Saga Plc

Saga Plc (SAGA) is a Folkestone, the United Kingdom-based company, which provides exceptional products and first-class services to its customers over the age group of 50 from last 65 years. The company has divided its operations into three divisions being Travel, Insurance and Emerging Businesses. The company is awarded for its products and services which includes personal finance, cruises & holidays, the Saga Magazine and insurance.

Recent News
On 19th September 2019, Thursday, Saga announced its interim results ending July 31st, 2019.

Financial Highlights – H1 Financial Year 2020 (£, million)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2020, the company’s revenue declined by 8.30 per cent to £395.9 million from £431.9 million in the H1 FY2019. The decline in the revenue was driven by a decline in the business volumes, which resulted in lower revenues from Retail Broking Business for the period. The group’s trading EBITDA declined by 38.3 per cent from £141.1 million in the H1 FY2019 to £87.1 million in H1 FY2020. The company’s underlying PBT (profit before tax) declined by 50.9 per cent to £52.8 million in H1 FY2020 from £107.5 million in the H1 FY2019. The PBT (Profit before tax) declined by 52.1 per cent from £109.7 million in the H1 FY2019 to £52.6 million in H1 FY2020. The PAT (Profit after tax) declined by 48.2 per cent from £88.4 million in the H1 FY2019 to £45.8 million in H1 FY2020. The company’s underlying earnings per share declined by 47.4 per cent to 4.1 pence in H1 FY2020 from 7.9 pence in the H1 FY2019. The company’s total net debt was up by 64.3 per cent to £642.9 million in H1 FY2020 from £391.3 million in the H1 FY2019.

Share Price Performance

Daily Chart as at 19^th September 19, before the market close (Source: Thomson Reuters)

On 19^th September 2019, Saga Plc shares were trading at GBX 46.71 at the time of writing before the market close (at 9:08 AM GMT) and up by 2.84 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 141.20/GBX 31.78.


Valuation Methodology

*Peers: FBD Holdings Plc, Aviva Plc, Unipol Gruppo SpA, Chesnara Plc and Sjova-Almennar tryggingar hf.

Conclusion
Although the company’s top-line and the bottom-line performance has significantly declined in the first half of the financial year 2020, the company remained highly cash generative and has secured a long-term capital structure which will provide the company with financial strength and flexibility. The company is focused on improving its operational performance through capital and cost-efficiency.
The company is performing well despite challenging conditions. The company is expecting good progress with the launch of new products for its insurance business. Based on the above rationale and valuation done using the above methodology, we have given a "Hold" recommendation at the closing price of GBX 45.42 (as on September 18, 2019) based on the 6.10x NTM Price/Earnings (approx.) on the FY20E earnings per share (approx.).

Wilmington Plc

Wilmington Plc (WIL) is a Media company and is engaged in the business of networking and education. The company’s operations are divided into 3 operating segments being Healthcare, Professional and Risk & Compliance. The company’s geographical businesses include North America, Europe, United Kingdom and Rest of the World.

Recent News
On 19th September 2019, Thursday,Wilmington announced full-year results ending June 30^th, 2019.

Financial Highlights – Financial Year 2019 (£, thousand)

(Source: Annual Report, Company Website)
 
For the financial year ending 30^th June 2019, the company’s revenue surged by 1 per cent to £122,525 thousand as against £121,342 thousand in FY2018. The increase in the revenue was driven by solid revenue generation by Healthcare and Risk & Compliance segments for the period. The company’s adjusted EBITA declined by 9.7 per cent to £21.5 million in FY2019 from £23.8 million in FY2018. The EBITA margin was at 17.6 per cent in FY2019 versus 19.6 per cent in FY2018. With the decline in the operating expenses for the period, the company reported an operating profit of £16,865 thousand in FY2019 as against an operating profit of £4,244 thousand in FY2018. The company’s adjusted PBT (Profit before tax) declined by 11.5 per cent to £19.3 million in FY2019 as against an adjusted PBT (Profit before tax) of £21.8 million in FY2018. Reflecting the benefit of ICP business gains, non-repetition of one-off costs and goodwill impairment, the company’s PBT (Profit before tax) stood at £14.7 million in FY2019 as against a PBT (Profit before tax) of £2.3 million in FY2018. The company’s adjusted earnings per share were down by 11.9 per cent to 17.44 pence in FY2019 from 19.80 pence in FY2018. The company’s basic earnings per share stood at 12.74 pence in FY2019. The company’s final dividend surged by 4 per cent to 5.00 pence in FY2019 versus 4.8 pence in FY2018; the total dividend was up by 3 per cent to 9.1 pence for the period.

Share Price Performance

Daily Chart as at 19^th September 19, before the market close (Source: Thomson Reuters)

On 19^th September 2019, Wilmington Plc shares were trading at GBX 194 at the time of writing before the market close (at 11:41 AM GMT) and down by 3.48 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 224.00/GBX 160.00.

Valuation Methodology


Conclusion
On an adjusted basis, the company had shown a decline in the financial performance for the current period. The company expects the cost to increase in the near term. Whereas on the reported basis, the company had shown a decent growth in the financial performance for the financial year 2019. The company’s top-line and the bottom-line performance has improved for the period.

The company’s supply chain is impacted negatively by the uncertainty created due to an ongoing Brexit. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. 

The company expect its organic revenue to increase in the future with a growth ranging from low-mid single-digit. The group is confident about sales performance growth from all three divisions in the first two months of FY2020. The company is also witnessing robust demand for its online courses and programmes. The company has started seeing the benefits from integration activities with an increase in the business sales in the United Kingdom. The new product offerings such as APMi in French market giving a strong underlying performance for the period.Over the course of 4 years (FY14 - FY18), the company’s revenue surged from £90 million in FY14 to £121.60 million in FY18. Compound annual growth rate (CAGR) stood at 7.81 per cent.

Based on the decent prospects and supported by valuation done using the above method, we have given a "Speculative Buy" recommendation at the current price of GBX 194 (as on 19th September 2019, before the market close), with single digit upside potential, based on 11.30x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters.

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