in the corporate division has continued to improve, with a further reduction in the bad debt ratio from 1.2% to under 1% of net receivables being achieved for the year. The division’s return on average net receivables also continued to improve from 5.9% last year to 6.2% in 2004. Cattles Invoice Finance has again performed well, improving profits to £3.2 million from £2.8 million in 2003, whilst growing its client base by 10% in the year. This business now operates from five regional centres, with a new office being opened in Maidstone during the year to improve the division’s service to London and the South East. This will complement the division’s other regional centres located in Manchester, Oxford, Leeds and Glasgow. Cattles Commercial Finance, which is primarily involved in hire purchase and leasing advances to the SME market, had another good year, increasing its profits before tax by 9.2% to £4.6 million. On 14 January 2005, we announced the sale of this non-core business for a total cash consideration of £70 million. These proceeds will be used to provide additional working capital for the group. Information Technology We continue to invest significantly in Project Phoenix, the development of our next generation of IT and customer relationship management systems. During the year, contracts were awarded to Siebel, Fiserv and IBM to supply all major computer software, hardware and database management systems for Phoenix. I am pleased to report that this major project remains on schedule for implementation in 2006. Funding In July 2004, the group successfully completed a new five year syndicated bank facility of £500 million. This replaced maturing facilities of £353 million and provides the group with
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Annual report and accounts - Cattles Limited

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