Over 50s holiday specialist suffers share price plunge

Over 50s holiday and insurance specialist Saga has seen almost a third wiped off the value of its shares after announcing a pre-tax operating loss of £134.6 million.

The loss for the year to the end of January 2019 compared with a profit last year of £180.9 million.

The company said it was facing ‘long-term challenges’, especially in the insurance market. However, its travel division had its fifth successive year of profit growth, rising 2.4% to more than £21 million for the first time. Nevertheless, the group said Brexit is ‘putting a clear dampener on customers’ willingness to commit to holidays in 2019′.

Group chief executive officer Lance Batchelor said today the group was launching a ‘fundamental change’ to its insurance strategy, including focusing on direct channels and value-driven rather than price-driven insurance products.

He added: "As a result of lower margins in insurance, a change in approach to renewal pricing, lower reserve releases and investment in new products, underlying profit before tax for the 2019/20 financial year is expected to be between £105 million to £120 million.

"Therefore, we have taken the difficult decision to reduce our final dividend and write down goodwill. The fundamental changes we are making are essential to address the long-term challenges facing our business. They will support future growth in customers and profits, and generate attractive cash flows for Saga."

In tour operations, it will accelerate its move away from undifferentiated, low value products, such as short haul, to higher value, more differentiated segments such as escorted tours, third party cruises and river cruises, it said.

"We have seen the extraordinarily rapid build, to schedule, of Spirit of Discovery, our first ever purpose built cruise ship during 2018. Spirit of Discovery will carry her first passengers in July 2019.

"Our second new ship, Spirit of Adventure, is due to be delivered in summer 2020. Forward bookings for both ships are on track. They are each expected to deliver c.£40m EBITDA per annum. This will be transformational for the future profit trajectory of our Travel business," added Batchelor.

"We are starting to renew our river ship fleet, and have recently ordered two purpose built vessels on long-term lease agreements. While we do not expect significant growth in tour operating revenues, this forward transformation is expected to lead to improved margins in the next few years. "