Over 50s travel and insurance operator Saga [SAGA] has been one of the hardest hit over recent weeks by the coronavirus pandemic, and ultimately was left with little choice but to suspend its operations until 1 May. Unsurprisingly, like its fleet of cruise ships, the Saga share price has also been anchored to the floor.
The impact of coronavirus on the travel industry with respect to airlines has already been seen, with many airlines completely grounded and temporarily laying off staff to cut costs. The cruise ship sector has also taken a beating, with Carnival having also announced the suspension of cruise operations for the next few months.
Saga, which is based from Southampton with its home port Dover, is in a similar boat, so to speak, given it runs travel operations and cruises for the over 50s, and it’s this demographic which has been worse-affected by the virus.
Saga's share price plunge
At the start of the year, Saga’s share price was already some way off its 52-week high, at 53p a share, but as the virus began to spread globally, and cruise ship passengers became infected – notably the Carnival-owned Diamond Princess, which was quarantined off Yokohama, Japan for a month from early February – its shares unsurprisingly fell further, to 32p by the end of the month, and as low as 12p in early March.
Other operators have similarly suffered sharp share price falls, with Carnival’s share price down from a 52-week high of 4,175p to as low as 606p in early March, before staging a tentative recovery back above 1,200p, prior to slipping to around 900p on 31 March.
Coronavirus cruise curtailment
Saga suspended all its cruise sailings for an initial six weeks – at an estimated cost of between £10m and £15m – following UK government's advice for the over-70s and people with health problems not to go on cruises, and since then more and more countries have gone into lockdown, as the virus has spread.
Saga has said it will refund those customers who would prefer their money back – alternatively customers are able to rebook for another date – when that might be though at this point, is anyone’s guess, but it certainly won’t be for the foreseeable future. And that is clearly a major problem for the management to grapple with.
Saga’s silver lining
While Saga is best known for its holidays for the over-50s market, it does also have an insurance business and that part of its operation should remain relatively unaffected by the Covid-19 virus, in comparison with its travel arm.
New CEO Euan Sutherland took the helm in January, in what must amount to one of the toughest baptisms a new chief can have faced. Mr Sutherland doesn't have an especially successful track record as the top man – he left Co-op due to differences of opinion over governance, only to go to Superdry, before he also left for similar reasons. However, Thursday’s annual results will present an opportunity for Mr Sutherland to lay out his plans for the future, and offer an update on how Saga plans to recover once its cruise ships are able to set sail again.
However, there has to be some concern as to whether Saga will be able to recover once the crisis is over – and Saga’s share price could be in for a bumpy ride for a while yet.
Saga is due to release its preliminary results for the year ending 31 January 2020 on Thursday 2 April. Read our Saga full-year results article.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.