MONY Group plc (MONY) Earnings Call Transcript
July 22, 2024
Earnings Call Speaker Segments
Good morning, and welcome to MONY Group Interim Results live Q&A. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to Peter Duffy, Chief Executive Officer of Money Group. Please go ahead.
Thank you, and good morning, everyone, and thank you for your time this morning. So hopefully, you've all had the opportunity to watch the results video that we released this morning, but perhaps I can just give you a quick recap before we get into questions. So we've had a good start to the year. We've delivered our best ever H1 revenue and EBITDA. Revenue was up 5% to GBP 223 million, EBITDA up 8% to GBP 73 million. The MONY group is all about saving households money. That is exactly what we've been up to in the half because we've saved customers an estimated GBP 1.7 billion. Now this growth is supported through our 2-sided marketplace. On the consumer side, we've seen momentum across what we're calling our member-based propositions. That's the SuperSaveClub for MoneySuperMarket, the app for MoneySavingExpert and Quidco. By growing members here, we're encouraging customer loyalty, retention and repeat purchasing. And in time, this will grow our revenue per customer, but then also importantly, reduce our reliance on expensive third-party marketing because more customers will be coming to shop with us directly. It's still early days. The initial results are suggesting that our member base models are achieving what they set out to do. On the provider side, the work we've done on our platform means we can get our products to market faster, onboarding them across our -- all of our brands, and our B2B partners simultaneously. And then we've also made great progress advancing or other additional provider services, market boost and tenancy. And these services help our partners get more great deals in front of customers and spend on us more revenue at the same time. So as we always say, there is strength in the breadth of our offering. We are more than just the comparison website and our investments in data, tech platform and marketing infrastructure means we are in the best shape possible to drive further growth, and I'm excited for what's ahead. But of course, our confidence in FY 2024 performance and continued strategic delivery meant that we were delighted to have grown the dividend by 3%. And with that, I'm going to open the floor to questions.
[Operator Instructions] We'll take our first question from Joe Barnet-Lamb at UBS.
Excellent. So 3 questions from me, please. So firstly, with premium growth slowing substantially led by motor but with home following, could you give us a bit more color on what gives you the confidence that insurance can continue to grow in 2H? Obviously, last year was really exceptional in the second half. Secondly, as growth in insurance slows down and cashback and B2B are sort of growing nicely, do you think this is going to negatively impact your gross margins in 2H? Or do you think you can hold them steady at 1H levels? And then the third question around OpEx. The low-cost growth in 1H was very impressive. This sort of low- to mid-single-digit cost growth guidance that you've given. Should we be thinking more low to mid? Or is there anything on the agenda to drive that up? And can you give us a bit of sort of broader color around the measures taken to get that cost growth so low? And as the group progresses post tech and data spending, do you think that can continue at low-single-digit levels?
Thanks, Joe. Perhaps I'll do one and I'll pass 2 and 3 on to you. So just in terms of premium growth. So obviously, premium growth in FY '23 for car was very significant at 35%. That's tapered off to 18% in H1 '24 and as we always say, home sort of lags car by 3 to 6 months. So we saw premium growth of circa 34% last year in home. That's now tapering off to circa 30% in H1 '24. So you see the sort of same trend, but not as pronounced in terms of what's happening. Yes, you're right, Joe. I mean, we will have tough comps in H2, but I'd point to a number of things, really. Firstly, the absolute price for a consumer paying is still really significant. We're estimating in H1 that an average consumer is saving about GBP 550 coming on to the platform. So whilst inflation may be tailing off, the absolute amount the customer is paying is really significant and the car insurance has never cost so much. We've now got 260 products for Car & Home on the platform. So typically, somebody is pricing in a way that is going to attract a certain sort of customer that means they can begin to find value. On top of that, all our [ martech ] that I used to talk about is now fully deployed and is helping us begin to drive volume efficiently. We've also obviously now got 10 B2B partners in car that we didn't have 12 months ago. So I think strategically, we're in a strong position in the second half of the year. Niall, do you want to pick up the questions on margin and OpEx?
