Six months on from Saga’s (SAGA) “fundamental shift” in strategy, the costs of the move are clear. Pre-tax profits in the first six months of the year were less than half those generated in the prior period, while unrestricted operating cash flow plummeted 72 per cent to £24.9m.
Saga announced a change in strategy after increased commoditisation in the travel and insurance market pushed the group into a £135m full-year loss. In response, it is moving away from loss-leading discounted insurance pricing and comparison sites and is developing more differentiated travel products such as escorted tours and cruises.
The over-50s specialist’s consumer strategy increased the proportion of business that came in directly to 53 per cent, from 44 per cent previously. Management also lauded a “positive response” to new product launches, selling omore than 175,000 policies of is three-year fixed-price insurance offering.
Cruise sales were buoyed by the launch of new ship Spirit of Discovery, with the group achieving forward bookings of 50 per cent next year, having booked out this year. Investors welcomed the news, sending the shares up 15 per cent following the announcement.
Broker Numis is forecasting adjusted pre-tax profits of £98m for the full year, giving EPS of 7.1p, up from losses of £135m and 14.4p last year.
| SAGA (SAGA) | ||||
| ORD PRICE: | 49p | MARKET VALUE: | £ 549m | |
| TOUCH: | 48.7-49.1p | 12-MONTH HIGH: | 141p | LOW: 32p |
| DIVIDEND YIELD: | 4.7% | PE RATIO: | NA | |
| NET ASSET VALUE: | 88p* | NET DEBT: | 65% | |
| Half-year to 31 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 (restated) | 432 | 110 | 7.90 | 3.00 |
| 2019 | 396 | 52.6 | 4.10 | 1.30 |
| % change | -8 | -52 | -48 | -57 |
| Ex-div: | 10 Oct | |||
| Payment: | 22 Nov | |||
| *Includes intangible assets of £1.24bn, or 110p a share | ||||
