Saga plc · LSE:SAGA
Saga — FY2022 Earnings Presentation
69 slides from Saga's earnings presentation, Mar 23, 2022
Slide 1: Preliminary Results for the year ended 31 January 2022
PRELIMINARY RESULTS for the year ended 31 January 2022 23 MARCH 2022
Slide 2: Agenda
AGENDA Overview Euan Sutherland Group CEO Financial performance James Quin Group CFO Strategy overview Euan Sutherland Customer insight Lisa Edgar the Big Window CEO Insurance Steve Kingshott Insurance CEO Cruise Nigel Blanks Cruise CEO Conclusion Euan Sutherland 2 Preliminary results for the year e
Slide 3: Overview
OVERVIEW Euan Sutherland Group CEO
Slide 4: Resilient performance and positioned for growth
RESILIENT PERFORMANCE AND POSITIONED FOR GROWTH Strong progress: Insurance delivered second year of policy growth; team significantly strengthened Successful restart of Cruise with encouraging pipeline of bookings for 2022/23 Restructured Tour Operations business Relaunched the brand, showcased thro
Slide 5: Second year of positive insurance momentum; travel well-placed
SECOND YEAR OF TRAVEL WELL-PLACED POSITIVE INSURANCE AS WE EMERGE FROM MOMENTUM THE PANDEMIC 47% 82.8% Positive cash three-year customer retention and EBITDA fixed-price for Cruise in the second half (2021 – 35%) (2021 – 80.5%) Launched Saga Plus 31k Travel guests AICL policies in force 68% +3% Crui
Slide 6: ESG highlights
ESG HIGHLIGHTS Overall colleague Launched engagement 7.7 out of 10 123 Grandparents’ (vs. 7.3 at February 2021) families of our Leave Filipino crew Diverse range of ESG initiatives underway supported with educational Recognise that there is more to do and are bursaries actively engaged in that work
Slide 7: Financial performance
FINANCIAL PERFORMANCE James Quin Group CFO
Slide 8: Small underlying loss but strong cash recovery
SMALL UNDERLYING LOSS BUT STRONG CASH RECOVERY Increased revenue following 2021/22 2020/21 Change resumption of Cruise operations Revenue £377.2m £337.6m 12% Small Underlying Loss Before Tax due to continuing impact of COVID- Underlying (Loss)/Profit Before Tax (£6.7m) £17.1m (139%) 19 on the Travel
Slide 9: Continuing to navigate pandemic challenges
CONTINUING TO NAVIGATE PANDEMIC CHALLENGES Retail Broking profit lower, mainly 2021/22 2020/21 Change due to reduced PMI result and investment in advertising Retail Broking (written) £66.6m £73.8m (10%) Insurance KPIs show progress in Written to earned adjustment (£0.2m) £2.1m (110%) motor and home
Slide 10: Robust broking result in challenging market environment
ROBUST BROKING RESULT IN CHALLENGING MARKET ENVIRONMENT Year-on-year movement in written Retail Broking Underlying Profit Before Tax £8.4m £3.4m £1.0m (£6.3m) (£6.0m) (£7.7m) £73.8m £66.6m 1 2 3 4 5 2020/21 New business Renewals PMI Travel insurance CHMC Operating 2021/22 contribution contribution e
Slide 11: Underwriting ahead of expectations
UNDERWRITING AHEAD OF EXPECTATIONS Strong result with high reserve releases Movement in reserve margin 2020/21 2021/22 £13.0m £11.9m £182.4m £165.9m 2020/21 2021/22 (£42.1m) £52.6m £35.4m £58.7m £54.1m Underlying revenue Underlying Profit Before Tax Jan-21 Favourable Basis change Reserve Jan-22 expe
Slide 12: Continued pandemic impact on travel
CONTINUED PANDEMIC IMPACT ON TRAVEL Financials Travel loss at similar level to the prior year 2021/22 2020/21 Variance Cruise resumed operations in June 2021, Revenue £94.7m £51.6m 84% was EBITDA positive in the second half and cash positive for the full year Gross profit (£8.2m) (£16.5m) 50% 2021 l
Slide 13: Investment to support post-pandemic recovery
INVESTMENT TO SUPPORT POST- PANDEMIC RECOVERY Full year in line with expectations set at half year Underlying marketing costs* £5.0m £2.9m Increase in underlying marketing costs of £11.6m £6.4m (£2.7m) compared to prior year; due to TV advertising and (£3.4m) brand relaunch, as well as returning Cru
Slide 14: Continued net debt reduction
CONTINUED NET DEBT REDUCTION Movement in net debt £42.4m £2.2m £36.4m £12.5m (£51.7m) (£22.8m) (£35.0m) (£15.2m) Available Operating Cash Flow before net cash support £760.2m to Travel of £89.4m £729.0m 1 Feb 2021 Unrestricted Dividend Working Capital Tour Operations Cruise Available Debt Non-tradin
Slide 15: Actions taken to strengthen our financial position
