Cattles plc

1927–1970

Cattles plc is one of the United Kingdom's top providers of small loans and related financial services through a nationally operating network of more than 470 Shopacheck, Welcome, and other financial services offices. Although the company has traditionally targeted the low-income, subprime borrower categories, Cattles has been driving into higher income categories in the early 21st century. Nonetheless, small loans remain the company's core product. Through its chain of Shopacheck branches, the company provides small loans averaging £150, then collects weekly fees, including interest rates of up to 36 percent, through its army of collectors. The typical payback period for these loans is six months. The company's Welcome chain provides larger loans, averaging £2,000, with payback periods of two years or more. Cattles also operates its own debt collection company, Lewis Group, to collect on its bad debt pool, which averages 8 to 9 percent per year. Other members of the Cattles plc Consumer Division include Ewbanks Mail Order, which provides a variety of consumer goods; Teleplan Rentals, a television and video rental business; and Watsons Personal Finance, which extends the Shopacheck concept with a monthly payment plan. Cattles also operates a Corporate Division, providing loans and accounting services for small businesses. The company, with annual sales of nearly £500 million ($830 million), is quoted on the London Stock Exchange.

Check Trader in the 1950s

The concept of check trading, also known as trading vouchers or shopping checks, evolved from the United Kingdom's retail industry in the late 19th century. Originally issued as a form of credit by then Provident Clothing and Supply, the shopping check became an industry of its own in the early part of the 20th century. Check trading companies issued checks to customers, typically in small amounts, who could then use the checks at local retailers. The check trading companies then sent out agents to customers' homes in order to collect weekly fees on the checks. While controversial--interest rates could range up to 70 percent on an annualized basis--check trading provided access to credit to consumers otherwise unable to procure loans from traditional banking sources.

Although check trading became a national phenomenon in the United Kingdom, the credit form was especially popular in the country's lower-income northern regions. By the second half of the 20th century, more than 400 check traders were in operation, although the market was dominated by a small number of larger players, including Provident and Hull-based Cattles.

Cattles, like Provident, originated from a retail drapery shop founded by Joseph R. Cattle in Hull in 1927. Cattle began offering check trading services, while expanding his company's range of businesses. By the early 1960s, the company, which had changed its name to Cattle's (Holding) Ltd., operated a department store, five furnishing stores, a drapery and outfitters store, and a nursery, and had annual sales of £800,000. The company also operated a credit trading arm, as well as a wholesaling business.

Cattle's went public in 1963 and began building its business through a number of acquisitions, including Crescent Premier Supply Company in 1967, and the Grimsby Supply Co. and Easy Purchase Services Ltd. in 1970. If Cattle's had entered the 1960s defined as a retail group, by the beginning of the 1970s, it had already begun to transform itself into one of the United Kingdom's leading credit traders--a process spurred on by the company's flagging retail operations.

Cattle's grew strongly during this period, with sales rising from £1.7 million in 1968 to nearly £4.4 million in 1971.

1900–1992

In the 1970s, Cattle's turned its attention more fully to its credit trading arm, beginning plans to build a national chain of branch offices, in large part through new acquisitions. For its national drive, the company adopted the Shopacheck brand name. Cattle's grew strongly during this period, with sales rising from £1.7 million in 1968 to nearly £4.4 million in 1971. The company took a major step forward in 1972, paying a total of £850,000 to acquire Derby-based Progressive Group, which provided check trading and insurance brokerage services. The following year, after purchasing four smaller credit traders, for a total cost of £550,000, the company's revenues topped £15 million in sales.

By then, Cattle's had taken on a major shareholder, after rival Provident began acquiring stock. By the mid-1970s, Provident held nearly 25 percent of Cattle's. The two companies initially remained friendly, but, at the beginning of 1977, Provident launched a full-scale takeover offer of Cattle's. The Cattle's board rejected the offer, which valued Cattle's at £5 million, however. Provident ultimately pulled back from its takeover ambitions, after the offer was referred to the mergers and monopolies commission. Nonetheless, Provident held onto its stake in Cattle's for some time, selling out only in the mid-1980s.

