MONY Group plc (MONY) Earnings Call Transcript
July 24, 2023
Earnings Call Speaker Segments
Good day, and thank you for standing by. Welcome to the Moneysupermarket Interim Results 2023 Q&A session. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Peter Duffy, CEO. Please go ahead.
Well, good morning, everybody, and thank you very much for joining MoneySupermarkets Half Year Results Q&A for 2023. I'll just say a few opening remarks before we open up for questions. We've had a strong first half of the year. You will have seen the revenue was up to GBP 213.8 million. That was up 11%. We've maintained margins at 68% and EBITDA was up 20% to nearly GBP 68 million. Within that, trading for insurance has been standout. It's grown at 23% in the first half as we lapped the market-driven declines of last year. And this morning, we've also guided towards the upper [ end ] of census for EBITDA in '23. And importantly, we've announced a return to dividend growth starting with a 3% increase for this half. With strategy, I am pleased to say we've made significant progress. [indiscernible] support our efficient acquisition, including all the work on data is now in place and it's being used in [indiscernible]. But this platform is now also enabling the testing of new user experiences aim to drive customer retention and growth. And we talked this morning in the presentation about 3 retention and cross-sell initiatives. Firstly, for rollout of our dialogue platform, which is all about how we speed up the user experience. Secondly, the trial of our reward and loyalty program, the MoneySupermarket SuperSaveClub Club. And thirdly, how we're beginning to personalize the money saving up per app. And also, we've talked about the introduction of our new chatGPT feature. So I hope all this shows how we are planning to build off of good work over the last 2 years through initiatives which are going to help customers save more money by doing more with us. So with that, we'll open up for questions. Who's got the first question, please.
[Operator Instructions] We'll now take our first question -- this is from the line of Andrew Ross from Barclays.
I've got 2, if that's okay. The first one is on all the technology investments that's go into the group. It's clear that there is a benefit that is now starting to manifest in the numbers. You're gaining share in insurance, for example. I wanted to ask you about the gross margin in 2024 and when we might start to see the benefit of better retention coming through in the numbers. So how confident are you in expanding your gross margins in 2024 if we kind of assume a broadly stable revenue mix of the group by product category? And then the second question is about SuperSave and what you've learned in the trial so far. I assume the fact that you are budgeting some TV spend to vest in the second half, if I understood it correctly, means that trial is clearly pointing to a kind of NPV positive. But any numbers or kind of indicators you could share us how about trials going would be really helpful.
Great. Thanks, Andrew. I'll do SuperSave, and Niall, I'll ask you to pick up on margin for '24. So if I just start with SuperSaveClub just to say it's really early to us. So essentially, we put this live in May of this year. As you would guess, it starts off with being an operational trial. So we're bringing together car insurance, home insurance, broadband and travel insurance kind of for the first time, and we've got to ensure that all the redemption and the systems work in the way that they wanted to do. We're confident that we've proven out that that's the case in terms of what's happening -- but of course, and this will sort of feed into Niall's answer as well. We are working with products that are on an annual cycle here in terms of how they renew. So to a similar question, I think I was asked at the full year results about how we see this manifesting. We would hope it would be gained by seeing customers who are on the trial actually purchasing more with us. So bringing more policies, not just improved renewal rates at the 12-month point, but bringing more policies maybe second of their cars or their home insurance or the travel insurance, bringing more stuff together. We've got a sort of looking great at 1.2 products. So if we can improve that, that would have a significant impact. And the other point just to comment on with Club is about source mix -- so the way price comparisons traditionally worked, we have had very large and expensive third-party media budgets. If we can begin to substitute some of that spend to begin to get the customer come directly to us and essentially spend some of that money in terms of customer retention. We think that's a better and a more sustainable model over time. And that's probably just a good segue just talking about margin. Niall, do you want to pick up on margins?
