Saga Plays Long Game in Search for Cruise Nirvana

Saga, the conglomerate catering to people 50 and older, saw profit in its travel business plunge in the first-half of its financial year as the company works towards recalibrating the division.

The sector continues to be the biggest individual revenue generator across the business, which also encompasses insurance broking, but earnings have taken a hit for a number of reasons.

Pre-tax profit across the company in the first six months of its financial year fell 52 percent to $65.9 million (£52.6 million) while travel suffered a 60 percent slump to $7.6 million (£6.1 million).

Saga is busy updating its cruise fleet and is getting rid of its two old ships and replacing them with new ones. Revenue fell as a result of the sale of Saga Pearl II, while at the same time the company had to spend more on marketing and launching its new ship, Spirit of Discovery.

Executives at the company, which has endured a difficult time of late, will be hoping that the substantial investment pays off in the long run.

Outgoing CEO Lance Batchelor said the new ship was already proving a success.

“The launch of Saga Spirit of Discovery was a really significant milestone for the company. And the booking momentum that we’ve had since then has meant that we’ve achieved this year’s targets. And looking forward to next year, over 55% of our total target volume is already booked,” he told analysts on an earnings call on Thursday.

The company is aiming to make $50 million (£40 million) in profit (EBITDA) per ship per year.

While Saga’s long-term plan for its cruise division seems on track, elsewhere in travel things remain tricky.

The mainstream holiday market in the United Kingdom is in the middle of a Brexit-related downturn with holidaymakers still adjusting to the continued uncertainty.

“Outbound UK travel has been tough for the first seven months of our financial year. The Brexit uncertainty has had an impact on both people willing to travel, but also general consumer confidence,” Robin Shaw, travel division CEO told analysts.

Underlying profit in the division halved to $5.2 million (£4.2 million) and Saga intends to keep moving away from commoditised hotel packages to more lucrative river cruises and escorted tours.

Activist investor Elliott took a stake in the company in July, prompting speculation that a separation of its various businesses was on the cards.

On the same day as its results Saga also faced criticism for an ill-judged advert, which it claimed came from one of its partners.