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As a provider of non-standard loans, Cattles has attracted a lot of new business - loan applications in the first half rose to 1.8m, against 1.5m for the whole of 2007.
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However, Cattles has avoided the temptation to lend excessively and management continues to apply strict lending criteria. Accordingly, unsecured loan volume actually fell 3.8 per cent during the period to £245.4m. The Welcome Finance business, which covers hire purchase, secured and unsecured loans, saw acceptance rates fall from 6.3 per cent to 5.2 per cent reflecting tighter lending requirements. So, overall, new business volumes were broadly flat at £661m.
But despite the tougher lending criteria, instalment arrears at Welcome Finance rose from 7 per cent of receivable to 7.2 per cent, and customer balances with a proportion in arrears rose from 29.2 per cent of the book to 31.4 per cent. On the funding side, there's £334m of lending headroom and only $40m of maturing debt this year. The next debt maturity is for £500m next July, but Cattles believes that it will have secured a banking licence before then, and plans to raise £1bn of customer deposits by 2010. Daniel Stewart expects full-year adjusted pre-tax profits of £188.5m, with EPS of 28.1p.
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| CATTLES (CTT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 113p | MARKET VALUE: | £594m | |
| TOUCH: | 112-113p | 12-MONTH HIGH: | 333p | LOW: 98p |
| DIVIDEND YIELD: | 17.4% | PE RATIO: | 4 | |
| NET ASSET VALUE: | 155p | |||
| Half-year to 30 Jun | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) | |
|---|---|---|---|---|
| 2007 | 60.1 | 10.3 | 6.20 | |
| 2008 | 70.2 | 11.1 | 6.51 | |
| % change | +17 | +8 | +5 | |
Ex-div 03 Sep Payment: 10 Oct |
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Cattles isn't short of business and, assuming that it keeps a lid on bad debts and secures its banking license, the shares - on a forward PE ratio of just 4 - rate long-term good value.
Last IC view: Good value, 113.25p, 19 August 2008.
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