Saga expects ‘significant’ profit growth as demand for holidays explodes
- Saga reported sales rose 15% to £355.3 million in the six months to July
- The lack of travel restrictions has led to a huge upswing in foreign travel
- The number of customers in the travel division increased by a quarter to approximately 25,700
Saga expects annual sales and profits to exceed market forecasts this year, following a continued strong recovery in demand for overseas holidays.
The over-50s specialist told investors it expects “significant” double-digit growth in revenue and underlying pre-tax profit for the fiscal year ending January 2024.
In the six months to July, Saga’s revenue rose 15 percent to £355.3 million, driven by a solid performance from its cruise and travel business.
Forecast: Saga told investors it expects to see ‘significant’ double-digit growth in revenue and underlying profit before tax for the fiscal year ending January 2024
The lack of travel restrictions and the widespread rollout of Covid-19 vaccination programs have led to a significant recovery in the number of retirees booking foreign trips over the past two years.
Saga’s river and ocean cruise businesses both returned to an underlying profit in the first half after reaching a passenger load factor of 83 percent.
Meanwhile, customer numbers in the travel industry, home to the Saga Holidays and Titan brands, rose by a quarter to around 25,700 after being hit by disruptions within the airline sector last year.
The Kent-based company said the travel industry is expected to return to annual profits, with last week’s booked sales 46 percent higher than the same period in 2022 and further growth expected.
Euan Sutherland, CEO of Saga, said: “Looking ahead to the full year, we are keeping our costs under tight control and are confident we will deliver significant double-digit growth in revenue and underlying profit, ahead of market expectations . ‘
But Saga warned its insurance brokerage was likely to post weaker profits this year due to much tougher conditions in the auto industry.
Auto insurers are increasingly hit by rising claims inflation, amid a sharp increase in repair, labor and auto insurance costs second-hand cars.
Under Financial Conduct Authority rules, the sector is currently banned from ‘price hiking’ – offering cheaper premiums to new customers while charging higher fees to those who renew their deal.
Russ Mould, investment director at AJ Bell, said: ‘At some point the argument can be made that Saga should jettison its entire insurance business and concentrate solely on being a specialist tour operator.’
In January, Saga confirmed it was planning to sell its insurance business, but has since halted the planned sale in the hope of getting a better deal if insurance market conditions improve.
The company has said that proceeds from such a sale would go towards reducing its massive debt pile, which stood at £657.4 million at the end of July.
Saga Stocks were 0.5 percent, or 0.6 pence, lower at £1.22 on Wednesday morning and remain down more than 90 percent over the past five years.