Saga plc · LSE:SAGA

Saga — FY2015 Earnings Presentation

44 slides from Saga's earnings presentation, May 2015

  1. Slide 1: Full year results for the year ended 31 January 2015

    Full year results for the year ended 31 January 2015

  2. Slide 2: Introduction

    Introduction Lance Batchelor Chief Executive Officer

  3. Slide 3: Delivered on IPO targets

    Delivered on IPO targets  We have achieved the targets we set out at IPO: – Strong growth in Trading EBITDA – Continued cash generation – Proposed dividend at top end of the target range – Debt reduction target beaten  Progress made against new strategy outlined in January 2015  Commitment to bal

  4. Slide 4: Growth from core businesses

    Growth from core businesses  Growth potential in core businesses highlighted in January  These businesses demonstrated good growth throughout the year  Continue to see significant growth opportunities: – Expand motor insurance footprint with motor panel – Capitalise on pricing advantage through h

  5. Slide 5: Financials

    Financials Stuart Howard Chief Financial Officer

  6. Slide 6: Strong financial performance

    Strong financial performance 31 January 2015 31 January 2014 Change Group Trading EBITDA £227.4m £214.5m +6.0% Like-for-like profit before tax1 £195.5m £178.3m +9.6% Pro forma operating earnings per share 12.6p 11.1p +13.5% Leverage (net debt to EBITDA)2 2.5x 3.1x -0.6x Proposed final dividend 4.1p

  7. Slide 7: Profitable underlying growth

    Profitable underlying growth 12m to % 12m to £m 31 Jan 2015 Growth 31 Jan 2014 (1) Revenue 900.5 0.6% 895.4 Trading EBITDA 227.4 6.0% 214.5 Trading EBITDA % (of gross revenue) 21.3% 0.6% 20.7% Operating profit 198.4 7.4% 184.8 Exceptional expenses (2.4) (6.4) Net finance costs (pension scheme) (0.5)

  8. Slide 8: EBITDA growth across core businesses

    EBITDA growth across core businesses 12m to % 12m to £m 31 Jan 2015 Growth 31 Jan 2014 (1) Trading EBITDA: Motor Insurance 104.2 8.9% 95.7 Home Insurance 64.5 2.2% 63.1 Other Financial Services 41.9 12.3% 37.3 Total Financial Services 210.6 7.4% 196.1 Travel 26.0 29.4% 20.1 Healthcare Services 2.2 (

  9. Slide 9: Motor Insurance – strong performance in challenging market

    Motor Insurance – strong performance in challenging market 12m to 31 January 2015 12m to 31 January 2014 (1) Core Ancillary Broking / Total Growth Core Ancillary Broking / Total £m UW UW Other Motor % UW UW Other Motor Revenue 240.8 35.2 36.0 312.0 (12.2%) 275.9 41.9 37.4 355.2 Trading EBITDA 78.5 2

  10. Slide 10: Motor Core Underwriting – excellent EBITDA and claims costs performance

    Motor Core Underwriting – excellent EBITDA and claims costs performance 12m to Growth 12m to £m 31 January 2015 % 31 January 2014 Net earned premium 232.8 (12.5%) 266.1 Instalment income 3.6 (25.0%) 4.8 Other operating income 4.4 (12.0%) 5.0 Revenue 240.8 (12.7%) 275.9  Continued Claims costs (180.

  11. Slide 11: Home Insurance – driving efficiency through the panel

    Home Insurance – driving efficiency through the panel 12m to 31 January 2015 12m to 31 January 2014 Core Core Ancillary Total Ancillary Total £m Broking / Growth % Broking / UW Home UW Home Coinsured Coinsured Revenue 15.8 76.0 91.8 1.4% 16.5 74.0 90.5 Trading EBITDA 12.3 52.2 64.5 2.2% 12.6 50.5 63

  12. Slide 12: Other Financial Services – growth in PMI and Travel Insurance

    Other Financial Services – growth in PMI and Travel Insurance 12m to 31 January 2015 12m to 31 January 2014 Total Total Core Core Core Other Core Other £m Broking / Growth % Broking / UW Financial UW Financial Other Other Services Services Revenue 39.9 54.4 94.3 (2.7%) 42.6 54.3 96.9 Trading EBITDA

  13. Slide 13: Travel – strong first year of five-year growth plan

    Travel – strong first year of five-year growth plan 12m to 12m to £m Growth 31 January 2015 31 January 2014(1) Revenue: - Holidays 297.3 15.8% 256.8 - Cruising 84.0 13.2% 74.2 - Total 381.3 15.2% 331.0 Gross profit: - Holidays 58.9 8.7% 54.2 - Cruising 17.8 79.8% 9.9 - Total 76.7 19.7% 64.1 Trading

