Saga Regulatory News (SAGA)

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 £74 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 £7m-£9m 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 £78m 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 £74 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 £7m-£9m 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 £78m, excluding £23m within the Saga Tour CAA ring fenced group, in addition to an undrawn £100m 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 £246m 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 £757m, largely in line with 31 January 2021, reflecting a £3m 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