Blackfriar: FSA needs to get its finger out and end uncertainty at CPP

Shares in the York-based company slumped by over a third on Tuesday and were down another seven per cent last night after the company said a Financial Services Authority investigation is still ongoing.

This is despite an agreement being reached last month.

It wasn’t the warm welcome back to the market CPP might have hoped for.

Trading in the shares resumed on Tuesday following their suspension last month due to the uncertainty caused by the investigation into the mis-selling.

At the moment we have absolutely no idea what steps the FSA may take or when it’s going to take them.

In the agreement CPP was asked to put business reviews on its own direct sales channels.

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

CPP’s chief executive Paul Stobart’ summed up the confusion surrounding all this when he said: “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.”

CPP, whose products are aimed at victims of identity theft, has been under investigation by the regulator 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.

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

It also said it was making good progress on improving its business practices and customer relations.

CPP has held its hands up and accepted the blame.

“We did not in the past live up to the standards required and we’re deeply sorry that was the case,” said Mr Stobart.

The group has made another provision of £14.8m to cover compensation to customers in light of the FSA’s probe.

This has hit the company’s annual results with pre-tax profits falling by 29 per cent to £28.3m in the year to December 31.

Analyst Victoria Prior at J P Morgan Cazenove summed up the uncertainty caused by the continuing investigation.

“Despite good growth in some areas of the group, there remains further uncertainty with the FSA investigation ongoing,” she said.

“There is a possibility that the FSA chooses to examine the industry which may have a further impact on CPP and its business partners.

“As a consequence, valuing the group remains challenging at this point and we are therefore withdrawing our recommendation and price target on CPP.”

The FSA has had a year to investigate CPP.

The company now needs to put the past behind it. The future of 1,000 staff in York depend on the company’s ability to trade going forward.

Except for Barclaycard, CPP’s customers have all kept faith with the company.

The FSA needs to hurry up and make a decision on whether the company should also compensate consumers who were sold products through other parties.

Why this issue wasn’t raised over the last year while the investigation was ongoing is a mystery.

CPP is now left in limbo.

It has high hopes for an exciting range 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.

These include getting the phone to take a photo if the thief moves the phone and telling 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 won’t want their new employers finding out about it.

CPP needs to put the FSA investigation behind it if it is to bring these schemes to fruition.

The FSA needs to get its finger out.

Could one of Yorkshire’s top five listed companies be on the brink of being snaffled up by a rival?

If you believe analyst Benjamin Leyre at Exane BNP Paribas that might well be the case.

He believes that Drax is the only potential takeover target in the European utilities market.

He adds that Centrica could be a suitor as acquiring Drax could diversify the British Gas owner’s power production mix.

However, as Leyre himself says, any bidder would want to wait for further clarity on Government support for biomass, which Drax needs if it is to go ahead with its ambitious eco-friendly plans.

Until the biomass support level is confirmed and Drax goes ahead with its biomass plans, a bid is unlikely.