One Day Can Be A Long Time In The Market

By David Buckland | More Articles by David Buckland

 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.