Saga shares has plunged following a profit warning that revealed a slowing insurance business was not going to be offset by a recovery in cruises and other travel products.
The group said profit before tax would now be in the range of £20m to £30m, down from their previous guidance of £35m to £50m.
Saga shares were down 21% to 105p at the time of writing, the lowest level since their IPO. Saga now has a market cap of just £189m, having been valued at around £2bn when they listed in 2014.
“Following a return to service for cruises and travel, Saga’s experienced impressive growth in the division allowing for reduced losses despite still facing some on-going disruptions from Covid-19 and the conflict in Ukraine. This growth has helped contribute to a positive underlying pre-tax profit of £14m at the half year mark,” said Charlie Williams, Equity Research Assistant at Hargreaves Lansdown.
“The insurance division hasn’t performed as well. Larger than expected inflationary pressures and rising claims have reduced profitability for the division and resulted in a downwards revision of the groups full year pre-tax profit of £20-30m. Previous guidance was £35-50m. For the long term however, Saga’s unique offering to the ‘grey pound’ works well and with many of its customers likely to have paid off their mortgages, it’s good to see them as more insulated than most from further interest rate rises.”
