Half-year pre-tax profits at over-50s group Saga fell to £32.8 million from £91.2 million despite its travel division having a strong start to the year.
The figure came after £50.8 million of stock market listing expenses and a one-off cost of new debt, Saga announced on its first set of financial results today as a public company since its IPO in May.
The group operating profit was up by 15.2% to £110 million in the six months to July 31 as revenue declined by 3.9% to £583.5 million.
Subsequent highlights from the travel division included the acquisition of a 75% shareholding in Destinology for £23.4 million and partnerships signed to extend the Saga brand into third party cruising.
Saga followed this last week by announcing plans to sell through the trade for the first time.
The travel division achieved an improved operating profit of £9.1 million against £2.6 million in the same period last year, with total revenue up by 9.2% to £176.5 million.
The group said it had been working hard to add value to the range of holidays it offers under the Saga brand.
This, combined with a shift in product mix towards long-haul and river cruises, resulted in an improvement in gross margin in the six months. There was a 20% rise in the number of Titan passengers travelling over the period.
The cruise business restructured its pricing policy and the banding of its cabins, resulting in improved demand for higher-graded cabins.
The availability of packages for on-board services and excursions was enhanced, both in advance of and during each cruise, further improving revenues.
“Combined with increased passenger numbers manifesting in higher load factors on both the Saga Sapphire and the Saga Pearl II, this has led to higher margins and profit,” the company said.
Chief executive Lance Batchelor said the group’s travel business had a “very strong” start to the year, delivering growth in like-for-like passenger volumes and margin.
“The business has focused heavily on improving its digital capabilities its customer contact strategy and implementing a number of initiatives to promote value added offerings to customers that have increased revenue and had a beneficial impact on the product mix,” he said. “The business has also benefited from the healthier macroeconomic environment.
“Within the holidays business we continue to innovate and look at ways of opening up the Saga experience to more of our target demographic.
“In August we announced the acquisition of Destinology, an acquisition that will expand and enhance Saga’s offer in premium travel. In particular, given the age profile of Destinology’s customer base, it will help improve access to the affluent younger age group (50-60) within Saga’s target demographic.
“In the cruising business, we have extended the Saga brand into third party cruising, through agreements with four separate cruise lines.
“Initial demand for this product has been strong and, encouragingly, 30% of the demand has originated from new customers – those that have not booked a cruise or holiday with us before – with a further 19% of the demand from people who have not holidayed or cruised with us for over three years.”
Batchelor identified more than 20 million people within Saga’s target demographic who do not currently buy from the company.
“We continue to target them by offering market leading products and services in the areas we already operate,” he said.
“We are also able to identify and deliver additions to our current operations – both organically and through acquisition – that add to the Saga offer, such as the recently announced acquisition of Destinology in our travel business.”