REG - SAGA Plc - Interim results for the six months ended 31 July
11/10/2024 07:00
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RNS Number : 7905H SAGA PLC 11 October 2024
11 October 2024
Saga plc
Interim results for the six months ended 31 July 2024
Strong underlying profit growth, alongside significant deleveraging
Continued momentum across Cruise and Travel, while market conditions impacted
Insurance
Saga plc (Saga or the Group), the UK's specialist in products and services for
people over 50, announces its interim results for the six-month period ended
31 July 2024.
Six months ended 31 July 2024 31 July 2023 Change
Underlying Revenue(1)0F £393.3m £355.3m 11%
Revenue £404.8m £358.1m 13%
Trading EBITDA(1) £67.4m £53.0m 27%
Underlying Profit Before Tax(1) £27.2m £8.0m 240%
Loss before tax (£104.0m) (£77.8m) (34%)
Available Operating Cash Flow(1) £54.4m £85.9m (37%)
Net Debt(1) £614.6m £657.4m 7%
Leverage ratio 4.6x 7.0x 2.4x
1 Refer to the Alternative Performance Measures Glossary for definition and
explanation
Mike Hazell, Saga's Group Chief Executive Officer, said:
"Saga made significant progress in the first half of the financial year, with
Ocean and River Cruise delivering exceptional growth, while we continued to
position the Group for long-term success through the exploration of potential
partnership opportunities.
"The Group delivered an Underlying Profit Before Tax(2) that increased more
than threefold when compared with the same six months in the prior year and we
reduced Net Debt(2) by £42.8m over the same period. In line with our debt
reduction plans, we also repaid our £150.0m senior unsecured bond in May.
"Ocean and River Cruise had an excellent start to the year, with load factors
and per diems, across both businesses, well ahead of the same period last
year. Travel also continued to grow, delivering a small Underlying Profit
Before Tax(2) compared with an Underlying Loss Before Tax(2) in the first half
of the prior year.
"In Insurance, our Underwriting business returned to profit, however, market
conditions for Broking remained challenging, particularly for home. While this
continues to have a material impact on profitability, and resulted in an
impairment of goodwill, we have been taking action to stabilise the business
in the short-term and position it for long-term sustainable policy growth.
"As you may have seen from our separate announcement this morning, we are in
exclusive negotiations with Ageas for a 20-year affinity partnership for our
motor and home Insurance Broking operations and the sale of our Insurance
Underwriting business. Our strong brand and 40 years' experience in providing
motor and home insurance, combined with Ageas's extensive knowledge of the
insurance needs of people over 50 and experience in operating successful
affinity partnerships, offers the potential to create a winning partnership
and, for us, a capital-light route to growth.
"We continued to make good progress with growing customer engagement, in part
through enhancements to our websites, which increased the number of visits in
the year to date by more than 20%. At the same time, we took steps to increase
the number of customers that we have consent to contact about our range of
products and services.
"The future for Saga is exciting, as we deliver our clear strategy,
underpinned by the strength of our brand, our people and our data, and move
towards a more capital-light model, reducing debt and delivering long-term
sustainable value for our stakeholders."
(2) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Operational and financial highlights
· Underlying Revenue(2)1F3 increased 11%, driven by continued
strong momentum in our Cruise and Travel businesses and an improved Insurance
Underwriting performance, but affected by ongoing challenges in Insurance
Broking.
· Trading EBITDA(3) was £67.4m, an increase of 27% when compared
with the same period last year.
· Underlying Profit Before Tax(3) of £27.2m increased more than
threefold when compared with the £8.0m reported in the prior period.
· The challenging conditions in Insurance Broking resulted in an
impairment of the goodwill allocated to that business of £138.3m. This,
together with other small, one-off exceptional items resulted in the Group
reporting a loss before tax of £104.0m. This compares with a loss before tax
of £77.8m in the prior period, which included a £68.1m impairment of
Insurance Broking goodwill.
· Available Operating Cash Flow(3) was £54.4m, 37% behind the
prior period. The year-on-year reduction was driven primarily by the one-off
beneficial changes in the prior year to our customer deposit arrangements for
River Cruise and Travel, where we moved from a 100% trust to a 70% ring-fenced
escrow arrangement, alongside lower Insurance Broking Trading EBITDA(3) and
Underwriting dividends.
· The Group remains on track to deliver a full year Underlying
Profit Before Tax(3) that is broadly consistent with the prior year.
(3) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Divisional performance
Cruise - Customer demand continues to grow, supporting increased load factors
Ocean Cruise
· Ocean Cruise reported an Underlying Profit Before Tax(4) of
£28.0m, more than double the £12.9m in the prior period.
· Revenue was £121.5m, 17% higher than the same period the year
before. We achieved a 90% load factor, which was 7ppts higher than the same
period last year, and a per diem of £362, which was 9% higher.
· As a result, Ocean Cruise Trading EBITDA (Excluding
Overheads)(4), was £55.8m, or £27.9m per ship, trending well in excess of
our £40.0m per ship annualised target.
River Cruise
· River Cruise reported an Underlying Profit Before Tax(4) of
£2.9m, 93% higher than the same period last year.
· Revenue was £26.4m, 13% and £3.0m ahead of the prior period,
reflecting a load factor of 86% and a per diem of £340, which were 3ppts and
15% ahead respectively.
Travel - Material revenue growth drives return to first half profit
· Our Travel business, for which profitability is typically lower
in the first half as a result of seasonality, had a strong start to the year,
reporting an Underlying Profit Before Tax(4) of £0.3m, compared with an
Underlying Loss Before Tax(4) of £2.6m for the prior period.
· On a like-for-like basis, excluding the discontinued Titan
third-party river cruises in the prior year, revenue grew 29% and passengers
grew 13%. On a reported basis, revenue of £78.9m grew 13%, while the 24.5k
passengers was 5% lower than the prior period.
Insurance - Profitability in line with guidance
Insurance Broking
· Insurance Broking earned Underlying Profit Before Tax(4) was
£12.2m. This was lower than the £23.8m in the same period in the prior year,
but in line with guidance as we invested in pricing to improve our competitive
position.
· Conditions continue to be challenging. While inflationary
pressures lessened in motor, conditions in home remained further behind in the
cycle, placing continued pressure on that product. These factors, when
combined, dampened the effect of the pricing action we took.
· The number of policies sold across all product lines, in the
first half of the year, was 0.7m, 13% lower than the prior period. While some
of this was expected, given the lower policy numbers coming into the year, it
was exacerbated by the competitive environment. We had 1.4m policies in force
at 31 July 2024, 13% behind the same point last year.
· For the first half of the year, for motor and home specifically:
o motor policy sales were 12% behind the prior period, with 6% growth in new
business being offset by fewer renewals, following price increases introduced
in the second half of last year;
o home policy sales were 14% behind the prior period as a result of fewer
renewals, compounded by reduced competitiveness following the introduction of
price increases necessary to mitigate continued net rate inflation;
o the £58 margin per policy was slightly ahead of the same period last
year; and
o customer retention was 76%, 8ppts lower due to increased competition in
the market.
· The Underlying Profit Before Tax4 from our other broking products
was £7.0m lower than the prior period, reflecting market-wide net rate
inflation in private medical insurance, alongside particularly competitive
market conditions in travel insurance.
· These factors, and their anticipated impact on future cash flows
when compared with previous projections, resulted in Insurance Broking
goodwill being impaired by £138.3m. At 31 July 2024, £206.4m of Insurance
Broking goodwill remained on the statement of financial position.
Insurance Underwriting
· Insurance Underwriting reported an Underlying Profit Before
Tax(4) of £1.9m. This compares with an Underlying Loss Before Tax(4) of
£3.6m for the same period in the prior year.
· Pricing action taken to mitigate lower, but ongoing, motor claims
inflation, currently expected to be around 10% for the full year, continued to
flow through to the result, with average earned premiums 39% higher than the
prior period.
· The net current year combined operating ratio (COR) was 102%,
23ppts lower than the same period in the prior year and 15ppts lower than the
year ended 31 January 2024.
(4) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Wider strategic progress
· Money reported an Underlying Profit Before Tax(5) of £0.4m,
broadly consistent with the prior period.
· Following enhancements to our customer-facing websites, we saw
increased traffic, with the number of visits in the year to date 21% higher
than in the prior period. The number of unique visitors was 10% higher.
· Our 9.5m strong customer database remains a key focus for us, as
the scale of our first party data provides unparalleled reach and insight into
our target market. In addition, the 3.8m consented customers on our database
at 31 July 2024, which was 16% higher than the same point in the prior year,
gives us a unique ability to engage directly with this group.
· To broaden our customer reach, the Saga Magazine, which was
previously only available via subscription, is now available to purchase in
selected stores.
· We are now distributing our new weekly digital newsletters to a
combined total of 1.4m unique readers per week. 1.0m readers receive our
Travel newsletter, 0.8m our Money newsletter and 0.7m the Magazine newsletter.
This form of engagement continues to be popular amongst our customers, with an
industry- leading open rate, across all three newsletters, of 38% when
combined.
· We continue to build our brand values into our colleague
experience and, following actions taken, colleague engagement, according to
our most recent survey, increased to 7.6 out of 10, from 6.6 in December 2023.
(5) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Financial position
The Group continues its focus on debt reduction and made good progress in the
year to date. In May 2024, we repaid the £150.0m bond through a combination
of Available Cash(6)3F resources and a drawdown of £75.0m on the loan
facility provided by Roger De Haan.
At 31 July 2024, Net Debt(6) was £614.6m, £42.8m lower than 31 July 2023 and
£22.6m lower than 31 January 2024. The total leverage ratio improved to 4.6x,
compared with 7.0x at 31 July 2023.
We recently concluded discussions with our Revolving Credit Facility (RCF)
lenders to extend the facility and provide the Group with greater financial
flexibility. As a result, the facility was amended to reflect a new maturity
date, extended from 31 May 2025 to 31 March 2026; alongside changes to its
leverage test, which used to exclude Ocean Cruise, but will now be conducted
on a total Group basis. These discussions also resulted in a reduction in its
covenant, from 6.25x to 6.0x, through to maturity. For context, this is
comparable with our leverage ratio of 4.6x at the half year end.
The Group held Available Cash(6) of £86.3m, in addition to the undrawn
£50.0m RCF and remaining undrawn £10.0m of the loan facility provided by
Roger De Haan.
(6) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Strategy and outlook
The continued momentum in the year to date in Cruise and Travel, alongside a
strong pipeline of future bookings, is expected to drive further growth across
those businesses for the full year.
The current Ocean Cruise load factor for 2024/25 continues to be strong, at
90%(7), with a per diem of £359(7). These compare with a load factor of
87%(7) and per diem of £331(7) at the same time last year. As a result, Ocean
Cruise Trading EBITDA (Excluding Overheads)(8) is expected to materially
exceed our £40.0m per ship annualised target.
The current River Cruise booked load factor of 88%(7) and per diem of £327(7)
are also trending well and ahead of the same point last year by 3ppts and 15%
respectively.
In Travel, growth continues, with current booked revenue for the full year of
£162.2m(7) and 54.4k(7) passengers, which compares with £140.3m(7) and
50.3k(7) in the prior year.
Insurance Broking remained challenging, particularly towards the end of the
first half, with inflationary pressures in home, alongside increased
competition in motor. These factors resulted in fewer policy sales in the
first six months of the year, a trend that is expected to continue for the
second half of the year.
Pricing increases in our Insurance Underwriting business, reflecting the
impact of ongoing claims inflation, are expected to continue to benefit the
financial result, improving both Underlying Profit Before Tax(8) and the
reported net COR for the full year.
In Money, we continue to develop the business for medium-term growth and
introduced a range of new products in the second half of last year, which will
take time to generate a material contribution to earnings. We expect
Underlying Profit Before Tax(8) in the second half of the year to be broadly
consistent with the first.
While Insurance continues to navigate challenging market dynamics, the strong
start to the year in Cruise and Travel means that the Group remains on track
to deliver a full year Underlying Profit Before Tax(8) broadly in line with
the prior year.
Available Cash(8), at 31 January 2025 is expected to be lower than at 31 July
2024, driven by continued repayments on our two Ocean Cruise ship loan
facilities, together with lower Trading EBITDA(8) from Insurance Broking and
the expected unwinding of some of the working capital timing differences in
the first half. As a result, Net Debt(8) is expected to be slightly higher at
31 January 2025 when compared with 31 July 2024.
Looking beyond the full year, while there is no certainty that the proposed
transaction with Ageas will occur, Ageas has the scale, infrastructure and
expertise to support a powerful partnership with Saga as we take action to
return the Insurance Broking business to policy growth. This potential
partnership, alongside continued growth in our Cruise, Travel and Money
businesses, would leave us well positioned to continue to broaden the range of
products and services we offer our customers, while enhancing long-term value
for our stakeholders through continued growth and deleveraging.
(7) Current year bookings reflect the position at 6 October 2024, while the
prior year refers to the position at 8 October 2023
(8) Refer to the Alternative Performance Measures Glossary for definition and
explanation
END
Management will hold a presentation for analysts and investors at 9.30am
today. The webcast can be accessed by registering at
www.investis-live.com/saga-group/66d06a7726e9bc12006c53e3/nfgmk
(http://www.investis-live.com/saga-group/66d06a7726e9bc12006c53e3/nfgmk) and a
copy of the presentation slides is available at
www.corporate.saga.co.uk/investors/results-reports-presentations/
(http://www.corporate.saga.co.uk/investors/results-reports-presentations/) .
A separate live presentation for retail investors will be held via the
Investor Meet Company platform on 14 October 2024 at 9.30am. The presentation
is open to all existing and potential investors. Questions can be submitted
pre-event via the Investor Meet Company dashboard up until 9.00am on 11
October 2024, or at any time during the live presentation. Investors can sign
up to Investor Meet Company for free and follow Saga plc via
www.investormeetcompany.com/saga-plc/register-investor
(http://www.investormeetcompany.com/saga-plc/register-investor) . Investors
who already follow Saga plc on the Investor Meet Company platform will
automatically be invited.
For further information, please contact:
Saga plc Tel: 07732 093 007
Emily Roalfe, Director of Investor Relations and Treasury Email: emily.roalfe@saga.co.uk
Headland Consultancy
Susanna Voyle Tel: 07980 894 557
Will Smith Tel: 07872 350 428
Tel: 020 3805 4822
Email: saga@headlandconsultancy.com
Notes to editors
Saga is a specialist in the provision of products and services for people over
50. The Saga brand is one of the most recognised and trusted in the UK. Saga
is known for its high level of customer service and its high-quality,
award-winning products and services including cruises and holidays, insurance,
personal finance and publishing. www.saga.co.uk (http://www.saga.co.uk)
Chairman's Statement
Saga made significant progress during the first six months of the financial
year with the performance of our Cruise and Travel businesses being a
particular highlight. Net Debt(1)5F reduced significantly when compared with
the same point last year and debt reduction continues to be a key strategic
priority for us. Alongside this, we more recently executed amendments to the
Group's financing facilities to provide us greater flexibility in the short to
medium-term.
We continue to generate exceptionally high customer demand for our ocean and
river cruises and expect occupancy levels and revenue to remain strong for the
full year. This strong performance and outlook is reinforced by our customer
satisfaction surveys, which show that customers are enjoying our ocean and
river cruises more and more. Travel growth also continued, with revenue
significantly ahead of the same six-month period in the prior year.
The action we took in Insurance Broking, that I spoke about in April, involved
us investing in pricing to win more business, however, the competitive market
dampened its effectiveness. Alongside this, the home insurance market was
challenged by increasing claims inflation and this ultimately impacted the
number of policies we sold. However, our Insurance Underwriting business ended
the half year period in a much stronger position, following a return to
profit.
Our Money team has been hard at work, embedding the new products launched last
year that broaden the range of services we offer. Publishing, meanwhile,
continues to engage readers with popular weekly newsletters and our
award-winning Saga Magazine which is celebrating 40 years of publication this
month. Alongside this, we made strong progress with our data strategy,
increasing not only our website visitors but also the number of people who
have given their consent to be sent more information about our products and
services. Our new Magazine website is already achieving visitor numbers in
excess of those seen on our previous exceptional.com site.
Of course, none of this would be possible without Saga's excellent people and
I am pleased that colleague engagement has recently increased following the
actions we took to invest in career growth and to build greater awareness of
the Group's strategy. These improvements place us in the best possible
position to serve our customers, who remain at the heart of everything we do.
Beyond the work we are already doing, the potential partnership with Ageas
represents an exciting opportunity to transform a key area of our Insurance
Broking business and fits perfectly with our strategy. Ageas has the right
structure and expertise, alongside a deep understanding of motor and home
insurance products for people over 50. It would allow us to capitalise on the
strengths of both our companies and leave us well-positioned to increase the
number of our motor and home insurance customers. Alongside the potential
partnership, Ageas would also acquire our Insurance Underwriting business.
Our key priorities in the second half of the year are to continue to grow our
core businesses, conclude the discussions with Ageas and further reduce our
debt. I look forward to the future as we continue to leverage opportunities to
grow our businesses, position Saga for sustainable growth and enhance value
for our stakeholders.
Sir Roger De Haan
Non-Executive Chairman
10 October 2024
(1) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Group Chief Executive Officer's Strategic Review
Delivering on our ambition
I joined Saga at the end of last year, excited by the opportunity to develop a
previously capital-constrained business, with a fantastic brand and loyal
customer base into the largest and most-trusted brand for older people in the
UK. I am pleased to report that we are making good progress towards this
ambition, having continued to grow our successful Cruise and Travel
businesses, navigated challenging conditions in Insurance and broadened the
reach of our Money business. We achieved all this while continuing to reduce
our debt and progressing our partnership ambitions, most notably through our
now exclusive negotiations with Ageas for a 20-year affinity partnership and
the acquisition of our Insurance Underwriting business.
Continued growth across Cruise and Travel, but challenging Insurance
conditions
Customer demand for our Cruise and Travel products remained high in the first
six months of the year, with both businesses delivering growth. While
Insurance Underwriting performed well, Insurance Broking remained under
pressure from cyclical challenges, particularly market-wide inflationary
pressure in home and increased pricing competition. Our Money business traded
in line with expectations, following the launch of our range of new products
last year, and we continued to increase Group-wide customer engagement through
our website, consent initiatives, newsletters and the Saga Magazine.
Threefold increase in Underlying Profit Before Tax(1)
I am very pleased to report that, for the six months ended 31 July 2024, Saga
delivered a strong financial performance. Underlying Revenue(1)6F of £393.3m
reflected 11% growth when compared with the prior period and revenue, on a
statutory basis, of £404.8m, was 13% higher.
The Group reported a threefold increase in Underlying Profit Before Tax(1),
which was £27.2m for the first half of the current year, compared with £8.0m
in the first half of the prior year. This represents continued momentum in
Cruise and Travel and improved performance in Insurance Underwriting,
partially offset by ongoing challenges in Insurance Broking. On a statutory
basis, the loss before tax was £104.0m, reflecting an Insurance Broking
goodwill impairment of £138.3m, alongside other small, one-off exceptional
items. This compares with a loss before tax of £77.8m for the same period
last year, which included a £68.1m impairment to Insurance Broking goodwill.
Alongside underlying earnings growth, we continued to make progress with debt
reduction, one of our key strategic priorities. At 31 July 2024, Net Debt(1)
was £614.6m, 7% or £42.8m lower than the same time last year, and 4% or
£22.6m lower than at 31 January 2024. The Group also held Available Cash(1)
of £86.3m, in addition to the undrawn £50.0m Revolving Credit Facility (RCF)
and the remaining undrawn £10.0m of the loan facility provided by Roger De
Haan.
(1) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Our strategy
Our ambition is to become the largest and most-trusted brand for older people
in the UK. We aim to achieve this through the delivery of our growth plan,
which is focused on the following three priorities:
1. Maximising our core businesses
2. Reducing debt through capital-light growth
3. Growing our customer base and deepening our customer relationships
An update on our progress, during the first six months of the year, in each of
these areas is set out below.
1. Maximising our core businesses
We plan to drive our core businesses of Cruise, Travel, Insurance and Money,
through business-led growth strategies, supported by our extensive data and
Publishing marketing platform.
Cruise
Ocean Cruise had an exceptionally strong start to the year and, for the six
months ended 31 July 2024, reported an Underlying Profit Before Tax(2) of
£28.0m, more than double the £12.9m for the same period in the prior year.
Customer demand remained high, with a load factor (being the proportion of our
total capacity that was filled) of 90% and per diem (being the average price
charged per customer per day) of £362, reflecting a 7ppt and 9% increase on
the 83% and £333 in the prior period. This, in turn, drove 17% growth in
revenue, from £103.8m in the prior period, to £121.5m in the current period.
In addition, Ocean Cruise Trading EBITDA (Excluding Overheads)(2) increased
39%, to £55.8m, and is on track to once again exceed our annualised target of
£40.0m per ship.
We continually enhance our Ocean Cruise proposition to ensure that customers
receive the best possible experience and, in the year to date, we extended the
reach of our VIP chauffeur service from 250 to 300 miles, making our unique
boutique cruising experience a more comfortable one to more customers.
