Saga profits drop as travel business hit by Brexit uncertainty

Over-50s specialist Saga posted a drop in interim profit on Thursday as Brexit-related uncertainty took its toll on the travel business, but the group backed its expectations for the year.

In the six months to the end of July, pre-tax profit fell 52.1% to £52.6m and the dividend declined to 1.3p a share from 3p in the first half a year ago. Underlying pre-tax profit slid to £52.8m from £107.5m which the company said reflects the lower level of reserve releases from in-house underwriter AICL, lower margins in its retail broking business, and the short-term impact of the retirement of Saga Pearl II in the first half.

Saga said the performance of its tour operations business reflects challenging markets in which continued Brexit uncertainty has dented customer demand. Underlying pre-tax profit of £4.2m for the division, down from £8.4m the previous year, was hit by lower gross profits resulting from fewer passengers and a high level of discounting across the industry.

"These factors are not expected to continue into the second half given our visibility over forward bookings," it said.

Still, Saga maintained its full-year guidance for underlying pre-tax profit of between £105m and £120m.

Despite the drop in profits, chief executive Lance Batchelor said the company had made "good progress" against its strategic reset.

"The sales of our 3-year fixed price insurance are encouraging, and a higher proportion of customers are coming to us direct. Spirit of Discovery is now fully operational, delighting customers, and delivering on our targets for filling additional cruise capacity into next year.

"We are pursuing a number of initiatives to further improve the performance of our insurance business. In Tour Operations we are adapting to a challenging market by building on differentiated tours and river cruise. Our membership programme is starting to prove effective in helping us develop a deeper relationship with, and sell multiple products to, our members."

At 0915 BST, the shares were up 1.6% at 46.13p.