Shares in insurance and travel company Saga (SAGA) fell over 6% to 238p despite the announcement of in-line results for the year to January 2022.
Investors were concerned by the distinctly cautious nature of the management statement which accompanied the latest update from the company.
Saga reported an underlying pre-tax loss of £6.7 million for the year. The travel arm recorded a £79 million loss, while group overhead costs came in at £48 million.
These two factors more than offset a positive £120 million contribution from the insurance division. This performance was somewhat flattered by a significant reserve release from the underwriter AICL.
CAUTIOUS OUTLOOK
Moving forward, the potential threat of further Covid disruptions hangs over the travel business.
This meshes with management flagging ongoing headwinds in the travel business. The fear is that this may scupper the group’s expectation to achieve a 73% load factor for its cruise business this year.
The insurance business is suffering from a reduction in the volumes of broker policies.
This is a direct result of the FCA’s pricing review. The extent to which this will negatively impact profits from the group’s motor and home insurance broking business is another uncertainty which is likely to act as a brake on the share price.
These concerns will be compounded by the fact that management has provided no guidance apart from the expectation that Saga will return to a positive profit contribution in 2022/2023.
THE PEEL HUNT VIEW
Peel Hunt analyst Andreas von Embden said: ‘We had already built more caution in our numbers recently, but we will have to test our assumptions against Saga’s cautious outlook again.
‘As such, earnings visibility remains poor and keeps us on the face as we retain our Hold rating, patiently waiting for travel to recover.’
