iSelect shares plummet after profit disappointment – but comparison sites still doing fine

Price comparison site iSelect has started its life on the ASX with a whimper, missing out on revenue targets for its first results announcement – and its shares have plummeted yet again. 

This morning, shares are down 11% to $1.44 at 12.00 AEST, well below the original listing price of $1.76. 

The performance echoes the company’s first day on the bourse, when shares dropped 15%.

But does this reflect badly on the rest of the price comparison and aggregation industry?

Not so much, industry veterans say.

“With iSelect, the company has a health insurance business which is quite mature,” says price comparison site Mozo’s managing director Rohan Gamble.

“But they still have several early stage businesses within the company and it’s going to take time for those to get going.”

After listing in June – after several years of speculation – iSelect experienced a disappointing start, falling 29 cents on its first day of trading to $1.56. Yesterday’s announcement resulted in a drop of 6% to $1.62.

iSelect reported a full-year net profit of $13.4 million yesterday, on revenue of $118 million. Earlier this year, in its prospectus, the company predicted revenue of $121.6 million and profit of $14.5 million.

Chief executive Matt McCann said the changes to the private health rebate had impacted business.

“We saw people make lower-price purchases in terms of their private health insurance policies,” he told Fairfax.

“But demand for private health insurance is still strong, the market is still growing.”

iSelect is seen as the darling of the Australian product aggregation industry, having been the first to achieve massive success and a listing. While this setback could be seen as a slight, Gamble says the nature of the industry is too popular and growing too quickly to ignore.

“iSelect is not really an online business,” he says. “I don’t even see them as a competitor, they’re running an offline call centre business at the end of the day.”

“All of this comes down to perspective – they’ve had a cracking valuation.”

Earlier this year, Catcha Group chief executive Patrick Grove said aggregation sites and services businesses would be part of the next wave of successful online enterprises in Australia.

The success of the comparison industry has attracted regulators’ attention – in December 2012 the Australian Securities and Investments Commission released a warning saying it would keep a close eye on the sector.