ACTIONS TAKEN TO STRENGTHEN OUR FINANCIAL POSITION Summary of financing facilities Confidence in our position Ship debt financing to be repaid over next 11 years £187m Available Cash at 31 January £76m of ship debt repayments deferred; to be repaid over Further £32.4m cash held within the ST&H ring-
Slide 16: Expected acceleration of debt reduction
EXPECTED ACCELERATION OF DEBT REDUCTION Deleveraging should pick up pace as Travel Deleverage profile with updated stress test cashflows improve applied Chart on the right shows expected profile of debt Group net debt reduction in a range of scenarios, including possible Spirit of Adventure but remo
Slide 17: Outlook for 2022/23
OUTLOOK FOR 2022/23 Retail Broking – wider range of uncertainty post market study; continued disciplined approach to pricing Underwriting – expect to see favourable reserve releases in AICL albeit lower than in 2020/21 and 2021/22 Cruise – expect improved result with load factor >75%; around £8m one
Slide 18: Strategy overview
STRATEGY OVERVIEW Euan Sutherland Group CEO
Slide 19: Experience is everything… the next phase
EXPERIENCE IS EVERYTHING… THE NEXT PHASE Saga is a strong brand with great people We are emerging from the pandemic stronger than we went in We have already put in place the fundamental building blocks to reset our brand and our business We’re now focused on returning the business to growth, whilst
Slide 20: "I'm not 'old'..."
“I’M NOT ‘OLD’... The majority of our audience don’t self-identify as old, and they certainly don’t want to be seen as old by others. 20 Preliminary results for the year ended 31 January 2022
Slide 21: …I'm experienced"
…I’M EXPERIENCED” Experience defines who you are, and everyone wants to be experienced. And our audience has more than anyone. It’s the one key advantage they have that no one can argue with. Source: Research group 2020 21 Preliminary results for the year ended 31 January 2022
Slide 22: Advertising resonates strongly with our audience
“WE ARE THE SUM OF “I’M NOT OLD, OUR EXPERIENCE: JUST MORE GOOD AND BAD ONES” EXPERIENCED” “EXPERIENCE ROUNDS PEOPLE, “YOU CAN’T BUY IT BUILDS EXPERIENCE” “THAT HITS THE CHARACTER” NAIL ON THE HEAD” ADVERTISING RESONATES STRONGLY WITH OUR AUDIENCE Key quotes from our 2020 research groups 22 Prelimin
Slide 23: Experience is everything
THINKING OF SOMEONE AS EXPERIENCED SHAPES HOW WE SERVE THEM ‘OLD’ ‘EXPERIENCED’ ASSOCIATIONS ASSOCIATIONS Losing faculties Sharp, savvy and discerning In need of help Plenty to contribute Largely ignored Respected and influential Nostalgic In the present Easily pleased Demand exceptional EXPERIENCE
Slide 24: Why Saga exists
WHY SAGA EXISTS Our vision Is to help lead and create a UK where older people are valued for their experience and have greater confidence, contribution and connections. Our purpose Our purpose is: To deliver exceptional Exceptional Experience Every day experiences every day means means means while b
Slide 25: Our business model – a competitive strength
OUR BUSINESS MODEL – A COMPETITIVE STRENGTH MOVING TO CAPITAL-LIGHT, HIGH-GROWTH, LIFETIME VALUE Frequency …over the of lifetime of our purchase… customers, developing a Cross-sell 30-year within and lifetime value across businesses… Retention in every business… Consistent customer growth… 25 Prelim
Slide 26: Saga's business structure
SAGA’S BUSINESS STRUCTURE Capital-light New businesses Insurance direct-to-customer Powered by our Broking and Innovation Hub Underwriting marketing, content and distribution business Innovation Brand and culture Brand, data, insight and Marketing, innovation are our core IP Personal finance the Big
Slide 27: From stabilisation to growth
FROM STABILISATION TO GROWTH Five-pillar turnaround plan Two-year highlights Growth plan Simplified operating model and hybrid working People and culture step change Improvement of c.20% in colleague engagement 1. Increased focus on diversity, equity and inclusion Maximise our existing Relaunched th
Slide 28: Our growth plan
OUR GROWTH PLAN 1 Maximise our existing businesses Specific growth plans for each business, enabling growth, accountability, efficiency and the delivery of a common brand purpose Insurance Move from reset to growth, focused on optimising our products and broadening the range, building CRM capability
