Saga, the British holiday and insurance group catering to the over-50s demographic, is forecasting a significant annual profit increase, expecting a doubling in earnings. The optimistic outlook is driven by the company’s confidence in robust long-haul travel demand from affluent retirees, which is anticipated to counterbalance challenges in its insurance unit.
Mike Hazell, Saga’s Chief Executive, emphasized the resilience of the company’s travel and cruise segments amid the ongoing conflict in the Middle East. Despite potential concerns, Hazell expressed confidence that the impact on travel and cruise demand would not be substantial. While acknowledging a slight impact on travel to Egypt and Jordan, he refrained from quantifying the financial implications.
Saga currently operates a 28-day cruise to Israel and Ancient Egypt, scheduled for September. Hazell noted that the company is keeping a close eye on developments and will review the cruise as necessary. The Gaza war had previously affected leisure travel demand to the region, leading to flight pauses and alterations to travel itineraries.
Shares in Saga, listed in the FTSE small-cap index, rose by 4.9% to 152.2 pence following the positive profit forecast and revenue growth expectations of 10% to 15%. The company has been actively implementing cost-cutting measures to reduce its substantial debt, including headcount reductions. A recent management reshuffle, including the appointment of a new CEO and CFO, and the exploration of potential partnerships for its Cruise operations, underscore Saga’s commitment to strategic adjustments.
In September, Saga had temporarily halted the sale process for its insurance underwriting arm, which was originally intended to be sold to Australia’s Open but was terminated earlier in 2023. The insurance business continues to pose challenges for Saga, with an expected 9% decline in policy sales for the fiscal year. Despite these challenges, the company remains focused on its overall profitability and the growth potential of its travel segments.
Saga’s proactive measures to address its debt and enhance operational efficiency align with its broader strategic goals. The company’s decision to put the sale of its insurance underwriting arm on hold and explore potential partnerships for its Cruise operations reflects a thoughtful approach to optimizing its business portfolio.
As the travel industry faces global uncertainties, particularly in regions affected by geopolitical events, Saga’s commitment to monitoring and adapting to market conditions positions it well for sustainable growth. The positive market response to its profit forecast and revenue growth outlook underscores investor confidence in Saga’s ability to navigate challenges while capitalizing on opportunities in the travel sector.
