Moneysupermarket flies on hiked full-year earnings guidance - UPDATE

6th Nov 2013 07:41

- EBITDA up 26 per cent in Q3- Sales up 6 per cent- Full year EBITDA guidance lifted Earnings guidance for the full year was lifted by a bullish Moneysupermarket.com Group after a "very strong" start to the fourth quarter boosted by energy-switching customers irked by utility price hikes.The FTSE 250 group, which brought its market announcement forward by a week, said its third quarter had been in line with expectation as earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 26% on revenue that was up 5% year-on-year, with visitors to MoneySupermarket.com ahead 5%.Even against tough comparables, the fourth quarter had so far seen a 25% increase in group revenues almost entirely from very strong energy switching levels, thanks to rapidly rising domestic fuel bills announced by the majority of the major providers in the second half of October.Management said it expected adjusted EBITDA for the full year to be "mid-single digit percentage ahead of analysts' expectations", with a consensus forecast of around £78.4m.Broker Numis remained sceptical about the medium-term impact of energy switching, saying "there is evidently a decent element of 'one off' to this guidance ahead of expectations, as energy switching tends to be a temporary volume driver, driven by media attention".The third quarter still represented progress on the previous year, despite a slow start, said Chief Executive Peter Plumb."Investments we made in our energy business early in the year, the acquisition of MoneySavingExpert in September 2012 and our growing travel business contributed significantly in the third quarter and demonstrates the value of our increasing diversity."Changes to search engine algorithms, notably Google's 'Penguin' update, hit website visitor numbers and revenues in the insurance channel, with the company also continuing to acquire fewer visitors for its home services channel via paid search. Revenues in the Money vertical were 4% lower despite higher visitor volumes, though Travel revenues were up 35% and Home Services revenues were ahead 11% in the face of much lower visitors.Broker Canaccord noted Moneysupermarket shares have been particularly weak since the interim results, with the shares down by 26%. On its revised forecasts, the company was trading on a current year price/earnings ratio of 14.5 times, backed by a dividend yield of 4.4%. Despite nudging down its target price from 213p to 205p, this still pointed to 32% potential upside and the broker raised its recommendation from hold to buy. Numis moved from its prior sell stance to put its recommendation and forecasts under review: "based on the significant fall in share price since the summer due to de-rating and based on last night's close price, our recommendation based on a 140p target price should logically move to hold from sell". Analyst David McCann's sell rating was predicated on his belief that the group did not warrant a premium rating. Despite what he believes to be a decent industry growth opportunity, this is offset by a perceived risk from Google based on his estimate that "around 50% of EBITDA comes from visitors who come via Google and Google appear to be trying to capture more of the value chain". Shares in MONY rocketed up 17% to 181.9p by 12:45 on Wednesday.OH