Saga share price sinks as cruises-to-insurance group warns on profits

Warning related to Monarch’s collapse

Saga share price sinks as cruises-to-insurance group warns on profits

Shares in Saga (LON:SAGA), the cruses-to-insurance group for the over-50s have lost nearly a quarter of their value in today’s session, as the company cautioned on profits. The group disclosed that it had seen more challenging trading environment, and was impacted by the collapse of Monarch Airlines.

As of 12:59 GMT, Saga’s share price had lost 24.38 percent to 137.10p, weighing on the mid-cap FTSE 250 index which currently stands 0.13 percent lower at 19,844.86 points. The group’s shares have lost just under 28 percent this year.

Saga warns on profits

Saga updated investors on its recent performance this morning, warning that its growth in underlying profit before tax was expected to be between one percent and two percent for the year ended January 31. The company attributed the lower expectations to more challenging trading in insurance broking during the period and the Monarch Airlines administration, which has affected the lifestyle group’s Tour Operations business where Saga booked an approximate one-off cost of £2 million.

The company noted that it had completed a review of its operating structure, which will realise approximately £10 million of annualised savings next year. Saga, however, expects to incur a one-off cost of about £4 million relating to these changes, excluded from underlying PBT.

“Against a backdrop of some challenging trading conditions in our final quarter, we continue to develop the business for the long term,” the lifestyle group’s chief executive Lance Batchelor commented in the statement.

Analysts weigh in

Sky News quoted Nicholas Hyett, equity analyst at Hargreaves Lansdown, as commenting that Monarch’s collapse as well as other industry-wide headwinds in the home insurance sectors were outside Saga’s control.

“But lower reserve releases and a rapid decline in benefits from the introduction of the motor broker panel shouldn't be coming as a surprise to management,” the analyst pointed out, adding that “the fact that the group feels the need to throw more cash at customer acquisition is also less than reassuring”.

“Saga’s pitch was always that its huge mailing list means all the clients it could ever want are just a mail drop away, the extra spending suggests it might not be as clean cut as that,” Hyett concluded. 

As of 13:24 GMT, Wednesday, 06 December, Saga PLC share price is 138.30p.

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