CPP reveals watchdog inquiry will check group’s sales growth

York-based CPP said it had still managed to achieve a strong performance over the last few months, and had secured a new business partner in India.

In March, CPP revealed that the FSA was investigating “alleged failings” in its sales calls for its credit card and identity theft products.

CPP has suspended sales of its ID theft products but insisted it has not misled customers and will fight the FSA probe. Yesterday, CPP said group sales had risen 12 per cent in the year to the end of April.

The company’s shares bounced back yesterday after losing more than half their value since the FSA investigation was announced.

Eric Woolley, the company’s chief executive, said he expected a swift resolution to the FSA probe, adding: “I would expect it to be in weeks, it might even be in days, but not months.”

Mr Woolley added: “They’re investigating our sales practice from two key perspectives. One is whether the premise of identity theft in general is exaggerated, and secondly whether people understand the purpose of the insurance.”

Within a fortnight of the initial probe being announced, the FTSE-250 company said Barclaycard had decided to suspend sales of CPP products through a card activation channel.

CPP’s other business partners are “keen to see the discussion with the FSA settled”, said Mr Woolley but have not suspended any CPP products. He said he did not know how long the review by Barclaycard would take, but said that the group still sells other CPP products.

CPP, which employs around 1,000 staff in York, raised £150m through a London listing last year.

Speaking before the company’s annual general meeting in York, Shaun Parker, the chief financial officer, said: “The FSA issue has started to cloud performance, but apart from that the business is doing well. After we announced the FSA issue, there was a large amount of press interest in us, and even on the back of all that, the complaint levels didn’t increase.”

He said morale at the company was good, and complaints from customers were low.

He said there was a “dialogue” going on with regard to the FSA investigation, but as yet, it had not drawn any conclusions.

He added: “We don’t agree with their assertion and we have told them that.” He said the FSA had asked for “granular data on complaint levels”.

Mr Parker said CPP always acted with the highest levels of integrity.

“Identity theft is a serious issue. We stand behind our product,” he added.

Mr Parker also revealed that some shareholders had decided the recent movement in the share price represented a good buying opportunity.

CPP highlighted the findings of a report by the National Fraud Authority, which is an executive agency of the Home Office. The report states that UK identity fraud costs more than £2.7bn a year and affects more than 1.8m people.

The company, which operates in 14 countries, said sales in Northern Europe grew by 14 per cent in the four-month period to the end of April, and rose 12 per cent in the UK, offset by a six per cent decline in southern Europe.

Mr Woolley said yesterday: “The group delivered another strong underlying business performance in the first four months of 2011 with encouraging trading trends in Northern Europe, North America and Asia Pacific, and with Southern Europe maintaining its margins but impacted by the challenging economic conditions in Spain.

“We are working hard to make further progress in our new developing markets, which offer significant longer term potential, and we have seen a number of pleasing developments including the addition of a new business partner, SBI Cards, in India.”

He added: “While the continuing uncertainty resulting from our ongoing discussions with the FSA is unwelcome, I remain confident that we have excellent products which fulfil a significant and growing need in our society, and a sound business model around which we will continue to grow both in the UK and internationally.”

In a statement, the company added: “We anticipate that revenue growth for the first half of 2011 will not continue at the level seen in the first four months of the year, being negatively impacted by the suspension of sales of identity protection through our UK voice channels since March 28, 2011. Group margins will be impacted by the lost sales, particularly in the first half of 2011.”

CPP was f ounded 30 years ago by entrepreneur Hamish Ogston, who still holds 57 per cent of the business. Mr Ogston, who is still a non-executive director, attended yesterday’s AGM in York but did not make any comment.

Mr Parker said that his basic pay would rise by three per cent to £268,000 next year, while Mr Woolley’s basic salary would rise by the same percentage to £412,000.

CPP’s shares closed up 18p, a rise of 15 per cent to 138p last night.

Analyst Hugo Mills at Citi said: “This was a solid statement considering the circumstances but until we have some certainty on the impact of the FSA investigation, it is hard to see a catalyst.”

[email protected]