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Always think if it hits a 52 week low just before results someone knows more than me
Still feeling confident about tomorrow and will be totally amazed as per BB if updates aren’t as good as I feel they will be! Will be very pleased to provide detailed feedback on cruise detail on my friend’s return as per questions asked by ‘Pokerchips’……..Good Luck everyone for a positive meaningful day tomorrow!
BB
I suspect some use the Saga Home Equity Release to spend on a cruise too - enjoy life while you can :-)
For what it's worth Poker the food , entertainment and staffing levels distinguish Saga. They operate in a premium market where price is not the be all and end all and post of the target customers have cpi linked pensions. I think they will maintain margins by increasing price.
Banburyboy
Yes...I am aware that in the great scheme of things Food isnt..hugely material....however ..I am interested as to how they are tackling these costs increases ... what approach they may be taking.....a lot of small savings here and there is what makes the difference....or..are they more interested in the customer reviews at the end of the cruise
I was merely wondering what the approach was on such things
Poker I don't think food or even fuel to a degree are material costs to this company. It stands and falls by per deims and capacity in terms of the Opperating model.
The Saga experience is built around the best food even if that's £20 per head (which is extreme) it will be closer to £10. The rise will add £2 per day on a per diem of £317 !! = Not material
Sensitivity is £1 = 300k per year so top whack 600k food prices
Be good to get this confirmed by Martins mate !
" My friend currently on a Saga Cruise so will report back when he returns and I get feedback."
MartinPalmer2
Thanks for that.....I would be interested to hear comments on the overall dining experience....given the higher cost of food at the moment...is the perception that meals are not as good as expected ..in order to to fit a budget ??....or are there food payment supplements now if you would like certain foods on the menu ??... ...or....is the food generally seen as good and the company is taking a margin hit on the cost ??
Buglet thanks.
As said previously lots of research has been done by myself and others. That research indicates we are turning and no horrors await.
For me if I'm wrong this time the boots will be hung up as I'm clearly not good at analysing this company.
You have small algorithms sells pumped through to attack the Bid, that are aimed at bringing out the bigger sells....maybe that is one for 5000 shares...as always it may need to the final sellers to throw in the towel before the buyers who are no doubt sitting on their hands...come into buy the created low
I think it is more about whether the performance is more or less equal to the expectations , and whether they are cost managing the reality against the expectations....
Talk of right issues, covenants are far too premature IMO
I would be more concerned if the SP was 240p and out of touch with earnings/margins reality than with 173p where it has already adjusted to what the challenges currently are
If Marshall Wace really thought there were serious issues I am sure they would have borrowed far more shares and made that view known to the BOD and the market.....their stable short level of 0.79% suggests they do see cost/earning pressures from external issues but they don't see the BOD as being particularly out of touch with managing the current economic difficulties ..they may well be happy to just let the nervous private investors do the selling for them
Direct Line reported in May that vehicle claims frequency remained modestly below expectations, but did report repair cost increases ..I suspect SAGA drivers may well be driving less frequently due to the fuel cost ..they certainly will be careful to ensure their renewal quotes aren't affected by any expensive claims
I would sit in the "average results, SP falls to 168" camp with a further drop depending on the forward guidance/expectation concerns ....the forward guidance is more where it will happen, if anything IMO
good luck all...either side of the opinions
Well done, Alnwick. Great post.
Coming at things from a different angle and offering perhaps insight into the murky world of market makers. Certainly made some sense to me.
Still here in the background and yes am substantially down on my average but absolutely sure the TU will throw a very good light on the overall Group and think both Insurance and Travel overall will be looking positive and the turnaround will begin to happen and amazed it will have taken this long! My friend currently on a Saga Cruise so will report back when he returns and I get feedback.
Thanks Buglet - I have been wrong many times with this share. For me if its really bad I will have to hang up my boots.
- confident on cruise
- no opinion on Tour but losses must reduce
- insurance some good posters (valuewise) reckon it could be grim. I'm not convinced.
- funding raise. Nil chance I will give up posting.
