Saga (LON: SAGA) shares rose around 12% in early trading today after the company upgraded its profit guidance and said its medium-term targets are likely to be reached earlier than planned. Saga is the UK specialist in products and services for people over 50, and it described its first-half performance as strong and ahead of expectations.
In the six months to the 31st of July, underlying profit before tax rose 98% to £46.6m from £23.5m a year earlier. Trading EBITDA, a measure of operating earnings, climbed 35% to £90.9m, on underlying revenue up 14% to £366.3m. Underlying figures are alternative performance measures defined by the company.
The guidance upgrade is the headline. Saga now expects full-year underlying profit before tax in a range of £65m to £70m, which it said would be materially higher than in the prior year.
Debt is the second part of the case. Net debt fell to £429.1m from £515.1m a year earlier, and is down £70.4m since the 31st of January. The leverage ratio, which compares debt with earnings, dropped to 2.7 times from 4.3 times a year ago and 3.7 times at the 31st of January.
That matters because the targets Saga set in April 2025 were £100m of underlying profit before tax and leverage below 2.0 times by January 2030. The company now says both will likely come sooner. Chief executive Mike Hazell said:
Profitability has increased significantly in the first half of the year and we expect this to drive a strong full year outcome, ahead of our previous guidance. All our core businesses are growing, cash generation has increased and debt continues to fall.
Mike Hazell, Chief Executive, Saga
Underlying available operating cash flow rose 27% to £101.0m, helped by growth in Travel and Insurance and lower capital spending. Motor and home insurance new business has fully moved to Ageas, with renewals following around the end of the financial year, and Saga received a further £10.5m of contingent consideration from Ageas in June.
The picture is not all clean. Profit before tax from continuing operations was £28.0m, up from £3.7m but well below the underlying figure. Saga expects net debt and leverage to stay broadly flat for the full year before falling again, and it notes potential economic headwinds.
An analyst presentation is due at 9.30am today, with a retail investor presentation at 9.30am tomorrow.