Furthermore, this will increase again in 2025, with the service being made
available nationwide.
At 6 October 2024, Ocean Cruise bookings for the full year were very strong,
with a load factor of 90%, which compares with 87% at the same time in the
prior year. At the same date, the per diem of £359 was also 8% higher.
River Cruise had a positive start to the year, reporting an Underlying Profit
Before Tax(2) of £2.9m for the first six months, compared with £1.5m for the
same period in 2023/24. Customer demand continued to be strong, as reflected
in the load factor, which increased 3ppts to 86%, with the per diem of £340,
15% higher than the £296 reported in the prior period.
Bookings for the full year, at 6 October 2024, continued to be strong, with a
load factor of 88%, 3ppts ahead of the 85% at the same time last year. The per
diem, at the same date, was also significantly ahead of the prior year, at
£327, reflecting 15% growth when compared with the £285 at the same time in
the year before.
Turning to next year, we look forward to the arrival of our new River Cruise
ship, Spirit of the Moselle, in July 2025, allowing us to offer even more
choice to our customers.
Travel
Travel had a very good start to the year and, supported by growing customer
demand, reported an Underlying Profit Before Tax(2)7F of £0.3m which compares
with an Underlying Loss Before Tax(2) of £2.6m in the prior period.
On a like-for-like basis, excluding the revenue and passengers from our
discontinued Titan third-party river cruise offering in the prior year,
passenger volumes grew 13% and revenue grew 29%, reflecting increased customer
demand across our escorted touring and holiday stays products. The reported
revenue of £78.9m grew 13%, on a passenger base of 24.5k, which compares with
25.7k in the prior period.
For the full year, booked revenue at 6 October 2024 was £162.2m, reflecting
growth of 16% when compared with the £140.3m at the same time last year, from
a higher volume of passengers, which increased 8%, to 54.4k, from 50.3k.
Insurance
For the first six months of the year, Insurance Broking reported an earned
Underlying Profit Before Tax2 of £12.2m. In line with our previous guidance,
this was lower than the £23.8m in the same six-month period in the year
before.
As we set out in April, we took action in this half to re-position the
business, investing in pricing to enhance our competitive position in order to
slow, and in the medium-term, ultimately reverse the decline in policy
volumes. The market environment, however, continues to be challenging and
while the ongoing inflationary pressures lessened in motor, conditions in home
remained further behind in the cycle, placing pressure on that product.
As a result of these conditions, the effectiveness of our pricing action was
dampened and policy sales in the first six months of the year across all
products, of 0.7m, were 13% lower than the 0.8m in the prior period. While
some of this was expected, given the lower number of policies available for
renewal following the decline in the prior year, this was exacerbated by the
difficult market conditions. These market conditions impacted our combined
motor and home customer retention, which was 76% over the period, 8ppts lower
than the 84% in the prior period. At 31 July 2024, therefore, the total number
of policies in force across all products was 1.4m, 13% lower than at the same
point last year. The margin per policy was slightly ahead of the prior period,
at £58, compared with £56.
In motor specifically, while our pricing actions showed early encouraging
results, market-wide pricing also subsequently reduced, dampening our
competitive position and hampering the effectiveness of our actions. As a
result, the 0.3m motor policies sold in the first six months of the year were
12% lower than in the same period in the prior year. Within this, we saw an
improvement in new business generation, with volumes increasing 6%, however,
this was offset by fewer renewals, driven by the absolute number of policies
coming into the year, and lower customer retention following the price
increases applied last year.
Similarly, for the six months ending 31 July 2024, the number of home
insurance policies sold was 0.3m, which was 14% lower than the prior period,
arising from fewer renewals, compounded by reduced competitiveness following
necessary price increases to mitigate the effect of continued market-wide net
rate inflation.
The contribution from our other broking products was also lower in the first
six months of the year, reflective of market-wide net rate inflation in
private medical insurance and increasingly aggressive market conditions in
travel insurance, where additional discounts and increased marketing activity
from our competitors is constraining our ability to generate new business.
The Insurance Broking trends observed towards the end of the first half of the
year, ultimately resulting in fewer policy sales, are expected to continue for
the second half of the year. The anticipated impact of these on future cash
flow generation resulted in an impairment to the goodwill allocated to the
Insurance Broking business of £138.3m. At 31 July 2024, £206.4m of Insurance
Broking goodwill remained on the statement of financial position.
We are focused on continually improving the customer experience and, to do so,
have recently launched an additional contact centre in South Africa to
complement our UK operations. This move will allow us to efficiently scale our
contact centre capacity, as necessary, to better meet customer demand and
reduce call wait times.
Significant progress was made during the first half in Insurance Underwriting,
as we reported an Underlying Profit Before Tax(2) of £1.9m which compares
with an Underlying Loss Before Tax(2)8F2 of £3.6m in the prior period. This
reflects the benefit from the pricing action taken to mitigate the impact of
claims inflation which, in turn, drove a 39% increase in average earned
premiums in the year to date.
Reflecting a similar trend, the net current year combined operating ratio
(COR) continued to reduce and, for the first six months of the year, was 102%,
23ppts lower when compared with 125% at the same time last year. Looking ahead
to the full year, we expect the positive trajectory in both Underlying Profit
Before Tax(2) and the net COR to continue.
Money
For the first half of the year, Money reported an Underlying Profit Before
Tax(2) of £0.4m, broadly consistent with the £0.2m in the prior period.
While it is still early days, following the launch of our suite of new
products in the second half of last year, these are encouragingly trading in
line with our expectations.
We are focused on building greater awareness of the products and advice
available to support the financial health of our customers through our popular
weekly newsletters, which are currently distributed to 800k readers, and free
webinars covering topics from estate planning and wills to the housing market.
(2) Refer to the Alternative Performance Measures Glossary for definition and
explanation
2. Reducing debt through capital-light growth
We aim to deliver capital-light growth across our businesses while reducing
debt and, in the first six months of the year, made good progress. At 31 July
2024, Net Debt(3) was £614.6m, £42.8m lower than 31 July 2023, and £22.6m
lower than at 31 January 2024. While this includes Available Cash(3) of
£86.3m, the Group also has access to additional liquidity through the undrawn
£50.0m RCF and remaining undrawn £10.0m of the loan facility provided by
Roger De Haan.
The significant growth in Trading EBITDA(3) driven by Cruise and Travel, and
the continued reduction in Net Debt(3), resulted in the total leverage ratio,
at 31 July 2024, reducing to 4.6x, compared with 7.0x in the preceding year.
Significantly, in May 2024, we repaid our £150.0m bond through a combination
of Available Cash(3) resources and a £75.0m drawdown on the loan facility
provided by Roger De Haan. Following this repayment, the capital structure
comprised the £250.0m bond maturing in July 2026; the £85.0m loan facility
provided by Roger De Haan maturing in April 2026; the combined £375.9m Ocean
Cruise ship facilities maturing in June 2031 and September 2032; and the
undrawn £50.0m RCF.
To provide the Group with further financial flexibility, we recently concluded
discussions with our RCF lenders. As part of this, we agreed an extension to
the facility's maturity date, from 31 May 2025 to 31 March 2026; a revised
definition for the leverage test, which used to exclude Ocean Cruise but will
now be calculated at a Group level; and an associated reduction to the
covenant, from 6.25x to 6.0x, until maturity.
(3) Refer to the Alternative Performance Measures Glossary for definition and
explanation
3. Growing our customer base and deepening our customer relationships
Helped by the analysis of our data, we continue to work towards increasing the
number of customers we serve and increasing the frequency and quality of the
interactions we have with them.
Often, our customers' first interaction with Saga is through our website and,
following significant enhancements made to our Money, Cruise, Travel and
Insurance sites, we saw an increase in this type of engagement. In the year to
date, the number of visits to our website increased 21% and the number of
unique visitors increased by 10%. Supporting this, our new Magazine website is
doing exceptionally well and already achieving visitor numbers in excess of
those seen on our previous exceptional.com site.
Our 9.5m strong customer database continues to be a key focus for us, as the
scale of our first party data provides unparalleled reach and insight into
people over 50 in the UK. Within this and at 31 July 2024, we had consent from
3.8m individuals who were willing to hear more about Saga's products and
services. This was 16% higher than at the same point in the prior year, giving
us the unique capability to engage directly with this group.
Our Publishing business continues to expand its audience, with our weekly
newsletters now reaching 1.4m unique readers. They have an industry-leading
combined open rate of 38% and we send 1.0m Travel newsletters, 0.8m Money
newsletters and 0.7m Magazine newsletters every week. Alongside this, our
popular, award-winning magazine, which is celebrating 40 years of publication,
has recently been launched in selected stores across the UK.
Recognising that our colleagues are integral to our success, we undertake
regular engagement surveys to improve our understanding of how they are
feeling and what is important to them. At the time of our latest survey,
engagement had increased to 7.6 out of 10, from 6.6 in December 2023. This
resulted from an improved focus on investing in our colleagues and their
career growth, alongside providing greater visibility and clarity on the
Group's strategy.
A strong platform
I would like to acknowledge that the significant progress in the first six
months of the year would not have been possible without the continued
dedication and hard work of my colleagues, who strive to deliver exceptional
experiences for our customers every day. I thank them all for their efforts
and for making Saga such a wonderful place to work. I also want to thank our
customers, suppliers and investors for their continued support on our journey
to become the largest and most-trusted brand for older people in the UK.
The progress made in the year to date represents a significant step forward in
our ambitions as we delivered a threefold increase in Underlying Profit Before
Tax(4)9F, supported by continued high demand for our Cruise and Travel
offerings. This, alongside the potential partnership with Ageas, positions the
business for sustainable capital-light growth, with a platform to deliver a
material step-change in debt reduction and unlock significant value for
shareholders.
Mike Hazell
Group Chief Executive Officer
10 October 2024
(4) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Group Chief Financial Officer's Review
The Group reported an Underlying Profit Before Tax(1)10F of £27.2m, compared
to £8.0m in the prior period. This reflected a strong performance from our
Cruise and Travel businesses, with the challenges in the Insurance market
continuing to impact our Insurance Broking business.
Cruise and Travel have seen strong demand in the period, with both passenger
numbers and average prices increasing. Ocean Cruise had a particularly strong
half, reporting an Underlying Profit Before Tax(1) of £28.0m (H1 2023:
£12.9m). River Cruise also saw strong demand and reported Underlying Profit
Before Tax(1) of £2.9m (H1 2023: £1.5m), despite the challenges from the
adverse weather seen across Europe. Travel performed well in the first half
with Underlying profit before Tax(1) of £0.3m (H1 2023: loss of £2.6m),
driven by a focus on higher value touring products.
The Group's Insurance Broking business continues to be challenged by high net
rate inflation, particularly in home, and a highly competitive marketplace.
The Insurance Broking business reported an earned Underlying Profit Before
Tax(1) of £12.2m (H1 2023: £23.8m), reflecting the impact of the actions
taken to increase competitiveness and stabilise policy volumes. Due to the
challenging market back drop, these actions had less of an impact and the
number of policies in force was down 13.2% to 1,386k.
Despite the challenges in Insurance Broking, our Underwriting business traded
well and reported Underlying Profit Before Tax(1) of £1.9m (H1 2023: loss
£3.6m), reflecting the ongoing earn through of the pricing action taken in
prior years and positive development on prior year claims.
The Group reported a loss before tax of £104.0m (H1 2023: loss of £77.8m),
that reflects an impairment of Insurance Broking goodwill of £138.3m and net
positive exceptional items of £7.1m. The impairment of goodwill was driven by
a lower view of cash flows from Insurance Broking, compared with our previous
growth projections, reflecting the high claims cost inflation impacts to
profitability and policy volumes in the future. The exceptional items
primarily relate to onerous contract provisions on three-year fixed-price
policies under International Financial Reporting Standard (IFRS) 17.
Reducing debt continues to be a priority for the Group and Net Debt(1), at 31
July 2024, was £614.6m, £22.6m lower than the year end, reflecting Ocean
Cruise ship debt repayments. During the period, the £150.0m 2024 bond was
repaid from a combination of Available Cash(1) and drawing £75.0m on the loan
facility provided by Roger De Haan, resulting in Available Cash(1) reducing to
£86.3m by the half year end (31 January 2024: £180.7m).
Available Operating Cash Flow(1) reduced to £54.4m (H1 2023: £85.9m), driven
by lower cash generation from the unrestricted businesses, and River and
Travel businesses, offset by an increase from Ocean Cruise. The reduction in
the River and Travel businesses was driven by a one-off benefit in the prior
period, after moving from 100% to 70% coverage under the Civil Aviation
Authority (CAA) escrow arrangement.
We recently concluded discussions with our Revolving Credit Facility (RCF)
lenders to provide the Group with greater financial flexibility. As a result,
the following amendments were agreed, in addition to other smaller changes:
· Extension to the maturity date, from 31 May 2025 to 31 March
2026.
· Leverage test to now be conducted on a Group basis, so including
the Net Debt(1) and Trading EBITDA(1) in relation to Ocean Cruise.
· Reduction in the leverage ratio covenant, from 6.25x to 6.0x,
until maturity.
The second half of the year is expected to be another strong period for
customer demand in Cruise and Travel, supported by the strong forward booked
positions in these businesses. The impact of home net rate inflation seen
towards the end of the first half is expected to continue to have a
significant impact on the Insurance Broking business, with margins and policy
volumes under pressure.
As you may have seen, we announced that we are in exclusive negotiations with
Ageas for a 20-year affinity partnership for motor and home insurance. If
these negotiations are successful, the ambition would be for the partnership
to go live by the end of 2025 and, therefore, have no impact on the current
year. As a result, we continue to expect Underlying Profit Before Tax(1) for
2024/25 to be broadly consistent with that of 2023/24.
(1) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Operating performance
Group income statement
Unaudited6m to Change Unaudited6m to
July 2024 July 2023
£m
Underlying Revenue(2)11F 393.3 10.7% 355.3
Underlying Profit/(Loss) Before Tax(2)
Cruise and Travel 31.2 164.4% 11.8
Insurance Broking (earned) 12.2 (48.7%) 23.8
Insurance Underwriting 1.9 152.8% (3.6)
Total Insurance 14.1 (30.2%) 20.2
Other Businesses and Central Costs (5.2) 58.4% (12.5)
Net finance costs(3)12F3 (12.9) (12.2%) (11.5)
Underlying Profit Before Tax(2) 27.2 240.0% 8.0
Impairment of Insurance Broking goodwill (138.3) (68.1)
Other exceptional items 7.1 (17.7)
Loss before tax (104.0) (33.7%) (77.8)
Tax (expense)/credit (2.1) (130.9%) 6.8
Loss after tax (106.1) (49.4%) (71.0)
Earnings/(loss) per share
Underlying Earnings Per Share(2) 17.9p >500.0% 1.7p
Loss per share (75.9p) (49.1%) (50.9p)
The Group's business model is based on providing high-quality and
differentiated products to its target demographic, predominantly focused on
cruise, travel and insurance. The Cruise and Travel businesses comprise Ocean
Cruise, River Cruise and Travel. The Insurance business operates mainly as a
broker, sourcing underwriting capacity from selected third-party insurance
companies, and, for motor and home, also from the Group's in-house
underwriter. Other Businesses include Saga Money, Saga Publishing and
CustomerKNECT, a mailing and printing business.
Underlying Revenue(2)
Underlying Revenue(2) increased by 10.7% to £393.3m (H1 2023: £355.3m)
mainly due to increased load factors and per diems across our Cruise
businesses, alongside a 18.7% increase in average revenue per passenger in our
Travel business.
Underlying Profit/(Loss) Before Tax(2)
The Group generated an Underlying Profit Before Tax(2) of £27.2m in the first
half of the current year, compared with £8.0m in the first half of the prior
year. This is primarily due to a:
· £19.4m increase in Cruise and Travel, moving to an Underlying
Profit Before Tax(2) of £31.2m (H1 2023: £11.8m), with £15.1m driven by
Ocean Cruise;
· a return to an Underlying Profit Before Tax(2) in Insurance
Underwriting of £1.9m (H1 2023: Underlying Loss Before Tax(2) of £3.6m); and
· £7.3m improvement in Other Businesses and Central Costs
following the cost reduction programme actioned in the second half of the
prior year.
These were partially offset by an £11.6m reduction in Insurance Broking
profitability due to difficult trading conditions, particularly within home.
Net finance costs(3) in the period were £12.9m (H1 2023: £11.5m), which
exclude finance costs that are included within the Cruise and Travel
businesses of £8.2m (H1 2023: £9.7m) and Insurance Underwriting business of
£1.9m (H1 2023: £6.5m).
Loss before tax
The loss before tax for the period, of £104.0m, includes a £138.3m
impairment to Insurance Broking goodwill and a net positive of other
exceptional items of £7.1m, consisting of:
· onerous contract provisions net positive of £9.7m on three-year
fixed-price policies and on insurance contracts under IFRS 17;
· fair value gains on debt securities of £2.7m;
· a £0.3m positive change in discount rate on non-periodical
payment order (PPO) insurance liabilities;
· foreign exchange gains on River Cruise ship leases of £0.5m;
· restructuring costs of £4.2m;
· costs associated with the unsecured loan facility provided by
Roger De Haan of £1.2m;
· fair value losses of £0.6m on derivatives; and
· a negative IFRS 16 adjustment of £0.1m on River Cruise ships.
The loss before tax in the prior period, of £77.8m, includes a £68.1m
impairment to Insurance goodwill and a net negative of other exceptional items
of £17.7m, comprising:
· restructuring costs of £5.9m;
· onerous contract provision net cost of £9.2m on three-year
fixed-price policies and on insurance contracts under IFRS 17;
· fair value losses on debt securities of £4.8m;
· a £3.1m positive change in discount rate on non-PPO insurance
liabilities;
· arrangement fee on the unsecured loan facility provided by Roger
De Haan of £1.0m;
· a £0.1m acquisition cost on the purchase of The Big Window
Consulting Limited;
· fair value losses of £0.9m on derivatives;
· foreign exchange gains on River Cruise ship leases of £0.6m; and
· a positive IFRS 16 adjustment of £0.5m on River Cruise ships.
Tax
The Group's tax expense for the period was £2.1m (H1 2023: £6.8m credit),
representing a tax effective rate of 6.1% (H1 2023: 70.1%), excluding the
Insurance Broking goodwill impairment charge. In both the current and prior
periods, the difference between the Group's tax effective rate and the
standard rate of corporation tax was mainly due to the Group's Ocean Cruise
business being in the tonnage tax regime.
There was also an adjustment in the current period for the over-provision of
prior year tax of £0.3m credit (H1 2023: £1.2m credit). Excluding the impact
of the Ocean Cruise business being in the tonnage tax regime, the Insurance
goodwill impairment and adjustments to prior year tax, the tax effective rate
for the current period is 35.8% (H1 2023: 25.6%).
Earnings/(loss) per share
The Group's Underlying Basic Earnings Per Share(2)13F was 17.9p (H1 2023:
1.7p). The Group's reported basic loss per share was 75.9p (H1 2023: loss of
50.9p).
(2) Refer to the Alternative Performance Measures Glossary for definition and
explanation
3 Net finance costs exclude Cruise, Travel and Insurance Underwriting finance
costs and net fair value losses on derivatives
Cruise and Travel
Unaudited 6m to July 2024 Unaudited 6m to July 2023
£m Ocean River Travel Total Cruise and Travel Change Ocean Cruise River Travel Total Cruise
Cruise Cruise Cruise and Travel
Revenue 121.5 26.4 78.9 226.8 15.2% 103.8 23.4 69.7 196.9
Gross profit 52.1 7.8 16.5 76.4 35.9% 36.1 6.5 13.6 56.2
Marketing expenses (6.8) (2.4) (5.9) (15.1) (2.7%) (6.5) (2.8) (5.4) (14.7)
Other operating expenses (9.1) (2.7) (10.9) (22.7) (12.9%) (7.0) (2.2) (10.9) (20.1)
Investment return - 0.2 0.6 0.8 >500.0% - - 0.1 0.1
Finance costs (8.2) - - (8.2) 15.5% (9.7) - - (9.7)
Underlying Profit/(Loss) Before Tax(4)14F 28.0 2.9 0.3 31.2 164.4% 12.9 1.5 (2.6) 11.8
Average revenue per passenger (£) 5,170 3,034 3,220 4,000 19.0% 4,272 2,721 2,712 3,360
Ocean Cruise load factor 90% 90% 7ppt 83% 83%
Ocean Cruise per diem (£) 362 362 8.7% 333 333
River Cruise load factor 86% 86% 3ppt 83% 83%
River Cruise per diem (£) 340 340 14.9% 296 296
Passengers ('000) 23.5 8.7 24.5 56.7 (3.2%) 24.3 8.6 25.7 58.6
Ocean Cruise
The Ocean Cruise business owns two ocean cruise ships, Spirit of Discovery and
Spirit of Adventure.
In the first half of the current year, the business achieved a load factor of
90% (H1 2023: 83%) and a per diem of £362 (H1 2023: £333). These two
factors, when combined, equated to revenue growth of 17.1% and resulted in a
117.1% increase in profitability, from an Underlying Profit Before Tax(4) of
£12.9m in the first half of the prior year, to an Underlying Profit Before
Tax(4) of £28.0m in the first half of the current year.
