Saga Share Discussion Threads

[belluci] 06/7/2022 12:19

Thanks for sharing

[theaccountant2] 05/7/2022 21:39

Could be taken private debt very high

[sambuca] 05/7/2022 21:00

An interesting article from Money Week

Saga’s figures are heading in the right direction – so should you buy?
Saga the over-50s travel and financial services specialist, has been struggling for years. But now, with the pandemic behind, it it is planning for future growth. Rupert Hargreaves looks at where it went wrong and asks if the shares are now worth buying.

by: Rupert Hargreaves
5 JUL 2022
Saga Sapphire cruise ship
Saga spent huge sums on new cruise ships just as the pandemic arrived.


Saga (LSE: SAGA), the over-50s travel and financial services specialist, has been struggling for the best part of the past decade. Thanks to some strategic mis-steps in insurance, the company entered the pandemic in poor shape, debt was high and sales had been declining for five years.

Further, in the years before, it had spent huge sums on new cruise ships to bulk out its travel and holiday business. Just as these vessels were supposed to come online, the pandemic arrived.

In total, Saga has lost £571m over the past four years – nearly two and a half times its current market value. Still, it looks as if the business is on the way to getting back on track, although you wouldn’t know it from the share price. The stock has slumped 55% over the past 12 months. Since the end of 2019, it’s down by 78%.



Refinitiv analyst estimates have the firm earning a profit of £35.7m this year, in line with Saga’s own trading projections. According to its latest trading update, management now expects full-year profits to come in at £35m to £50m. It also looks as if the group has put its balance sheet issues behind it.

After raising around £400m last year through a share placing and bond issue, Saga is now expecting leverage to start falling in the second half of the year with the ambition of repaying a £150m bond when it falls due in 2024. In January, the group had a cash buffer of £187m to support its operations.

Saga’s market share should help the company prosper

Ever since Saga went public in 2014, I have been fascinated by the business.

In theory, it should be raking in cash. The Saga brand is well trusted by its main market, the over-50s, and the size of that market is growing steadily. According to the latest UK census figures, the number of over-65s in the UK and Wales has reached record levels.

And unlike other market segments, the wealth of the over-50s is booming. One in four pensioners in Britain is now a millionaire thanks to soaring property and pension values, according to government data.

These are the sort of market advantages many companies can only dream of. So, where did Saga go wrong?

Most of the group’s problems stem from its insurance business. The UK home and car insurance markets are well developed and highly competitive. Yes, Saga has an edge over some of the market, but it is working against big, strong competitors. Insurance can also be a tricky business if companies don’t get their sums right, and this is where Saga has tripped up in the past.


Still, management has been working hard to get the insurance arm back onto a stable footing and these efforts are paying off. Policy margins have stabilised, new products are performing well and recurring revenue is growing (which is good news, as this has a far lower cost for customer acquisitions).

Thanks to all of these initiatives, management is projecting a long-term combined ratio for the group of 97% (a ratio below 100% indicates an underwriting profit). Any insurance company that can sustainably earn a combined ratio of less than 100% on a repeat basis is doing something right.

For example, according to consultancy EY, the overall UK car insurance market could see a combined ratio of as much as 113.8% this year and 111.1% in 2023 due to higher costs and stagnant premiums.

Cruising back into profit
As the insurance business gets back on its feet, the holiday and cruise business is also showing signs of strength. While there’s still some disruption across these two divisions, Saga is projecting an ocean cruise load factor of 67% for the first half of 2022.

It is also now forecasting a load factor of 83% for the second half and 75% for the full-year. With a daily rate of £319 from paying customers, compared to just under £300 last year, the business is clearly making headway.

The holidays business (comprising Titan Travel and Saga Holidays) is also improving in line with the rest of the global travel industry, although management still expects a loss for the year.

Nonetheless, the latest trading update clearly shows that Saga is putting the pandemic behind it and planning for future growth.

The company could face growing pains in the future
That said, despite its improving outlook, I’d be wary of rushing headlong into this stock.

Saga has plenty of attractive qualities, but as I’ve pointed out above, its main profit centre today is insurance, and this is a tough industry. The organisation is going to have its work cut out to keep on top of the sector and achieve further growth.

Indeed, management is already expecting the profit margin on each insurance policy to fall in the next financial year, costing £20m to £21m in annual profits. The travel business will have to pick up the slack here.

