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Monday 10 December 2018

Saga shares rise as over-50s travel and insurance firm ekes out earnings growth

Saga warned in December that the collapse of Monarch had hit earnings.

Saga stock
Saga stock

By Kalyeena Makortoff, Press Association City Correspondent

Over-50s travel and insurance firm Saga has reported a marginal rise in earnings thanks to growth across its travel arm, helping boost investor confidence following a profit warning in December.

The company reported a 1.4% rise in underlying pre-tax profits to £190.1 million for the 12 months to January 31, up from £187.4 million a year earlier, despite what the company said was a “challenging few months during which the share price has been under real pressure”.

That was against fall in 1.2% in revenue to £860.1 million.

Saga warned in December that the collapse of Monarch had hit earnings.

The airline’s demise, which saw holidays cancelled for around 860,000 people, had knocked its tour operations business, leaving it with a £2 million one-off hit.

But the full-year performance seemed to buoy investor confidence, sending shares up as much as 6%.

It followed a 36.9% rise in profits at Saga’s travel business and “robust” performance in its retail broking insurance unit despite “challenging trading conditions”.

Written profit growth across the insurance division rose 4.3%, as a 37.3% increase in the motor segment helped offset an 8.8% fall in homes.

Saga stock market move

Lance Batchelor, group chief executive officer, said: “In a challenging market we have delivered a set of full-year results which is in line with the rebased profit expectations set at the end of 2017.

“We have also continued to develop our strategy for long-term growth. We have achieved a modest increase in underlying profits and have remained highly cash generative.

“We have increased the dividend given our confidence in the stability of our highly cash generating model.”

Fiona Cincotta, senior market analyst at City Index said that while Monarch’s collapse had taken its toll on the business, Britain’s withdrawal from the EU was also dragging on Saga.

“Brexit woes are affecting not only the travel division of the company but are having an even deeper impact on the insurance part of the business where home insurance premiums are showing signs of inflation,” she said.

Saga is also settling in following a top-level reshuffle that saw managing director of tour operations Jeannette Linfoot leave the business, and Robin Shaw appointed to the new role of chief executive of Saga Travel after a restructuring which will see tour and cruise operations combine.

Earlier this spring the company confirmed it had appointed Old Mutual’s Patrick O’Sullivan to replace chairman Andrew Goodsell, with plans for the new boss to take the post on May 1.

Press Association

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