Saga lowers profit guidance; swings to loss on impairment charge

(Alliance News) - Saga PLC shares tumbled on Tuesday, after the travel and insurance firm lowered ...

Alliance News 27 September, 2022 | 9:45AM
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(Alliance News) - Saga PLC shares tumbled on Tuesday, after the travel and insurance firm lowered annual profit guidance and a substantial impairment charge in its half-year accounts resulted in a pretax loss.

Saga shares were 120% lower at 106.90 pence each in London on Tuesday morning. The stock is down 63% in 2022 so far.

Saga provides insurance, cruises and package holidays to people over 50. In the six months that ended July 31, it posted revenue of GBP258.3 million, up sharply year-on-year from GBP156.4 million. This was as normal cruise and travel operations resumed following the Covid-19 pandemic.

However, the cost of sales rose even more sharply, to GBP124.6 million from GBP48.6 million, and Saga booked a hefty GBP269.5 million impairment of assets, compared to no such charge in the previous year.

This led to a pretax loss of GBP257.5 million, swung from a profit of GBP700,000 a year before.

The impairment relates to Insurance goodwill, and reflects a "reduced view of future motor and home margins per policy", as previously mentioned in July.

Back in July, analysts at Peel Hunt had warned that Saga's introduction of new insurance products was likely to hurt its insurance broking business, and would likely result in a goodwill impairment in its first half results.

Peel Hunt had pencilled in Saga making a more modest non-cash impairment of GBP150 million.

For the whole financial year, Saga lowered guidance for underlying pretax profit to a range of GBP20 million to GBP30 million from a previous range of GBP35 million and GBP50 million.

Saga commented: "Looking ahead to the second half of the year, we expect a continued recovery in our Cruise and Travel businesses. We anticipate that the headwinds experienced in the first six months will recede as customer demand continues to rebuild and we are able to grow our bookings.

"Whilst we are mindful of the broader inflationary environment in the UK, the exposure within these businesses has been largely offset or, in the case of fuel, hedged, and at present, we are not seeing any impact to demand from our customers."

By Elizabeth Winter; elizabethwinter@alliancenews.com

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Saga PLC 105.80 GBX 1.34 -

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