Saga eyes ‘significant’ profit growth as holiday demand booms
- Saga reported turnover increased by 15% to £355.3m for the six months to July
- An absence of travel restrictions has led to a massive rebound in foreign travel
- Customer numbers in its travel division jumped by a quarter to around 25,700
Saga expects annual revenue and profits to surpass market forecasts this year following a continued strong recovery in foreign holiday demand.
The over-50s specialist told investors it anticipates a ‘significant’ double-digit expansion in sales and underlying pre-tax profits for the fiscal year ending January 2024.
In the six months to July, Saga’s turnover increased by 15 per cent to £355.3million thanks to solid performances from its cruise and travel businesses.
Forecast: Saga told investors it anticipates seeing a ‘significant’ double-digit expansion in sales and underlying pre-tax profits for the fiscal year ending January 2024
An absence of travel restrictions and the widespread rollout of Covid-19 vaccination programmes has led to a considerable rebound in pensioners booking overseas trips over the past two years.
Saga’s river and ocean cruise operations both returned to a first-half underlying profit after achieving a passenger load factor of 83 per cent.
Meanwhile, customer numbers in the travel arm, home to the Saga Holidays and Titan brands, jumped by a quarter to around 25,700, having been impacted the previous year by disruption within the airline sector.
The Kent-based firm said the travel business is set to return to an annual profit, with booked revenue as of last week up 46 per cent on the same time in 2022 and further growth expected.
Euan Sutherland, chief executive of Saga, said: ‘Looking ahead to the full year, we are keeping tight control of our costs and are confident that we will deliver significant double-digit growth in revenue and underlying profit that is ahead of market estimates.’
But Saga warned that its insurance broking arm would likely make weaker profits this year due to much more challenging conditions in the motor industry.
Vehicle insurers have been increasingly impacted by spiralling claims inflation amid a sharp rise in costs for repairs, labour and second-hand cars.
The sector is currently prohibited under Financial Conduct Authority rules from ‘price walking’ – offering cheaper premiums to new customers while charging more to those renewing their deal.
Russ Mould, investment director at AJ Bell, said: ‘At some point, the argument may be made that Saga should jettison the entire insurance operation and focus solely on being a specialist travel operator.’
In January, Saga confirmed that it was looking to sell its insurance underwriting arm but has since paused the planned disposal in the hopes of getting a better deal when conditions in the insurance market improve.
The company has said proceeds from such a sale would go towards reducing its huge debt pile, which stood at £657.4million at the end of July.
Saga shares were 0.5 per cent, or 0.6p, lower at £1.22 on Wednesday morning and remain more than 90 per cent down over the past five years.