TIDMSAGA
RNS Number : 7051B
SAGA PLC
14 June 2021
14 June 2021
Saga plc
("Saga" or "the Group")
AGM Trading Update
Saga makes further progress against strategic priorities
Saga plc ("Saga" or "the Group"), the UK's specialist in
products and services for people over 50, announces a trading
update for the period from 1 February 2021 to 13 June 2021, ahead
of its Annual General Meeting today at 11.00am.
Highlights
-- Insurance business makes further progress against key metrics:
o Motor and home policy sales 2% behind the prior year,
reflecting a competitive market; improved picture since start of
May; expected to be broadly flat over the first half.
o Customer retention of 80%; underlying margin of GBP74 per
policy, both in line with 2020/21.
o Three-year fixed price increased to 43% of total motor and
home policy sales, vs. 38% in 2020/21.
o Reduced claims frequency continues; expected benefit to first
half current year loss ratio of at least 5ppts.
o Good progress with preparations for implementation of FCA
market study pricing rules.
o Appointment of Steve Kingshott as Insurance CEO, currently CEO
of Tesco Underwriting and Chief Insurance Officer at Tesco
Bank.
-- Travel business due to restart from 27 June 2021, subject to government restrictions.
o Cruise load factors strong at 77% and 48% for 2021/22 and
2022/23; per diems ahead of expectations.
o Tours bookings represent 60% and 27% of the revenue targets
for 2021/22 and 2022/23.
o Retention rates remained high through period of suspension;
73% Cruise and 42% Tour Operations.
o Cash burn rate for the year to date at the lower end of the
guidance of GBP7m-GBP9m per month.
-- Continued debt reduction through period of travel suspension,
supported by actions over last 12 months:
o Net debt to EBITDA (excluding Cruise) of 2.9x as at 31 May
2021, within the current covenant in short-term bank debt of
4.75x.
o Liquidity position remains strong, with total available cash
of GBP78m at 31 May 2021.
-- Consistent delivery against all five pillars of the strategic turnaround plan:
o Improved colleague engagement; record score and participation
rate following launch of colleague recognition programme and award
of wellbeing day.
o Significant focus on customer experience; improvements to the
digital journey; launch of our customer experience strategy, GDPR
re-consent programme and future operations plan.
o Launch of motor mid-term adjustment changes, giving customers
more options when making a change to their policy.
Euan Sutherland, Group Chief Executive Officer, said:
"Saga has made further strong progress, delivering against all
the pillars of our turnaround plan. In Insurance we have continued
to support customers and delivered another resilient performance.
In Travel we are clearly focused on the safe return to service and
ensuring we can satisfy the significant pent-up demand from
customers.
"Our focus on enhancing our financial position, while driving
simplicity and efficiency across the business remains and we are
well progressed with our plans for a brand relaunch and to
transform our data and digital approach.
"Saga is a strong brand with loyal customers and great people,
and we will continue to innovate, driving change in our markets and
strengthening our customer relationships. Looking ahead, while we
are mindful of continued uncertainties around COVID-19 and the
outlook for the consumer economy, we are confident we have the
right strategy and people in place to return Saga to sustainable
growth."
Divisional Highlights
Insurance
The Retail Broking business has continued to make progress
across the key motor and home metrics, despite challenging
conditions with continued premium deflation across the market. For
the four months to 31 May 2021, motor and home policy sales were 2%
behind the same point last year however May showed early
indications of improvement and policies are expected to be broadly
flat over the first half.
Customer retention remains high at 80%, in line with 2020/21,
supported by 240,000 three-year fixed-price policy sales at 31 May.
These policies represent 43% of the total motor and home sales,
versus 38% for the year ended 31 January 2021. Direct customers
account for 59% of new business, in line with prior year and motor
and home margins, after allowing for marketing expenses, are GBP74
per policy, also in line with 2020/21. Travel policies continue to
be impacted by COVID-19 with total sales in the year to date 5%
below the prior year.
The Insurance Underwriting business has continued to experience
reduced motor claims frequency, in line with the wider market. This
is expected to lead to a short-term improvement to the current year
loss ratio of at least 5ppts for the half year. Reserve releases
are also expected to continue for the half year, albeit to a lesser
extent than the prior year, largely due to continued favourable
experience on large bodily injury claims relating to prior accident
years.
Preparations for the implementation of the FCA market study
pricing rules are progressing with pace and we are working on the
launch of innovative, new and highly differentiated product
offerings.
We are delighted to announce the appointment of Steve Kingshott
as Insurance CEO, who will be joining the business from Tesco in
the Autumn. Steve has a strong track record of strategic delivery,
having spent more than 30 years in a variety of senior roles within
the insurance sector. Euan Sutherland will remain as Interim CEO of
Insurance until his arrival.
