One-in-five jobs at risk as lender wields axe

Jan 8 2009 by Iain Laing, The Journal

CONSUMER lender Cattles is considering plans to cut 1,000 jobs. The company that employs around 5,000 people, said the reduction was needed as it expected its Welcome Finance personal lending arm to cut new business volumes by around 75% this year.

The company said it had begun consultation with staff about the reduction of 1,000 jobs, including the loss of 400 positions through the closure of the back office operation at Hull.

Cattles, which is also suspending dividend payments to shareholders, will look for a range of other cost-saving measures in order to conserve cash in the coming months.

It is in talks with its banks about refinancing facilities which are due for repayment in July.

Cattles chief executive David Postings said the measures, which will deliver savings of around £40m, were designed to strengthen the business in the current uncertain funding environment.

He added: “We have not taken these decisions lightly and we firmly believe that, by cutting costs and preserving capital in the business, we can continue to trade profitably, weather the current economic conditions, and continue to serve over 850,000 customers in this important part of the market.”

Cattles, which is a specialist lender in the sub-prime market, said credit quality remained within “reasonable tolerances” and had no bearing on its announcement yesterday.

The company also runs debt recovery firm Lewis and a business providing working capital finance to small and medium-sized businesses through six regional offices across the UK.

Cattles said it would continue to write new business in 2009, but said it expected volumes in Welcome Finance to be down by some 75% on 2008, which itself saw a reduction from 2007.

Staff at the office in Anlaby, on the outskirts of Hull, said that they could not comment on the job cuts.

Cattles also said it continued to hold “constructive discussions” with the Financial Services Authority regarding its application to become a bank and hold a retail deposit-taking licence.

Numis Securities said it expected that Cattles will not get a banking licence until its funding situation has been resolved.

The broker added that the company’s plan to shrink the business appeared sensible.

It said in a note: “We believe that Cattles is preparing to repay the £500m of debt that falls due at the end of June this year and taking the prudent assumption that they cannot refinance.”