‘My flip from selling pizzas to steadying the ship at Saga’
Former Domino’s boss went from pizzas to pensioners at Saga. He tells Lucy Burton the over-50s’ favourite will be shipshape soon
Encouraging hung-over 20-somethings to order twisted cheese dough balls or pepperoni passion pizza to their homes on a Sunday night was never something former Domino’s boss Lance Batchelor struggled with. Selling £250-a-night cruise holidays and insurance policies to the over-50s is not quite so simple.
“Domino’s, in a way, was doing too well. It’s a great business but it’s a simple business – you make pizza, you open shops, you sell pizza,” says Batchelor, now four years into his role as the chief executive of Saga.
“I wanted the broader challenge of fixing a great British brand. I didn’t think it would take four years to get all of the pieces of the jigsaw sorted, but now we have done.”
A former Navy submarine officer, the 54-year-old decided to take the leap from the UK’S largest pizza delivery company just before Saga’s disastrous initial public offering in 2014. Its shares have fallen 28pc since then, with the company issuing a profit warning in December and announcing a management shake-up in January.
Investors have grown increasingly impatient with the speed of the group’s growth, and Batchelor has held meetings with over 35 shareholders in the last few weeks to discuss the company’s future and revive spirits.
“[Investors] want lots of information on insurance and travel and how the two interact, they want reassurance that our debts are coming down, that our dividend is strong, that the investment we’re putting in will be spent wisely,” he says.
“We’ve had good noises back from the analysts and investors, saying it’s becoming clearer, they are starting to understand the moving parts. Four years ago when we floated it was perceived we were a closed book.”
Indeed, one of the criticisms of Saga has been that it has promoted itself as a holiday company when in reality around 80pc of its profits come from insurance. Batchelor admits that investors “consistently cry out for more and more information around insurance” but adds that the marketing tactic is deliberate. A picture of a beautiful ship anchored in St Lucia makes a wonderful visual when you are trying to sell motor insurance, he says, and he has no intention of splitting the two sides up.
“There is a dilemma for us, which is we are two businesses in one. The consumer thinks of us as a travel company and the financial institutions see us more as an insurance company,” he says. “[But] if you go into a price comparison website and five brands pop up, the reason you know Saga is because we’re a respected travel company that might have taken your mum on holiday. If you imagine them being totally separate then you just have another insurance company that stands for nothing.”
Investors are starting to buy into his promises. Though it has been a long time coming, debt has come down significantly and shareholders can finally see the potential for growth.
There are hopes that Saga’s recently launched Vip-style membership scheme will increase engagement with the business, while the launch of two new cruise ships, as well as the growing appetite among wealthy retirees to opt for long-haul, more adventurous holidays is expected to boost its travel arm.
Eager to tap into the rapidly growing over-50s demographic, investors are hopeful their patience is about to pay off. Richard Marwood, a fund manager at the group’s fourth largest shareholder, Royal London Asset Management, says Batchelor was “plain speaking” and clear about the group’s strategy when they met up.
“One thing that is quite refreshing is when they came to market they were very keen to make clear that they were not just an insurance company. Now they’re accepting that insurance is where they make a lot of the money,” he says. “It’s [also] worth noting that when they issued the profit warning in December, they mentioned the car insurance market being quite tough and the suspicion was that maybe Saga had got something wrong, but subsequently we’ve heard from other players that the market is tough. People are now accepting that.”
While its turnaround has been slower than expected, there is no doubt that Saga is rebuilding investor confidence at a much faster rate than its former sister company the AA.
The two firms were brought together in 2007 under a holding company called Acromas, owned by private equity groups CVC, Charterhouse and Permira, but both became independent after floating in 2014. In the years it owned the two groups, Acromas was criticised by union leaders for putting pressure on staff salaries and pension benefits, while racking up huge debts, and the AA, the roadside recovery business, is still struggling to reduce its expensive debt mountain. “I don’t want to fill in the gaps with the AA, I’ll let you do that, but we’ve had a good run since IPO,” Batchelor insists.
“The businesses are fundamentally different. The last question we had about the AA from an investor was a year after the IPO.”
Does he think private equity ownership harmed the business? “I don’t think so, but the business was run for cash for 10 years – that’s what private equity often does, and now it’s being run for long-term growth,” he says. “I think they [private equity] got stuck, I think their plan was an IPO after five or six years and then the financial crash hit.”
Looking forward, Batchelor is philosophical about the role Saga has to play in society as Britons live longer and the population gets older.
He speaks fondly of a recent trip to Norway where he joined Saga guests – mostly in their 80s and 90s – on a cruise where they saw a spectacular northern lights show in minus 18C temperatures. They were, he says, full of rich stories and having the time of their lives.
“I was sitting next to a woman who was nearly 90 and she had been in the Wrens [the Women’s Royal Naval Service] at Bletchley Park in the Second World War, and she had some extraordinary stories to tell,” he recalls. “Are we really living our lives to the full, are we deserving of what she did and what her generation did? I always host a dinner for our customers when I’m on board – every time I do that I wish I could be at a dinner every night on both of our ships.”
That’s not to say they are easy to please. Having worked for Procter & Gamble, Amazon, Tesco, Vodafone and Domino’s, Batchelor admits that the over-50s crowd are among his toughest customers yet.
“By the time people join Saga they’ve already tried stuff many, many times. They’re very demanding and they know what good service looks like – they definitely know what bad service looks like. They’re a really tough audience,” he says.
“They have learnt through a lifetime of experience that if a credit card company isn’t fair or a motor insurer isn’t right you just get up and go.”
Despite the challenges at Saga, of which there still are plenty, Batchelor insists he has never looked back at any of his former roles with rose-tinted glasses. This includes Amazon, where he was hired by chief executive Jeff Bezos in the early days to launch a video unit for them, and where many of his friends are now in senior roles.
“Amazon was losing money at the time, and [Mr Bezos] would stand up on a stage and talk about a future world where anything you wanted online, Amazon would offer it,” he says. “He’s done it. I’m not Jeff Bezos, but I did take away from those years a sense that whenever you run into a business challenge, instead of just looking at the orthodoxy, the way it’s always been done, you should look at it from a new angle.”
‘By the time people join Saga they’ve already tried stuff many times. They know what good service looks like’
Lance Batchelor admitsproviding insurance policies and holidays to the over-50s is trickier than selling pizzas. Below, the Saga Sapphire arrives in Dover