Yes. Thank you, Andrew. I mean I'm going to sort of echo a lot of what Peter has said. I think -- I mean if I look at margin in the half, we're obviously flat year-over-year. Within that, there are a number of sort of puts and takes that we saw strength in insurance. And as you see, the work that we've done around PPC, an efficient acquisition have certainly been tailwinds in the half, but then headwinds coming through from Money, Home Services and then winning more B2B I think we're not giving guidance on 2024 today. But if you think about that as that's the breadth of the group that the strength of the group is that we've got many products in many verticals, and those types of puts and takes will probably play out in 2024 as well. I think and as Peter said, a lot of that work long-term, especially if you take SuperSaveClub, for example, is around rewarding loyalty and moving some of that spend from giving it to customers. So I think we will see that play out over a number of cycles because we're on annual renewals, and it will take a while to come through. So as Peter says, hopefully, in pounds and then eventually in greater strength.
And your question, Andrew, was about '24 specifically, but just at the highest level, the combination of SuperSaveClub in dialogue to make it easier for customers to buy more stuff from us and to incentivize them to buy more stuff from us, just makes sense as a strategy for this organization.
We'll now take our next question -- this is from the line of Rahul Chopra from HSBC.
I have a couple of questions. First, could you give us a sense of the change in providers response post FCA in terms of the number of new product launches? And maybe some color on insurance premium in Q2 by verticals? That's the first question. The second, could you also talk about -- a bit more about cross channel inquiries. You talked about cost channel queries at 20%. So I just want to check, which probably just a sense of where are you seeing those product gross inquiries? Is it basically between money and energy or money and insurance are between travel? I just wanted to get a sense of where these gross inquiries are conversion rates on those gross inquiries as well, please, if you could give us some sense.
Great. I'll do the first, Rahul, and again, I hand over to Niall for the second. Let me begin by talking about motor insurance because I do think it's really interesting. What we've seen in the half -- so starting in most premiums have been up 18%. You will probably have seen some numbers which are exciting at 18%. 18% is the number to the end of May, the industry data about products that have been purchased. So not quote that have been given, actually products that have been purchased. On top of that, we have seen a 24% year-on-year increase in the half in terms of the number of products on the platform. And interestingly, over 1 in 3 of those products are now what I call tiered products, potentially giving customers the opportunity to trade up and buy more features. And we see something around 50% of customers deciding to do that, actually looking for tiered products and then kind of buying more -- or buying an enhancement essentially to the base offer, which was made. Now I think the reality of all that together, premiums up by significant amounts an increasingly complicated product environment for customers to navigate just says that they need price comparison to help them through all of their comparison websites. I think are probably one of the few ways you can really guarantee that you're meeting properly customers' demands and needs and the way that the regulator wants us to see. That has resulted in market switching being up 19% in the half. That, again, I think, is end of May data. Although you'll see that our numbers are better than that in that we have been up 23% against that market up of 19%. So the summary of all that, I think, is premiums have gone up more products have been launched. That means that customers have increasingly gone to comparison websites like ourselves to actually find good solutions. And then as we've said, we have won a greater share of this growing market. If I then look at home insurance, it's a sort of similar story, but one that slightly lags kind of in every way. So you would be surprised to hear that an [indiscernible] insurance to provide us more profitable products. They focus there first, after the FCA regulation moves on [ fame ] after that. So we've seen premiums up 13% in home. We've probably seen about 10% more products launched H1 on H1 in terms of where they are. And we're starting to see tiered products coming through. So that market is up 6% overall. Again, winning we're winning share of the growing market. But we're seeing a very, very similar story begin to wash through. So I hope that answers #1, Rahul. Niall just to have cross-channel.
