Saga hits lowered targets but sees more challenges

Saga, the over-50s travel and insurance company, met its downgraded annual profit expectations but said the market remained "challenging" and that profits would fall remain under pressure in 2018.

Shortly after Saga warned investors on profits back in early December, the group made the move to reshuffle its senior management in January as part of an effort to become “more focused” moving forward.

While Saga's underlying pre-tax profits ticked ahead just 1.4% to £190.1m in the year ended 31 January, profits from the group's continuing operations dialled back 7.6% to £178.7m, something the firm said reflected costs associated with its successful refinancing, as well as its cost savings programme and fair value losses on derivatives.

Saga generated good levels of cash throughout the year, pushed along by a "robust" performance in its retail broking insurance business and a continued growth in its travel division. This supporting the group's 7% cut to net debt to £432m and a proposed full year dividend of 9p, 5.9% higher than the 8.5p proposed a year earlier, offering investors who saw basic earnings per share drop 7.8% to 13p, some comfort.

Saga's travel business handled more than 208,000 holidaymakers throughout the year, pushing revenue ahead 3.9% and underlying pre-tax profit up 36.9% to £18.1m.

The firm pointed out that it had already secured the majority of its travel sales targets for its current trading year as a result of its customers' preference to book holidays in advance, but reiterated that its underlying profit would, again, be about 5% lower in the year ending January 2019.

Lance Batchelor, 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."

"In December we outlined our plans to further invest in growing our customer base and, having seen some initial momentum in new business, the early signs are promising. While this investment will contribute to a small decrease in profitability compared to last year, I am confident that we have put in place the right investment to drive the Saga business forward," he added.

As of 0840 BST, shares had gained 5.98% to 124p.