Saga takes £4m hit from Thomas Cook collapse
Over-50s insurer Saga has said underlying profit before tax will meet expectations despite the company taking a £4m hit from the administration of Thomas Cook.
However, it warned home and motor insurance policies will pull in revenue three per cent lower than the previous year. But margins will still hit the higher end of Saga’s £71 to £74 guidance range.
Saga said it was operating against a “challenging” backdrop in its last half-year between August and January. It has set full-year underlying profit before tax guidance at between £105m and £120m.
But the company today also warned of a future hit to its underwriting business from higher inflation on third party damage and theft costs.
Overall inflation stands at seven per cent, up on longer-term predictions of five per cent.
“This trend is not expected to have a significant impact on the current year but will have a modest adverse impact on future year margins if retail pricing conditions remain competitive,” Saga said.
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The company, which also operates cruise tours, revealed it is “fully on track” to hit £40 in earnings before interest, tax, depreciation and amortisation (Ebitda) per new ship by 2020-21.
New ship The Spirit of Adventure is expected to total £20m in Ebitda for the second half of the financial year.
But tour revenue is expected to fall five per cent year on year. That is despite Saga seeing a “much more resilient picture” in areas like escorted tours. But it revealed Thomas Cook’s administration will cost it £4m in one-off costs it will take before underlying profit before tax.
Saga appointed a new chief executive in former Superdry boss Euan Sutherland in December. He arrived shortly after Cheryl Agius joined as CEO of Insurance and Gilles Normand became COO.
Saga has shaken up its management after reporting a sharp fall in half-year profits in September. The business has put its care division up for sale after pressure from activist hedge fund investor Elliott Advisers.
“I’m delighted to have joined Saga and to be working with a strong executive team,” Sutherland said.
“Although Saga continues to face challenging markets in insurance and travel, we have a clear focus on improving performance and cost efficiencies within the group, while strengthening our financial position and reducing debt.”