Published: 00:01, 11 November 2017 |
Three years after leaving Domino’s Pizza, the chief executive of over-50s holiday and insurance giant Saga thinks the business is ready to build on its £2.1bn valuation.
Lance Batchelor explained why he swapped pepperoni for pensioners – and how they have shielded the company from Brexit.
Lance Batchelor jumped out of the pizza oven and into the fire when he took the helm at Saga.
He joined the business two months before it floated on the London Stock Exchange, having spent nearly three years as chief executive of Domino’s Pizza.
The company, founded in 1951 by Sidney De Haan in Folkestone, where it still has its headquarters, grabbed headlines for the wrong reasons when it joined the London Stock Exchange in May 2014.
It had grown during a decade of private equity ownership after philanthropist Sir Roger De Haan, its founder’s son, sold the company for nearly £1.4bn in 2004.
Yet its flotation came in at the bottom end of its 245p to 185p estimate, valuing the business at nearly £2.1bn.
Saga’s share price has danced up and down since then, initially faced with scepticism, dipping down to 146p the following January, and later giving way to confidence in its strategy, reaching a peak at 225p in September last year.
Despite continuing strong trading figures – its latest half-year underlying pre-tax profits increased by 5.5% to £110.2m – the company’s value was down to around 188p on Friday.
Mr Batchelor, a former submariner with the Royal Navy for nine years, admits many investors, fund managers and analysts struggle to find “a nice simple shorthand” to explain the company.
Founded as a travel business offering cruises to over-50s, today it also offers home and motor insurance, credit cards and healthcare, sold by more than 5,000 staff in offices in Folkestone, Ramsgate and Hastings.
“I loved running Domino’s,” said Mr Batchelor, 53, who splits his time between Saga’s office in London and its Enbrook Park headquarters in Folkestone.
“It was a lovely, clean, simple business but it was a bit two dimensional. Open more shops, sell more pizza.
"I love the intellectual challenge and the breadth of getting your arms around a company like Saga.
“It is simultaneously a membership structure with a database of millions of passionate customers, one of Britain’s great brands dating back decades, an insurance, travel, cruise, personal finance products and health company all rolled into one.
“Also, and this might sound a bit corny, but I do mean it, a company that exists for the right reasons.
“Why is there a Saga? Saga exists so we can make the lives of retired people better. That’s a worthwhile thing to do when you come to work every day.”
One of his major projects since becoming chief executive was launched in October, as the company began rewarding loyal customers with a new membership scheme.
It is also building two more cruise ships, one launching in 2019 and another in 2020.
In 2014, travel accounted for just £4m of about £160m of profit. Last year that was £15m and when the two ships arrive they are expected to make more than £20m.
Mr Batchelor said: “Insurance will be the majority of what we do in five years’ time and possibly 10 years’ time because it is very big and growing.
“However, travel and cruise ships are growing even faster.
“We make more money from insurance but half of our revenue comes from travel.
“With the arrival of two new ships, both of which will be more profitable than the old ones, that tips the balance.
“Whilst insurance continues to grow, we expect our travel division to be four to five times the size it is now in five years.”
“Whilst insurance continues to grow, we expect our travel division to be four to five times the size it is now in five years...” - Lance Batchelor, Saga
Mr Batchelor believes the company is well placed in an environment where many companies are gripped by uncertainty over Brexit, even though 17% was wiped off Saga’s share price over two days after the EU referendum.
“Corporately Saga is a lot less affected by Brexit than many UK companies,” he said.
“Our customer base are retired Brits spending a pot of pounds that they own, most of which they spend with us in the UK in pounds.
“There’s no particular reason why they’ll get less for their money if they buy motor insurance or home insurance from us.
“Some of our customers are affected because if they are travelling today to an EU country they are going to get 10 to 12% less for their money than they did pre-Brexit.
“Our customers tend to have a fixed budget because they are living out of savings. If they have said they are going to spend £2,000 this summer, they will, but it just means they may have to go to a three-star hotel rather than a four-star or go for 10 days instead of two weeks.”
The company is also protected from Brexit thanks to its “very deep roots” in its community, where a third of its workforce live in Folkestone and half live within an hour.
Mr Batchelor said: “We do have international people working in the business but it’s a tiny proportion when compared with an investment bank in Canary Wharf or Domino’s where I used to work, where a huge proportion of their workforce are immigrants.”
The one drawback has been the cost of its new ships, being built in Papenburg in Germany.
“The second ship was ordered after Brexit and therefore costs us 10% more than it was going to.
“I don’t think any company in the UK doesn’t have any impact at all from Brexit.
“We are less impacted than others and it’s partly because our customer base tend to be very wise, pragmatic people in their 60s, 70s and 80s who have seen it all before.
“They remember the UK before the EU and as far as they’re concerned life will continue after. They are not going to sit and sulk about it. They are going to enjoy their lives because this is their chance.”
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