Cash / debt during pandemic 1st Feb 20 to 31st July 2128 Nov 2021 18:27
Why I’m upbeat on Saga
• At the 31st January 2019. Saga had no ship debt and net debt of £391m. (Bonds and loans £440m less cash equivalents excluding restricted of £49m)
• At the 31st January 2020, excluding the then one ship the equivalent £359m
• At the 31st January 2021 excluding the two ships the equivalent was £247m
• At the 31st July 2021 excluding the two ships the equivalent was £227m.
So, during the pandemic (forget the ships cover that later) debt has reduced from £359m to £227m in 18 months so £132m
During the period we raised £139m net and circa £12m profit from disposals so £151m
This is key as it proves Insurance pays for Tour and Cruise at a complete standstill – excepting just £19m and a freeze in cruise capital repayments .
The company also incurred £53m in finance costs on the ship’s loans and bonds and £80m of one-off hits on rebating Tour customers. So arguabily insurance pays for these
The issue then becomes cruise debt of £516m.
Payments of £51.8m up to March 22 have been deferred and will need repaying over five years – so £10.4m a year commencing Jun 21 .
This will be on top of the normal £45m a year repayment so ship debt will fall by £55m a year so £461m at March 23.
The model 80% capacity and £250 pppn per diem funds repayments and finance costs of £16m a year and still leaves a cash flow positive of £10m.
We know each 1% increase in capacity above 80% is £1m extra per ship per year and each £1 extra ticket is 300k per ship per year – so cover looks easy and plenty of potential to add £30 - £40m to cash flow if times are good.
In summary through the pandemic Insurance cash has kept the company afloat and virtually all of fund raise and disposal proceeds has reduced net debt rather than being burnt. Different perspective but gives me much more confidence in the company.
The market not only fails to account for 80% of profits being Insurance, but also misses the fact that debt / gearing is completely dependent on the continued operation of the 2 ocean liners and far less so on travel / Tour generally . The impact of continued suspension of Tour in pertuity is minor in terms of cash flow.
Saga is a steal at this price provided you take the view that Cruise will not be impacted by new government measures. My view is its highly unlikely due to the protocols, mandating of vaccinations and being UK based. Just hope i am right
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