- Price comparison site benefiting from tough backdrop
- Money and travel channels drove Q3 growth
- Warns energy switching ‘unlikely’ to return in 2023
Shares in Moneysupermarket (MONY) topped the FTSE 250, marked up 6.5% to 211.4p, as the price comparison site increased full year guidance after delivering growth ahead of expectations in the third quarter ended 30 September.
The Chester-based group’s total revenue grew 33% year-on-year to £101.9 million in the quarter with the cost-of-living crisis forcing households to ensure their finances are ship-shape and shop around for better deals.
Moneysupermarket is clearly benefiting from the difficult backdrop as individuals seek better rates on credit cards and other financial products.
And having seen 24% sales growth year-to-date, it now expects full year earnings before interest, tax, depreciation and amortisation (EBITDA) to be ‘towards the upper end’ of market expectations pitched at between £108.5 million and £115.5 million.
WHY IS MONEYSUPERMARKET ON A ROLL?
‘The cost-of-living crisis makes our purpose of helping households save money as important as ever,’ explained CEO Peter Duffy. ‘This quarter was another good performance.’
Moneysupermarket attributed this result to strong growth in its money and travel channels, the former growing by 42% to £28.1 million in the quarter, the latter by 204% to £4.5 million.
Insurance revenue rose by 10% to £45.3 million, with strong travel insurance growth offset by some weakness in car and home, though levels of switching activity increased compared with the first half as premium inflation drove higher search volumes.
WHY DID HOME SERVICES REVENUE REVERSE?
In Moneysupermarket’s home services arm, broadband and mobile saw good growth, though home services revenue fell by 26% to £10.3 million with September marking the anniversary of the closure of the energy switching market.
‘The conditions in the wholesale energy market and the introduction of government support measures, including the Energy Price Guarantee, mean it is unlikely that energy switching will return in 2023’, cautioned the company.
Looking ahead, Duffy added: ‘There are early signs of improving trends in the insurance market, and in money more consumers are finding attractive products to switch to. Our strong brands are well equipped to support consumers at this critical time.’
WHAT ARE THE EXPERTS SAYING?
Despite the guidance upgrade, Russ Mould, investment director at AJ Bell, said things are not perfect for Moneysupermarket, ‘as the energy switching market has effectively shut up shop on a temporary basis, and weaker consumer sentiment has trickled through to weaker demand for travel insurance.
‘The net effect still swings in Moneysupermarket’s favour as revenue jumped by a third in the three months to 30 September, a greater rate of growth than the 24% revenue gain recorded in the first nine months of its financial year.
‘Newspapers and mainstream news websites are full of stories giving personal finance tips and a large majority will recommend shopping around for better deals. Therefore, one might expect sales momentum to remain strong for Moneysupermarket well into 2023.’
Shore Capital’s Roddy Davidson noted that Moneysupermarket’s shares are trading at roughly a 30% discount to the broker’s 253p fair value estimate.
He believes the company is modestly valued relative to its ‘medium term growth potential, significant income attractions, considerable sunk investment in technology or the potential for the group to deliver significant savings across a range of verticals to households faced with substantial cost inflation’.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) owns shares in AJ Bell.
