CPP insists business model sound as inquiry continues

The York-based company revealed in March the Financial Services Authority is investigating “alleged failings” in its sales calls for credit card and identity theft products.

Yesterday the company posted six months of growing sales and profits, but said its UK business has been in a hiatus while it awaits the outcome of the investigation.

“We cannot do anything but allow them to complete their work,” said chief executive Eric Woolley.

“We’ve very careful in our compliance where ever we operate, and that’s why we’re a little bit shocked and disappointed by the UK investigation.”

The FSA, which has declined to comment on the probe, has various options including imposing a fine, reviewing CPP’s previous sales in detail or doing nothing.

“The timeframe to conclusion of such discussions remains unclear,” said CPP.

Shares in the company firmed 1.25p to 138.75p.

“We admit we find it difficult to forecast CPP currently given the uncertainty on the outcome of the FSA investigation,” said analysts at house brokers UBS. “We have nudged up 2011 by three per cent reflecting higher revenue growth, and left outer years unchanged.”

CPP, which was founded more than 30 years ago, reported 10 per cent growth in revenues to £172.1m in the first six months of the year, compared with the same period in 2010. Underlying pre-tax profits increased by five per cent to £23.9m.

“The exciting thing about these results is we’re still growing in double digit revenue terms,” said Mr Woolley.

However, the group’s annual renewal rate slipped to 75 per cent from 75.9 per cent.

Mr Woolley said this reflected “very slight degradation” due to an increase in the price of its products, as well as the growth of newer markets.

The FSA probe has so far cost CPP about £0.6m in extra costs. On learning of the investigation, CPP suspended sales of ID protection in the UK. Barclaycard also decided to suspend sales of CPP products through a card activation channel.

As a result of these lost sales and increased costs, underlying operating profits increased by just one per cent to £24.3m. CPP’s operating profit margin slid to 14.1 per cent from 15.3 per cent a year earlier.

Despite the FSA probe, Northern Europe grew revenues by 12 per cent during the six months – although the growth rate slid to eight per cent in the second quarter.

North American revenues increased 24 per cent and Asia Pacific sales were up 17 per cent.

Sales in Southern Europe and Latin America dropped eight per cent on the tough economy.