Gocompare.com Group PLC (LON:GOCO) shares sank in mid-morning trading Tuesday after it reported flat revenues in its half-year results, offsetting a rise in adjusted operating profits.
The insurance comparison provider reported the revenues were unchanged from the same period a year ago at £75.8mln, while adjusted operating profits rose 20% to £15.9mln driven by an expansion in marketing margins in its price comparison division to 46.4% from 39.6%.
READ: Gocompare.com sees 2018 outlook unchanged as it posts strong 2017 results
The firm’s total marketing spend also declined during the period to £40mln from £45.8mln in the same period last year.
However, the group also saw a 12.9% decline in customer interaction in its price comparison division, although the average revenue per customer had increased to £4.80 from £4.43 at the same time last year.
In its outlook, the group said it was confident of meeting its expectations for the full year.
Matthew Crummack, chief executive of GoCompare, said that increase in adjusted operating profits was down to “a disciplined approach to marketing spend”, adding that the group’s “focus on cash generation” would continue to help drive innovation and shareholder value.
However, the market was less than impressed, with shares dropping 7.8% to 121.6p.
Analysts at City broker Liberum said that while the company was confident of meeting its full-year expectations, they were struggling to see “how this happens” with revenues staying flat year-on-year.
They added that underlying revenues for the year had actually declined by 4.9% year-on-year and that this would be “taken negatively”, especially given a 5% revenue rise for competitor Moneysupermarket.com Group PLC (LON:MONY).
Nicholas Hyett, equity analyst at Hargreaves Lansdown, was more upbeat, saying the fact that "profits have still taken a meaningful step in the right direction is welcome news".
He added that this "bodes well [as] anyone can throw money and manpower at marketing and so long as the product is good enough some will stick, but a more value-focused approach should deliver profitable growth long term. It reminds us of the old saying that ‘sales are vanity but profits are sanity’".
--Adds analyst comment and updates share price--