(Reuters) - Over-50s tourism and insurance firm Saga Plc (SAGAG.L) reported lower underlying earnings for the first half of the year but said the Brexit vote had not had a significant impact on its customers’ travel plans.
The drop in the pound since Britain’s vote to leave the European Union in June 2016 has hit consumer spending power, but Saga’s customers have continued to travel as most of them plan well in advance and already have their retirement funds.
“We do not believe that Brexit is having a significant impact. I would not say our customers are totally unaffected but I think they are much less affected than the market average,” Chief Executive Officer Lance Batchelor told Reuters.
The company reported profit before tax of 109 million pounds ($143 million) for the six months ended July 31, compared with 105.6 million pounds reported a year earlier, as the overhaul of its travel business paid off and it saw robust demand from affluent older Britons for trips.
Saga revamped its travel business following partner Monarch Airlines’ collapse last year on the back of intense competition for flights and a weaker pound, leading to the cancellation of hundreds of thousands of holidays.
“We have dusted off that (Monarch’s) challenge from last year ... We have seen good growth in things like river cruise and long haul,” Batchelor said.
Batchelor said older Britons were travelling to the Balkans - Croatia, Montenegro, Slovenia- and also China and Japan.
“Our membership (has) become more and more adventurous. They really want to see the whole world,” he added.
Saga, which is set to launch two new ships by 2020, said it had hit over 64 percent of its sales target for the first 19 trips for its new cruise ship ‘Spirit of Discovery’.
However, a challenging motor insurance market and weakness in home insurance led to a lower profit at Saga’s insurance business.
That, coupled with money spend on the revamp, led to a 3.7 percent fall in overall underlying pre-tax profit to 106.8 million pounds.
“Motor insurance is a cyclical sector, and pricing pressure waxes and wanes over time – but Saga usually escapes the worst of it thanks to its targeted and loyal customer base of 50+ customers,” Nicholas Hyett, Equity Analyst at Hargreaves Lansdown, said.
Shares of the Kent, UK-based company were very volatile on Thursday, and were up nearly 3 percent by 0917 GMT, reversing course after falling about 4 percent in early trading.
Saga, which hopes to hit 1 million customers, had said earlier in the year that it would spend about 10 million pounds on marketing to attract new customers.
“After several years of declining customer numbers at Saga, we have actually stopped that decline now and we are back up to the level we were at in the first half of last year,” Batchelor added.
“We hit bottom about six months ago and now the numbers have stabilised to where they were a year ago.”
Reporting by Muvija M and Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr/Keith Weir