MONY Group plc (MONY) Earnings Call Transcript & Summary

Good morning, everybody, and thank you for taking the time to join us this morning. Hopefully, you've had the chance to watch the results video that we released at 7:00 a.m. But before we open up for questions, perhaps I can just give a quick recap of the main messages there. We've had a good start to the year, achieving both financial and strategic milestones, and we've helped U.K. households save an estimated GBP 1.4 billion. We've grown revenue by 1% to GBP 225 million, and our adjusted EBITDA is up by 2% to GBP 75 million. Now that's a resilient financial performance given the exceptional growth in car insurance last year, and that's given us confidence to reiterate our guidance for the full year. We continue to deliver on our strategy to grow both sides of our marketplace. The MoneySupermarket SuperSaveClub has welcomed 0.5 million more members since February. That actually brings our total members now to over 1.5 million. And we see plenty of opportunity for further growth there. So we've been investing to drive that with the introduction of our first purchase reward scheme. We've also continued to enhance our offering to providers. We have 11% growth in this area and we've scaled our 34 B2B partnerships. And now we also have over 100 providers signed up for Market Boost. That's our innovative data product. All this has been doable because of the investment already made in building out our data and tech platform, which is serving our diverse product range. It's enabled us to unlock further cost efficiencies and it's also facilitating the development of AI-enabled features and optimized product offerings right across the group. This is all adding up to a highly effective and resilient business well positioned for profitable growth. So as a result, we're expecting to deliver a package of shareholder returns totaling GBP 96 million over 2025. That comprises our ordinary dividend, which we've increased by 1% and the ongoing GBP 30 million share buyback. So with that, I'll open for questions.

[Operator Instructions] And we'll now take our first question from Andrew Ross from Barclays.

I've got 2, if that's okay. First one is just a clarification on the outlook language. You talked about the Board being happy with the range of consensus expectations. But could you just clarify you're happy with the midpoint of consensus expectations for this year, so around that kind of GBP 144 of EBITDA? That's the first question. And then the second one is to kind of double-click on some of the disclosure you've given on SuperSaveClub and to kind of compare that to what you gave us at the full year results. So it looks like the kind of new customer acquisition is still strong but the ARPU has gone from 25 to 27 and the kind of share of revenue from SuperSaveClub has gone from 12% to 14%, which is a relatively modest step up. So help us understand that. And then the margin of incremental transactions seems to have gone down from 79% to 75%. So if you could help us understand the drivers of that.

Thanks, Andrew. So let me just go straight into the clarification on the outlook. Yes, we are happy with the midpoint. So I can confirm that. Niall, do you want to just pick up on the double-click on SuperSaveClub?

Yes. So Andrew, I think a lot of this is going to be -- the answer is going to be slightly in the mix really. So obviously, 75%, a lot of last year was related to car. So that is quite a good margin there. Clearly, more people are coming in and buying more products. So again, there is a mix element to that. The 12% to the 14%, remember that you've got first purchase in there as well. So you are getting some people who've only made one purchase in that percentage. So it will sort of grow over time as those people then mature. And then the ARPU number, clearly, we're hoping that people will do more with us over time. So hopefully see that move in the right direction.

[Operator Instructions] Our next question is from Luke Holbrook from Morgan Stanley.

My first question is just on the Energy segment, which seems to have a material Q-on-Q impact on rise. And I'm just wondering how much improvement have you seen since the price cap activity? Is this something that you expect to be sustainable into the second half of this year? And how we should think about that trajectory into 2026? And then my second question is just on the CPC rates, which you've been calling out as rising for some time. I'm just wondering if you can give us some context around what's driving this? Is it just more competition in the market? Is there some other structural factors to be aware of just in tying that back to how we think about the marketing margin going forward?

