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Saga - Dividend up 76%

Nicholas Hyett | 22 April 2016 | A A A
Saga - Dividend up 76%

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Saga have announced robust growth in trading profit of 5.2% at the full year. Profit before tax is up 54.8% to £176.2m (2014: £113.8m), after £50m in listing costs depart the income statement. Full year earnings per share grow 54.7% to 13.3p, with the full year dividend up 75.6% to 7.2p.

Free cash, up 9.3% this year, is expected to improve as capital requirements for the group's underwriting activities fall. This helps to support an increase in the target dividend payout ratio from 40%-60% of net earnings to 50%-70%, while also reducing net debt to EBITDA from 2.6x to 2.3x.

The number of active Saga customers increases slightly to 2.66m (2014: 2.63m) with the Saga database growing to 11.2m (2014:10.8m).

Saga shares rose 2% in early trading.

Insurance - 93% Group Trading Profit:

The group saw a 3.1% underlying improvement in its core insurance policies, driven by a strong performance in the dominant motor division.

Motor trading profit increased 17.8% following the successfully launched the motor insurance panel. Four third party insurers currently participate, allowing the company to service a broader range of clients and helping to drive a 3.5 percentage point improvement in motor combined operating ratio, to 74.4% (2014: 79.9%).

Across insurance, trading profit rose 8% with a Solvency II capital ratio of 170%.

Travel - 7% Group Trading Profit:

Customer numbers increased across the division with tour operating passenger numbers up 9.9% and ship passenger days up 0.9%. Trading profit improved 26.5% to £17.2m.

Design and construction of the next generation of Saga cruise ship is underway with delivery expected in 2019.

Outlook:

Under current market conditions the group expects steady growth in profit before tax and customer numbers. Combined with improved free cash flow and reduced capital requirements in the underwriting division this is expected to result in higher dividends going forwards although remember all dividends are variable and not guaranteed.

Group Chief Executive, Lance Batchelor, commented:

"I'm delighted that we are able to propose an increased dividend for the year that is above expectations as well as committing to a higher future payout range. This commitment is supported by our confidence in the Group's continued strong profit and cash generation performance and the successful evolution of our model towards less capital intensive activities, delivering a higher quality earnings stream."

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.