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.
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,” says Danni Hewson, head of financial analysis at AJ Bell.
“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.
“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.
“Outsourcing its insurance underwriting activities seems logical and will help free up capital, but it is not a silver bullet for the group’s problems. Perhaps a larger third party might swoop in and see if it can successfully exploit what remains a strong brand.”