Saga PLC (LON:SAGA) shares bounced back on Thursday after the over-50s travel and insurance company reported a small rise in full-year pretax profit after its tour operations were hit by the collapse of Monarch Airlines, but said its travel business had “excellent” visibility this year.
For the year ended January 31 2018, the FTSE 250-listed firm said its underlying pretax profit rose to £190.1mln, up from £187.4mln a year earlier.
READ: Saga restructures travel unit in wake of December warning over Monarch Airlines collapse
The group’s reported pretax profit, however, fell by 7.6% to £178.7mln, hurt in part by refinancing costs and savings.
The failure of Monarch, the largest UK airline to go bust, affected nearly 900,000 passengers in total and hit Saga’s tour operations, leading the firm to restructure its travel business in January.
Saga said it had already secured the majority of its full-year 2019 travel sales targets due to its customers’ preference to book holidays in advance.
The company, however, reiterated that its underlying profit would be about 5% lower for the year ending January 2019.
Lance Batchelor, Saga’s CEO commented: “In a challenging market we have delivered a set of full-year results which is in line with the rebased profit expectations set at the end of 2017.”
Confidence in future cash generation
The group increased its final dividend to 6.0p, making a total payout for the year of 9.0p, up from 8.5p a year earlier, reflecting “confidence in the future cash generation of the business.”
In early morning trading, Saga shares were nearly 8% higher at 126.3p.
Lee Wild, head of equity strategy at interactive Investor, commented: “Saga has made a good start to the difficult job of restoring confidence in the business following December’s profits warning.
“Full-year results bear the scars of problems at the core retail insurance and travel businesses, but, crucially, there has been no further deterioration in the numbers.”
He added; “It is encouraging to see strong cash generation and retail broking growing volumes quickly again, while increasing the annual dividend by 5.9% is another big win for income seekers.
“That Saga shares have performed largely in line with the wider market this year is encouraging and a prospective dividend yield of over 7% attractive.”