U.S. Markets open in 3 hrs 55 mins

Edited Transcript of ISU.AX earnings conference call or presentation 20-Aug-19 1:00am GMT

Full Year 2019 iSelect Ltd Earnings Call

Melbourne Sep 4, 2019 (Thomson StreetEvents) -- Edited Transcript of iSelect Ltd earnings conference call or presentation Tuesday, August 20, 2019 at 1:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Broderick Ernst George Arnhold

iSelect Limited - CEO & Executive Director

* Henriette Rothschild

iSelect Limited - COO

* Slade Sherman

iSelect Limited - Chief Experience Officer

* Vicki Pafumi

iSelect Limited - CFO

* Warren Hebard

iSelect Limited - CMO

================================================================================

Conference Call Participants

================================================================================

* Alex Shevelev

Forager Funds Management Pty Ltd. - Senior Analyst

* Ian Munro

CCZ Equities Pty Limited, Research Division - Senior Analyst

* John Hester

Bell Potter Securities Limited, Research Division - Senior Healthcare Equities Analyst

* Michael Goldberg;Collins Street Value Fund

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Thank you for standing by, and welcome to the iSelect Limited FY '19 Full Year Results Presentation. (Operator Instructions)

I would now like to hand the conference over to Mr. Brodie Arnhold, CEO. Please go ahead.

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [2]

--------------------------------------------------------------------------------

Thank you for everyone who's may be able to dial-in today. I just want to start this presentation just by thanking the executive team, which was completed in the current year with the addition of Gavin Byrnes as General Counsel, and Gavin brings great experience in helping us navigate the regulatory focus that's in our market, so a welcome addition. We've got some speakers here today alongside myself: Henriette Rothschild, who is our Chief Operating Officer; Slade Sherman, who is our Chief Experience Officer; Warren Hebard, who is our Chief Marketing Officer; and Vicki Pafumi, our Chief Financial Officer. So they all will be saying a few words today, and you'll get the opportunity to ask some questions during the question time.

I'd also just like to thank the team for the wonderful alignment that they've given myself and the Board over the last 15 to 18 months since things have changed quite a little bit. It's definitely the strongest team we've ever had on the park and also the longest serving which is a really good sign from a culture perspective and where we're heading as an organization.

I'd like to thank the Board led by Chris Knoblanche, who supported successful business reset in FY '19, which is largely complete while allowing us to also invest in technology as we continue to transform our business from a transactional sales model to a customer relationship-based digitally-led model, which will match global best practice.

Most importantly, I want to thank our shareholders for their ongoing support and patience. And this will be rewarded with a strong sustainably profitable business moving forward. Awards are being seen in improved FY '19 performance which we'll talk about in a minute, but more importantly, the base has been set for future growth which will be able to leverage our investment in the brand and technology that's well underway in FY '20 and beyond.

Since stepping in as CEO in April 2018, we've focused hard as a team on informing the market what our plans are and then delivering on those plans. We've done this full year in FY '18 post the April update, the half year once again in February of FY '19 and once again today. We also plan as a Board and executive to remain very transparent on where we're heading with our business, and we'll continue to do this.

I want to Slide 3, which is FY '19 in review, and it's clearly a year of substantial turnaround. The primary focus has been on sustainable profitable growth. The EBIT growth in the underlying sense is up 77% on last year. This has been underpinned by significant improvement in our marketing ROI, which will continue to be a focus in FY '20 and beyond. Improved core business performance in an environment of regulatory change, we've had health changes, we've had energy changes and we've also had life insurance reforms. So it's been a busy market from a regulatory perspective, but the agility of our business model and our people and our commercial operators had led us to stay ahead of the game and very much driven a very profitable year.

The operating model review is complete. We announced that just before the end of the year with the exit of Cape Town and the on-boarding back into Australia. However, the 50 staff that we have on board there's still some time with the expected competency and getting them up to speed, which will, say, over the next 2 to 3 months, pay full fruition. We've also got a new partner on in home loans, so AFG have come along as our partner in home loans. And once again, the affiliate portal we're currently building, which will be available in the second quarter of this year, will add greatly to that relationship, and we've also continued on with our general insurance digital enablement.

We continue to invest in the technology and customer experience in helping customers save time, with initial benefits in online being realized in the second half of '19 and will be ongoing. And just to touch on iMoney, the performance is very strong. We've got top line growth of 40% year-on-year. We're seeing some record months coming through, particularly in Indonesia and the Philippines, which we see as 2 of the best growth markets, and we'll just touch more on what we're doing with iMoney in a few minutes.

