Saga Plc · LSE:SAGA
Saga — H1 FY2015 Earnings Presentation
44 slides from Saga's earnings presentation, September 2014
Slide 1: Interim results for the six months ended 31 July 2014
Interim results for the six months ended 31 July 2014 1
Slide 2: The Team
The Team Lance Batchelor Stuart Howard Chief Executive Officer Chief Financial Officer 2
Slide 3: Introduction
Introduction • Strong first half, on track to meet market expectations for the financial year to January 2015 • Structural advantages enhanced • Continued commitment to quality – both in what we offer and the business we do • Innovation team set up and creation of ‘fast pilots’ • Progress made on ne
Slide 4: Stuart Howard, Chief Financial Officer
Stuart Howard Chief Financial Officer 4
Slide 5: Overview
Overview Group on track to deliver for the financial year to January 2015 • Group Trading EBITDA increased by 9.7% to £130.4m (2013: £118.9m) • Group Operating profit increased by 15.2% to £110.0m (2013: £95.5m) • Group profit before tax up 14.9% to £106.5m (2013: £92.7m) Cash generation shows the s
Slide 6: Trading EBITDA Growth High Cash Conversion
Trading EBITDA Growth High Cash Conversion Trading EBITDA (£m) & Trading EBITDA Margin (%)1,2 Available Cash Flow (£m) and Conversion (%)1,3 20% 22% 102% 110% 144 130 122 119 2 2 15 9 17 19 31 29 63 67 6m to July 2013 6m to July 2014 6m to July 2013 6m to July 2014 Motor Home Other Financial Service
Slide 7: Group Income Statement Highlights
Group Income Statement Highlights 6m to 6m to 6m to Jul 2013 6m to Jul 2013 £m Jul 2014 Growth Jul 20131 Reported Adjustment Revenue £583.5m (3.9%) £607.1m £632.0m (£24.9m) Trading EBITDA £130.4m 9.7% £118.9m £122.4m (£3.5m) Operating profit £110.0m 15.2% £95.5m £94.9m £0.6m Exceptional expenses (£4
Slide 8: Group Cash Flow & Liquidity Highlights
Group Cash Flow & Liquidity Highlights £m July 2014 July 2013 Change (%) Trading EBITDA 130.4 118.9 9.7 Less Restricted Businesses (42.3) (36.4) Working Capital & Non-Cash items 62.8 43.3 Net Capex (7.2) (4.1) Available Operating Cash Flow 143.7 121.7 18.1 Available Operating Cash Flow (%) 110.2 102
Slide 9: Motor
Motor
Slide 10: Motor – Revenue and Trading EBITDA
Motor – Revenue and Trading EBITDA Trading EBITDA 32.1% 38.3% Margin 182.2 160.0 66.6 62.9 6m to July 2013 6m to July 2014 Revenue (£m) Trading EBITDA (£m) 10
Slide 11: Motor Policy Volumes
Motor Policy Volumes LTM Core Policies Sold LTM Add-on Policies Sold 1.75m 1.63m 1.47m 1.09m 1.06m 1.01m Jul-13 Jan-14 Jul-14 Jul-13 Jan-14 Jul-14 11
Slide 12: Motor Combined Ratio
Motor Combined Ratio Reported Combined Ratio for Saga Core Motor Pure Combined Ratio for Saga Core Motor 101.6% 91.8% 76.4% 65.6% 6m to July 2013 6m to July 2014 6m to July 2013 6m to July 2014 12
Slide 13: Motor
Motor £m 6m to Jul 2014 Growth 6m to Jul 20131 Saga core business £113.6m (13.3%) £131.0m Ancillary income £23.0m (13.5%) £26.6m Other trading activity £23.4m (4.9%) £24.6m Third party premiums £13.9m 0.7% £13.8m Gross revenue £173.9m (11.3%) £196.0m Third party premiums (£13.9m) 0.7% (£13.8m) Reven
Slide 14: Reserve Releases
Reserve Releases £ (m) As a % of Net Earned Premium 1 1.0% 33.0 29.8 26.2% 25.2% 6m to July 2013 6m to July 2014 6m to July 2013 6m to July 2014 1 Saga core Motor business only. 14
Slide 15: Home
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Slide 16: Home – Revenue and Trading EBITDA
