Saga share price: what’s the outlook as turnaround plans gets underway?

The over 50s insurance and holiday brand is busy executing its turnaround strategy amid a difficult insurance and travel market, providing little support to its share price.

Saga Source: Bloomberg

Saga continues to rely heavily on its insurance business to prop up profits, while the troubling travel market continues to negatively impact its results.

Insurance broking accounted for 59% of the company’s profits in 2018, but even that has taken a hit with Saga struggling to keep customers onboard as increased competition and ease of switching provider making it a challenging market to navigate.

AGM statement sends share price south

In the wake of its AGM statement, which saw Saga warn investors how political uncertainties were weighing on its tour operator business, its share price fell more than 14% to £32.28 on Wednesday last week.

The company used the statement to also mention how ‘despite challenging trading conditions in both insurance and travel markets’ the over 50s insurance and tour operator has seen trading between February 1 to June 18 remain in line with expectations.

‘We are resolutely focused on the execution of our new strategy and have a clear set of priorities,’ Saga CEO Lance Batchelor said.

‘Against challenging headwinds in both travel and insurance, we see early signs of progress in stabilising our Retail Broking business and forward bookings for the Cruise business have been resilient,’ he added.

Saga ‘vulnerable to takeover’ as share price sinks

Saga’s turnaround plan will need to reap results sooner rather than later, with the company’s sliding share price leaving its ‘vulnerable to takeover’, according to AJ Bell Investment Director Russ Mould in an interview with ThisIsMoney.

‘The company is in a sticky mess and is now reliant on flawless execution to try and put the business back on track,’ he said. ‘The very depressed market valuation leaves Saga vulnerable to takeover interest from rivals.’

‘Despite the recent setbacks its brand still has considerable value and it does have a large customer base which presents opportunities to make money should someone feel brave enough to buy the company while it is on its knees,’ he added.

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