Saga plc · LSE:SAGA

Saga — H1 2016 Earnings Presentation

36 slides from Saga's earnings presentation, September 2016

  1. Slide 1: Results Presentation

    Results Presentation Interim Results for the 6 months ended 31 July 2016

  2. Slide 2: Lance Batchelor, Chief Executive Officer

    Lance Batchelor Chief Executive Officer Saga plc Interim Results for the 6 months ended 31 July 2016 1

  3. Slide 3: Today's Agenda

    Today’s Agenda Lance Batchelor Overview and strategy CEO Jonathan Hill Financials CFO Lance Batchelor Summary CEO Q&A Saga plc Interim Results for the 6 months ended 31 July 2016 2

  4. Slide 4: Overview

    Overview Strong financial results Profit Before Tax Consistent financial performance and significant increase in dividend £109.9m +8.5%  Growth in Trading Profit from core insurance and Debt Ratio travel businesses 2.2x  Continued strong cash generation = further (2.4x at HY deleveraging and incre

  5. Slide 5: Consistently growing profit and reducing debt

    Consistently growing profit and reducing debt 3.1x 2.6x 2.4x 2.3x 2.2x IPO £184.8m £176.2m PBT* Net £172.1m £172.9m debt to EBITDA £163.8m Jan-15 Jul-15 Jan-16 Jul-16 Saga plc Interim Results for the 6 months ended 31 July 2016 *Reported PBT from continuing operations on a last 12 months basis, excl

  6. Slide 6: Growing the core businesses: Insurance

    Growing the core businesses Insurance: strong performance in competitive environment  UK motor and home insurance markets remain competitive Retail broking  Retail broking model continues to provide flexibility model continues  Motor panel performing effectively to provide – around a quarter of n

  7. Slide 7: Growing the core businesses: Travel

    Growing the core businesses Travel: robust trading performance and visibility  Tour operating businesses: – increase in revenue and profit <1% of customers – positive shift in mix to longer-haul, higher value products – benefit of differentiated model without need for volume polled said travel comm

  8. Slide 8: The future

    The future Significant work to enhance customer understanding  Segmentation of the customer base: – cohort of high value customers identified Continued – insight allows for evolution of proposition and customer journey segmentation of  Implementation of new marketing software to database personali

  9. Slide 9: Jonathan Hill, Chief Financial Officer

    Jonathan Hill Chief Financial Officer Saga plc Interim Results for the 6 months ended 31 July 2016 8

  10. Slide 10: Financial Highlights

    Financial Highlights Solid first six months From continuing operations vs. HY 2015 Profit before  Continued strong cash generation led to tax £109.9m 8.5 %  further reduction in debt ratio Profit before tax (excl. £104.5m 3.9 %  derivatives)  Strong Solvency II position Debt ratio 2.2x (0.2)x 

  11. Slide 11: Group Results

    Group Results HY 2015 HY 2016  Revenue decrease reflects impact of quota Revenue £478.3m £437.2m (8.6)% share arrangement Trading  Profit £117.5m £117.6m 0.1%  Trading Profit reflects impact of Saga Profit Sapphire and before tax £101.3m £109.9m 8.5%  investment in emerging businesses Profit aft

  12. Slide 12: Growth in core businesses

    Growth in core businesses Increased profit from core businesses Trading Profit HY 2015 HY2016 Trading Profit growth from core business +2.0% Motor £127.5m Insurance £65.6m £72.1m 9.9%  £125.0m Home Insurance £34.4m £30.4m (11.6)%  Other Insurance £14.3m £16.0m 11.9%  Travel £10.7m £9.0m (15.9)% 

  13. Slide 13: Motor Insurance

    Motor Insurance Solid profit growth HY 2015 HY 2016  Trading Profit growth driven by: – positive claims experience Revenue – introduction of motor panel £157.2m £120.4m (23.4)% – impact of Bennetts Trading Profit £65.6m £72.1m 9.9%  Revenue decreased with introduction of quota share Core Policy 1,

