MONY Group plc (MONY) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Moneysupermarket Interim Results 2022 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Peter Duffy. Please go ahead.

Well, good morning, everybody, and thanks very much for making the time for us this morning. This morning, we reported a good trading performance and momentum on our strategic delivery. Revenue for the half was GBP 193 million, that was up 19% or 2% excluding Quidco, and profit returned to growth with EBITDA up 10% to GBP 57 million. Within that trading, money has been the standout performer. Q2 was exceptional at plus 64%, driven by very strong banking products. Our travel channels also had a strong half, helped by the recovery in the travel market. Gross margin was down by circa 2 percentage points to 67.9%, mainly due to the Quidco consolidation that we flagged at prelims back in February. We've increased year-end guidance to around the upper end of market expectations. We've maintained the interim dividend of 3.1%. I'll focus a couple -- on a couple of areas in my presentation. First, the FCA general insurance pricing regulation that was introduced in January. And the important thing to stress there is that it's still really very early days despite the fact we're 6 months in, and we don't believe that we've reached steady state. Overall, there has been less provider switching, PCWs are taking more share of the switching that there is. And we're also pleased that within that, our performance has improved, helped by our initiatives to be slightly better in Q2, meaning we've made some progress on market share. Overall, with our strategy, we've made good progress to becoming a scalable tech-led savings platform. We've completed core data transition to Google Cloud Platform, which alongside our market-leading PPC, CRM and SCO platforms will labor foundations for future growth. The new Moneysupermarket marketing campaign is resonating well with customers. And our 3 acquisitions of 2021, Quidco, CYCI and ITG are all on track. We continue to streamline the business, taking out legacy roles and layers, and all of this sets us up to the next phase of our strategy, where we can begin to use data to drive greater cross-sell, product innovation and enhanced offers to providers. So with that, we're going to open the call to questions. Can we take the first question, please?

The first question comes from the line of Adam Berlin from UBS.

Three questions, if I can, please. The first question is on energy switching. Clearly, there wasn't much revenue in Q2 and you're still guiding for no revenue in the rest of the year. What's your current view based on what's happened recently to get wholesale prices on when you think the switching market could reopen? And very specifically, let's say, wholesale prices remain where they are right now through the rest of the year when the price cap increases in October, does that give us any hope that the switching market could open then? Obviously, there's uncertainty how that could go, but if we just assume wholesale prices remain roughly where they are now by then, what does that mean? That's the first question. Second question is just a question on travel. I was interested that the travel insurance revenue was up quite strongly on Q2 '19, but travel sub supermarket revenues were still down. Could you just explain why that is? And is there still upside in the travel supermarket revenue as travel recovers? And just explain that, that would be helpful. And then the third thing is, can you give us an underlying growth rate for Quidco in the first half?

Maybe I'll take the first two and I'll hand the third one to Scilla, is that all right? So on energy switching, thanks, Adam. Yes, I mean, the basic point is, it's really very hard to predict. I think there are 4 factors, 4 buckets that we need to sort of take into account in terms of the market returning to more steady state, first consumer demand for switching. We have seen actually that continues to be robust, essentially across the first half. Customers are coming to the site that they are looking for opportunities to save. Unfortunately, we just don't have any product out there to sell. So #1 is consumer demand for switching, and I think that is still solid. The next point is in wholesale prices. We need those to return to a level that enable providers to offer attractive tariffs again. Clearly, we're looking into a significant increase in terms of the price cap coming in at the start of October, but that market continues to be much more volatile than perhaps we would have even expected when we spoke to you in February. And so there is no sense that, that is going to come back in '22 and there's really limited visibility in terms of what that looks like in to '23. I think the third area then is providers. Obviously, we've seen some level of shakeout of the market. That has stabilized to some degree. We've got 20-plus providers still in the market at the moment, broadly the same number that we have in broadband, which makes it -- have the potential to be a competitive market, but they have to have absorbed for customers that they've taken on as a result of the market shake out and be ready to come back to acquisition. So I think that's another issue. And then we've got increasing levels of regulation coming through. So we've seen the market stabilization charge. As an example, we've also seen a regulator announcing that they will be moving the price cap on to a quarterly rather than a half yearly basis. We know that every time the price cap shifts, essentially, it creates in consumers' minds, the opportunity to go and check on a good deal. So we take that as a sort of net positive thing. So I mean, there are 4 factors that we have to sort of take a view on really. What I would say is this is still an exciting market, albeit it's closed at the moment. 75% plus now households are on the standard variable tariff. And we have a leading short and very simple journey with Pick Me A Tariff Every Year on MSE and the equivalent products super-switch now on Moneysupermarket ready to go as and when that market does begin to open. So consumers have been moved to provide us that they didn't choose they're on variable rates, and they will be wanting to get better deals as and when that market begins to open. There is very limited visibility about when that will happen at the moment. So that's #1. #2 is travel insurance revenue versus TSM revenue. I'll get to pick up on this. But fundamentally, revenue is running ahead of volume. So volume is up circa -- sorry, volume is about 30% of where it was in 2019 on insurance, but revenue was running ahead of that. TSM has come back strongly, and it's -- I don't think we've published the percentage.

