Credit card protection company CPP has plunged nearly a third as its shares returned from suspension after releasing its financial results.
CPP has been under investigation by the Financial Services Authority - an investigation which is still continuing - and has so far set aside £16.9m to cover the costs. This has left it with flat profits of £46.4m. It has agreed with the FSA a number of actions to improve its sales processes, and will also conduct a review of sales of its card protection and identity protection products since 2005, including providing redress to customers where necessary. It also warned the FSA could take wider industry action, which could also have a financial impact. In any case, difficult trading conditions meant its profits for 2012 were likely to be significantly lower than in 2011.
It is also in talks with its banks about its £80m facility which expires in a year's time, and said there was a risk one or more of its existing banks may not want to participate in new lending facilities. It is currently also considering other financing options.
CPP is 33p lower at 70p. Analyst Henry Carver at Peel Hunt said its full year profits had come in slightly higher than expectations:
However, 2012 profits are likely to be around 20% lower than 2011 as the UK business has been severely impacted by the FSA investigation in 2011, meaning lower levels of profitable renewals in 2012. We note the FSA investigation is ongoing, and believe high risks to relationships with business partners remain. As the shares return to trading this morning we are retaining our sell recommendation and reintroducing a price target of 65p.
