Moneysupermarket.com share price drops despite 70% profit rise

Moneysupermarket.com earns a fee on the sale of mortgages, credits cards, insurance and holidays

Shares in price comparison website Moneysupermarket.com have dropped by 15% despite the firm recording a sharp rise in half-year profits.

The company, based in Ewloe, Flintshire, said pre-tax profits were up 70% from £11.6m to £19.8m.

Its share price fell on Wednesday after it said the UK government's funding for lending scheme had hit business.

The firm said cheap loans had reduced rates for savers too, so fewer people were comparing and switching accounts.

It added that fewer banks were offering its accounts for comparison via the website.

Moneysupermarket.com earns a fee on the sale of mortgages, credits cards, insurance and holidays.

Impacts

The company said: "The group's non-credit business and in particular its savings revenues have continued to be impacted by the government's funding for lending scheme which enables financial institutions to borrow from the Bank of England at very attractive rates.

"This has had two impacts upon the dynamics within the savings channel.

"Firstly the deposit rates available to consumers have fallen significantly and this has reduced consumers' propensity to switch products.

"Secondly the demand from providers [banks] for more costly retail deposits has also fallen reducing the number of providers who have a commercial arrangement with the group for retail deposits."

It said the two factors had "significantly reduced revenues" in its savings business in the first half of the year.

Moneysupermarket.com said its other three divisions - insurance, travel and home services - all saw earnings increase.

In the six months to June 30, the company said earnings before interest, tax, depreciation and the adjusted value of its assets (EBITDA) grew by 29% to £39.9m, while revenue increased by 10% to £112.3m.

Simon Nixon - who co-founded the price comparison site in 1999 - made £170m after selling a 15% stake in the company, it was announced in June.