MONY Group plc (MONY) Earnings Call Transcript & Summary

Good morning, everybody, and thank you for making the time for joining us this morning. Look, hopefully, you've had a chance to watch our results video, which we posted at 7:00 a.m. But before we open up the questions, perhaps you could just allow me to do a quick recap of the main points we were making there. So firstly, 2024 was another strong year for the group with revenue up 2% to GBP 439 million and adjusted EBITDA up 7% to GBP 142 million. In addition, we've made further progress in line with our company purpose, which is all about helping households save money. In '24, we've actually saved customers an estimated GBP 2.4 billion. Now this growth has been driven by our 2-sided marketplace strategy. On the consumer side, we've seen momentum across our member-based propositions. That's the MoneySuperMarket SuperSaveClub, that's the app from MoneySavingExpert and Quidco. And by growing numbers across our brands, we are encouraging consumer loyalty, retention, repeat purchasing, and this is delivering positive results. We're especially excited about our progress with the SuperSaveClub. We have now surpassed 1 million members. And these members are generating higher revenue per user, and we're attracting more traffic directly, and that is critical in reducing our reliance on expensive third-party marketing. We've also made great progress on the provider service side. That's across B2B, Market Boost and Tenancy. In B2B, our revenue was up 49% in the year. We now have 35 providers live. Market Boost is being used by over 80 providers. And in Tenancy, we have grown revenue by 6%. Now this 2-sided marketplace is underpinned by our leading data and tech. And we said last year that our data transformation have been completed. We've announced this morning that our broader tech transformation is also now largely complete. And this positions us well to benefit from AI, both internally, but more importantly, by using it to further advance our customer proposition. So key to our strategy is the strength and our breadth, and this continues to provide us with an important differentiator as different markets begin to move through their cycles at different times. It's really critical for us, and that is translating into a highly effective and resilient business with strong operating cash flows. We've got efficient capital allocation, and we're positioned well to continue to deliver sustained and profitable growth. So as a result in '24, we're once again growing the dividend this time by 3%. But also this morning, we have been able to announce a GBP 30 million -- up to GBP 30 million share buyback, which, of course, will provide additional value for shareholders. So about what we're saying and the tone in which we're saying it, you'll hear that we remain excited about the opportunity for growth across our 2-sided marketplace. We see that we're well-positioned for sustained and profitable growth both into 2025 and beyond. So with that, can I open for questions.

[Operator Instructions] And the first question comes from Luke Holbrook from Morgan Stanley.

Thank you for providing a lot more information on the SuperSaveClub, I think that's really helpful. Now you've got 1 million members signed up. One of the things that I was -- slightly surprised me was that you wouldn't see a higher than 1% improvement in gross margin for every 1 million customers signed up given the retention and the frequency KPIs that you're outlining today. Is it possible that, that metric that you're issuing is slightly conservative? And then my second question is just more on capital allocation. You've been quite clear on the 4 capital allocation priorities that you have. But given you're now in a net cash position, you've done a GBP 30 million buyback, but it feels like you could have gone beyond that, either growing the dividend more or done a special dividend. I'm just wondering how you're thinking about the balance sheet into next year and maybe just why you've been a bit conservative in that regard as well.

Yes. Thank you, Luke. I'm going to throw both of those over to Niall. Just to say at the start, though, that it's important to remember that margin is a function of mix within this business. So our SuperSaveClub will provide a certain benefit as Niall will go on to describe. Obviously, the impact on the overall margin is a function of everything else that's happening, the growth in B2B, what we're doing with Quidco, et cetera. Now why don't you take that up and then also go into capital allocation?

