Trading Statement

RNS Number : 7447T

CPPGroup Plc

12 December 2011

 

CPPGROUP PLC

12 DECEMBER 2011

PRE-CLOSE ANNOUNCEMENT

CPPGroup plc ("CPP" or "the Group") today publishes the following statement prior to entering its close period for the year ended 31 December 2011.

The FSA investigation into certain issues surrounding the sale of the Group's Card Protection and Identity Protection products in the UK, and the suspension of Identity Protection sales in the Group's UK voice channels, both of which were announced in March 2011, are continuing to have a material impact on the Group's ability to sell its full range of products in the UK. The duration and outcome of the FSA investigation continues to be uncertain.

As previously announced, the Group developed a new, non-insured service product, Identity Safe, which it had hoped to introduce into the call to confirm and card activation voice sales channels during 2011. Following extensive discussions with the Group's business partners it is now expected that the new Identity Safe product will not be adopted by business partners until after the FSA investigation is concluded.

Despite these factors and the impact of the worsening economic situation in Southern Europe, overall trading has been robust and the Group expects to deliver 2011 organic revenue growth of around 6% which is broadly in line with market expectations. The Group's KPIs continue to be resilient, with renewal rates (adjusted for changes in country mix), and underlying operating profit margin both in line with our recent Interim Management Statement.

Total new assistance income for 2011 is expected to be up to 4% lower than 2010. New assistance income derived from the sale of retail products has, however, declined compared to 2010 as a result of the suspension of Identity Protection in the UK and the economic situation in Southern Europe. This has been partially offset by the growth in new assistance income from the Group's packaged accounts and wholesale activities.

As the Group looks towards 2012, there are good opportunities to achieve improved revenue growth compared to 2011. However, the impact of lower than expected new assistance income from retail products in 2011 is to reduce the size of the Group's base of renewing retail policies which means that the mix in 2012 will be skewed towards new sales. As the accounting profit for renewing retail policies is higher than for new sales, this mix effect has an adverse impact which, together with increased operating costs which are in part due to increased costs of regulatory compliance, will reduce underlying operating profit margin. As a result it is expected that, prior to any further adverse impacts on the business resulting from the conclusion of the FSA investigation, underlying Group operating profit in 2012 is likely to be significantly lower than 2011, and weighted towards the second half of the year.

The Group continues to be strongly cash generative and is expected to finish 2011 with net cash, with further positive cash flow expected in 2012.  There is no change in our stated dividend policy at this time. It will be reviewed prior to the announcement of our 2011 results in the light of progress made with the FSA investigation and any financial impact of the outcome.

The Board remains positive about the Group's overall prospects and its clear strategy of product, sector, sales channel and international expansion. Whilst 2012 profitability is expected to be adversely affected by the events seen during 2011, the Board remains confident that future revenue growth remains sustainable and that operating profit and margins will return to growth and more normalised levels once the current constraints on the business are removed. The consumer appeal of CPP's products remains strong. Meanwhile the Group's long-term international prospects continue to develop well, with launch in Brazil imminent and robust revenue growth in North America and Asia Pacific, where the large bankable populations offer significant potential for further market penetration.

Paul Stobart, Group Chief Executive commented:

"It has been a challenging year for CPP as the business has adjusted to the implications of the FSA's ongoing investigation announced back in March. The transition to a new Identity Protection product has meant lost sales opportunities and this, combined with challenging trading conditions in Southern Europe, will impact the business in the near term.

"Our UK business has been and will continue to be impacted by the uncertainties created by the FSA investigation and will take time to regain momentum. However, we are making excellent progress in many of our international operations, including our newer markets, such as China and India, which offer significant longer term potential.

"We continue to work constructively with the FSA as we seek a resolution to its investigation, and we are pleased with progress on improving our internal processes and customer facing activities. We remain focused on providing an excellent, market leading service to our customers."

Conference Call

A conference call for analysts and investors will take place at 8.00am this morning, dial-in details for which are as follows:

Tel: [phone]

Participant access code: 927906#

For enquiries contact:

Paul Stobart, Group Chief Executive

Shaun Parker, Chief Financial Officer

Tel: [phone]

Tulchan Communications

John Sunnucks

David Allchurch

Tel. [phone]

Note to editors

CPPGroup Plc ("CPP") is a leading international Life Assistance business with operations in 15 geographical markets in both developed and developing countries. Card protection was the first product the Group introduced 30 years ago. Since then CPP has launched mobile phone insurance, legal assistance and identity theft protection. CPP is also prominent in the provision of Packaged Accounts where we source products and services to create a tailored 'package' for bank account customers. We also provide a range of travel support services such as translation and lost-and-found luggage services as well as access to airport lounges worldwide. Our joint venture with Mapfre Asistencia provides assistance for plumbing, drainage, gas, electrical and other home-related emergencies.

Cautionary statement:

This trading statement 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 trading statement 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 UK Listing Authority's Disclosure and Transparency Rules and Listing Rules, CPPGroup plc 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 trading statement.

 

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