Saga (SAGA) made further progress in strengthening its balance sheet and de-risking its business during the first half. Signing a reinsurance agreement with Munich Re in February may have dampened revenue for its motor business, but it means around three-quarters of any loss made will be absorbed by the reinsurer. Without the one-off items that plumped up cash generation last year, group available operating cash flow reduced by 30 per cent to £97m. However, this was still enough for management to continue to pay down debt, which now represents 2.2 times cash profits at the period-end, from 2.4 times a year earlier.
Premium inflation meant increased churn within the motor insurance market, resulting in growth in core motor policies of around a quarter. The recently introduced motor panel meant a greater proportion of higher premium business being placed with third-party underwriters, freeing up capital. High competition in the home insurance market put pressure on premiums, pushing down sales by 6 per cent to £48m.
The cruise ship Saga Sapphire was out of action for 63 days between April and June, taking a chunk out of sales and trading profit for the travel business. However, the tour operating business increased revenue slightly thanks to more sales of long-haul and third-party cruise products.
Analysts at Numis expect adjusted pre-tax profits of £181m during the year to December 2016 and EPS of 13.5p (from £114m and a loss per share of 13.3p in 2015).
SAGA (SAGA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 222.8p | MARKET VALUE: | £2.49bn | |
| TOUCH: | 222.8-222.9p | 12-MONTH HIGH: | 227p | LOW: 171p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 101p* | NET DEBT: | 47% | |
| Half-year to 31 July | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 478 | 101 | 7.3 | 2.2 |
| 2016 | 437 | 110 | 7.9 | 2.7 |
| % change | -9 | +8 | +8 | +23 |
Ex-div: 6 Oct Payment: 18 Nov *Includes intangible assets of £1.5bn, or 137p a share | ||||