Slide 29: Our growth plan: scale while reducing debt; create the Superbrand
OUR GROWTH PLAN 2 Step-change our ability to scale while reducing debt Grow existing businesses while reducing debt Developing new businesses through innovation in a capital-light way 3 Create ‘The Superbrand’ for older people Address the current brand polarisation Commercialise and grow our databas
Slide 30: Customer insight
CUSTOMER INSIGHT Lisa Edgar the Big Window CEO
Slide 31: An insight vision driving a unique position
AN INSIGHT VISION DRIVING A UNIQUE POSITION Only Saga will know and understand what it means to get older and how to make it the positive experience it should be Our existing and potential customers are confident that Saga knows that they need as they age and will deliver those needs Every Saga coll
Slide 32: A solid platform to move forward with
A SOLID PLATFORM TO MOVE FORWARD WITH We start from a very strong position We know who We know what We know what they to target they want respond to Group-wide segmentation pin- Extensive, engaged and Years of effective test and pointing our primary targets: expanding customer panel, learn activity
Slide 33: Translating unique insights into consumer value
TRANSLATING UNIQUE INSIGHTS INTO CONSUMER VALUE 1. Our ever-building knowledge of the ageing mind Building a brand campaign that successfully and meaningfully reframed age as experience 33 Preliminary results for the year ended 31 January 2022
Slide 34: The ageing mind
THE AGEING MIND Crystalised intelligence Complex decisions Fluid intelligence 53 years 60 years 70 years 80 years Source: The Age of Reason: Financial Decisions over the Life-Cycle with Implications for Regulation. Sumit Agarwal, John C. Driscoll, Xavier Gabaix, and David Laibson, October 19, 2009 3
Slide 35: Translating unique insights into consumer value
TRANSLATING UNIQUE INSIGHTS INTO CONSUMER VALUE 1. Our ever-building knowledge of the ageing mind Building a brand campaign that successfully and meaningfully reframed age as experience 2. Our understanding that as we age, we seek familiarity, Developing products that meaningfully resonate with the
Slide 36: Complexity versus familiarity as we age
COMPLEXITY VERSUS FAMILIARITY AS WE AGE Higher complexity Familiar Unfamiliar Saga does fully understand the appeal of three-year fixed to provide a framework for more ideas like this Lower complexity 36 Preliminary results for the year ended 31 January 2022
Slide 37: Translating unique insights into consumer value
TRANSLATING UNIQUE INSIGHTS INTO CONSUMER VALUE 1. Our ever-building knowledge of the ageing mind Building a brand campaign that successfully and meaningfully reframed age as experience 2. Our understanding that as we age, we seek familiarity, Developing products that meaningfully resonate with the
Slide 38: Saga talks to consumers at a key turning point in their lives
SAGA TALKS TO CONSUMERS AT A KEY TURNING POINT IN THEIR LIVES The ‘Saga moment’ 38 Preliminary results for the year ended 31 January 2022
Slide 39: Translating unique insights into consumer value
TRANSLATING UNIQUE INSIGHTS INTO CONSUMER VALUE 1. Our ever-building knowledge of the ageing mind Building a brand campaign that successfully and meaningfully reframed age as experience 2. Our understanding that as we age, we seek familiarity, Developing products that meaningfully resonate with the
Slide 40: A lifetime map of consumers' experience of ageing
A LIFETIME MAP OF CONSUMERS’ EXPERIENCE OF AGEING Active Passive Supported Passive retirement 83* (lowest % pot) Age perception gap at largest Supported retirement Active phase of phase retirement begins 75 Involvement of Key changes (max % of 74 family retirement pot) SWB at lowest but 68* Horizon
Slide 41: A plan for leading the way
A PLAN FOR LEADING THE WAY An ageing unit Opening-up the funnel capable of applying of consumer needs Flagship the best expertise in Experts in through the lens of insight ageing to real ageing ageing initiative consumer solution Continually driving the development of new products and services Saga
Slide 42: Insurance
INSURANCE Steve Kingshott Insurance CEO
Slide 43: The Saga difference and what it means for insurance
