Saga (SAGA) spent 2015 getting its house in order by improving cash generation and paying down debt. Its progress has been encouraged by the launch of a motor panel, comprising four third-party insurers, as well as a new reinsurance arrangement with Munich Re, which will free capital from its in-house underwriter. The result was a 9 per cent increase in available operating cash flow to £178m. This not only enabled management to hike the dividend this year, but also means it expects future payouts to be between 50 per cent and 70 per cent of net earnings.
Gross written premiums from core policies continued to fall in line with the industry. However, underlying core policy volumes, excluding its acquisition of motorbike insurer Bennetts, increased 3 per cent. In all, motor insurance trading profit increased by almost a fifth. Saga is aided by its customer database - which added an extra 400,000 members to 11.2m - which lowers the cost of customer acquisitions and increases cross-selling opportunities.
A shift towards longer-haul, higher-value tour operating products boosted profit for the travel business by more than a quarter to £17m. Management expect Saga's planned third cruise ship to make £30m in annual revenue.
Analysts at Canaccord Genuity expect adjusted EPS of 13.6p for the year ending 31 January 2017, up from 13.2p in FY2016.
SAGA (SAGA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 200.6p | MARKET VALUE: | £2.24bn | |
| TOUCH: | 200.6-200.8p | 12-MONTH HIGH: | 225p | LOW: 171p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 97p* | NET DEBT: | 50% | |
| Year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1,175 | 148 | na | na |
| 2013 | 1,310 | 150W | na | na |
| 2014** | 944 | 171 | 16.0 | na |
| 2015 | 901 | 114 | 8.6 | 4.1 |
| 2016 | 963 | 176 | 13.3 | 7.2 |
| % change | +7 | +54 | +55 | +76 |
Ex-div: 12 May Payment: 30 Jun *Includes intangible assets of £1.54bn, or 138p a share **Company floated in May 2014 | ||||