River Cruise
The River Cruise business has 10-year charters in place for two boutique
purpose-built river cruise ships, Spirit of the Rhine and Spirit of the
Danube, alongside two other shorter-term charters.
In the first half of the current year, the business achieved a load factor of
86% (H1 2023: 83%) and a per diem of £340 (H1 2023: £296). This resulted in
revenue growth of 12.8% and a 93.3% increase in profitability to an Underlying
Profit Before Tax(4) of £2.9m (H1 2023: £1.5m).
Travel
The Travel business, which includes both the Saga Holidays and Titan brands,
generated higher revenue per passenger in the first half of the current year,
increasing by 18.7% from £2,712 to £3,220, but saw slightly reduced volumes
when compared with the first half of the prior year, with passenger numbers
decreasing from 25.7k to 24.5k.
This led to revenue growth of 13.2% and a return to profitability, from an
Underlying Loss Before Tax(4) of £2.6m in the first half of the prior year,
to an Underlying Profit Before Tax(4) of £0.3m in the first half of the
current year.
On a comparable basis and, therefore, excluding the discontinued Titan
third-party river cruise product, which is included in the prior year numbers,
revenue grew 28.5% on a passenger base that grew 13.3%.
Forward Cruise and Travel sales
The Ocean Cruise load factor for 2024/25 is ahead of the same point last year
for 2023/24 by 3ppts, driven by an improved load factor in the first quarter
when compared with the prior year. The per diem for 2024/25 is 8.5% higher
than the same point last year, reflecting strong customer demand.
The Ocean Cruise load factor for 2025/26 is in line with the same point in the
prior year, despite the season going on sale one week later, with the per diem
7.5% ahead.
The River Cruise load factor and per diem for 2024/25 are also ahead of the
same point last year, by 3ppts and 14.7% respectively, reflecting increased
customer demand.
Looking ahead to 2025/26, the River Cruise booked load factor is in line with
the prior year position, with the per diem 7.4% ahead.
Travel bookings for 2024/25 are ahead of the same point last year by 15.6% and
8.2% for revenue and passengers respectively. The increased revenue is due, in
part, to higher passenger numbers, but also higher average selling prices, as
a result of enhanced revenue management processes. The increase in passenger
numbers is largely due to increased uptake of short-haul travel within our
Titan brand and the introduction of new products, alongside Titan tours now
being sold to customers in Australia.
Travel bookings for 2025/26 reflect a revenue position that is 5.9% ahead of
the same point in the prior year, with passengers 3.8% ahead, following the
launch of Titan tours in Australia.
Current year departures Next year departures
6 October Change 8 October 2023 6 October 2024 Change 8 October
2024 2023
Ocean Cruise revenue (£m) 228.8 10.0% 208.0 138.4 5.3% 131.4
Ocean Cruise load factor 90% 3ppts 87% 51% - 51%
Ocean Cruise per diem (£) 359 8.5% 331 388 7.5% 361
River Cruise revenue (£m) 49.0 12.9% 43.4 17.6 (6.9%) 18.9
River Cruise load factor 88% 3ppts 85% 29% - 29%
River Cruise per diem (£) 327 14.7% 285 347 7.4% 323
Travel revenue (£m) 162.2 15.6% 140.3 77.1 5.9% 72.8
Travel passengers ('000) 54.4 8.2% 50.3 21.9 3.8% 21.1
( )
(4) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Insurance
Insurance Broking
The Insurance Broking business provides tailored insurance products and
services, principally motor, home, private medical and travel insurance. Its
role is to price the policies and source the lowest risk price, whether
through the panel of motor and home underwriters or through solus arrangements
for private medical and travel insurance. The Group's in-house insurer,
Acromas Insurance Company Limited (AICL), sits on the motor and home panels
and competes for that business with other panel members on equal terms. AICL
offers its underwriting capacity on the home panel through a coinsurance deal
with a third party, so the Group takes no underwriting risk for that product.
Even if underwritten by a third party, the product is presented as a Saga
product and the Group manages the customer relationship.
Unaudited 6m to July 2024 Unaudited 6m to July 2023
Motor Home Other Motor Home Other
£m broking broking broking Total Change broking broking broking Total
Gross Written Premiums(5) (GWP)
Brokered 65.1 81.1 64.8 211.0 0.4% 61.9 78.3 70.0 210.2
Underwritten 88.0 - 1.2 89.2 0.7% 86.9 - 1.7 88.6
GWP 153.1 81.1 66.0 300.2 0.5% 148.8 78.3 71.7 298.8
Broker revenue 4.7 6.7 20.5 31.9 (20.4%) 4.7 12.1 23.3 40.1
Instalment revenue 1.6 1.7 - 3.3 - 1.7 1.6 - 3.3
Add-on revenue 3.8 4.0 - 7.8 (14.3%) 4.2 4.9 - 9.1
Other revenue 14.3 8.6 (2.6) 20.3 - 13.4 8.1 (1.2) 20.3
Written Underlying Revenue(5) 24.4 21.0 17.9 63.3 (13.0%) 24.0 26.7 22.1 72.8
Written gross profit 21.8 21.0 21.8 64.6 (11.7%) 20.7 26.7 25.8 73.2
Marketing expenses (4.4) (2.9) (3.6) (10.9) - (5.1) (2.6) (3.2) (10.9)
Written Gross Profit After Marketing Expenses(5) 17.4 18.1 18.2 53.7 (13.8%) 15.6 24.1 22.6 62.3
Other operating expenses (16.7) (12.5) (12.9) (42.1) 4.5% (18.3) (15.5) (10.3) (44.1)
Written Underlying Profit/(Loss) Before Tax(5)15F 0.7 5.6 5.3 11.6 (36.3%) (2.7) 8.6 12.3 18.2
Written to earned adjustment 0.6 - - 0.6 (89.3%) 5.6 - - 5.6
Earned Underlying Profit Before Tax(5) 1.3 5.6 5.3 12.2 (48.7%) 2.9 8.6 12.3 23.8
Policies in force 649k 564k 173k 1,386k (13.2%) 754k 634k 208k 1,596k
Policies sold 337k 279k 95k 711k (13.2%) 385k 323k 111k 819k
Third-party panel share(6)16F 37.6% (1.3ppt) 38.9%
Insurance Broking written Underlying Profit Before Tax(5), which excludes the
impact of the written to earned adjustment deferring the revenue on policies
underwritten over the term of the policy, decreased to £11.6m, from £18.2m
in the prior period.
A key metric for the Insurance Broking business is Written Gross Profit After
Marketing Expenses(5), before deducting overheads. This reduced from £62.3m
in the first half of the prior year to £53.7m in the first half of the
current year, mainly due to lower renewal volumes and margins on home, lower
renewal margins on private medical insurance (PMI) and lower new business
volumes and margins on travel. This was partially offset by an improvement in
motor margins as net rate inflation has slowed. Written Gross Profits After
Marketing Expenses(5) fell by £6.0m in home and £4.4m in other broking,
partially offset by an increase in motor of £1.8m.
For motor and home insurance, in terms of the total Written Gross Profit After
Marketing Expenses(5), the new business proportion reduced by £0.4m and the
renewal proportion by £3.8m.
The reduction in profitability of the home business is attributable to
significant inflationary pressure in the net rates charged by panel
underwriters, which have increased at a faster pace than the price that can be
charged to consumers in a competitive marketplace. This has been accentuated
by the fact that a significant number of home policies are on three-year
fixed-price deals, which fix the customer price for two renewals. Lower new
business volumes in the prior year have also led to a 14% reduction in the
level of renewal volumes in the first half of the current year.
The three-year fixed-price product remains significant, with 180k policies
sold in the period, compared with 319k policies in the prior year. This
represented 29% of total motor and home policies (H1 2023: 45%), with 28% of
direct new business customers taking the product (H1 2023: 30%). These
policies remain highly attractive to our customer base and, while current
profitability has been impacted by high industry inflation, this is a
short-term challenge, as all policies will have been repriced by the middle of
2025.
The challenging home environment has been broadly offset by an improvement to
the motor environment which has led to the average gross margin per policy for
motor and home combined, calculated as Written Gross Profit After Marketing
Expenses(5)17F divided by the number of policies sold, increasing to £57.6 in
the first half of the current period, compared with £56.1 in the prior
period.
In addition, customer retention reduced from 84% to 76%, overall motor and
home policies in force decreased 13% when compared with 31 July 2023 and
direct new business sales reduced by 3ppts to 43% as the Group rebalanced
volumes towards price-comparison website distribution channels.
Written profit and gross margin per policy for motor and home are stated after
allowing for deferral of part of the revenues from three-year fixed-price
policies, which is then recognised in profit or loss when the option to renew
those policies at a predetermined fixed price is exercised or lapses,
recognising the inflation risk inherent in these products. At 31 July 2024,
£11.6m (H1 2023: £11.1m) of income had been deferred in relation to
three-year fixed-price policies, £5.2m (H1 2023: £4.5m) of which related to
income written in the period to 31 July 2024.
Motor broking
Gross Written Premiums(5) increased 2.9% due to a 17.5% increase in average
premiums, partially offset by a 12.5% reduction in core policies sold. Gross
Written Premiums(5), from business underwritten by AICL, increased 1.3% to
£88.0m (H1 2023: £86.9m), due to a 13.7% increase in average premiums,
offset by a 11.0% decrease in core policies sold.
Written Gross Profit After Marketing Expenses(5) was £17.4m (H1 2023:
£15.6m), contributing £51.6 per policy (H1 2023: £40.5 per policy). The
increase in renewal margins and a 6.4% increase in new business policies sold
was partially offset by lower new business margins and a 16.6% reduction in
renewal policies sold.
Home broking
Gross Written Premiums(5) increased 3.6% due to a 19.9% increase in average
premiums, partially offset by a 13.6% reduction in core policies sold.
Written Gross Profit After Marketing Expenses(5) was £18.1m (H1 2023:
£24.1m), equating to £64.9 per policy (H1 2023: £74.6 per policy). The
reduction in written gross profits, and margin per policy, was mainly due to
the adverse impact of net rate inflation on home renewal profitability.
Other broking
Other broking primarily comprises PMI and travel insurance.
Gross Written Premiums(5) reduced 7.9% as a result of both lower average
premiums and a reduction to policy sales to 74k (H1 2023: 86k) in travel
insurance. For PMI, policy sales were broadly stable at 16k (H1 2023: 17k).
As a result, Written Gross Profit After Marketing Expenses(5) relating to
travel insurance products decreased by £1.4m.
While sales of PMI were broadly stable, there were net rate inflation
pressures in the first half of the year, reducing renewal margins and leading
to Written Gross Profit After Marketing Expenses(5) decreasing by £2.6m.
(5) Refer to the Alternative Performance Measures Glossary for definition and
explanation
(6) Third-party underwriter's share of the motor panel for policies
Insurance Underwriting
Unaudited 6m to July 2024 Unaudited 6m to July 2023
£m Re- Gross change Re-
Gross insurance Net Gross insurance Net
Insurance Underlying Revenue(7)18F A 102.0 (9.0) 93.0 29.9% 78.5 (8.0) 70.5
Incurred claims (current year) B (78.4) (0.6) (79.0) 14.3% (91.5) 19.2 (72.3)
Claims handling costs in relation to incurred claims C (8.3) - (8.3) (5.1%) (7.9) - (7.9)
Changes to liabilities for incurred claims (prior year) D (1.4) 2.2 0.8 (116.3%) 8.6 7.4 16.0
Other incurred insurance service expenses E (7.3) - (7.3) 5.2% (7.7) - (7.7)
Insurance service result 6.6 (7.4) (0.8) 133.0% (20.0) 18.6 (1.4)
Net finance (expense)/income from (re)insurance (excludes impact of change in (5.4) 3.5 (1.9) 58.1% (12.9) 6.4 (6.5)
discount rate on non-PPO liabilities)
Investment return (excludes fair value gains/losses on debt securities) 4.6 - 4.6 7.0% 4.3 - 4.3
Underlying Profit/(Loss) Before Tax(7) 5.8 (3.9) 1.9 120.3% (28.6) 25.0 (3.6)
Reported loss ratio (B+D)/A 78.2% 84.1% 27.4ppt 105.6% 79.9%
Expense ratio (C+E)/A 15.3% 16.8% 4.6ppt 19.9% 22.1%
Reported combined operating ratio (COR) (B+C+D+E)/A 93.5% 100.9% 32.0ppt 125.5% 102.0%
Current year COR (B+C+E)/A 92.2% 101.7% 44.2ppt 136.4% 124.7%
Number of earned policies 260k (6.4%) 278k
Policies in force - Saga motor 435k (5.8%) 462k
The Group's in-house underwriter, AICL, underwrites over 60% of the motor
business sold by Insurance Broking, alongside a smaller proportion of business
on other panels. Alongside this, AICL underwrites a portion of Saga's home
panel, although all home underwriting risk is passed to third-party insurance
and reinsurance providers. AICL also has excess of loss and funds-withheld
quota share reinsurance arrangements in place, relating to its motor
underwriting line of business, which transfer a significant proportion of
motor insurance risk to third-party reinsurers.
In line with the wider market, AICL experienced a prolonged period of elevated
claims inflation across 2022 and 2023, with the significant price rises
applied over that period having now materially earned through to insurance
revenue.
Gross insurance Underlying Revenue(7), in the first half of the year,
increased 29.9% to £102.0m (H1 2023: £78.5m), reflecting a 38.8% increase in
average earned premiums. This was partially offset by a 6.4% reduction in the
number of earned policies underwritten by AICL, particularly those
underwritten for Saga as opposed to other panels.
The pricing and other management action taken during 2022 and 2023 resulted in
significant improvement in the gross insurance service result year on year,
with a 44.2ppt reduction in the current year gross COR to 92.2% (H1 2023:
136.4%). After allowing for reinsurance arrangements, this increased slightly
to 101.7% (H1 2023: 124.7%). This result was in line with expectations,
recognising the fact that the gross current period motor surplus generated
during the first half of the current year is shared with reinsurance partners.
Motor claims severity inflation during the first half of the current year
reduced to 11%, in line with pricing expectations, with the full year expected
to reduce further.
Positive changes to liabilities for incurred prior year claims reduced from
£16.0m in the first half of the prior year to £0.8m in the first half of the
current year. Both years benefited from favourable large claims movements (net
of excess of loss reinsurance), albeit more so in the prior year. The net
impact of our quota share reinsurance arrangements switched from a net benefit
in the prior year to a net cost in the current year, with 80% of the
favourable development in the most recent accident years ceded to quota share
reinsurance partners.
The net finance expense of £1.9m reduced from £6.5m in the prior period. The
expense was higher in the prior period as there was an increase in the yield
curve which increased indexation of reinsurance deductibles and, therefore,
net incurred claims.
(7) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Other Businesses and Central Costs
Unaudited 6m to July 2024 Unaudited 6m to July 2023
£m Other Central Costs Total Change Other Central Costs Total
Businesses Businesses
Underlying Revenue(8)19F
Money 2.8 - 2.8 (24.3%) 3.7 - 3.7
Publishing and CustomerKNECT 6.8 - 6.8 17.2% 5.8 - 5.8
Insight - - - (100.0%) 0.5 - 0.5
Total Underlying Revenue 9.6 - 9.6 (4.0%) 10.0 - 10.0
Gross profit 3.5 3.0 6.5 (3.0%) 4.2 2.5 6.7
Operating expenses (2.9) (11.1) (14.0) 34.9% (6.4) (15.1) (21.5)
Investment income - 2.3 2.3 - - 2.3 2.3
Net finance costs - (12.9) (12.9) (12.2%) - (11.5) (11.5)
Underlying Profit/(Loss) Before Tax(8) 0.6 (18.7) (18.1) 24.6% (2.2) (21.8) (24.0)
The Group's Other Businesses include Saga Money, Saga Publishing and
CustomerKNECT.
Underlying Profit Before Tax(8) for Other Businesses, when combined, increased
by £2.8m, from a £2.2m Underlying Loss Before Tax(8) in the first half of
the prior year to an Underlying Profit Before Tax(8) of £0.6m in the first
half of the current year. This was largely due to the decision made, in the
second half of last year, to exit our smaller, loss-making activities of Saga
Exceptional and Saga Insight. Underlying Revenue(8) in Saga Money reduced
£0.9m due to market-wide equity release challenges arising from the
inflationary environment.
Central operating expenses reduced to £11.1m (H1 2023: £15.1m). Gross
administration costs, before Group recharges, decreased by £2.6m in the
period, as a result of a cost-reduction programme enacted in the second half
of the prior year. Net costs decreased by a further £1.4m due to higher Group
recharges to the business units.
Net finance costs in the period were £12.9m (H1 2023: £11.5m), which exclude
finance costs that are included within the Cruise and Travel businesses of
£8.2m (H1 2023: £9.7m) and Insurance Underwriting business of £1.9m (H1
2023: £6.5m). The increase was predominantly driven by the drawdown on the
loan facility provided by Roger De Haan to support repayment of the £150.0m
bond in May 2024 and the higher interest rate attached to that facility.
(8) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Cash flow and liquidity
Available Operating Cash Flow(9)20F
£m Unaudited6m to Unaudited
July 2024 Change 6m to
July 2023
Insurance Broking Trading EBITDA(9) 15.9 (42.2%) 27.5
Other Businesses and Central Costs Trading EBITDA(9) (2.7) 73.0% (10.0)
Trading EBITDA(9,10)21F from unrestricted businesses 13.2 (24.6%) 17.5
Dividends paid by Insurance Underwriting business - (100.0%) 7.0
Working capital and non-cash items (6.1) (>500.0%) (0.7)
Capital expenditure funded with Available Cash(9) (8.3) 23.9% (10.9)
Available Operating Cash Flow(9) before cash repayment from Cruise and Travel (1.2) (109.3%) 12.9
operations
Cash repayment from River Cruise and Travel businesses 1.5 (94.2%) 26.0
Ocean Cruise Available Operating Cash Flow(9) 54.1 15.1% 47.0
Available Operating Cash Flow(9) 54.4 (36.7%) 85.9
Restructuring costs (6.8) (41.7%) (4.8)
Interest and financing costs (20.4) 4.2% (21.3)
Tax receipts 1.2 300.0% 0.3
Other payments (5.8) - (5.8)
Change in cash flow from operations 22.6 (58.4%) 54.3
Change in bond debt (150.0) (100.0%) -
Change in bank and other debt 75.0 100.0% -
Change in Ocean Cruise ship debt (31.1) - (31.1)
Cash at 1 February 169.8 7.8% 157.5
Available Cash(9) at 31 July 86.3 (52.2%) 180.7
Available Operating Cash Flow(9) is made up of the cash flows from
unrestricted businesses and the dividends paid by restricted companies, less
any cash injections to those businesses. Unrestricted businesses include
Insurance Broking (excluding specific ring-fenced funds to satisfy Financial
Conduct Authority (FCA) regulatory requirements), Other Businesses and Central
Costs, and the Group's Ocean Cruise business. Restricted businesses include
AICL, River Cruise and Travel.
As a result of a reduction in cash generation from unrestricted businesses,
particularly in Insurance Broking and cash repayments from the River Cruise
and Travel businesses, partially offset by improved cash generation from the
Ocean Cruise business, Available Operating Cash Flow(9) reduced from £85.9m
in the first half of the prior year to £54.4m in the first half of the
current year.
Excluding cash repayments from the Cruise and Travel businesses, Available
Operating Cash Flow(9) was an outflow of £1.2m compared with an inflow of
£12.9m in the prior period. Trading EBITDA(9,10) from unrestricted businesses
reduced by £4.3m, mainly as a result of lower margins and policies in the
Insurance Broking segment, particularly in home and other, partially offset by
the impact of cost savings enacted in Central Costs during the second half of
the prior year. Changes in working capital were a £6.1m outflow in the
current period, compared with a £0.7m outflow in the prior period, mainly due
to a reduction in net premiums payable to our panel of underwriters on motor
following price reductions in the period as claims inflation slowed. No
dividends were received from AICL, as expected, a reduction of £7.0m when
compared with the prior year.
For River Cruise and Travel, the Group was repaid £1.5m in the first half of
the year. This is a reduction of £24.5m when compared with the £26.0m
repayment in the first half of the prior year. The reduction is due to the
businesses, in the first half of the prior year, in agreement with the CAA,
moving from a fully ring-fenced trust arrangement, where the businesses could
not access 100% of customer cash until they returned from their river cruise
or holiday, to a ring-fenced escrow arrangement where only 70% of customer
cash is restricted until they return. This resulted in a one-off cash benefit
in the first half of the prior year. At 31 July 2024, the ring-fenced
businesses held cash of £72.3m, of which £56.6m was held in escrow. The
Group must hold a minimum of £8.1m of cash outside of escrow within the
ring-fenced businesses, as agreed with the CAA.
The Ocean Cruise business reported an Available Operating Cash Flow(9) of
£54.1m (H1 2023: £47.0m), with an increase in advance customer receipts of
£7.2m (H1 2023: £18.7m) and net trading income of £47.7m (H1 2023:
£31.4m), partially offset by capital expenditure of £0.8m (H1 2023: £3.1m).
