iSelect to list on June 24 with predicted revenue of $122 million

Insurance comparison group iSelect has finally filed its prospectus with the Australian Securities and Investments Commission, predicting earnings before interest, depreciation and tax of $30 million in the 2013 calendar year.

The prospectus comes after years of speculation regarding the company’s intentions. It is one of the largest comparison sites in Australia, a category which has continued to grow in both popularity and market value over the past several years.

iSelect co-founder and executive chairman Damien Waller said in the prospectus the company has recorded growth in major metrics including lead volumes and sales conversion, which has increased from 3.6% in 2010 to 5.7% in 2012.

“To sustain these results we will continue to invest in our brand and technology platform as these will be key drivers of our ongoing growth,” he said, also noting iSelect will continue to expand outside its primary health insurance category.

iSelect was founded in 2000, originally focused on health insurance but expanded to car, travel and home loan comparison services. The demand for comparison services has pushed iSelect to the top of the market, most recently valued at over $300 million due to an investment in 2011.

According to the latest prospectus, iSelect will be valued at $479 million after listing. Shares will be offered to investors at $1.85 per share.

Major investor Ninemsn will sell all of its 62 million shares for $113 million – a significant profit from the original $20 million invested in 2006.

Spectrum Equity, the company which bought a 10% stake in the business in 2011, will keep the majority of its holding, selling only 350,000 shares at $645,000.

Waller will keep 31 million shares, valued at $58 million at the share listing price.

Foad Fadaghi, director of research at Telsyte, told SmartCompany the growth of the comparison market is in part due to the fact it has very few barriers to entry, along with protection from international competition.

“The market is localised, so every country has the ability to have a leader in comparison within a particular category. That provides an opportunity, and protects local players,” he says.

The comparison market has been filled with similar success stories internationally. Back in 2011, Google paid £37.7 million for BeatThatQuote.com.

The local market has been no less successful, with entrants such as Mozo and Finder.com.au attempting to carve out their own niches.

However, Fadaghi says the success of these sites – including iSelect – depends on their commercial relationships.

“How strong are they?” he says.

“The question is whether or not these providers which work in the comparison space will be happy to work with competitors. As long as you can build those relationships…that’s what keeps the market together.”

“These companies live and die by the commercial relationships.”

In the iSelect prospectus, Damien Waller notes the company is exposed to risk including changes in government, increased competition, and “adverse decisions taken by product providers”.

“Key Product Providers may make fewer products available, may not make certain products available or may not make any products available to iSelect,” it says.

“This may be for a number of reasons, including, in the case of Product Providers who are insurers, decisions they take to limit the number of new policies that they write in response to changes in market conditions, their perception of where their best growth opportunities may lie or as a result of a lack of sufficient capital or funds generally which are required to underpin new policy growth.”

But Fadaghi says if the company has the ability to own market leadership, “that can be a disincentive to break that relationship”.

The iSelect listing is set to take place on June 24.

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