Saga PLC (LON:SAGA) has confirmed plans to raise £150mln and carry out a 15-for-one share consolidation as it revealed a new strategy update and a swing to losses in the first half of the year.
With former boss Roger De Haan, son of the company’s founder, returning as chairman and contributing a large chunk of a £150mln fundraising, the over-50s holidays and insurance specialist unveiled its new strategy, which it said is intended to “drive growth in revenues, profit and cash, return Saga to sustainable growth and restore significant shareholder value”.
READ: Saga shares soar after former owner backs £150mln investment plan
Based on what it remains confident is a fundamentally strong proposition, with a target audience that is the fastest growing and wealthiest consumer segment in the UK, the strategy will be focused on delivery under five key pillars, including resetting company culture; a “bigger, bolder” focus on digital and data; optimising experiences for customers; cutting costs; and reducing debt.
The group reported revenue of £192.4mln for the six months to end July, 2020, down 51% compared to last year, while underlying profit before tax plummeted 70% to £15.9mln.
But restructuring costs and a large goodwill write-down of its travel business led to a statutory loss before tax of £59.8mln from the £52.6mln profit a year ago, while net debt increased 9% to £646mln.
However, the board said it was “encouraged” by the progress made under new chief executive Euan Sutherland since the start of the year “and by the resilience of the business through a time of unprecedented challenge and change”.
De Haan added: “Saga is a special company and I am very optimistic about its future as a result of the strategy that is being outlined today.”
The shares dropped 4% to 15.37p on Thursday morning.
Analyst William Ryder at Hargreaves Lansdown said: “Saga is in a tough spot, but management are fighting gamely to get the company back on its feet. That’s meant making some hard decisions and having an honest look at what’s gone wrong over the last few years.”
He said the turnaround plan was “plausible” due to the cost-cutting element, the refocus of the travel operations towards providing meaningfully differentiated holidays under a refreshed brand, and aggressive tackling of debt thanks in part to the new cash.
“To be clear, the group is still in a very difficult position and there’s no guarantee of success – especially if we get a large second wave of coronavirus infections. But we can now see a way forward – and that’s something.”
--Updates shares, adds broker comment--