Net of interest costs of £7.0m (H1 2023: £8.1m), the Ocean Cruise business
reported a net cash inflow, before capital repayments on the ship debt, of
£47.1m for the first half of 2024/25 compared with £38.9m in the first half
of prior year.
Other cash flow movements
Interest and financing costs reduced in the current period due to lower
interest costs on the ship debt loans as a result of the gross ship debt
reducing as capital repayments are made.
The Group continued to make the agreed payments to the defined benefit pension
fund as part of the deficit recovery plan of £5.8m (H1 2023: £5.8m). These
are included within other payments.
In the current period, the Group repaid in full its £150.0m corporate bond at
maturity, drew down £75.0m of the available £85.0m loan facility provided by
Roger De Haan and continued to make capital repayments against its ship debt
facilities, with one payment of £15.3m (H1 2023: £15.3m) on Spirit of
Discovery's debt facility and one payment of £15.8m (H1 2023: £15.8m) on
Spirit of Adventure's debt facility.
(9) Refer to the Alternative Performance Measures Glossary for definition and
explanation
1(0) Trading EBITDA includes the line-item impact of IFRS 16 with the
corresponding impact to net finance costs included in net cash flows used in
financing activities
Reconciliation between operating and reported metrics
Available Operating Cash Flow(11)22F1 reconciles to net cash flows from
operating activities as follows:
£m Unaudited Unaudited
6m to Change 6m to
July 2024 July 2023
Net cash flows from operating activities (reported) 42.8 17.5% 51.9
Exclude cash impact of:
Trading of restricted divisions (13.3) (125.4%) (5.9)
Non-trading costs 12.6 >500.0% 0.2
Interest paid 19.9 (3.9%) 20.7
19.2 28.0% 15.0
Cash released from restricted divisions 1.5 (95.5%) 33.0
Include capital expenditure funded from Available Cash(11) (8.3) 23.9% (15.8)
Include Ocean Cruise capital expenditure (0.8) 74.2% (3.1)
Available Operating Cash Flow(11) 54.4 (36.7%) 85.9
Underlying Revenue(11) reconciles to the statutory measure of revenue as
follows:
m to m to
uly 2024 uly 2023
£m Unaudited Change Unaudited
6m to 6m to
July 2024 July 2023
Underlying Revenue(11) 393.3 10.7% 355.3
Ceded reinsurance premiums earned on business underwritten by the Group 9.0 12.5% 8.0
Onerous contract provision 2.1 140.4% (5.2)
Exit from smaller, loss-making activities 0.4 100.0% -
Revenue 404.8 13.0% 358.1
Trading EBITDA(11) reconciles to Underlying Profit Before Tax(11) as follows:
£m Unaudited Change Unaudited
6m to 6m to
July 2024 July 2023
Insurance Broking Trading EBITDA(11) 15.9 (42.2%) 27.5
Insurance Underwriting Trading EBITDA(11) 3.8 31.0% 2.9
Ocean Cruise Trading EBITDA(11,12)23F 46.7 41.1% 33.1
River Cruise and Travel Trading EBITDA(11) 3.7 >500.0% (0.5)
Other Businesses and Central Costs Trading EBITDA(11) (2.7) 73.0% (10.0)
Trading EBITDA(11) 67.4 27.2% 53.0
Depreciation and amortisation (17.2) 0.6% (17.3)
Net finance costs (including Cruise, Travel and Insurance Underwriting) (23.0) 17.0% (27.7)
Underlying Profit Before Tax(11) 27.2 240.0% 8.0
Adjusted Trading EBITDA(11)24F1 is used in the Group's leverage calculation
for the RCF covenant and is calculated as follows:
£m Unaudited Change Unaudited
6m to 6m to
July 2024 July 2023
Trading EBITDA(11) for 12m to 31 January 2024 116.5 25.8% 92.6
Less Trading EBITDA(11) for 6m to 31 July 2023 (53.0) 0.4% (53.2)
Add Trading EBITDA(11) for 6m to 31 July 2024 67.4 27.2% 53.0
Trading EBITDA(11) (12 months rolling) 130.9 41.7% 92.4
Impact of accounting standard changes since 31 January 2017 2.6 30.0% 2.0
Spirit of Discovery and Spirit of Adventure Trading EBITDA(11,12)25F (88.4) (48.8%) (59.4)
Adjusted Trading EBITDA(11) 45.1 28.9% 35.0
Ocean Cruise Trading EBITDA(11)(,12) reconciles to Ocean Cruise Trading EBITDA
(Excluding Overheads)(11) as follows:
£m Unaudited Change Unaudited
6m to 6m to
July 2024 July 2023
Ocean Cruise Trading EBITDA(11,12) 46.7 41.1% 33.1
Ocean Cruise overheads 9.1 (30.0%) 7.0
Ocean Cruise Trading EBITDA (Excluding Overheads)(11) 55.8 39.2% 40.1
(11) Refer to the Alternative Performance Measures Glossary for definition and
explanation
1(2) Ocean Cruise Trading EBITDA includes Ocean Cruise overheads
Statement of financial position
Goodwill
On 1 January 2022, new pricing rules arising from the implementation of
recommendations included in the FCA's General Insurance Pricing Practices
market study came into effect. As a result, and against the background of a
highly competitive motor insurance market, the Group saw a fall in policy
volumes in the period to 31 July 2023 and year to 31 January 2024. At 31 July
2024, high claims cost inflation in a competitive market continued to have an
adverse impact on the expected future profitability of the Insurance business.
Management, therefore, considered it necessary to perform impairment
assessments of goodwill attaching to the Insurance Broking business at each of
these dates. Forecast cash flows were modelled and, as a result, management
took the decision to impair Insurance goodwill by £138.3m at 31 July 2024,
following total impairments recognised in the year to 31 January 2024 of
£104.9m. Consistent with the approach taken in previous years, this
impairment is not included within Underlying Profit Before Tax(13)26F.
(13) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Carrying value of Ocean Cruise ships
At 31 July 2024, the carrying value of the Group's Ocean Cruise ships was
£576.9m (31 January 2024: £586.7m). Trading performance in the current year
has been very positive, and, with strong bookings for 2025/26, the Directors
concluded that there were no indicators of impairment at 31 July 2024.
Investment portfolio
The majority of the Group's financial assets are held by its Insurance
Underwriting entity and represent premium income received and invested to
settle claims and meet regulatory capital requirements.
The amount held in invested funds increased by £5.7m to £257.6m (31 January
2024: £251.9m). At 31 July 2024, 100% of the financial assets held by the
Group were invested with counterparties with a risk rating of BBB or above,
consistent with the prior year end, reflecting the relatively stable credit
risk rating of the Group's investment holdings.
Credit risk rating
AAA AA A BBB Unrated Total
At 31 July 2024 £m £m £m £m £m £m
Investment portfolio
Debt securities 24.3 63.8 63.4 63.5 0.1 215.1
Money market funds 42.5 - - - - 42.5
Total invested funds 66.8 63.8 63.4 63.5 0.1 257.6
Derivative assets - - 0.2 - - 0.2
Total financial assets 66.8 63.8 63.6 63.5 0.1 257.8
Credit risk rating
AAA AA A BBB Unrated Total
At 31 January 2024 £m £m £m £m £m £m
Investment portfolio
Debt securities 23.9 59.2 70.4 65.6 - 219.1
Money market funds 32.8 - - - - 32.8
Total invested funds 56.7 59.2 70.4 65.6 - 251.9
Derivative assets - - 0.3 - - 0.3
Total financial assets 56.7 59.2 70.7 65.6 - 252.2
Insurance reserves
Analysis of insurance contract liabilities at 31 July 2024 and 31 January 2024
is as follows:
At 31 July 2024 At 31 January 2024
£m Gross Reinsurance assets Net Gross Reinsurance assets Net
Incurred claims - estimate of the present value of future cash flows 289.0 (138.8) 150.2 286.4 (141.3) 145.1
Incurred claims - risk adjustment 46.4 (39.7) 6.7 40.2 (33.7) 6.5
Remaining coverage - excluding loss component 53.3 5.2 58.5 56.6 3.1 59.7
Remaining coverage - loss component 7.6 (0.4) 7.2 16.1 (1.3) 14.8
Total 396.3 (173.7) 222.6 399.3 (173.2) 226.1
The Group's total insurance contract liabilities, net of reinsurance assets,
decreased by £3.5m in the period to 31 July 2024 from the previous year end,
primarily due to a £8.8m reduction in net remaining coverage claims reserves.
This was partially offset by a £5.3m increase in net incurred claims
reserves. The reduction in net remaining coverage claims reserves reflect
favourable experience on large bodily injury claims relating to prior accident
years.
Financing
At 31 July 2024, the Group's Net Debt(14)27F was £614.6m, £22.6m lower than
at the beginning of the financial year. The Group's total leverage ratio was
4.6x as at 31 July 2024 (31 January 2024: 5.4x).
31 July 31 January 2024
£m Maturity date(15)28F 2024
3.375% Corporate bond May 2024 - 150.0
5.5% Corporate bond July 2026 250.0 250.0
RCF March 2026 - -
Loan facility with Roger De Haan April 2026 75.0 -
Spirit of Discovery ship loan June 2031 158.3 173.6
Spirit of Adventure ship loan September 2032 217.6 233.4
Less Available Cash(14)(,16)29F (86.3) (169.8)
Net Debt(14) 614.6 637.2
Net Debt(14) is analysed as follows:
Adjusted Net Debt(14) is used in the Group's leverage calculation and
reconciles to Net Debt(14) as follows:
31 July 31 January 2024
£m 2024
Net Debt(14) 614.6 637.2
Exclude ship loans (375.9) (407.0)
Exclude Ocean Cruise Available Cash(14) 2.7 2.7
Adjusted Net Debt(14) 241.4 232.9
Excluding the impact of debt and earnings relating to the Ocean Cruise ships,
the Group's leverage ratio applicable to the RCF, at 31 July 2024, was 5.4x
(31 January 2024: 5.4x), within the 6.25x covenant. At 31 July 2024, the RCF
remained undrawn.
During the first half of the year, the Group repaid in full its £150.0m
corporate bond at maturity and drew down £75.0m of the available £85.0m loan
facility provided by Roger De Haan. The Group also made repayments on its
Ocean Cruise ship debt facilities in March 2024 for Spirit of Adventure and in
June 2024 for Spirit of Discovery, of £15.8m and £15.3m respectively.
To support the transition to our new Insurance operating model, we recently
concluded discussions with our RCF lenders to provide the Group with greater
financial flexibility. As a result, the following amendments were agreed, in
addition to other smaller changes:
· Extension to the maturity date from 31 May 2025 to 31 March 2026.
· Leverage test to now be conducted on a Group basis, so including
the Net Debt(14) and Trading EBITDA(14) in relation to Ocean Cruise.
· Reduction in the leverage ratio covenant from 6.25x to 6.0x until
maturity.
In addition, a series of amendments were made to the loan facility provided by
Roger De Haan. These included an extension to the facility maturity, from 31
December 2025 to 30 April 2026, a reduction to the notice period required for
drawdown of the loan, to 10 business days, and an increase in the maximum
number of permitted utilisations, to 10.
(14) Refer to the Alternative Performance Measures Glossary for definition and
explanation
15 Maturity date represents the date that the principal must be repaid, other
than the Ocean Cruise ship loans, which are repaid in instalments over the
next eight years
16 Refer to Note 13 of the financial statements for information as to how this
reconciles to a statutory measure of cash
Pensions
The Group's defined benefit pension scheme liability, as measured on an
International Accounting Standard 19R basis, decreased by £1.4m to a £46.5m
liability as at 31 July 2024 (31 January 2024: £47.9m).
31 July 31 January 2024
£m 2024
Fair value of scheme assets 210.4 204.5
Present value of defined benefit obligation (256.9) (252.4)
Defined benefit pension scheme liability (46.5) (47.9)
The movements observed in the scheme's assets and obligations were impacted by
macroeconomic factors during the period where, at a global level, there have
been rising inflation and cost of living pressures, as well as shifts in
long-term market yields. The present value of defined benefit obligations
increased by £4.5m to £256.9m, primarily due to higher-than-expected
inflation experience and an increase in future expectations for inflation. The
fair value of scheme assets increased by £5.9m to £210.4m. The increase in
asset values was largely driven by the recovery plan payment, alongside
marginally lower returns on assets from the fall in interest rates in the
period.
Net assets
Since 31 January 2024, total assets decreased by £177.3m and total
liabilities decreased by £70.2m, resulting in an overall decrease in net
assets of £107.1m.
The reduction in total assets is primarily due to:
· a decrease in goodwill of £138.3m, following an impairment to
Insurance Broking goodwill in the period;
· a decrease in cash and short-term deposits of £79.4m, mainly as
a result of the repayment of the £150.0m corporate bond at maturity,
partially offset by the £75.0m drawdown of the available £85.0m loan
facility provided by Roger De Haan;
· an increase in trade and other receivables of £16.7m; and
· an increase in trust accounts of £18.7m due to seasonality in
the River Cruise and Travel businesses.
The decrease in total liabilities largely reflects:
· a decrease of £100.5m in financial liabilities, which is mainly
due to a reduction of £104.9m in bond and bank loans, as a result of the
repayment of the £150.0m corporate bonds and £31.1m of capital repayments on
Spirit of Discovery and Spirit of Adventure facilities, partially offset by
the £75.0m drawdown of the available £85.0m loan facility provided by Roger
De Haan; and
· an increase of £30.9m in contract liabilities due to seasonality
in the Cruise and Travel businesses.
Going concern
The Directors have performed an assessment of going concern to determine the
adequacy of the Group's financial resources over a period of 16 months from
the date of signing these financial statements; a period selected to include
consideration of the final covenant test date, at 31 January 2026, of the
Group's £50.0m RCF.
This assessment is centred on a base case overlaid with risk-adjusted
financial projections which incorporate scenario analysis and stress tests on
expected business performance.
The Group's base case modelling assumes continued strong performance in the
Cruise division on the back of high load factors and per diems. Travel is also
expected to achieve continued growth in profits. The Insurance business,
however, continues to experience challenge from high inflation in the net
rates charged by partners on our underwriting panel, which puts pressure on
Broking margins in a competitive consumer marketplace.
The Group's severe but plausible stressed scenario incorporates lower load
factors for Ocean Cruise, lower levels of demand in River Cruise, and slower
growth in the Travel business. Downside risks modelled for the Insurance
business reflect the possibility that planned actions to limit inflation of
underwriting net rates do not deliver the expected benefits.
As a result of actions undertaken by management to reduce the administrative
overhead and central cost base last year, both scenarios include an assumption
that the ensuant levels of savings are maintained throughout the assessment
period.
Following the repayment of the £150.0m senior bonds in May of this year, the
Group now operates with a lower level of Available Cash(17)30F. This has
reduced the Group's ability to withstand possible events that are beyond those
contemplated in the severe but plausible stressed scenario modelled.
Notwithstanding this, the Group expects to meet scheduled Ocean Cruise debt
principal repayments as they fall due over the next 16 months, and to also
meet the financial covenants relating to its secured Cruise debt.
In addition, in both the base case and the stressed scenario, the £50.0m RCF
is forecast to remain available for the Group to access throughout the
assessment period, ensuring the Group has sufficient resources to continue in
operation for at least the next 16 months.
Noting that it is not possible to accurately predict all possible future risks
to the Group's trading, based on this analysis and the scenarios modelled, the
Directors concluded that the Group will have sufficient funds to continue to
meet its liabilities as they fall due for a period of at least 16 months from
the date of approval of the condensed consolidated interim financial
statements. They have, therefore, deemed it appropriate to prepare the
financial statements for 31 July 2024 on a going concern basis.
(17) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Dividends and financial priorities for 2024/25
Dividends
Given the Group's priority of reducing Net Debt(18)31F, the Board of Directors
does not recommend payment of an interim dividend for the 2024/25 financial
year, nor would this currently be permissible under financing arrangements and
while the ship debt facility deferred amounts are outstanding.
Financial priorities for 2024/25
The Group's financial priorities for the current financial year are to reduce
Net Debt(18) via capital-light growth, conclude the discussions with Ageas
that could support this objective, continue the growth trajectory of the River
Cruise and Travel businesses, and balance the protection and, ultimately,
growth of policy sales with the delivery of sustainable profitability within
Insurance.
Mark Watkins
Group Chief Financial Officer
10 October 2024
(18) Refer to the Alternative Performance Measures Glossary for definition and
explanation
Principal risks and uncertainties
The Group is subject to a number of risks and uncertainties as part of its
activities. The Board regularly considers these and seeks to ensure that
appropriate processes are in place to manage, monitor and mitigate these
risks. The Board included full details of the risk and uncertainties pertinent
to the Group on pages 46 to 49 of its Annual Report and Accounts for the year
ended 31 January 2024, available at
www.corporate.saga.co.uk/investors/results-reports-presentations/
(http://www.corporate.saga.co.uk/investors/results-reports-presentations/) .
Since the publication of the latest Annual Report and Accounts, the Board
reviewed the list of principal risks and uncertainties (PRUs) and the outlooks
for each. By exception, the following changes were made:
PRUs for which the outlook has worsened
PRU Reason for change in outlook Mitigations
Insurance pricing, underwriting and claims The risk increased primarily in Insurance Broking, due to market-wide · Entered exclusive partnership negotiations.
headwinds across motor, home and travel insurance.
· Experienced management and teams.
· Continued enhancements to our risk and retail pricing tools and models.
· Continuous monitoring of pricing adequacy performance drivers.
· Conservative reserving, where best estimate reserves are calculated
internally and externally by independent actuaries.
· Proactive claims management and settlement.
· Reinsurance and coinsurance programme.
Capability and capacity Ongoing change in the business has put pressure on key subject matter expert · Optimisation of resource in line with our strategic priorities.
resource.
· Key resource plans and strategies in place.
PRUs for which the outlook has improved
PRU Reason for change in outlook
Cyber There has been significant progress in implementing action plans to reduce the
risk exposure.
Breach of Data Protection Act/General Data Protection Regulation There has been significant progress in implementing action plans to reduce the
risk exposure.