Home – Revenue and Trading EBITDA Trading EBITDA 32.2% 31.3% Margin 44.3 43.7 31.4 29.0 6m to July 2013 6m to July 2014 Revenue (£m) Trading EBITDA (£m) 16
Slide 17: Home Policy Volumes
Home Policy Volumes LTM Core Policies Sold LTM Add-on Policies Sold 1.31m 1.30m 0.58m 0.62m 0.54m Jul-13 Jan-14 Jul-14 Jul-13 Jan-14 Jul-14 17
Slide 18: Other FS - Revenue and Trading EBITDA
Other FS - Revenue and Trading EBITDA Trading EBITDA 28.2% 26.8% Margin 48.2 49.0 18.9 16.9 6m to July 2013 6m to July 2014 Revenue (£m) Trading EBITDA (£m) 18
Slide 19: Other FS Policy Volumes
Other FS Policy Volumes LTM Core Policies Sold 0.33m 0.33m 0.34m Jul-13 Jan-14 Jul-14 19
Slide 20: Travel
Travel
Slide 21: Travel
Travel Revenue (£m) Trading EBITDA (£m) Trading EBITDA 5.6% 8.6% Margin 176.5 15.2 161.7 43.3 38.1 9.1 133.2 123.6 6m to July 2013 6m to July 2014 6m to July 2013 6m to July 2014 Holidays Revenue (£m) Cruising Revenue (£m) 21
Slide 22: Healthcare
Healthcare
Slide 23: Healthcare Services
Healthcare Services 161.9 145.5 6m to July 2013 6m to July 2014 Revenue (£m) Trading EBITDA (£m) 23
Slide 24: Media
Media
Slide 25: Media and Central Costs
Media and Central Costs £m 6m to July 2014 6m to July 2013 Change (%) Revenue 13.7 13.4 2.2 Gross profit 5.7 4.7 21.3 Gross Profit % 41.6 35.1 6.5 Trading EBITDA (1.2) (3.1) 61.3 Trading EBITDA % (8.8) (23.1) 14.3 Operating Profit (4.5) (6.6) 31.8 Operating Profit % (32.8) (49.3) 16.5 2013 presented
Slide 26: Summary
Summary • Group on track to meet expectation for the financial year to January 2015 • Strong cash generation • Robust balance sheet • Dividend in line with expectations 26
Slide 27: Lance Batchelor, Chief Executive Officer
Lance Batchelor Chief Executive Officer 27
Slide 28: A Busy First Half
A Busy First Half • Admission to the London Stock Exchange on 29 May, joined the FTSE 250 on 22 September 2014 • 200,000 retail shareholders took up the offer, over 80% customers • Continued growth in the database. Access to 10.6m people, 46% of those over 50 in the UK • 2.7m customers were buyers i
Slide 29: The Saga Fundamentals
The Saga Fundamentals Saga is committed to making life better for the over 50s • Customers at the heart of everything we do • Proprietary data driven insight • Delivering the best possible products and services • Creating a culture of innovation • Delivering everything with exceptional customer serv
Slide 30: Structural Advantages
Structural Advantages Structural advantages across the business: • Ability to shift resources around the Group to generate the greatest possible returns • Our access to data, insight and contact with the 10m+ customers means lower cost of acquisition than the industry average • Flexibility of the in
Slide 31: Insurance
Insurance Motor • A good first half despite challenging market conditions • Flexibility provides many ways to access the market to provide what our customers need • Options that allow us to account for changing market dynamics whilst maintaining and protecting our performance Home • Solid performanc
Slide 32: Other Financial Services
Other Financial Services Encouraging performance in an important area for Saga going forward Travel insurance • Policy numbers up • New routes to market • Important source of names for the database Private Medical Insurance • Policy numbers up • Enhanced use of third party lead generators 32
