slumps after strategy shift stalls growth

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LONDON (Reuters) – Price comparison website said its earnings would not grow this year as it tries to reinvent itself to focus on more personalization, mobile and new products like mortgages, sending its shares down 25 percent.

The British group, which offers deals on products like insurance, credit cards and utilities, said its revenue would also grow more slowly than the market while it shifts strategy.

It said it had started the year with revenue growth of around 4 percent, in line with last year, but lagging the wider market, which it expects to grow by 6-7 percent this year.

The slow growth, and an additional 5 million pounds of spending on product engineering, would results in core earnings coming in around 2017’s 127 million pounds ($176 million), around 10 percent below analysts’ forecasts.

Shares in the company slumped as much as 26 percent to a 18-month low on Thursday as the investors baulked at the guidance. They were trading down 18 percent at 269.5 pence at 0937 GMT.

Chief Executive Mark Lewis, who joined the company from retailer John Lewis in March 2017, said he wanted to make its price comparisons easier, quicker and simpler.

“Our goal is to offer our customers ways to save that they didn’t know existed and to do so in a way that is as effortless as we can make it,” he said.

Moneysupermarket, like its rivals, and, spends heavily on marketing to help attract and retain customers.

Its advertising campaigns, which use the strap line ”You’re so Moneysupermarket,“ featured 1980s children’s characters ”He-Man“ and Skeletor” last year.

Analyst Ian Whittaker at Liberum, who has a “hold” rating on the shares, said he expected a 10 percent downgrade to 2018 consensus estimates.

“While the new strategy does make sense, it highlights the fundamental issue, i.e. that barriers in price comparison websites are low, although Moneysupermarket’s new strategy is looking to address that,” he said.

Hedge funds missed out on the profits to be gained from Thursday’s share fall, with just 5,617 shares out on loan, or 0.001 percent, according to data from FIS’ Astec Analytics.

The company reported a 5 percent rise in core earnings to 127.2 million pounds on revenue of 329.7 million pounds, up 4 percent, for 2017.

Reporting by Paul Sandle and Maiya Keidan; Editing by Adrian Croft