- Travel and cruise booking ahead
- Insurance improving despite tough market
- On track to meet full year targets
Over 50s travel and insurance specialist Saga (SAGA) had a bounce in its step on Tuesday after revealing a good start to its new financial year, putting the business on track to meet full-year expectations.
Investors welcomed the trading update for the four months to 24 June ahead of the firm’s annual general meeting, with the shares gaining 1.3% to 114.3p, although they remain 22p or 16% below where they started the year.
The company said the ocean and river cruise businesses had enjoyed an ‘exceptional’ start to the year with booked load factors (percentage of available cargo space being utilised) at 83% and 78% respectively, both ahead of the prior year.
Travel bookings were also ahead of the prior year driven by a higher number of passengers with booked revenue up 14% year on year.
As expected, market conditions remained challenging for the insurance business, although the company pointed to the benefits of pricing actions which it said were earning through to an improving combined operating ratio.
The combined operating ratio is a measure of insurance profitability. A ratio above 100% signifies costs are higher than premiums. In the year to 31 January Saga insurance reported an improved combined operating ratio of 117% from 120.5% in the prior year.
WHAT DID THE COMPANY SAY?
Group chief executive Mike Hazel commented: ‘Looking ahead, we are focused on driving sustainable business growth in a capital-light way, while growing our customer base and deepening our connections with those customers.’
The company said it continued to explore partnership opportunities in ocean cruise and insurance to support growth and ‘enhance long term returns for shareholders.’
AJ Bell investment director Russ Mould said partnerships were a key part of Saga’s strategy, allowing it to grow without having to employ lots of capital and helping it address a stretched balance sheet.
Mould commented: ‘The company walked back on an attempt to effectively outsource its underwriting operation last year.’
‘However, there is clearly appetite among management to keep pursuing these sorts of deals, including for its cruise ships which are expensive to run, and the market is likely to judge the company on its ability to deliver.
‘There is plenty about the Saga proposition which makes sense – the demographic it serves is substantial and growing and typically has more disposable income than other parts of the population. It also remains a strong brand which seems to resonate with its target audience.
‘However, since listing a decade ago the company has, through a mix of poor execution and events like the pandemic, consistently failed to match up to expectations.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor (Ian Conway) own share in AJ Bell.
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