Troubled CPP makes progress but warns of challenges ahead

TROUBLED CPP Group said it is making progress righting the wrongs of the recent past as it announced its half year results but warned of further challenges ahead.

The York-based insurer, which specialises in ID and credit card theft protection, was fined £10.5m by the Financial Conduct Authority in 2012 for mis-selling insurance products and is paying out £65.8m in compensation to customers.

Although revenue from continuing operations slumped to £58.7m in the six months to June 30 from £99.7m in the prior year period, the group said its underlying operating performance from continuing operations is now at breakeven from a £3.3m loss in the the first six months of 2013.

Loss for the period from continuing and discontinued operations was £2.7m. 

CPP said that it is “moving forward” and is focused on its immediate priorities to further realise the “embedded value within the existing business” and explore future growth opportunities.

However, while claims under the scheme of arrangement, set up to deal with compensation claims which closes on August 30, have tracked within expectations the group said it had significantly reduced its financial resources and liquidity. 

It said that further action is required to rebuild the business and uncertainty remains due to liquidity, the execution and delivery of the group’s longer term plans and trading performance.

“Liquidity in the short term relies on either the release of restricted cash from one of the UK regulated entities or other working capital solutions. These will require third party agreement and the group is engaged in on-going dialogue with its stakeholders. As a result, the outlook continues to reflect the significant challenges and risks ahead and performance for the remainder of 2014 will remain constrained,” CPP said.

Brent Escott, chief executive, said: “We have continued to move forward on our journey to ‘rebuild, improve, modernise and evolve’ the group. As a result of the prudent steps that we are taking and on-going focus on costs, we have continued to stabilise the business.

“Managing change and rebuilding a business is a substantial task and much work remains as we complete the required actions to reshape the organisation.”

Mr Escott said that as the scheme of arrangement claims draws to a close, the group welcomes the opportunity to move forward for the next phase of its development.

“Nonetheless, the impact of the scheme has been considerable and our priority remains to ensure that the group is in a stable position. We are focused on future value creation whilst evolving our longer term business plan in order for us to succeed as an effective and efficient customer-led business,” he said.

The group also announced that Duncan McIntyre, non-executive chairman, intends to step down from the board.

McIntyre has served on the board since January 2011 and was appointed to the role of non-executive chairman seven months ago.

“During his tenure, Duncan has made a significant contribution to CPP and provided immense support. The board wishes to express its sincere thanks for his service, leadership and guidance,” said CPP.

A process has started to identify a new non-executive chairman for the group.