THE SAGA DIFFERENCE AND WHAT IT MEANS FOR INSURANCE Saga has unique competitive assets, which we will leverage to drive growth : P Brand heritage amongst older people Enhanced brand positioning P through ‘Experience is Everything’ campaign Unique data and insight into ageing P from the Big Window an
Slide 44: The foundations are already in place…
THE FOUNDATIONS ARE ALREADY IN PLACE… Proposition Service Introduced Saga Plus enhanced three- P year fixed-price cover P Improved net promoter score (49 vs. 43 a year ago) Relaunched the brand, showcased P Awarded recommended provider for motor and home insurance by Which? P through three new telev
Slide 45: Insurance with the needs of older people at its heart
INSURANCE WITH THE NEEDS OF OLDER PEOPLE AT ITS HEART Saga customers have very clear needs when it comes to insurance: We deliver quality insurance products and Reassurance Can I make a claim with minimum exceptional experiences fuss and great service? every day at Can I buy the insurance I want in
Slide 46: Building direct, long-lasting and deep customer relationships
BUILDING DIRECT LONG-LASTING AND DEEP CUSTOMER RELATIONSHIPS Our three-year fixed-price product meets customer …and helped us keep customers longer, with needs and has driven policy growth… 8 out of 10 staying with us at renewal… Three-year fixed-price 83% Three-year 81% fixed-price 75% 72% 2018/19
Slide 47: The FCA pricing reforms – positive in the medium term
THE FCA PRICING REFORMS – POSITIVE IN THE MEDIUM TERM Saga’s target customers are more likely to purchase based on trust, loyalty and reputation… 51% It was the cheapest available 53% 36% It's a company I trust 32% 39% I've used the insurer before 22% 30% The insurer has a good reputation 26% 17% It
Slide 48: We will expand our product range and relationship marketing capabilities
WE WILL EXPAND OUR PRODUCT RANGE AND RELATIONSHIP MARKETING CAPABILITIES… 1 2 3 4 Product range and World-class CRM Distribution shift Optimising our innovation capabilities from PCW to direct product sourcing Optimisation of current approach Accelerating the build of an Shifting distribution from p
Slide 49: How we will measure success
HOW WE WILL MEASURE SUCCESS Extended product range, driven by our Product range and customer insights OUR AMBITION 1 innovation Re-entered the pet insurance market Grow policies in force ahead of the ~ 2.5% p.a. increase in our target World-class CRM Growing customer numbers and loyalty 2 demographi
Slide 50: Cruise
CRUISE Nigel Blanks Cruise CEO
Slide 51: The Saga difference – a unique boutique cruise offer
THE SAGA DIFFERENCE – A UNIQUE BOUTIQUE CRUISE OFFER Saga’s unique offering is tailored for older people in the UK: Ships and cruises specifically tailored for P our customer segment Two new, state-of-the-art ships; 987 guest P capacity; greater space per guest P All-inclusive pricing Exceptional cu
Slide 52: Unique offer leaves us well-placed
UNIQUE OFFER LEAVES US WELL-PLACED Our approach means we are Our ships are positioned ideally for operating today – ideally positioned for operating newer, smaller ships with greater space per guest post-pandemic 6,100 Newer, smaller ships (popular with guests and ports) 5,100 2 ships Enhanced air c
Slide 53: We remain committed to our targets
WE REMAIN COMMITTED TO OUR TARGETS EBITDA per capacity day per ship Indicative Underlying Profit Before Tax £312 per diem (per ship, per annum) x 85% load factor £7 EBITDA per ship £40m Depreciation and amortisation (£10m) £265 Finance costs (£8m) (£139) (£22) £111 Central Cruise overheads (£6m) Tic
Slide 54: Load factor ahead of pre-pandemic levels; per diems driven by differentiated offer
LOAD FACTOR AHEAD OF PER DIEMS DRIVEN BY PRE-PANDEMIC LEVELS DIFFERENTIATED OFFER Load factor evolution and sensitivities Per diem evolution and sensitivities 2019/20 Achieved per diem growth in excess of wider UK 2022/23* market 73% 2018/19 Increasing revenues supported by adding selected inclusion
Slide 55: Key priorities for Cruise in 2022/23
KEY PRIORITIES FOR CRUISE IN 2022/23 Creating a centre of excellence across both cruise propositions On track to achieve £40m per ship EBITDA target from 2023/24 Drive value-for-money credentials in ocean with additional inclusion Leverage integration of ocean and river operations: Create a centre o
