Saga shares sail higher as Elliott Capital takes 5% stake

(Sharecast News) - Over-50s specialist Saga saw its shares rally as it emerged that activist investor Elliott Capital has taken a stake in the company.
A filing out on Wednesday revealed that Elliott took a 5.14% stake in Saga on 12 July.

CMC Markets analyst Michael Hewson noted that since its IPO back in 2014, Saga shares have dropped more than 70% "as management have struggled to tap into an over 50s market which should be extremely lucrative".

In April, Saga shares tumbled after it issued a profit warning and wrote down the value of its business by £310m.

Hewson said: "The insurance business has been the main weak spot due to the growth of price comparison websites, and it is here that the company needs to focus its attention. Its travel division has performed better, and this morning's news that Elliott Capital has taken a stake could well be the beginning of a concerted move to ramp up the pressure on management to start earning their money and boost returns."

Russ Mould, investment director at AJ Bell, said: "And so it begins. Saga's dramatic fall from grace has seen its share price fall to such low levels that an activist investor has popped up on the shareholder register.

"Activists like to challenge management on their decisions and make suggestions to put a company back on the right path and/or realise hidden value by pushing for asset sales.

"Saga has a valuable brand associated with the over-50s market and is principally focused on travel and insurance. It has already announced changes to how its insurance business works and so Elliott would need a convincing argument to push for further change. However, the activist may have a way of better exploiting Saga's position in capitalising on the older generation's increasing desire to travel.

"Saga is currently searching for a new chief executive and so Elliott may want to have a say in who is hired, although one would suggest it will need a bigger stake in the business to have any influence on strategic decisions."

Separately, Saga said in a release that it has appointed Jane Storm as chief people officer with effect from 1 October.

Storm has around 25 years' experience in Human Resources and is currently CPO at Connect Group, a UK distributor operating in newspaper and magazine wholesaling.

Chief executive Lance Batchelor said: "We are delighted that Jane will be joining Saga. Her extensive human resources experience will be invaluable at this pivotal moment in our business, as we focus on becoming an increasingly customer centric organisation and with the recent launch of our three-year fixed price insurance offering and our fantastic new cruise ship, the Spirit of Discovery, which has just carried her first passengers."

At 0910 BST, the shares were up 4.7% at 44.93p.