Saga plc (lon:saga)
SAGA – The Group And The Cruise Business Seems Healthy

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Commentary History
Commentary
Title: SAGA – The Group And The Cruise Business Seems Healthy
Company: SAGA - Saga plc
Share Price Then: 16p
Author: Ian Smith
Date: Fri 10 Jul 2020
Comments: Saga seem to be in less trouble than might be expected given the cancellation of the cruise business.

The car insurance division of Saga is quite interesting in that by the 14 June 2020, the Group had sold 533,000 three-year fixed-price policies, with over 60% of direct new business customers choosing this product since it was fully launched.

What this means is that In a market that has a lot of churn because there always seems to be someone willing to buy business with massive new business discounts, Saga have found a group of people happy to have a known premium and to stick with it for three years.

It is of course possible that there will be complaints that someone wants to leave early or make changes that make Saga uncompetitive, but how that will work out is unknown.

With about 60% of policies coming in directly and 40% via brokers there is still room for improvement, but price comparison sites are here to stay, at least for a while.

Travel insurance is of course down but so are motor claims.

The sale of Bennetts Motorcycling Services is expected in the next few weeks and will be worth around £23m.

The holiday business stopped operating in mid March and nothing is planned before September, what is good news is that The Group has retained over 70% of advance receipts on cancelled Cruise departures and the demand for cruises is still there.

Although it may be a bit blinkered Saga cruises are for older people, many who have pension income rather than job salaries so the cost of the cruise won’t be an issue. Indeed with tourism world wide affected many customers may be smelling some bargains.

£32m of debt repayments of group’s two ships Spirit Of Discover and Spirit Of Adventure until March 2021 have been deferred but no dividends can be paid until these payments have been made, which is scheduled to take 4 years.

With £30m in cash and another £50m undrawn from the RCF the group doesn’t seem likely to collapse soon, but so much depends upon when tourism restarts at pre covid levels any predictions seem pointless.
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