Saga Regulatory News (SAGA)

22 June 2020

Saga plc

("Saga" or "the Group")

AGM Trading Update

Saga plc, the UK's specialist in products and services for people aged 50 and over, announces a trading update for the period from 1 February to 21 June 2020, ahead of its Annual General Meeting today at 11:00am.

Operating performance

Insurance

The Insurance business has been resilient and continues to make progress, with performance led by the success of our three-year fixed-price policies.

Retail Broking trading has performed well across home, motor and private medical insurance partially offset by an expected reduction in the sales of travel insurance.

· Motor and Home policies for the period of 567,000 are 1% higher than in the prior period, reflecting higher retention partially offset by a continued disciplined approach to new business.

· Customer retention across Motor and Home business of 79% is six percentage points better than in the prior period, reflecting a range of initiatives.

· Motor and Home margins per policy after marketing costs in the first four months of the year were £68, £6 below the prior period but broadly in line with expectations.

· Total policies for the period of 620,000 are 5% lower than in the prior period due to a significant decline in the number of new travel policies sold from mid-March.

· As of 14 June 2020, the Group had sold 533,000 three-year fixed-price policies, with over 60% of direct new business customers choosing this product since it was fully launched.

· 58% of new business customers are coming to Saga on a direct basis, compared to 59% in the year ended 31 January 2020.

Market conditions continue to be challenging, in part due to COVID-19, with an easing of competitive conditions in February and March but with signs of a return to more competitive conditions in motor and home in the last month.

The Group continues to innovate its Insurance offering and has announced that treatment abroad for COVID-19 and repatriation to the UK has been included as standard as part of its travel insurance policies for all trips from 1 June. Saga has added the cover to help customers feel more comfortable travelling once the Government advice changes to say that it is safe to do so.

For the Insurance Underwriting business, reserve releases of £20m in the first four months of the year are ahead of expectations. This is due to favourable experience on large bodily injury claims relating to prior accident years.

Current year claims frequency from March onwards has been much reduced as a result of lower miles driven following the start of the COVID-19 lockdown. The Group has not recognised any COVID-19 related claims upside in current year results or financial projections.

Travel

The Group's Travel business has remained on pause since the decision in mid-March to suspend operations due to COVID-19. The Group has been focused on ensuring customers whose holidays have been cancelled are re-booked on future trips or offered a cash refund. The Group continues to expect some travel to resume this year; retention levels continue to be high, particularly in Cruise, and a significant number of changes have been made to how the Travel businesses operate to provide peace of mind and ensure the safety of customers and colleagues.

As at 31 May the Group had cancelled all travel departures up to and including August and had refunded £44m of advance receipts to customers, mainly relating to the Tour Operations business.

For Cruise, customer loyalty has been exceptional. Advance receipts at the end of May were £43m, which is £5m lower than at the end of March but well ahead of expectations. The Group has retained over 70% of advance receipts on cancelled Cruise departures, and new bookings for next year have been very positive.

The sale of the Saga Sapphire was completed on 12 June on terms broadly in line with previous expectations and the latest indication for the Spirit of Adventure is that she will be delivered by the end of October.

The Group has been working with industry bodies and the Government to establish operational practices that would enable a return of operations in both Tour and Cruise businesses as the current restrictions are lifted. The Group's new mid-sized ships are ideally placed to offer 'safe sailing' and all these measures will be in place by the end of August.

Healthcare

The Group announced the sale of two domiciliary healthcare companies, Patricia Whites and Country Cousins, in March, and recently completed the transfer of Saga-branded healthcare customers and colleagues to a well regarded third party care provider for a nominal sum. This completes the exit from healthcare.

Group liquidity

The Group's liquidity position remains strong and benefits from diversified sources of income. At 31 May 2020, the Group held available cash balances, which exclude the Saga Tour CAA ring fenced group, of £30m and continued to have access to a further undrawn £50m on the Group's revolving credit facility. The available cash balances have reduced by £62m from £92m at 31 March 2020 due to £56m cash support to the Travel businesses, £7m restructuring costs and £7m interest payments, partially offset by cash inflow relating to the normal trading activity of the Group. The reduction in cash since the end of March is in line with the assumptions in COVID-19 stress tests.