Slide 56: Conclusion
CONCLUSION Euan Sutherland Group CEO
Slide 57: All business units positioned for growth
ALL BUSINESS UNITS POSITIONED FOR GROWTH Addressed legacy issues and navigated the pandemic, bringing stability to the business Refocused vision, purpose and positioning will underpin future success All business units well-positioned for growth Group IP of data, insight, brand and culture and innova
Slide 58: Appendix
APPENDIX
Slide 59: Saga plc consolidated income statement
SAGA PLC CONSOLIDATED INCOME STATEMENT 2021/22 Change 2020/21 Revenue £377.2m 12% £337.6m Underlying (Loss)/Profit Before Tax Total Retail Broking (earned) £66.4m (13%) £75.9m Underwriting £54.1m (8%) £58.7m Total Insurance £120.5m (10%) £134.6m Travel (£79.3m) (1%) (£78.5m) Other Businesses and Cen
Slide 60: Underlying to statutory marketing and administration costs
UNDERLYING TO STATUTORY MARKETING AND ADMINISTRATION COSTS 2021/22 2020/21 Total underlying marketing and administration costs (page 13) £208.2m £201.1m Restructuring costs £6.3m £21.3m IAS 19 charge £1.6m £2.6m Costs ceded under quota share reinsurance (£6.9m) (£7.7m) Charge on closure of defined b
Slide 61: Insurance retail broking income statement
INSURANCE RETAIL BROKING INCOME STATEMENT Motor Home Other Total Total Broking Broking Broking 2021/22 Change 2020/21 Broked £105.0m £153.2m £96.5m £354.7m (5%) £373.4m Underwritten £205.5m - £3.4m £208.9m - £208.1m Gross written premiums £310.5m £153.2m £99.9m £563.6m (3%) £581.5m Broker revenue £4
Slide 62: Insurance underwriting income statement
INSURANCE UNDERWRITING INCOME STATEMENT Reported Underlying Underlying 2021/22 Quota Share 2021/22 Change 2020/21 Net earned premium £51.5m (£110.0m) £161.5m (12%) £183.4m Other revenue £33.2m £28.8m £4.4m 540% (£1.0m) Revenue A £84.7m (£81.2m) £165.9m (9%) £182.4m Claims costs B (£44.3m) £87.7m (£1
Slide 63: Reserve releases
RESERVE RELEASES 2021/22 Total Group motor reduction in best estimate claim costs and COVID-19 surplus by accident year (£’m) 12.4 7.0 6.9 6.6 4.6 1.4 1.4 0.8 1.0 Pre -2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Accident Year to 31 January 63 Preliminary results for the year ended 31 January 2
Slide 64: Travel income statement
TRAVEL INCOME STATEMENT 2021/22 2020/21 Tour Total Tour Total Operations Cruising Travel Change Operations Cruising Travel Revenue £12.2m £82.5m £94.7m 84% £32.7m £18.9m £51.6m Gross loss (£0.5m) (£7.7m) (£8.2m) 50% (£2.6m) (£13.9m) (£16.5m) Marketing expenses (£8.7m) (£12.1m) (£20.8m) (40%) (£7.8m)
Slide 65: Cruise operating costs
CRUISE OPERATING COSTS EBITDA per capacity day per ship Approximate breakdown of operating costs £312 per diem x Crew c.25% 85% load factor £7 Hotel costs (food and consumables) c.15% Fuel oil** c.12% £265 (£139) (£22) UK car service c.10% £111 Port costs c.10% Ticket revenue Other net Operating Mar
Slide 66: Other businesses and central costs
OTHER BUSINESSES AND CENTRAL COSTS 2021/22 2020/21 Change Central Costs Revenue £17.3m £18.0m (4%) Around £60m gross cost in central areas, much of which is recharged to Gross profit £9.1m £9.3m (2%) BUs, and with increasing focus on decentralisation Operating expenses (£36.8m) (£29.1m) (26%) Expect
Slide 67: Other businesses and central costs income statement
OTHER BUSINESSES AND CENTRAL COSTS INCOME STATEMENT 2021/22 2020/21 Other Central Other Central Businesses Costs Total Change Businesses Costs Total Revenue Personal Finance £5.9m - £5.9m (2%) £6.0m - £6.0m Healthcare - - - (100%) £0.9m - £0.9m Printing and media £9.9m - £9.9m 9% £9.1m - £9.1m Other
Slide 68: Cash flow and liquidity
CASH FLOW AND LIQUIDITY 2021/22 Change 2020/21 Retail Broking Trading EBITDA £73.2m (10%) £81.6m Other Businesses and Central Costs Trading EBITDA (£21.5m) (115%) (£10.0m) Trading EBITDA from unrestricted entities £51.7m (28%) £71.6m Dividends paid by Underwriting business £35.0m 43% £24.5m Working
Slide 69: Travel cash flows
TRAVEL CASH FLOWS Cruise cash flow Tour Operations cash flow Overall Cruise Available Operating Cash Flow, after £38.0m cash support provided vs. £70.3m in the accounting for customer receipts, of £22.8m prior year due to: Significant increase in advance customer receipts in shift to trust accountin