Annual report and accounts - Cattles Limited

6
Cattles plc Annual Report and Financial Statements 2004
Seán P Mahon
Chief Executive’s Review
I am pleased with the performance of
the group during 2004, resulting in an
increase in profit before tax and goodwill
amortisation of 15.1% to £141.2 million
for the year. These excellent results
reflect the benefits of our continuing
focus on controlled growth, in an
increasingly competitive and regulated
UK consumer credit market. Lewis, our
debt recovery specialists, and the
corporate division have also improved
their contributions in the year.
Consumer Division
Profits before tax of the consumer
division have increased significantly by
16.2% to £137.2 million, compared to
£118.1 million reported last year. This
has been achieved through the
on-going development of our
distribution channels and increased
volumes generated for the consumer
division by Dial4aloan and Welcome
Car Finance. Careful management of
our existing receivables book, together
with continuing investment in our
bespoke credit profiling and
underwriting processes have also
contributed.
The consumer division’s total income
rose by 21.9% during the year to
£710.0 million (2003: £582.6 million).
This was primarily due to an increase in
net interest income of 15.5% to
£429.4 million, reflecting continued
volume growth in net receivables, and
an 18.2% increase in fees and
commissions to £176.1 million, which
includes income from insurance
products sold alongside consumer
loans and revenues from early
settlements. Other income, which
mainly includes the sale of second hand
vehicles for a full year by Welcome Car
Finance and collections by Lewis,
amounted to £104.5 million
(2003: £61.9 million).
The group’s strategy remains focused
on the profitable expansion of its
consumer credit activities, underpinned
by a policy of responsible lending and
maintaining stable credit quality. The
consumer division remains committed
to serving local communities through an
extensive UK network of branches
supported by central underwriting and
increasingly sophisticated customer
profiling, based on our many years
experience in the non-standard
consumer finance market.
I am, therefore, pleased to report that
there has been no deterioration during
the year in the credit quality of the
consumer division. Customers’ arrears
levels have remained stable at around
11% of receivables and the bad debt
charge for the year has improved to
7.5% (2003: 7.7%) of net receivables.
Consumer Credit
As commented upon in the Chairman’s
Statement, the sale of both primary
mortgage and general insurance
products are now regulated by the FSA.
We were pleased to receive the required
authorisations from the FSA prior to their
respective impact dates. However, the
cost and disruption to the consumer
division’s business of preparing for and
complying with the new regulatory
environment has been significant,
including extensive additional training for
all relevant members of the division’s
customer facing staff.
Small, unsecured personal loans,
typically of around £1,400
(2003: £1,200) continue to be advanced
to around 70% of our customers. A
further 16% of customers are provided
with HP loans for the purchase of cars,
where the typical advance of £4,800
(2003: £4,000) has increased in line with
the better quality cars being sold by