Saga plc

Good morning everybody and welcome to Saga's results for the year ended 31st of January 2025. My name is Mike Hazel, I'm the Group CEO and I'm joined today by Mark Watkins, our Group CFO. This has been a transformational year for Saga. We've delivered a strong financial performance and at the same time taken strategic action to fundamentally change the shape of our group. As a result, we're in a better position than we have been for many years to deliver long-term and sustainable growth. We've reported growth in underlying profit ahead of our previous guidance and continued net debt reduction and strong cash flow generation. Our travel businesses comprising cruise and holidays have had another outstanding year with more and more customers choosing to take their holiday with Saga. We've completed our strategic review, outlined our plans and delivered on those plans. The result is a go forward group that comprises a lower risk insurance business now set for growth a highly successful and fast growing travel business, and a personal finance business with significant growth potential ahead of it. This is a strong position to end the year in, a position further strengthened by our new long-term financing arrangements, providing funding certainty for the next six years. In recognition of this progress, we're today announcing some medium-term targets. We expect underlying profits to reach at least 100 million within the next five years and leverage to fall below two times. Before I hand to Mark to go through the financials, I've highlighted on this page some of our key trading metrics. The progress we are making is clear, particularly in our travel businesses. Mark will now talk you through this performance in more detail.

Thanks, Mike. Good morning, everybody. It's a pleasure to be here today. I'll spend the next few minutes covering the financial results for the group for the year ended 31st January 2025. I'll then follow that with the outlook for the remainder of the year. I'm delighted to report that Saga delivered a strong set of financial results with growth across revenue, trading EBITDA and underlying PBT. This growth was driven by the continued momentum in our cruise and holidays businesses, alongside an improved performance in insurance underwriting. Before we get too far into the detail, I should just highlight that throughout our financials, you'll see that we've introduced a split between continuing and discontinuing operations. This arises from the agreement for the sale of our insurance underwriting business to Aegeus, as announced at the end of last year, This means that the performance of that business and the associated written to earned accounting adjustment are now classified as discontinued. Alongside the growth I mentioned a moment ago, strong cash generation continued, albeit this was lower than in the prior year due to the expected reduction in the contribution from insurance broking alongside some one-off positive inflows that benefited the prior year. Net debt also continues to reduce and is now 590.5 million pounds at 31st of January 2025. This is 46.7 million pounds lower than at the same point last year and ahead of our previous guidance. Reflecting this lower net debt and alongside the higher trading EBITDA, the leverage ratio reduced from 5.4 times to 4.7 times. Turning now to the drivers of the growth in underlying PBT. Saga delivered an underlying PBT from continuing operations of £37.2 million, which was 8% higher than the prior year. This was driven by a 59% increase across our combined travel businesses, but materially lower earnings from insurance broking, which is consistent with our previous guidance. Finance costs increased as a result of the utilisation of the loan facility provided by Roger De Haan as part of the repayment of the £150 million bond in May 2024. Central costs reduced following the actions taken in the second half of last year. After accounting for our discontinued insurance underwriting business and the written to earned adjustment that arises due to the ownership of that business, the group reported a total underlying PBT of £47.8 million, 25% higher than the prior year. I'll now go into a bit more detail of each of our core businesses. Ocean Cruise continued to build on the momentum from 23-24, reporting a load factor of 91%, which was three percentage points higher, and a per diem of £357, which was 8% higher. This drove an increase in underlying revenue of 10%, and due to the operating leverage within the business, the majority of this flowed through to gross profit, which was 20% higher. After the modest increases in marketing and other operating expenses to support this growth, Ocean Cruise reported an underlying PBT of £48.9 million, 38% higher than in the prior year. Looking ahead to the forward bookings for 2025-26, the load factor in the first half is currently 94%, five percentage points higher than at the same time last year, and the per diem is 7% higher. For the full year, the load factor is currently two percentage points higher than at this time last year, with a per diem 8% higher. Our river cruise business reports a similar growth story. Revenue increased 13%, driven by a four percentage point increase in load factors and a 14% increase in per diems. This resulted in gross profit and underlying PPT increasing by a third. As we've spoken about before, there is a significant opportunity to scale this business with the addition of chartered ships to our existing fleet of two Spirit-class river vessels. As part of this strategy, we're pleased that our newest ship, Spirit of the Moselle, joins the fleet in July, which will bring incremental capacity on an analysed basis. Looking ahead, the forward bookings position is strong. with load factors in the first half of 25-26 5 percentage points ahead of the same time last year, with