Sure. Thanks, Joe. I mean start with gross margin. I think you're right. You're calling out in H1 sort of -- there's a couple of ups and downs going on inside that holding it steady. Obviously, the mix into Insure is helpful. We've also been doing a lot of work on our PBC bidding to make sure that, that remains efficient, and those are all tailwinds in the first half. And then offsetting that, the growth in Cashback and in B2B, obviously, they're structurally lower margins. I think as we look into the second half, you're going to see the similar dynamics play out with Cashback and B2B, hopefully continuing to grow. But we'll also be working to make sure that we manage our margin carefully. We're always making decisions week-to-week, month-to-month on where we find margin to be acceptable and either bidding or not bidding on that basis. And then picking up on the OpEx piece, clearly, we've guided low to mid for the year. We're coming in at 2% for the half, which is partly distribution costs where, again, we've sort of taken the advertising down where we could. But also, I think inside admin costs as well, if you look at people cost being up 2%, that those were [indiscernible] piece of work. So lot of that good work will sort of also see benefit in the second half.
Our next question is from Andrew Ross at Barclays.
I've got 2, if that's okay. The first one is on SuperSaveClub. And I wanted to ask, can you give us a sense as to what percentage of switches or revenues the SuperSaveClub represents in the early verticals [indiscernible] insurance? And maybe to ask a question in a different way, how many of your total transacting users does the 500,000 people now find up to the club represent because the 14 million active users you suppose, I think, is inquiring from your transactions. If you can give a sense as to what that number is in transaction, that would help us to [indiscernible] meaningful because that is in context? That's the first question. And the second one is on energy, I guess, a big picture one. But -- what is your latest thinking in terms of when revenues might start to be material in that business?
Great. Thanks, Andrew. Perhaps I'll do Club. Niall, do you want to pick up energy? So I mean I think the short answer is it's not massively material at the moment, Andrew. So we've done really well. We've got 500,000 members, which we're very excited about. And we've shared with you some data from the very early cohorts in terms of what they were looking like 6 months later. But obviously, about 500,000 has sort of grown across the half really. And so it isn't significant versus our overall sales yet. But I think what you should read in 500,000 is that customers think this is a relevant proposition. So as that grows, I would expect that to be different. So I don't think there's any more color I can show it on yet than to say it's not material at the moment. Niall, Energy?
Yes. Energy. So I think we're continuing to call out that we're not expecting anything material this year in energy. Clearly, as the year has gone on, there are things out there that are improving. So wholesale prices are coming down. They're not necessarily stable every day of the week yet, but they're definitely coming down. We know that the ban on acquisition tariff is being locked out by Ofgem and hopefully, in October this year, we'll know more on that. And we have got these on the platform. So at the end of the period, we had 4 teams on the platform as well. So that's all positive momentum. I think then what we need to see is kind of clarity, I guess, around the regulatory environment and providers feeling that confidence to come into the market and offer these.
If I could just follow up on that first answer. So I guess, Peter, would you expect that it will be a material part of revenue or a more material part of revenue just getting to '25 as part of scale. And I guess what I'm trying to ask is obviously good for those [indiscernible] dynamics going on amongst early adopters but when does this actually get big enough that it makes a difference to the P&L? Are you saying that's more a '26 thing than a '25 thing? Is it still a kind of immaterial part of the overall group revenue right now?
Yes. No, I do think you'll start seeing the impact in '25, Andrew, beginning to wash through. So if we kind of look at our rate of acquisition and if that stays at the levels that we're seeing at the moment in the attachment rates we see from customers who are coming to the platform now, we would expect that to be a significant volume in '25 and start to begin to have an impact.
Our next question is from Luke Holbrook at Morgan Stanley.
My first is just on market share dynamics in the quarter. So I think in prior releases, you might have commented on whether you've kind of gained share and installments or not. Just wondered if you can comment in that regard. And also, just secondly, on the reduction in distribution costs on -- was it more of a conscious effort to reduce brand advertising in terms of growth and profitability trade-off and whether that also impacted any of your market share in the quarter?