Slide 33: Travel
Travel Travel • Very good start to the year • Growth in like-for-like passenger volumes and margin • Acquisition of a majority shareholding in Destinology Ltd • Helping to unlock the affluent younger age group (50-60) • Extension of the Saga brand into Third Party Cruising • 30% of initial demand fr
Slide 34: Healthcare
Healthcare Private Pay Care Offering • Acceleration in development • Dedicated management team appointed • Small scale trial taking place this winter Allied Healthcare • Continued focus on margin • Efficiency and quality gives competitive advantage • Continue to win new contracts • Market is challen
Slide 35: Innovation
Innovation • New dedicated innovation team • Use data to drive insight into products and services customers will value most in the future • Instigation of ‘fast pilot’ programme • Test findings quickly in real world environment • Look at many more areas in a highly efficient and focussed way 35
Slide 36: New Opportunities
New Opportunities Progress made in two important areas 1. Wealth Management: Comprehensive review of marketplace and Saga’s options to enter it - start up, acquisition or partnership • Decision made to partner • Advanced negotiations with a number of providers 2. Retirement Villages: Partnership sig
Slide 37: Summary and Outlook
Summary and Outlook • Solid first set of interim results, which put us on track to meet market expectations for the financial year to January 2015 • Excellent cash generation shows strength of the model • Debt reduction ahead of schedule • Continued focus of making life better for the over 50s 37
Slide 38: Q&A
Q&A 38
Slide 39: Appendices
Appendices 39
Slide 40: Exceptional Expenses
Exceptional Expenses £m H1 2015 H1 2014 P&L charge consists of: - Share-based Payment Costs 41.1 0.0 - Flotation and Other Costs 3.3 0.0 - Staff bonuses 6.7 0.0 - Stabilisation profits (0.3) 0.0 - Restructuring Costs 3.7 4.1 - Cost of Cancelled and Curtailed Cruises 0.6 0.6 - Other Exceptional Expen
Slide 41: Financing
Financing Available Leverage £m Gross Debt Cash Net Debt LTM EBITDA Ratio New Debt raised on 17th April 2014 1,250 Proceeds from IPO (550) As at 29th May 2014 700 (10) 690 225 3.1x Available cash generation post IPO (94) (94) As at 31st July 2014 700 (104) 596 242 2.5x £m H1 2015 H1 2014 FY 2014 Fin
Slide 42: Available Operating Cash Flow Rec
Available Operating Cash Flow Rec £m 6m to July 2014 6m to July 2013 Net Cash Flows from Operating Activities (Reported) 110.9 196.7 Exclude cash impact of: - Trading of restricted divisions (31.6) (25.1) - Cash released from restricted divisions 26.5 0.0 - Exceptional Expenses 20.4 6.0 - Costs of n
Slide 43: Pro Forma Operating Earnings Rec
Pro Forma Operating Earnings Rec £m H1 2015 H1 2014 Profit Before Tax (Reported) 32.8 92.1 Add back: - Exceptional Expenses 55.1 4.7 - Exceptional Finance Costs 12.9 - Less Non-controlling Interests (0.2) (0.7) Pre-tax Operating Earnings 100.6 96.1 Tax at effective rate of 21.33% (FY14 23.17%) (21.5
Slide 44: Tax
Tax £m H1 2015 H1 2014 Profit Before Tax 32.8 92.7 Add back: - Underlying Adjustments - (0.6) Deduct: - Profit charged to ROI Tax - - - Non-deductible / Non-taxable Items 17.2 2.8 Taxable Profits 50.0 94.9 Underlying Tax Rate 21.3% 23.2% Tax Expense excluding Prior Year Adjustments 10.7 22.0 Retrans