Saga’s IPO at a £2.1 billion valuation seemed a long time ago on Tuesday morning as the company shed another 10% following the release of the group\s preliminary results for the year ending 31st January 2023.
Losses before tax accelerated to £254m from £24m a year prior as a £269m impairment charge to their insurance business destroyed modest underlying profit before tax.
Although, revenue for the year increased to £581.1m from £377.2m as a result of travel bookings bouncing back, concerns about the economic backdrop and insurance business did little to spark optimism among investors.
“Over the past year, through what continued to be a particularly challenging external backdrop, Saga made progress against its strategy while achieving significant revenue growth and returning to underlying profit,” said Euan Sutherland, Saga’s Group Chief Executive Officer.
Underlying profit before tax rose to £21.5m from a £6.7m loss last year.
“The longer the market had to look at Saga’s results this morning the less it liked about them. Yes, in theory the group returned to ‘profit’. But this was an adjusted profit and on a statutory basis losses widened thanks to impairments on its insurance business,” said Danni Hewson, head of financial analysis at AJ Bell.
Hewson continued to explain two big problem’s at Saga – lower cash flow and a big debt pile.
“And cash flow, the one metric which is difficult to massage, was materially lower year-on-year with only a modest reduction in the company’s onerous debt pile.
“Guidance for the insurance business was gloomy and Saga has very little credit in the bank with long-suffering shareholders as it looks to turn around the business.
“In theory Saga’s proposition makes sense. The over-50s are a growing and relatively wealthy demographic who, if they own their homes outright, are less exposed to the recent increases in interest rates.”
Hewson concluded with a damning assessment of Saga time as a listed company:
“However, Saga has never delivered on the promise which accompanied its market listing nine years ago. A series of operational failures have tripped the company up and damaged its credibility.”