Perfect. I mean I think, look, let me just -- I mean, I'll extend Peter's point in microcosm in the same way that the group's margin is a function of the mix. SuperSaveClub margin going forward will also be a function. What we're sort of putting forward here is the FY '24 effect of adding 1 million members, and we're seeing that flow through. So if you look at what is actually happening, it's having the effect that we wanted to have. We're growing the revenue per user because users, members are coming and doing more with us. So you can see that in the uptick in cross-channel inquiry, and they're also cheaper to acquire. So this year, which is the first year, that's 14% lower. And in this first year, we've had to acquire those members for the first time and then see them come back and do another thing beyond that. So as those cohorts mature, clearly, we hope that they will come more directly to us. But in any given year, we will hopefully also be adding more members to it. So there will be a mix effect in any given year going forward as well. So we'll see that play out as we go through. And I'd say, we're kind of trying to give you as much as we can here with the guidance around how we see the 2024 cohort. So that's on SuperSaveClub. I think then on to capital allocation. Look, I think the buyback reflects our sort of ongoing commitment to sustainable shareholder returns. And in fact, you should just see this as a logical outcome of the capital allocation policy, Luke, as you're kind of calling out in your question there. We look to invest in the business for organic growth. We absolutely make sure we pay the ordinary dividend. We screen for attractive M&A to do, and as you know, we've got a very, very high hurdle around that. And then we look to do enhanced distribution. So why are we announcing it today? We're announcing it today because we've gotten to that point where we've paid off the Quidco term loan. We now have a net cash position. So we've got a very clean balance sheet. And announcing at the level that we've announced that gives us sort of flexibility going forward to continue with our policy to consider further M&A as appropriate and also to provide further enhanced distributions.

And the next question comes from the line of Andrew Ross from Barclays.

I wanted to ask about the competition you've kind of called out in the statement as being a factor behind the softer gross margin in the second half. And hoping you can give us a bit more as to kind of which verticals you're seeing that competition in just to kind of make sure we fully understand what's happening. And I guess whether you see that as a temporary or a permanent factor? And I guess as an extension to that, when we then kind of think through the gross margin dynamics in 2025, I would appreciate any color as to how to think about that because clearly, SuperSaveClub is working directionally as you want it to. It's clearly given you a tailwind to margins. But then in aggregate, the group margin has come back in the second half. So what are the kind of puts and takes that we should think about when we think about the overall gross margin into '25 and beyond?

Thanks, Andrew. I'll take the first bit. I'll hand the margin dynamics over to Niall. So look, I think at the highest level, the competitive structure of our market hasn't enormously changed. You'll know insurance, we have 3 price comparison competitors. You know that in money, our competitors are broadly ClearScore and Experian. You know that we have one significant competitor in terms of home services. And structurally, we haven't really seen any new players come into the market or any significant changes in how the existing players operate. But I think what we have seen, as we pointed out, is a heating up of this PPC market. Now to some degree, that is not unusual. That sort of heats up and cools down at different points in time. But if you go back sort of 4 years to when I started here, you'll remember that a very core part of the early strategy was to make sure that we replatformed all our martech. So we could begin to rely on direct traffic more than expensive third-party media. We need to wean ourselves up off that. So that's what the algorithmic bidding on PPC was about. That's what the SEO replatforming was about. That's what all the focus on data and CRM was, of course, all the work that we have done on the brand. But in saying that, obviously, PPC markets, as I say, kind of heat up, they cool down, but fundamentally, they get more expensive over the years. I think what we've seen in the latter half of '24 and certainly into '25 as well is perhaps our largest competitor on the insurance side losing market share. And as a consequence, then competing very, very heavily in the PPC markets, which has caused this sort of heating up essentially. And we then obviously have to think what that means for us. Now of course, we will always be very thoughtful about how and when we compete in terms of profitable growth. But importantly, for us, this is all about our member-based propositions. So the reason that we're doing SuperSaveClub, the reason we're doing app, the reason we're doing Quidco is we want to give customers reasons to begin to come directly so we can begin to get that direct traffic working as strongly as we can do. So it really reinforces the importance of the strategy that we're following. That's what we're doubling down on. That's why we're so pleased on that 1 million members. That's why we're wanting to continue to grow that in SuperSaveClub over '25. That has to be the answer to the competitive dynamics. Niall, do you want to just talk about margin dynamics?

Yes. Look, I think a little bit, as Peter was alluding to earlier, margin is a function of mix. When we think about that going forward, in the second half this year, which you called out your question, Andrew, we had sort of 2 big things going on. One is that PPC cost escalating. And the other is B2B. So we won the Auto Trader or we announced the Auto Trader contract in May last year. So clearly, that's been growing as we've gone through the second half. And as you know, that's a sort of structurally lower margin. So in any given period, I think we'll see that mix effect coming through. You can see in some of the numbers we put forward today. We have worked very effectively over the last number of years to offset headwinds. But as Peter said, the sort of the underlying trajectory of increasing cost in third-party media is there over a number of years. So it's leaning into the clubs to offset some of that as we go forward.

