Saga LON:SAGA has spent much of the past decade lurching from one squall to another — debt, pandemic-stricken cruises, and a misfiring insurance arm. Its latest interim results suggest the ship is steadier, though hardly storm-proof.
Underlying revenues in the six months to July rose 7 per cent to £320.5m, with trading EBITDA up 8 per cent to £67.5m. Available operating cash flow jumped 64 per cent. Net debt fell to £515m, down £102m year on year, trimming leverage to 4.3 times from 4.8. For a company whose balance sheet once looked close to foundering, this is no small feat.
The jewel in the crown is now travel. Demand for ocean and river cruises continues to swell. The new vessel Spirit of the Moselle launched in July, adding capacity to a business that has been a rare growth engine. Bookings for the second half are said to be strong. Higher passenger numbers should lift profitability, provided costs are kept on course.
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Insurance, long Saga’s ballast, is also shifting. The sale of its underwriting arm to Ageas completed on schedule, yielding £17m more cash than expected. A 20-year partnership with Ageas on broking is due to go live in the fourth quarter. That will mean lower underwriting risk and greater reliance on commissions. In the near term, however, investments to drive policy volumes will weigh on profits.
Saga’s refinancing has been tidied up
Refinancing has also been tidied up. A new £335m loan due 2031 replaces a £250m bond and a costly shareholder facility. The change locks in stability at the price of higher interest costs. Net finance charges rose 59 per cent to £20.5m, dragging underlying pre-tax profit down 5 per cent to £23.5m. Still, the bottom line returned to the black, with statutory pre-tax profit of £3.7m versus a £117m loss last year.
The group insists it remains on track to deliver at least £100m in underlying profit before tax by 2030, with leverage below two times. That ambition looks credible if travel continues to expand and insurance stabilises. Yet the path is narrow. Cruises are a discretionary spend, and Saga’s over-50s customer base is not immune to economic chill. A stumble in bookings would quickly expose high fixed costs.
Equally, while debt is lower, leverage remains elevated compared with peers. Management deserves credit for refinancing and deleveraging, but there is little margin for error.
“The long-term ambition to deliver £100m in profit by 2030 is a bold one,” said Mark Crouch, an analyst with eToro. “Investors will rightly ask whether the pace is brisk enough to justify patience, especially with debt still casting a long shadow over the balance sheet. Financing costs may have taken a bite out of interim profits, but the real question is how efficiently Saga can turn strong bookings into consistent cash flow.”
Saga’s shares have languished as investors tired of restructurings that never seemed to end. These results hint at progress: travel growth, an orderly insurance reshaping, and clearer long-term targets. What they do not yet offer is a reason to pay up for the stock, although note that shares are doing well this morning, up nearly 6% since the open.
The company is cruising more smoothly, but it still carries plenty of ballast. Investors should enjoy the calmer seas — and keep their lifebelts handy.