So consistent with the discussions at the half year, FY '19 was a business reset and a stabilization of our core business. I won't go into chapter and verse what we've already told you previously, but the business reset initiatives, including obviously from a strategic review, write-off and disposal of legacy assets, renegotiation of kiosks, InfoChoice sale and also exit of Nest. The home loans business model, as I mentioned previously, has changed into a partnership model with AFG, which commenced in the second half of the current year, and once more, we've on-boarded the Cape Town team back into Australia and they're very much part of the team today.

Strategic focus areas. We're focused on EBIT and a positive ROI from all marketing activity. That is going to continue on into FY '20, and there's some further automation going on with our marketing to introduce in the second half of this year that will complete that marketing activity.

Reduction in sales leaking, this is clearly an ongoing part of our business. I don't think we'll ever rest on our laurels in terms of reducing sales leakage, but we're getting some real strong wins with our partners as we move to become an end-to-end platform. And once again, in the first half of this year, we'll start seeing some really strong wins in that area as we continue that focus.

And then cross-serve and multiproduct, one of the key drivers in the business of our future growth. We've increased the number of multi-skilled consultants, and Henriette will go into more detail in that regard, and cross-serves also increased as you'll see in the slides coming up. So some very positive initiatives there. And as we've spoken about previously, the game changer for us will be the single view of customer, very much as we move from that transaction model into the customer relationship-based model, and we'll see the second half of this year where we start getting leverage of that and then FY '21 and '22 will really change the game for us.

Over to Page 6, just some quickly, as we said, $15.2 million underlying EBIT is a fantastic result in a transition year. Both leads and sales, as a result of our focus on marketing ROI, have introduced, and you see that in the top line revenue. And we've been very clear that was the right strategy to follow. More importantly, we're seeing improvement in cross-serve and reduction in fixed costs. And as a result, you're seeing both gross profit margins and also EBIT margins increase dramatically. And as we have said previously, 3.36 is the marketing ROI, so that in other words that's for each dollar of marketing spend how many dollars of revenue we need to get out of the business.

From an iMoney perspective, we're very pleased with the growth in revenue. As I said before, we're having some record months. It is a different business model to iSelect, and it is a model that needs significant investment going forward. So we are just considering all our strategic options, which really are push on ourselves, we're now about 85% of the business and grow it; look for strategic partner; or also join the Southeast Asian consolidation, which is going heavily at the moment. So all those 3 options will be considered, and we'll probably come back around the AGM time with a further update on iMoney.

Quickly turning to the numbers, and I think we've touched on most of these previously. The revenue shortfall is very much part of the strategy of prioritizing profitable revenue growth and sets us up well for sustainable profitable growth going forward. As we've said, GP margins have improved. We've decreased overheads. D&A had increased, but that's just a result of our technology spend, and we'll go into more details during the full year reported earnings with Vicki a little bit later in the presentation. We also have some segment breakdown for you to follow. One thing we do note is the other segment is pretty much exited, InfoChoice and Nest and the other things that sit in there, so it's purely just the home loan side, which sits in the wealth now. So it's a much cleaner business. It's a much more stable business. It's a great platform to grow from. However, we're now at a stage where the opportunity for us is to invest and to accelerate our investment in technology and brand and that's something we're very much going to do in peak years of FY '20 as we go forward.

So on that note, I'd like to hand over to Henriette Rothschild, who's just going to take you through some of the operational highlights for FY '19, and then we'll come back later on in the presentation to have a view through of FY '20 and then answer any questions that you may have. Thank you.

--------------------------------------------------------------------------------

Henriette Rothschild, iSelect Limited - COO [3]

--------------------------------------------------------------------------------

Thank you, Brodie, and good morning all. I'll be focusing on 2 key areas: an overview of our operational performance and operating model changes and also providing brief overview of the industry outlook.

So turning to Page 11. We've got improved performance and efficiencies in our core business, which is a key focus in FY '19. This included increasing by 27% the number of our existing consultants that were able to sell multiple products to customers. So this is both a benefit to customers themselves to the team members through development and for the business that actually ensures much better efficiencies.

Conversion is a focus in ensuring that customers who come to our website or talk with our consultants are well informed and convert through our services remains a strong priority. Conversion has improved in key channels through FY '19, though we also work to optimize the range of more cost-effective and different lead sources where conversion is traditionally lower.

Our partner panel continues to strengthen. We've added a number of new providers and ensuring that we have a big, better, digital ecosystem for our customers. So it's been a focus. A solid progress is made in FY '19 retaining key partners and really strengthening that across verticals as well as revenue per sale. We also improved the initial month customer retention by 1.3 percentage points for our partners within the health vertical.

And as a business, we continue to work to make the comparison and buying process easier for our customers. One way that we like to evaluate this is looking at our Net Promoter Score, and we're delighted to see this climb by almost 10% this year, reinforcing that we're making some really good headway in improving the customer experience.