Yes. Thanks, Luke. Look, I think in terms of market share, we don't obviously get into individual dynamics. I think if you look at this on a sort of what's been happening over the last couple of years, we've been clearly taking share in this half. We've won the Auto Trader deal. We also are pointing out that we have taken decisions to keep margin where we want it to be at certain points in time as well. So there's always ups and downs in it, but we're happy with where we are. I think then, sorry, on the second question, reduction in distribution costs. You remember that sort of back end of last year, we did say that we put more money behind Quidco and travel supermarkets specifically. And we also were looking to make the spend more efficient as we get into this half. So some of it was -- sorry, all of it was a very conscious decision about where we were putting our money, but it comes on the back of the work that we've already been doing for the last couple of years really to get the spend that we are putting out there more effective.
Okay. Understood. So the fact that you're effectively reiterating adjusted EBITDA guidance in line with the market for the full year just basically reflects some of the potential in the second half to see maybe some lower growth than profitability if you're basically protecting that in Q2. I'm just wondering why -- or if you think the market may be a bit conservative on the profitability for the full year?
So we're getting to the consensus number. So we have it at GBP 140.5 million and I think it probably will reflect some of the trends of what we've seen in H1, where we're guiding to low to single in terms of OpEx where -- and we're saying there's not going to be any energy and the insurance becomes a sort of a tougher comp in the second half. So I think that's kind of in line with what the market has been.
Our next question is from Ciaran Donnelly of Berenberg.
Just a couple for me. I guess on marketing margin. If we could just dive a little deeper on that. Could you help us, I guess, understand a little bit more how much of it came from kind of benefits you've seen on the efficiency of your marketing spend? I guess, is there anything in terms of pricing in online spend, it's slightly softened, I guess, 3 just in terms of the member-based propositions. Have you seen any benefit from that flowing through? And then just secondly, just on M&A, obviously, Quidco is now kind of in the rearview mirror. Can you give us your updated thoughts on that?
Do you want to pick up on the margin, I'll pick up on M&A?
Yes. I think the margin is pretty much the point we were just talking about, Ciaran, and you can see the benefit of the reduction around the TV and radio spend that's gone through in the half. So that is the bulk of what's going on. So I'd say that all comes from getting the spend quite efficient over the last few years. You can choose which channels you want to go and spend your money and we're choosing and trying to keep the margin in the right place as we go through each period.
And then, Ciaran, to your point on M&A, we will have delevered Quidco by the end of the year. Look, our situation is kind of the same. We look at it a lot. We consider a few. We do very, very little. We have a very high benchmark when it comes to M&A. We look at things that make absolute strategic sense to us and the shareholder. So obviously, we have an active program understanding what's happening in the market. At any point in time, we will only consider the absolute best opportunities for the group. So nothing changes in that regard.
My next question is from Roddy Davidson at Shore Capital.
And not too much left on the question, Peter, actually, after the other guys. Just a couple of things, maybe sort of slightly higher level in terms of perspective if I may. Firstly, any thoughts -- initial thoughts on the sort of relevance of any of the initial trends from the new government on your trading environment, any of your underlying verticals? And also just interested in your view on how quickly you think that products within the money vertical could pivot in the event of an interest rate cut.
Yes. Thanks, Roddy. I mean, obviously, it's still very early days in terms of a new administration. So I think it's very difficult to kind of call out anything in particular, Roddy. I think there are very few initiatives which are particularly in the space of kind of what we do. So I think it is just too early doors really to say one thing or another. Sorry, the second question was...
Money and interest rates.
Money and interest rates. So clearly, as interest rates begin to drop, we would expect that to be a tailwind. So you remember when we have a [indiscernible] trust budget. We saw almost overnight reduction in conversion rates on mortgages, loans and credit cards. Niall has pointed out that we've had quite strong trading in credit cards, but you're still seeing suppressed conversion really on loans and mortgages. I think small changes aren't going to make a massive difference. But I think when rates potentially come down by 1% or 2% or more like 2%, we will probably see that to be an environment that was more supportive of the consumer in terms of using borrowings to begin to bring forward some of their discretionary purchases.
Yes, I guess it's difficult to make an assessment of how quickly things pivot. I just -- I suppose I was interested in whether you get a sense from your partners that they have products that are basically on the shelf and ready to go. The other -- can I ask, if I may, a supplementary just on B2B, I mean, great progress we've made in that area in terms of the number of partners that you have. How should we sort of think of the ultimate potential and breadth of the opportunity in that space?