Great. Thanks, Luke. I'll do Energy, and I'll pass CPC over to Niall. So I think let's start by having a look at what's happened for customers. If we go back to the peak of energy in '19, '20, average bills now are up circa 40% from those days. But I think the significant difference is that customers are typically only sending about 10% today versus what would have been about 30% back then. And to a degree, that's because regulation is still sitting heavily on the market. Obviously, we have a price cap but we still have a ban on acquisition tariffs, which is likely to be in place until at least March of 2026, the end of March 2026. However, if we look at what's happened in the first half of this year, go back 12 months previous, we had a handful of providers. We now have 7 providers with deals on the platform. And actually, they're the majority of the major providers in the U.K. We've had 10 exclusive deals in the half, and that's been the majority of the switching. That's been about 60% of our switching volume. And I think what we saw in the half is when the price cap increased in February, we really did have a very strong customer switching at that point. And when the price cap decreased essentially, the forecast was a decrease in May, we still saw interest, but it wasn't as strong as it had been in the February announcement really. So in saying that, 2/3 of customers are still on the price cap tariff. We have reengineered MoneySavingExpert, Cheap Energy Club. So we've really optimized our journeys for traffic. So I think we're optimistic about what it looks like going forward but realistic at the same time, we're expecting this market to come back gradually. And I think that would be the main message. Now anything to add to that or go straight on to CPC.

No, I'll pick up. On -- so Luke, we're calling out in the pack there that PPC costs are up 20% year-over-year. And really, that's an extension of what we saw in the second half of last year when we saw that really pick up. Now that is quite correlated to the time when the headwind in car started to come in. So we -- when we look at our analysis, it suggests that a lot of that is driven by competitor behavior. And we're sort of observing -- depending on which segment you're looking at, we're seeing quite divergent behavior from competition. And there are occasions where there are things going on where we don't really understand that. I think when you take a step back from it, ultimately, our long-term strategy is to reduce reliance on paid media, which is why we're leaning into growing the clubs and obviously focusing on profitable growth as well.

Understood. Can I just clarify that your energy revenues therefore peaked in February, you were saying and then have come back a bit since. Is that the right way to think about the trajectory?

Well, I think what we're saying is that the way that the market is operating is that consumers are looking when there are price cap movements. That's not to say that nothing happens in between but you get a lot of volume around those movements. So there was obviously 2 price cap announcements here in February, the one where prices were going up. So that tends to drive more looking from consumers.

[Operator Instructions] I would now like to hand over to Jen for any webcast questions. Over to you, Jen.

Yes. We have a question from Jessica at Peel Hunt. Do you expect there to be more exclusive energy deals for H2? You mentioned some of the marketing costs have been moved into social. And can you comment on the ROI of social versus PPC?

So social versus PPC. First, social is a paid channel. We don't get into necessarily the ROIs of any individual channel but clearly, it's a paid channel. It's also a channel where you can scale effectively across a number of platforms. So it was a good place to diversify for the travel segment in this half. In terms of energy deals, we are always looking for more exclusives. We had 10 in the first half, and the team are working hard to get more for our consumers in H2.

Okay. So we have a follow-up question over the phone from Andrew Ross from Barclays.

Sorry, guys. I thought I will squeeze in a couple more since there aren't any other questions. First one on working capital. Just help us explain the dynamics there in terms of the outflow of receivables in the first half and how we should think about that into the balance of the year? Are we -- should we be assuming some kind of outflow in the working capital for the year? That's the first question. And then the second one is just to kind of double-click on the trends you've seen in Motor through the half. Am I now right in saying that on a run rate basis, the switching market in Motor insurance has kind of bottomed out and through the worst? Or is there still a scenario where things could deteriorate further from here?

