While Saga (LON:SAGA) has trimmed its dividend and is looking to focus on its direct to consumer business, that does not mean that the hard work is over, Hargreaves Lansdown has reported. The comments came after the cruises-to-insurance group for the over-50s updated investors on its performance yesterday, saying that it had made progress against the strategic reset of its business.
Saga’s share price rallied yesterday as investors responded positively to the update, gaining 16.25 percent to close at 52.80p. This morning, the shares have fallen marginally lower, having given up 0.28 percent to 52.65p as of 08:12 BST.
Hargreaves Lansdown weighs in
Hargreaves Lansdown research editor Nadeem Umar commented in a note yesterday that the broker had “worried for some time that Saga’s brand didn’t have the same resonance with the younger end of its ‘over 50s’ customer base,” meaning that without brand loyalty, the company “is just another insurer”.
The analyst further reckons that while Saga will focus on its direct to consumer business going forward and has taken “the painful, but we think, prudent decision to slash the dividend,” that does not “mean the hard work is over”.
“Saga urgently needs to address the falling customer numbers, especially as its business model is increasingly built on cross-selling services,” Umar pointed out. “It’s encouraging to see the group making strides to improve performance, but only time will tell if attempts to revamp its insurance offering are enough to attract premium customers back.”
Other analysts on lifestyle group
Reuters meanwhile quoted Russ Mould, Investment Director at AJ Bell, as commenting that “if this is what ‘good progress’ looks like according to CEO Lance Batchelor, investors must dread to think what weak progress might mean”.
UBS reaffirmed Saga as a ‘neutral’ today, without specifying a valuation on the shares. According to MarketBeat, the lifestyle group currently has a consensus ‘hold’ rating, while the average target on the Saga share price stands at 99.20p.