CPP sets aside extra £7.5m in customer compensation

The York-based group also revealed it is exploring “alternative financing and strategic options” as a deadline approaches on renewing its debt facility. CPP, founded more than 30 years ago, is entangled in a long-running probe by the Financial Services Authority over a mis-selling scandal which has forced job cuts and a deep overhaul of its business.

Yesterday the group announced in-line results for the first six months of the year. Underlying pre-tax profits fell 24 per cent year-on-year to £18.6m and revenues dropped five per cent to £162.9m, as the investigation hampers UK sales of credit card and identity protection. Sales in Northern Europe were down nine per cent to £113.6m and operating profits fell to £10.4m from £18m a year earlier.

CPP said profits and margins this year are likely to be significantly lower than 2011. It also expects T-Mobile not to renew its mobile phone insurance contract, which analysts think will wipe £13m from 2013 revenues.

Almost a quarter was wiped from its market value, with shares closing down 11.5p at 38.25p as analysts warned of downgrades.

The ‘life assistance’ company said the FSA may take industry-wide action, and added provisions could rise further as the investigation deepens. It has yet to pay out any compensation, and said a pilot redress scheme may now not happen.

The City watchdog has an increasingly dim view of some general insurance products which it believes have “limited value”. In its Retail Conduct Risk Outlook in March, the FSA said: “We are concerned about firms often designing insurance products, bundled with other services, which are of limited use to the consumer and may be poor value, resulting in consumer detriment.”

Chief executive Paul Stobart said yesterday: “We rescue about 1,000 customers every day who have either lost their cards or been mugged or had them stolen. The FSA would do well to ask those 1,000 people whether they see value in the product.”

Finance director Shaun Parker said “alternative financing” could include other forms of debt and non-core disposals. CPP’s £80m debt facility with Barclays, RBS and Santander expires in March 2013. Mr Stobart said it is “possible” founder Hamish Ogston could inject his own money, but added he believes CPP will remain a listed company.