Saga PLC (LSE:SAGA) returned to an underlying profit in the first half of the year as its travel business got back into the swing of things, but cut its guidance for the full year due to insurance challenges.
The specialist travel group posted an underlying profit before tax of £14mln for the six months to 31 July compared with an underlying loss of £2.8mln a year ago.
For the full year, with inflationary pressures in the insurance market anticipated to continue, an underlying profit before tax of £20-30mln is expected, compared to previous guidance of £35-50mln.
On a statutory level, the over 50’s travel company swung to a £257.5mln loss from a £0.7mln profit as it wrote down goodwill in the insurance business by £269mln to represent a reduced view of future motor and home margins per policy, which the group signalled in July.
At 31 July 2022, £449.6m of insurance goodwill remained on the balance sheet, down from £718.6mln in January and July 2021.
Group revenue rose 65% to £258.3mln, reflecting a strong ocean cruise season.
Final preparations were also made for a new digital Saga Travel business, which has just launched its first new products.
Looking ahead to the second half, directors expect a continued recovery in the cruise and travel businesses, with headwinds in the first six months seen receding as customer demand continues to rebuild.
“Whilst we are mindful of the broader inflationary environment in the UK, the exposure within these businesses has been largely offset or, in the case of fuel, hedged, and at present, we are not seeing any impact to demand from our customers,” Saga said.
The current high levels of insurance claims inflation is expected to continue and the sales of motor and home insurance policies to be similar to the first half.
Launches of a new product range, alongside increases to pricing are anticipated to see the insurance business to return to policy growth over time, it said.