Moneysupermarket caught in energy crisis crossfire

Moneysupermarket.com (MONY), the price comparison website, is facing headwinds from the energy and travel industries. High wholesale energy prices meant there were no switchable energy tariffs available from October 2021. This contributed to a 34 per cent drop in annual home services revenue. Meanwhile, travel insurance revenue fell32 per cent on an annual basis as people decided to stay at home over the summer.

Management remains confident that the “energy switching market will return strongly in the medium term, but [we] assume no energy revenue in 2022”. In January, TravelSupermarket generated only around 35 per cent of 2019 sales. Given the lowly valuations on airlines, the market seems unconvinced travel will bounce back as quickly as once thought.

Despite a drop in the top line, the asset-light website business is still generating decent cash flows. Its operating cash flow for the year was £65.7mn, which gives an operating cash conversion rate of 126 per cent. A rise in net debt includes £58mn of borrowings and £14.6mn of deferred consideration from the acquisition of cashback website Quidco.

Broker Peel Hunt has lowered its 2022 earnings per share forecast from 15.7p to 13.2p and expects zero energy switching revenue and mid-single-digit insurance growth. However, the broker thinks this could be the valuation trough. With a FactSet 2022 consensus free cash flow yield of 8 per cent, the forward price/earnings ratio of 12.4 looks good value. The healthy dividend should keep shareholders sweet until travel and energy revenues return. Buy.

Last IC View: Buy, 262p, 22 July 2021