iSelect falls shy of first targets
The company, which was listed on the Australian Securities Exchange in June, told the market in its prelisting prospectus that it expected revenue for the financial year to climb to $122 million, driving its profit to a record high of $14.5 million.
The company missed this guidance on Thursday, reporting a full-year net profit of $13.4 million, with revenues of $118 million.
The lower earnings disappointed investors, who sent shares down 6.1 per cent on Thursday, to close at $1.62.
Chief executive Matt McCann said changes to the private health rebate had an impact on the type of policies the company was selling in the second half of the year.
"We saw people make lower-price purchases in terms of their private health insurance policies. That for us was part of the cause."
"But demand for private health insurance is still strong, the market is still growing."
The comparison website made a dismal debut in June, slumping 29¢ to $1.56. The bulk of the company's revenues are generated through commission payments. These are typically in upfront fees or trailing commissions.
Frequently Asked Questions about this Article…
iSelect reported full-year revenue of $118 million and a net profit of $13.4 million for the 2013 financial year. This was below the company's pre‑listing guidance, which had forecast $122 million in revenue and a record profit of $14.5 million.
iSelect said it missed the target because customers shifted to lower‑priced private health insurance products in the second half of the year. The company linked this change in buying behaviour to adjustments in the private health rebate, which altered the mix of policies being sold and reduced average revenue per sale.
Investors reacted negatively to the lower earnings: iSelect shares fell 6.1% on the day the results were released, closing at $1.62. The stock also had a weak market debut in June, dropping 29 cents to $1.56 shortly after listing.
The bulk of iSelect's revenues come from commission payments tied to the policies it helps place. Those commissions typically come in the form of upfront fees or trailing commissions from insurance providers.
iSelect was listed on the Australian Securities Exchange in June. Its debut was described as dismal in the article, with the stock falling 29 cents to $1.56 soon after listing.
CEO Matt McCann said demand for private health insurance remains strong and the market is still growing, but he noted that policy purchasers were making lower‑price choices in response to rebate changes, which affected iSelect’s revenue mix.
Changes to the private health rebate can shift consumer preferences toward lower‑priced policies. Because iSelect earns commissions on policies it places, a move to cheaper products can reduce average commission income and therefore lower overall revenue and profit.
Everyday investors should know iSelect's results are sensitive to the type of private health policies sold (price mix) and to regulatory or rebate changes that affect consumer choice. Since most revenue is commission‑based, shifts toward lower‑priced products can reduce income and cause short‑term share price volatility, as seen after the 2013 results and the company’s weak listing performance.
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