Saga confident as it swings back to underlying profit

4th Apr 2023 07:36

(Sharecast News) - Over-50s specialist product and service provider Saga reported revenue of £581.1m in its preliminary results on Tuesday - a 54% increase year-on-year.

The London-listed company's underlying profit before tax for the 12 months ended 31 January totalled £21.5m, swinging from an underlying loss before tax of £6.7m in the 2022 financial year.

However, Saga reported a loss before tax of £254.3m, widening from £23.5m a year earlier.

Saga's available operating cash flow for the year was £54.9m, down 28%, while net debt narrowed by 2% to £711.7m.

The firm's leverage ratio improved to 7.5x from 11.7x in 2022.

Looking ahead, Saga said it was optimistic about customer demand for its ocean cruises, and was aiming to achieve a load factor of at least 80% and its targeted £40m EBITDA per ship, excluding overheads.

The company said it expected both its river cruise and travel businesses to significantly increase passenger numbers, and return to profit.

Saga was meanwhile expecting lower sales in motor and home insurance, but with a margin in line with previous indications, trending towards £60 per policy.

Insurance underwriting was expected to report a broadly break-even result in the current year, with material rate increases fully benefiting future years.

Subsequent to the launch of new products planned for the second half of the current fiscal period, Saga said the contribution from Saga Money was expected to grow when compared with 2023 levels.

The board said it remained focussed on reducing its debt through the continued repayment of its ocean cruise ship debt, and the £150m bond on maturity in May next year, which it expected to repay from available cash.

Saga was also planning to continue its strategic pivot to become a capital-light, direct-to-customer marketing, content, and distribution business through investment in media, data, and insight.

The firm said it was aiming to increase the frequency and depth of its customer relationships, to "transform" Saga into "the largest and fastest-growing business" for older people in the UK.

"Over the past year, through what continued to be a particularly challenging external backdrop, Saga made progress against its strategy while achieving significant revenue growth and returning to underlying profit," said group chief executive officer Euan Sutherland.

"Our ocean cruise business continued to see strong customer demand and bookings for 2023-2024 are on track to meet our targets.

"In travel, bookings are significantly ahead of the same point last year and that business will return to profit this year."

Sutherland said Saga's insurance underwriting business took pricing action to reflect the rise in claims inflation, while its insurance broking business navigated a "challenging" landscape, adjusting to regulatory changes and increased competitive pressure.

"We also took a number of key steps to reposition the business, consistent with the strategy we set out 12 months ago to create 'the superbrand for older people'.

"Our top priorities for the next 12 months are to strengthen our financial position and continue to build Saga into the largest and fastest-growing business for older people in the UK, delivering long-term, sustainable growth for our stakeholders."

At 0817 BST, shares in Saga were down 2.46% at 133.83p.

Reporting by Josh White for Sharecast.com.