About 60%.

About 60% we've said, okay, versus 29, this was about the performance. So to your point, we still see that there's kind of upside to kind of come through. I think the thing we just need to be very conscious of with TSM is what's happening with the travel industry at the moment with a sense of disruption and certainly, the cost living crisis, where does that kind of end up? You've seen a strong performance certainly in quarter 2. Let's just see where that kind of gets to in quarter 3 and quarter 4. So do you want to add anything to that and also then pick up on question 3?

I think the key thing is actually as Peter touched on Adam is -- but what we're seeing in travel insurance is some significant growth in value, if you like, that volumes are still tracking behind 2019 levels. And we've seen that consumers effectively trading up a bit in terms of what policies they're taking out. And remember that travel is one of the very few channels where what we've paid is linked to the premium that somebody pay for the policy. So it's quite different than the model within both TravelSupermarket and Icelolly. Actually, if you look at them for Q2 on a volume basis, they're not as different as you're suggesting. So kind of take that into the round. The other bit we -- in danger value too much color here. But within the TravelSupermarket's business, there is a quite strong car hire business. And you were seeing car hire is experiencing sort of similar issues to what everyone else is seeing in terms of availability of cars and their pricing is particularly high. And so that's causing some impact in terms of traffic. So that's travel. You then asked a question in relation to Quidco. I think if you remember at the time of we did the acquisition, people asked about the shape to sales at that point in time. And really, we said that revenue was broadly evenly split between the halves with the exception of November, which Black Friday and so on, which I guided to being about twice as much value to the other months. So you can see on that basis, we're sort of reasonable sort of low growth on revenue. But importantly, look into the back of the RMS and look at the segmental for profits, where you'll see that for adjusted EBITDA, we printed GBP 5.4 million of EBITDA for the half for Quidco. That compares to GBP 7.9 million for the full year to July '21 at that acquisition. So you can see that as we've highlighted in the RMS, we're making some considerable progress in relation to synergies within that business.

Sorry, I didn't understand that last point. You said the EBITDA was down from 7.9...

Sorry, I was quoting, no. So in the half, we've done GBP 5.4 million compared to a full year of EBITDA of GBP 7.9 million to July '21.

[Operator Instructions] The next question comes from the line of Andrew Ross from Barclays.

Great. I've got 3 questions as well, if that's okay. First one, you made some interesting comments around your market share improving in home and motor insurance during the half. Can you just talk a bit about the competitive intensity you're seeing there and the gross margin, specifically in both verticals for you as you start to gain share? So are you able to hold on to gross margin gains and gain share is the question. Second one is on money, where you had a very strong banking performance in Q2. Can you just talk a bit about what you're budgeting for that market in the second half and whether in the [ 110 ] EBITDA guidance, we should assume there's a continuation of our very strong market or if it were to come, could that be on top? I mean the third one is a bigger picture question. It kind of feels like there's some really good tech progress being made in the business, and we may start to see some real evidence of that in consumer experience. The markets have not been normal in the last couple of years and maybe more normal next year. Do you now think this is a business that can grow EBITDA double digit? Is the tech in that place if you get normal end markets?

