TIDMCPP
RNS Number : 5923P
CPPGroup Plc
26 October 2012
CPPGROUP PLC
26 OCTOBER 2012
INTERIM MANAGEMENT STATEMENT
Performance in line; outlook for the full year remains
unchanged
CPPGroup Plc ("CPP" or the "Group") today publishes its Interim
Management Statement ("IMS"), for the period since 30 June 2012 to
the date of publication. Unless stated otherwise, comparative
references are to the equivalent period in 2011 and exclude the
impact of foreign exchange.
Group
The Group has continued to trade profitably, delivering a
performance in line with current market expectations and consistent
with the trends reported in the Group's Half Year Report.
Group revenue has declined, down 6%, compared against the same
period in 2011. Underlying operating profit has reduced as a result
of UK performance, albeit at a lower rate of decline compared to
the first half of the year as factors including the previously
announced cost saving measures in the UK take effect.
Renewal rates have decreased 0.6% from the half year to 74.1%
and live policies are 0.5 million lower than reported at 30 June
2012, impacted by performance in the UK. Outside of the UK, the
live policy base has remained stable.
FSA
As previously announced, CPP's first priority has been to work
closely with the FSA and implement actions designed to reshape our
business for future success.
Our activity has been focused on three key areas; firstly, to
reach a conclusion to the FSA investigation; secondly, to design
and develop an appropriate mechanism for redress to customers found
to have been mis-sold our products as a result of historic issues;
and, thirdly, to develop robust governance and risk management
structures and enhanced systems and controls within the UK
regulated business, with a view to recommencing new retail
regulated sales once the Group and FSA are satisfied that these
changes have been properly implemented.
The Group continues to implement a revised, customer-led,
strategy and has formed a new operational structure in the UK, led
by a new Managing Director for UK & Ireland, Shaun
Astley-Stone, who has considerable experience managing regulated
firms and leading transformational change programmes. This is being
supported by changes to our Internal Audit, Risk and Compliance
functions and our business transformation programme, which
encompasses people, customers, products and governance.
FSA update
We have continued to have constructive discussions with the FSA
about our on-going operations. We have now agreed in principle with
the FSA a framework for the operation of the regulated UK entities
which will be in place whilst we continue to work on completing the
change initiatives which address historic issues and implementing
and embedding enhancements to our governance and risk management
frameworks, systems and controls. Under this framework, the
restrictions on new retail sales of our regulated Card Protection
and Identity Protection products will continue, and will be
extended to encompass new retail sales of Mobile Phone Insurance as
well as Card and Identity. Renewals of existing retail policies
continue to be unaffected. Similarly, the Group's Packaged Account
and wholesale operations, including all Mobile Phone Insurance sold
through these operations, and all non-insured service activities
are unaffected by the agreement in principle and will continue as
normal.
The restrictions on asset dispositions will be extended to cover
both Card Protection Plan Limited ("CPPL") and in addition Homecare
Insurance Limited ("HIL"), which is the Group's UK insurance
subsidiary and which mainly provides Mobile Phone Insurance and
Identity Protection Insurance.
In addition, the Group has agreed with the FSA that CPPL will
not participate in future Group borrowing arrangements or offer its
assets as security for Group borrowing. The precise timing for
implementation of this aspect has not been finalised, but it is
expected that this will come into effect during the course of 2013.
It will not affect the security for the Group's current Revolving
Credit Facility (due to expire in March 2013). This may have a
material impact on the Group's ability to raise debt finance.
Finally, CPP has agreed to appoint an external professional
services firm (approved by the FSA as a skilled person) to monitor
and review the UK businesses' current claims management and
complaints handling processes over a three month period. This
review provides an opportunity for the Group and the FSA to ensure
that these processes are operating effectively and in accordance
with our regulatory obligations.
