Saga's cruise business bounces back but losses jump

Saga’s (SAGA) reported results were heightened in their complexity by the mingling of changes in asset prices with goodwill write-downs in its insurance business, which the company had already reported in its interim results. The net outcome was a greatly enhanced loss before tax of £254mn, which probably obscured some of the positive developments for the company as demand for its holidays increases. With Saga also refinancing some of its debt, the outlook looks slightly brighter.

This was most apparent in the cruise and holiday businesses. Overall, the segment narrowed its losses to £9.9mn, compared with £79.3mn this time last year. Saga’s cruise ships are working to a load factor of 72 per cent for 2023-24, with revenue per passenger forecast at £339.

The other bright spot was Saga’s insurance broking business where earned income of £69mn was 4 per cent higher. This relatively robust performance contrasted with Saga’s consistently underperforming underwriting business, which saw profits decline by 65 per cent to £19mn for the year. The underwriting business is now being put up for sale as Saga looks to rationalise the insurance segment.

Saga is sticking with its debt reduction strategy ahead of the refinancing of a £150mn bond due in May 2024. Part of refinancing that debt was settled in these results, with the company agreeing a new £50mn loan facility with Sir Roger De Haan.

Stripping out the impact of the debt, Numis forecasts an enterprise value to sales ratio of 1.7 for 2024, taking into account that the key summer holiday season is still ahead. Saga has shown resilience, but more tangible improvements are needed to change our view. Hold.

Last IC view: Hold, 106p, 27 Sep 2022