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Sunday share tips: Saga, Arena Events, G4S
Saga shares were branded 'avoid' in the Sunday Times' Inside the City column, even though its debt has been shrinking and its profits rising, in contrast with former stablemate, the AA. The share price has also recently been on the way down after warning on profits in early December due to higher costs and "more challenging trading" in insurance broking, with growth in underlying profit before tax expected to be between 1% and 2% for the year to 31 January 2018.
Saga will now be accounting for revenues more conservatively, with £10m more to be spent on 'customer acquisition' but £10m of annualised savings spied for the new financial year. All in all, the changes are expected to result in underlying profit before tax for next year being approximately 5% lower than the current year.
Since floating, management's efforts to modernise and shift away from capital-intensive underwriting, setting out last March a new capital-light strategy to use Saga's deep knowledge of its most loyal customers to enable it to increase margins by acting as a broker of various third-party services under the name of 'Saga Possibilities'. This, the column said, was "proving much harder than it expected" amid intense competition and will "require a lot of patience".
Shares in Arena Events were tipped as a 'buy' by Midas in the Mail on Sunday. The company, which listed on the junior market last July at a price of 55p, helps with the organisation of top sporting fixtures such as the London Marathon, Cheltenham Festival and music festivals from Glastonbury to the Dubai Jazz Festival, as well as setting up marquees and ice rinks for other annual events in sites near its offices in America, Hong Kong, Kuala Lumpur and the Middle East. The business is in creating 'temporary event environments', providing large-scale event project management and specialist event equipment.
Management want to expand into new geographies, including the US West Coast and selling more complete tents-to-teaspoons packages. Arena is also keen to fill out its calendar with more events in Dubai and Kuala Lumpur and in music festivals and cold-weather activities. Results for 2017 are due to be announced in April, with analysts forecasting revenues of £100m, profits of £4.5m and a 1.4p dividend per share. For 2018, sales are predicted to climb to £107m, with profits jumping to almost £6m and a dividend of 1.8p.
G4S is "one outsource worth buying", said Questor in the Sunday Telegraph.
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