Moneysupermarket hit by travel sickness

You wouldn’t imagine that the lockdowns would necessarily have a negative impact on the financial performance of Moneysupermarket.com (MONY) at its June half-year.

After all, people should still insure their vehicles even if they’re not using them. Although car and home insurance channels registered a slight decline in volumes in the early part of the period under review, car insurance has subsequently returned to year-on-year growth. But the virtual collapse of the travel sector fed through to a 10 per cent revenue decline in the group’s Insurance segment, which accounts for half of the group total.

Other factors, such as reduced search demand for credit products and tighter lending criteria, constrained volumes at the group’s Money segment, though there was a stark contrast between the quarters, with revenue growing by an impressive 43 per cent in the three months to 30 June. In Home Services, an increase in the energy price-cap during April was set against rising wholesale prices, meaning that energy providers were unable to provide much in the way of competitive price tariffs.

The shares have traded within a relatively narrow range over the past 12-months, but they’re now changing hands at 37 per cent below where they were two-years ago. That equates to 20 times the full-year earnings estimate of analysts atUBS. That doesn’t seem prohibitive given valuations in this space and there is a prospective dividend yield of around 5 per cent. Cash generation remained solid through the lockdowns and the group also managed to boost the gross margin by 331-basis points during the period. And nascent inflation is probably favourable to the business as consumers become ever more price-conscious. The standard caveat is that disruptors in the marketplace can themselves be disrupted, but we retain our buy call. Buy.

Last IC view: Buy, 310p, 29 Jul 2020