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Moneysupermarket.com shares tumble on disappointing outlook

U.K.-based financial comparison site Moneysupermarket.com group plc's shares tumbled in Feb. 22 trading after the company released a 2018 outlook that fell short of investor expectations.

Shares fell more than 25% early in the day before rallying somewhat, eventually closing down 13.75% at 283.7 pence apiece, after the company said it expects growth in 2018 to slow as it makes a £5 million investment in its product engineering teams. The move is designed to help the company expand price comparison and add new market growth.

The company expects its core markets to grow around 6% to 7%, although growth in 2018 will be slower than that before accelerating thereafter. Moneysupermarket said it had begun 2018 at a similar growth rate to that seen in 2017, meaning that adjusted EBITDA for 2018 is expected to be broadly flat before returning to growth in 2019.

It added that it expects £6 million to £9 million of one-off transitional costs in 2018.

Moneysupermarket reported full-year 2017 after-tax profit of £78.1 million, up from £73.5 million in the year-ago period, as group revenue and operating profit both rose 4% to £329.7 million and £94.9 million, respectively. Adjusted EBITDA rose 5% to £127.2 million, and the board recommended a final dividend for 7.60 pence per share for 2017, up from 7.10 pence per share a year earlier.

RBC Capital Markets insurance analyst Kamran Hossain said in a note to clients that the full-year revenue figure had fallen 1% below consensus estimates of £334.7 million, but he also said that although the company's medium-term plan "seems sensible, and shows that the company is aware of the challenges and opportunities that lie ahead," its earnings in 2018 were likely to be "disappointing."

He noted that the projection for broadly flat adjusted EBITDA would imply a 9% reduction in consensus expectations.

"We expect that the near-term reaction to the 2018 outlook will be negative," Hossain predicted just after trading opened. "However, if the company can deliver on what appear to be sensible, targeted plans, then in the medium term it should be able to deliver both top line and bottom line growth for shareholders."

The final dividend, which is subject to shareholder approval at the annual general meeting May 3, takes the proposed full-year dividend to 10.44 pence per share, a 6% increase from 9.85 pence per share in 2016. The final dividend will be paid May 15, to registered shareholders as of April 6.