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iSelect share price on watch after mixed earnings result

share price falls

The iSelect Ltd (ASX: ISU) share price is on watch this morning after announcing a $6.93 million loss, down 367% from the $1.48 million loss in 1H18.

What did iSelect report?

The insurance comparisons site also saw revenue decline 8% on prior corresponding period to $74.25 million while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 204% to -$2.57 million, down from $2.48 million in 1H18.

Net tangible assets (NTA) per security was flat at $0.60 per share while underlying earnings per share (EPS) increased by 69% to 2.2 cents per share (cps). The company reported an underlying net profit after tax (NPAT) of $4.83 million, up 72% from last year – albeit these underlying results strip out financial impacts of iMoney, impairment losses, write-offs from discontinued operations and material one-off transactions.

On a consolidated basis, the company generated 1.97 million leads with a conversion rate of 10.0%, down from 2.15 million at 10.4% in 1H18. The company saw a 6% decline in its Health operating revenue, however operating margin increased 3.9 percentage points (pp) to 13.6%. Life and General Insurance performed strongly, with operating revenue increasing 12% in the half while margin increased 16.3pp to 24.3%, while challenges in Energy and Telecommunications continued with an 18% drop in operating revenue in the half.

The company’s balance sheet also took a hit in 1H19, with net assets dropping $6 million to $157.60 million for the half. Net cash from operating activities was in the black, up 390% on last year’s numbers to $1.39 million in 1H19.

iSelect’s share price has been on the slide since a peak of 2.128 per share in July 2017, with Friday’s closing price of $0.800 per share representing a 62% decline in just 18 months. The company endured a difficult year in 2018 as its CEO resigned amid ongoing downgrades to earnings.

The company has blamed weak market conditions, particularly in the healthcare and telecommunications sectors, as the catalyst for its eroding profitability.

Is the iSelect share price a ‘Buy’?

I wouldn’t be buying the iSelect share price at $0.80 per share. It will be interesting to see the market reaction to the announcement this morning with a fairly mixed bag of results to dissect in the first half.

At the moment, I’d be steering clear and looking towards the likes of Origin Energy Ltd (ASX: ORG) ahead of its earnings release later in February.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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