Moneysupermarket.com Results and Parliamentary Criticism

It was interesting to listen to the Preliminary Results on-line conference call of Moneysupermarket.com this morning.  The results were positive and better than analysts’ forecasts but the interesting bit came in the question/answer session. Top marks though to the company for making the call freely available.

Revenue of the company rose 10% and adjusted earnings per share were up 14%. The dividend was also raised by 10%. The company also noted that trading was strong in the first two months of this year and they anticipate meeting expectations for the year. In other words continued growth, although comparatives will become tougher in the second quarter.

Of particular interest perhaps was a question raised about the possible impact of a Parliamentary Select Committee recommendation that price comparison web sites should compensate past customers when they have not given the lowest possible cost recommendation for a utility supplier, but solely the lowest with whom they have a contract. This has been the focus of a campaign by certain newspapers and has received TV coverage also.

The response to the question of whether the company might be affected by such a proposal was that the company is one of two”accredited” price comparison sites with OFGEM (the utilities regulator) which means they have signed up to their code. They comply with the code and are audited by OFGEM.

The Select Committee did not hear the full conversations in the alleged telephone calls from customers. The script used by the company always commences with a warning that they can only recommend certain suppliers. Likewise under the OFGEM regulations they have to disclose on their web sites if they are only listing suppliers with whom they have contracts.

In summary the suggestion was that it was difficult to see the basis for any legal claim against the company. Note also that utility (gas/electricity) is a relatively small part of the company’s  overall revenue (less than 10%) and there are lots of other players in that segment some whom are perhaps not so strict in sticking to the rules.

Other questions/comments were:

Negative comments were made on the Apps, but the company covered their app strategy and they were also researching customer needs on this. In the meantime all their software is mobile optimised.  The company is also implementing a new CMS (content management software) product and an “aggregator engine” to improve the service.

Another possible regulatory issue was the use of “auto-renew” for car insurance where customers of car insurers do not get the opportunity to renew or decline. The Financial Ombudsman have apparently received a lot of complaints about this and the FCA is also looking at this issue. It would of course assist price comparison web sites if folks were reminded to review their insurance costs before renewing. The company is making representations on the matter.

What was not asked by anyone was why the company runs such pointless advertisements around the theme “you’re so Moneysupermarket”. It’s not at all clear what message is intended to be transmitted and if it’s just brand awareness advertising then the associations it prompts must be bizarre. Just think how well they might be doing if they actually had advertising that communicated the benefits of using their service. At least that is the view of one shareholder.

The share price fell after the announcement but as so often it was not immediately clear why. In these kinds of companies one suspects that often happens as insiders have the opportunity to sell after a close period. The share price has gone up by 50% in the last few months, so perhaps it is them and other “profit  takers” at an opportune moment.

Roger Lawson

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