Why Leeds-based insurance products firm CPP has left the Chinese market
Leeds-based CPP said it has entered into a sale and purchase agreement for the disposal of CPP Asia and its wholly-owned Chinese subsidiary CPP Technology Services (Shanghai) Co., collectively known as CPP China, to T-Link Holdings for a nominal cash consideration of HK$ 1.
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Hide AdThe disposal will take effect from January 27, 2022. As part of the disposal, CPP Group has made a working capital cash injection into CPP China of £500,000. The majority shareholder of T-Link is Wilson Chan, the CEO of CPP China.
CPP China was established to capitalise on the demand for protection and assistance services in the Chinese market. However, progress has been slow and the business continues to make losses.
Jason Walsh, CEO of CPP, said: "This disposal is in line with CPP Group's commitment to taking decisive action in withdrawing from markets where it does not believe its prospects are sufficiently strong.
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Hide Ad"It follows the steps we took in 2021 to simplify and focus the Group, through the sale of our German card protection business and restructuring our operations in Mexico and Malaysia.
"The progress we have made on these fronts, together with further actions planned for 2022, allows us to reduce our ongoing operating expense base and concentrate on our technology-led strategy in our key markets where we have the scale and capabilities to generate sustainable growth and deliver greater value for all our stakeholders."
CPP's board believes an exit from the market is in the best interests of the Leeds-based firm with no clear pathway to sustainable returns.
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Hide AdThe terms of the disposal reflect the ongoing cash losses and investment requirements of CPP China, the firm added.
It concluded that sale of the business to T-Link rather than a closure was both the least costly for CPP Group and the right option for all stakeholders, enabling the firm to focus on its core markets while ensuring in China the smooth transition of staff and continuity of service to partners and their customers.
CPP China accounted for EBITDA losses of £400,000 in 2020 against an overall EBITDA profit of £8.1m from the group's ongoing operations. The impact of the disposal will therefore not be material to the group.
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