- Saga has enjoyed a significant revival in demand over the past few years
- Both its river and cruise arms are set to post strong full-year sales growth
- The group’s shares have still plummeted by c.90% over the past five years
Saga expects annual underlying pre-tax profits to more than double, thanks to ‘outstanding’ performances by its cruises and travel operations.
The over-50s specialist has enjoyed a significant revival in demand in recent years, following the rollout of Covid-19 vaccinations and the loosening of travel restrictions across Europe.
It expects its river cruise arm to rebound to profit in the current financial year and for earnings before nasties at its ocean cruise division to surpass £40million per ship.
Recovery: Saga has enjoyed a significant revival in demand following the widespread rollout of Covid-19 vaccinations and the loosening of travel restrictions across Europe
Both segments are forecast to post strong full-year sales growth, with the former set to increase turnover by over half to around £40million and the latter predicted to achieve a rise of about 30 per cent.
Meanwhile, Saga expects turnover in its travel business to jump by 40 to 45 per cent, supported by passenger numbers expanding by more than 20 per cent.
Consequently, the Kent-based firm believes the division, when combined with the river cruise segment, will see underlying pre-tax profits recover to pre-pandemic levels.
Mike Hazell, chief executive of Saga, said: ‘Our cruise and travel businesses have had an outstanding year, having taken around 120,000 passengers on holiday, with customers continuing to be drawn to the strength of the Saga brand and offer.
‘As a result, these businesses will return to profitability, in line with expectations.’
Saga shares jumped 5 per cent to 152.2p on Tuesday morning, making them one of the top performers on the FTSE All-Share Index.
However, they have still plummeted by approximately 90 per cent over the past five years because of the pandemic and the company’s massive debt pile, which stood at £657.4million in July last year.
Last week, Saga said it was ‘exploring opportunities’ for its cruise operations, including a ‘partnership agreement’ involving its ocean cruise division, to help cut liabilities and boost value for investors.
It followed Sky News reporting that Saga was looking to sell its ships or offload the business under a licensing arrangement.
Sky also claimed the firm could try to dispose of its insurance underwriting arm again, having halted a potential sale last Autumn amid weak market conditions.
Saga forecasts the division’s underlying pre-tax profits to be ‘in the low-single digits’ for the 2023/24 fiscal year.
The group’s insurance business has struggled with inflationary pressures and weaker sales volumes amid widespread troubles in the home and motor industry.
Vehicle insurers are being significantly affected by surging claims inflation due to more expensive repair and labour costs and semiconductor shortages pushing up secondhand car prices.
In addition, they are now banned from price walking – giving cheaper premiums to new customers while making older customers pay more for renewals.
Saga warned: ‘The conditions in insurance remain challenging and, against this backdrop, we are focused on effectively balancing the protection and, ultimately, growth of policy sales with the delivery of sustainable profitability.
‘This reshaping will take place over time as the market challenges begin to wane; however, the likely changes are expected to impact profitability in the short-term.’