Condensed consolidated income statement
for the period ended 31 July 2024
Unaudited Unaudited 12m to
6m to 6m to Jan 2024
Jul 2024 Jul 2023
Note £m £m £m
Revenue from Cruise and Travel services 3 226.8 196.9 410.0
Revenue from Insurance Broking services 3 60.5 62.5 128.7
Other revenue (non-Insurance Underwriting) 3 14.8 13.5 24.8
Non-insurance revenue 3 302.1 272.9 563.5
Insurance revenue 3 102.7 85.2 177.6
Total revenue 3 404.8 358.1 741.1
Increase in credit loss allowance - (0.1) -
Other cost of sales (157.2) (143.2) (301.1)
Cost of sales (non-Insurance Underwriting) 3 (157.2) (143.3) (301.1)
Gross profit (non-Insurance Underwriting) 144.9 129.6 262.4
Insurance service expenses 15 (93.4) (114.8) (249.2)
Net (expense)/income from reinsurance contracts 15 (8.2) 19.3 40.2
Insurance service result 1.1 (10.3) (31.4)
Other income - - 5.0
Administrative and selling expenses (94.9) (101.8) (214.2)
Increase in credit loss allowance (0.7) (0.3) (1.1)
Impairment of non-financial assets (138.3) (68.1) (118.6)
Net finance expense from insurance contracts 15 (4.9) (7.6) (3.5)
Net finance income from reinsurance contracts 15 3.2 4.2 1.9
Net profit/(loss) on disposal of property, plant and equipment and software 0.1 (0.1) (0.5)
Investment income 9.2 0.3 15.4
Finance costs (23.7) (23.7) (44.4)
Loss before tax (104.0) (77.8) (129.0)
Tax (expense)/credit 4 (2.1) 6.8 16.0
Loss for the period (106.1) (71.0) (113.0)
Attributable to:
Equity holders of the parent (106.1) (71.0) (113.0)
Loss per share:
Basic 6 (75.9p) (50.9p) (80.8p)
Diluted 6 (75.9p) (50.9p) (80.8p)
Condensed consolidated statement of comprehensive income
for the period ended 31 July 2024
Unaudited Unaudited 12m to
6m to 6m to Jan 2024
Jul 2024 Jul 2023
£m £m £m
Loss for the period (106.1) (71.0) (113.0)
Other comprehensive income
Other comprehensive income that may be reclassified to the income statement in
subsequent periods
Net losses on hedging instruments during the period (0.8) (1.7) (1.3)
Recycling of previous losses to income statement on matured hedges 0.4 1.3 1.0
Total net losses on cash flow hedges (0.4) (0.4) (0.3)
Associated tax effect - 0.7 0.6
Total other comprehensive (losses)/income with recycling to income statement (0.4) 0.3 0.3
Other comprehensive income that will not be reclassified to the income
statement in subsequent periods
Remeasurement losses on defined benefit plan (3.4) (1.4) (41.1)
Associated tax effect 0.9 0.3 10.3
Total other comprehensive losses without recycling to income statement (2.5) (1.1) (30.8)
Total other comprehensive losses (2.9) (0.8) (30.5)
Total comprehensive losses for the period (109.0) (71.8) (143.5)
Attributable to:
Equity holders of the parent (109.0) (71.8) (143.5)
Condensed consolidated statement of financial position
as at 31 July 2024
Unaudited Unaudited
As at As at As at
31 Jul 2024 31 Jul 2023 31 Jan 2024
Note £m £m £m
Assets
Goodwill 8 206.4 381.5 344.7
Intangible assets 9 63.8 57.9 60.7
Property, plant and equipment 10 583.6 601.2 593.4
Right-of-use assets 11 28.6 30.7 24.6
Financial assets 12 257.8 242.5 252.2
Current tax assets 4.6 4.7 4.8
Deferred tax assets 4 51.4 30.7 49.4
Reinsurance contract assets 15 173.7 147.9 173.2
Inventories 7.9 7.7 8.1
Trade and other receivables 144.4 134.3 127.7
Trust and escrow accounts 56.6 47.2 37.9
Cash and short-term deposits 13 109.3 207.2 188.7
Assets held for sale 19 17.4 31.2 17.4
Total assets 1,705.5 1,924.7 1,882.8
Liabilities
Retirement benefit scheme liability 14 46.5 8.0 47.9
Insurance contract liabilities 15 396.3 353.6 399.3
Provisions 2.4 9.4 8.0
Financial liabilities 12 727.9 863.7 828.4
Deferred tax liabilities 4 17.6 11.7 14.6
Contract liabilities 190.7 184.0 159.8
Trade and other payables 207.7 200.1 201.3
Total liabilities 1,589.1 1,630.5 1,659.3
Equity
Issued capital 17 21.5 21.1 21.3
Share premium 648.3 648.3 648.3
Own shares held reserve (1.4) (1.0) (1.2)
Retained deficit (559.6) (381.7) (452.5)
Share-based payment reserve 10.9 10.4 10.5
Hedging reserve (3.3) (2.9) (2.9)
Total equity 116.4 294.2 223.5
Total equity and liabilities 1,705.5 1,924.7 1,882.8
Condensed consolidated statement of changes in equity
for the period ended 31 July 2024
Attributable to the equity holders of the parent
Share premium Own shares held reserve Retained (deficit)/ Share-based payment reserve Hedging reserve Total equity
earnings
Issued capital
£m £m £m £m £m £m £m
Unaudited
At 1 February 2024 21.3 648.3 (1.2) (452.5) 10.5 (2.9) 223.5
Loss for the period - - - (106.1) - - (106.1)
Other comprehensive losses excluding recycling - - - (2.5) - (0.8) (3.3)
Recycling of previous losses to income statement - - - - - 0.4 0.4
Total comprehensive losses - - - (108.6) - (0.4) (109.0)
Issue of share capital (Note 17) 0.2 - (0.2) - - - -
Share-based payment charge - - - - 1.9 - 1.9
Transfer upon vesting of share options - - - 1.5 (1.5) - -
At 31 July 2024 21.5 648.3 (1.4) (559.6) 10.9 (3.3) 116.4
Unaudited
At 1 February 2023 21.1 648.3 - (309.7) 8.9 (3.2) 365.4
Loss for the period - - - (71.0) - - (71.0)
Other comprehensive (losses)/income excluding recycling - - - (1.1) - 1.1 -
Recycling of previous gains to income statement - - - - - (0.8) (0.8)
Total comprehensive (losses)/income - - - (72.1) - 0.3 (71.8)
Share-based payment charge - - - - 2.4 - 2.4
Own shares transferred - - (1.0) (0.8) - - (1.8)
Transfer upon vesting of share options - - - 0.9 (0.9) - -
At 31 July 2023 21.1 648.3 (1.0) (381.7) 10.4 (2.9) 294.2
Attributable to the equity holders of the parent
Share premium Own shares held reserve Retained (deficit)/ Share-based payment reserve Hedging reserve Total equity
earnings
Issued capital
£m £m £m £m £m £m £m
At 1 February 2023 21.1 648.3 - (309.7) 8.9 (3.2) 365.4
Loss for the period - - - (113.0) - - (113.0)
Other comprehensive losses excluding recycling - - - (30.8) - (0.8) (31.6)
Recycling of previous losses to income statement - - - - - 1.1 1.1
Total comprehensive (losses)/income - - - (143.8) - 0.3 (143.5)
Issue of share capital (Note 17) 0.2 - - - - - 0.2
Share-based payment charge - - - - 3.4 - 3.4
Own shares transferred - - (1.2) (0.8) - - (2.0)
Transfer upon vesting of share options - - - 1.8 (1.8) - -
At 31 January 2024 21.3 648.3 (1.2) (452.5) 10.5 (2.9) 223.5
Condensed consolidated statement of cash flows
for the period ended 31 July 2024
Unaudited Unaudited 12m to
6m to 6m to Jan 2024
Jul 2024 Jul 2023
Note £m £m £m
Loss before tax (104.0) (77.8) (129.0)
Depreciation, impairment and loss on disposal, of property, plant and 14.7 18.0 35.1
equipment and right-of-use assets
Amortisation and impairment of intangible assets and goodwill, and profit or 143.0 72.4 117.2
loss on disposal of software
Impairment of assets held for sale - - 10.4
Share-based payment transactions 1.9 1.6 3.4
Net finance expense from insurance contracts 15 4.9 7.6 3.5
Net finance income from reinsurance contracts 15 (3.2) (4.2) (1.9)
Finance costs 23.7 23.7 44.4
Interest income from investments (9.2) (0.3) (15.4)
Increase in trust and escrow accounts (18.7) (11.0) (1.7)
Movements in other assets and liabilities 3.1 37.6 40.8
56.2 67.6 106.8
Investment income interest received 6.5 5.0 11.9
Interest paid (19.9) (20.7) (38.2)
Income tax received - - 3.2
Net cash flows from operating activities 42.8 51.9 83.7
Investing activities
Proceeds from sale of property, plant and equipment and right-of-use assets 0.1 - -
Purchase of, and payments for the construction of, property, plant and (9.9) (14.4) (26.7)
equipment, and intangible assets
Disposal of financial assets 6.7 26.6 56.4
Purchase of financial assets - (11.8) (11.7)
Net cash flows (used in)/from investing activities (3.1) 0.4 18.0
Financing activities
Payment of principal portion of lease liabilities (3.6) (6.7) (11.6)
Proceeds from borrowings 16 75.0 - -
Repayment of borrowings 16 (181.1) (31.1) (62.2)
Net cash flows used in financing activities (109.7) (37.8) (73.8)
Net (decrease)/increase in cash and cash equivalents (70.0) 14.5 27.9
Cash and cash equivalents at the start of the period 219.6 191.7 191.7
Cash and cash equivalents at the end of the period 13 149.6 206.2 219.6
Notes to the condensed consolidated interim financial statements
1 Corporate information
Saga plc (the Company) is a public limited company incorporated and domiciled
in the United Kingdom under the Companies Act 2006 (registration number
08804263). The Company is registered in England and its registered office is
located at 3 Pancras Square, London N1C 4AG.
The condensed consolidated interim financial statements of Saga plc and the
entities controlled by the Company (its subsidiaries, collectively Saga Group
or the Group) for the six-month period ended 31 July 2024 were authorised for
issue in accordance with a resolution of the Directors on 10 October 2024.
2.1 Basis of preparation
These financial statements comprise the condensed consolidated interim
financial statements (the financial statements) of the Group for the six-month
period to 31 July 2024.
The financial statements are prepared on a going concern basis and on a
historical cost basis, except as otherwise stated. The Group reviewed the
appropriateness of the going concern basis in preparing the financial
statements, as set out in Note 2.7. The Directors concluded that it remains
appropriate to adopt the going concern basis in preparing the financial
statements.
The Group's financial statements are presented in pounds sterling which is
also the parent company's functional currency, and all values are rounded to
the nearest hundred thousand (£m), except when otherwise indicated.
The financial statements are prepared in accordance with the Disclosure and
Transparency Rules (DTR) of the Financial Conduct Authority (FCA) and in
accordance with International Accounting Standard (IAS) 34 'Interim Financial
Reporting' as adopted for use in the UK. The material accounting policies
applied by the Group are set out in the Annual Report and Accounts for the
year ended 31 January 2024, as referenced in Note 2.3. These are consistent
with International Financial Reporting Standards (IFRS), as issued by the
International Accounting Standards Board and adopted by the UK Endorsement
Board for use in the United Kingdom.
The financial statements are unaudited but have been reviewed by KPMG LLP and
include their review conclusion. The financial statements do not constitute
statutory accounts as defined in Section 434 of the Companies Act 2006. The
results from the year ended 31 January 2024 were taken from the Group's Annual
Report and Accounts for that year. Therefore, these financial statements
should be read in conjunction with the Annual Report and Accounts for the year
ended 31 January 2024 that were prepared in accordance with UK-adopted
International Accounting Standards.
Statutory financial statements for the year ended 31 January 2024 were
delivered to the Registrar of Companies. The auditor's report on those
financial statements: (i) was unqualified; (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis without
qualifying their report; and (iii) did not constitute a statement under
Section 498 (2) or (3) of the Companies Act 2006.
2.2 Basis of consolidation
The financial statements comprise the financial position and results of each
of the companies within the Group. Where necessary, adjustments were made to
the financial position and results of subsidiaries to bring the accounting
policies used into line with those used by the Group. All intra-group
transactions, balances, income and expenses were eliminated on consolidation.
The policies set out below were applied consistently throughout the periods
presented to items considered material to the condensed consolidated interim
financial statements.
2.3 Summary of material accounting policies
The financial statements for the period ended 31 July 2024 were prepared,
applying the same accounting policies that were applied in the preparation of
the Group's published consolidated financial statements for the year ended 31
January 2024.
Full details of the accounting policies of the Group can be found in the
Annual Report and Accounts for the year ended 31 January 2024, available at
www.corporate.saga.co.uk (http://www.corporate.saga.co.uk) .
2.4 Standards issued but not yet effective
The following is a list of standards, and amendments to standards, that are in
issue but are not effective or adopted as at 31 July 2024.
a) Lack of exchangeability (amendments to IAS 21)
The amendments contain guidance to specify when a currency is exchangeable and
how to determine the exchange rate when it is not. The amendments are
effective for annual reporting periods beginning on, or after, 1 January 2025.
The amendments are not expected to have a material impact on the Group's
financial statements. The amendments are not currently endorsed by the UK
Endorsement Board.
b) IFRS 18 'Presentation and Disclosures in Financial Statements'
IFRS 18 includes requirements for all entities applying IFRS for the
presentation and disclosure of information in financial statements. IFRS 18
will replace IAS 1 'Presentation of Financial Statements'. IFRS 18 introduces
three defined categories for income and expenses: operating, investing and
financing; to improve the structure of the income statement, and requires all
companies to provide new defined subtotals, including operating profit. The
standard is effective for annual reporting periods beginning on, or after, 1
January 2027. The impact of these amendments on the Group's financial
statements is still being assessed. The standard is not currently endorsed by
the UK Endorsement Board.
c) Amendments to IFRS 9 and IFRS 7 regarding the classification and
measurement of financial instruments
The amendments address matters identified during the post-implementation
review of the classification and measurement requirements of IFRS 9 'Financial
Instruments'. The standard is effective for annual reporting periods beginning
on, or after, 1 January 2026. The amendments are not expected to have a
material impact on the Group's financial statements. The amendments are not
currently endorsed by the UK Endorsement Board.
2.5 First time adoption of new standards and amendments
The following is a list of standards, and amendments to standards, that became
effective, or were adopted, for the first time during the period ended 31 July
2024.
a) Classification of liabilities as current or non-current (amendments
to IAS 1)
The amendments aim to promote consistency in applying the requirements by
helping companies determine whether, in the statement of financial position,
debt and other liabilities with an uncertain settlement date should be
classified as current (due, or potentially due, to be settled within one year)
or non-current. The amendments are effective for annual periods beginning on,
or after, 1 January 2024. The amendments had no effect on the Group's
financial statements.
b) Definition of lease liability in a sale and leaseback (amendment to
IFRS 16)
The amendment clarifies how a seller-lessee subsequently measures sale and
leaseback transactions that satisfy the requirements in IFRS 15 to be
accounted for as a sale. The amendment is effective for annual reporting
periods beginning on, or after, 1 January 2024. The amendments had no effect
on the Group's financial statements.
c) Supplier finance arrangements (amendments to IAS 7 and IFRS 7)
The amendments add disclosure requirements, and 'signposts' within existing
disclosure requirements, that ask entities to provide qualitative and
quantitative information about supplier finance arrangements. The amendments
are effective for annual reporting periods beginning on, or after, 1 January
2024. The amendments had no effect on the Group's financial statements.
d) Non-current liabilities with covenants (amendments to IAS 1)
The amendments clarify how conditions with which an entity must comply within
twelve months after the reporting period affect the classification of a
liability. The amendments are effective for annual reporting periods beginning
on, or after, 1 January 2024. The amendments had no effect on the Group's
financial statements.
2.6 Significant accounting judgements, estimates and assumptions
Full details of significant accounting judgements, estimates and assumptions
used in the application of the Group's accounting policies can be found in the
Annual Report and Accounts for the year ended 31 January 2024, available at
www.corporate.saga.co.uk (http://www.corporate.saga.co.uk) . There were no
changes to the principles in these critical accounting estimate and judgement
areas during the six months ended 31 July 2024.
2.7 Going concern
The Directors have performed an assessment of going concern to determine the
adequacy of the Group's financial resources over a period of 16 months from
the date of signing these financial statements; a period selected to include
consideration of the final covenant test date, at 31 January 2026, of the
Group's £50.0m Revolving Credit Facility (RCF).
This assessment is centred on a base case overlaid with risk-adjusted
financial projections which incorporate scenario analysis and stress tests on
expected business performance.
The Group's base case modelling assumes continued strong performance in the
Cruise division on the back of high load factors and per diems. Travel is also
expected to achieve continued growth in profits. The Insurance business,
however, continues to experience challenge from high inflation in the net
rates charged by partners on our underwriting panel, which puts pressure on
Broking margins in a competitive consumer marketplace.
The Group's severe but plausible stressed scenario incorporates lower load
factors for Ocean Cruise, lower levels of demand in River Cruise, and slower
growth in the Travel business. Downside risks modelled for the Insurance
business reflect the possibility that planned actions to limit inflation of
underwriting net rates do not deliver the expected benefits.
As a result of actions undertaken by management to reduce the administrative
overhead and central cost base last year, both scenarios include an assumption
that the ensuant levels of savings are maintained throughout the assessment
period.
Following the repayment of the £150.0m senior bonds in May of this year, the
Group now operates with a lower level of Available Cash(1)32F. This has
reduced the Group's ability to withstand possible events that are beyond those
contemplated in the severe but plausible stressed scenario modelled.
Notwithstanding this, the Group expects to meet scheduled Ocean Cruise debt
principal repayments as they fall due over the next 16 months, and to also
meet the financial covenants relating to its secured Cruise debt.
In addition, in both the base case and the stressed scenario, the £50.0m RCF
is forecast to remain available for the Group to access throughout the
assessment period, ensuring the Group has sufficient resources to continue in
operation for at least the next 16 months.
Noting that it is not possible to accurately predict all possible future risks
to the Group's trading, based on this analysis and the scenarios modelled, the
Directors concluded that the Group will have sufficient funds to continue to
meet its liabilities as they fall due for a period of at least 16 months from
the date of approval of the condensed consolidated interim financial
statements. They have, therefore, deemed it appropriate to prepare the
financial statements for 31 July 2024 on a going concern basis.
(1) Refer to the Alternative Performance Measures Glossary for definition and
explanation
3 Segmental information
For management purposes, the Group is organised into business units based on
their products and services. The Group has three reportable operating segments
as follows:
· Cruise and Travel: comprises the operation and delivery of ocean and river
cruise holidays, as well as package tour and other holiday products. The Group
owns and operates two ocean cruise ships. All other holiday and river cruise
products are packaged together with third-party supplied accommodation,
flights and other transport arrangements.
· Insurance: comprises the provision of general insurance products. Revenue
is derived primarily from insurance premiums and broking revenues. The segment
is further analysed into four product sub-segments:
o Insurance Broking, consisting of:
§ Motor broking
§ Home broking
§ Other broking
o Insurance Underwriting
· Other Businesses and Central Costs: comprises the Group's other
businesses and its central cost base. The other businesses primarily include
Saga Money (the personal finance product offering), Saga Publishing and the
Group's mailing and printing business, CustomerKNECT.
Segment performance is evaluated using the Group's key performance measure of
Underlying Profit Before Tax(2)33F. Items not allocated to a segment relate to
transactions that do not form part of the ongoing segment performance or which
are managed at a Group level.
Transfer prices between operating segments are set on an arm's-length basis in
a manner similar to transactions with third parties. Segment income, expenses
and results include transfers between business segments which are then
eliminated on consolidation.
All revenue is generated solely in the UK.
Seasonality
The Group is subject to seasonal fluctuations in both its Insurance, and
Cruise and Travel, segments resulting in varying profits over each quarter.
The Insurance segment experiences increased motor insurance sales in the month
of March and, to a lesser degree, September due to the issue of new vehicle
registration plates; and increased home insurance sales in March, June and
September coinciding with the historic quarter days. In the motor Insurance
Underwriting business, a greater proportion of claims are notified in the
second half of the financial year.
Typically, increased holiday departures in the shoulder months of May, June
and September and low departure volumes during July and August create seasonal
fluctuations in the profit of the Cruise and Travel segment.
