This week Saga (LSE: SAGA), the company that provides products and services from cruises to insurance targeting the over 50s market, released yet more bad news for investors. The company advised it faces “challenging headwinds” and weakness in the travel division is expected to negatively impact results.
It said booked revenues in its tour operations division were down 4% for the year to 15 June versus the previous year and its margins for this year will also be hit. This was because it was forced to discount holiday packages as a result of competition.
Bad news – not for the first time
This was hardly the first negative trading update from the company. Saga’s share price has been tumbling for much of the past 18 months. Showing just how far the company has fallen, the P/E ratio is now below three – the lowest I remember seeing anywhere on the market. Not even under-pressure housebuilders have valuations that low.
The latest bad news follows on from preliminary results for the year ended 31 January, which showed that for continuing operations, profit fell by 174% versus the previous year, and the proposed dividend fell by 56%. These are truly horrible numbers for investors to see and indicate a business that is really in trouble. Given the struggles of the business, I feel its debt is quite high also, even though it has been brought down, it is still £391.3m and net-debt-to-trading-EBITDA is 1.7x.
In my view, this all paints an unattractive picture. No part of the business seems to be doing well, which is a huge worry and takes away a lot of hope that the firm can be turned around anytime soon. That said, my Foolish colleague, Rupert Hargreaves, disagrees with me and thinks Saga is showing signs of recovery.
New kid on the block
Unlike Saga, online investment platform AJ Bell (LSE: AJB), which only became a public company in late 2018, has been seeing strong rates of growth. Its first-half pre-tax profits increased 27% to £17.7m while revenues jumped 17% to £50.1m. This improvement was driven by higher customer numbers and an increase in managed assets.
Before the results, the company had said it expected interim results to be slightly ahead of expectations as total assets under administration (AUA) rose 8% to £47.7bn in the second quarter. During that quarter, platform customer numbers increased by 10,424 to a record high of 200,922.
The industry AJ Bell operates in is supported by some major growing trends, which should help it continue to prosper. These include an ageing population and increased awareness of the need to self-invest, alongside a shift from defined benefit to defined contribution pension schemes. All this adds up to an ever growing market for the services that the company provides.
With AJ Bell being popular with investors and given the success of competitor Hargreaves Lansdown as a listed company, I have high hopes for the company. Despite recent negative publicity, HL’s share price increased by 47% over the last five years and by 217% since the start of 2011. I see no reason why this success cannot be replicated. Given its competitor’s current woes from the Woodford fallout, there may even be an opportunity for AJ Bell to gain further market share.
