Cattles 'unconcerned' by lending inquiry

CATTLES chief executive Sean Mahon says he is not concerned about an inquiry by UK competition authorities into doorstep lending because it is now only a small part of the company's activity.

Shares in Cattles fell this morning 26¼p, or 7%, to 350¾p, after the consumer lender said last year's profit - which it reported up a healthy 15% - would have been cut by about 30% under new accounting standards that take effect later this year.

The Office of Fair Trading asked the Competition Commission in December to investigate the doorstep-lending market, which is dominated by a handful of companies. But Mahon declared today that this accounts now for only 11% of its consumer business, down from 15% a year earlier.

Cattles lends an average of £4,400 to people who choose not to or are unable to borrow from banks for cars, home improvements and consumer goods. Rates of interest are higher than those at banks and building societies.

UK consumer debt rose to more than £1 trillion last year amid a spending boom fuelled by low interest rates. With rates predicted to rise later this year, borrowing is slowing, but Mahon said Cattles' growth would not be harmed.

'A lot of the massive growth in consumer spending is in areas we are not involved in, like credit cards,' he said. 'We are seeing stronger demand for our product this year than last year and stronger demand last year than the year before.'

The company, started by Joseph Cattle in 1927, has reduced its reliance on weekly collections at borrowers' homes and focused on longer-term loans repaid by direct debit.

It reported full-year pretax profit up 15% to £141.2m, slightly ahead of forecasts, as business grew at the consumer division and bad debts were stable.

But profit would have been about £100m pounds under the new accounting rules because of changes to when fee revenue and loan arrears are recorded in accounts, Cattles said.

The new rules start in the second half of this year. They are meant to make accounts clearer and easier to compare, but accountants have warned of confusion as results are restated and investors struggle to judge companies' underlying performance.

'This is a very new process and as we come into this reporting period, we will see some wild swings in results,' said Numis Securities analyst Justin Bates, who recommends buying Cattles. 'There is no cashflow hit, and the rate of growth is just the same.'

Cattles' full-year dividend was set at 14p a share, up from 12.10p in 2003.