LON:SAGA | Saga - SAGA - General Discussion

2nd Aug '21 by Paul Scott

122 comments 14305 reads

Hi, it's Paul here. I'm just trialling an idea, to see if people take to it. Instead of discussion all getting sucked into the SCVRs, I thought let's have some general discussion threads for individual companies, so that we can share news & views any time.

Please feel free to post anything about Saga (LON:SAGA) in the comments to this thread.

Rational bull & bear views welcomed. Please keep it civil (that's a message to self as much as anyone else!) ;-)

I'm fed up with the poor quality of nonsense on free bulletin boards elsewhere, so hope we can have a more constructive discussion here instead.

Regards, Paul.

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About the Author

Paul Scott

Premium Member

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

122 comments

GrahamF

9th Mar '22

Well spotted on 27.

I was just wondering about impact of fuel cost increases on Saga over on the SCVR.

Even if some of the fuel cost is hedged, how certain is it that the counter party is good for it in the current climate?

And I guess the food costs are completely unhedged.

No position myself. But was wondering whether it had dropped so far it was now a bargain. Still too risky and I think that if I held I would be considering getting out at least in part if not altogether.

Wol

17th Mar '22

Very good question on_27. Sadly I don't have a researched answer. My finger in the air guesses would be that:

1. margins on cruises are good enough to cover fuel price increases

2. fuel costs will be a smaller %age of total costs on a cruise ship than on a plane (no need to use fuel to keep the ship in the sky!)

But of course I'd be happy to find out that I am wrong if such is the case.

Also, can we still believe that people will continue to book cruises given

1. fears about wars spreading further

2. worries about cost of living increases vs limited pensions increases

3. returning worries about covid - increasing cases again and a recent ship that had to return to port because of covid cases on board

I hold and am confident in Paul Scott's judgement that it is cheap. But a recovery in the share price does seem to be taking its time

gmtrader

17th Mar '22

https://apple.news/ALMnONPNmTt...

willhampson

17th Mar '22

Sad news and never nice to see mass redundancies. I see little read across to £SAGA; if anything it shows that the company was lucky to have its insurance business propping up the rest of the business over the last few years (as compared to the £100m annual losses referenced by P&O in the video to its employees, with the requirement that the business losses were funded by a parent who presumably have now had enough)

https://www.bbc.co.uk/news/bus...

gmtrader

17th Mar '22

Yes sad news. Luckily saga is more diversified than P&O. Fuel prices are probably what has pushed P&O over the edge.

dhannaway58156

18th Mar '22

I suspect we may be able to develop some answers from the below screenshotted presentation .

As I read it the £40m per ship EBITDA is derived from c.£89m turnover per ship

That means £49m of operating costs & marketing.

It also says that if fuel increases 10% then ebitda reduces by .5m per ship. (Does this mean base fuel use is c.£5m per ship?):

4th November 19 is the base date. Brent crude 62.52 yesterdays price (a mean avg would be better) 106.6 = 70% increase so a reduction of 3.5m ebitda per ship (assuming Brent crude moves in line with marine oil).

This means that the target scenario of 40m ebitda per ship reduces to 36.4m.

Note this back in 2019 when fuel swaps were higher? I suppose the erosion of EBITDA would be greater now due to the lack of fuel swaps. I'm not sure how to read them on the balance sheet it indicates .2m which is well down on 2020 period? Although if no protection is assumed then I'm still only getting 3.5m erosion of ebitda per ship based on 70% increase in fuel and my £10m guess above.

We know one of the ships was effectively sailing for free over the last month which will impact all of the above -£9.5m rev + £4m of operating costs that still need to be paid.

Allowing for that plus the higher ticket prices and guided 86% loadings. I get around £37.6 Ebitda for the first half (assuming all costs incurred in a linear fashion throughout the year)

We also know that Saga were paying for testing, extra cleaning, other covid related refunds transfers etc etc. Food costs are also increasing dramatically so operating costs are bound to have gone up. From memory they've also fixed at at a higher interest rate.

Perhaps we could x operating expenses less fuel x an inflation figure of say 8% = 2.5m per ship in the base scenario. A lot of these costs must be fixed regardless of occupancy of the ship.

So potentially takes ebitda down to 36.35 in the first half.

If you can hold any weight on the above it actually looks better than I was expecting. If SAGA can sail both ships at say £314 per ticket at say 85% loadings in the second half. I think full year ebit could be above 40m - 45m per ship.