And the next question comes from Rahul Chopra from HSBC.

I have a couple of questions. In terms of the insurance, you had 2% exit rate during the quarter. Could you just break down in terms of what you're seeing within car versus home insurance? Because I would imagine home insurance still had a higher premium inflation compared to cars. So I just wanted to get a sense of what's happening between those verticals within the insurance will be helpful. That's the first question. In terms of the second question, in terms of provider services, obviously, you did call about the growth rates. Could you give a bit more sense in terms of where the scale of this business in terms of revenue numbers and the margin dynamics between B2B Market Boost and Tenancy? Just wanted to understand the dynamics around that, please.

Brilliant. Thanks, Rahul. Again, I'll throw the second question on Provider Services to Niall. Let me start on insurance. So look, you'll know, Rahul, that we don't actually provide segmental or product level guidance. We're only ever guiding to group adjusted EBITDA. But look, insurance, as everyone knows, is 50% of group revenue and half of that, again, 25% of group revenue is car essentially. So it is important to sort of just say what we're seeing there and how we kind of see things over the next 12 months, particularly. So what I'd call out is, clearly, there are well-documented headwinds in terms of car insurance premiums. They're coming off record highs, and that is something that we will see into '25. But I think 2 stats that you should really equally focus on. The first is that your average car insurance premium is about 48% higher than it was pre-GIT. So customers are paying more for their car insurance than they have ever paid before. And secondly, versus pre-GIT, we've seen an over 2x increase in the number of products which are available to consumers to begin to buy when they come and actually search on the site in terms of what's available. So what that means is that car insurance has never been more expensive. And actually, there are lots of different new products out there for customers to begin to save money. And I think that is something which is really, really critical. The other thing I'd point to is the other half of our insurance business that is not car insurance. So that's home, travel, life, pet, there is a whole range of services which we offer consumers where we do see growth opportunities. So whilst obviously, motor insurance is a significant part of our insurance portfolio, it is not the whole story by any stretch of the imagination, and there are a number of dynamics there in terms of how that should work. And I think that reflects in some of our tonality this morning in terms of where we are. And then, of course, if we go up a level again, the point in strength in our breadth is that we also have an opportunity in money, in home services, in our other verticals as well. So please see that in the round as much as you can. Niall, do you want to talk about provider services?

Yes, brilliant. Rahul, provider services, remember, in there, we're talking about 3 things. So we've got the B2B business where we're providing our platform to other audience providers. So Rightmove, Auto Traders, we talked about as big wins last year. Market Boost, which is our data offering to providers, that helps providers to grow their business on our platform and then the tenancy business, which is selected placements where providers are looking to achieve certain things by putting a placement on our sites. So we don't break out the scale of those businesses, but they're growing quite well. In terms of the question you're asking around sort of where is the margin coming from? Clearly, the B2B business is different because in that business, we split the CPA effectively with our partner. And so we're achieving the same CPA, but we split that with the audience provider. And we're very happy to do that because we believe that we can then pass that traffic through the platform that we've got at very, very marginal cost to us. So while it's a drag on gross margin, it's still a very profitable business for us to do. So very happy with progress this year across provider services and hopefully more to come.

And the next question comes from Ciaran Donnelly from Berenberg.

A few for me. Just in terms of M&A, I guess, could you just outline what you're looking for in potential acquisitions? Is it tech capabilities or access to a new vertical? Or is it something along the lines of, I don't know, maybe a MoneySavingExpert to try and lean into that member-based offering and kind of acquire new members through something like that? Just kind of ideas in terms of priorities for M&A going forward. And then just a few on SuperSaveClub. I guess, could you just outline what you see as kind of the key levers for growth in the member base going forward? And also, do you have an idea in terms of how many of the 1 million members you have today, were they previously kind of MoneySuperMarket or Quidco active users? Just trying to get a sense of where the member acquisition has come from thus far? And also, just one clarification. When you're quoting the member numbers, is that as of today? Or is it as of the December year-end?

