Saga Group has seen profits from its travel arm slashed in the first six months of the year.
Total travel earnings in the half year to July fell to £800,000 compared with a profit before tax of £13.1 million in the same period last year. Total travel revenue decreased slightly from £230 million to £219 million.
The profits fall is attributed to a £3.4 million loss from the cruising arm, compared to a £4.7 million profit in the same period last year. In addition, tour operating profits halved from last year’s £8.4 million.
Saga’s first new cruise ship, Spirit of Discovery, made its maiden voyage in July, with another to follow next year. Saga said: “The group’s cruise business is undergoing a significant transformation with the first of its two purpose-built cruise ships now in operation. Saga’s first new cruise ship was delivered on time and on budget.
“The cruise business reported an underlying loss of £3.4 million for the first six months. This is due to the sale of Saga Pearl II and a consequent short-term reduction in revenue, as well as training, launch, marketing and finance costs supporting the Spirit of Discovery.
Cruise bookings for 2019/20 for the Spirit of Discovery and for 2020/21 for the two new ships reflect strong demand generation and support the group’s target of £40 million Ebitda per ship.”
Saga said the tour operating market “remains challenging, with competitive discounting and current political uncertainties continuing to impact performance”. Tour operations saw an average 2.8% higher average revenue per passenger, partially offsetting a 5.6% fall in passenger numbers.
Saga is in the midst of transforming its travel business and said this was evident in figures that confirmed a 19% decline in commoditised hotel packages, a 15.4% increase in river cruises and a 7.1% rise in escorted tours.
Saga said: “The impact of this mix change is reflected in a 2.8% increase in average revenue per passenger.” It added that gross margins in the second half were expected to improve on current forward booking trends “together with strong cost control and targeted marketing”.