Saga Regulatory News (SAGA)

30 January 2024

Saga plc

Trading Update

Saga on track to deliver significant growth for the full year

Saga plc (Saga or the Group), the UK's specialist in products and services for people over 50, provides the following update on trading covering the period from 1 August 2023 to 29 January 2024.

Mike Hazell, Saga Group Chief Executive Officer, said:

"For 2023/24, Saga remains on track to deliver significant growth in revenue, in addition to an underlying profit more than double that of the prior year1, exceeding our previous guidance. Our Cruise and Travel businesses have had an outstanding year, having taken around 120k passengers on holiday, with customers continuing to be drawn to the strength of the Saga brand and offer. As a result, these businesses will return to profitability, in line with expectations. In Insurance, the market-wide inflationary environment and declining policy volumes are continuing to impact our performance.

"The year ahead will see a continuation of these trends across our business. Bookings for the new seasons in Cruise and Travel are robust, showing good overall progress. The dynamics in Insurance remain challenging and we need to ensure we balance the business effectively between protecting and, in time, growing volume and the delivery of sustainable profitability. More widely, we will build on the successful cost and efficiency savings achieved in 2023/24, further develop our Money business and continue to execute our data and brand strategy.

"In delivering my first update as Group CEO, it is clear that Saga is a business with strong fundamentals in place, underpinned by an outstanding brand, brilliant colleagues, loyal customers and an opportunity to drive long-term sustainable growth, as we unlock value through optimising our core businesses and reducing debt."

2023/24 Outlook

· The Group is expected to report revenue growth of between 10-15% and an Underlying Profit Before Tax more than double that of the prior year1.

· Ocean Cruise revenue growth is expected to be around 30% year-on-year, delivered through a load factor of 87% and per diem of £331, both significantly ahead of the 75% and £318 in the prior year. As a result, and in line with previous guidance, we expect to exceed our target of £40.0m Ocean Cruise Trading EBITDA (Excluding Overheads) per ship.

· River Cruise is expected to return to underlying profit, supported by a load factor of 85% and a per diem of £285. This equates to revenue of around £44m and 17k passengers, which compares with £29m and 12k passengers in the prior year.

· Travel revenue growth is expected to be between 40-45%, with 58k passengers, an increase of more than 20% when compared with the prior year. In line with previous guidance, Travel (when combined with River Cruise for consistency with previous reporting) is on track to return to pre-pandemic Underlying Profit Before Tax.

· Conditions facing our Insurance businesses are broadly unchanged. In Insurance Broking, both policies in force and policy sales across all products, are expected to be around 9% lower than in the prior year. In motor and home specifically:

o  policy sales are expected to be 9% behind, with customer retention of 81%, compared with 84% in the year before; and

o  the margin per policy is expected to be around £54, compared with £69 in the prior year1 and £56 in the first half.

· Insurance Underwriting expects to report an Underlying Profit Before Tax in the low-single digits and a gross current year combined operating ratio lower than the 136.4% reported in the first half of the year, as the significant price increases applied begin to flow through.

· Following the cost efficiencies reported in our interim results and subsequent actions taken, central costs are expected to be significantly lower than in the prior year, at around £30m, compared with £37.7m in the year before.

· Available Cash is expected to be in the range of £135-145m at 31 January 2023, excluding the £50m revolving credit facility and the £85m facility with Roger De Haan which both remain undrawn. Total Net Debt is expected to be slightly higher than at 31 July 2023, in line with guidance.

Looking ahead to 2024/25

· At 28 January 2024, the 2024/25 Ocean Cruise booked load factor and per diem were materially ahead of the prior year at 66% and £368 respectively, compared with 62% and £337 in the prior year.

· Given the ongoing momentum in Ocean Cruise, the business is now approaching optimum capacity, building on the continued high demand for our successful boutique cruise offer. We are exploring opportunities to optimise the business, including potential partnership arrangements which, consistent with our move to a capital-light business model, would support further growth, crystallise value, reduce debt and enhance long-term returns for shareholders.

· The River Cruise booked load factor, at 28 January 2024, was 59% with a per diem of £335, both significantly ahead of the 52% and £295 respectively at the same time last year.

· Our Travel business is also making progress, largely in line with the dynamics over the last year. At 28 January 2024, booked revenue for 2024/25 was £115m, 12% ahead of the same point in the prior year, with passengers of 35k, 2% ahead.

· The conditions in Insurance remain challenging and, against this backdrop, we are focused on effectively balancing the protection and, ultimately, growth of policy sales with the delivery of sustainable profitability. This reshaping will take place over time as the market challenges begin to wane, however, the likely changes are expected to impact profitability in the short-term.

· In 2023/24, we refocused on our core businesses of Cruise, Travel, Insurance and Money, underpinned by our data and brand strategy, having exited our smaller loss-making businesses of Saga Exceptional, Insight and Spaces. Moving into 2024/25, our purposeful and insightful customer-driven content will be showcased within our popular magazine and regular newsletters.

· The full year impact of the central cost efficiencies delivered will continue to flow through into the coming year, in line with guidance, as we embed our leaner operating model.

· As we have previously indicated, we expect to repay the £150m bond due in May 2024 through Available Cash resources and the £85.0m facility with Roger De Haan.

[1] Refers to the 2022/23 financials, restated to reflect the adoption of International Financial Report Standard 17 'Insurance Contracts'

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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 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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