StockMarketWire.com - Saga, a services provider for the over-50s, said its travel business remained on pause as cruise ships were idled, and that it had refunded £44m of advance receipts to customers.

The company also announced that it had agreed to a debt repayment holiday for two ship facilities up until the end of March 2021, though no dividends could be paid while the debt remained outstanding.

As at 31 May, the company had cancelled all travel departures up to and including August, with the £44m of refunds mainly relating to the tour operations business.

Customer loyalty in the cruise division had been 'exceptional', Saga said, with advance receipts at the end of May worth £43m, which was £5m lower than at the end of March, but 'well ahead' of expectations.

'The group has retained over 70% of advance receipts on cancelled cruise departures, and new bookings for next year have been very positive,' Saga said.

The company said it had been working with industry bodies and the government to establish operational practices for when current restrictions were lifted.

'The group's new mid-sized ships are ideally placed to offer 'safe sailing' and all these measures will be in place by the end of August,' it said.

Saga's insurance business, meanwhile, had been 'resilient', with motor and home policies for the period from 1 February to 21 June of 567,000, up 1% on-year.

Total policies for the period of 620,000, however, were 5% lower, due to a significant decline in the number of new travel policies sold from mid-March.

'Market conditions continue to be challenging, in part due to Covid-19, with an easing of competitive conditions in February and March but with signs of a return to more competitive conditions in motor and home in the last month,' Saga said.

The company said its liquidity position remained 'strong' and benefited from diversified sources of income.

Saga also announced that it had signed an agreement for a debt holiday and covenant waiver for two ship facilities, allowing the deferral of £32m principal payments that were due up to 31 March 2021.

'These deferred amounts will amortise over a four-year period,' Saga said. 'Interest remains payable and no dividends can be paid by Saga Group while these principal payments remain outstanding.'

Saga said it had delivered £15m of run-rate cost savings during the period and expected to achieve a further £5m across the business. A review of costs in the travel business to cut marketing and other costs was expected to lead to a further £20m in-year cost reduction.

'The group's near-term priorities are to preserve cash and reduce leverage, operating within amended banking covenants, and ensure our travel businesses are ready to re-start operations as soon as restrictions lift,' Saga said.

'The group remains able to resume traveling as soon as restrictions have been removed but has continued to run stress tests based on a wide range of outcomes for the Covid-19 crisis, including a further delay to the resumption of travel until next year.'

'Based on this analysis the group continues to expect to remain in compliance with key banking covenants at the next two half-yearly testing dates, although further actions may be needed to stay ahead given potential uncertain long-term impacts of Covid-19 on the business and the maturity of bank facilities in May 2022 and May 2023.'

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