Okay. Maybe I start with tech progress and then Scilla and I will sort of dance on the other two. So yes, I think we have good progress. As I described, we've moved everything now on to Google Cloud platform. That means all the data is in one place. It's available real time. But importantly, it's available operationally as well as for analytics. And so I described this morning, the first sort of significant shift in the customer proposition where we'll be able to use that data to truncate the experience for returning customers. And you may remember when I first presented going back almost a couple of years now, one of the things I spoke about is how we break the expense of marketing loop and try to recontact customers and bring them back or ready the site and do that in a very, very efficient way. These are the building blocks to enable that to begin to happen. So I really think that is quite a significant shift for us in terms of how that practically works. The second point is then about the savings platform, so the tech-led savings platform. So we're building out our technology once so we can then begin to feed that into multiple brands, whether that's Moneysupermarket, MoneySavingExpert, Quidco or actually other people's brands through our B2B business as well. And we've made good progress there in the half in that we have launched MSE car for the first time, which uses obviously, the group aggregation stack that very much has the MSE tone of voice, but you can imagine that we'll be looking to begin to move that into quicker at an appropriate point in time, and also offer that out as a B2B service as well. So more progress to be announced there in terms of where we are. In terms of the competitive intensity, against the existing model, yes, I think it has been competitively intense. So we see media budgets very strong. We see aggressive bidding on PPC. We see everybody chasing the same SEO customers. So there's been no letup in terms of that. Would I say it's any more intense than it has been historically? I don't think so, particularly, I think it is just a very, very competitive market in terms of where that is. In terms of money, I'll hand over to Scilla in a second to pick up your points on gross margin and EBITDA. But the key points on money that we've tried to make this morning is that whilst we've had strong growth right across the category, we've had particularly strong growth in terms of our banking products. And that is very promotional by which we mean we -- it's fundamentally checking and savings accounts, it really is about great rates being available to customers. Great rates, particularly on experiences where the customer can convert easily. And whilst we see the potential for that, obviously, kind of going forward, we just have very limited visibility in terms of when those deals are going to come. Typically, we can understand that deal will become available with, say, a month before it kind of appears live. Scilla, do you want to pick up then the points about the gross margin? What's in the 110, and where we are in terms of what we are doing on the EBITDA?

Sure. So I mean, within insurance in terms of the market share and taking that lot holding margin, Andrew, you'll have seen within the commentary on gross margin for the first half I have given a note to the conversion points in car and home being a slight headwinds on margin in the first half. So as ever, it's a little bit difficult to disaggregate the pure conversion versus the competitive intention in the auction, but it has been a slight drag in March in the first half. You'll remember, Peter describing at prelims, what we were looking to do and we touched on this in terms of growing share. So obviously, the platformization into MSE, margin positive, CRM and a bottom line, gross margin positive. PPCs I sort of guided to. So you've got a bit of mix going on there. On money, exactly, again, as Peter touched on, very strong, and we've used the word exceptional Q2 performance Actually, it was double-digit growth for all channels, so borrowing and banking, but it was really banking that drove the sort of true -- the exceptional nature of it in Q2. It -- you've heard me say it before, I'm smiling because I sort of say it's very lumpy and very difficult to predict. It was the highest quarter in over 5 years from banking. So knowing you do, you wouldn't expect me to be expecting and forecasting that to continue in that shape into H2.

The next question comes from the line of Bridie Barrett from Stifel.

If we go to another question and see if Bridie comes back a bit later.

And the question comes from line of Ciaran Donnelly from Liberum.

Most of mine have been asked. 2, I guess, one, just on the improvement you've seen on the data side and the replatforming. I wonder could you give us some insight into how that might translate into an improvement in marketing margin whether there's any kind of leverage from that side of things? And two, I wonder if you could give any update on what I'm sure is a very hard task in replacing Scilla.

