Popular over-50’s insurance-to-holidays provider Saga (SAGA) is to suspend all of its cruise holidays until the beginning of May as the coronavirus spreads.
This will slash somewhere in the region of £10m to £15m off profits this year, to 31 January 2021. Analyst had been estimating around £100m of pre-tax profit for that 12-month period. That implies a bigger decline in profits than the rough £7m already anticipated on last year to 31 January 2020. Those results will be announced on 2 April.
TAKING GOVERNMENT ADVICE
The decision came after the UK government advised people aged 70 and over, and those with pre-existing health conditions, against cruise ship travel.
This news comes following the 60-day worldwide suspension on Thursday of all cruise holidays by Princess Cruises, which has seen ships quarantined off the coasts of Japan and San Francisco in recent weeks.
Saga has promised full refunds or travel credits to all passengers that were due to travel in the next six weeks. The company said it had already received around £22m in advanced booking revenues for the six week suspension period.
NO CASH CRUNCH, SAYS SAGA
Saga, which has been struggling for a couple of years, moved to reassure investors that the issues caused by the coronavirus would not leave the company in financial dire straits.
‘While the travel environment remains uncertain, the group continues to have significant available liquidity, underpinned by a £100m undrawn revolving credit facility, £33m of cash at the end of February and the strong cash generation of the Insurance business’, the company said.
It has also generated an extra £37m through recent asset sales.‘There are a range of further mitigating actions the group will take, including additional cost efficiencies and reducing discretionary spend,’ Saga said.
This appears to been a significantly better position to be in than investors had been expecting, hence today’s 7% share price rally to 16.06p, valuing the business at about £180m.
But the stock has fallen by around two-thirds since the coronavirus outbreak emerged, and has lost more than 90% of its value since summer 2016.
