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The only thing that hasn't improved for sub-prime lender Cattles is its share price that succumbed to general market malaise, despite figures that showed a very strong trading performance in 2007.
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Sub-prime lending is a difficult business to get right, but Cattles applies strict lending criteria and also charges a lot more than high street lenders. And with bigger lenders pulling up the drawbridge on unsecured lending, Cattles has been overwhelmed with enquiries, which has also allowed it to be extremely selective on whom it lends money to. So, of the 3.3m applications last year, Cattles wrote 208,000 new contracts. Overall, customer numbers grew by 25.6 per cent to 514,000.
And while loan volumes rose by 42.5 per cent to £1.4bn, instalment arrears fell from 7.4 per cent to 7 per cent of receivables. What's more, Cattles has reasonable funding headroom of £226m, and a £150m facility arranged in December has just been increased to £250m, demonstrating the Royal Bank of Scotland's confidence in Cattles' business model. Meanwhile, the Robinson Way debt collection division more than doubled its profits to £10.2m.
Broker Daniel Stewart expects adjusted pre-tax profits for 2008 of £188m (£165m in 2007) and EPS of 36.5p.
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| CATTLES (CTT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 267p | MARKET VALUE: | £969m | |
| TOUCH: | 267-268p | 12-MONTH HIGH: | 444p | LOW:238p |
| DIVIDEND YIELD: | 7.2% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 164p* | |||
| Year to 31 Dec | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2003 | 119 | 26.4 | 12.1 |
| 2004 | 102 | 21.8 | 14.0 |
| 2005 | 115 | 28.0 | 15.7 |
| 2006 | 132 | 28.0 | 17.5 |
| 2007 | 165 | 32.3 | 19.3 |
| % change | +25 | +15 | +10 |
Ex-div: 26 Mar Payment: 13 May *Includes intangible assets of £97m, or 27p a share |
|||
Cattles might need more funding this year, but seems confident that it can raise it. Trading on 7 times forward earnings and yielding over 7 per cent, the shares continue to rate good value.
Last IC View: Good value 293p 13 December 2007.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