Moving to the next page and thinking of our operating model. The improved profitability was in part driven by a review and implementation of changes to our existing operating model; in other words, the way we organize ourselves to go-to-market. In reviewing our operating model over these 4 key areas, first of all, we wanted to focus on the core and really reduce our focus on anything that wasn't about helping customers with their household bills. Secondly, we really wanted to have a very strong highly skilled Australian-based workforce. So we've on-shored a lot of sales and service operations back to Cheltenham in Victoria as we continue to develop these consultant capabilities and improve the impact that we have on our customers. Thirdly, as mentioned by Brodie, we have in quarter 4 transitioned our home loans team to AFG, and we now have a joint operation with them that allows us to reach a broader source of the home loan markets than we could have achieved continuing to go at alone in this large and very competitive market. And finally, we continued to invest in a stronger digital ecosystem, leveraging partnerships in insurance to increase our profitable online-only sales channels. So these operating model changes, efficiencies and improvements really have been important in setting us up for the opportunities that we perceive in the market.

Turning to the next slide. FY '19 when we look at our team, required our team to focus and focus our efforts greatly as we managed a significant turnaround. The increased stability and resolve of the whole team has been a massive success in a challenging environment. The ability for us to grow local jobs and ensure growth and development of our people are very important investments in ensuring long-term sustainability and performance. And for those of you looking at the slide, we don't have models here. We've got [Ambrose] and [Tom] and [Cheryl] from our Cheltenham office who are all part of making the results that you see in front of you today.

And finally, on Page 14, with a little bit of look towards the future market, we've been doing market research locally and engaging with customers through our contact center and growing what we really poised to see is a very strong growing need for comparison process, with key customers looking at more affordable services and really wanting more simple experiences. This is backed up by research out of Europe by McKinsey with the comparison industry is actually growing above underlying market growth anywhere between 6% and 15%. And recent U.K. announcement by money served market, (inaudible) really reinforces growth, and the importance of customer-centric technology as a driver of this growth. We believe the outlook for the local comparison services is positive and likely to grow in excess of underlying market so long as the customer experience is a simple and informative one.

I'll now hand over to Slade, our Chief Experience Officer, to update on how the tech investments in moving our platform from a transactional to a relationship-based model is progressing.

--------------------------------------------------------------------------------

Slade Sherman, iSelect Limited - Chief Experience Officer [4]

--------------------------------------------------------------------------------

Thanks, Henriette, and good morning, everyone. In February, we highlighted 3 core areas of focus that we were working on to improve performance, including service platforms for our customers, better integration with our partners and improvements in our customer contact center operations. We've seen improvements in ways the customer experience, rate continuation and online sales via our conversion rate optimization program with one example being a 13% increase in continuation in our health web platform.

Our focus on improving partner experience is also progressing well with measured reductions in leakage rates in our Energy & Telco business, and in FY '20, we'll be releasing a range of features to provide additional value to partners like enhanced reporting, APIs and a self-service portal.

In our call center, we've rolled out our new engagement platform Genesys Pure Connect, which seamlessly integrates with sales force and our web platform. The outcome of this program of work is improved data orchestration between our systems and higher consultant efficiency. Our focus across these core areas is on removing the friction from customer experience and driving further personalization in the way that we service our customers.

Moving over to Slide 16. In -- FY '19 saw a significant increase in our design, engineering and data science function with our technical team now representing 20% of our total employees. This is strong validation of our executive team's commitment to our digital transformation. The increase spend will help us move off-legacy platforms in FY '20. And in the future, we expect to see reduced OpEx spend and stronger ROI focus on technology projects. Our investments will completely transform the way iSelect does business, taking us from a transactional business to one which builds ongoing relationships with our customers helping them across more verticals and encouraging repeat visits as they need change.

Moving to the next page. We believe that in order to better service our customers it's critical to understand their needs irrespective of the vertical. So in the past, like others in financial services, our systems have been fragmented. First, the customer provided iSelect with their details, for example, for health comparison, the customer needs weren't necessarily easily visible in other verticals. Brodie updated you in February regarding the investments we've been making relating to single view of customer, and we've already made great progress. We now have a stronger visibility of our customer across all verticals, and we're building a range of services to improve cross-sell, upsell and customer experience across all our channels. We launched a beta landing page for customer account registrations. And in Q2, we will launch a customer account that will show the customer their past comparison quotes and purchases.

In the long term, the customer account will allow us to truly help Australians with ongoing management of their bills and expenses and will enable free and paid subscription services and payment options to diversify our revenue. A better understanding of our customers through data that they choose to share with us along with powerful machine learning and data capability means we're well positioned to better predict when customers’ needs change and offer services in the future like order comparison. The customer accounts will be complemented in Q2 FY '20 with the implementation of our marketing automation technology stack.