Yes. Maybe I'll do the first one and pass the second one on to Niall again on B2B. So in terms of sort of products on the shelf to pivot, I think really these lending products, these mortgages, they're relatively simple and essentially, the sticker price is the thing that really begins to make a difference to the consumer, what that monthly repayment is. So I think when interest rates get to the point that, that becomes something that seems to make sense to a consumer versus the -- what they're wanting to do is that discretionary expenditure, then we'll start to begin to see that move. And I think in terms of the mortgage market, well, there's quite a lot of commentary there in terms of what we would expect it to begin to happen as interest rates begin to kind of move back to more historic norms, obviously, pre the financial crisis. So I'm thinking of a couple of percent, Roddy, again, I sort of reiterate that before you would begin to see those tailwinds starting to come through. Now on the second part of the question?
Yes. I think B2B, I just think there's -- historically, we've done a lot of B2B in home services. Last year, we really sort of got insurance live. And we've kind of gone quite rapidly at winning customers through -- well, through the course of last year, including sort of the Auto Trader towards the end of the half. So there is -- as we bring more products on that gives us more potential to win in more markets. But even within the markets that we have, we've got a fairly full pipeline review that we do regularly. It does take time to bring these -- bring them on. So we'll just keep chipping away at it, Roddy.
[Operator Instructions] Our next question is from Rahul Chopra at HSBC.
I have 2 questions. In terms of the slowdown in insurance, could you give us any -- are you seeing any signs of increased competitive activity in the insurance vertical that should impact conversion rates. How should we think about that? Second, in terms of coming back to insurance, Direct Line recently had given an indication that they'll be moving towards price comparison websites towards the Direct Line insurance brand. So any early comments in terms of how you're thinking in terms of what it means to the volumes for the price comparison sector? And finally, in terms of SuperSaveClub loyalty costs, I think the GBP 15 voucher and GBP 300 basically reward loyalty -- I mean probably that's an aggregate number. But that how does it compare with traditional marketing or net spend on a per user basis? Just wanted to understand a feel of it.
Great. Thanks, Rahul. Niall, can I ask you to pick up the third one there? So just in terms of competition, I would observe the home and motor markets are intensely competitive. I think I said earlier in the call, we have 260 products, many of which are repriced, very regularly for customers, if not same day, real-time increasingly. So I think you've got a very, very competitive market there, which is why the consumer does need an environment like MoneySuperMarkets begin to get the best deal for them to meet their individual demands and needs. It's just too complicated to kind of understand without some level of taxable. And I don't see any reduction in that competition starting to happen. What you see are new products, you see new initiatives coming through from providers all the time, quite an entrepreneurial space. So I don't see that environment changing. The 260 products I talk about, that's up 20% essentially in 2 years. In terms of Direct Line, yes, obviously, Direct Line has said that they're coming on to comparison. Obviously, Direct Line group are already in comparison with our other brands, but they have said that they're bringing a red line on to price comparison websites as well. So we'll be looking forward to having conversations with them about how quickly we can begin to support them with their aspiration. Niall?
Yes. So in terms of the SuperSaveClub, I think the way to think about this is if you look at our current cross inquiry rate that we give as a KPI, the customers are looking at 1.2 things. So that's kind of telling you something about the number of times we need to acquire a customer for any given product. And the point of what we're trying to achieve in the club is we're trying to get them to buy more and to do that constantly with us sort of over multiple years. And that's a sort of proper change of behavior that we're wanting to drive. Clearly, as Peter has kind of called out, we're in the quite early stages of it to know whether or not that's going to compare very differently in the future to what we've got right now. But we are managing club and our marketing mix at the moment to hold our margin where it is. So we're managing that through this period as we try to get more control over our spend in the future through the member-based initiatives.
We have another question from Joe Barnet-Lamb at UBS.
Excellent. A couple more from me, please. So on tenancy, how meaningful are the revenues coming from tenancy now? And how do you view that with regards to where it can get to? When you consider the growth of those tenancy revenues, what's -- does the growth come from you putting more real estate aside for ads or selling out the space you already have or driving up the cost you're charging for it? And just to confirm, presumably that's close to sort of 100% margin? And then secondly, you mentioned, I think, in the recorded remarks about the new AI-powered campaigns to reach more users through more channels and specifically, I think you called out broadband. Can you give a little bit more color on what you've done here, what the benefits were on CAC and is it something you can push more widely as well?