the per diems 6% ahead. The books load factor for 25-26 full year is 67%, slightly lower than at the same point in the prior year, with the per diems 6% higher. This reflects the same revenue management approach used in our cruise business, ocean cruise business, which optimizes load factors on a month by month basis, beginning with the early months. The full year load factor is expected to be at least equal to that of 24, 25. Turning now to our holidays business. Revenue grew 7% and on a like for like basis, after excluding the discontinued Titan river cruises in the prior year, this was approximately 19% driven by 9% more customers traveling with us and average revenues that were also 9% higher. This, when combined with the one-off costs which impacted the prior year, meant that we reported a step change in underlying PBT, which went from £1.5 million to £10.7 million. The growth in this business is only expected to continue, demonstrated by our strong forward bookings position for 2025-26, with revenue and passengers both significantly ahead of the prior year, at 14% each. Consistent with our previous guidance, insurance broking reported a written underlying PBT that was materially lower than that of the prior year at £14.1 million. This reflects an increase in the contribution in motor insurance of £6.7 million, reflecting higher margins per policy, with the margin increase arising from net rate reductions on our three-year policies more than offsetting the impact of pricing action taken on our one-year policies. The contribution from home insurance, however, reduced by £22.2 million and more than offset the motor increase. This reflects lower policies available for renewal coming into this year, alongside continued inflationary pressure on net rates, which impacted our competitiveness, policy sales and margins. Our other broking products, being primarily private medical and travel insurance, also remained under pressure, with net rate inflation in PMI and increasing competitive market in travel impacting the contribution from these products, which when combined, reduced by £6 million. These were, however, partially offset by reduced operating expenses following the restructuring in the second half of last year. Our insurance underwriting business, Acol, while discontinued following the agreement of its sale to Aegeus, delivered a strong performance following several challenging years. The pricing action taken in response to elevated levels of claims inflation during this time resulted in the business returning to a profit, reporting an underlying PBT of £10.7 million compared with a loss of £1.4 million in the year before. In addition to this, the current year combined operating ratio improved significantly to 100.7% from 117.1% in the prior year. Turning now to look at net debt in a bit more detail. Net debt closed the year at £590.5 million, which was £46.7 million lower than the previous year end. This, when combined with the increase in trading EBITDA, resulted in the leverage ratio materially reducing from 5.4 times to 4.7 times. This reflects continued strong cash generation with £109.6 million of available operating cash flow, which was only partially offset by capital expenditure, debt service, and some restructuring costs. I'll now cover the outlook for 2025-2026, taking earnings first. We expect the travel businesses to continue their momentum with further expected growth across ocean, rivers, load factors and per diems, alongside increasing passengers in holidays. In line with our previous guidance, insurance broking earnings are expected to fall in 2025-26 as we transition to the new partnership model with Aegeus, with growth expected from 2026-27 onwards. Overall, we expect underlying PBT to be lower than that of 24-25 before returning to growth thereafter. Trading EBITDA, which excludes the increased finance costs that we have guided to previously, is, however, expected to be broadly consistent with that of 24-25. In 2025-26, as we embed our new capital structure and transition to the AGEAS partnership, there are a few changes and one-off items that it's worth highlighting as they'll impact the group's net debt position. Firstly, the combination of the new term loan facility with HPS, which was drawn at the end of February, and the undrawn 100 million delayed draw facility results in the group having secured its financing through to 2031 with incremental flexibility. When looking at the impact of this refinancing, the group's blended effective pro forma interest rate, including the ship debt, is around 7.6%. Applying this to our total gross debt of around 660 million pounds results in total interest of around 50 million pounds, with around 35 million of this relating to the corporate facilities. Also, in relation to the refinancing, we incurred between £15 and £20 million of one-off debt issue costs, which, while amortised over the life of the facility for the P&L, will be paid during 25-26. If we now take the Aegeus transaction, we expect around 45.5 million pounds of net proceeds from the ACOL disposal, being the total consideration of 67 and a half, less the deductions we previously guided to around 22 million pounds. These include the discharge of ACOL's section 75 pension liability, the transfer of properties owned by ACOL and some transaction costs. Finally, and also arising from the partnership with the GS, we expect to incur cash implementation costs of around £25 million, also consistent with our previous guidance. Looking ahead, these one-off items will reduce the deleveraging pace during 2025-26, but we still expect net debt at the end of the financial year 2025-26 to be lower than that 31st of January 2025. deleveraging remains a strategic priority for the group, and from January 2026, the pace of reduction is expected to accelerate. I'll now hand back to Mike.