- covernent breach looks to me as they are before interest and depreciation we only need PBT to be nil. That would be awful but the bar is really low
Not long now and this one owes all of us
Fair enough BB. The research done by you and a couple of others is outstanding, which is why I will probably buy back after the TU. Thanks for a courteous response.
Buglet - my research on cruise completely backs up Magic's analysis.
Not being rude but read Alnwick's post of 19.33 it sums it up from my perspective and most others on here the fall..
Others have really researched this. You have not.
You work on a simple prognosis the market knows best which i concur is quite often right this time i suspect not.
Not long now but the evidence to me supports a little egg on the Buglet face may result.
I hope so :)
Assuming all is well as you suggest Magic, can you provide an explanation of why there has been a dramatic fall in the SP. I simply do not buy the positive narrative, sorry.
Very good pov which i think sums up present position. Tuesday should affirm direct of travel which i still think will take a couple of years to recover.
Good evening Banbury,
If it wasn’t for the short term Financial pain I find it quite amusing reading some of these posts.
I find yours very informative! Thank you.
Here’s my take on what’s happening to SAGA in the current market.
SAGA Has 140,337,271 shares in issue
RDH has 26%
Institutions have over 50%
10’s of thousands of shareholders have the rest dating back to the original float and in most cases are nursing a 90% loss !!!
The average number of shares traded per day is 363,000 That’s less than 0.025%
Most of the sellers are already 90% underwater and are probably just bailing as they had enough pain !
The market makers are marketing down the shares to build the book ready for next weeks demand.
Current Market Cap of SAGA £245m
Ludicrous!!!!!
I have continued buying this stock and remain a holder for at least 5 years and stand on my forecast.
I think next week will bring some welcome relief !
Have a good weekend SAGA investors
Thanks Value.
Covenants are
Ship - 1× capital repayment for PBIT&D - I make that £60m
2 x interest repayment for PBITD - again probably just shy of £60m.
These are not stretching particularly as they exclude interest and depreciation.
If they don't repay the £150m 2024 bond the RCF is pulled.
No dividends until £50m deffered debt is repaid. This is currently being repaid over 5 years.
All the talk of inflation is one sided- yes it puts pressures on operating margins but we have £700m of debt with an average cost of 4.5% which is fixed. 9% inflation erodes very quickly the value of the debt and interest payments and could be really benificial and a boon.
The three year fix is rolling so a third is renewed each year at prevailing premium rates. Its effectively cyclical so a locked in gain as premiums fall.
Again like debt their are two angles and it could be good or bad but it's not cut and dried.
Tuesday is make or break for me but I can't see any bombshells. The update will be cautious and report very steady progress.
My main concern is some sort of low ball offer or taking this private.
The wait is nearly over.
Good luck
BanburyBoy
I agree that there will be some releases as the company guided but they will be a lot lower than 2020/21. Reserves are released only if the actual result is better than expected. I think you also have to take account of higher inflation and claims frequency emerging after the company did the presentations in March. Hence, I expect the Insurance Underwriting PBT to be less than £10m.
As you say, the TU may not tell us much about this and we will need to wait for the interims to see how this is going.
On my holding, I sold out last week at 191p and took my losses. I have not analysed closely how they might be doing against their covenants but I fear that with the drop in insurance and the rising costs in Travel, may mean that they need relief on these although I do not see a Rights issue at this price.
Sorry, you asked me so I have to disclose my sell, as not keen to promote negativity. I fear disappointment ahead.
Value note 29b sets out the reserve figure £284.9m .£140m of this pre dates 2018 and some is ten years old.
I concur releases will reduce but they will not be nil. The trading update won't tell us much its not something they normally refer to.
One for us both to watch.
Do you see value in the company at £1.80 are you invested ?
BanburyBoy
The underwriting PBT was boosted by releases of prior year reserves. These releases accelerated because during COVID in 2020 and 2021, claims frequency was lower as people were driving less. Thus, the company was over provisioned and released the reserves. It will not have such a high level of releases any more as claims frequency has risen post re-openings. Additionally, claims costs have risen due to inflation and higher used car prices.
