Over-50’s insurance and travel specialist Saga PLC (LON:SAGA) has reported solid growth in full-year profits, fuelled by good performances in both its divisions, leading to a cut in net debt and an increased dividend.
The FTSE 250-listed firm saw its underlying pretax profit - excluding derivative gains and the Ogden discount rate cut impact - rise to £187.4mln for the twelve months to January 31 2017, up 5.6% on the £177.4mln reported a year earlier.
The group’s basic earnings per share from continuing operations increased by 6% to 14.1p, while its net debt at the year-end was £464.8mln, down 15.1% on a year earlier.
The group said its sustained cash generation had led to further deleveraging, with the firm’s debt ratio now within its medium-term target range of between 1.5 and 2.0 times.
In its Insurance division, Saga highlighted a strong performance from motor underwriting in a competitive environment, although the impact of the change in the Ogden discount rate for personal injury claims impacted its profits by £4mln.
The group also said it saw profit growth across its travel business, despite scheduled maintenance of the Saga Sapphire cruise ship.
Saga said current travel reservations are 8% ahead of the previous year, with a new cruise ship on track for delivery in June 2019.
Lance Batchelor, Saga’s group chief executive officer, said: “Our confidence in continuing to deliver a consistent financial performance in 2017 is strong. We have started the financial year well, and I look ahead with a great deal of optimism for the business."
Saga is to pay a full-year dividend of 8.5p, up 18.1% on last year’s 7.2p pay-out.
Bounced back ...
In a note to clients on Saga, analysts at Peel Hunt said: “The outlook is positive with the recent investment in extracting value from the customer database set to deliver ongoing consistent profit growth with the outlook for Insurance broking and Travel positive.”
They added: “Saga has bounced back from a 13x 2017/18e P/E to 14x, but still trades well short of a 16x-18x P/E brokers traditionally valued at.
“The combination of mid-to-high single digit EBITDA growth and the ongoing de-gearing of the balance sheet should support a material increase in the pay-out ratio as the business moves further towards an affinity broker model.”
Peel Hunt repeated a ‘buy’ rating and 250p target price on Saga shares, although in early trading they drifted 2.6p lower to 207.4p.
-- Adds broker comment, share price --