One Day Can Be A Long Time In The Share Market; iSelect down 52%
This year the Blue Sky Alternative Investments (ASX: BLA) share price has declined 78 per cent from $14.54 to $3.23 and the Company has earlier today accepted the resignation of Managing Director, Robert Shand. Fellow Executive Directors, Elaine Stead and Nicholas Dignam, have stepped down from the Board of Directors and will continue in their executive roles, as Head of Venture Capital and Growth Capital, respectively.
“We are seeking to appoint additional independent directors in line with our previously announced commitment to transitioning to a majority independent Board”, said John Kain, Blue Sky Chairman.
Meanwhile, iSelect Limited (ASX: ISU), has also seen its share price decline 78 percent, from $2.20 at July 2017 to the current $0.48. (And $0.52 of that share price decline occurred today). The difference with BLA however is in iSelect’s case its share price decline took nine months not four months. Scott Wilson resigned as CEO of iSelect and like Blue Sky the Company has appointed an interim-CEO and is now searching for a “permanent” successor.
The iSelect business does comparisons to assist its customers get better value for health insurance, electricity, gas, broadband, home loans, life insurance, car insurance, home and contents insurance as well as pet and travel insurance.
After a very tough trading period over the past five weeks, iSelect cut its Earnings before Interest and Tax (EBIT) guidance for the year to June 2018 by 64 per cent from a mid-point of $27.5 million to a mid-point of $10 million. (This compares with EBIT of $22.5 million in the year to June 2017). With June historically accounting for the bulk of the second half year’s earnings, the new guidance assumes a similar trajectory as that experienced over the last five weeks. (Five weeks – are these guys kidding?)
Pertinent points included:
- Both the Health and Energy & Telco verticals have been negatively impacted by market volatility and lower than expected leads;
- Health experienced a softening in overall market demand following low industry rate rises and challenging market conditions; and
- Energy & Telco was impacted by higher digital customer acquisition costs.
With 222.8 million shares on issue, iSelect has a current market capitalisation of $107 million, no debt and a cash balance of $21 million. Cash has declined from $80.4 million at June 2017 and $50 million of this difference can be explained from share-buybacks ($20.4 million), dividends ($12.4 million), the acquisition of iMoney ($10.2 million), capital expenditure ($4.8 million) and negative cash-flow ($2.2 million). The Company’s trail commission receivable as at March 2018 was $123.7 million.
One day can be a very long time in share markets, this year the Blue Sky Alternative Investments share price has declined 78%, iSelect has also declined this much since July 2017. Click To Tweet
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Joe Rich
:
Is the fund looking at iselect given potential for value in light of bargain price?
David Buckland
:
No Joe. Apart from illiquidity, we would have to assess the degree in which five bad weeks has lead to such a severe decline in the company’s earnings guidance for the year to June. This aspect is difficult to comprehend, given the financial year only has 9 weeks to go.
Phil WASER
:
And didn’t CBA dodge a bullet with ISU. They started 2018 owning 8.33% of ISU and only last month left the substantial shareholders register.
David Buckland
:
Thanks Phil. Yes CBA sold down from 18m shares to sub 11m shares as per ASX notice of 8/3/18. We don’t know how many of the shares (sub 5.0% of issued capital) they kept.
Tony Yates
:
I thought anyone was able to ask for print outs of share register movements for any given period. Is that incorrect?
David Buckland
:
Hi Tony, that is correct. However a lot of institutions invest via “Nominee companies” and this may be aggregated in terms of ownership.