The company warned that reserve releases will be lower in 2022/23 in its annual report. The CFO stated this in the company presentation to analysts. The CFO was questioned again on this point in the presentation two days later to retail investors, a recording of which is available on Investor Meet Company in which he unambiguously repeated the £10m PBT figure for Insurance Underwriting in the Q&A. Analysts have reduced the 2022/23 earnings forecasts based on this and also in the expectation that insurance profits will hurt even more because of the change in regulation and the fact that inflation has been much higher than expected since the company announced its annual results.
It is not true that other insurance companies are not experiencing the same, lower reserve releases, higher frequency of claims and higher costs due to inflation. This is an industry wide experience. Admiral ,which is the market leader in motor insurance has made the same statements in its annual report and presentations for 2021 released in March 2022. Their stock is also down, from 2951p on 1st March 22 to 2244p today.
My view is that Saga should stick to Retail Broking but not be in underwriting. They are sub-scale in this and ther players are better at it. Better to be in broking and also use co-insurance or reinsurance. They should sell this business. The reserve releases have made things look better but excuse the pun, one should look under the hood.
Value couple of observations.
I'm anchoring everything at £120m for insurance as its the only evidenced comparative we have. I am saying I would be hugely disappointed if it was less than £100m in 22/23 - you seem confident in £72m. A 40% fall in the "value" prognosis.. The Banbury case for the defence is.
- insurance business mirror each other. Looking at other insurers no evidence of distress factors re 40% declines
- The CFO comment re no reserve releases is ambiguous and not in written presentations. Reserving is prudent and over the last five years releases has averaged £40m. Yes it may reduce but to nil which is central to your prognosis no chance
- We've been exchanging views since pre covid and you have allways been downbeat on insurance. Not a bad thing but the company seems to over achieve your expectations
- The market at the time nor this board reacted to the CFO comment when it was made. Its been dragged out as some reason for the appalling reduction in SP in the last three months which I think is solely down to market sentiment and not Saga specific.
- The finance costs are a mixture of bond issue and ship loan. Both are fixed. The outstanding bonds rose from £250m to £400m and the higher rate adds £12m. This is nothing to do with insurance per se. The rest is ship loans which will fall £2.5m a year as we have commenced ship repayments and principle is lower. The model 85% capacity has these funded by cruise.
I sincerely hope you are wrong on insurance its been the golden goose that's saved the company and has a goodwill value of £900m. Any numbers close to your £72m would require some serious consideration of an impairment to goodwill
Banburyboy
The Insurance numbers bear a cold hard look. It is easy to see why there could be a substantial fall from £120m PBT in 2020/21. The 2021/22 insurance PBT of £120m, was made up of £66.4m from retail broking and £54.1m from underwriting. The underwriting number included £42.1m of prior year reserve releases. These were driven by the lower claims costs during COVID. The company has said clearly that reserve releases will be a lot lower in 2022/23 such that the underwriting PBT may be around £10m. If you factor in that claims inflation costs are higher and operating expenses are higher due to inflation, then the underwriting PBT may well be lower. Lets say, £6m to £8m. This means that if the Retail Broking is assumed to do as well as 2021/22 (an optimistic assumption), then the Insurance PBT for 2022/23 will be around £72m. Finance costs and Overhead is £48m. This means £24m net PBT. Now estimate what the Tour and Cruise can generate in PBT. If they break even, the net PBT will be around £24m. Assuming tax expense of £4.5m (same as last year), we have net profit of £20m.
The Consensus Estimate is £35.7m (EPS 25.9p) which tells me that they are assuming a PBT contribution from Travel. You follow the Travel metrics closely so can judge what PBT contribution it might make. But I wanted to show to you why anchoring on £120m PBT for insurance may be fantasy.
Best Wishes
Everyone can have an opinion...no problem with that...and it is easy right now to see the market being poor in general terms....
Right now it depends on costs.margins and earnings and that is all best left to the Update