This framework will shortly be formalised in the form of a
Voluntary Variation of Permissions. Once CPP believes that it has
completed the change initiatives and enhancements to its governance
and risk management systems and controls described above, it will
apply to the FSA for the restrictions on sales and asset
movements/borrowing arrangements to be lifted. The precise time at
which this will happen cannot be identified with certainty at this
stage, but the Group is committed to working closely and
co-operatively with the FSA to complete the process of addressing
historic issues and move towards the position of recommencing
regulated sales to retail customers in the UK as soon as possible.
The Group will continue to demonstrate leadership and
accountability, so as to complete the implementation of changes to
systems and controls as quickly as possible, and to develop
well-defined, compliant propositions and a market leading approach
to customer service. We are confident that this process will allow
the Group to move forward, and will provide a stronger platform for
the UK business with a view ultimately to recommencing sales of a
full range of compliant regulated products in the UK, which will be
to the benefit of all stakeholders, including our customers.
FSA investigation
We continue to have constructive discussions with the FSA with a
view to bringing its investigation to a conclusion. At this stage,
however, there continues to be uncertainty about the duration and
outcome of the investigation.
Customer redress
We continue to have constructive discussions with the FSA and
with certain of the Group's larger Business Partners, regarding the
form, structure, details and timing of customer redress. These
discussions continue to include consideration of the use of a
Solvent Scheme of Arrangement as a vehicle for providing
redress.
Certain smaller groups of customers, who may have been affected
as a result of other aspects of our historic practices, will also
be offered redress. This will be effected by CPP separately from
the wider redress exercise referred to above.
Provisions for redress and the associated costs of the FSA
investigation amounting to GBP24.9 million have been made in the
Group's financial statements, based on current assumptions as to
the proposals and the scope of the actions necessary.
Business Partners
We are pleased to confirm additional new relationships with
Business Partners, including Vodafone in Spain, which in addition
to 20:20, a major distributor of Yoigo, provides us with a strong
mobile platform in Spain. Further new Business Partners include
Axis Bank in India and Ping An Bank in China. As announced on 11
October, Everything Everywhere has confirmed its decision not to
renew our contract with T-Mobile. In our Asia Pacific region,
Citibank has confirmed its decision not to renew our contract at
the end of 2012.
Northern Europe
Northern Europe revenue trends continue unchanged, decreasing 7%
compared to the same period in 2011. This includes a similar
revenue decline in the UK of 7% as a result of reduced Identity
Protection and reduced Card Protection revenue. The impact of this
has been marginally mitigated by the performance of our Packaged
and wholesale activities and Mobile Phone Insurance.
Our revenue performance in Ireland, Germany and Turkey has
developed in line with our expectations during the period.
Southern Europe and Latin America
Our results across Southern Europe and Latin America continue to
be mixed as the challenging economic conditions in Southern Europe
remain. As a result, revenue has declined, as expected, by 10%,
principally as a result of a 15% decrease in Spain. Operating
profit is in line with our expectations.
In Latin America, Mexico continues to develop positively and we
continue to invest in our newest market, Brazil, which offers
significant long-term potential for the Group.
North America
North America revenue increased 4% in the period as a result of
renewal performance. As announced in our Half Year Report, revenue
growth is, as expected, lower than the first half due to lower
retail customer acquisitions across Business Partners.
Asia Pacific
Revenue in Asia Pacific has decreased 2% for the period, with
reducing new sales across the region, with the exception of India,
being partially offset by renewals growth in China and India. New
revenue growth has been impacted in the region as a result of
delayed and suspended campaigns by Business Partners coupled with
the regulatory environment. These factors are expected to continue
for the remainder of 2012. Our investment in India continues to
make good progress and the level of start-up losses have reduced as
it moves towards profitability. We continue to invest in Asia
Pacific, a market where we believe there is potential for
significant future growth.
Home 3
The Group's investment in Home 3, our joint venture with Mapfre
Asistencia, continues to develop, however, its progress is now
likely to result in break-even being achieved towards the end of
2014.