PBT is guided at 20m per ship based on 40m ebitda on the same presentation.

I suppose the risks abound with this one & its tour segment: fuel, covid & general inflation are the ones that spring to mind.

However I expect the half year results will be better than the second half of last year and that cruise should revert to at least the base case by the end of the year.

James101

18th Mar '22

Have to disagree with this. SAGA has been in a pretty brutal downtrend since June 2021 making a series of lower highs and lower lows. I'm currently struggling to see what the catalyst will be for it to re-rate. Maybe many people are in a position to have money sitting around doing nothing for years hoping this one will turn around. I don't unfortunately. Good Luck

Wildcat

19th Mar '22

I think the other big problem for P&O is reduced freight to the EU. Freight used to make up a big part of the profits.

Wildcat

19th Mar '22

Thanks for this very useful analysis

CamRaid

24th Mar '22

Is this not a concern for everyone?

"The reported loss before tax for 2021/22 of £23.5m was materially better than
the £61.2m loss in the prior year, mainly due to significantly lower
restructuring costs, as well as the £59.8m goodwill impairment included in
the 2020/21 results."

Does that actually mean that the trading results for 21/22 are worse than 20/21?

Yes, if you look at the underlying numbers, the PBT has swung from a £17.1m profit to a £6.7m loss, largely due a downturn in the Insurance business.

DanTE

31st Mar '22

It's just the management being biased towards the positive results as always. You got a point and it should be a warning sign that even their insurance business is operating at a loss, but in the grand scheme of things, where you're looking at a company like this with a overall good track record that took a beating due to the hostile environment, those years can be written off to a certain extent IMO. If you do find the reason why their revenues decreased and cost increased in the insurance business, and this can be extrapolated into the future I would be worried. I don't know if that's the case though, but from what I see in the numbers (and this is as shallow as an analysis can get) it just seems like a slight underperformance in the insurance segment. In the grander scheme of things their insurance business is still not what it once was but the bets are hedged on the travel segment to recover.

GloucesterBob

31st Mar '22

I see Lady de Hann has just purchased £50k worth of shares.

I am sure she hasn't done it to make money she needs for her pension, but hopefully it sends a positive message to the market.....every little helps as they say.

CamRaid

5th Apr '22

For someone with such wealth it seems like such a nominal amount.

Good to see the family investing but it doesn't make much sense to me.

tiswas

3rd Jun '22

Not very encouraging news for Saga shareholders or potential cruisers in Telegraph today https://www.telegraph.co.uk/mo...

BnB

3rd Jun '22

Ouch.

GloucesterBob

3rd Jun '22

Yes I read that (behind a paywall) and thought, you wouldn't catch me on a Saga (LON:SAGA) cruise if they are dictating draconian COVID curbs as in that article, at least inform your customers up front, having to wear a mask while sat down until you are served, for what purpose?

I checked the website after reading it and its very vague of the rules. Not a good advertisement.

peterg

4th Jun '22

Though others might see their stong line on covid protections as a postive. And the thing that would really hit cruise earnings is a significant outbreak on a cruise ship.

CamRaid

15th Jun '22

I was looking at the cruises this morning and did some random checks.

6 August, Croatia and Med. 32 Cabins available from a total of 554. 94% occupancy.

31 August, Norway. 15 cabins available from 554. 99.8% occupancy.

10 July, Greenland. 45 available cabins from 554. 92% occupancy.

Looking further out:

11 Sep 2023, Late Summer Adventure, 287 rooms available from 554. 48% occupancy.

I don’t have time to do more but I think this shows the demand for the cruises. Near term they appear almost fully booked.

Almost 18 months ahead is 50% booked.

One question is are they opening all 554 rooms as available or are they running a reduced capacity due to C19 restrictions? I am unsure.

However, I would assume/hope that the cruises they are running are viable/profitable and these occupancy levels seem reassuring to me.

carmensfella

15th Jun '22

CamRaid....A call to one of the main cruise holiday companies would probably give you some info on whether all the cabins are being used or on limitations still.

They are very knowledgeable and I have been booking family holidays on cruises for many years before the pandemic but not quite ready to return just yet.

Where do you find your occupancy stats?

CamRaid

15th Jun '22

If you go to the Saga website and click on individual cruises you can click on availability. It tells you how many rooms of each type are available for each cruise. Each ship has 554 rooms. I worked them out myself.

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Saga - SAGA - general discussion

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About the Author

Paul Scott

122 comments

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