ONE of York’s biggest employers has warned it must look at ways of reducing costs as it steels itself for tough times in 2013.

Customer compensation and a fall in UK revenues are expected to hit performance next year for CPP Group Plc, the card and phone protection company.

The York-based business said it faced “significant challenges and uncertainties” as it moves into the new year, and it was considering the best way to reduce its cost base to mitigate some of the adverse profit impact from lower revenue and redress-related costs.

As reported, an investigation which found “widespread mis-selling” at the business means CPP must now pay a £10.5m Financial Services Authority fine over the next two years.

Other costs, including compensation to customers, are expected to bring the total amount to £33.4m.

Paul Stobart, chief executive officer, said: “The Group has made progress with the FSA and on deploying our new customer focused strategy as we reshape our business for the future. The closure of the FSA’s investigation during the period was an important milestone, which removes an element of uncertainty for the business and our stakeholders.

“Our performance, nonetheless, continues to be affected by the on-going challenges of our operating environment, which will remain difficult moving into 2013 and beyond. However, the continuing demand for our products and the actions we are taking to rebuild our business and reputation, combined with enhanced governance and risk management across the group, will provide us with a platform to move the business forward.”

CPP also said it had continued to trade profitably and its full year results for 2012 would be in line with current market expectations.

Revenue from UK trading has been hit by CPP’s restricted ability to sell its full range of products, said the statement.

However, a number of product development initiaives are said to be at an advanced stage, with pilot launches expected to start soon.

International operations, both in North America and Latin America, are seeing a growth in revenue however performance in Southern Europe was suffering.