Member Info for Banburyboy

Millionaire £12 - £15 will require a substantial turnaround on insurance not just a recovery.
My long term horizon is £8- £10 as insurance is tough.

We all routinely agree that Cruise will do well when sailing commences.
Its easy to forget Saga is 80% an insurance company and that was in terminal decline before Covid. Addressing that decline is fundamental to Saga hitting the £8-£10 range we hope for. It wont happen with cruise alone insurance needs to recover .

Some really promising trends in the January update :
• Policy growth +1%
• Customer retention 80% + 5% on last year’s accounts
• Margins £71 per policy in line with expectations – last year’s accounts £74.30
• Three year fixes 596k this is a fabulous figure and lock in margins
• 60% of all customers opt for a fix
• 59% of customers direct last year 57%
• 5 basis point reduction in loss ratio

I have had a stab by looking at Admirals accounts released last week at what the Covid dividend might be and have come up with a £27m increase on PBT compared to 2020. Interested in views of others ?

Saga in 2020 final accounts made £130.8m PBT on insurance (£28m motor, £33m home £29m other and £40.6m underwriting).

Interims for 2021 year were £70m. But they clearly said no covid dividend or recognition.

Some interesting pointers from Admirals accounts household profit doubled on previous year as substantially less theft and water leaks. Saga customers stay at home anyway but should be a 35% gain so let’s say £45m household

Adding back stay at home rebate motor and underwriting Admiral PBT was up 35%. This related to a decrease in claims in Covid and marked reduction in prior year claims prompting reserve releases. So applying 35% to the 2020 Saga combined motor and underwriting should mean £93m

Take off £10m for add on’s and in particular travel insurance which was hit so down from £29m to £19m

My take on the covid rebate to expect in the final accounts based on some read across from ADM trends and experience is £157m (£17m increase on interims on a pro rata basis and £27m on previous year’s figures )

Wesley it acedemic to a degree but roughly :
£15 based on equivelent market value at IPO
£27.75 if you participated in the IPO and sat on your hands .
£18.49 if you were IPO holder and took rights.

Im getting 413 to sell lets hope it holds.

Sheltie the last metrics they published for £40m profit per ship before interest tax and dep (its £20m after) was £234 pppn and 80% capacity. Sensativities are + or - 1% capacity £1m. + or - £1pppn 300k. They are stuck at 80% capacity because of covid if they could get 30% on price so £300. That would be £20m extra bottom line per ship = £40m. Word of caution data is from nov 19 and costs may have gone up and that would need to be maintained all year . Cruise is important as resumption solves cash burn but i think £40m per ship is safe. Sucess for the company is around wider metrics of stabalising insurance and cutting costs / increasing margins. Trading update sounded promising . Its easy to forget the rot set in before covid and it was insurance related so for me cruise is a given. It will do well but need confirmation insurance has turned the corner. That will really drive recovery.

Pmh - confirmation of deferral of 2021 ship payment (£45m as was ) over five years 22 -26 at a reasonable cost £6m was for me the single biggest de risking we have had. Cash burn was £9m in five months until 31st December 2020 and we can probably expect a bit higher until sailing as they ready the ships. Other things to look out for :
1 - sale and value of Titan £100m has been cited and its all bottom line as no assets other than brand. Accouts will reveal more particularly if its held for sale in accounts.
2 - value of properties three up for sale. Could be worth a bit again all bottom line and accounts will inform.
3 - at £5.30 ish we would be back in the Fts350. That means institutions and trackers push us up
4 - accounts reveal what 5bp off loss ratio equates to. The covid dividend.
5 - Im also expecting a working from home dividend as head office costs overheads rates utilities fall sustantially
6 - finals usually update on forward sales and margins on cruise . We need roughly 80% capacity and £234 per person per night to get the targeted £40m before i t &d that the company was aiming for per ship.
7. Jan trading update had insurance stabalising and hoping for comformation in April
Downside risk is Dofus theory on RDH taking it private at £7. I respect his view but dont know how that works if other sharehoders think its worth £10 how does he do it ?. Covid returning unlikely. More regulation on insurance and from 2023 corporation tax up by 6%. Which from our halcyn days would be a £10m per year hit.
Lot more positives than negatives to me at current share price.
Tried to summerise a balanced view of everything im aware of. Anyone think ive missed something ?

