Saga Cruises has achieved more than 50% of its sales target for the first 19 cruises on new ship Spirit of Discovery a year ahead of its launch.
The disclosure came today as parent company Saga revealed a 7.6% decline in pre-tax profits to £178.7 million for the year to January 31 following a “challenging few months,” according to group chief executive Lance Batchelor.
He described the highlight of the year being the decision to invest further in Saga’s shipping capacity with a second new ship, the Spirit of Adventure, to be delivered in August 2020.
“Having two new efficient ships will significantly change the profit trajectory of our travel business,” Batchelor said.
Booked revenue increased by £23.6 million year-on-year for 2019-20 departures.
“This is due to the Spirit of Discovery having achieved over 50% of our sales target for her first 19 cruises at attractive per diem rates,” Saga revealed.
The over-50s company’s travel business handled more than 208,000 holidaymakers in the year, with revenue up by 3.9% and underlying pre-tax profit rising by 36.9% to £18.1 million.
The travel division remains on track to grow profits by four to five times over the five years from January 2017.
Saga’s tour operating arm achieved 20% profit growth to £13.8 million
“We continue to see a shift in the mix of sales towards higher value, long-haul, river cruise and third-party cruise products,” the company said.
“The trend to higher value products has been offset by a slight decline in passengers during the year, primarily due to flight cancellations following the collapse of Monarch Airlines.”
The tour operating business is comprised of four segments – Go for it, Discover, Unwind and Stay & Explore.
“We remain focused on leveraging our deep customer insight in the development of highly differentiated holidays and guided tours tailored to meet the needs of our travel customers.” Saga said.
Underlying profit before tax for Saga Cruising’s two cruise ships, Saga Sapphire and Saga Pearl II, almost doubled from £3.4 million the previous year to £6.6 million.
“This was driven by favourable fuel hedges and a 7% increase in passenger days as both ships required fewer maintenance days: a 19 day dry dock of the Pearl in April 2017 and a 20 day dry dock of Sapphire in November 2017, compared to a 63 day wet dock for Sapphire in the prior year,” Saga said.
Looking forward, the company added: “Our travel business has excellent visibility of bookings in the year ahead due to our customers’ preference to book holidays in advance. In both tour operating and cruising, we have already secured the majority of our full year 2019 sales targets.
“Overall profitability for the travel business is expected to step forward again year on year. Growth in forward travel reservations combined with our cost reductions will be partially offset by incremental marketing.
“The incremental marketing investment in tour operations has led to an increase in revenue in the year to date of 0.7%.
“There are no scheduled days in dock for our shipping fleet this year, increasing the number of days at sea. This benefit will be partially offset by a year on year increase in fuel costs because we will not benefit from the excellent forward acquired fuel rates we enjoyed in full year 2018.”