Wednesday 17 July 2019 9:55 am

Activist investor Elliott takes stake in Saga

US activist investor Elliott has taken a stake in troubled tourism and insurance firm Saga in a move that could put pressure on management to boost returns.

Shares in Saga were up 9.18 per cent this afternoon after it was revealed that Elliott Capital Advisors has disclosed a 5.14 per cent stake in the company.

Read more: Saga shares plunge on warning of fresh travel struggles

The firm, which is hunting for a new chief executive after Lance Batchelor quit last month, issued a profit warning in April. 

The company said that consumer uncertainty over Brexit had dented its bookings numbers, and warned that profit could fall by as much as £75m this year. 

Elliott was the most prolific activist investor in the UK last year, and its campaigns included Costa Coffee’s sale to Coca Cola as well as Melrose’s £8bn hostile takeover of GKN.

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.

“Elliott Investors has form in shaking up businesses, including diversified resources group BHP and investment trust Alliance Trust, and it has now taken a 5.1% stake in Saga.

“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.”

“We have good and open relations with all of our shareholders and expect to be in contact with Elliott shortly,” a spokeswoman for Saga said, according to Reuters.

The company’s shares have fallen 58 per cent this year and have slumped 81 per cent from their 2016 highs. 

In April Saga fell to a £134.6m loss before tax and announced it was writing down £310m of good will. The insurance firm also cut its full year dividend from 9p to 4p. 

Read more: Saga chief executive Lance Batchelor steps down

As part of a plan to reinvigorate the company Saga said it would change its approach to insurance, moving from a business that wins new customers on price and recoups losses through increased renewal prices, to a business that “will offer a differentiated insurance product on the basis of unique and attractive features”.

It is launching a home and motor insurance product that guarantees the same premium for three years providing there are no claims in the period, available only to customers who come directly to Saga.

Main picture credit: Getty