Comparison site warns on profits after closure of Firstplus

The shock closure of Barclays Bank's Firstplus secured loans business yesterday forced Moneysupermarket.com, the price comparison site, to rush out an immediate profits warning.

Barclays said it would close its Firstplus unit to new business early in August, with the loss of up to 300 jobs, after failing to generate sufficient demand for the second-charge mortgages it offers.

That prompted Moneysupermarket.com to warn that its sales for the year could be reduced by £7m, almost 4 per cent of analysts' forecasts for the business. The profits warning resulted in a 32 per cent slump in the price comparison company's shares.

The closure of Firstplus is a big blow to Moneysupermarket because the Barclays unit is the biggest player in its sector and tops the price comparison site's recommended list of secured loan providers. Once it closes, the site will no longer earn commissions from business it refers.

Simon Nixon, Moneysupermarket.com's chief executive, said: "The group will take steps to mitigate the impact of First Plus's decision by sourcing additional capacity elsewhere, by reviewing costs and by reviewing loans advertising spend. However, the direct impact on 2008 revenues is expected to be approximately £7m."

Firstplus has 128,000 customers and will retain 130 of its 430 staff in Cardiff to service this business. Neil Radley, the unit's managing director, said the bank would attempt to find alternative employment for the rest of the workers, but could not guarantee them all jobs.

Moneysupermarket.com shares fell 32.19 per cent to 59.5p.