Moneysupermarket News and Market Exuberance

Moneysupermarket.com (MONY) issued their preliminary results this morning. It was headlined “Return to profit growth and good progress on reinvent”. The results were much as forecast so far as I could see, although the outlook suggests some second half weighting for the current year. But the share price has jumped 18% today to 365p which is where I started buying some last June. But I got somewhat nervous when the share price subsequently consistently fell after an initial spurt upwards despite forecasts being positive.

The other significant news was that CEO Mark Lewis indicated he wished to step down yesterday “and pursue his career in a new direction” so the board has started a search for a replacement. This is rather surprising as he has not been there very long. More explanation as to why he is departing would have been helpful.

Price comparison businesses like Moneysupermarket still seem to be growing but clearly they are maturing somewhat. However on a prospective p/e of 17 (before today’s jump) and a dividend yield of 4.6% according to Stockopedia they surely looked good value.

The company does generate considerable cash with a good return on capital but most of the profits are paid out in dividends rather than used to generate growth or acquire complementary businesses. Is that the strategic issue that caused the CEO to depart I wonder? We may no doubt learn more in due course.

Otherwise the stock market seems to be ignoring the global trade threats such as the coronavirus outbreak in China and the US/China trade war, plus the possible risk of a failure of UK free trade talks with the EU. It’s one of those markets where almost everything is rising and investor are just buying everything that looks reasonable. I may have to go on a share buying strike until the market calms down as it seems somewhat irrational at present. Too much investor exuberance in summary.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Moneysupermarket and Private Eye

Fame at last. This week Private Eye published a letter of mine on the subject of Moneysupermarket.com Plc. This was in response to a somewhat inaccurate article on companies ditching their advertising agents. This is what the letter said:

“Sir, Contrary to your article on companies ditching their advertising agencies in EYE 1466, where it is stated that Moneysupermarket.com lost money last year, the truth is that they actually made profits of £78.1 million.

However, as an investor in the company, I applaud the action of the new CEO in firing their advertising agency. I always thought good advertising was about promoting the merits of the product or service you were offering. But Moneysupermarket’s recent campaigns, such as a prancing “twerking businessman with a giant arse” as you put it, was nothing of the kind. Perhaps the new(ish) CEO (he has been there a year) took a similar view. Particularly when the financial results for last year were indeed disappointing, albeit revenues and profits were up 4% – but that’s not much more than inflation.”

Private Eye often publish some revealing articles on financial matters and this latest edition contains one such by “Slicker”. It covers the “existential crisis in corporate governance” which he says has increased since the financial crisis of 2008 with no top bankers, auditors, lawyers or regulators in court. The article covers many of the scandals that have come to light in that period, and this is a particularly pertinent comment therein: “Non-executive directors, who supposedly oversee the executive directors, have too often become an over-rewarded mafia of mediocrity, exhibiting all the signs of Stockholm Syndrome, their captors being the domineering CEOs to whim they never say no”.

He suggests some remedies which include “a corporate vicarious liability law” as in the USA, a Sarbanes-Oxley style law, and the banning of LTIPs. All well argued and it’s certainly worth reading.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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