LONDON: British investment vehicle Kelso Group Holdings Plc said on Tuesday it had built a new position in Saga Plc, betting that the over-50s specialist is poised for a re-rating as debt falls and its cruise-focused travel business thrives.
Kelso purchased 400,000 shares in Saga at an average price of 386.5 pence in January, it said in a statement. The company, which listed in 2022 to target undervalued UK mid-caps, outlined a detailed rationale for the investment, citing Saga’s dramatic debt reduction and its pivot back to being a travel-led business.
Saga, once a stalwart of the British insurance market, has shifted back to its travel roots, with its ocean and river cruise divisions now driving profitability. Kelso noted that revenue in these divisions has grown more than fourfold since Saga’s 2014 initial public offering.
A key pillar of the thesis is deleveraging. Saga’s net debt has fallen to a point where its market capitalisation, at £551.5 million as of January 5, recently exceeded it for the first time in over five years. Its leverage ratio has dropped to 4.3x from a peak of 12.3x in 2021.
“With the clear strategic focus, debt falling and profits rising, Kelso believes that now is the right time to invest in Saga,” the group said. It argued the stock is undervalued, trading at an enterprise value-to-EBITDA multiple of about 7.5x for January 2026, compared to a multiple over 20x for U.S.-listed rival Viking Holdings Inc.
Kelso also pointed to the 2025 disposal of Saga’s capital-intensive underwriting arm as a simplifying move that strengthened the balance sheet. The company retains customer relationships and future commission earnings from the sold business.
In a letter to Saga’s board, Kelso has proposed ideas to accelerate value creation, including greater targeting of U.S. investors. It suggested a return to the FTSE 250 index in 2026 could trigger significant buying from index funds.
Sir Nigel Knowles, Chairman of Kelso, praised Saga’s management, particularly the role of Chairman Sir Roger De Haan, who returned to the company in 2020 and provided critical financial backing during the pandemic.
“We believe Saga has the ability, with its focus on travel with ancillary financial services, to return to being a multibillion pound company,” Knowles said.
Saga’s current market capitalisation remains below the book value of its fleet of cruise ships, launched in 2019 and 2020, which Kelso highlighted as a sign of underlying asset backing.