So Niall, I'll pass SuperSaveClub on to you, and I'll just quickly do M&A. So thanks for that, Ciaran. So our approach to M&A is we sort of look at a lot, we consider a few, we do very little, which is exactly what I think you would want us to do really, and we have a very high bar that we look to evaluate any opportunity against. Our thoughts are, are there any markets that we're not currently accessing? Are there any key technologies that we don't have within the existing portfolio? Do we want to begin to go deeper into our value chain. We just look at sort of areas where our consumer groups we don't currently access, I should add that as well. So we just look at things that sort of make logical sense. And I think if you look at sort of the big acquisitions of MoneySuperMarket, Decision Tech, CYTI and Quidco, you hopefully see that all begins to stack up. So there's a sort of broad pipeline that we have a look at, but really, we have very, very high hurdles for that to cross, which is why we're very, very considered about what we do. So I hope that answers your question. On SuperSaveClub, there's quite a lot there actually. And Niall, you do the bits that you think you should do and then throw it back to me.

So I think you're asking about sort of levers for growth. I think the first thing, Ciaran, is obviously, we want to get more members into SuperSaveClub. What have we been doing this year? We've been using the marketing spend that we were going to spend anyway to bring people into the club. So as people have bought a product, we've offered them the opportunity to join the club and then a percentage of those have converted into club members. So we still see that as a perfectly valid continuing exercise as we go into 2025 as kind of primary thing. But more importantly than that, when they are then in the club, they are doing more with us now than they were before. So clearly, if you think about just the [ file ] size that we'll be trying to add members, but then we'll be asking members to do more, which will obviously grow the revenue of the club. In terms of where the existing users or where they are not, I mean, I think when we talk about 14 million active users, that's an inquiry-based metric. So people who had run an inquiry across those 2 brands over the previous 12 months so that's a big, big number. There's probably a bigger market we'll base to all the people who've ever contacted us. So a lot of these users will have been previous, at some point, an MSM user, but we've never -- it's never been our intention to sort of only focus on people who weren't MSM users, we absolutely want those users in the club, and we want them to do more with us. So it's about getting more wallet share over a period of time. So I think probably it weights towards MSM previous users, but it would do because we've got a big file.

Yes. The only thing I'd sort of add to that, I think implicit in your question, Ciaran, so haven't politely not said it directly, but are we just attracting the Super users. And obviously, we can, through our work on data, really begin to understand that, and that is not a concern that you should have.

Great. And just one clarification in terms of the 1 million users. Is that as of today? Or is it as of the end of December?

Yes, it's at the end of December. It was very, very close to the even million. Today, it's over 1 million.

As there are no further questions on the phone lines, I would now like to hand back to the room for any questions on the webcast.

We have a question from Ross Broadfoot at RBC. With the SuperSaveClub growing healthily, are you able to give us a steer on your share of direct traffic and how that is evolving?

Do you want to pick that up now?

Sure. I think the SuperSaveClub, obviously, the point is to get people in and get them coming directly. And what we're seeing here is that more people are coming to us directly when they are using the club. We don't really break out source mix, but we believe that over the long term, SuperSaveClub will be a positive to our direct traffic.

Yes, I think that's a point. I talked in my part of the presentation about the number of people we're seeing coming directly to Club. So Club is now only one of our 14 million users. Obviously, as that grows, we would expect to see the direct traffic continuing to grow, but we haven't broken that down at this point.

The next question is from Jess Pok at Peel Hunt. PVC inflation of 19% H2 over H1, how does this level of inflation compare with past periods? Can you give any color on which segments are more impacted?

So I think it's general, Jess. And I think that is kind of quite a lot, but it's not that it hasn't heated up and cooled down before. So you should see this very much as a market that begins to do that. But I think it's kind of the underlying direction of travel of PVC costs that we are also trying to flag. So fundamentally, yes, I think the 19% is a loss. I think it is quite focused on general insurance on the car and on the home side of things, but also we're seeing that generally across the piece as well. We're seeing some of it coming through in Money. We don't anticipate it's going to continue at this level, but it's very hard to call, but it's the underlying that I think we should focus on. I think that is done. So assuming that we have no more questions on the line, can I just double check that from our moderator?

Hello, I can confirm that there are no further questions on the phone lines.

So brilliant. Then it just is left for me to say thank you, everybody, for your time this morning and joining us. We are coming out to see a lot of you over the next couple of weeks. So we look forward to continuing the conversation then one-to-one. So thanks for your time. Cheers. Take care.