Unaudited Cruise and Travel £m Insurance
6m to
Jul 2024
Motor broking Home broking Other broking Under-writing £m Total Other Adjustments Total
£m £m £m £m Businesses
£m
£m
and Central
Costs
£m
Non-insurance revenue 226.8 22.1 21.0 17.4 4.9 65.4 12.3 (2.4) 302.1
Insurance revenue - 5.1(3)34F - 0.5 97.1 102.7 - - 102.7
Revenue 226.8 27.2 21.0 17.9 102.0 168.1 12.3 (2.4) 404.8
Cost of sales (non-Insurance Underwriting) (149.7) (8.3) - 4.0 - (4.3) (3.2) - (157.2)
Gross profit/(loss) (non-Insurance Underwriting) 77.1 13.8 21.0 21.4 4.9 61.1 9.1 (2.4) 144.9
Insurance service expenses - (11.4) - - (82.0) (93.4) - - (93.4)
Net income from reinsurance contracts - (0.3) - - (7.9) (8.2) - - (8.2)
Insurance service result - (6.6) - 0.5 7.2 1.1 - - 1.1
Administrative and selling expenses (38.1) (10.7) (15.4) (16.6) - (42.7) (17.2) 2.4 (95.6)
Impairment of non-financial assets - - - - - - - (138.3) (138.3)
Net finance expense from insurance contracts - - - - (4.9) (4.9) - - (4.9)
Net finance income from reinsurance contracts - - - - 3.2 3.2 - - 3.2
Net loss on disposal of property, plant and equipment 0.1 - - - - - - - 0.1
Investment income 0.8 0.5 - - 7.2 7.7 0.7 - 9.2
Finance costs (9.5) - - - - - (14.2) - (23.7)
Profit/(loss) before tax 30.4 (3.0) 5.6 5.3 17.6 25.5 (21.6) (138.3) (104.0)
Reconciliation to Underlying Profit/(Loss) Before Tax(2)35F
Profit/(loss) before tax 30.4 (3.0) 5.6 5.3 17.6 25.5 (21.6) (138.3) (104.0)
Net fair value loss on derivative financial instruments 0.6 - - - - - - - 0.6
Impairment of goodwill - - - - - - - 138.3 138.3
Costs associated with Roger De Haan loan facility - - - - - - 1.2 - 1.2
Restructuring costs 0.6 1.2 - - 0.1 1.3 2.3 - 4.2
Foreign exchange movement on river cruise lease liabilities (0.5) - - - - - - - (0.5)
Fair value gains on debt securities - - - - (2.7) (2.7) - - (2.7)
Changes in underwriting discount rates on non-periodical payment order (PPO) - - - - (0.3) (0.3) - - (0.3)
liabilities
Onerous contract provisions - 3.1 - - (12.8) (9.7) - - (9.7)
IFRS 16 adjustment on river cruise vessels 0.1 - - - - - - - 0.1
Underlying Profit/(Loss) Before Tax(2) 31.2 1.3 5.6 5.3 1.9 14.1 (18.1) - 27.2
Unaudited Cruise and Travel £m Insurance
6m to
Jul 2023
Motor broking Home broking Other broking Under-writing £m Total Other Adjustments Total
£m £m £m £m Businesses
£m
£m
and Central
Costs
£m
Non-insurance revenue 196.9 14.1 26.7 21.7 3.5 66.0 12.9 (2.9) 272.9
Insurance revenue - 9.8(3)36F - 0.4 75.0 85.2 - - 85.2
Revenue 196.9 23.9 26.7 22.1 78.5 151.2 12.9 (2.9) 358.1
Cost of sales (non-Insurance Underwriting) (139.6) (4.2) - 3.8 - (0.4) (3.3) - (143.3)
Gross profit/(loss) (non-Insurance Underwriting) 57.3 9.9 26.7 25.5 3.5 65.6 9.6 (2.9) 129.6
Insurance service expenses - (13.6) - - (101.2) (114.8) - - (114.8)
Net income from reinsurance contracts - 0.2 - - 19.1 19.3 - - 19.3
Insurance service result - (3.6) - 0.4 (7.1) (10.3) - - (10.3)
Administrative and selling expenses (35.0) (10.5) (18.1) (13.6) - (42.2) (27.7) 2.8 (102.1)
Impairment of non-financial assets - - - - - - - (68.1) (68.1)
Net finance expense from insurance contracts - - - - (7.6) (7.6) - - (7.6)
Net finance income from reinsurance contracts - - - - 4.2 4.2 - - 4.2
Net loss on disposal of property, plant and equipment (0.1) - - - - - - - (0.1)
Investment income/(loss) 0.1 0.1 - - (0.5) (0.4) 0.6 - 0.3
Finance costs (11.2) - - - - - (12.5) - (23.7)
Profit/(loss) before tax 11.1 (4.1) 8.6 12.3 (7.5) 9.3 (30.0) (68.2) (77.8)
Reconciliation to Underlying Profit/(Loss) Before Tax(2)F
Profit/(loss) before tax 11.1 (4.1) 8.6 12.3 (7.5) 9.3 (30.0) (68.2) (77.8)
Net fair value loss on derivative financial instruments 0.9 - - - - - - - 0.9
Impairment of goodwill - - - - - - - 68.1 68.1
Arrangement fee on Roger De Haan loan facility - - - - - - 1.0 - 1.0
Restructuring costs 0.9 - - - - - 5.0 - 5.9
Acquisition costs relating to the Big Window Consulting Limited (the Big - - - - - - - 0.1 0.1
Window)
Foreign exchange movement on river cruise lease liabilities (0.6) - - - - - - - (0.6)
Fair value losses on debt securities - - - - 4.8 4.8 - - 4.8
Changes in underwriting discount rates on non-PPO liabilities - - - - (3.1) (3.1) - - (3.1)
Onerous contract provisions - 7.0 - - 2.2 9.2 - - 9.2
IFRS 16 adjustment on river cruise vessels (0.5) - - - - - - - (0.5)
Underlying Profit/(Loss) Before Tax(2) 11.8 2.9 8.6 12.3 (3.6) 20.2 (24.0) - 8.0
12m to Cruise and Travel £m Insurance
Jan 2024
Motor broking Home broking Other broking Under-writing £m Total Other Adjustments Total
£m £m £m £m Businesses
£m
£m
and Central
Costs
£m
Non-insurance revenue 410.0 32.3 55.4 41.0 4.8 133.5 25.1 (5.1) 563.5
Insurance revenue - 12.7(3)38F2 - 0.8 164.1 177.6 - - 177.6
Revenue 410.0 45.0 55.4 41.8 168.9 311.1 25.1 (5.1) 741.1
Cost of sales (non-Insurance Underwriting) (292.5) (8.7) - 7.9 - (0.8) (7.8) - (301.1)
Gross profit/(loss) (non-Insurance Underwriting) 117.5 23.6 55.4 48.9 4.8 132.7 17.3 (5.1) 262.4
Insurance service expenses - (22.0) - - (227.2) (249.2) - - (249.2)
Net income from reinsurance contracts - 0.1 - - 40.1 40.2 - - 40.2
Insurance service result - (9.2) - 0.8 (23.0) (31.4) - - (31.4)
Other income 5.0 - - - - - - - 5.0
Administrative and selling expenses (67.7) (23.7) (35.7) (24.7) - (84.1) (68.3) 4.8 (215.3)
Impairment of non-financial assets - (1.2) - - (4.1) (5.3) (8.4) (104.9) (118.6)
Net finance expense from insurance contracts - - - - (3.5) (3.5) - - (3.5)
Net finance income from reinsurance contracts - - - - 1.9 1.9 - - 1.9
Net loss on disposal of property, plant and equipment and software - (0.1) - - - (0.1) (0.4) - (0.5)
Investment income 0.8 0.3 - - 12.1 12.4 2.2 - 15.4
Finance costs (20.8) (0.1) - - - (0.1) (23.5) - (44.4)
Profit/(loss) before tax 34.8 (10.4) 19.7 25.0 (11.8) 22.5 (81.1) (105.2) (129.0)
Reconciliation to Underlying Profit/(Loss) Before Tax(2)39F
Profit/(loss) profit before tax 34.8 (10.4) 19.7 25.0 (11.8) 22.5 (81.1) (105.2) (129.0)
Net fair value loss on derivative financial instruments 1.4 - - - - - - - 1.4
Impairment of goodwill - - - - - - - 104.9 104.9
Impairment/loss on disposal of assets - 1.2 - - 1.9 3.1 8.8 - 11.9
Amortisation of fees and costs on Roger De Haan loan facility - - - - - - 0.4 - 0.4
Restructuring costs 3.4 3.8 - - 1.4 5.2 31.7 - 40.3
Acquisition and disposal costs relating to the Big Window - - - - - - - 0.3 0.3
Foreign exchange movement on river cruise lease liabilities (0.6) - - - - - - - (0.6)
Fair value gains on debt securities - - - - (3.5) (3.5) - - (3.5)
Changes in underwriting discount rates on non-PPO liabilities - - - - (1.0) (1.0) - - (1.0)
Onerous contract provision - 0.5 - - 11.6 12.1 - - 12.1
Ocean Cruise discretionary ticket refunds and costs 1.0 - - - - - - - 1.0
Underlying Profit/(Loss) Before Tax (2) 40.0 (4.9) 19.7 25.0 (1.4) 38.4 (40.2) - 38.2
a) Disaggregation of revenue
Unaudited
6m to Jul 2024
Insurance
Major product lines Cruise and Travel Underwriting Broking Other revenue Total Insurance Other Total
£m
£m £m Businesses £m
£m £m
and Central
Costs
£m
Ocean Cruise 121.5 121.5
River Cruise and Travel 105.3 105.3
Motor broking 5.1 22.1 - 27.2 27.2
Home broking - 21.0 - 21.0 21.0
Other broking 0.5 17.4 - 17.9 17.9
Insurance Underwriting 97.1 - 4.9 102.0 102.0
Money 2.8 2.8
Publishing and CustomerKNECT 6.8 6.8
Other 0.3 0.3
226.8 102.7 60.5 4.9 168.1 9.9 404.8
Unaudited
6m to Jul 2023
Insurance
Major product lines Cruise and Travel Underwriting Broking Other revenue Total Insurance Other Total
£m
£m £m Businesses £m
£m £m
and Central
Costs
£m
Ocean Cruise 103.8 103.8
River Cruise and Travel 93.1 93.1
Motor broking 9.8 14.1 - 23.9 23.9
Home broking - 26.7 - 26.7 26.7
Other broking 0.4 21.7 - 22.1 22.1
Insurance Underwriting 75.0 - 3.5 78.5 78.5
Money 3.7 3.7
Publishing and CustomerKNECT 5.8 5.8
Other 0.5 0.5
196.9 85.2 62.5 3.5 151.2 10.0 358.1
12m to Jan 2024
Insurance
Major product lines Cruise and Travel Underwriting Broking Other revenue Total Insurance Other Total
£m
£m £m Businesses £m
£m £m
and Central
Costs
£m
Ocean Cruise 210.0 210.0
River Cruise and Travel 200.0 200.0
Motor broking 12.7 32.3 - 45.0 45.0
Home broking - 55.4 - 55.4 55.4
Other broking 0.8 41.0 - 41.8 41.8
Insurance Underwriting 164.1 - 4.8 168.9 168.9
Money 6.4 6.4
Publishing and CustomerKNECT 12.5 12.5
Other 1.1 1.1
410.0 177.6 128.7 4.8 311.1 20.0 741.1
( )
(2) Refer to the Alternative Performance Measures Glossary for definition and
explanation
3 This relates to amounts received by the Group's Insurance Broking entity in
relation to insurance policies that are underwritten by the Group, which are
accounted for as insurance premiums. This includes the street pricing
adjustment
4 Tax
The major components of the income tax expense/(credit) are:
Unaudited Unaudited 12m to
6m to 6m to Jan 2024
Jul 2024 Jul 2023
£m £m £m
Condensed consolidated income statement
Current income tax
Current income tax charge - - -
Adjustments in respect of previous periods 0.2 (0.3) (3.6)
0.2 (0.3) (3.6)
Deferred tax
Relating to origination and reversal of temporary differences 2.4 (5.6) (11.5)
Adjustments in respect of previous periods (0.5) (0.9) (0.9)
1.9 (6.5) (12.4)
Tax expense/(credit) in the income statement 2.1 (6.8) (16.0)
The Group's tax charge for the period was £2.1m (July 2023: £6.8m credit)
representing a tax effective rate of 6.1% (July 2023: 70.1%) before the
impairment of goodwill. In both the current and prior periods, the difference
between the Group's tax effective rate and the standard rate of corporation
tax, was mainly due to the Group's Ocean Cruise business being in the tonnage
tax regime.
Adjustments in respect of previous periods include adjustments for the
over-provision of the tax charge in prior periods of £0.3m (July 2023: £1.2m
over-provision).
Reconciliation of net deferred tax assets
Unaudited Unaudited 12m to
6m to 6m to Jan 2024
July 2024 Jul 2023
£m £m £m
At 1 February 34.8 11.5 11.5
Tax (charge)/credit recognised in the income statement (1.9) 6.5 12.4
Tax credit recognised in other comprehensive income 0.9 1.0 10.9
At the end of the period 33.8 19.0 34.8
On 3 March 2021, it was announced that the corporation tax rate will increase
from 19% to 25% from 1 April 2023. This increase was substantively enacted on
24 May 2021. As a result, the closing deferred tax balances at the statement
of financial position date were reflected at 25%. Net deferred tax assets are
expected to be normally settled in more than 12 months.
5 Dividends
No ordinary dividends were declared, nor paid, during the current and prior
periods.
The distributable reserves of Saga plc are in a deficit position as at 31 July
2024, and are equal to the retained earnings reserve. If necessary, its
subsidiary companies hold reserves from which a dividend could be paid.
Subsidiary distributable reserves are available immediately, with the
exception of companies within the River Cruise, Travel and Insurance
Underwriting businesses, which require regulatory approval before any
dividends can be declared and paid. Under the terms of the Ocean Cruise ship
debt facilities, dividends remain restricted until the ship debt principal
repayments that were deferred as part of the ship debt repayment holiday are
fully repaid (Note 16). In addition, under the terms of the RCF, dividends
also remain restricted.
6 Loss per share
Basic loss per share is calculated by dividing the loss after tax for the
period attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the period. Diluted loss
per share is calculated by also including the weighted average number of
ordinary shares that would be issued on conversion of all potentially dilutive
options.
There were no transactions involving ordinary shares, or potential ordinary
shares, between the reporting date and the date of authorisation of these
financial statements.
The calculation of basic and diluted loss per share is as follows:
Unaudited Unaudited
6m to 6m to 12m to
Jul 2024 Jul 2023 Jan 2024
£m £m £m
Loss attributable to ordinary equity holders (106.1) (71.0) (113.0)
Weighted average number of ordinary shares 'm 'm 'm
Ordinary shares as at 1 February 139.8 139.5 139.5
Movement during the period - (0.1) 0.3
Ordinary shares as at the end of the period 139.8 139.4 139.8
Weighted average number of ordinary shares for 139.8 139.4 139.8
basic loss per share and diluted loss per share
Basic loss per share (75.9p) (50.9p) (80.8p)
Diluted loss per share (75.9p) (50.9p) (80.8p)
The table below reconciles between basic loss per share and Underlying Basic
Earnings Per Share(4)40F:
Unaudited Unaudited 6m to
6m to Jul 2023 12m to
Jul 2024 Jan 2024
Basic loss per share (75.9p) (50.9p) (80.8p)
Adjusted for:
Net fair value loss on derivative financial instruments 0.4p 0.2p 0.8p
Impairment, and net loss on disposal, of assets - - 6.8p
Impairment of Insurance Broking goodwill 98.9p 48.8p 75.0p
Acquisition and disposal costs relating to the Big Window - 0.1p 0.2p
Onerous contract provision (7.1p) 1.9p 6.9p
Amortisation of fees and costs on Roger De Haan loan facility 0.9p 0.2p 0.2p
Foreign exchange movement on lease liabilities (0.3p) (0.1p) (0.4p)
Fair value (gains)/losses on debt securities (1.9p) 1.0p (2.0p)
Changes in underwriting discount rates on non-PPO liabilities (0.2p) (0.6p) (0.6p)
Restructuring costs 3.1p 1.2p 23.3p
Ocean Cruise discretionary ticket refunds and associated costs - - 0.6p
IFRS 16 lease accounting adjustment on river cruise vessels - (0.1p) -
Underlying Basic Earnings Per Share(4) 17.9p 1.7p 30.0p
(4) Refer to the Alternative Performance Measures Glossary for definition and
explanation
7 Business combinations and disposals
a) Acquisitions
There were no business acquisitions in the period ended 31 July 2024 or the
period ended 31 July 2023.
b) Disposals
There were no material business disposals in the period ended 31 July 2024 or
the period ended 31 July 2023.
8 Goodwill
Goodwill acquired through business combinations was allocated to Cash
Generating Units (CGUs) for the purpose of impairment testing. The carrying
value of goodwill by CGU is as follows:
Unaudited Unaudited
As at As at As at Jan 2024
31 Jul 2024 31 Jul 2023
£m £m £m
Insurance Broking 206.4 381.5 344.7
206.4 381.5 344.7
The Group tests all goodwill balances for impairment at least annually, and
twice-yearly if indicators of impairment exist at the interim reporting date
of 31 July. The impairment test compares the recoverable amount of each CGU to
the carrying value of its net assets including the value of the allocated
goodwill.
On 1 January 2022, new pricing rules arising from the implementation of
recommendations included in the FCA's General Insurance Pricing Practices
market study came into effect. As a result, and against the background of a
highly competitive motor insurance market, the Group saw a fall in policy
volumes in the period to 31 July 2023 and year to 31 January 2024. In the
periods to 31 July 2024 and 31 July 2023, high claims cost inflation in a
competitive market continued to have an adverse impact on the expected future
profitability of the Insurance business. Management considered these trading
impacts to constitute indicators of impairment and, therefore, conducted full
impairment reviews of the Insurance Broking CGU as at 31 July 2023, 31 January
2024 and 31 July 2024.
At each review date, the recoverable amount of the Insurance Broking CGU was
determined based on a value-in-use calculation using nominal cash flow
projections from the Group's latest five-year financial forecasts to 2028/29,
which were derived using past experience of the Group's trading, combined with
the anticipated impact of changes in macroeconomic and regulatory factors. A
terminal value was calculated using the Gordon Growth Model based on the fifth
year of those projections and a terminal growth rate calculated using an
assumption of 2.0% (July 2023: 2.0%; January 2024: 2.0%) as the expected
long-term target rate of inflation for the UK economy. The cash flows were
then discounted to present value using a suitably risk-adjusted nominal
discount rate based on a market-participant view of the cost of capital and
debt relevant to the insurance industry.
As at 31 July 2024, the pre-tax discount rate used for the Insurance Broking
CGU was 14.7% (July 2023: 13.8%; January 2024: 13.0%). The Group's five-year
financial forecasts incorporate the modelled impact of the new pricing rules
and the estimated impact this will likely have on future new business pricing
and retention rates. As per IAS 36.44, incremental cash flows directly
attributable to growth initiatives not yet enacted at the statement of
financial position date were removed for the purpose of the value-in-use
calculation.
The Group also considered the impact of downside stresses, both in terms of
adverse impacts to the cash flow projections and to the discount rate. For the
cash flow stress test, the Group modelled the impact of a more prudent outlook
on the current competitive challenges seen in the insurance broking market, in
combination with a more cautious terminal growth rate based on a more
conservative assumption of 1.5% (July 2023: 1.5%; January 2024: 1.5%), as the
outlook for long-term growth of the UK economy. For the discount rate stress
test, the Group applied risk premia of +0.5ppts at 31 July 2024 (July 2023:
+0.7ppts; January 2024: +0.2ppts).
The deficit of the Insurance Broking CGU against the carrying value of
goodwill at the time of the review of £344.7m at 31 July 2024 (after
recognising an impairment charge of £36.8m at 31 January 2024), £449.6m at
31 July 2023, and £381.5m at 31 January 2024 (after recognising an impairment
charge of £68.1m at 31 July 2023), was as follows:
(Deficit)/headroom £m
Base scenario Cash flow stress test scenario Discount rate stress test scenario
31 31 31 January 2024 31 31 31 January 2024 31 31 31 January 2024
July July 2023 July July 2023 July July 2023
2024 2024 2024
Insurance Broking (72.0) 11.6 (17.8) (204.5) (88.7) (55.7) (81.8) (9.8) (25.0)
At 31 July 2023, the Group determined that the recoverable amount of the
goodwill was below the carrying value, and so the Directors took the decision
to impair the goodwill by £68.1m, based on a probability-weighted assessment
of the base and stressed forecast cash flows modelled.
The market challenges in Insurance persisted through the second half of the
year to 31 January 2024. Management, therefore, considered it necessary to
perform a further impairment assessment of goodwill as at 31 January 2024.
Forecast cash flows consistent with the latest five-year plan and further
stress tests, including the impact of a slower recovery from high claims
inflation, were modelled. Again, and applying a probability weighting to the
base and stressed forecast cash flows modelled, management took the decision
to impair goodwill by a further £36.8m, taking the total impairment charge
for the year to £104.9m.
At 31 July 2024, the Group, again, determined that the recoverable amount of
the goodwill was below the carrying value, and so the Directors took the
decision to impair the goodwill by a further £138.3m, based on a probability
weighted assessment of the forecast cash flows modelled.
The (deficit)/headroom calculated is sensitive to the discount rate and
terminal growth rate assumed, and to changes in the projected cash flows of
the CGU. Increased inflationary pressures on claims, the evolving market
response to the regulatory changes introduced in early 2022 and, in
particular, the extent to which market prices move against Saga in a period of
heightened global economic uncertainty, combine to increase the range of
possible cash flow outcomes in management's modelling. A quantitative
sensitivity analysis for each of these at 31 July 2024, and its impact on the
base scenario (deficit)/headroom against the carrying value of goodwill at the
time of the review of £344.7m, is as follows:
Pre-tax discount rate Terminal growth rate Cash flow (annual)
+1.0ppt -1.0ppt £m +1.0ppt -1.0ppt £m +10% -10%
£m £m £m £m
Insurance Broking (19.0) 22.0 23.2 (18.8) 22.8 (22.8)
9 Intangible fixed assets
During the period, the Group capitalised £7.8m (July 2023: £10.9m) of
software assets and charged £4.7m (July 2023: £4.3m) of amortisation and
impairment to its intangible assets. The Group did not dispose of any assets
in the period to 31 July 2024 (July 2023: none).
10 Property, plant and equipment
During the period, the Group capitalised assets with a cost of £1.4m (July
2023: £1.7m), disposed of assets with a net book value of £nil (July 2023:
£0.1m) and charged £11.2m (July 2023: £11.4m) of depreciation and
impairment to its property, plant and equipment. The profit arising on
disposal was £0.1m (July 2023: £0.1m loss).
At 31 July 2024, capital amounts contracted for but not provided for, in the
financial statements, amounted to £nil (July 2023: £nil).
Impairment review of property, plant and equipment
The Directors did not consider it necessary to conduct an impairment review of
property, plant and equipment at 31 July 2024 since no new indicators of
impairment were identified. In the prior period, the Directors concluded that
there were no indicators of impairment at 31 July 2023 and, accordingly, no
impairment review was deemed necessary.
11 Right-of-use assets
During the period, the Group capitalised assets with a cost of £7.6m (July
2023: £6.5m) and charged £3.6m (July 2023: £6.5m) of depreciation and
impairment to its right-of-use assets. The Group did not dispose of any assets
in the period to 31 July 2024 (July 2023: none).
Right-of-use assets capitalised in the period ended 31 July 2024 primarily
relate to the river cruise ship, Spirit of the Douro. Right-of-use assets
capitalised in the period ended 31 July 2023 primarily relate to long
leasehold land buildings, vehicles and the river cruise ship, Amadeus Elegant.
At 31 July 2024, the value of lease liabilities contracted for but not
provided for in the financial statements in respect of right-of-use assets
amounted to £9.9m (July 2023: £nil). This lease commitment relates to the
river cruise vessel, Spirit of the Moselle.
Impairment review of right-of-use assets
The Group did not consider it necessary to conduct an impairment review of
right-of-use assets as at 31 July 2024 since no new indicators of impairment
were identified. In the prior period, the Directors concluded that there were
no indicators of impairment at 31 July 2023 and, accordingly, no impairment
review was deemed necessary.
