Comparison site Moneysupermarket.com (MONY) gains 6% to 321p as a pre-close update reveals 20% growth in the fourth quarter.
BUOYANT TRADING
This buoyant end to the year puts the company on course for a strong 2016 result. Total group revenue for the three months to 31 December comes in at £73.8m, up 20% year-on-year, the insurance arm is a key driver, up 30%.
Full year revenue is expected to be up 12% to £316m and adjusted operating profit up 8% at £108m. The company also confirms John Lewis retail director Mark Lewis will succeed Peter Plumb as chief executive in April.
Longer-term we think Lewis might have a difficult job, given the company has historically shown some correlation with a UK economy now facing up to the realities of Brexit.
Liberum also highlights margin pressure as a concern, with adjusted operating margins down 1.4% for the full year.
MARGIN PRESSURE
Analyst Ian Whittaker, who has a ‘hold’ recommendation on the stock and 305p price target, comments: ‘This provides support to our thesis that whilst we believe MoneySupermarket is going to be able to drive top line growth as switching penetration increases and benefits from its market leading position in many verticals.'
‘We question whether MoneySupermarket can deliver the margin expansion as marketing spend increases to maintain its marketing position and top line growth.’
Whittaker adds that the company's Fusion technology platform could protect margins by driving consumers to the site organically as it offers more personalised content.