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Rogue, so i think the recent appreciation in build cost has cancelled out some or all of the depreciation. so a sale of i estimate £600 to £700 million for both ships would wipe out the debt. Even if they leased out the ships at £60 million per year then with an EBITDA of £90 million for both ships would leave a profit of £30 million .... just for ocean cruise ...
Rogue,
so that would be a sensible thing offsetting any one off profit from the sale of the cruise ships with a goodwill rightdown as there would be less tax to pay. The main point is sale and leaseback generates cash while goodwill is a non-cash item so the debt would go down on a sale ...
Hi Rogue,
I am not an accountant so I maybe wrong but the reason I say this is because:
Currently the cruise operation has no goodwill on the books.
So if they sell the cruise ships for more than the current debt associated with it it would create a profit. As this profit is a one off and not due to normal operations it would be an exceptional profit.
The lease or rental on the ships would be part of normal operations, and therefore affect the underlying profits. This would therefore reduce the EBITDA and underlying profit with respect to the cruise ship business. However note that the proceeds of the sale would be used to pay of the ship debt, so the normal debt payments which have been affecting the underlying profit in the cruise business would dissappear. So I think the basic equations, keeping all other factors constant, are:
exceptional profit = sale of cruise ships - ship debt - transaction costs of deal
new EBITDA = previous EBITDA - lease/rental costs
new underlying profit = previous underlying profit - lease/rental costs + ship debt repayments
overall this would be very good as we would no longer have an issue regarding £250 billion bond payment and perhaps also lease more cruise ships
So disagree again with TO as Roger will block it.
But sale and leaseback would change the dynamics of this company. It would take the risk of paying the 2026 £250 billion bond of the table and of course make an exceptional profit for the year instantly.
Would also settle for selling AICL as well which would now be much more than the £90 million offered earlier.
However Saga is not had a history of making deals so far, but that was useless Euan, maybe Mike can do it
Cheers Alnwick,
so they reduce it from 220p to 175, which is probably why there was an initial sell on results day.
Really Saga needs to do a deal to shed debt. I am hoping for an AICL sell or a sale and leasback on the cruise ships
This would be funny if he had not done such a bad job as a CEO:
https://www.investorschronicle.co.uk/news/2024/04/16/saga-superdry-ag-barr-meausring-a-ceo-s-progress/
Mike Hazell is so much better, but is it too late?
Watched the presentation and the key thing is the 3 year policy damage due to rampant motor insurance cost inflation should be cleared out by the end of the year.
Hopefully this CEO can make a good deal unlike the previous one
Batfasted,
main reason is very low volume can swing this share plus they need to refinance and not use rogers money.
If they did a sale and leaseback on their cruise ships things would look a lot better on the balance sheet.
Thanks Poker,
So when there is another writedown of the insurance the net equity will drop again. How much goodwill is in the books regarding insurance at the moment.
I suspect by May they will have done a sale and leaseback or maybe sold the underwriting business. Or Maybe generated enough cash to pay the bond outright as they currently have £135 to £145 million in cash at the moment.
still dont know which broker changed to hold and took out price target?
Hi Thomson,
The reason for the recent fall especially Friday is the fact that 1 of the 3 analysts has stopped setting a price target on Saga and moved to hold. If anyone has more details it would be greatfully received. I know that Peel Hunt has a price target of 145p (Hold) and Numis has reiterated a price target of 200p. Not sure about the one that has stopped placing targets.
Https://www.sharecast.com/news/news-and-announcements/saga-says-annual-profit-set-to-more-than-double--15995692.html
https://www.cityam.com/saga-surges-towards-profit-in-stronger-than-expected-six-months/
https://www.proactiveinvestors.com/companies/news/1039638/saga-predicts-more-than-doubled-annual-profit-on-travel-upturn-1039638.html
.... next step broker upgrades ... what does Peel Hunt have to say!!!
Nice results ... year ahead should be even more profitable with extra loading on river and ocean cruises and improvement on underwriting and of course full benefit of cost reductions. iretail insurance not that good but again only short term pressures. Lets see how the market reacts.