- First half profit jumps to £27 million
- Strategic tie-up with Ageas
- Sale of insurance underwriting unit
Saga (SAGA) was the top performer in the FTSE All-Share on Friday, rising by a tenth after the over 50s travel and insurance specialist revealed strong first-half profit growth, a reduction in debt and confirmed it was in exclusive talks with Belgian insurer Ageas (AGS:EBR) to sell its insurance underwriting arm.
The shares are up around 37% over the last month and trade near six-month highs reflecting continued strong trading in the cruise division and good strategic progress.
WHAT DID THE COMPANY SAY?
CEO Mike Hazell commented: ‘Saga made significant progress in the first half of the financial year, with Ocean and River Cruise delivering exceptional growth, while we continued to position the group for long-term success through the exploration of potential partnership opportunities.
‘As you may have seen from our separate announcement this morning, we are in exclusive negotiations with Ageas for a 20-year affinity partnership for our motor and home Insurance Broking operations and the sale of our Insurance Underwriting business.’
Underlying group revenue for the six months to 31 July was up 11% to £393.3 million driven by a 17% increase in the ocean cruise division, resulting in doubled pre-tax profit for the unit.
Group pre-tax profit jumped to £27.2 million compared with £8 million in the first half of 2023. Net debt reduced by £42.8 million year-on-year to £614.6 million representing a leverage ratio of 4.6 times compared with seven times.
STRATEGIC ALLIANCE
Saga said it in exclusive negotiations with Ageas to establish a 20-year affinity partnership for home and motor insurance and sell its insurance underwriting business.
Ageas would pay Saga an upfront consideration of £80 million on or around the go-live date at the end of 2025, a contingent payment of up to £30 million in 2026 and up to £30 million in 2032, subject to certain profitability and volume targets being met.
Ageas UK would purchase Saga’s insurance underwriting business for a total consideration of £67.5 million with completion expected in the second quarter of 2025.
WHAT ARE THE EXPERTS SAYING?
AJ Bell investment director Russ Mould commented: ‘The market likes the proposed 20-year partnership with Belgian insurer Ageas which will see the latter pick up the insurance broking activities associated with its motor and home insurance lines as well as buying Saga’s underwriting business.
‘Not only will this provide Saga with a useful injection of cash, but it also points to a possible future for the company of focusing purely on managing its customers and the marketing side at the front end, while back-end functions are handled by specialist operators. This could allow Saga to grow without employing lots of capital.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