And I'll hand over to Warren, who will discuss this in more detail.

--------------------------------------------------------------------------------

Warren Hebard, iSelect Limited - CMO [5]

--------------------------------------------------------------------------------

Thanks, Slade. Going to Page 19 of the deck. Working with products and technology, the marketing team had 3 projects in the road map for delivery in H1 FY '20, which will be key contributors to improving marketing ROI. Firstly, the delivery of the prospect management technology solution, which is an affiliate lead-handling service. The first application of this service will be to fulfill the automation of leads from our home loans partner AFG into the life insurance business. Next, the MVP implementation of Salesforce marketing cloud will enable the business to deliver digital automated cross-sell easy journeys. We view this as the next major initiative to improve marketing ROI and it'll become a proof point for the investments the business is making in single customer view. And lastly, the marketing attribution project will be completed.

We now have 90% visibility from source and channels to converted sale and revenue, with the transition to revenue actuals based automated bidding on digital channels to be completed in H1 FY '20. We will also be continuing to invest in the iSelect brand in FY '20 by the next phase of the Billusionist campaign.

Turning to Page 20 of the deck. Marketing ROI will continue to be a key focus in FY '20. FY '19 full year results delivered an 8 percentage point year-on-year improvement in marketing as a percentage of revenue down to 29.8%. And our key marketing KPI of cost per acquisition was reduced from $145 in FY '18 to $118 in FY '19, down 19% year-on-year. With the marketing mishap of FY '18 firmly in a revision manner, the business now has a robust and measurable marketing operating strategy and day-to-day rhythm in place, which is centered around ROI.

Thanks. I'll now hand you over to our CFO, Vicki.

--------------------------------------------------------------------------------

Vicki Pafumi, iSelect Limited - CFO [6]

--------------------------------------------------------------------------------

Thank you, Warren. Good morning, everyone. As we turn to Slide 22, our positive view for health insurance, which remains a strong contributor to our full year results with EBITDA of $12.3 million. We've had a slight decrease in conversion which is related to lead mix. However, this has had a positive impact on profitability. We expect health to continue to be a consistent performer focusing on operational efficiency and customer experience moving forward.

Moving on to Slide 23. Energy & Telco has had revenue decline. That's in line with our internal expectation, which has been driven by the exit of our affiliate and also unprecedented demand in FY '18. EBITDA of $7.3 million is a positive result reflecting on efficiency in our return on investment in marketing. RPS growth of 9% is positive and is due to a favorable product mix. Conversion is an area of improvement and a decrease of 0.9% has been driven by Cape Town performance during the year, which we have now exited.

As we turn to Slide 24, our Life and General Insurance, it really shows revenue down slightly due to the life insurance regulatory reform. Significant EBITDA improvement of $1.8 million is driven by growth in our General Insurance businesses, some of which were launched during FY '18, including Pet and Travel insurance. RPS decline of 0 is reflective of the sales mix of this segment.

Slide 25, our balance sheet shows a strong result in our operating cash flow. This has been due to our increased profitability and improvement in trade did year-on-year. Offsetting this has been our increase in share of trail mix and iMoney's operating cash performance. Detail on our working capital is referenced on Slide 31 in our appendix. Also other asset reduction has been driven by impairment in home loans at H1 FY '19 as well as asset disposals from noncore activity.

Finally, moving on to Slide 26, our trail book asset for FY '19. As we discussed at H1, we've adopted AASB 15, which requires a more conservative approach to our trail valuation and revenue recognition. Growth in our trail book in FY '19 has been driven by 3 main factors: health provider and product mix has skewed towards trail; hybrid commission structure also resulted in increased trail mix for life; and Energy & Telco representing a reduced share of our revenue mix.

It is important to note that cash collection in H2 was at 101% versus trail book expectation, which reflects positively on our trail assets. Further, following the increase in trail revenue mix in FY '18/'19, we expect an improved working capital result in the future due to the timing of our current average trail return period as shown in appendix Slide 32.

Thank you, and I would now like to hand you back to Brodie, who will discuss our outlook for FY '20. Thanks, everyone.

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [7]

--------------------------------------------------------------------------------

Thanks, Vicki. Yes, let's just wrap this up and go to questions. Our FY '20 coming off the back of a really strong FY '19 with improved profitability and also a solid investment in technology gives us a great base to move from and to start growing the business again. That being said, we just want to highlight that in the first half of FY '20, we do have a significant investment in both brand and also technology as we move through to the single view of customer and customer relationship models. This investment as well as Vicki mentioned AASB 15 will have an impact in what we call the controllables. We've also had a change in energy reform from the government that kicked in from the 1st of July 2019. That was a fairly light and significant change which has just taken out partners and providers a while to get all their plans in place. I do want to congratulate our team, both in technology and commercial, on a significant effort in being live from the 1st of July, not any other competitors in Australia were live on the 1st of July. However, even though this is a one-off change, it's going to take a few months before we get to a full panel with competitive plans again. So that's having a short-term impact on the business and will impact H1.