12 Financial assets and financial liabilities
a) Financial assets
Unaudited Unaudited As at
As at As at 31 Jan 2024
31 Jul 2024 31 Jul 2023
Note £m £m £m
Fair value through profit and loss (FVTPL)
Foreign exchange forward contracts - 0.1 -
Money market funds 13 42.5 0.7 32.8
Debt securities 215.1 230.2 219.1
257.6 231.0 251.9
FVTPL designated in a hedging relationship
Foreign exchange forward contracts - 0.2 -
Fuel oil swaps 0.2 0.8 0.3
0.2 1.0 0.3
Amortised cost
Deposits with financial institutions - 10.5 -
- 10.5 -
Total financial assets 257.8 242.5 252.2
Current 107.8 33.6 74.1
Non-current 150.0 208.9 178.1
257.8 242.5 252.2
The Group's financial assets are analysed by Moody's credit risk rating from
the Group Chief Financial Officer's Review.
b) Financial liabilities
Unaudited Unaudited As at
As at As at 31 Jan 2024
31 Jul 2024 31 Jul 2023
Note £m £m £m
FVTPL
Foreign exchange forward contracts 0.8 0.7 0.5
0.8 0.7 0.5
FVTPL designated in a hedging relationship
Foreign exchange forward contracts 3.3 3.8 2.7
Fuel oil swaps 0.5 0.4 0.8
3.8 4.2 3.5
Amortised cost
Bonds, ship loans and loan facility with Roger De Haan 16 691.3 825.3 796.2
Lease liabilities 29.8 31.8 26.3
Bank overdrafts 13 2.2 1.7 1.9
723.3 858.8 824.4
Total financial liabilities 727.9 863.7 828.4
Current 72.6 226.3 238.2
Non-current 655.3 637.4 590.2
727.9 863.7 828.4
c) Fair value hierarchy
Unaudited Unaudited
As at 31 Jul 2024 As at 31 Jul 2023
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m £m £m £m £m £m £m £m
Financial assets measured at fair value
Foreign exchange forwards - - - - - 0.3 - 0.3
Fuel oil swaps - 0.2 - 0.2 - 0.8 - 0.8
Debt securities 215.1 - - 215.1 230.2 - - 230.2
Money market funds 42.5 - - 42.5 0.7 - - 0.7
Financial liabilities measured at fair value
Foreign exchange forwards - 4.1 - 4.1 - 4.5 - 4.5
Fuel oil swaps - 0.5 - 0.5 - 0.4 - 0.4
Financial assets for which fair values are disclosed
Deposits with institutions - - - - - 10.5 - 10.5
Financial liabilities for which fair values are disclosed
Bonds, ship loans and loan facility with Roger De Haan 233.6 424.3 - 657.9 - 750.9 - 750.9
Lease liabilities - 29.8 - 29.8 - 31.8 - 31.8
Bank overdrafts - 2.2 - 2.2 - 1.7 - 1.7
As at 31 Jan 2024
Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets measured at fair value
Fuel oil swaps - 0.3 - 0.3
Debt securities 219.1 - - 219.1
Money market funds 32.8 - - 32.8
Financial liabilities measured at fair value
Foreign exchange forwards - 3.2 - 3.2
Fuel oil swaps - 0.8 - 0.8
Financial liabilities for which fair values are disclosed
Bonds and ship loans 356.3 356.1 - 712.4
Lease liabilities - 26.3 - 26.3
Bank overdrafts - 1.9 - 1.9
Full details of the valuation techniques and inputs used to develop fair value
measurements can be found in the Annual Report and Accounts for the year ended
31 January 2024. The fair value of the loan facility provided by Roger De Haan
is considered not to be materially different from the carrying amount, since
the interest payable on it is close to current market rates.
d) Other information
Debt securities and money market funds relate to monies held by the Group's
Insurance Underwriting business, are subject to contractual restrictions and
are not readily available to be used for other purposes within the Group. The
values of the debt securities and money market funds are based upon publicly
available market prices.
There were no transfers between Level 1 and Level 2 and no non-recurring fair
value measurements of assets and liabilities during the period (July 2023:
none).
Foreign exchange forwards are valued using current spot and forward rates
discounted to present value. They are also adjusted for counterparty credit
risk using credit default swap curves. Fuel oil swaps are valued with
reference to the valuations provided by third parties, which use current
Platts index rates, discounted to present value.
The Group operates a programme of economic hedging against its foreign
currency and fuel oil exposures. During the period, the Group designated 172
(July 2023: 139) foreign exchange forward currency contracts as hedges of
highly probable foreign currency cash expenses in future periods and
designated 20 (July 2023: 20) fuel oil swaps as hedges of highly probable fuel
oil purchases in future periods. At 31 July 2024, the Group had designated 266
(July 2023: 375) forward currency contracts and 61 (July 2023: 70) fuel oil
swaps as hedges.
During the period, the Group recognised net losses of £0.8m (July 2023: net
losses of £1.7m) on cash flow hedging instruments through other comprehensive
income (OCI) into the hedging reserve. The Group recognised £0.3m gains (July
2023: £nil gains) through the income statement in respect of the ineffective
portion of hedges measured during the period.
During the period, the Group de-designated 11 (July 2023: one) foreign
currency forward contracts, with a transaction value of £7.5m (July 2023:
£nil), where the forecast cash flows were no longer expected to occur with a
sufficiently high degree of certainty to meet the requirements of IFRS 9. The
accumulated losses in relation to these contracts of £0.2m (July 2023: £nil)
was reclassified from the hedging reserve into profit or loss during the
period. The Group did not de-designate any fuel oil swaps during the period
(July 2023: nil). During the period, the Group recognised a £0.4m loss (July
2023: £1.3m loss) through the income statement in respect of matured hedges
which were recycled from OCI.
13 Cash and cash equivalents
Unaudited Unaudited
As at As at As at
31 Jul 2024 31 Jul 2023 31 Jan 2024
£m £m £m
Cash at bank and in hand 70.8 84.3 57.8
Short-term deposits 38.5 122.9 130.9
Cash and short-term deposits 109.3 207.2 188.7
Money markets funds (Note 12a) 42.5 0.7 32.8
Bank overdraft (Note 12b) (2.2) (1.7) (1.9)
Cash and cash equivalents in the cash flow statement 149.6 206.2 219.6
Included within cash and cash equivalents are amounts held by the Group's
River Cruise, Travel and Insurance businesses, which are subject to
contractual or regulatory restrictions. These amounts are not readily
available to be used for other purposes within the Group and total £63.3m
(July 2023: £25.5m). Available Cash(5)41F excludes these amounts.
Cash at bank earns interest at floating rates based on daily bank deposit
rates. Short-term deposits are typically made for varying periods of between
one day and three months, depending on the immediate cash requirements of the
Group, and earn interest at the respective short-term deposit rates.
The bank overdraft is subject to a guarantee in favour of the Group's bankers
and is limited to the amount drawn. The bank overdraft is repayable on demand.
(5) Refer to the Alternative Performance Measures Glossary for definition and
explanation
14 Retirement benefit schemes
The Group operates retirement benefit schemes for the employees of the Group
consisting of a defined contribution plan and a legacy defined benefit plan.
In July 2021, following the completion of a review of the Group's pension
arrangements, a consultation process with active members was launched. The
consultation process concluded during October 2021 and, with effect from 31
October 2021, the Group closed both its existing schemes to future accrual:
the Saga Pension Scheme (its defined benefit plan) and the Saga Workplace
Pension Plan (its defined contribution plan). In their place, the Group
launched a new defined contribution pension scheme arrangement, operated as a
master trust. This move served to reduce the risk of further deficits
developing in the future on the defined benefit scheme, while moving to a
fairer scheme for all colleagues.
a) Defined contribution schemes
There is one defined contribution scheme in the Group. The assets of these
schemes are held separately from those of the Group in funds under the control
of Trustees.
b) Defined benefit plan
The Group operated a funded defined benefit scheme, the Saga Pension Scheme,
which was closed to future accrual on 31 October 2021. From 1 November 2021,
members moved from active to deferred status, with future indexation of
deferred pensions before retirement measured by reference to the Consumer
Price Index. There will be no further service charges relating to the scheme
and no future monthly employer contributions for current service.
The fair value of the assets and present value of the obligations of the Saga
defined benefit scheme are as follows:
Unaudited Unaudited
As at As at As at
31 Jul 2024 31 Jul 2023 31 Jan 2024
£m £m £m
Fair value of scheme assets 210.4 208.5 204.5
Present value of defined benefit obligation (256.9) (216.5) (252.4)
Defined benefit scheme liability (46.5) (8.0) (47.9)
The present value of the defined benefit obligation at 31 January 2024 was
measured using the projected unit credit method. Liabilities at 31 July 2024
were estimated by rolling forward from 31 January 2024, allowing for changes
in market conditions and estimating the value of benefits accrued and paid out
over the period. In addition, the net liability position at 31 July 2024,
consistent with the position at 31 January 2024, is based upon updated data
from the 31 January 2023 triennial actuarial valuation, which is in progress.
During the period ended 31 July 2024, the net liability position of the Saga
Scheme reduced by £1.4m, resulting in an overall scheme deficit of £46.5m,
mainly as a result of a recovery plan contribution being paid by the Group,
although this has been partially offset by higher-than-expected inflation
experience. The £5.8m deficit funding contribution was paid by the Group in
February 2024 in relation to a recovery plan agreed under the latest triennial
valuation of the scheme at 31 January 2020.
The movements observed in the scheme's assets and obligations were impacted by
macroeconomic factors during the period where, at a global level, there have
been rising inflation and cost of living pressures, as well as shifts in
long-term market yields. The present value of defined benefit obligations
increased by £4.5m to £256.9m, primarily due to higher-than-expected
inflation experience and an increase in future expectations for inflation. The
fair value of scheme assets increased by £5.9m, to £210.4m. The increase in
asset values was largely driven by the recovery plan payment, alongside
marginally lower returns on assets from the fall in interest rates in the
period.
A High Court legal ruling in June 2023 (Virgin Media Limited v NTL Pension
Trustees II Limited) decided that certain rule amendments were invalid if they
were not accompanied by the correct actuarial Section 37 certificate
confirmation. While the ruling only applied to the specific pension scheme in
question, it could be expected to apply across other pension schemes that were
contracted out on a salary-related basis and made amendments between 6 April
1997 and 6 April 2016. The ruling was appealed but, in July 2024, the Court of
Appeal dismissed the appeal. The Group is considering the implications of the
case on its defined benefit scheme. At 31 July 2024, the defined benefit
obligation for the Group's scheme was calculated on the basis of the pension
benefits currently being administered. The Group has not, as yet, assessed any
likely impact due to the court ruling. Any subsequent developments following
the Court of Appeal's judgement will be monitored by the Group.
15 Insurance and reinsurance contract liabilities and assets
Liabilities for remaining coverage Liabilities for incurred claims
Excluding loss component Loss component Estimate of the present value of future cash flows Risk adjustment Total
£m £m £m £m £m
As at 1 February 2024
Insurance contract liabilities (56.6) (16.1) (286.4) (40.2) (399.3)
Insurance revenue 102.7 - - - 102.7
Incurred claims and related expenses - 12.7 (76.3) (6.0) (69.6)
Changes to liabilities for incurred claims - - (1.8) 0.4 (1.4)
Insurance acquisition cash flows expensed (11.9) - - - (11.9)
Losses on onerous contracts and reversals of those losses - (4.2) - - (4.2)
Other incurred insurance service expenses - - (6.3) - (6.3)
Insurance service expenses (11.9) 8.5 (84.4) (5.6) (93.4)
Insurance finance expense - - (4.3) (0.6) (4.9)
Total changes in the income statement 90.8 8.5 (88.7) (6.2) 4.4
Cash flows
Premiums received (99.4) - - - (99.4)
Insurance acquisition cash flows incurred 11.9 - - - 11.9
Claims and other expenses paid - - 86.1 - 86.1
Total cash flows (87.5) - 86.1 - (1.4)
Unaudited
As at 31 July 2024
Insurance contract liabilities (53.3) (7.6) (289.0) (46.4) (396.3)
Assets for remaining coverage Amounts recoverable on incurred claims
Excluding loss-recovery component Loss-recovery component Estimate of the present value of future cash flows Risk adjustment Total
£m £m £m £m £m
As at 1 February 2024
Reinsurance contract (liabilities)/assets (3.1) 1.3 141.3 33.7 173.2
Allocation of reinsurance premiums (9.0) - - - (9.0)
Amounts recoverable for incurred - (1.6) (3.1) 2.5 (2.2)
claims and other expenses
Changes to amounts recoverable for incurred claims - - (1.6) 2.9 1.3
Loss-recovery on onerous underlying contracts and adjustments - 0.7 - - 0.7
Effect of changes in the risk of non-performance of reinsurance contracts - - 1.0 - 1.0
Net (expense)/income from reinsurance contracts (9.0) (0.9) (3.7) 5.4 (8.2)
Reinsurance finance income - - 2.6 0.6 3.2
Total changes in the income statement (9.0) (0.9) (1.1) 6.0 (5.0)
Cash flows
Premiums paid 6.9 - - - 6.9
Amounts received - - (1.4) - (1.4)
Total cash flows 6.9 - (1.4) - 5.5
Unaudited
As at 31 July 2024
Reinsurance contract (liabilities)/assets (5.2) 0.4 138.8 39.7 173.7
Liabilities for remaining coverage Liabilities for incurred claims
Excluding loss component Loss component Estimate of the present value of future cash flows Risk adjustment Total
£m £m £m £m £m
As at 1 February 2023
Insurance contract liabilities (44.3) (8.4) (259.2) (35.6) (347.5)
Insurance revenue 85.2 - - - 85.2
Incurred claims and related expenses - 5.3 (92.0) (6.6) (93.3)
Changes to liabilities for incurred claims - - 2.2 6.3 8.5
Insurance acquisition cash flows expensed (12.4) - - - (12.4)
Losses on onerous contracts and reversals of those losses - (10.0) - - (10.0)
Other incurred insurance service expenses - - (7.6) - (7.6)
Insurance service expenses (12.4) (4.7) (97.4) (0.3) (114.8)
Insurance finance expense - - (6.7) (0.9) (7.6)
Total changes in the income statement 72.8 (4.7) (104.1) (1.2) (37.2)
Cash flows
Premiums received (80.7) - - - (80.7)
Insurance acquisition cash flows incurred 12.4 - - - 12.4
Claims and other expenses paid - - 99.4 - 99.4
Total cash flows (68.3) - 99.4 - 31.1
Unaudited
As at 31 July 2023
Insurance contract liabilities (39.8) (13.1) (263.9) (36.8) (353.6)
Assets for remaining coverage Amounts recoverable on incurred claims
Excluding loss-recovery component Loss-recovery component Estimate of the present value of future cash flows Risk adjustment Total
£m £m £m £m £m
As at 1 February 2023
Reinsurance contract (liabilities)/assets (5.5) 2.7 87.6 27.4 112.2
Allocation of reinsurance premiums (8.0) - - - (8.0)
Amounts recoverable for incurred - (0.9) 17.1 2.1 18.3
claims and other expenses
Changes to amounts recoverable for incurred claims - - 8.8 (0.9) 7.9
Loss-recovery on onerous underlying contracts and adjustments - 1.6 - - 1.6
Effect of changes in the risk of non-performance of reinsurance contracts - - (0.5) - (0.5)
Net (expense)/income from reinsurance contracts (8.0) 0.7 25.4 1.2 19.3
Reinsurance finance income - - 3.0 1.2 4.2
Total changes in the income statement (8.0) 0.7 28.4 2.4 23.5
Cash flows
Premiums paid 12.3 - - - 12.3
Amounts received - - (0.1) - (0.1)
Total cash flows 12.3 - (0.1) - 12.2
Unaudited
As at 31 July 2023
Reinsurance contract (liabilities)/assets (1.2) 3.4 115.9 29.8 147.9
Liabilities for remaining coverage Liabilities for incurred claims
Excluding loss component Loss component Estimate of the present value of future cash flows Risk adjustment Total
£m £m £m £m £m
As at 1 February 2023
Insurance contract liabilities (44.3) (8.4) (259.2) (35.6) (347.5)
Insurance revenue 177.6 - - - 177.6
Incurred claims and related expenses - 17.4 (176.0) (9.7) (168.3)
Changes to liabilities for incurred claims - - (20.9) 5.5 (15.4)
Insurance acquisition cash flows expensed (26.0) - - - (26.0)
Losses on onerous contracts and reversals of those losses - (25.1) - - (25.1)
Other incurred insurance service expenses - - (14.4) - (14.4)
Insurance service expenses (26.0) (7.7) (211.3) (4.2) (249.2)
Insurance finance expense - - (3.1) (0.4) (3.5)
Total changes in the income statement 151.6 (7.7) (214.4) (4.6) (75.1)
Cash flows
Premiums received (189.9) - - - (189.9)
Insurance acquisition cash flows incurred 26.0 - - - 26.0
Claims and other expenses paid - - 187.2 - 187.2
Total cash flows (163.9) - 187.2 - 23.3
As at 31 January 2024
Insurance contract liabilities (56.6) (16.1) (286.4) (40.2) (399.3)
Assets for remaining coverage Amounts recoverable on incurred claims
Excluding loss-recovery component Loss-recovery component Estimate of the present value of future cash flows Risk adjustment Total
£m £m £m £m £m
As at 1 February 2023
Reinsurance contract (liabilities)/assets (5.5) 2.7 87.6 27.4 112.2
Allocation of reinsurance premiums (17.0) - - - (17.0)
Amounts recoverable for incurred - (3.7) 21.5 3.2 21.0
claims and other expenses
Changes to amounts recoverable for incurred claims - - 32.0 2.8 34.8
Loss-recovery on onerous underlying contracts and adjustments - 2.3 - - 2.3
Effect of changes in the risk of non-performance of reinsurance contracts - - (0.9) - (0.9)
Net (expense)/income from reinsurance contracts (17.0) (1.4) 52.6 6.0 40.2
Reinsurance finance income - - 1.6 0.3 1.9
Total changes in the income statement (17.0) (1.4) 54.2 6.3 42.1
Cash flows
Premiums paid 19.4 - - - 19.4
Amounts received - - (0.5) - (0.5)
Total cash flows 19.4 - (0.5) - 18.9
As at 31 January 2024
Reinsurance contract (liabilities)/assets (3.1) 1.3 141.3 33.7 173.2
16 Loans and borrowings
Unaudited Unaudited As at As at
As at 31 Jul 2023 31 Jan 2024
31 Jul 2024
£m £m £m
Bonds 250.0 400.0 400.0
Ocean Cruise ship loans 375.9 438.1 407.0
Loan facility with Roger De Haan 75.0 - -
RCF - - -
Accrued interest payable 5.3 5.0 4.8
706.2 843.1 811.8
Less: deferred issue costs (14.9) (17.8) (15.6)
691.3 825.3 796.2
a) Bonds, RCF and loan facility with Roger De Haan
At 31 July 2024, the Group's financing facilities consisted of a £250.0m
five-year senior unsecured bond (repayable July 2026), a £50.0m five-year RCF
(expiring in March 2026) and an £85.0m loan facility provided by Roger De
Haan (expiring April 2026). The RCF and £10.0m of the loan facility with
Roger De Haan were undrawn as at 31 July 2024.
i) Bonds
In May 2024, the Group repaid in full its £150.0m 2024 senior unsecured bond.
The 2026 bond is, and the 2024 bond was, listed on the Irish Stock Exchange
(Euronext Dublin). The 2026 bond is, and the 2024 bond was, guaranteed by Saga
Services Limited and Saga Mid Co Limited.
Interest on the 2026 corporate bond is incurred at an annual interest rate of
5.5%. Interest on the 2024 corporate bond was incurred at an annual interest
rate of 3.375%.
Accrued interest payable on Group's bonds at 31 July 2024 was £0.5m (July
2023: £1.6m).
ii) RCF
Interest payable on the Group's RCF, if drawn down, is incurred at a variable
rate of Sterling Overnight Index Average (SONIA) plus a bank margin that is
linked to the Group's leverage ratio.
In the six-month period to 31 January 2024, the Group announced that it had
reached agreement with its banks to amend the covenants on its RCF. The
covenants within the Group's RCF were amended to increase the leverage ratio
(excluding Ocean Cruise) covenant for 31 January 2024 from 5.5x to 6.25x.
In the period to 31 July 2024, the Group concluded further discussions with
the lenders associated with the RCF to increase the Group's financial
flexibility. As a result, the following amendments were agreed, in addition to
smaller, immaterial changes:
· Increase to the leverage ratio for all remaining testing periods to 6.25x.
· Quarterly covenant testing, irrespective of whether the loan is drawn.
· The introduction of a restriction whereby, post repayment of the 2024 bond,
no utilisation of the facility is permitted if free liquidity is below
£40.0m.
· Consent requirement for any early repayment of corporate debt or payment of
shareholder dividends.
Since 31 July 2024, the Group concluded further discussions with the lenders
associated with the RCF to further increase the Group's financial flexibility.
As a result, the following amendments were agreed, in addition to other
smaller changes:
· Extension of the expiry date of the facility from 31 May 2025, to 31 March
2026.
