It's too easy to get carried away with top-line expansion and the pursuit of market share in the digital economy. Some analysts argue that profit growth is more important, assuming the resultant cash generated is used to pay down debt, facilitate future M&A and fund shareholder returns. Thankfully, Gocompare.com (GOCO) has given analysts little to gripe about on that score: last year operating profit increased by half to £33m, following a 220-basis point hike in the marketing margin to 40.5 per cent, the result of solid revenue growth combined with improved operating efficiencies. On an adjusted basis, the level of net cash generated rose from £23.1m to £30.5m in 2017.
The group increased its marketing expenses by a relatively modest £1.1m, although net debt was slightly higher than expected due to new minority stakes in two start-up companies, online marketplace Mortgage Gym and UAE-based comparison website Souqalmal. The acquisition of The Global Voucher Group also completed after the period end.
Analysts at Peel Hunt expect pre-tax profit of £43.5m for the year ending December 2018, giving EPS of 8.1p, compared with £33.7m and 6.3p in 2017.
| GOCOMPARE.COM (GOCO) | ||||
| ORD PRICE: | 112.6p | MARKET VALUE: | £471m | |
| TOUCH: | 112.6-113p | 12-MONTH HIGH: | 120p | LOW: 85p |
| DIVIDEND YIELD: | nil | PE RATIO: | 19 | |
| NET ASSET VALUE: | * | NET DEBT: | £39.4m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 110 | 25.5 | na | na |
| 2014 | 113 | 25.8 | na | na |
| 2015 | 119 | 23.3 | 4.6 | na |
| 2016 | 142 | 21.6 | 3.8 | nil |
| 2017 | 149 | 30.7 | 5.8 | nil |
| % change | +5 | +42 | +53 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Negative shareholders' funds | ||||