Great. Thanks, Andrew. Let me pick up on car first and then pass over to Niall on working capital, and maybe let's just look at general insurance as well as car in giving you that answer really. But let's start specifically with car. So look, prices now are on average 42% higher than they were when GF was introduced at the start of '22. And so whilst we've seen premiums fall in the half, they've fallen by about 9%. This is really against exceptional growth in '24, where in the first half of '24, they were up by 18%. So that's the tough comparator that we've just been working through. So yes, I think the peak in car premium inflation is definitely behind us, and we'll see a gradual easing of that across the second half of the year. But the context piece is, as we've guided previously, trends in home tend to mirror those seen in car typically by 6 to 9 months. So in a similar way, in the first half of last year, we saw home insurance premiums up by 30%. They're up by 4% in the half. So we'll see some similar effect happening in H2. But look, in total here, we've got over 250 products for home and car insurance on the platform. There is significant competition between providers that plays out, I think, to the advantage of customers and they're finding they can make significant savings. So all that adds up to us remaining confident that we can navigate our way through any headwinds and the strength and breadth is really going to be a big plus for the group. Niall, on to working capital.

Working capital. Andrew, so I think first thing to say, there is always a bit of a H1, H2 effect. Actually, the cash conversion in this half isn't that different to what it was in '23, for example. However, I think the thing to note that we're calling out is in this period, what we've seen is a sort of timing and mix effect, which is specific to the half, I think, around the fact we're mixing out of car, which has slightly faster cash conversion cycle and mixing into energy and life, which has slightly slower cash conversion. So this is very much a timing and mix effect. I think overall, the cash generation remains strong.

And it appears that we have another question on the webcast. With this, Jen, over to you.

This one is from Gareth Davies at Deutsche Numis. You asked a question on working capital, which we've already answered. And his other question is, could you give a little more color on the people cost reduction?

Niall, do you want to pick that up for Gareth?

Yes. So Gareth, I think this is really a manifestation of a lot of the heavy lifting that has been done on the data and tech platform flowing out into costs. So if I give you a sort of single example, we have removed something like 50% of legacy code. When you take out code like that by collapsing all of those various things into a singular platform, then you don't need engineers to maintain what was there before. You then have choices to take it in cost or to take in efficiency. So we've done that, and we believe we've improved productivity of the team along the way as well. So we have taken opportunities from automation from that replatforming work to deliver the cost savings.

And just to build on that, this is very much a new way of working really. So across the last 2 years, we've seen a 300% improvement in the productivity of our tech team. So this is just the benefits of working on new modern platforms installed in a very consistent way right across our range of brands and products. So it's sort of the benefits of a new approach.

Okay. So it seems that we have another question on the webcast. Jen, over to you.

So this one is from William Larwood at Berenberg. Can you talk more about the gross profit margin decline? And what proportion is due to first purchase rewards in B2B, et cetera? And also, how do you expect margin to progress into H2? Can you expect further decline due to first purchase rewards?

Niall, do you want to pick both of those up?

Yes. I mean, I think we've talked about this before. Margin is ultimately always a function of mix. And what we've seen in this half is margins has gone from 68% to 66%. There's 3 main effects in there, sort of not going to get into the breakdown of it but first purchase reward is a part of it. The other is PPC. Clearly, we're now seeing annualization effect or the sort of year-on-year effect of that 20% uplift that we've talked about. And the other is that we've grown the B2B business or the white label business. So clearly, in any given period, we are looking to optimize margin where we can. But if white label can win a very big contract at a structurally lower margin, that is still good business that we're going to do. Ultimately, when we look across revenue and costs for the year, we're very happy with where the consensus range is for the full year.

Thank you. And it appears there are currently no further questions. With this, I'd like to hand the call back over to Peter for closing remarks.

Thank you. And look, I'll just wrap up briefly by recapping. We had a good start to the year. And as we look forward, we really do see a compelling outlook for growth with significant headroom in our member-based propositions that's going to increase loyalty and in term of lifetime value, our innovative product development pipeline to improve customer experience that will boost conversion and tap into new markets and of course, confidence in our end markets as well. So look, thank you very much for taking the time to join us this morning. We're looking forward to following up with a number of you across the course of the next week. But thank you for joining. Speak soon. Bye-bye.