The Saga Tour ring fenced group held £45m of cash at 31 May 2020, representing 87% of the £52m of advance customer receipts. In the last two months ST&H has returned around £28m of net cash to customers and has made trading payments of around £23m, offset by £41m of cash support from the Group.

The Group remains on track to receive regulatory approval for the sale of Bennetts Motorcycling Services in the next few weeks and to compete the transaction by 31 July 2020, generating net disposal proceeds of around £23m.

The Group has now signed an agreement for a debt holiday and covenant waiver for the two ship facilities. This allows the deferral of £32m principal payments that were due up to 31 March 2021. These deferred amounts will amortise over a four-year period. Interest remains payable and no dividends can be paid by Saga Group while these principal payments remain outstanding.

Costs and efficiency

As previously announced, the Group has successfully delivered £15m of run-rate cost savings during the period. The Group has continued this focus on efficiency, for example by enabling all colleagues to work from home, and now expects to achieve a further £5m of run-rate cost savings across the business.

As a result of the current period of travel suspension, the Group has undertaken a review of costs within the Travel business to reduce near-term marketing and other costs through the current period of disruption. This is expected to lead to a £20m in-year cost reduction over and above other savings and to reduce the combined cash 'burn' cost of the Tour and Cruise businesses to between £6m and £8m per month.

Outlook

The Group's near-term priorities are to preserve cash and reduce leverage, operating within amended banking covenants, and ensure our Travel businesses are ready to re-start operations as soon as restrictions lift. The Group will maintain the tight focus on costs and efficiency, while continuing the progress in Insurance that started last year, completing Cruise transformation and repositioning the Tour Operations business.

The Group remains able to resume traveling as soon as restrictions have been removed but has continued to run stress tests based on a wide range of outcomes for the COVID-19 crisis, including a further delay to the resumption of travel until next year. Based on this analysis the Group continues to expect to remain in compliance with key banking covenants at the next two half-yearly testing dates, although further actions may be needed to stay ahead given potential uncertain long-term impacts of COVID-19 on the business and the maturity of bank facilities in May 2022 and May 2023.

The Board of Directors and Executive team are encouraged by the progress made since the start of the year and by the resilience of the business through a time of unprecedented challenge and change. The current crisis highlights the strength of the Saga brand where the Group offers differentiated products and great customer service and against that backdrop the Board believes there is significant potential in the business that has not been fulfilled in recent years. An update on strategy will be provided with the interim results announcement.

Euan Sutherland, Group Chief Executive Officer, said:

"Saga has made good progress against the priorities set last year and we have accelerated this change given the backdrop of the COVID-19 crisis. We have been clearly focused on serving our customers and keeping colleagues safe through this period of major disruption. We reacted quickly to the imposition of the lockdown, moving more than 3,000 colleagues to work from home, while maintaining our industry-leading customer service levels.

"Our Insurance business has been resilient and continues to make progress while within Travel, more than 70% of Cruise guests have moved their booking to later sailings, showing the continued demand for our specialist boutique offer.

"I want to thank all our colleagues for their hard work and our customers for the loyalty they have shown to Saga. What is clear is that we play a really important role in the lives of our customers and this underlines my belief in the strength of the brand. I am excited about what we will be able to achieve with a tighter focus on differentiated products and the right investment in strengthening our digital capabilities and driving our brand and membership proposition."

ENDS

The Annual General Meeting will be held at 11:00am today via a conference call and via an online platform. To join the meeting electronically, you will need to either: a) Download the Lumi AGM app from the Apple Store or Google Play Store by searching for "Lumi AGM"; or b) Visit http://web.lumiagm.com from your device. The meeting ID is: 133-651-038. Shareholders who would like to ask a question will require their unique pin and ID as provided within their AGM documentation. The conference call can be accessed on: UK: 020 3936 2999, all other locations: +44 20 3936 2999. Participant Password: 270232.

For further information please contact:

Saga plc

Mark Watkins, Investor Relations Director Tel: 07738 777 479

Email: mark.watkins@saga.co.uk

Headland Consultancy

Susanna Voyle Tel: 07980 894 557

Henry Wallers Tel: 07876 562 436

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 life after 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