Cattles, whose market value is just £18m, said advisers including the accountancy firm Deloitte have reported back after re-examining its books in the wake of the discovery of errors. It will now add £700m to its previous bad loan provisions. If a different accountancy standard is used, this would add a further £150m still, said the company, which is in talks with its lenders after breaching loan agreements and finding accounting irregularities. "The management's focus is now on working closely with its debt providers to sustain their support for the Group's programme of action to stabilise its financial position," said Cattles.
The action includes a reshuffle of management, as well as asset sales and the "controlled" collection of debts outstanding, the company said, adding that the collection programme has so far generated net cash receipts in 2009.
The revelations are the latest in a long string of bad news for the company. Cattles said on 18 December that trading was in line with expectations for £174m of pre-tax profit last year. But since then it has become clear that with the change in year the company is truly having an annus horribilis. It gave up its application in January for a banking licence – which would have given it access to retail funding – then found under-reporting of bad debts at its main business, Welcome Financial Services.
The sub-prime lender then revealed on 10 March that it had breached its banking covenants, and after issuing its second profits warning in as many months, the company said it had suspended three senior directors at Welcome Financial Services.
Its finance director, James Corr, was suspended over accounting errors, along with Ian Cummine, the chief operating officer, and Adrian Cummings, the head of compliance for Welcome's lending business. Three other directors have also been suspended.
Cattles was founded in 1927 by Joseph Cattle in Hull. It listed on the London Stock Exchange in 1963, and now operates under three brands. Welcome provides personal loans, Lewis is a debt recovery and investigations business, while Cattles Invoice Finance lends to small and medium-sized businesses.
Shares in Cattles fell another 2 per cent to 3.38p yesterday, less than 1 per cent of their value in mid-2007, when doorstep lending was an integral part of the credit boom. In January Cattles' shares fell sharply after it failed in its attempt to win a banking licence. On 20 February, they dived again as Cattles issued a profits warning and put its results on hold, followed by the review of its bad loans provisions.