iSelect (ASX:ISU)

Brodie Arnhold
Acting-CEO
Market Cap (AUD): 134.48M
Sector: Consumer Discretionary
Last Trade (AUD): 0.615 +0 (+0%)
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1. About

iSelect is Australia’s leading destination for personalised comparison and expert advice across insurance, utilities and personal financial products. iSelect is a consumer-led and customer-centric business. The Company compares and sells some of Australia’s biggest brands and is always adding more. iSelect  is a publicly-listed Australian company, and unlike other comparison services, the Company is not owned by an insurance company. From health and life insurance through to energy and broadband, as well as car insurance and home loans.

2. Business model

 

The Company operates the following divisions:[1]

 

Divisions

Revenue ($’000)

% of total Revenue

% of Profit (before Int,Tax, Depn & Amort)

Profit drivers[2]

Health

$89,123

51.5%

61.0%

The Health segment had a challenging second half of 2018 with annual operating revenue decreasing by $4,848,000 (or 5%) to $89,123,000. This was mainly due to a 9% decrease in leads with the new to private health insurance market demand continuing its decline

Life and General Insurance

$29,272

16.9%

33.8%

Operating revenue for the Life and General Insurance segment decreased by $3,350,000 (or 10%) from the last comparative year due in part to a drop in Life Insurance lead volumes in the first half of FY2018 through market demand and marketing mix. The life insurance industry is undergoing industry consolidation and structural reforms which have been a focus for the Life Insurance team in ensuring iSelect is well prepared and position for these changes

Energy and Telecommu-nications

$54,787

31.6%

5.2%

The Energy and Telecommunications segment continues to deliver top-line growth, posting an operating revenue result of $54,787,000 which when compared to this time last year, increased by $4,434,000 (or 9%). This was a result of industry price increases in the Energy business, as well as a 0.2pp increase in segment conversion with increased consultant speed-to-competency in the South African Customer Contact Centre

3. Strategy

    

Key strategies include:[3]

 

  • Achievement of FY18 guidance positions iSelect for a return to growth.
  • Revitalised senior executive team focused on operational performance and sustainable, profitable growth.
  • Initiatives implemented over Q4 FY18 are delivering tangible benefits.
  • Investment in technology to improve customer experience and underpin long-term growth.
  • Ensure iSelect continues to make it easier for customers to transparently compare services and make informed decisions to renew, buy and save through ongoing work with commercial partners, regulators and government.
  • Performance over July, featuring more effective marketing, leads optimised strong conversion rates and higher profits ahead of budget, gives the Board confidence of a promising year ahead and a trajectory that should see iSelect return to its historic profitability over the short to medium term.

4. Markets

    

The Company operates in markets including:[4]

 

Industry (Australia)

Industry Revenue (2018)

Growth Rate (annual 13-18)

General Insurance

$64 billion

2.2%

Health Insurance

$26 billion

4.6% (annual 14-19)

Life Insurance

$59 billion

(2.9%)

5. Competition

 

Major competitors include:[5]

 

  • Insurance Australia Group Ltd (ASX:IAG)
  • Medibank Private Ltd (ASX:MPL)
  • AMP Limited (ASX:AMP)

6. History

 

2000[6]   

iSelect launched by Damien Waller and another co-founder

 

2004   

iSelect recorded its first profit

 

2005   

Television and radio advertising commenced

 

2006   

Ninemsn acquired a 35% shareholding in iSelect

Popular “Puffin Muffins” television and radio advertising campaign launched

 

2007   

iSelect launched Life business unit

 

2009   

iSelect launched Car business unit

 

2011   

Spectrum acquired substantial shareholder in iSelect

Health business unit recorded over 66,000 sales in FY11

iSelect launched its Home Loans and Broad business units

iSelect completed the acquisition of InfoChoice

iSelect launched “Mr iSelect” marketing campaign

iSelect moved into a new campus in Cheltenham, Victoria

 

2012   

iSelect Health business unit recorded over 100,000 sales FY12

iSelect launched its Energy business unit

 

2013  

iSelect Limited announced the signing of a three year deal with Qantas Airways Limited to offer Qantas Point to customer purchasing Private Health Insurance and Energy product through iSelect

 

2014   

iSelect Limited  announced it had agreed to acquire 20.1% of the shares in Intelligent Money Sdn. Bhd at a cost of USD $4.0%m

 

2015   

iSelect Limited and nib holding limited entered into a multi-year agreement for iSelect to compare and distribute the majority of product from nib’s health insurance product range

 

2016   

iSelect announced landmark sponsorship of Bayside United Football Club

 

2017   

iSelect expands in South-East Asia with a majority interest in iMoney

7. Team

 

Board of Directors[7]

 

Chris Knoblanche AM – Chairman & Independent Non-Executive Director

Brodie Arnhold – CEO and Executive Director

Bridget Fair – Independent Non-Executive Director

Shaun Bonett – Independent Non-Executive Director, Chair of Remuneration and Nominations Committees

Melanie Wilson – Independent Non-Executive Director

Geoff Stalley – Non-Executive Director

 

Management Team

 