Okay. So on the first, I mean essentially everything we're trying to speak, Ciaran is to begin to use our own data, use our own resources to begin to drive volume rather than always rely on expensive third-party media. In saying that we're not guiding specifically on the marketing margin in terms of where we are at the moment, but we're making good progress in terms of all of that with SEO with CRM with everything we're doing on NQA, which is a program we call No Questions Asked. So I don't think there's any additional guidance to kind of give there but you can see what our direction of travel is. In terms of replacing the irreplaceable Scilla, we have a thoughtful head hunter looking at that at the moment. I'm seeing candidates as we speak. I have no doubt we will find someone brilliant. But of course, it was a very sad day when Scilla told us her news and she's been absolutely brilliant for this organization. Brilliant to me as well, not just as a colleague but also as a friend, so we're very sad to see her go. But all good in terms of looking for a replacement.

[Operator Instructions] The question comes from the line of Rosslyn Jobber from Citi.

Two questions, if I may. First of all, I think I'm right in saying that at the prelims, you gave a very interesting statistic about 19% of active users inquiring in more than one channel, which was lower than the pre-pandemic peak of 23%. Just interested if you've got any sort of update on that for us in terms of the first half and whether you saw that move at all. And then a similar question but slightly longer term. In terms of the reorganization of the tech stack, when would you expect that to start to have an impact financially? Are we really talking about next financial year rather than this?

So the second one first, Ross, yes. So the way that No Questions Asked will be rolling out the way some of the smarts that are still rolling out in terms of the [indiscernible]. It's sort of done on a category-by-category basis really. So NQA will go on to car loans, car insurance to start off with. In getting that stuff live, we need to make sure it works, inevitably, some bits of it work well, some bits of it don't work well. It takes a while to begin to bed in. So I wouldn't be expecting anything coming in this half specifically very much with a view to kind of '23. In terms of the cross buying rates that we shared, I think I may have said in February, we're not planning on giving you running commentary on that every half year, there being some pluses and minuses in terms of how that's worked as you will begin to expect. And it will be something that I'm very happy to kind of come back to you next February and kind of give an overall view of where we've got to over the 12 months.

The next question comes from the line of Bridie Barrett from Stifel.

Hello, can you hear me?

Yes, we can, Bridie.

Sorry about before. I'm not sure how some was on mute. I'm happy to have it going now. Yes. I just was curious on the motor and home insurance point that you made earlier that the PCWs have been increasing their market share. And I just wondered if you had any thoughts as to why that might be particularly at the moment, given everything that's going on? And if that's something that you think as an industry, you'll be able to carry on building on because I think until sort of more recently, the view was that it was a fairly mature market already. And I've got a couple of little questions. I just wanted to follow up on after that as well.

Yes, sure. No. My answer to that, Bridie, is that you've got very strongly embedded consumer behavior about going to check and price comparison websites at the point of renewal. So even though the market is smaller, you've got consumers who are going to go and look kind of regardless really, so I think that for me would be why PCWs are taking a bigger share of the market overall. The market may be smaller, but people are still looking in the way that they were.

Okay. You don't really see it being sort of tied to cost of living, crisis, inflation, kind of people? Is it more just generally active?

Yes. I think all of that will factor in, but I don't think we can draw that out specifically as the reason why. All our research says about 60% of all car and home inquiries we'll go and look at a price comparison website just to make sure that the deal there on is sensible. So I think that for me would be the reason why.

Okay. And then just coming back to travel again. And I think you said you're back to 60% of 2019 levels. I just wanted to check, is that pro forma for Icelolly?

Yes.

It is pro forma, Okay, fine. And then the other thing I just wanted to ask was about the kind of new product opportunities that you've been talking about. You mentioned introducing some tenancy advertising to the platform. Are you able to give us a sense of materiality of that presumably will be 100% margin product. So kind of when should we start factoring that in as a new revenue line for that?

Not at this point, Bridie, I think we're still very much in the process of kind of rolling that out. As I say, category by category, it's very early days. We want to see how that works. It's been very successful for us in Decision Tech. Let's see how that begins to work more broadly across the enterprise. So I don't think we can give you any specific guidance on that at the moment.

Dear speakers, there are no further questions at this time. Please continue.

Okay. So I think we're seeing there's no more questions. So look, thank you, everybody, for your time. We really appreciate it. If you have any follow-ups, then please get in contact with us directly. Otherwise, look forward to catching up at you one-on-one shortly.

That does conclude our conference for today. Thank you for participating. You may all now disconnect. Speakers, please stand by.