Saga share price: 5 things to watch out for in its full-year results

Saga will publish its full-year 2018 results on April 4, covering the 12-month period to 31 January 2019, with investors eager to see how the company plans to drive growth after what has been a disappointing year of trading.

Low earnings expectations

Saga is expected to report headline earnings per share of 13.1p, representing a 4% increase compared with the previous year.

However, revenues are forecast to fall by 1.5% to £847 million and earnings are expected to decline in 2019 and 2020, as the performance of its overall business continues to struggle, despite the group’s travel unit remaining relatively strong.

Profit warnings

Saga issued a profit warning in late-2017 and the group has struggled to regain the ground it lost over the course of 2018, with investor sentiment remaining subdued despite a slight boost to sales volumes.

In a bid to improve its performance, Saga Group’s CEO Lance Batchelor has concentrated on driving new business at the expense of margins, a move that flies in the face of the insurance industry at large.

Saga maintains its strong brand loyalty

Insurance is a business dominated by loyalty. Despite the push for consumers to become more aware of the advantages conveyed by switching providers, plenty of people still stick with the same policies.

Saga’s position as a key provider of insurance to the over-50s provides it with a degree of branding and identification that other firms envy and will provide the company with much needed stability as it takes the steps it needs to take to ensure its future.

Investors fear earnings impact on dividends

Considering its recent run of bad form, many investors are concerned that if the company’s earnings continue to take hits, it will result in the management slashing its dividend payouts.

However, despite the many challenges the business faces it has manged to maintain strong cash generation, which is helping the company to reduce the amount of debt on its balance sheet, which has helped stop dividends sliding in recent years.

Furthermore, the firm has seen a notable pickup in cruise bookings, with more than half of the space available on the new cruises already booked, despite the fact that one ship has only just entered service, and another is not to enter the market until the summer of 2020.

Saga targets long-term recovery

It has been a tough couple of years for Saga, but perhaps things are looking better. In any case, with a low valuation and a more interesting technical outlook, investors are starting to look more optimistically at the company. There is still a lot to be done, but the shares seem to offer better value now than they did back in 2017.