It has been a funny old week for investors in Moneysupermarket.com (LSE: MONY). Share prices drifted lower on Tuesday, then slumped on Wednesday when it was announced that Money’s CEO is looking to step down. The reaction seemed overblown to me.
The current CEO will stick around until he can hand over to a successor. In the same press release, it was made clear that full-year 2019 results would meet expectations, allaying any fears that the CEO’s departure forewarned a disappointing financial performance report. It is likely that share prices recovered some of the losses made over the week once investors realised they had overreacted.
Acting on results
Today, Money shares are up by nearly 13% as I write this piece. The full-year 2019 results seen today are good. Revenues grew by 9% in 2019 to £388.4m. What is very encouraging is that Money has maintained its operating profit margin at just over 30%, and kept its financing costs in check. As a result, profits after tax have grown by 10% over the year from £129.4m in 2018 to £141.5m in 2019.
Total dividends for 2019 are 11.71p per share, a 6% rise over the previous year. Dividends are covered 1.51 by 2019’s earnings per share of 17.7p. Dividend cover has actually been over 1.4 for the last five years. This suggests the dividend is sustainable at Money as it is paying them out of earnings with plenty left over to reinvest in the business.
Debt has risen slightly in the last year, with 54p of borrowings for every £1 in equity reported. 2018 debt levels were lower at 46p for every £1. However, I do not see a cause for concern at present as the debt looks like it rose to support logical acquisitions while core growth held up.
Moving forward
I am personally happy with 2019’s results since I tipped Money shares for success in January. So long as people are aware of price comparison services, I can’t see them declining the chance to try to save money. Money has been spending on refreshing and promoting its brand, and personalising the comparison and advice offered to users. Expanding the range of advice and comparison services, and venturing into business-to-business comparisons should help revenue growth keep ticking along.
I was attracted to Money because it pays an increasing dividend, and is still growing its revenues and profits at a healthy pace. From what I have seen in the 2019 results, these features are still in place. Money has now grown its revenues by 11.85% on average over the last five years. Profits have grown by 13.6% while dividends increased by 12.04% on average, measured over five years.Â
This stock has both growth and income aspects. Yes, the dividend yield, being around 3.3% now, is not jaw-dropping, but it is not low by any means. Since dividends are still increasing, the yield should increase over time for current shareholders. In addition, if growth continues, a higher stock price in the future should add to the total return.
Investors in Money will have to wait and see what experience the new CEO brings to the table. In the meantime, two new non-executive directors have been appointed. Both have ample digital experience and will bring that expertise to bear as Money expands and streamlines its Internet-based services.
The full-year 2019 results have reassured me that buying shares in Moneysupermarket.com for 2020 was a good decision.