Saga is considering “prudent planning scenarios” for the extended suspension all cruise and tour operations for six months due to the impact of the coronavirus pandemic.
The disclosure was made in a trading update today.
The over-50s specialist said: “Given the significant potential impact of Covid-19 on the travel industry, the group has considered scenarios for extended suspension of cruise and tour operations, including full cancellation of all travel departures over six months, followed by a slow recovery.”
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The company has also been notified that disruption arising from Covid-19 may delay delivery of Saga’s second new ship, Spirit of Adventure, which was due to enter service in August.
“This has been considered within planning scenarios and is not anticipated to significantly change the group’s financial position,” Saga said.
‘Ready to sail’
Group chief executive Euan Sutherland said: “Saga is ready to start sailing as soon as the travel advice changes.
“Today we have outlined some prudent planning scenarios to investors – they are not a prediction as to when travel will resume.”
The company revealed a “precautionary” £50 million draw down of a revolving credit facility, with available cash resources at the end of March of £92 million.
Other actions being taken include reducing operating expenses of £15 million.
But this will be partially offset by an expected £10 million of redundancy costs.
“Further mitigating actions are underway in response to the Covid-19 crisis in relation to the travel business,” Saga added.
“Travel operations have successfully repatriated almost all customers and are supporting rebooking efforts across tour operations and cruise.”
The company expects an underlying pre-tax profits for the 12 months ending on January 31, 2020, to be £110 million. At that point forward cruise bookings for 2020-21 were at 80% of the full target and ahead of expectations.
Annual results delayed
The publication of full annual results for last year have been put back by a week and are expected to be published on April 9 following the request by the Financial Conduct Authority to observe a moratorium on the publication of results statements.
Sutherland said: “In a year of change, Saga has made significant operational progress and strengthened the management team to ensure the business is positioned to deliver for our customers and members and for investors.
“Our insurance and cruise businesses made good progress against the priorities we set out in April and we have moved to significantly strengthen our financial position, reducing debt and operating expenses and improving cash flow.
“Saga insurance remains largely unaffected by Covid-19, however along with all other travel businesses, our travel business has been significantly impacted.
“We have acted quickly to ensure the health and wellbeing of our customers and colleagues and, following the government’s advice on cruise ship and air travel, we have suspended our cruise and tour operations.
“We have also worked with our banks to agree temporary amendments to our debt covenants. We have significant available liquidity and can consider a range of further mitigating actions across the group.
“Saga is a strong brand, with loyal customers and where we offer really differentiated products, underpinned by excellent service, our businesses do well and have potential to do better.”
He admitted: “Organisationally, the group had become inefficient, lost its tight focus on customers and had under invested in digital, data and brand.
“We have started the work to make the changes necessary for us to be able to deliver the truly differentiated products and services our customers expect from us.
“Against the backdrop of Covid-19, the outlook is uncertain, but we remain confident that the Saga brand, and our insurance and travel businesses have a successful future ahead.”