So Rahul, you'll see in the pack and in the RNS that we've put out what we call MSM cross-channel inquiry, 20.6%, which is flat year-over-year. And what that number is, it is the number -- the proportion of MSM active users that are making an inquiry in more than one channel in the last 12 months. Now in that number this year, you've got a couple of -- you've got well, a few moving parts. The big one is energy. So you'll recall at the prelims, we talked about the fact that energy inquiry was up more in 2022 than the year before that. So people inquiring when there was nothing. Energy in this period is down on that, which is probably not surprising given where the sort of end market is. And then the things that are making the ups are primarily in the other channels, but definitely insurance is one of the big upswings.
We'll now take our next question -- this is from the line of Julia Casa Kosiba from UBS.
I've got a couple, if I may. So my first question is about energy switching. I believe right now, there is a gap between the wholesale price and the price cut of the market. So why do you think we don't see a lot of providers coming back to the market with new offers to attract new customers? And in your view, what needs to change for this to happen. And the second question is about current revenue trends. Can you please update us on insurance and [ money trading ] in July, please?
Again, I'll pass the second on to now Niall [indiscernible] right, and I'll pick up the first in terms of energy. So I think you're right. So we are seeing now wholesale prices at the point below the price cap were post-market stabilization charge providers could make some money. I think the issue really here, Julia, is volatility. Those wholesale prices are changing, obviously, daily, but the movements can be significant as well. So I think that we would expect more of a [ retent ] market when providers get confident that, that pricing is a little bit more stable than it is at the moment. So the opportunity for deals is there, and we've got one deal now on the platform. But I think we're probably going to need to see a little bit more price stability on the wholesale markets before we kind of get a more significant return coming. I think that's probably one of the biggest factors at the moment. Niall, do you want to pick up on anything else on that or money.
So just picking up, I mean, I think you're asking, Julia, the trend into H2, I think, nothing particularly extra in July compared to what we've already called out. Obviously, as we go through H2, we can talk about the fact that in H1 last year, the insurance market was down significantly. And then as we went through the year, that market got better. So as we go through this period, we're expecting that trend to continue. So nothing extra to call it in July other than what we've already said in the statement.
[Operator Instructions]
So we have one question that's been asked via the webcast from Alastair Reid at Investec. The first question is, firstly, you've announced the launch of your MSE ChatGPT product. What do you see as a potential benefit from this? And what risks, if any, do you see from these types of AI models more generally. And the second question from Andrew is Lastly, how are you thinking about the trajectory of the returning energy activity post 2023? Would you expect a return to near historic levels of activity as energy providers offer and compete on more innovative types of tariffs?
Okay. Again, study #1, and you do #2 Niall. So thanks for asking that, Alistair because I think this whole called ChatGPT thing is quite a huge level of interest in the market. So it's kind of good to have the opportunity to put our point of view forward. I think you can divide it in 2 ways. Firstly, how does this technology to get strong efficiency within the business. But I think perhaps even more importantly and more excitingly is how you begin to increase the funnel in which users can begin to search for our offerings. So in terms of the first, we're doing all the things that you would expect us to be doing. So thinking about SEO, we're [indiscernible], our CRM, generates our first AI on e-mails, looking at our tech growth and how we can make cogeneration more efficient, probably a number of the things you're hearing from lots of other organizations. But I think to your question, it's really how we can begin to use this technology to improve the customer experience that is really exciting. So the first application that has gone live is obviously on the MSE app, where we've used the tech to be into enable customers to quickly navigate through the wealth of information that, that can contain to begin to answer questions. And in part, that's just helping us understand how this technology works. The sort of responses we get from consumers to -- and how we essentially see it working in terms of the answers that we're happy it's delivering versus what is happening in practice. And I point something which I think is quite critical for this group really because what we do is take personal information from customers, put it through our proprietary systems essentially gives them a very personalized response, which meets all the regulatory criteria. Regulators, as you all know, are increasingly focused on customer outcomes, and they want somebody to be responsible for the quality of that outcome and to make sure that they are meeting [ trends ] and needs and delivering the right thing for the customer in the right sort of way. That's exactly what we do. And I think that, to some degree, provides a moat around our activities. We are not providing standardized answers. We are not -- we're not going to, I think, be finding ourselves competing against anonymous sources of information. The regulator does want to make sure that personalized solutions are actually meeting all the requirements that they should do. And I think that's kind of an important criteria. So you're going to be seeing more from us in coming weeks. We have other initiatives which are very, very close to kind of going live. They will look at all different areas of the proposition we're putting in front of the customer. Like many organizations, we see ourselves very much in the learning phase at the moment, which is conscious about the pace of this technology and making sure that we seize the opportunity as quickly as we can. Niall, I think the second part of the question was trajectory for energy post '23.