Based on its own projections and Refinitiv analyst earnings estimates for the current fiscal year, the Saga share price is selling at a forward price/earnings (p/e) ratio of 6.5 falling to 3.8 next year. That looks cheap on the face of it, but there’s a huge amount of uncertainty here. I think it’s unlikely the market will re-rate the stock to a higher multiple until the group is firmly back in the black.

Sam

[fant1] 05/7/2022 17:56

Saga closing share price 161.00 minus 5.90 (WOW) down 3.5% is 150 coming? I bet those who bought here July 2021 circa 4.00 are pig sick. 🎏

[theaccountant2] 05/7/2022 17:29

He did the same with Super dry.

[onjohn] 05/7/2022 16:57

Ewain Sutherland will drive this into the ground

[theaccountant2] 05/7/2022 16:41

I have its not great to be honest, alot of headwinds ahead also a recession looming.Buy below £1

[taddavies] 05/7/2022 16:33

Have you read the RNS?, somehow I doubt it.Filtered

[theaccountant2] 05/7/2022 16:31

Still a risky business with the debt and covid returning with a vengeance. I'll buy below £1

[hamhamham1] 05/7/2022 16:03

Anyway, I bought some now, so I should get out the pom-poms really :)

[hamhamham1] 05/7/2022 16:02

I agree, but cash in bank doesn't show the health of a company really, in this market IMO.
Want to see high profit before tax and debt paying down as indicators for me.

[taddavies] 05/7/2022 16:00

Customers cash is ring fenced.

[hamhamham1] 05/7/2022 15:57

Cruise lines / your operators are line airlines, they always have buckets of cash in hand, well they should coz they taken deposits or full payments months or a year before the customer uses the service.
IAG always used to say we have billions on cash on the bank, but again it wasn't really theirs to spend at that stage.

[taddavies] 05/7/2022 15:40

End of Jan 2022: Available cash £186.6m plus the £100m undrawn RCF.The new £250m bond has generated additional cash. Reducing the RCF (and associated finance costs) suggests they will be generating significantly more cash flow going forwards.

[hamhamham1] 05/7/2022 15:07

That's why I dipped toe in.
Not sure about credit line going from 100m to 50m is wise or a Saga call?

[blueball] 05/7/2022 14:20

Heading to 150p .

[galeforce1] 05/7/2022 14:15

hamham - the surplus x 2.5 of book value over market cap is reassuring, I agree. This is definitely a useful 'moat'.

But there will be significant intangible assets in the balance sheet, and in a recession these may get written down. In particular, the goodwill values in the insurance vision. But I haven't yet looked at the balance sheet in detail.

[taddavies] 05/7/2022 13:51

Their debt payments are fixed interest and they have sufficient cash and cash flow to meet these payments.Reducing the RCF by £50m doesn't exactly indicate they have any issues with liquidity, on the contrary.

[theaccountant2] 05/7/2022 13:39

Too much debt with interest rates rising, 1.20 soon.

[hamhamham1] 05/7/2022 13:30

NAV is 2.5x - 3x multiple of market cap?

[finkie] 05/7/2022 13:08

Debt isn’t big as it’s mainly very tangible cruise ships so that doesn’t worry me personally. Their NAV is therefore significantly higher than share price

[hamhamham1] 05/7/2022 11:50

Bought 2500 at 164p today.
Will buy another 2500 if it goes down to 130's area.
If not, and it goes up, I'll put the rest to work somewhere else.
Plenty of bargains out there.
Last of the big spenders me :)
But I like to spread it thin.

[taddavies] 05/7/2022 11:28

HiWould have to disagree with regards to your views on bookings, they serve the demographic which will spend on holidays.As to the price, this is trading on a forward PE of between 5 and 8. IMO that's already undervalued."2022/23 Cruise booked load factor at 2 July 2022 of 73% and GBP319 per diem; expected full year load factor of around 75%. Exceptionally strong booked load factor over the summer.Strong launch of 2023/24 Cruise season with bookings representing a load factor of 34% and per diem of GBP312, both well ahead of expectations.Recent launch of Holidays bookings for 2023/24 show encouraging early signs."

[hamhamham1] 05/7/2022 10:15

Possibly am a buyer on the 120s/130s.
Too much push back over next few months because of inflation, peeps have less spare cash so big (and epecially luxury) purchases are being put on the back burner IMO. True already booked are there, but last minute / late bookings and 2023 will be put off or delayed IMO.
But this will turn just not sure when, maybe someone email Putin to check his plans for the year :)