Rogue it was all looking a bit limp for the afternoon and the BB prediction of £4.20. Suddenly shot up to £4.13 maybe i'm on Millionaires tea leaves. Good week for Saga and holders

Not confinced the deferal was entirely baked in. Im going for an afternoon spurt and a £4.20 close

There seem to be two things
1 - change to covernants which is standard
2 - defferal of £51.8m ship repayment from this year to the next five years . This is big news.
The repayments should have been £45m if paid on time and given the current rates on loans at a cost of £6.8m a cheap deferal ( the fees for rights and consolidation were a jaw breaking £10m).
I had been thinking they might refinance all debt on.lower terms but great start.
I think market will like this

Millionaire have noticed a compete change in share price this week and last :
1 most days we close at or around the day high
2 big falls the other day 2% and today 1% are shrugged off and its flat and even slightly up.
3. Days when market rises it out performs the average.

Something has changed i know there i a thing called a volitility index and feels like Sagas moved from 8 on the scale to 2.
Not complaining and lovely to see

Hi Banjo welcome back. You must have pre-dated my arrival and as Rogue says I was one of the loud ones.
The current carrying value of goodwill in the last accounts is £778.4m (£718.6 insurance. £59.8 travel) and as you say will be subject to a management assessment and an independent review by the auditors KPMG.
Travel - they prudently wrote this down to nil at the 31st July 20 Interims. So the write down of £59.8m has been declared. Interestingly this was more technical as uncertainty on start dates means you don't have a robust basis for an independent valuation. Two thirds of the £60m relates to Titan which has minimal assets and a suggested sale value of £100- £150m and is up for sale. My take is the write down is prudent , technical only but does not represent the current business fundimentals on tour where sale value exceeds £40m of goodwill. I don't have a view on the £20m or so Cruise goodwill.
Insurance - current goodwill is £718m. Management estimates of the discount rate used to assess this fell from 12.6% they used in last years finals to £9.9% in the interims. The lower discount rate means significant headroom £200-£300m in balance sheet carrying value.
Some of why the discount rate reduces is technical but it also reflects the business fundimentals - insurance is stabilising and doing well for the finals I think they may even use a lower rate and heres why

From recent Jan 21 trading update plus my comparison with last years accounts

• Policy growth +1%
• Customer retention 80% + 5% on last year’s accounts
• Margins £71 per policy in line with expectations – last year’s accounts £74.30
• Three year fixes 596k this is a fabulous figure and lock in margins
• 60% of all customers opt for a fix
• 59% of customers direct last year 57%
• 5 basis point reduction in loss ratio
• PBT in insurance expected to be £140m in line with previous year before claims windfall

Insurance really resilient. Hastings has exactly the same PBT and incredibly sold for £1.66bn in the summer this would be at the more optimistic spectrum of the value of goodwill giving headroom of £800m.

Lots of woffle but likelihood of an insurance goodwill write down in 2021 Final accounts - NIL

Rogue contrasting fortunes in Steel City last night with a ten men theme. The Villans could not blunt the Blades and the Millers with 10 men secured a victory in the 7th minute of overtime against the Owls now controlled by an ex Baggie Mr Moore. A Millers escape has the Blues and sky blues and Terriers looking over there shoulder I think we will escape.

Dofus amongst some stiff competition you emerge as my favourate poster on Saga. You have a touch of the Scarlett pimpernal. Wise a little inside knowledge and a conspiracy theory re Private but allways informed and interesting. Two posters who were good and gone quiet.
1.Horsearse i know got covid and was really poorly but did great analysis on cruise bookings. Be great to hear you again horse.
2. Valuewise who knew his stuff on insurance and i was hoping could shed light on 5bp reduction in loss ratio to bottom line.
Special mention to Millionare whose tea leaves are doing well and Gooner for covid and buildings for sale posts.
Great board all.
Im a novice on shares but for a week we have more or less closed on an intra day high that seems good to me. Any chartests have a view ?

