Premiums may be under pressure in some parts of the insurance market, but Saga's (SAGA) broking activities continued to strengthen the business during the first half. Adjusted cash profits increased 5 per cent year-on-year to £141m. That helped reduce the net debt-to-cash profits ratio further to 1.8 times, from 2.2 times a year earlier; and, importantly, within the target range of 1.5-2 times.
Fair value losses on derivative contracts took a bite on statutory profit, masking some of the over-50s services provider's gains. The benefit of growth in written revenue per policy was offset by the in-house underwriter accounting for a greater proportion of broker revenue, meaning more revenue is deferred. But lower marketing and operating costs, including savings from the closure of its Direct Choice brand, helped push up motor broking pre-tax profit by 15 per cent to £25.5m.
High competition in home insurance continued to flatten premiums. Management decided to reduce the number of core policies to try to improve profit per policy, but that led to a 4 per cent decline in pre-tax profit. The picture was brighter at the travel business, where pre-tax profit excluding derivatives was up 63 per cent to £11.9m. This was driven by cruises, which benefited from an additional 29,000 passenger days. Management approved construction of a second additional cruise ship, for delivery in August 2020.
Analysts at Numis expect adjusted pre-tax profit of £190m for the 12 months to end-January 2018, giving EPS of 13.6p (from £193m and 13.7p in 2017).
| SAGA (SAGA) | ||||
| ORD PRICE: | 196p | MARKET VALUE: | £2.2bn | |
| TOUCH: | 195.9-196.1p | 12-MONTH HIGH: | 225p | LOW: 180p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 109p* | NET DEBT: | 38% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 437 | 110 | 7.9 | 2.7 |
| 2017 | 435 | 103 | 7.5 | 3 |
| % change | - | -6 | -5 | +11 |
| Ex-div: | 12 Oct | |||
| Payment: | 17 Nov | |||
| *Includes intangible assets of £1.5bn, or 138p a share | ||||