That being said, with the investments and also the energy markets normalizing to adjust the new regulatory environment, we're going to have a very strong second half of the year in FY '20 and obviously beyond. The continued in investment is going to going to enable us and we keep saying this because it's really important to get your head around the move from a transactional to a customer relationship-based model that has a whole variety of impacts in terms of cost of acquisition, ease of acquisition, customer relationship, customer journey, all those things as well as improving our partners' systems through efficiency and leakage reductions.

There's probably half a dozen key takeaways that I want everyone to leave with today, and so want to just summarize those and then move to questions. The reset we commenced in April 2018 is largely complete. And with a key focus on marketing ROI that will remain a focus in FY '20 and beyond. The technology improvement in sales model allows to reduce revenue leakage, increase online conversion and improve cross-sell of products. And we've commenced that in the second half of FY '19, that momentum will just build over the next year or 2. So that is a really strong point to our future growth, just in doing what we currently do better.

Some game changers we're introducing, which will commence leveraging in FY '20 and that remains a shift from transactional to customer relationship to what we talk about single view of customer as well as the affiliate hand in technology which will be introduced in the second quarter of this year with AFG obviously ready to go to start leveraging off some of their leads and that business will just grow more and more to diversify our lead sources. We've got a strong executive team and a very aligned Board that tell you what we're going to do and then so far have executed this with transparent and very consistent manner and you can expect more of the same from us with a strong balance sheet to execute our plans and the brand remains incredibly strong. And globally, the comparison sector's outgrowing underlying market and our plans are aligned with global best practice.

So that's a half a dozen points that I'll leave you guys with. Thank you for listening to the executive team, and obviously, we'll open up to some questions now from you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question today comes from Michael Goldberg from Collins Street Asset Management (sic) [Collins Street Value Fund].

--------------------------------------------------------------------------------

Michael Goldberg;Collins Street Value Fund, [2]

--------------------------------------------------------------------------------

From reading the presentation it wasn't clear, but it does sound from the commentary that perhaps it is true. Would you guys say that the transition that started in 2018 at this point, bearing in mind the costs in the next half, is complete and the company is looking to growth from here on end? And related, do we envisage seeing a revenue growth in 2020?

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [3]

--------------------------------------------------------------------------------

Thank you, Michael. So the -- yes, the reset is broadly complete. The 2 areas I've mentioned a little earlier that we're still finalizing is obviously as we on-boarded 50 staff back into the Australian call center, it just takes some time to, a, recruit them and, b, get their speed to competency up. So that's probably going to be the second quarter of this year before we're really comfortable and have them at the benchmark level of their performance. And then as we mentioned previously, as we moved some of our models, such as our home loans model, the opportunity for us is to diversify our lead source with affiliates coming back in from our partners and that piece of tech's going to be available in the second quarter -- back into the second quarter of this year. So that will probably be when I would stick my hand up and say the reset is now complete. Of course, we're always focusing on cost pretty heavily in this business as well. And as we've shrunk the business a little bit, we're very and improved technology, we still see some further cost opportunities in the business during the next 6 months.

In terms of growth, yes, the answer is, yes, the revenue growth should start kicking in. However, the change in the energy regulatory environment has had a short-term impact on that. It is significant to start with. It's getting smaller by the day, and we should have that normalized during the first half. That does have an impact, both from a energy perspective and also from the cross-sell we receive from them. So from a first half's perspective, I'm not expecting any significant revenue growth, but from the second half of this year, you should start seeing that kicking in as we end up in a more normal world.

--------------------------------------------------------------------------------

Michael Goldberg;Collins Street Value Fund, [4]

--------------------------------------------------------------------------------

Okay. Can I ask a second question?

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [5]

--------------------------------------------------------------------------------

Of course.

--------------------------------------------------------------------------------

Michael Goldberg;Collins Street Value Fund, [6]

--------------------------------------------------------------------------------

Just on the marketing return on investment being at 3.36x, is that scalable as more marketing spend is put towards it?

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [7]

--------------------------------------------------------------------------------

I might hand that over to Warren, our CMO, just to answer that question.

--------------------------------------------------------------------------------

Warren Hebard, iSelect Limited - CMO [8]

--------------------------------------------------------------------------------

Thanks, Brodie. Michael, look, we expect marketing ROI to somewhat stabilize now, now that we've fixed the problem and really what we're doing is looking to grow leads and sales volume at similar levels of ROI of what we achieved in FY '19 into FY '20, noting that there's some short-term impact in the energy market that Brodie touched on.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

The next question comes from Ian Munro from CCZ Equities.

