Cruiseship operations eased the pain felt by UK-based Saga plc as its share price slumped today after announcing a preliminary loss before tax of £134.6m ($177m) for 2018.
The provider of products and services for the over-50s age group has taken a goodwill impairment of £310m relating to the group’s insurance operations.
Saga, which says it is adopting a “new approach” to the challenges faced in the motor and home insurance markets, is reporting in contrast a fifth successive year of profit growth for its travel division.
It says forward bookings for both the new ships it has on order at Meyer Werft in Germany are on track.
Saga’s first-ever purpose-built cruiseship, the Spirit of Discovery, will begin operations in July 2019.
Its second newbuilding, Spirit of Adventure, is pencilled in for delivery in the summer of 2020.Both are 55,500-gt with capacity for almost 1,000 passengers.
Saga says they are each expected to deliver £40 million ebitda per annum, which it describes as “transformational for the future profit trajectory of our travel business.”
The Folkestone-headquartered company said: "We are (also) starting to renew our river ship fleet and have ordered two purpose-built vessels on long term lease agreement.”
The company describes construction of Spirit of Discovery at Meyer’s Papenburg yard as an “extraordinarily rapid build to schedule”
The Saga cruise business delivered a 9.5% increase in revenue to £96.6 million against £88.2 million in the previous year.
It reflected an 11,000 increase in passenger days, as well as fewer maintenance days and higher per diems as demand for the operator’s 18,600-gt, 450-berth Saga Pearl 11 (built 1981) was higher than expected in its final year.The ship will be replaced by Spirit of Discovery.
Underlying profit before tax from the cruise business is expected to be £6.9 million versus £6.5 million a year earlier. Revenues per diem improvements offset £2m of additional fuel costs, net of fuel hedges.
Brexit uncertainty is being blamed for a 3.4% fall in Saga’s overall forward travel sales for 2019/2020, although cruise ticket revenues and passengers for 2019/2020 departures are up 17.7% and 17.8% respectively, again reflecting the 19% increase in capacity with the introduction of the new ship Spirit of Discovery.
Underlying profit before tax for the Saga group is down 5.4% to £180.3 million because of the disappointing retail insurance performance.At the time of writing, Saga’s shares had tumbled over 32% to 72.2 pence.
