Over 50s holidays-to-insurance group Saga (SAGA), which floated in May at 185p, releases maiden half-year results on Tuesday 30 Sep. At the time of the IPO, Saga created more than a little controversy by arranging to be listed as a general retailer, focused on specialised consumer services, despite the fact that most earnings come from selling insurance.
In fact, insurance - largely motor and home insurance - generated a chunky 86 per cent of the group’s cash profits in the year to January. On that basis, investors will be keen to see details of just how effective an underwriter Saga actually is, given that premium rates on many business lines - especially motor cover - have been under strong downward pressure.
The group’s high-profile travel operation generated a cash profit of just £20.1m in 2013-14 - 9 per cent of the total. While competition among tour operators can be fierce, Saga’s focus on a loyal over-50s customer base should allow it to deliver a resilient performance. Its target demographic spends more than £7bn on travel annually.
JP Morgan Cazenove expects pre-tax profit for the year to end-January 2015 of £171m, giving EPS of 11.9p and a 3.8p dividend.