--------------------------------------------------------------------------------

Ian Munro, CCZ Equities Pty Limited, Research Division - Senior Analyst [10]

--------------------------------------------------------------------------------

Just looking at, I guess, the evolution of the marketing strategy and the number of leads really being managed for ROI and also for profitability, just how far away are you do you think from getting to that sweet spot of the ROI sort of working all the way through the customer base so managing sort of less leads but for greater profit per customer and therefore having just, I guess, a greater level of repeat business inside the metrics that you prefer to have it?

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [11]

--------------------------------------------------------------------------------

Thanks, Ian. I'll take that one. So the answer is, in terms of the efficiency around our marketing, we mentioned that during the first half of this year, there's still some more technology alignment that will probably take that to at least for now as good as we can get from the efficiency perspective and understanding of ROI. In terms of the leveraging the customer base rather than just chasing legal ways the whole time, this is going to be a topic that we probably introduce a little bit further at the AGM and certainly at the half year when we start talking about customers, multiproducts, sales per customer and to a degree the average income per customer. So there's a mix which we want to turn to. Probably, at start of the second quarter this year, we should be in a position to have that single view of customer. And from there, we're obviously working in the background customer journeys and how we leverage that customer base a lot more. And so from really H2 this year, we'll start getting the leverage on that customer base, but you will see gradual improvement, you won't see an instant kick.

But as of FY '21, that will just build momentum further and further as that story gets stronger, so definitely during the current year, but I don't want to overpromise and say that you press the button single view of customer and all of a sudden the world changes. You really got to develop that customer journey in that CRM platform along the way and getting users to engage with you. But the early signs of testing we have done online with some changes to our web, et cetera, have been really promising and people started look at customer account and starting to grow that. So we remain high conviction in the success of that strategy, but we're cautious that the impact on the current year is going to be solid, but it's really the future years that we get the real kick.

--------------------------------------------------------------------------------

Ian Munro, CCZ Equities Pty Limited, Research Division - Senior Analyst [12]

--------------------------------------------------------------------------------

Just in terms of the rationale behind the iSelect account, the economics behind that of the -- sort of 300,000, 350,000 product sales per annum what's the, I guess, rationale and the thinking behind the number of those that would carry forward into that single view of customer and have a reoccurring transactional relationship with iSelect?

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [13]

--------------------------------------------------------------------------------

I might hand that over to our Chief Experience Officer, Slade, who is a little bit closer with that level of detail in there.

--------------------------------------------------------------------------------

Slade Sherman, iSelect Limited - Chief Experience Officer [14]

--------------------------------------------------------------------------------

Yes. Look, we think that there's opportunity in the number of points in the customer journey both through our website and our contact center just to do a better job with servicing the customer initially through their customer accounts. So that's the first examples of that is being able to see comparisons and quotes but also seeing orders. And so we would expect that over time that's going to translate fairly significantly so that every customer who is receiving value from iSelect will have the opportunity to log into an account. Then from there, there'll, obviously, be data about that customer and the comparisons that we have done, and there'll be new opportunities to service them so that if you are an account holder, you'll also be able to just increase the ease of use of using our web platforms as well as engagement through our call center.

So we think it's fairly significant in terms of building that ongoing relationship. And then also in Warren's area, with the marketing automation, just thinking about the opportunities to better service the customer and really predict when they're going to have new requirements and needs across the verticals that we have.

--------------------------------------------------------------------------------

Ian Munro, CCZ Equities Pty Limited, Research Division - Senior Analyst [15]

--------------------------------------------------------------------------------

And just one final question. I think Henriette mentioned the performance of European piece. Is it possible to give some update on domestic piece and perhaps the competitiveness of the marketing dollar out there and how you're seeing iSelect's market share relative to peers?

--------------------------------------------------------------------------------

Henriette Rothschild, iSelect Limited - COO [16]

--------------------------------------------------------------------------------

I guess an initial answer to that, Ian, is how well we look to the European market is twofold: one is because they're probably a couple of years ahead of us; and the second is because they're listed and the information is out there and very public. That's not the situation here. So I guess we're constantly benchmarking and looking at what we are doing locally. But given that most of our competitors are private locally, that level of visibility isn't there.

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [17]

--------------------------------------------------------------------------------

So I'll just further to that. We're probably seeing, as Henriette said, a really strong alignment with the European market and how they have changed their models. Very high conviction on high level, already decided to change their model, and we're well aligned. In the local market, we think there's going to be consolidation. And certainly, when we look at our capital and our balance sheet, we look to that consolidation as an opportunity coming up. You've seen and obviously, we're a market leader in valuation. So as our valuations come down, I think expectations have also come down across some of the other players in the market. And so it's going to be interesting couple of years when you look at (inaudible) Finders and One Big Switches and a few others out there how they play the game and how they actually monetize their assets and then obviously compare the markets remains out there as a strategic investor with us. And we continue to -- as our largest investor, work with them and to speak to them about where they're heading next, but we are competitors as well so we just need to be careful in the information we share, but there's an ongoing relationship that's a very positive one with the competitive markets.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from Alex Shevelev from Forager Funds.