Brodie Arnhold – CEO and Executive Director

Henriette Rothschild – Chief Operating Officer

Vicki Pafumi – Chief Financial Officer

Slade Sherman – Chief Experience Officer

Warren Hebard – Chief Marketing Officer

Alan Caputo – Group Executive – Financial Services & Life

Kirsten Craven – Group Executive – Marketing

Alya Stephen – Group Executive – Energy & Telco

Michael White – Group Executive – Health & General Insurance

Nadine Lennie – Chief Financial Officer[8]

Mark Licciardo – Company Secretary[9]


read more

8. Financials

     

Financial Year 2017/18 (ended 30 June):[10]

 

Divisions

Revenue ($’000)

% Change

Profit (before Int,Tax, Depn & Amort) ($’000)

% Change

Health

$89,123

(5.2%)

$12,385

(44.9%)

Life and General Insurance

$29,272

(10.3%)

$6,856

(30.5%)

Energy and Telecommunications

$54,787

8.8%

$1,046

(63.5%)

Total

$173,182

(2.1%)

$20,287

(42.4%)

9. Risk

 

Major risks include:[11]

 

Financial Risk

The Company’s underlying business activities result in exposure to operational risks and a number of financial risks, including interest rate risk, foreign currency risk, credit risk and liquidity risk.

 

Interest Rate Risk

Interest rate risk arises from changes in market interest rates. Variable rates on its cash and cash equivalents give rise to cash flow interest risk.

 

Foreign Exchange Risk

Foreign currency risk is the risk that the value of a financial commitment, forecast transaction, recognised asset or liability will fluctuate due to changes in foreign exchange rates.

 

Credit Risk

Credit risk is the risk that a counterparty will default on its contractual obligations resulting in a financial loss. The Company is exposed to credit risk from its operating activities (primarily from cash and cash equivalents, trade and other receivables and trail commission receivable in future periods).

The Group’s maximum exposure to credit risk at reporting date in relation to each class of financial asset is the carrying amount of those assets as indicated in the statement of financial position.

Credit risk related to cash and cash equivalents

Investments of surplus funds are made only with approved counterparties and for approved amounts, to minimise the concentration of risks and mitigate financial loss through potential counterparty failure.

Credit risk related to trade receivables and future trail commission

The Group has exposure to credit risk associated with the health, life and general funds and mortgage providers, with regard to the calculation of trail commissions. Estimates of the likely credit risk are incorporated in the discount rates (one of the assumptions used in the fair value and amortised cost calculation). Any risk in relation to other revenue has been reflected in the allowance for credit losses.

 

Liquidity Risks

Liquidity risk is the risk that it will be unable to meet its financial obligations.

The Group aims to maintain the level of its cash and cash equivalents at an amount to meet its financial obligations. The Group also monitors the level of expected cash inflows on trade and other receivables together with expected cash outflows on trade and other payables through rolling forecasts. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted.

References

  1. ^ Annual Report 2018, P 29 - 30
    https://www.listcorp.com/asx/isu/iselect/news/fy18-iselect-annual-report-1948687.html
  2. ^ Annual Report 2018, P 29 - 30
    https://www.listcorp.com/asx/isu/iselect/news/fy18-iselect-annual-report-1948687.html
  3. ^ Full Year Results Investor Presentation 2018 P 19
    https://www.listcorp.com/asx/isu/iselect/news/fy18-full-year-results-investor-presentation-1948690.html
  4. ^ http://www.ibisworld.com.au/industry/default.aspx?indid=526
    http://www.ibisworld.com.au/industry/default.aspx?indid=525
    http://www.ibisworld.com.au/industry/default.aspx?indid=522
  5. ^ http://www.ibisworld.com.au/enterprisefull/default.aspx?entid=12919
  6. ^ http://corporate.iselect.com.au/our-business/our-history/
    http://www.asx.com.au/asxpdf/20131024/pdf/42k88d95gzfm3z.pdf
    http://www.asx.com.au/asxpdf/20140925/pdf/42sg2c246fqk66.pdf
    http://www.asx.com.au/asxpdf/20150210/pdf/42whzfk0072098.pdf
    http://corporate.iselect.com.au/wp-content/uploads/2013/09/28-February-2016-iSelect-announces-landmark-sponsorship-of-Bayside-United-Football-Club.pdf
    https://www.asx.com.au/asxpdf/20171003/pdf/43mwpkv93cd7b3.pdf
  7. ^ http://corporate.iselect.com.au/our-business/our-board/
    http://corporate.iselect.com.au/our-business/our-leadership-team/
  8. ^ https://www.listcorp.com/asx/isu/iselect/news/chief-financial-officer-appointment-1839558.html
  9. ^ https://www.listcorp.com/asx/isu/iselect/news/company-secretary-appointment-resignation-2005043.html
  10. ^ Annual Report 2018, P 29 - 30
    https://www.listcorp.com/asx/isu/iselect/news/fy18-iselect-annual-report-1948687.html
  11. ^ Annual Report 2018, P 83 - 84
    https://www.listcorp.com/asx/isu/iselect/news/fy18-iselect-annual-report-1948687.html