  14. Slide 14: Motor Underwriting

    Motor Underwriting Strong underwriting result – Profitability of motor underwriting Comparable Trading Profit and Net Earned Premiums has improved, driven by: HY 2015 HY 2016 HY 2015 HY 2016 £113.8m – improved risk index for AICL £105.4m policies and an earned to written £57.3m benefit of arrangemen

  15. Slide 15: Impact of quota share

    Impact of quota share Motor Core 6m to Quota 6m to Growth Underlying Underwriting P&L Jul 2015 Share Jul 2016 Revenue £118.3m 0.3% £118.7m (£48.0m) £70.7m Gross profit £60.8m 16.1% £70.6m £1.9m £72.5m Trading Profit £49.8m 15.1% £57.3m (£0.9m) £56.4m Reported COR 65.5% (6.9%) 58.6% 25.3% Pure COR 10

  16. Slide 16: Reserve releases

    Reserve releases Consistent year on year HY 2016 Total Group Reserve  Consistent level of reserve Releases by Accident Year (£m)* releases with no deterioration in reserve margin 12.0  Releases in H2 expected to be lower YoY 8.0 8.0  2015/16 releases originate from Other Insurance 5.0 4.0  Relea

  17. Slide 17: Solvency II

    Solvency II Robust position Solvency II coverage 196% 196% 170% £104.9m £214.6m £109.7m FY 15/16 HY 16 SCR SCR Solvency coverage Surplus Solvency IIII capital Solvency capital  Group’s Solvency II position improved as quota share arrangement taken into account  Coverage ratio of 196% supports furt

  18. Slide 18: Home Insurance

    Home Insurance Continued competitive environment HY 2015 HY 2016  Continued competitive environment, no premium inflation Revenue £50.6m £47.5m (6.1)%  Revenue decreased due to a Trading reduction in profit share and a Profit £34.4m £30.4m (11.6)% limited fall in average premiums Core  Panel clos

  19. Slide 19: Other Insurance

    Other Insurance Strong profit growth Trading Profit and Revenue (£m) Core policy numbers (000s) 46.5 47.0 10.5% Revenue Trading Profit 399k 14.3 16.0 361k HY 15 HY 16 HY 2015 HY 2016  Revenue growth driven by: – increase in travel insurance volumes – lower net rates on private medical insurance due

  20. Slide 20: Travel

    Travel Continued demand  Tour operating HY 2015 HY 2016 – 2.2% increase in revenues and 2.4% increase in Trading Profit Revenue – positive shift in product mix to £209.7m £208.0m (0.8)% more long haul and third-party cruise products Trading Profit £10.7m £9.0m (15.9)%  Cruising – scheduled mainten

  21. Slide 21: Emerging Businesses & Central Costs

    Emerging Businesses & Central Costs Investment in future growth areas HY 2015 HY 2016 Revenue £14.3m £14.3m Trading Loss £(7.5m) £(9.9m)  Revenue consistent with the previous year  Increase in Trading Loss driven by investment in the Saga Investment Services and healthcare businesses Saga plc Inte

  22. Slide 22: Cash Generation

    Cash Generation Sustained cash generation  Continued to generate high Available operating cash flow % levels of cash flow Trading EBITDA Available operating cash flow*  Available operating cash flow % in H1 2016 consistent with expected full-year cash flow £238.8m outturn 74.6%  Decrease from HY

  23. Slide 23: Capital structure

    Capital structure On track to reach target debt ratio Net debt to Trading EBITDA 3.5  Debt ratio further reduced to 2.2x Ongoing ratio 3 Net debt to EBITDA  Medium-term debt 2.5 target maintained at 1.5x-2.0x 2 3.1 2.6 2.3 2.2  New ship delivered in 1.5 mid-2019 1.5 1 May-14 FY 14/15 FY 15/16 HY

  24. Slide 24: Maintaining our efficient operating model

    Maintaining our efficient operating model Increase efficiency and future proof systems  Modernising of insurance sales and administration platform over next 3 years  Introduction of new claims handling system  Remodelling travel back office to increase efficiency and cut costs  Introduction of e

  25. Slide 25: Financial outlook and guidance

    Financial outlook and guidance  Targeting ongoing growth in the profitability of the core businesses  Given cash generation and enhanced solvency positon, confident in delivering on progressive dividend policy  Deleveraging to continue On track to deliver PBT growth of between 5% and 7% for the f