Financial position
Our net funds position has improved in the period to GBP19.9
million from the half year position of GBP8.0 million, due to
favourable working capital movements, which includes the
anticipated reversal of increases reported at the half year, and
cash flows from trading performance. The improved net funds
position has in part arisen from favourable timing of working
capital movements which we expect to reverse in the coming
months.
The Board continues to assess and actively pursue a range of
financing options. We are in discussions with our lending banks
about our debt facilities which mature in March 2013 as well as
considering a number of alternative financing and strategic
options.
The Board is in discussions with its lending banks regarding the
cancellation of the unutilised element of its Revolving Credit
Facility. The Board does not envisage this to have any material
impact on the Group's working capital as the Group maintains the
ability to draw up to the current drawn balance of GBP43.5
million
Outlook
We anticipate that trading will continue to be difficult, most
notably in the UK, as the combination of the decline in new retail
business and impact of customer redress exercises will adversely
affect revenue and renewal rates, particularly in 2013. Whilst
performance during the remainder of 2012 will continue in line with
recent trends, performance in 2013 is expected to be materially
lower than 2012.
Despite the challenges and improvements we have to accomplish,
the Board remains confident that our clear focus on the actions we
need to take to reshape our business, coupled with our
international prospects, will ultimately allow the Group to perform
profitably and realise the considerable longer-term prospects for
the business.
Paul Stobart, Chief Executive Officer, commented:
"During the period we have made important progress with the FSA
while the Group continues to implement its new, customer-led
strategy and to address past shortcomings.
We have a clear roadmap that will, we believe, ultimately allow
us to establish a market leading customer service organisation in
the UK that can offer customers a broad range of innovative,
compelling and affordable retail products. We are very focused on
working closely and co-operatively with the FSA to achieve
this.
Importantly, we continue to trade profitably, with a net funds
position and millions of customers who truly value our products and
the service we provide to them. We are focused on delivering our
plans for the current financial year and positioning the Group for
growth in the longer-term. I remain confident that the progress we
are making will provide the Group with a strong platform to move
the business forward successfully."
A conference call for investors and analysts will be held on 26
October 2012 at 8:00 a.m. (BST), dial in details for which are as
follows:
Dial in: +44 (0)20 3140 0668
Participant ID: 561919#
For enquiries contact:
Investor Relations
CPPGroup Plc
Paul Stobart, Chief Executive Officer
Shaun Parker, Chief Financial Officer
Tel: +44 (0)1904 544702
Helen Spivey, Head of Corporate and Investor Communications
Tel: +44 (0)1904 544387
Media
Tulchan Communications: David Allchurch; Martin Robinson
Tel: +44 (0)20 7353 4200
Notes to Editors
CPPGroup Plc (CPP) is an International Assistance business
operating across 16 geographical markets with more than 200
Business Partners worldwide. Via its Business Partners, CPP
provides Life Assistance products to consumers, which includes
annually renewed and packaged products that provide assistance and
insurance across a wide range of market sectors helping our
customers to live life and worry less.
For more information on CPP visit www.cppgroupplc.com
Cautionary Statement
This IMS has been prepared solely to provide additional
information to shareholders as a body to meet the relevant
requirements of the UK Listing Authority's Disclosure and
Transparency Rules. The IMS should not be relied on by any other
party or for any other purpose.
The IMS contains certain forward-looking statements. These
statements are made by the directors in good faith based on the
information available to them up to the time of approval of the IMS
but such statements should be treated with caution due to the
inherent uncertainties, including both economic and business risk
factors, underlying any such forward-looking information. Subject
to the requirements of the UK Listing Authority's Disclosure and
Transparency Rules and Listing Rules, CPP undertakes no obligation
to update these forward-looking statements and it will not publicly
release any revisions it may make to these forward-looking
statements that may result from events or circumstances arising
after the date of this IMS.
This information is provided by RNS
The company news service from the London Stock Exchange
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