Going Upscale in the New Century

Cattle's continued to build up its check trading business in the early 1980s, including acquiring Mutual Check Traders, based in Farnworth, in 1983. Yet, fearing the entry of the United Kingdom's larger building societies and clearing banks into its core high-risk consumer credit market, Cattle's embarked on a diversification drive in the 1980s. By the end of the decade, Cattle's had a variety of businesses, including video rental stores, insurance, travel agencies, and indoor sports arenas. The company also had broadened its retailing interests, which were regrouped into the Rosebys chain of shops.

In 1988, however, Cattle's joined with upholstery and fabrics distributor Rexmore, which also owned the Waldmans retail chain, to form a new Rosebys, combining both groups' retail operations. The new Rosebys, held at 80 percent by Cattle's and boasting 115 stores throughout the United Kingdom, was then slated to be spun off as a public company in the early 1990s. Rosebys' listing took place in 1992, at which time Cattle's reduced its stake to just 45 percent.

Cattle's was undergoing a different kind of reduction by then, as new CEO Edward Cran, who joined the company in 1990, refocused the company around its core financial services businesses. As Cattle's exited its noncore operations, it boosted its financial services division. In 1990, the company acquired Compass Credit, founded in 1900, for £8 million, adding its 92-branch network of offices. Where Cattle's Shopacheck chain focused on small loans averaging £150, usually payable within six months, Compass offered loans of up to £1,000, payable within a year.

1994–2003

Cattle's expanded further into this larger loan category in 1994, when it paid London & Manchester more than £23.5 million to acquire its Welcome Financial Services chain. Welcome was then put in place as the company's second major brand, beside Shopacheck. The company also acquired Reedham Factors that year, which provided factoring services to small businesses. That acquisition marked the start of Cattle's Corporate Services division.

The consumer credit industry faced a challenge from the British government in the mid-1990s, which sought to place controls on the industry--and particularly on the high interest rates charged to customers. Yet the company, by then renamed Cattles, defended itself by pointing out that it provided access to loans to customers who were otherwise shut out of the main banking system. At the same time, part of the company's success had always been its locally based operations--using agents, typically women, working part-time to make collections.

Nonetheless, Cattles continued to seek ways of reducing its bad debt rate while easing the collection burden of its main branches. In 1997, the company acquired debt collection and recovery company Lewis Group for £7.7 million. In that year, also, Cattles, which had reduced by half its holding in Rosebys, sold off its remaining 23 percent in the growing retail group.

By 1998, Cattles boasted 135 Shopacheck branches and 50 Welcome branches, serving more than 450,000 customers nationwide. In that year, however, Cattles attempted to shed its small but growing commercial services division in order to concentrate more fully on its consumer businesses. Six months after announcing its intention to sell its commercial operations, however, the company retracted the offer, claiming that it had not found the price it wanted.

Instead, Cattles went on a new expansion drive for the start of the 21st century, launching a five-year strategy to expand its branch office network. In 1999, the company began opening new offices at a rate of nearly one per week. In 2000, the company stepped up its ambitions, promising a new wave of branch openings to take the company to 335 branches by 2001.

Edward Cran left the company in 2001, causing a dip in Cattles' share price. Yet the company quickly bounced back, as its growth continued strongly into the new century. By August of that year, Cattles announced its intention to build up its network to more than 550 branches by 2003.

2002–2003

In the meantime, Cattles began to reposition itself in the consumer lending market, which, with the rise in the British economy over the previous decade, had begun a shift away from the subprime markets. Cattles began attracting referrals from other lenders, such as mail order houses and retailers, that passed along credit applications from higher-risk customers to Cattles.

This effort took on steam in October 2002, when Cattles paid £56.5 million to acquire the car loan portfolios of some 13,000 customers from Citigroup lending wing Associates Capital. The company also acquired consumer credit business Dial4aloan for £15 million that month. By the end of 2002, Cattles' sales neared £500 millon.

At the beginning of 2003, Cattles took a new step into the near-prime market with a hookup with Barclays Bank. Under the agreement, Barclays brought in Cattles to provide processing, administration, and monitoring services for Barclays' own loans to near-prime customers. Meanwhile, Cattles own portfolio revealed its gradual shift into high-end consumer categories, as the percentage of loans to the lowest-income group slipped to below one third of its total portfolio. While responding to the shifting economic status of the U.K. market, Cattles remained at the top of the consumer credit industry.