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Saga (SAGA) is on the road to profit this financial year, despite highlighting difficulties with the insurance side of its business in a trading update covering the five months to 4 July. Given that the over-50s specialist’s customer base is the most vulnerable to Covid-19, it is no surprise that the pandemic has been a disaster for the business (the shares have cratered by almost 75 per cent since February 2020). But the company’s fortunes are improving as the travel sector recovers, and its demographic target group has felt comfortable sailing off into the sunset on cruises once again.
An insurance environment with high claims inflation and many customers sitting on fixed-price policies is a challenge, however, and a decline in new business hit sales in the period. Total policy sales were down by 2 per cent, with motor and home policy sales down by almost a tenth and policies in force down 4 per cent since 31 January this year. The impact of the Financial Conduct Authority's insurance pricing reforms, which mean that renewing customers cannot be quoted more than a new customer would be for an equivalent policy, “was larger than we expected” on Saga’s trading performance, Numis analysts added. On the positive side, policy sales should be boosted in the second half by new products, which include an electric vehicle offer.
With punters now spending on holidays and cruise bookings once again, progress is being made in the company’s travel business. A cruise load factor of 75 per cent is expected for the full year, with an “exceptionally strong” summer performance, while bookings for the 2024 season are “well ahead of expectations”.
The company forecasts an underlying profit before tax of £35mn to £50mn for the full year, which is in line with analyst expectations. While net debt is expected to be slightly higher at the end of July than it was in January, leverage should fall in the second half. Saga’s shares look cheap at six times Numis’ adjusted forward 2023 earnings, but insurance troubles have added further pressures.
We’re off and running lads. Looks like the bottom is in following the trading update.
Looking forward to the 500 p meet up in York. Or is it 400 p now?
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.
Most of the American cruise stocks are up between 12 and 15% today. Norwegian, Royal and Carnival.
Great post providing insight into how insurance companies operate. Well done chaps.
I think the entire foreign travel and cruise sector is getting hammered at the moment. Think Easy Jet, Carnival, TUI etc.
We’ve always suffered from being treated as a pure travel stock even though we are actually mostly insurance. I’d be more concerned if SAGA had been singled out and other travel stocks were doing fine.
I exited SAGA last week because I was fed up of watching travel sink. My intention is to buy back in before results though because I think it is likely the news will be positive.
Not a bad result for this stock to break even today given a lot of other travel stocks continued to get hammered.
What happened at the AGM that has resulted in this having 7.5% chalked off today?
Buglet steams in out of nowhere with a downbeat forecast. lmao
Yep. Buyers came in on quite a few stocks I was monitoring this afternoon and pushed them back up again.
Would be interested to hear if anyone has any calculations / projections for the current forward price to earnings ratio.
Must be somewhere between 1 and 5 I’d wager.
I agree Mr Banbury. This price is a steal. Think I’ll be back in again prior to the July update. Knowing my luck I’ll stay out too long and miss the boat again!
My memory is a bit hazy now so I'm probably a bit out, but I'm somewhere near the ball park I think. I came in after the rights issue.
I seem to recall that post rights issue, to the surprise of many, the price continued to fall. I think I dropped in at about 11 p, giving myself a pat on the back and thinking I had bought in at the bottom. The price then proceeded to fall even further in the following weeks and at one point even went as low as 8 p I think.
We then had 15 to 1 consolidation and then the vaccine news came through and sent us rocketing up into the 300s if I remember correctly. That was the moment I made the small fortune, which I have since subsequently lost again on the way back down from 460!
Ahhhh happy memories...
This is now getting close to the level I originally bought in at a couple of years ago and made a small fortune. I think I bought in at about 11 p pre consolidation or 130 p new money. I never thought I would see it back down there again.
Easy Jet on the news last night. Completely inundated with people who want to book flights. Having to cancel 1 in 16 flights due to lack of capacity. They attempt to rebook or refund these customers and very importantly, they don't pay compensation to anyone who's flight has been cancelled.
Despite all that their share price is languishing down at 415 and they had another 6.31% chalked off today. Absolute madness to see that given the demand is so high that they can't fulfil it.
Interesting observation Mr Banbury. Could be a trading update included at the AGM next week?
Thanks, banbury. Great post as always.
I decided to sell up this morning and move over to NEX. Trying to catch the current wave of optimism surrounding the bussers following the various takeovers.
Still think this is a great long term hold and I have faith in Mr Haan Man to turn it around. Just a bit skeptical now about how fast the recovery is going to be for the travel sector given everything that is going on.
Hopefully I’ll make a bit of money elsewhere and be back in again soon so that I can join everyone for the big push to 600 p and subsequent drinking session in York!
Good luck all.
Evening all,
Not been on for a while, but I can assure you I have been sharing in the despair of watching the share price fall through the floor over the past year. I bought back in here pre omicron and pre putin, expecting it to be a good post covid recovery play into 2022.
As it happened, I bought back in right on the peak and have now lost all my gains from trading through the pandemic plus some more. I honestly thought the company would be returning to profit in the previous trading update, so was dismayed to see them barely break even.
My question is this. Is it worth staying in here for the July update? There appears to be quite a few good investment opportunities available elsewhere at the moment and it seems that, with the exception of the bussers, travel stocks are completely out of fashion.
One for resident local accountant Banbury - how are the accounts looking? Is tour still a massive black hole or is there any light at the end of the tunnel?
I was expecting a bit better, including a profit this year, but todays update wasn’t a bad update by any stretch of the imagination.
The balance sheet and cash on hand look to be in good shape. We are also seeing solid insurance results, good cruise bookings and an indication that tour is being sorted out.
Looking at the current intraday price of +6.00% it would appear as though the update has been well received by investors, who are probably now looking 6 months ahead.
People probably getting their money out this morning before Russia invades Ukraine. US and UK have started telling their embassy staff to leave.
Given that we are primarily an insurance business.