It is becoming increasingly important for price comparison websites to sit near the top of a Google search list. That’s because more customers are using their mobile phones – where only the top three hits appear – to shop for products such as car insurance. This trend has forced GoCompare.com (GOCO) – like its older peer Moneysupermarket.com (MONY) – to up its spending on online pay-per click advertising. This sent group sales costs up 8.6 per cent to £24m in the six months to June 2016 and narrowed gross margins to 68 per cent, from 70 per cent last year.
Management has balanced these extra costs out by reducing television marketing spend. Overall marketing costs dropped 4 per cent to £45.8m. Combined with the uptick in customer numbers and income per sale, adjusted operating profit rose 22 per cent to £17.5m.
But investors weren't blown away by these numbers. Revenue growth in the core insurance division was just 3.5 per cent, considerably lower than numbers recently reported by Moneysupermarket. Higher finance and staffing costs alongside a one-off share-based payment dampened pre-tax profit growth, which Peel Hunt expects to have an impact on full-year earnings. The broker has forecast 2017 EPS of 6p, from 5.7p in the prior year, but growing to 7.4p in 2018. Meanwhile, management has announced its first dividend which, at just 22 per cent of post-tax profit, is at the lower end of its proposed payout guidance.
| GOCOMPARE.COM (GOCO) | ||||
| ORD PRICE: | 114p | MARKET VALUE: | £477m | |
| TOUCH: | 113.8-114.3p | 12-MONTH HIGH: | 117p | LOW: 57p |
| DIVIDEND YIELD: | 0.6% | PE RATIO: | 30 | |
| NET ASSET VALUE: | * | NET DEBT: | £50m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 72.8 | 14.5 | 2.8 | nil |
| 2017 | 75.8 | 14.7 | 2.8 | 0.7 |
| % change | +4 | +1 | - | - |
| Ex-div: | 14 Sep | |||
| Payment: | 6 Oct | |||
| *Negative shareholders' equity | ||||