--------------------------------------------------------------------------------

Alex Shevelev, Forager Funds Management Pty Ltd. - Senior Analyst [19]

--------------------------------------------------------------------------------

Two questions for you, just around the brand investment. You mentioned, I think, on your outlook slide you plan to reinvest in the brand and also you were saying that you expected that marketing as a portion of revenue to remain stable. Is that to say that's got to come through over the next year and will yield similar results?

--------------------------------------------------------------------------------

Warren Hebard, iSelect Limited - CMO [20]

--------------------------------------------------------------------------------

Alex, it's Warren here, the CMO, I'll field that question. As stated in the deck, we are going to increase the investment in the brand across all channels. In terms of marketing as a percentage of revenue, the objective is to keep that at somewhat similar levels from FY '19 into FY '20. And as I mentioned to Michael on the -- a couple of questions ago that noting we've got some short-term pain in energy markets, which is affecting us at the moment, but that should flush itself out going into H2. So that's our objective.

--------------------------------------------------------------------------------

Alex Shevelev, Forager Funds Management Pty Ltd. - Senior Analyst [21]

--------------------------------------------------------------------------------

Right. And then an update on the iMoney, if you could provide that for us?

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [22]

--------------------------------------------------------------------------------

Yes. So from the iMoney, we have about 84% holding and we've invested about $18.4 million. We also have a shareholder line of roughly approximately USD 4 million in there. We have just recently taken to market to speak to a variety of players, financial investors, strategic investors, and as I said, previously, consolidators. At the same stage, we're also assessing our own future cash flows. We believe strongly in the strategy, we're seeing really high levels of growth, and we can accelerate that growth, particularly in Indonesia and the Philippines. We're just trying to make the call whether that's something we should to do ourselves or whether it's something that we should do with other parties and expect to kind of get some further clarity on that over the next quarter.

There's some very positive conversations going on. It's certainly being an area where significant capital has been raised in recent times. It's just a question really for us of how much we invest, how far we go, and ultimately, what is the end goal for that asset because it is a different style and a different stage of asset than iSelect. And certainly we found that the market have found that asset quite difficult to value and potentially it's even a small drag on our overall earnings and then valuation, which is probably how we see the asset. So more work to be done, and we'll be updating the market as we complete that strategic review.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is a follow-up from Michael Goldberg from Collins Street Asset Management (sic) [Collins Street Value Fund].

--------------------------------------------------------------------------------

Michael Goldberg;Collins Street Value Fund, [24]

--------------------------------------------------------------------------------

Just a quick question. In the context of the company trading at a discount or thereabouts to the company's NTA, can somebody speak to what it is that the management would like to see before they consider bringing back either a buyback or a dividend? And if those things are at the table, what else can be done to recognize and close what appears to be a significant value gap between the market cap and what we think the worth is of the company?

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [25]

--------------------------------------------------------------------------------

Thanks, Michael. It's a good question. And we obviously every 6 months as a Board review what capital we have, what our forecast of cash flow and what we see as the opportunities in the market. As we sit today, particularly with iMoney as yet on result and our next steps there and some potential consolidation, we still view that the best use of our capital is in driving in ROI considering those opportunities. Once we have bottomed those opportunities out a little bit further and if we do bring in a partner for iMoney or took some capital off the table for that, you may be in a position to once again consider buybacks or dividends, just isn't in the best interest of iSelect as we speak today, but it's definitely something that we assess on a regular basis. And depending on some circumstances if the valuation remains at this level and the strategic M&A and the investment in iSelect isn't something that we're pursuing any further, then it will make a lot of sense to bridge that gap through dividends and/or a buyback.

--------------------------------------------------------------------------------

Michael Goldberg;Collins Street Value Fund, [26]

--------------------------------------------------------------------------------

You mentioned that there aren't a lot of competitors listed in the Australian space so it's hard for us to compare. But are any of the foreign competitors trading at or around about their NTA? Or is this quite a unique situation?

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [27]

--------------------------------------------------------------------------------

We might take that one on notice, Michael. We'll just do a quick bit of research and why don't we catch up with you a bit later in the week, why don’t we explore that a bit further?

--------------------------------------------------------------------------------

Michael Goldberg;Collins Street Value Fund, [28]

--------------------------------------------------------------------------------

Sounds like a deal. That's it for me.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

The next question comes from John Hester from Bell Potter Securities.

