“With our strong brand and revamped insurance business, we have the resources to weather the current crisis and to emerge from it stronger,” vows Patrick O’Sullivan at the start of Saga’s (SAGA) annual report. Judging by the threats to the retirement group’s cruise operations, the chairman will need lots of help from policy sales.
Current evidence does not wholly convince. While last May’s switch to a direct three-year fixed-price product resulted in the sale of 320,000 in the year, higher claims inflation meant the overall underlying combined operating ratio rose from 62 to 83 per cent. The result was a 53 per cent decline in the division’s pre-tax profit, to £40.6m.
Cash generation here will need to be resilient. The £92m of cash currently on hand is described as “significantly higher than the level needed to cover short-term cash outflows”, but banking covenants have had to be re-set so that they are not breached later this year.
Indeed, Saga’s debt management is far from plain sailing, quite literally. Should the cessation of cruise and holidays continue until 2021, the group will need to cut more operating costs, delay tax and defer capital payments on the £245m debt facility used to purchase a ship launched last July. Hopes that another liner will be delivered in August look increasingly fanciful.
Peel Hunt expects adjusted earnings of 3.9p a share for FY2021.
| SAGA (SAGA) | ||||
| ORD PRICE: | 17.1p | MARKET VALUE: | £191m | |
| TOUCH: | 16.9-17.1p | 12-MONTH HIGH: | 61.8p | LOW: 12.5p |
| DIVIDEND YIELD: | NIL | PE RATIO: | N/A | |
| NET ASSET VALUE: | 52.5p* | NET DEBT: | 101%^ | |
| Year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 963 | 176 | 13.3 | 7.2 |
| 2017 | 871 | 193 | 14.1 | 8.5 |
| 2018 | 860 | 181 | 12.5 | 9.0 |
| 2019 | 842 | -135 | -14.5 | 4.0 |
| 2020 | 797 | -301 | -27.9 | 1.3 |
| % change | -5 | - | - | -68 |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
| *Includes intangible assets of £836m, or 74.6p a share. ^Includes lease liabilities of £28.6m | ||||
