Saga H1 Earnings Call Highlights

Key Points

• Saga raised its full-year underlying profit outlook to £65 million–£70 million, above the £60.4 million consensus, after first-half revenue rose 14% to £366 million and underlying profit before tax nearly doubled to £46.6 million.
• The company continued to reduce debt, with net debt falling to £429.1 million and leverage declining to 2.7 times. Management said it expects to reach its £100 million profit and sub-two-times leverage targets before January 2030, while prioritizing further deleveraging over dividends, buybacks or a third cruise ship.
• Travel and insurance operations improved: ocean cruise profit rose 38%, holidays more than doubled profit, and insurance broking profit increased 75%. River cruise also grew strongly, but full-year profit is expected to decline because of low European river water levels.

Saga LON: SAGA raised its full-year profit outlook after reporting higher revenue, profit and cash generation for the six months ended July 31, supported by demand in its travel businesses and improved insurance broking performance.

The company said it now expects full-year underlying profit before tax of between £65 million and £70 million, compared with £44 million reported last year. Group CFO Mark Watkins said the revised range was above consensus expectations of £60.4 million.

Underlying revenue increased 14% to £366 million, while trading EBITDA rose 35% to £90.9 million. Underlying profit before tax nearly doubled, increasing 98% to £46.6 million. Statutory profit before tax from continuing operations rose to £28 million from £3.7 million a year earlier, helped by lower exceptional costs associated with implementing the company’s partnership with insurer Ageas.

“Saga delivered an exceptionally strong first half performance, driven by growth across all our core businesses,” Watkins said.

Debt reduction and earlier medium-term target

The company also reported continued deleveraging. Net debt stood at £429.1 million at July 31, down £86 million from a year earlier and £70.4 million below the year-end level. Saga said its leverage ratio fell to 2.7 times from 4.3 times a year earlier and from 3.7 times in January.

Underlying available operating cash flow increased 27% to £101 million, reflecting higher cash generation in travel and insurance as well as lower capital expenditure, according to Watkins.

Management said it now expects to reach its medium-term goals before January 2030. Those targets, announced last year, call for £100 million of underlying profit and leverage of less than two times.

Despite the stronger outlook, management said its current capital-allocation priority remains reducing leverage. In response to an analyst question about potential dividends, share buybacks and further investment, including a possible third ocean cruise ship, management said it was too early to discuss those options while the company remains focused on its £100 million profit and two-times leverage objectives.

Ocean cruise drives travel growth

Ocean cruise, Saga’s largest profit contributor, recorded a 14% increase in underlying revenue to £149.5 million. Underlying profit before tax increased 38%, driven by a 13% increase in per diems to £440 from £391.

Load factors remained high at 92%, although they were two percentage points lower than the prior year because of a different itinerary mix. Saga said reduced discounting, supported by strong booking demand and its early-booking price promise, was a principal driver of higher per diems.

For the full year, ocean cruise bookings had reached a 91% load factor, broadly in line with the prior-year period, while per diems were 11% higher. Bookings for 2027 and 2028 were also ahead of the prior year, with booked load factors up three percentage points and per diems up 11%.

Management said the operating cost base for the ships is largely fixed, allowing improved revenue to support margins, though the company continues to invest in onboard experiences, food and drink offerings, excursions and other elements of the customer proposition.

River cruise revenue rose 33% to £34.9 million, aided by a 32% capacity increase following the July 2025 addition of the Spirit of the Moselle. Underlying profit before tax rose 54% to £6 million, and load factors remained at 92% despite the additional capacity.

However, Saga expects river cruise full-year underlying profit to be below last year because of low water levels in Europe and normal seasonal patterns. Management said its ships continued sailing through the summer and that itinerary flexibility and newer vessels designed to operate in varying water conditions helped manage disruption. The company also said it may consider expanding to additional rivers over time, noting that customers had shifted to Douro itineraries that were not affected by disruption on the Rhine and Danube.

Holidays and insurance broking improve

Saga’s holidays business increased revenue 9% to £97.7 million, while passenger numbers rose 6% to 29,400. Trading EBITDA more than doubled to £7.6 million and underlying profit before tax more than doubled to £6.6 million.

Bookings for the remainder of the year were resilient despite geopolitical disruption in the Middle East, Saga said, with revenue and passenger numbers broadly in line with the same point last year. Management noted that the second half includes the business’s peak September and October trading period and that bookings were affected earlier in the year by the start of the Middle East conflict.

The company said it is pursuing organic growth in holidays through tailored offerings for older travelers, including special-interest holidays, China itineraries, U.K. hotel stays and Christmas breaks. Management said the business currently serves about 60,000 holiday passengers and sees opportunity to grow from that base.

Insurance broking underlying profit before tax increased 75% to £15.9 million, exceeding management expectations. The result reflected stronger home insurance margins and lower operating costs following the shift to a simpler operating model under the Ageas partnership.

Total policies in force rose 5%, with growth in three of four product lines. Motor contribution before overheads increased £0.6 million, while home insurance contributed a £5.7 million increase in profit, primarily from higher renewal margins. Travel insurance profit declined £0.8 million as Saga increased targeted marketing investment, which helped policies grow 51%.

Watkins said private medical insurance’s year-on-year comparison was affected by a £2.5 million prior-year profit commission, adding that the product remained profitable. He said the company expects insurance broking profit for the full year to exceed last year, although second-half profit should be broadly flat year-on-year due to investment in motor and home pricing ahead of Ageas renewal-policy migration.

Exceptional costs tied to the Ageas implementation are expected to continue next year during a 12-month policy migration period, though Watkins said they should be lower and then decline further as the business moves to a steadier operating model.

About Saga (LON:SAGA)

Saga exists to deliver exceptional experiences for our customers every day, whilst being a driver of positive change in our markets and communities.

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