--------------------------------------------------------------------------------

John Hester, Bell Potter Securities Limited, Research Division - Senior Healthcare Equities Analyst [30]

--------------------------------------------------------------------------------

Brodie, just coming back to conversions in health care, one of the things that was talked about extensively during the course of the year was the closure of Cape Town call center, and there was an expectation certainly as far as I was concerned that, that conversion back to Melbourne would lift the conversion rate in the second half, particularly in health care. That didn't occur. Can you give us some more color on that? Now you talked about 2 things, one of which was getting more staff up to speed and the second thing was mix. Have you got anything else to add to those 2 points? And can you probably just explain them a little bit more fully, please?

--------------------------------------------------------------------------------

Henriette Rothschild, iSelect Limited - COO [31]

--------------------------------------------------------------------------------

Henriette here. So they are the 2 key points. The lead mix, just giving an example, where in the past we would have spent money on advertising that would have -- above the line advertising that would have driven inbound calls from customers that convert at a very high level. We may be using different digital approaches. For example, sending out ED and -- which converts at a lower level but a much more profitable from an ROI perspective. So that's an example of changing the way that we're sourcing leads for ROI rather than for conversion per se. So that I guess it's -- sort of giving that bit of picture.

And absolutely, the ongoing -- the actual key conversion metric for the various key channels are actually holding up pretty well. We're just using different channels. So in terms of energy, which is where we have more recently on-boarded more people from -- into the Australian team that was as Brodie mentioned where we will see over the next quarter ongoing uplift in conversion.

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [32]

--------------------------------------------------------------------------------

So John, just to round that out, I think so Cape Town wasn't and doesn't convert -- it wasn't in the health vertical, it was in the Energy & Telco vertical in FY '18 it was, FY '19 it wasn't. And then as Henriette mentioned, the lead mix in health has skewed away from inbound and skewed towards more affiliates and affiliate leads convert at a lower rate than inbound leads. So yes, those 2 factors probably made it a worse a little bit, but it's too sensitive information to kind of put out in the public domain to explain that in full detail, but happy to explore that further if you have any further questions on it when we catch up.

--------------------------------------------------------------------------------

Henriette Rothschild, iSelect Limited - COO [33]

--------------------------------------------------------------------------------

And I think, it's fair to say that there is a high level of confidence in a very high performing team in the Australian operations, who have adapted to these different lead sources and are actually converting those lead sources at much higher rates than they have in previous years.

--------------------------------------------------------------------------------

John Hester, Bell Potter Securities Limited, Research Division - Senior Healthcare Equities Analyst [34]

--------------------------------------------------------------------------------

So with the expectation going forward, I mean historically, it was sort of -- news come by it's been up sort of in the 9%, 9.5% level, this year 9.1%. Is the expectation now reset at that lower level do you think at that sort of 9% rather than some 10s, 10.5%?

--------------------------------------------------------------------------------

Henriette Rothschild, iSelect Limited - COO [35]

--------------------------------------------------------------------------------

So we already said we'll actually keep evolving, but it won't necessarily be a good measure of actual performance. So one of the ways that we evolve is, for example, getting new lead sources, which may take the conversion down but the profitability up. The other way is going to vary is when we do, for example, more sales online through purely online channels. And again, conversion will be different there. So we may get to a point where actually conversion doesn't become really strong focus. It's actually more about customer experience, repeat visits from customers and whether we're doing the right thing by customers coming through our website or through the door. So I think there's probably new ways that we're going to need to look at our measures of performance going forward. And I think that's something that will be useful to discuss as we get into our Annual General Meeting later in the year.

--------------------------------------------------------------------------------

John Hester, Bell Potter Securities Limited, Research Division - Senior Healthcare Equities Analyst [36]

--------------------------------------------------------------------------------

And second question from me is, with the brand investment that you've alluded to over the next -- well, over the course of FY '20, is that across all 3 core business units? Or is it specifically in Energy & Telco or one or the other?

--------------------------------------------------------------------------------

Warren Hebard, iSelect Limited - CMO [37]

--------------------------------------------------------------------------------

John, it's Warren Hebard here, the CMO. I'll deal with that question. It will be across all verticals, but we'll use health as a primary driver to build the brand.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

At this time, we're showing no further questions. I'll hand the conference back to Mr. Arnhold for closing remarks.

--------------------------------------------------------------------------------

Broderick Ernst George Arnhold, iSelect Limited - CEO & Executive Director [39]

--------------------------------------------------------------------------------

Thank you. I just want to thank you, everyone, for making the efforts to dial-in. I hope that was reasonably straightforward and transparent and easily understood. Very much look forward to seeing a lot of you over the course of the next few days, and we can drill back into any questions you may have. But thanks for your attendance, and we will speak shortly.