Let me start then on both of them, and then I'll throw those over to Niall to pick up on both of them. So -- so Joe, tenancy is all about smarter targeting. It's not about putting more inventory all over the site. So we're quite happy with the way tenancy works on the site now. It's just about refining the targeting and enabling providers to talk to those cohorts they really want to talk to. So that's very much what our focus looks like going forward. And actually, the tenancy that SuperSaveClub is a good example of that where you have a provider who essentially can begin to augment the club benefits essentially for someone who is a member. So if the club gives you x, then they can get y, if they choose that product from somebody who's buying into that opportunity. I think the -- what I was trying to make on AI is that actually the breadth of our exploration across the whole group is what is kind of really exciting. So we've got a lot of stuff going on. So clearly, we've switched on the copilot in terms of software development, in terms of data science. We're obviously using it in terms of content creation and the customer services like many organizations have. I used the example how our bot now is answering 2/3 of customer contacts on MoneySuperMarket, and we're getting really, really strong feedback in terms of how that happens. But it's actually the stuff that we're planning on doing in terms of the customer experience, the overall customer proposition that most excites us, and we can begin to use this technology to offer services that we haven't been able -- or enhance services that we haven't been able to do previously, it would have been very complicated for us to begin to do previously. So just to say there's kind of lots going on across the group. Niall, do you want to pick up on anything else in that?
Only just to sort of extend into the point on AI, I think the thing about having a platform now, Joe, is that we push those -- we push that type of campaign everywhere. So all the brands get access to those tools right away. I think the -- can we do more becomes about the data that we have and the more that we question to our member-based propositions, the more we'll know and the better we can target the cohorts that our providers want to target as well as that we want to target.
Just a follow-up on tenancy, if that's all right. I mean, is it fair to assume that tenancy at the moment is sort of fairly immaterial to group revenues? Is it sort of low-single-digit percentage? Because I sort of imagine that the incremental margin there is close to 100%. And otherwise, if it were more material, it would be impacting group margin?
So yes, I think you're in the zip code of where to think about it. It's very high-margin products, not totally free as we do have people who look after that service for us, but it's very helpful from a margin perspective.
[Operator Instructions] We have another question from Andrew Ross at Barclays.
I have one more on [indiscernible] talked about normalization in premium, I think this is one of the areas where your monetization actually is a function of premium buying as opposed to being a flat fee. Can you just tell us where the average premium in travel is compared to [indiscernible]? How fast that normalizing [indiscernible] normalize this to? I mean how we could try to think about that in product your revenues into '25? And I guess I'm worried is an extra [indiscernible] back half of this year in '25 if we probably normalize [indiscernible]. All of that would be helpful.
Andrew. You are going to have to forgive us, you're a bit discombobulated there, but I think we've got the message of it is around travel, travel insurance premiums. Niall, do you want to?
Yes, I didn't -- I didn't quite catch all of the question, Andrew, I think. I think what we're calling out here is that we're seeing consumers move to a lower tier of cover from what they have been since COVID basically. So what we've been seeing over the last few years is that we've had a tailwind from people buying the highest tier of cover. And what we've seen through the first half is that people are breeding down into more silver and bronze. Clearly, that is a bit of a headwind in terms of we get a percentage of the price on travel insurance, but it's not something -- we're not calling out here that this is materially below pre-COVID levels.
How much higher is the premium today that you're getting on average than it was pre-COVID when we kind of think about over time, how normalization has to run or maybe think it won't fully normalize, but to better understand that.
Andrew, why don't I come back to you with some of the detail on it. I think that this is one of these things where you -- we're comparing quite different things now to what we were comparing then in terms of mix, in terms of providers that were there in terms of all that. So I don't want to lead you astray with the wrong number.
There are no further questions. I'll now hand back to Peter for closing remarks.
Well, great. Thank you very much for your time, everybody. I really appreciate the opportunity to talk more. I think we'll be speaking with a number of you over the next few days. But of course, if there's anything that we haven't covered, but you'd like to have information on, then please get in contact with the team and may be only too happy to help. But thank you for your time this morning. Appreciate it. Take care. Bye-bye.
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