25th Jun 2024 09:52
(Alliance News) - Saga PLC said it is trading in line with expectations, with its travel arm soaring, though its insurance offering struggling to make further traction.
In a trading update ahead of Tuesday's annual general meeting, the provider of insurance and travel services for people aged 50 and over said it remains on track for the full year, with trading from February 1 to date in line with expectations.
"Our Ocean and River Cruise businesses have had an exceptional start to the year with booked load factors ahead of the same point last year, at 83% and 78% respectively, alongside growing per diems," Saga said.
Travel bookings are also ahead of the prior year, with booked revenue 14% up, on a higher number of passengers.
But market conditions for Insurance remain challenging, the company added.
"We are taking action to stabilise our Broking business and are seeing early signs of the expected benefits in motor. Emerging net rate inflation in home means the actions are expected to have less of an impact overall," Saga stated.
Saga said it was continuing to explore partnership opportunities within Ocean Cruise and Insurance that would support growth ambitions, crystallise value and enhance long-term returns for shareholders.
Chief Executive Officer Mike Hazell said it had been a "good start to the new financial year".
"Our Ocean Cruise business has traded exceptionally well and, in Insurance, we have continued to take actions within a market which remains challenging. 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."
Peel Hunt rates the stock at 'hold', a recommendation it will maintain until it sees "further strategic action to place Saga on a firmer financial footing".
AJ Bell analyst Russ Mould said Saga's insurance offering is balancing out its success elsewhere.
"The net result is that Saga is only on track to hit existing forecasts, rather than being in a position to lift guidance," Mould added.
"A key part of Saga's strategy is to seek partnership deals which will allow it to grow without having to employ lots of capital and help it to address a stretched balance sheet. 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.
Mould added: "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."
Saga shares traded 1.0% higher at 113.88 pence each in London on Tuesday morning.
By Eric Cunha, Alliance News news editor
Comments and questions to [email protected]
Copyright 2024 Alliance News Ltd. All Rights Reserved.
Related Shares:
Saga