GoCompare profit and revenue rise, plans £10m investment in weflip

Price comparison website GoCompare posted a rise in full-year operating profit and revenue on Thursday as it announced a £10m investment in its weflip service.

Revenue in the year to the end of December 2018 pushed up 2.3% to £152.6m, with adjusted operating profit up 22.2% to £44m and adjusted basic earnings per share 20% higher at 7.8p.

Meanwhile, pre-tax profit rose to £33.8m from £30.7m the year before.

The price comparison marketing margin improved to 46.4% during the year from 40.5% in 2017 through gains in conversion and more targeted marketing spend.

The board announced a final dividend of 0.8p a share, taking the full-year dividend to 1.6p, up 14%.

Chairman Peter Wood said: "The group pursued a fast-paced and ambitious strategic plan in 2018, making investments and product developments that set the group up for long-term success. This was complemented by a continuation of our disciplined approach to financial performance and a focus on cash generation, resulting in good growth in adjusted operating profit.

"Throughout 2019 and beyond, we will continue to focus on delivering value to our shareholders by developing new and more efficient ways to help people save time and money."

The company said weflip, the new energy switching service it launched last year, has the potential to disrupt markets in the same way that price comparison did when GoCompare was launched back in 2006.

"Over the medium term, we believe weflip will deliver exceptional growth and transform the group," said chief executive officer Matthew Crummack.

The group said it plans to spend £10m in marketing for weflip this year, which will be funded by operational cash flow from the core business.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "GoCompare’s results are driven by the price comparison business - where more targeted marketing spend has boosted margins and profits. But the focus today is really on the future.

"Management think its automatic switching service has the potential to revolutionise the way we buy services - and if it’s successful it will revolutionise GoCompare as well. The current business is very transactional - users log on to the website, buy a product and leave, they might come back next year or they might not.

"Weflip would give GoCo an ongoing relationship with its customers, earning revenues over a longer period of time and reducing the need for constant marketing spend to keep customers coming back. That would make GoCo a lower risk, higher margin business.

"It’s going to take money to get weflip to where it needs to be though, and that’s soaking up the cash coming from the core price comparison business. The moustachioed tenor is forking out £10m to fund his younger brother next year, management will be hoping that weflip is quick to hit the right note."

At 1430 GMT, the shares were down 5.8% to 65.56p.