  26. Slide 26: Lance Batchelor, Chief Executive Officer

    Lance Batchelor Chief Executive Officer Saga plc Interim Results for the 6 months ended 31 July 2016 25

  27. Slide 27: Summary

    Summary 1. Consistent financial performance 2. Further deleveraging and increased dividend 3. Continued core business growth 4. Progress on customer understanding 5. On track to meet targets for the full year = Resilient earnings and progressive dividends Saga plc Interim Results for the 6 months en

  28. Slide 28: Q&A

    Q&A Saga plc Interim Results for the 6 months ended 31 July 2016 27

  29. Slide 29: Appendix

    Appendix

  30. Slide 30: Saga Plc consolidated P&L

    Saga Plc consolidated P&L £m 6m to % 6m to Jul 2016 Growth Jul 2015 Revenue £437.2m (8.6%) £478.3m Trading Profit £117.6m 0.1% £117.5 Non-trading items (incl. IPO expenses) (£0.6m) (£0.4m) Amortisation of acquired intangibles (£3.5m) (£2.4m) Net finance costs (£9.0m) (£14.1m) Net fair value gains on

  31. Slide 31: Motor Insurance P&L

    Motor Insurance P&L 6m to Jul 2016 6m to Jul 2015 £m Core Ancillary Broking / Total Growth Core Ancillary Broking / Total UW Other Motor UW Other Motor Revenue £70.7m £16.9m £32.8m £120.4m (23.4%) £118.3m £17.3m £21.6m £157.2m Trading Profit £56.4m £8.8m £6.9m £72.1m 9.9% £49.8m £10.5m £5.3m £65.6m

  32. Slide 32: Motor Underwriting P&L

    Motor Underwriting P&L Motor Core 6m to Quota 6m to Underlying Growth Underwriting P&L Jul 2016 Share Jul 2015 Net earned premium A £54.4m (£51.0m) £105.4m (7.4%) £113.8m Instalment income £2.3m - £2.3m 21.1% £1.9m Other income B £14.0m £3.0m £11.0m 323.1% £2.6m Revenue £70.7m (£48.0m) £118.7m 0.3%

  33. Slide 33: Home Insurance P&L

    Home Insurance P&L 6m to Jul 2016 6m to Jul2015 Ancillary Core Total Ancillary Core Total UW Broking / Home Growth UW Broking / Home Coinsured Coinsured Revenue £9.2m £38.3m £47.5m (6.1%) £9.0m £41.6m £50.6m Trading Profit £3.9m £26.5m £30.4m (11.6%) £5.1m £29.3m £34.4m Number of policies sold: - co

  34. Slide 34: Other Insurance P&L

    Other Insurance P&L 6m to Jul 2016 6m to Jul 2015 Core Core Total Core Core Total UW Broking / Other Growth UW Broking / Other Other Insurance Other Insurance Revenue £17.8m £29.2m £47.0m 1.1% £19.7m £26.8m £46.5m Trading Profit £1.5m £14.5m £16.0m 11.9% £2.0m £12.3m £14.3m Number of policies sold:

  35. Slide 35: Travel P&L

    Travel P&L 6m to Jul 2016 6m to Jul 2015 Tour Cruising Total Growth Tour Cruising Total Travel Operating Travel Operating Revenue £170.5m £37.5m £208.0m (0.8%) £166.9m £42.8m £209.7m Trading Profit £8.5m £0.5m £9.0m (15.9%) £8.3m £2.4m £10.7m Number of holidays passengers 95k n/a 95k (1.0%) 96k n/a

  36. Slide 36: Cash flow and liquidity

    Cash flow and liquidity Available Cash Flow 6m to 6m to Growth Jul 2016 Jul 2015 Trading EBITDA £133.4m 2.1% £130.6m Less Trading EBITDA relating to restricted businesses (£64.3m) 6.6% (£60.3m) Intra-group dividends paid by restricted businesses £50.0m (15.3%) £59.0m Working capital and non-cash ite

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