-Saga reports widened statutory loss on insurance hit
-Shares slump more than 8%
-Focused on reducing debts in 2023
Investors were in no mood to give over-50s travel and insurance group Saga (SAGA) any credit for a return to profit on an adjusted basis as the company reported a significantly widened statutory pre-tax loss.
Revenue in the financial year to 31 January was up 54% to £581.1 million as passengers booked on its cruise ships and travellers employed its services again post the pandemic.
In its Travel business, revenue was £108.4 million, up significantly from £10.5 million the year before, while revenue in Ocean Cruise climbed to £168.3 million from £82.5 million.
On a statutory basis the company posted a pre-tax loss of £254.2 million, up from £23.5 million, amid a £269 million impairment relating to its insurance arm.
Net debt at the end of the period was down a modest 2% year-on-year at a still hefty £711.7 million. By mid-morning the shares had settled down 8.3% to 125.8p having been down less early on but then plunging to a double-digit fall at one point.
FOCUSED ON REDUCING DEBT
Looking ahead, the company said the progress made in the last year puts it in ‘good stead’ as it enters its 2023 financial year. It added that it remains focused on reducing its debt through the continued repayment of its ocean cruise ship debt and the £150 million bond set to mature in May 2024.
AJ Bell investment director Russ Mould commented: ‘In theory Saga’s proposition makes sense. The over-50s are a growing and relatively wealthy demographic who, if they own their homes outright, are less exposed to the recent increases in interest rates.
‘However, Saga has never delivered on the promise which accompanied its market listing nine years ago. A series of operational failures have tripped the company up and damaged its credibility.
‘Outsourcing its insurance underwriting activities seems logical and will help free up capital, but it is not a silver bullet for the group’s problems. Perhaps a larger third party might swoop in and see if it can successfully exploit what remains a strong brand.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Tom Sieber) and the editor of the article (Martin Gamble) own shares in AJ Bell.