Yes. So I think it's worth maybe just calling out before the energy market closed up in 2020, we were doing at around GBP 50 million of revenue in the energy vertical. So it's a significant part of the business that's not there today. And in the medium-term, we're very confident of a market, a robust market coming back. I think our view, as we probably talked about before, is that providers will probably want to sign out the market. And as Peter sort of touched on a bit earlier, just that sort of volatility in the market probably militates a little bit towards doing that type of activity. And in fact, we -- as we've mentioned on the call today, we've got one small deal on at the moment. I see that as kind of good evidence of a return. But as we've talked about, nothing material for FY '23. So I think we will see it come back and probably any [indiscernible] way as we're seeing at the moment.
And just a couple of builds for that. We have probably the same number of providers left in the market that we have in broadband, and that's a very, very competitive market. And so for more our conversations with providers, we are fully anticipating that there will be a return to competitive dynamics. It was really good to see the regulator last week, acknowledging that a competitive market is really important in terms of creating good customer outcomes. And I know they're thinking more about how they make that happen as well. Any other questions?
We have a couple more coming through from the phone lines. And the next is a follow-up from the line of Julia Casa Kosiba from UBS.
I have one follow-up question on gross margin for the rest of the year. So given all the trends you mentioned, should we expect kind of flattish H2 gross margin as compared to H1.
Yes. Thanks, Julia. So obviously, H1 is flat year-over-year. I think I've talked about the puts and takes within that in terms of insurance and PPC being tailwinds and then headwinds within Money, Home Services and B2B. I think that's a very, very strong reflection of the strength of the group, the sort of portfolio of things that are there. And then if you think about the trend that we've sort of picked out for H2 there's nothing to say there that those themes won't play out in terms of percentage margin in the second half. But obviously, we'll be focused on growing the efficiency of the group, growing the top line sustainably.
We'll now take our next question -- and this is a follow-up from Rahul Chopra from HSBC.
I have a follow-up question on earlier in the call, you mentioned about giving back savings or spending on marketing. Could you just give us more sense of dynamics around gross margin versus marketing margin in the long, maybe medium-term? And basically, what should we think about operating margin for the group? Should it be probably higher -- when you think about a bit longer-term with lower marketing margin versus higher growth. I just want to understand if that macro those, please?
Yes. So I think Rahul what you're picking up there, I think, is around SuperSaveClub. So I think it's probably -- the key point here is SuperSaveClub is in trial, and we're not expecting anything material in terms of margins this year. So don't model anything in for that. I think in the longer-term, really, this is about rewarding customer loyalty. So we want to do more for customers who come to us directly. And hopefully, over time, that means shifting spend from paid sources to direct sources. So the benefit that we're going after really is around that. It's around customer loyalty. In the longer-term, as we kind of shift that source mix, that will give us choices around how we grow, how we achieve profitability. But it's going to take a number of cycles for it to play out. So if you think about most products are on an annual renewal cycle, we will have to see over those cycles, how it plays out.
[Operator Instructions]
Okay. I think that's feeling like we're done. I'm just checking for moderator anything else coming in.
No questions from the phone lines.
So well, just to finish by saying thanks very much for your time, everybody. I really appreciate you making the opportunity to ask questions today, and hopefully, we'll be following up with you over coming days if we can help any further. Thanks very much.
Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect. Speakers, please stand by.
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