For Saga (SAGA) shares to jump nearly 10% on news that half year profits have more than halved illustrates how far this company has fallen in investor estimations.

The over-50s insurance and cruise-line operator floated in London five years ago at a £2.1bn valuation when it raised £550m of funding at 185p per share. It was supposed to be a safe haven play on grey pound growth opportunities.

It hasn’t worked out well.

Today the share price is changing hands at 49.8p per share, even after today’s rally, giving the company a market value of roughly £560m.

TODAY’S NUMBERS

Saga reported today that pre-tax profits halved in the first half as the company focused on transforming its business in a tough market. Pre-tax profit slumped 52% to £52.6m in the six months to 31 July 2019.

However, the company said it had made ‘sufficient progress’ in the first half to confirm its confidence in achieving its full year guidance. That implies underlying pre-tax profit of between £105m and £120m.

Before today analysts were erring on the cautious side with consensus estimates at the very bottom of that range, according to Reuters data.

In July the stock shot up as US activist investor Elliott Advisors took a 5.1% stake in the business.

COST AND CAPITAL EFFICIENCY

‘Our focus over the next six months will be in building on this to ensure that we can grow our core businesses and continue to improve cost and capital efficiency,’ said chairman Patrick O'Sullivan.

‘We have made good progress against our strategic reset,’ the chairman claims, pointing to ‘encouraging’ sales of three-year fixed price insurance policies and more of them sold direct to customers rather than through third-parties, which is seemingly true of its cruise breaks too.

Chief executive Lance Batchelor also flagged that its new Spirit of Discovery cruise liner is now fully operational and delivering on Saga targets for filling additional cruise capacity into next year.

Saga said it would pay an interim dividend of 1.3p, in line with its rebased dividend policy having slashed last year’s payout from 9p to 4p.

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Issue Date: 19 Sep 2019