ii view: Saga steers losses lower

The share price fell by more than 65% in 2020 but is up over 45% in 2021. We assess prospects. 

Full-year results to 31 January

• Revenue down 58% to £338 million
• Pre-tax loss of £61 million, up from a loss of £301 million last year
• Net cash of £75 million and access £100 million credit facility

Chief executive Euan Sutherland said:

“The progress we have made is clear in the resilient performance delivered by our insurance business and in Cruise where our high levels of customer retention show clear loyalty to our differentiated boutique offering. At the same time, we have been working to develop the plans to refresh our brand and to invest in data and digital to improve the customer experience.

“Looking ahead, while we are mindful of economic headwinds and the potential ongoing impacts of Covid-19, it is clear that there is significant pent-up demand among our customer base, the vast majority of whom have now been vaccinated and are ready to enjoy post-lockdown freedom. We look forward to relaunching our brand later in 2021, which will only enhance our ability to unlock the potential in Saga, returning the business to sustainable growth and creating significant long-term value for all our investors and stakeholders.”

ii round-up:

Saga (LSE:SAGA) is a specialist provider of products and services for people aged 50 and over. The company first and foremost operates an insurance business selling a range of products including motor, home and travel cover. 

Second to insurance in profit terms although previously its biggest revenue generator, it also offers a range of holidays including cruises. 

Finally, its other services largely focus on personal finance, including savings accounts and equity release.   

For a round-up of these latest results, please click here. 

ii view:

The Folkstone-headquartered company last year outlined a series of new strategic goals. These include optimising its businesses, reducing the cost base, lowering group debt and sharpening its customer digital channels. Management layers have been reduced from 17 to five, with the company on track to achieve run rate cost savings of £20 million over time. 

These latest results saw motor and home insurance policies return to growth, with sales volumes 1.1% higher than the year before. Despite suspended travel under the pandemic, customer demand remains evident. Customer cruise bookings for the year ahead and the following combined are up 20% compared to this time last year.

For investors, the recent capital raising and current cash burn offer reassurance. A relatively new chief executive and subsequent strategy update give increased focus, while vaccination roll-outs and the group’s wealthy older customer demographic add to the positives. But with the outlook for travel under the virus still highly uncertain, and the share price having comfortably outperformed the wider FTSE All-Share index over the last year, the shares for now look to be up with events. 

Positives: 

• Its targeted demographic – 50 and over – is growing
• Cost-saving programme

Negatives:

• Travel business suspended under Covid-19 pandemic
• Leverage ratio up year-over-year

The average rating of stock market analysts:

Buy