(Reuters) - Britain’s Saga said an overhaul of its insurance business is beginning to pay off, promising a better second half of the year after the over-50s tourism and insurance firm’s first-half profit more than halved.
Shares in the company, which offers escorted tours, river and ocean cruises as well as motor and home insurance, improved 5% in a sign investors were relieved it did not issue another profit warning after it cut its outlook in April.
Saga, which owns Saga Holidays, Saga Cruises, Titan and Destinology, has been battling margin pressures in its insurance unit which accounts for the bulk of its earnings, while growing uncertainty over how or when Britain will leave the European Union has hurt its travel business.
In April the company, founded 65 years ago, announced three-year, fixed-price home and motor insurance policies and cut prices for renewals.
Saga said pretax profit fell 52.1% to 52.6 million pounds ($65.6 million) for the six months ended July 31, below a company-provided consensus of 55.0 million pounds.
Chief executive Lance Batchelor said Saga had sold more than 175,000 of the new fixed price policies and over half of its customers were opting to buy them. He also said more customers were buying policies directly from the company rather than from comparison websites.
“We have seen good solid margins on those (fixed price) products - at the upper end of our plan for the first half,” Batchelor, who is due retire in January, told Reuters.
Shares in Saga, part of UK’s midcap index, have fallen about 55% so far this year. The company confirmed its full year underlying pretax profit forecast of 105 million pounds to 120 million pounds, having made 180.3 million pounds in fiscal 2018.
“If this is what ‘good progress’ looks like according to CEO Lance Batchelor, investors must dread to think what weak progress might mean,” Russ Mould, Investment Director at AJ Bell said.
Saga predicted a better second half of the year for its tour business with newer cruise ships coming into service and improved bookings.
But it warned that Brexit has hurt its travel insurance business and made consumers reluctant to commit to holidays in 2020/2021 after earlier anticipating an impact only this year.
Saga said a no-deal Brexit, which the EU warned was increasingly likely, could make running its tour operations more costly and cause supply chain disruptions for motor repairs along with road disruptions due to delays at the port of Dover and Eurotunnel.
($1 = 0.8017 pounds)
Reporting by Muvija M and Pushkala Aripaka in Bengaluru; Editing by Tomasz Janowski and Elaine Hardcastle