THE INVESTMENT COLUMN: Cattles sell-off looks a sensible option

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The Independent Online
Cattles, the Yorkshire-based door-to-door credit group, will raise pounds 23.1m from yesterday's sale of its remaining 23 per cent stake in Rosebys, the household textile retailer. In the short run that will reduce debt, although the group speaks expansively about significant opportunities in its core markets, with the prospect of the funds being reinvested over time.

Rosebys was one of the non-core businesses floated off in 1992, when it was valued at around pounds 20m. Since then, the offspring has grown to a pounds 120m company through successive acquisitions and rights issues, while Cattles' original post-flotation stake of 48 per cent has been diluted to the point were the next deal would take it below the 20 per cent level at which its profits can be equity accounted.

So despite being done at a near 8 per cent discount to the share price, down 2.5p at 297.5p, yesterday's deal looked sensible. In the latest year to December, the stake contributed pounds 2.02m to Cattles' total pre-tax profit of pounds 33.9m and 1p to total earnings of 17p. The proceeds should reduce debt, which totalled pounds 148m at the year end.

Shopacheck the door-to-door collection division is still the largest chunk of Cattle's business, but rapid growth in Welcome, the conventional loan business, and the factoring and leasing divisions has diluted Shopacheck's contribution from 96 per cent of the total profits in 1994 to 65 per cent last year. Group profits grew 40 per cent in 1995 and another 20 per cent last year. Even assuming a half million dilution from the disposal, analysts still expect profits to grow to pounds 37.7m this year, rising to pounds 42.3m in 1998.

The sector has been adversely affected by rumours of a Government clamp- down on weekly collected credit, but the industry is confident it will escape any such moves. Down 2.5p to 311p, the shares look fairly rated on a forward multiple of 17, dropping to 15.

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