CPP sees shares slump as FSA probe goes on

Trading resumed in the York-based company’s shares yesterday following their suspension last month due to the uncertainty caused by the investigation into mis-selling.

But yesterday CPP’s chief executive Paul Stobart said the agreement with the FSA does not mark the end of the investigation which is continuing.

“It is unclear what steps the FSA may or may not take,” he said. “We’ve been asked to put business reviews on our own direct sales channels.”

The worry is that the FSA could launch an investigation into sales through other business partner channels.

“The majority is through other channels,” said Mr Stobart. “It’s difficult to read any implication into it. We simply don’t know. That’s why there’s a risk. We don’t think it likely we’ll be asked to look at other channels, but it’s possible. It’s a risk.”

The group’s shares lost 36 per cent to close down 37p at 65.75p.

Analyst Victoria Prior, at J P Morgan Cazenove, said: “Despite good growth in some areas of the group, there remains further uncertainty with the FSA investigation ongoing and the past business review only including those products that the group has sold directly to consumers rather than through business partner channels.

“Therefore, there is a possibility that the FSA chooses to examine the industry which may have a further impact on CPP and its business partners.” CPP, whose products are aimed at victims of identity theft, has been under investigation by the FSA since March 2011.

The FSA said CPP may have overstated the risks of identity theft to customers and not properly explained how its products worked.

CPP agreed last month with the FSA to make a number of changes to its renewals process and review its past business.

The company said it is making good progress on improving business practices and customer relations.

“We did not in the past live up to the standards required and we’re deeply sorry that was the case,” said Mr Stobart. “We’re putting investment into governance and compliance. I’m confident that we now offer a very much improved model in terms of governance and process.”

CPP made a provision of £14.8m to cover compensation to customers in light of the FSA’s probe, which hit the company’s annual results.

Pre-tax profits fell 29 per cent to £28.3m in the year to December 31.

Analyst Alex Hugh at UBS said: “Whilst progress is clearly being made, including the lifting of the trading suspension, there remain many unknowns in particular around the eventual reactions of business partners, which have been supportive so far excluding previously announced Barclaycard contract.

“Reflecting the uncertainty, there is a contingent liability noted in the accounts. Our forecasts are reduced by 20-30 per cent over the next four years and the risk around them remains high although we have tried to take a conservative approach.”

Mr Stobart said: “Our partners have stayed loyal. Barclaycard is the only one we failed to retain. Our partners know we are good at what we do. We’re very innovative and creative.”

He added that the group is working on a number of new products such as mobile assistance. If a customer loses their mobile, or it’s stolen, they will be able to do a number of things to find it or catch the thief.

New innovations will include deleting confidential data, getting the phone to take a photo if the thief moves the phone and getting the phone to emit a loud shrieking noise that can’t be turned off.

The group is also looking at ways for customers to delete information about themselves from the web. “If someone had a wild time at university, they don’t want employers seeing them on Facebook in a state of inebriation,” said Mr Stobart.

These new products will be launched over the next few months.

Following the voluntary redundancy of 140-150 management roles, Mr Stobart said no more job losses are planned.

None of the redundancies affected customer-facing staff and none were compulsory.

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