Thanks, Mel. We've delivered a strong performance this year, but I want to spend the rest of this presentation standing back and looking at the strategic progress, which has been equally strong. Since joining Saga, I've been keen that we re-instill the core values and principles that made Saga successful. Being clear on these principles and who our customer is, is key to our success. Nobody knows this customer better than us. And we have a wealth of insight and experience to support us in what we do for them. This is a busy slide, and so I won't talk to every point, but it helps demonstrate the opportunity and potential for Saga. You can see on the left hand of the page there are currently 26.4 million people over 50 in the UK. And with an ageing UK population, this is expected to grow to over 31 million by 2050. They are an affluent group with time and money to spend. Saga is the brand for this age group. And you can see in the middle of the page, we have 93% brand awareness. Once experiencing our products, our most loyal customers stay with Saga for 18 years on average. And our diverse product range means we can deepen our relationship with those customers, encouraging multi-category product holdings. Our database is key here. On the right of the page, you can see we hold rich and valuable insight into 9.4 million customers. And we're able to communicate with 7.8 million of them. So we're operating with a market leading brand, loyal customers, and a growing market into which we have extensive reach and insight. The opportunity for growth is clearly there. The actions we have taken this year mean we are now in a great position to deliver on this opportunity. Our cruise and holidays businesses are now all profitable and growing strongly. The sale of our underwriting business and new partnership with Aegeus moves us to a significantly lower risk, less complex insurance model with a fantastic partner to support our growth ambitions. And our refinancing means we have secure and flexible financing in place for six years and a runway to now focus on growth. Our vision will support this growth and guide our actions. We want to be the most trusted brand for older people in the UK and our growth plans will deliver this vision. Each of our businesses is well positioned and we are now also able to look beyond our existing businesses, exploring new and relevant opportunities outside our proposition today. With this in mind, we've added a fourth strategic priority to the priorities we have previously talked to. Focus on driving incremental value from new business lines and products. There are a range of areas today where older people are not well served. Our insight and experience in delivering great products and services designed for that customer group represents clear growth potential. Now let's spend a few minutes talking to each priority. Our existing businesses, which comprise cruise, holidays, insurance and money, each have a vital role to play in our future growth, and all are now well set. In cruise, we continue to see increasing demand for both our ocean and river holidays, and there remains significant growth potential across those products. Load factors and per diems are growing strongly, and we improve our proposition each year to further drive growth. We also welcome our newest river ship, Spirit of the Moselle, to the fleet later this year. Our holidays business is also growing well. Having addressed the operational challenges that were holding that business back, there is much we can do to build on this and further develop our already much-loved holiday experiences. We have consolidated our travel leadership team with Nigel Blanks, formerly CEO of our cruise business, now taking overall responsibility for travel. in order to better take advantage of the synergies we have available across those businesses. Our insurance business enters a transitional year as we complete the sale of ACOL around the end of Q2 and prepare to go live with our AGS partnership at the end of the year. These are exciting changes that transform the shape of our insurance business. and represent significant growth potential as we develop that partnership. And our money business remains an area with significant growth potential. Growth that will be supported by falling interest rates and the UK government's recent change to the ring fence limit for investment banks. Together with the bedding in of our newer personal finance products. As I mentioned earlier, the second pillar of our strategy represents the incremental opportunity we believe there now is to grow beyond what we do today and build on the plans we already have in place for our existing businesses. Our primary focus will be on delivering our existing growth plans, but we also believe there are opportunities to meet the needs of older people in ways we do not currently do today. Our partnership strategy gives us a low risk, capital light route to explore these opportunities. And we believe, and we've already seen from the partnership discussions we've had this year, that our brand and insight is attractive to potential partners. The work to explore such opportunities begins now. and will evolve over time. Updates will therefore come as and when we are further progressed and able to speak about anything specific. Everything we do comes back to our customer. Understanding our customer, engaging with our customer, and delivering products