Travel
Following the suspension in March 2020, our Cruise business will
resume on 27 June 2021, initially for UK itineraries, with the
inaugural cruise of Spirit of Adventure on 26 July and European
sailing planned from mid-August. With continued uncertainty
surrounding the timing of the full easing of government
restrictions and the implications of that for the travel sector, we
have put in place contingency plans to manage any potential
impacts. This includes plans to potentially operate for a short
period with fewer guests than typical load factors, if
necessary.
Through the first four months of the year, the focus has been on
ensuring the safe restart of the Travel business, while keeping
costs and subsequent cash burn to a minimum. The monthly cash burn
for the four months to 31 May 2021 was at the lower end of our
previous guidance of GBP7m-GBP9m per month.
Customer loyalty and demand throughout the suspension period has
been outstanding, with 73% of cancelled Cruise bookings retained
and sailings through to the end of September seeing exceptionally
high demand. Bookings beyond the initial UK itineraries remain
strong, and as at 5 June, the average load factor is 77% for
2021/22 with per diems ahead of plan, and 48% for 2022/23 with per
diems in line with the plan.
Following reset of the business and ahead of restart, customer
retention in Tours remains stable at 42%. Bookings are also strong
with 60% of the revenue target booked for 2021/22 and 27% for
2022/23, with the latter ahead of pre-pandemic levels.
Group Liquidity and Net Debt
The Group's liquidity position remains resilient, benefitting
from actions taken in 2020/21 to preserve cash and increase
financial flexibility. At 31 May 2021, the Group held available
cash balances of GBP78m, excluding GBP23m within the Saga Tour CAA
ring fenced group, in addition to an undrawn GBP100m revolving
credit facility (RCF). This is slightly above the level at 31
January 2021 largely due to Retail Broking trading EBITDA and
positive working capital movements, offset by only cash support
provided to Tours, capital expenditure, pension and interest
payments. Cruise cashflows are modestly positive for the year to
date as a result of the collection of final balances on June and
July departures.
Net debt, excluding the two cruise ships at 31 May 2021 was
GBP246m and the ratio of net debt to EBITDA was 2.9x, slightly
higher than at 31 January 2021 due to an expected reduction in
reserve releases but well within the 4.75x banking covenant
applicable to the Group's term loan and RCF. Total debt at 31 May
was GBP757m, largely in line with 31 January 2021, reflecting a
GBP3m increase in available cash, with gross debt remaining
unchanged.
Strategic Update
Progress against our turnaround strategy continues at pace.
Under our people and culture reset, we report an improved colleague
engagement score of 7.5, from 7.3 out of 10, with a record
participation rate of 93%. Colleague support was provided through
the launch of our new colleague recognition programme, the
provision of a digital gift voucher for each colleague and an
additional days' holiday in the form of a wellbeing day.
Within our data, digital and brand transformation, we improved
the digital journey and launched our customer experience strategy
that focuses on six key priorities to deliver excellence, both of
which are designed to bring to life our purpose of Exceptional
Experiences Every Day. We also launched the GDPR re-consent
programme in our contact centres, allowing us to tailor how and
when we ask about our customers' marketing choices, to grow our
database and ultimately create more advocates of the Saga
brand.
In Insurance, the launch of our motor mid-term adjustment
re-broking process ensures that customers are given more options
each time they make a change to their policy, which is expected to
drive a benefit through retention.
In order to continue to drive simplicity and efficiency within
the business, a plan has been launched for future operations. This
will create a step change in the service we are able to offer our
customers, allowing us to deliver exceptional experiences every
day. From a colleague perspective, we have developed a future
working strategy through our Big Conversation which has allowed us
to get the views of hundreds of colleagues on how we best
collaborate and work together in the future.
Outlook
Our focus remains on the consistent delivery of our strategy and
our Board has been encouraged by the continued progress in the
first four months of the year. In Travel, the resumption of sailing
for both ships and restarting Tours remains the priority, whilst in
Insurance we aim to deliver consistent performance across our
balanced scorecard. The work in our operating businesses will be
underpinned by continued progress in our people and culture reset,
our data, digital and brand transformation and the continued
disciplined cost management and cash preservation in order to
further reduce debt.
ENDS
The Annual General Meeting will be held at 11:00am today via an
online platform and via a conference call. To join the meeting
online, visit https://webcast.openbriefing.com/saga-agm/.
Shareholders will need to log in using their investor code (IVC)
and PIN provided within their AGM documentation. The conference
call can be accessed from the UK on 020 3936 2999 or for all other
locations, +44 20 3936 2999. Participant Password: 367292.
For further information please contact:
Saga plc
Emily Roalfe, Head of Investor Relations Tel: 07732 093 007
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
About Saga
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 brands in the UK and 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
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END
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