Jasson - holding Texas and Mississippi up as examples of how to conduct a proper exit from lockdown is not the wisest . Its one thing opening up but quite another not to wear masks and social disitancing . Reeves in particular conduct has been a disgrace hes paid lip service to the very minimum of measures and thousands have died and he does not care.
You clearly have a view on getting out of lockdown sooner rather than later but reccomend you read about Mr Reeves and the disaster that is Mississippi before holding it up as an elixier.
I want Saga to do well but covid considerations need to be informed and evidence based. Not touted by the same idiots who still think Trump won the 2020 electio and antifasca stormed the senate. Reeves and Abbott

I thought we were sailing in Uk only with no disembarking. That would be allowed ? I know ndh (thread police aka fight in an empty ship) was really excited about this.
Sorry seriuosly have i missed something ? Is saga not doing uk only cruises in May ?

Might shed some light on Saga.
Admirals half year results for motor were £249m profit but they gave back £97m as a stay at home discount of £25 so £346m. They have 4.26m vehicles insured. There loss ratio fell 11%. All from first half results.
Saga made £49.1m first half and have 1.1m customer policies (lets assume that is vehicles.
On a comparable basis per car to Admiral Saga would have made £89m not £49m. For full year our loss ratio they say will only fall 5basis point.
I had thought oldies driving less we would have done better but it doesn't appear so. Anyone know what is the drag on car insurance - does re-insurance mean there is just a profit up front and no covid benefit ? If so presumably we would be looking to underwrite more ?
Only uncertain area I have in an otherwise positive story

I

Beach i would normally agree but the way it gained 1% Friday with the market down 1% was really impressive. Im no expert on shares but feels like a re rate. So im going close £4.20 next friday. Markets apparantly spooked by inflation as economic activity booms. All the more reason to lock down refinancing at ultra low rates now and watch inflation (if it happens) erode the principle value. No £4.20 for me .

Always good to hear from Dofus who is well tuned into the companies thinking.
My musings on Titan are below
Titan was up for sale in Jan 20 as reported by this is money at a price of £100-150m.
Its cost in October 2011 was reported by the Independent as £15-20m - although in Saga's first accounts in 2016 goodwill was £24m so I think they paid more at least that.
Titan's revenue as reported in the segmented accounts for Jan 20 was £346m. No details on cost or overheads or profit as it is rolled into Cruise. You would like to think they could make at least 5% which give profit of £17m pa and supports valuation. To my mind the pandemic should not impact previous business valuations if anything it should emerge stronger as competition struggles.
If they could get £100m for Titan and the £100m over and above customers deposits to me this is a game changer because :
1 - No goodwill in the accounts for Titan and no debt means that is £100m to the bottom line and more importantly cash flow
2 - Corporation tax on sale limited by offsetting pandemic loss - its material and feels exceptional by nature
3 - £100m is two years of ship repayments which are £45m per annum. That's huge

Interestingly the accounts pre pandemic had the goodwill still at £24m but with headroom of £62m in the notes based on a 12% discount factor. This suggests a very prudent valuation of Titan of £88m just over a year ago.
There is an accounting requirement to report separately the value in the books of items held for resale - for Saga this definitely relates to three properties they are exiting from and might extend to Titan - it depends on the process and if it is formal or informal.
Anything from £90m upwards to me is a game changer and puts Saga in an extremely strong financial position, ensuring no further calls on shareholders and a whip hand in re-financing both the ship loans and potentially bond with as suggested using the insurance business as collateral.
Watching Titan developments with interest and added to Cruise putting the rocket burners on and insurance definitely stable and to an extent guaranteed by 60% of all policy sales being three year fixes and a loss bonus re reduced Covid claims - whats not to like !!
Titan could be some more icing on an increasingly attractive cake !
I hope my friends on the great board enjoy my Sunday morning pick up ? Have a great day

BB

1% up on a market down 1.4%.
No one rushing for the exit bodes very well.
Feel safer with this investment each day
BB

Yes Rouge it does seem to have re rated. Based on nothing but guess work barring some bad news on cruise or god forbid a cash raise (nil chance imo) £3.60 is the new floor. £1 up on this time last week.

Sheltie our stories are pretty similer. When you make your 50k i break even. To be honest it feels like a win as i had long ago written it off. I am so happy with Saga and cant see any major negative. The business as usual profit for the second half will be £90m (£180m annualised) and market value is £530m. Should get boosts from refinancing annoucement, crusing annoucement, final accouts with covid windfall and revealling value of for sale assets and at £5 we should be back in the ft250 which is a significant boost as trackers will hit on low value compared to profit. Happy days indeed