Growth on the cards as CPP looks to China

CREDIT card and wallet protection firm CPP continued its globalexpansion with strong growth in profits and sales.

The York-based company, which raised 150m through its flotation on the London Stock Exchange in March, reported underlying pre-tax profits of 22.7m in the first six months of the year, compared with 16.5m a year earlier.

Sales were up 11 per cent at 156.9m and the group proposed an interim dividend of 2.42p a share.

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CPP, founded 30 years ago by entrepreneur Hamish Ogston, now operates in 15 countries but is eyeing further expansion.

Fast-growing economies, such as China and India, offer CPP a rich source of increasingly affluent "bankable" consumers looking to protect their possessions and credit cards. The group takes between three and five years to build a profitable business in each new country.

"Clearly, China is still very much in launch mode and that's the big opportunity," said chief executive Eric Woolley. "Right now our primary goal is to make China work and consolidate on the other Asian countries.

"In terms of other opportunities we always keep an eye on countries like Brazil, Indonesia and Taiwan."

Earlier this year it signed a contract with China's Guangdong Development Bank for the wholesale supply of card protection, which it described as "an important first step".

Since launching in India in 2008, CPP has grown to nine business partners, including three added this year.

The Asia Pacific region, while still only a fraction of its revenues, poses big growth opportunities. The region had the group's highest revenues growth, rising 19 per cent to 2.7m. But losses increased 29 per cent to 1.3m.

CPP also sees strong potential in Mexico and Turkey, with the latter trading at breakeven for the first time since it was launched three years ago.

"They are all of them supporting the growth five years from now rather than this year or next," said Mr Woolley. "There's no question that these emerging markets are hugely significant in the medium term."

In Northern Europe, sales rose 16 per cent to 111.6m and comprise 71 per cent of its total business. Operating profits surged 43 per cent to 17m.

In these more mature markets, it is looking for new ways to drive growth. Increasing take-up of its identity theft cover plus developing packaged accounts generated new and renewal income. In the UK, CPP launched a packaged account with Royal Bank of Scotland which includes mobile phone, gadget and handbag cover. It also recently link up with the AA to provide products to its packaged account customers.

"I do not really see Northern Europe reaching saturation point as we have such a broad scope in our business," said Mr Woolley. "We can add multiple new products."

While the group is wary of the "challenging economic backdrop", it continually strives to "try to make the proposition more and more relevant". Renewal rates in the UK were "completely stable", added Mr Woolley.

In Southern Europe, where sovereign debt levels have weighed hard, sales ticked up just one per cent to 24.3m and operating profits fell 13 per cent to 5.9m. CPP insisted this was a "robust performance".

However, it sees chances to grow sales through card activation as chip and pin cards are launched across Spain. This is expected to drive sales in the medium term, but hit profits and margins in the short term.

North America delivered a seven per cent increase in profits to 2.8m on sales up three per cent at 18.2m. It added Sovereign Bank as a new business partner.

Across the group its policy renewal rate held broadly stable at 76.8 per cent.

The fear of identity theft

Increasing worries over identity theft are driving CPP's growth.

"One of the drivers of consumer behaviour is the prevalence and awareness of identity fraud," said the group.

Figures from CIFAS, the UK's fraud prevention service, show incidents of identity fraud in the UK increased 14 per cent in the first quarter on a year ago.

CPP estimates more than 420,000 scam emails are sent every hour in the UK. It estimates Britain was targeted by 3.7bn 'phishing' emails over the past year.

Its research also showed a quarter admit to falling victim to online-fraudsters, with the average victim losing more than 285 each.

Fake banking emails are the most common method used, it said, with 55 per cent of those targeted receiving seemingly-legitimate e-correspondence from high street banks.