Saga share price: 4 things we learnt from its half-year results

Last week, Saga saw its share price climb as much as 17% after publishing a strong set of half-year results, with the business on track to hit its full-year pre-tax profit target of between £105 million and £120 million.

‘I am pleased with the progress that has been achieved this year,’ Saga Chairman Patrick O’Sullivan said. ‘It is early days in our transformation programme and there remains much to do but what we have seen so far gives us confidence that we are pursuing the right strategy.’

In the wake of its latest results, IG looks at the key takeaways from its recent trading update.

Saga turnaround sees early results

Just six months into its turnaround strategy, Saga has made good progress, fundamentally changing the way it does business in an increasingly commoditised travel and insurance market that saw the company record a £135 million loss last year.

This financial year, the group has seen a positive response from consumers to its new product offerings, with over 175,000 3-year fixed price policies being sold since launch.

Saga’s direct-to-consumer insurance strategy is yielding a share of new business of 53%, with over half of those customers opting for the 3-year fixed price product, the company said

‘We have made good progress against our strategic reset,’ Saga Group CEO Lance Batchelor said. ‘The sales of our 3-year fixed price insurance are encouraging, and a higher proportion of customers are coming to us direct.’

Saga share price down 50%

The last six months represent a significant step in the right direction for Saga, but investors will need to see this strong set of results built upon in the second half of the year and beyond if the company’s stock is to rebound.

Since January, the over 50s insurance and travel provider has seen its stock value halve, with the group struggling in an extremely challenging insurance market.

Saga has struggled to retain customers in an insurance market where price transparency and the ease of switching have led to a lack of consumer loyalty.

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Cruise revenue targets hit

Saga has already met its cruise revenue targets for the financial year.

Cruise sales have significantly supported the group’s target of £40 million of EBITDA per year from each new ship. Its latest vessel, Spirit of Discovery, is now fully operational and helping fill additional cruise capacity into next year, the company said.

Saga slashes dividend

The group’s performance over the last six months allowed them to issue a 1.3p interim dividend to shareholders, down from 3p a share in the same period last year.

The decision to slash the dividend, although unpopular with shareholders, was necessary. Saga still has a lot of work ahead of it to address declining customer numbers and strengthen its insurance business, which is responsible for the lion share of the group’s profits.

‘It's encouraging to see the group making strides to improve performance, but only time will tell if attempts to revamp its insurance offering are enough to attract premium customers back,’ Hargreaves Lansdown research editor Nadeem Umar said.

‘The company currently trades on a PE ratio of just 5.7 times - investors are clearly not optimistic.’