Saga plc (lon:saga)
SAGA – The Group And The Cruise Business Seems Healthy


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Title: SAGA – The Group And The Cruise Business Seems Healthy
Company: SAGA - Saga plc
Share Price Then: 16p
Author: Ian Smith
Date: Fri 10 Jul 2020
Comments: Saga seem to be in less trouble than might be expected given the cancellation of the cruise business.

The car insurance division of Saga is quite interesting in that by the 14 June 2020, the Group had sold 533,000 three-year fixed-price policies, with over 60% of direct new business customers choosing this product since it was fully launched.

What this means is that In a market that has a lot of churn because there always seems to be someone willing to buy business with massive new business discounts, Saga have found a group of people happy to have a known premium and to stick with it for three years.

It is of course possible that there will be complaints that someone wants to leave early or make changes that make Saga uncompetitive, but how that will work out is unknown.

With about 60% of policies coming in directly and 40% via brokers there is still room for improvement, but price comparison sites are here to stay, at least for a while.

Travel insurance is of course down but so are motor claims.

The sale of Bennetts Motorcycling Services is expected in the next few weeks and will be worth around £23m.

The holiday business stopped operating in mid March and nothing is planned before September, what is good news is that The Group has retained over 70% of advance receipts on cancelled Cruise departures and the demand for cruises is still there.

Although it may be a bit blinkered Saga cruises are for older people, many who have pension income rather than job salaries so the cost of the cruise won’t be an issue. Indeed with tourism world wide affected many customers may be smelling some bargains.

£32m of debt repayments of group’s two ships Spirit Of Discover and Spirit Of Adventure until March 2021 have been deferred but no dividends can be paid until these payments have been made, which is scheduled to take 4 years.

With £30m in cash and another £50m undrawn from the RCF the group doesn’t seem likely to collapse soon, but so much depends upon when tourism restarts at pre covid levels any predictions seem pointless.
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Previous Commentaries On Saga plc
Date Share Price Author Commentary
Thu 04 Apr 201965.6pIan Smith

Saga – Thanks Market Overreaction. :-)

I have been following Saga for a while and came to the conclusion that they had lost the plot and had basically become a price comparison/affiliate marketing site.

Today’s trading update seems to agree with that;

“…the results demonstrate that Saga cannot grow without a clearly differentiated offering to its customers”

As well as this part of the update included a £310 million write down of goodwill which turned a £180million profit into a £135million loss.

These headline numbers seem to have caused a massive overreaction of a 40% share price drop.

Whilst the underlying numbers do indicate a small drop in business this surely has to be an opportunity with a big upside and almost as small as possible downside.

Update 16/April/2019 - I have been looking back at the 2017 accounts and comparing them with the latest results and I am a bit surprised that I seem to be wrong and there hasn't been a recovery.

I still think people are over recacting to the drop in insurance sales and the headline loss.
Fri 05 Jan 2018125pIan Smith

Saga an idea whose time has passed?

Saga have been around for ages but floated in 2014 so they are a relatively new investment opportunity.

Floating at around 185p peaking at around 220p and now at 125p are they sure to recover or are they on the Value Trap path.

I suspect a Value Trap and I am avoiding them because of what I see as a fatal flaw in their business model, The Internet.

In the past Saga’s database of the over 50s was their key market advantage, they could create a product either aimed at or apparently aimed at the over 50s, do a mailshot and put the money in the bank.

Yet this database is losing significance as every year the percentage of Saga’s target market that has grown up with price comparison sites and doing a web search is increasing, added to which search engines make it pretty easy for anyone with a product or service to target the over 50s.

So a Saga insurance quote will not be assumed to be either the best or almost the best deal, it will be heavily scrutinised and if not competitive another supplier will be selected.

It’s the same with holidays, financial services and health/care products.

All of this would be fine if you believe that Saga have products that people want, but looking at the Saga web site is a little bit like looking at a site filled with affiliate marketing links.

If you go the Money section you see; Share Dealing, Credit Cards, Personal Loans and you don’t get the impression that they have picked products and services that have taken age into account in any way.

A cycnic might say that it appears that Saga have approached a load of businesses, done some sort of a deal and then jammed all of their products into some sort of Content Management Website willy nilly.

So as well as being difficult to read, this is of course a subjective view, the web site reinforces the idea of a company that is lost and is trying everything to see what will be a success.