and services built on what we know about our customer. Our third strategic pillar, therefore, emphasises the importance of customer relationships and the insight we have into our customers. Our publishing business is pivotal in this process, providing insightful and engaging content through a variety of formats. Alongside our award-winning print magazine, our new magazine website now regularly sees more than one million visits per month. Building on this demand, this year we will introduce a new quarterly digital version of the magazine available free to all Saga customers, hugely extending the reach of this fabulous product. And our digital newsletters, which cover a range of topics from travel, money and lifestyle, are also proving incredibly popular. The 10.7 million newsletters we sent in January achieved industry-leading open rates of 46%, with minimal unsubscribe rates. These channels provide important feedback loops for us, supporting the continual replenishment of our database. That database currently holds the details of 9.4 million customers, with a communicable base of 7.8 million. With the power of this database, we're able to understand our customers better, communicate more intelligently with them, and design products with their needs in mind. Finally, we have our fourth strategic pillar, focused on reducing debt and simplifying our operations. Mark has already covered debt reduction, which remains key. so I'll focus on the simplification component. Our business has historically been a complex, highly regulated operation, with revenue streams experiencing significant volatility due to the risk-based nature of our insurance model. This complexity drove an increasingly siloed approach across our businesses, impacting efficiency. Our systems and infrastructure were designed to serve this complexity, resulting in a rigid and costly operating model. The strategic action that we've taken over the past year will significantly simplify our insurance business, adopting a lower risk model that removes much of this legacy complexity. And growth through partnerships will mean that we don't reintroduce unnecessary complexity as we grow. Mindset and culture are important here. Our recent changes in leadership and the platform we have built for the business gives us the opportunity to encourage a more agile, entrepreneurial approach to business with efficiency and simplicity, a key objective in the way that we do business. In short, we are creating a more streamlined and agile business with a lower risk, higher quality earnings profile capable of exploiting the growth opportunities ahead of us. That growth opportunity is clear. With our businesses all profitable, our refinancing complete, and our new lower risk insurance model being implemented, we are now in a strong position to deliver long-term and sustainable growth. The projections you can see on this page are supported by detailed growth plans for each of our businesses. They don't include new business lines or products we may introduce in the future. The chart on the left shows the expected profile of underlying profit before tax. beginning with 2425's continuing operations as the base. Mark has already mentioned 2526 will be a transitional year, reflecting the Group's new capital structure with incremental financing costs resulting in lower underlying profitability, but broadly flat trading EBITDA. Thereafter, having implemented our partnership with Aegeus, we see a clear path to growth across each of our existing businesses, alongside lower financing costs as we reduce our level of debt. Our cruise and holidays businesses are already performing strongly, and we expect this momentum to continue. Our insurance business will operate from a lower cost, lower risk model with benefit from the strength of our new partner, Aegeus. And our money business has significant future potential from its newly launched products and the recently lifted savings ring fence that will support growth in our highly successful savings product. We are therefore confident in the outlook this gives us and our medium-term target of underlying profit before tax of at least 100 million by 2930. This growth in profits and the continued strong cash flow generation means that we expect net debt to continue to reduce significantly with leverage falling below two times by January 2030. There's no shortage of growth potential here, and we are now in a position to deliver on that growth. And so finally, to wrap up before we move to questions, we've made significant progress this year. We've delivered a strong financial performance, growing underlying profits and continuing to reduce our debt. We've taken significant strategic action, And as a result, the business is in a great position to grow. All of our businesses are profitable and we have detailed five-year growth plans in place for each. There is further opportunity for growth beyond these plans as we explore incremental opportunities. We're confident in our plans and the routes to delivering at least 100 million of annual underlying profit before tax and a leverage ratio below two times within the next five years. Our focus on customer and being the most trusted brand for older people will guide everything that we do as we continue to deliver great quality, differentiated products designed to meet their needs. We'll now move to questions, taking questions in the room first and then moving online.