· Leverage ratio test for all remaining testing periods reduced to 6.0x,
based on a revised definition of the calculation, which is now performed on a
Group basis inclusive of amounts relating to the Ocean Cruise business.
At 31 July 2024, the Group's £50.0m RCF remained undrawn.
Accrued fees payable on the Group's undrawn RCF at 31 July 2024 were £0.2m
(July 2023: £0.2m).
iii) Loan facility with Roger De Haan
In the period to 31 July 2023, the Group entered into a forward starting loan
facility agreement with Roger De Haan, commencing on 1 January 2024, under
which the Group could draw down up to £50.0m with 30 days' notice to support
liquidity needs and specifically the repayment of £150.0m bond maturing in
May 2024. The facility was provided on an arm's-length basis and guaranteed by
Saga plc, Saga Mid Co Limited and Saga Services Limited. Per the original
terms of agreement, interest will accrue on the drawn total of the facility at
the rate of 10% and is payable on the last day of the period of the loan. The
facility was originally due to mature on 30 June 2025, at which point any
outstanding amounts, including interest, were due to be repaid. The facility
is subject to a 2% arrangement fee, payable on entering into the arrangement.
A drawdown fee of 2% on any amount drawn down under the facility is payable on
the drawing date; and milestone fees of 2% on any uncancelled amount of the
facility become payable on 31 March 2024 and 31 December 2024 respectively.
In the six-month period to 31 January 2024, the Group agreed an increase and
extension to the existing loan facility provided by Roger De Haan. This
increase was for the value of £35.0m, taking the total facility to £85.0m,
and it was extended to expire on 31 December 2025, previously 30 June 2025.
The interest rate paid on funds drawn under the facility to finance the
repayment of notes issued by Saga plc, or to provide cash collateral demanded
by providers of bonding facilities to the Group, remained at 10%, but
increased to 18% for any amounts drawn to support general corporate purposes.
In addition, the previous arrangement and milestone fees of 2% remained
payable; however, the drawdown fee of 2% increased to 5% on drawdowns for
general corporate purposes. The amended facility was provided on the basis of
certain conditions being met; including:
· no professional advisers may be appointed to or retained by Saga plc
without prior approval of the Board; and
· no incremental financial indebtedness, over and above the facilities
already in place, may be incurred by Group companies.
In the period to 31 July 2024, a reduction of the notice period required for
drawdown of the loan to 10 business days was agreed, in addition to a further
extension to the termination date of the facility, from 31 December 2025 to 30
April 2026.
Since 31 July 2024, an increase to the maximum number of permitted facility
utilisation requests was also agreed, from three to 10.
In May 2024, the Group drew down £75.0m of the loan facility provided by
Roger De Haan and at 31 July 2024, this remained the case. Accrued interest
payable on the loan facility with Roger De Haan at 31 July 2024 was £1.8m
(July 2023: £nil).
b) Ocean Cruise ship loans
In June 2019, the Group drew down £245.0m of financing for its Ocean Cruise
ship, Spirit of Discovery. The financing represents a 12-year fixed-rate
sterling loan, secured against the Spirit of Discovery cruise ship asset, and
backed by an export credit guarantee. The initial loan was repayable in 24
broadly equal instalments, with the first payment of £10.2m paid in December
2019.
The Board announced on 22 June 2020 that it had secured a debt holiday and
covenant waiver for the Group's ship facilities. The Group's lenders agreed to
a deferral of £32.1m in principal payments under the ship facilities that
were due up to 31 March 2021. These deferred amounts were to be paid between
June 2021 and December 2024 for Spirit of Discovery and between September 2021
and March 2025 for Spirit of Adventure, and interest remained payable.
On 29 September 2020, the Group drew down £280.8m of financing for its ocean
cruise ship, Spirit of Adventure. The financing, secured against the Spirit of
Adventure cruise ship asset, represents a 12-year fixed-rate sterling loan,
backed by an export credit guarantee. The loan is repayable in 24 broadly
equal instalments, with the first payment originally due six months after
delivery in March 2021, but initially deferred to September 2021 as a result
of the debt holiday described above.
In March 2021, the Group reached agreement of a one-year extension to the debt
deferral on its ocean cruise ship facilities. As part of an industry-wide
package of measures to support the cruise industry, an extension of the
existing debt deferral was agreed to 31 March 2022. The key terms of this
deferral were:
· all principal payments to 31 March 2022 (£51.8m) deferred and repaid over
five years;
· all financial covenants until 31 March 2022 waived; and
· dividends remain restricted while the deferred principal is outstanding.
In the period to 31 July 2023, the Group concluded discussions with its Cruise
lenders in respect of the covenant restrictions attaching to its two ship debt
facilities. Lenders agreed to a waiver of the EBITDA to debt repayment
covenant ratio for the 31 July 2023 testing date.
In the six-month period to 31 January 2024, lenders agreed to amend the
covenants on the two ship debt facilities to reduce the EBITDA to debt
repayment ratio from 1.2x to 1.0x for the additional periods up to, and
including, 31 January 2025.
Interest on the Spirit of Discovery ship loan is incurred at an effective
annual interest rate of 4.31% (including arrangement and commitment fees).
Interest on the Spirit of Adventure ship loan is incurred at an effective
annual interest rate of 3.30% (including arrangement and commitment fees).
Interest payable on the Group's Ocean Cruise ship debt deferrals is incurred
at a variable rate of SONIA plus a bank margin.
During the period to 31 July 2024, ocean cruise ship loan repayments of
£31.1m (July 2023: £31.1m) were made by the Group. Accrued interest payable
on the Group's Ocean Cruise ship loans at 31 July 2024 is £2.8m (July 2023:
£3.2m).
c) Total debt and finance costs
At 31 July 2024, deferred debt issue costs were £14.9m (July 2023: £17.8m).
The movement of £2.9m, year-on-year, represents an increase of £1.5m
following the drawdown of the loan facility provided by Roger De Haan, being
offset by £4.4m expense amortisation for the period between these two dates.
During the period, the Group charged £19.8m (July 2023: £20.6m) to the
income statement in respect of fees and interest associated with the bonds,
RCF, loan facility with Roger De Haan and Ocean Cruise ship loans. In
addition, finance costs recognised in the income statement include £1.1m
(July 2023: £0.9m) relating to interest and finance charges on lease
liabilities, £1.0m (July 2023: £0.3m) relating to net finance expense on
pension schemes, £1.2m (July 2023: £1.0m) in respect of arrangement and
milestone fees associated with the loan facility with Roger De Haan, as
disclosed above, and net fair value losses on derivatives of £0.6m (July
2023: £0.9m). The Group complied with the financial covenants of its
borrowing facilities during the current and prior periods.
17 Called up share capital
Ordinary shares
Nominal value
£
Value
£m
Number
Allotted, called up and fully paid
At 1 February 2023 140,337,271 0.15 21.1
At 31 July 2023 140,337,271 0.15 21.1
Issue of shares - 1 August 2023 1,458,551 0.15 0.2
At 31 January 2024 141,795,822 0.15 21.3
Issue of shares - 3 May 2024 1,565,919 0.15 0.2
At 31 July 2024 143,361,741 0.15 21.5
On 1 August 2023, Saga plc issued 1,458,551 new ordinary shares of 15p each,
with a value of £0.2m, for transfer into an employee benefit trust to satisfy
employee incentive arrangements. The newly issued shares rank pari passu with
existing Saga shares.
On 3 May 2024, Saga plc issued 1,565,919 new ordinary shares of 15p each, with
a value of £0.2m, for transfer into an employee benefit trust to satisfy
employee incentive arrangements. The newly issued shares rank pari passu with
existing Saga shares.
18 Share-based payments
The Group granted a number of different equity-based awards that it determined
to be share-based payments. New awards granted during the six months ended 31
July 2024 were as follows:
a) On 28 May 2024, nil cost options over 663,426 shares were issued
under the Deferred Bonus Plan to Executive Directors, reflecting their
deferred bonus in respect of 2023/24, which vest and become exercisable on the
third anniversary of the grant date. Under the Deferred Bonus Plan, executives
receive a maximum of two-thirds of the bonus award in cash and a minimum of
one-third in the form of rights to shares of the Company. There are no cash
settlement alternatives.
b) On 8 July 2024, nil cost options over 2,386,409 shares were issued
under the Restricted Share Plan to certain Directors and other senior
employees that vest and become exercisable on the third anniversary of the
grant date, subject to continuing employment. There are no cash settlement
alternatives.
c) On 11 June 2024, 550,672 shares were awarded to eligible employees
on the tenth anniversary of the initial public offering and allocated at nil
cost; these shares become beneficially owned over a three-year period from
allocation, subject to continuing service.
The fair value of all awards granted during the year under the equity-settled
and cash-settled share-based remuneration schemes operated by the Group were
assessed using market price and the Monte Carlo model. The Group charged
£1.9m (July 2023: £2.4m) during the year to the income statement in respect
of equity-settled share-based payment transactions. This was charged to
administrative and selling expenses.
19 Assets held for sale
At the end of the year ended 31 January 2021, the Group made the decision to
initiate an active programme to locate buyers for a number of its freehold
properties and one of its long leasehold properties. At the point of
reclassification to held for sale, the carrying values were considered to be
equal to, or below, fair value less costs to sell, and hence no revaluation at
the point of reclassification was required.
At the end of the year ended 31 January 2023, the Group made the decision to
initiate an active programme to locate buyers for a further two of its
freehold properties. The Group also reclassified, to held for sale, the
related fixtures and fittings associated with one of these freehold
properties.
At 31 January 2023 and 31 July 2023, the carrying values of the properties
classified as held for sale, totalling £31.2m, were representative of either
each property's fair value or historic cost less accumulated depreciation and
any impairment charges to date, whichever was lower.
In the six-month period to 31 January 2024, the Group declassified one of the
properties held for sale at 31 July 2023, to property, plant and equipment
since it was no longer being actively marketed for disposal. The carrying
value of this property at 31 July 2023 was £3.4m. Other than this one
property, there were no changes to the Group's intention to sell any of the
properties classified as held for sale at 31 July 2023.
At 31 January 2024, the Group obtained updated market valuations of its
freehold properties held for sale, to determine the fair value of each
building. As a consequence of the remeasurement of the properties to the lower
of fair value less cost to sell and the carrying value, management concluded
that net impairment charges totalling £10.4m should be recognised against the
Group's property assets held for sale as at 31 January 2024.
At 31 July 2024, the carrying values of the properties classified as held for
sale, totalling £17.4m, were representative of either each property's fair
value or historic cost less accumulated depreciation and any impairment
charges to date, whichever was lower. No gains or losses were recognised with
respect to the properties during the six months ended 31 July 2024. These
properties are being actively marketed and the disposals are expected to be
completed within 12 months of the end of the financial period. The held for
sale designation is considered to remain appropriate for all properties as at
31 July 2024.
20 Related party transactions
Related party transactions during the six months ended 31 July 2024 were
consistent in nature, scope and quantum with those disclosed in the Group's
Annual Report and Accounts for the year ended 31 January 2024 available at
www.corporate.saga.co.uk (http://www.corporate.saga.co.uk) . Please see Note
16(a)(iii) and Note 21 for further detail relating to the loan facility with
Roger De Haan.
21 Events after the reporting period
a) Proposed 20-year Insurance Broking partnership and sale of
Insurance Underwriting
Since the end of the period, the Group announced that it is in exclusive
negotiations with Ageas SA/NV over the establishment of a 20-year affinity
partnership for its motor and home Insurance Broking operations and the sale
of its Insurance Underwriting business, Acromas Insurance Company Limited
(AICL), subject to regulatory approval. As at 31 July 2024, the requirements
of IFRS 5 were not met and accordingly AICL has not been classified as a
disposal group held for sale in the statement of financial position nor has it
been disclosed as a discontinued operation in the income statement.
b) Loans and borrowings
Since 31 July 2024, the Group concluded further discussions with the lenders
associated with the RCF to further increase the Group's financial flexibility.
As a result, the following amendments were agreed, in addition to other
smaller changes:
· Extension of the expiry date of the facility from 31 May 2025, to 31 March
2026.
· Leverage ratio test for all remaining testing periods reduced to 6.0x,
based on a revised definition of the calculation, which is now performed on a
Group basis inclusive of amounts relating to the Ocean Cruise business.
In addition, since the end of the period, in relation to the loan facility
provided by Roger De Haan, an increase to the maximum number of permitted
facility utilisation requests was also agreed, from three to 10.
Please refer to Note 16 for further details.
Responsibility Statement
We confirm that to the best of our knowledge:
· the condensed consolidated interim financial statements are
prepared in accordance with UK-adopted International Accounting Standard 34
'Interim Financial Reporting' as issued by the International Accounting
Standards Board; and
· the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed consolidated set of
interim financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last Annual Report and
Accounts that could do so.
On behalf of the Board
Mike
Hazell
Mark
Watkins
Group Chief Executive
Officer
Group Chief Financial
Officer
10 October
2024
10 October
2024
Independent Review Report to Saga plc
Conclusion
We have been engaged by Saga plc (the Company or the Group) to review the
condensed consolidated set of financial statements in the interim financial
report for the six months ended 31 July 2024 which comprises the condensed
consolidated income statement, condensed consolidated statement of
comprehensive income, condensed consolidated statement of financial position,
condensed consolidated statement of changes in equity, condensed consolidated
statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated set of financial statements in the
interim financial report for the six months ended 31 July 2024 is not
prepared, in all material respects, in accordance with International
Accounting Standard (IAS) 34 'Interim Financial Reporting' as adopted for use
in the United Kingdom (UK) and the Disclosure Guidance and Transparency Rules
(DTR) of the UK's Financial Conduct Authority (FCA).
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity (ISRE (UK) 2410) issued for use in the UK. A
review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other information
contained in the interim financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the information in the
condensed consolidated set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the 'Basis for conclusion' section of this report,
nothing has come to our attention that causes us to believe that the Directors
have inappropriately adopted the going concern basis of accounting, or that
the Directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Company to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Company will continue in operation.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the interim
financial report in accordance with the DTR of the UK FCA.
As disclosed in Note 2.1, the annual financial statements of the Company are
prepared in accordance with UK-adopted international accounting standards.
The Directors are responsible for preparing the condensed consolidated set of
financial statements included in the interim financial report in accordance
with IAS 34 as adopted for use in the UK.
In preparing the condensed consolidated set of financial statements, the
Directors are responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend
to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
consolidated set of financial statements in the interim financial report based
on our review. Our conclusion, including our conclusions relating to going
concern, are based on procedures that are less extensive than audit
procedures, as described in the 'Basis for conclusion' section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Timothy Butchart
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
10 October 2024
Alternative Performance Measures Glossary
The Group uses a number of Alternative Performance Measures (APMs), which are
not required or commonly reported under International Financial Reporting
Standards, the Generally Accepted Accounting Principles (GAAP) under which the
Group prepares its financial statements, but which are used by the Group to
help the user of the accounts better understand the financial performance and
position of the business.
Definitions for the primary APMs used in this report are set out below. APMs
are usually derived from financial statement line items and are calculated
using consistent accounting policies to those applied in the financial
statements, unless otherwise stated. APMs may not necessarily be defined in a
consistent manner to similar APMs used by the Group's competitors. They should
be considered as a supplement to, rather than a substitute for, GAAP measures.
Underlying Revenue
Underlying Revenue represents revenue, net of ceded reinsurance premiums
earned on business underwritten by the Group, excluding the onerous contract
provision, but including revenue associated with the exit from some of our
smaller, loss-making activities.
This measure is useful for presenting the Group's underlying trading
performance as it excludes non-cash technical accounting adjustments and
one-off financial impacts that are not expected to recur. It is reconciled to
statutory revenue within the Group Chief Financial Officer's Review.
Underlying Profit Before Tax
Underlying Profit Before Tax represents the loss before tax excluding:
· unrealised fair value losses on derivatives;
· the net loss on disposal of assets;
· discretionary Ocean Cruise customer ticket refunds and associated
costs;
· impairment of the carrying value of assets, including Insurance
goodwill;
· impact of changes in the discount rate on non-periodical payment
order (PPO) liabilities(1)42F;
· fair value gains/(losses) on debt securities;
· foreign exchange movements on river cruise ship leases;
· costs and amortisation of fees relating to the facility provided
by Roger De Haan;
· movements in the insurance onerous contract provisions (net of
reinsurance recoveries)(2)43F;
· costs in relation to the acquisition and disposal of the Big
Window Consulting Limited (the Big Window);
· the International Financial Reporting Standard (IFRS) 16 lease
accounting adjustment on river cruise vessels; and
· restructuring costs.
It is reconciled to statutory loss before tax within the Group Chief Financial
Officer's Review.
This measure is the Group's key performance indicator and is useful for
presenting the Group's underlying trading performance, as it excludes non-cash
technical accounting adjustments and one-off financial impacts that are not
expected to recur.
Trading EBITDA/Adjusted Trading EBITDA
Trading EBITDA is defined as earnings before interest payable, tax,
depreciation and amortisation, and excludes the IAS 19R pension charge,
exceptional costs and impairments. Adjusted Trading EBITDA also excludes the
impact of IFRS 16 'Leases' and the Trading EBITDA relating to the two ocean
cruise ships, Spirit of Discovery and Spirit of Adventure, in line with the
covenant on the Group's Revolving Credit Facility (RCF). It is reconciled to
Underlying Profit Before Tax within the Group Chief Financial Officer's
Review. Underlying Profit Before Tax is reconciled to statutory loss before
tax within the Group Chief Financial Officer's Review.
This measure is linked to the covenant on the Group's RCF, being the
denominator in the Group's leverage ratio calculation.
Ocean Cruise Trading EBITDA (Excluding Overheads)
Ocean Cruise Trading EBITDA (Excluding Overheads) reflects the Trading EBITDA
for the Ocean Cruise business, adjusted to exclude the corresponding overheads
for those operations. This measure is comparable with the £40.0m per annum
per ship target that was set at the time the Ocean Cruise ships were purchased
and is reconciled to Ocean Cruise Trading EBITDA within the Group Chief
Financial Officer's Review.
Gross Written Premiums
Gross Written Premiums represent the total premium that the Group charges to
customers for a core insurance product, excluding insurance premium tax but
before the deduction of any outward reinsurance premiums, measured with
reference to the cover start date of the policy. This measure is widely used
by insurers so provides a meaningful comparison of performance with our peers.
It is analysed further within the Group Chief Financial Officer's Review.
Written Gross Profit After Marketing Expenses
Written Gross Profit After Marketing Expenses is calculated as written
revenue, less cost of sales and marketing expenses. This measure provides a
meaningful view of the contribution of each Insurance Broking product, before
accounting for operating expenses, and is analysed further within the Group
Chief Financial Officer's Review.
Underlying Basic Earnings/(Loss) Per Share
Underlying Basic Earnings Per Share represents basic loss per share excluding
the post-tax effect of:
· unrealised fair value losses on derivatives;
· the net loss on disposal of assets;
· discretionary Ocean Cruise customer ticket refunds and associated
costs;
· impairment of the carrying value of assets, including Insurance
goodwill;
· impact of changes in the discount rate on non-PPO
liabilities(1)44F;
· fair value gains/(losses) on debt securities;
· foreign exchange gains on river cruise ship leases;
· costs and amortisation of fees relating to the facility provided
by Roger De Haan;
· movements in the insurance onerous contract provisions (net of
reinsurance recoveries)(2)45F;
· costs in relation to the acquisition and disposal of the Big
Window;
· the IFRS 16 lease accounting adjustment on river cruise vessels;
and
· restructuring costs.
This measure is reconciled to the statutory basic loss per share in Note 6 to
the accounts.
This measure is linked to the Group's key performance indicator Underlying
Profit Before Tax and represents what management considers to be the
underlying shareholder value generated in the period.
Available Cash
Available Cash represents cash held by subsidiaries within the Group that is
not subject to regulatory restrictions, net of any overdrafts held by those
subsidiaries. This measure is reconciled to the statutory measure of cash in
Note 13 to the accounts.
Available Operating Cash Flow
Available Operating Cash Flow is net cash flow from operating activities after
capital expenditure but before tax, interest paid, restructuring costs and
other non-trading items, which is available to be used by the Group as it
chooses and is not subject to regulatory restriction. It is reconciled to
statutory net cash flow operating activities within the Group Chief Financial
Officer's Review.
Net Debt
Net Debt is the sum of the carrying values of the Group's debt facilities less
the amount of Available Cash it holds and is analysed further within the Group
Chief Financial Officer's Review.
Adjusted Net Debt
Adjusted Net Debt is the sum of the carrying values of the Group's debt
facilities less the amount of Available Cash it holds, but excludes the Ocean
Cruise ship debt and Available Cash. It is linked to the covenant on the
Group's RCF, being the numerator in the Group's leverage ratio calculation,
and is analysed further within the Group Chief Financial Officer's Review.
1 This adjustment reduces the risk of residual volatility from changes in
market interest rates adversely affecting Underlying Profit Before Tax
2 The IFRS 17 onerous contract requirements create a timing mismatch between
when claims are incurred and when they are recognised in profit before tax.
Underlying Profit Before Tax adjusts for this timing mismatch by reversing the
impact of these requirements
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