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Interim 2008 Cattles plc Earnings Presentation - Final.

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Original Source: FD (FAIR DISCLOSURE) WIRE

DAVID POSTINGS, CEO, CATTLES PLC: Thanks very much. Good morning, everybody. Welcome to our interim results announcement. The way we're going to play it today is I will speak for a few minutes to about half a dozen slides giving an overview of how we see things and how we're dealing with some of the big issues facing the business. James will take you through the detail on finance and trading, and then I will come back for a brief summary at the end, and then we will open up the floor to Q&A.

Looking at our results, I have to say I'm really pleased with them. They are a good set of results. Pretax profits up 16.8% to GBP70.2 million. During the first half, you will recall we undertook a successful rights issue raising GBP200 million, and we had a 97% takeup for that. On a like-for-like basis, earnings per share grew 7.7% to 11.05p, and our return on equity has ticked up to 16.1 on an adjusted basis.

One of the key things on this slide is that you will see we have increased the dividend by 5% to 6.51p increased the cash dividend. This is a lower rate of growth than we have seen in previous years, but it reflects our desire to be self-sustaining for equity capital for at least five years and hopefully a lot longer. And that is something that we've talked about when we did the rights issue back in April. And I will come back to that later.

So what about the business? We are operating in a challenging environment. The credit crunch has been with us officially I think for just over a year, and the business is performing pretty well I think. Demand for our products remains high. Applications for credit in the first half were up on 2007 at just over 1.8 million. So that demonstrates that we're doing something right, and we have got a lot of potential customers out there.

What we're also doing is converting fewer of those than we have ever done before. A number of our competitors have withdrawn or retrenched, and that has enabled us to reprice to be much more choosy and tighten our credit criteria, and we have deliberately scaled back volume.

There is no doubt that there is a squeeze on our customers. They cannot escape the inflationary pressures that everybody is feeling. So household bills have risen, and there is some impact on disposable income. And there is undoubtedly some impact on arrears. But you'll see later on when James explains how the arrears are calculated that there is quite a big factor driven by arithmetic related to the volume growth in the first half. So it's not all as a result of squeeze on our consumers.

We have successfully completed a debt fund raising in the first half through a syndication of bilateral, and the market remains tough but open to Cattles, and we hope that we will be successful in raising further funds in the second half.

As I have discussed, profits grew by 16.8%. Income grew by 17.8%. I'm pleased that our cost income ratio has improved half-one to half-one from 33.9 to 31.8, and our loan-loss ratio is stable. I think that demonstrates the fact that we are adept at managing in this kind of environment. The business, as I said, the preliminary announcement back in February is set up to operate in this kind of environment. We are close to our customers. We manage arrears and customer relationships, and I think that is demonstrated in the fact we can keep our loan-loss stable. There is undoubtedly some deterioration in arrears, and I mentioned James will touch on it later.

The rights issue strengthened our capital base, and our banking license application is underway. Our capital ratio will be around 20% when we start taking deposits, and it is important because it diversifies our funding sources. We have been probably too reliant on the wholesale market, and the ability to raise retail deposits will certainly give us an edge.

What we're trying to do is form some kind of triangulation. We obviously have some constraint as every business does around how we manage cash. So what we have...