  14. Slide 14: Saga Healthcare – pilot established and positioned for potential growth

    Saga Healthcare – pilot established and positioned for potential growth 12m to 12m to £m Growth 31 January 2015 31 January 2014 Revenue 4.3 (8.5%) 4.7 Gross profit 4.0 (9.1%) 4.4 Trading EBITDA 2.2 (18.5%) 2.7 Operating profit 2.0 (20.0%) 2.5  Business separation in 2014/15  Dedicated management t

  15. Slide 15: Media & Central Costs – first year plc costs

    Media & Central Costs – first year plc costs 12m to 12m to £m 31 January 2015 31 January 2014 Revenue 16.8 17.1 Gross profit 1.2 0.4 Trading EBITDA (11.4) (4.4) Operating profit (18.0) (11.9)  Plc costs include ― Headcount ― LTIP costs  Costs will increase in current year 15

  16. Slide 16: High levels of cash generation

    High levels of cash generation 12m to % 12m to £m 31 Jan 2015 Growth 31 Jan 2014 Trading EBITDA From continuing operations 227.4 6.0% 214.5 From discontinued operations 9.0 13.9% 7.9 Total 236.4 6.3% 222.4 Less Trading EBITDA from restricted businesses (78.8) 83.7% (42.9) Working capital and non-cas

  17. Slide 17: Asset light and efficient

    Asset light and efficient 12m to 12m to £m 31 Jan 2015 31 Jan 2014 Goodwill and intangibles 1,506.2 1,683.6 Property, plant and equipment 133.2 139.8 Financial assets 659.6 1,681.7 Restricted cash 85.2 66.8 Net available cash - 84.2 Other assets 299.9 308.7 Assets 2,684.1 3,964.8 Gross insurance lia

  18. Slide 18: Solvency Capital – well capitalised

    Solvency Capital – well capitalised As at As at £m 31 Jan 2015 31 Jan 2014 Solo statutory solvency capital Total invested equity 178.9 161.2 Regulatory adjustments (17.3) (17.4) Total regulatory capital resource 161.6 143.8 European Insurance Directive Requirement (Solvency I) Required minimum margi

  19. Slide 19: Dividend – top end of range

    Dividend – top end of range  Proposed dividend of 4.1p – Annualised 6.0p – Pay-out at top of 40-50% range  Balanced approach to debt reduction, dividend payment and value enhancing investments going forward 60% Top-end of target range increased 19

  20. Slide 20: Strategic Update

    Strategic Update Lance Batchelor Chief Executive Officer

  21. Slide 21: Strategy – focus on core businesses

    Strategy – focus on core businesses Release growth potential in our core businesses and focus on capital efficient model 1 Expand our insurance footprint 2 Grow Travel business 3 Continue to expand our Personal Finance offering 4 Continue to optimise the use of our database 5 Place innovation at the

  22. Slide 22: Financial Services - delivery in FY 2015

    Financial Services - delivery in FY 2015  Ongoing delivery of excellent performance in underwritten motor business  Continued success of Home Panel: – New underwriters added to panel – Proactive management and use of ‘Saga Factor’ driving down net rates  Announced launch of Motor Panel  Announce

  23. Slide 23: Financial Services - focus for FY 2016

    Financial Services - focus for FY 2016  Launch the Motor Panel: – Strong demand from underwriters and indicative prices encouraging – On track for launch Q3  Complete the Bennetts acquisition and maximise marketing and cross selling opportunities  Maximise the pricing advantage in Home Insurance

  24. Slide 24: Travel - delivery in FY 2015

    Travel - delivery in FY 2015  Major improvement in EBITDA performance  Management team strengthened and strategy defined  Destinology acquisition  Move into third party cruising provided capacity to meet increased cruising demand  Won more awards than any other Travel company at the 2014 Britis

  25. Slide 25: Travel - focus for FY 2016

    Travel - focus for FY 2016  Maintain the momentum in the business  Focus on enhanced use of the database to target customers with relevant products across the different travel brands  Continued focus on the customers’ online journey  More flexibility to customers around choice of departure airpo

  26. Slide 26: Wealth Management

    Wealth Management FY 2015  Announced plan to move into Wealth Management sector  All options assessed, start up, acquisition and joint venture  Saga Investment Services created, a joint venture with Tilney Bestinvest £1.5trn  Strong initial customer indications of Addressable Assets* opportunity

  27. Slide 27: Innovation – focus on value enhancing opportunities

    Innovation – focus on value enhancing opportunities  Private homecare pilot successfully underway  Retirement village pilot with Rangeford ongoing  Legal Services pilot scaling up carefully 27

  28. Slide 28: Strong team getting stronger

    Strong team getting stronger  Jonathan Hill, Group CFO Designate: – previously Group Finance Director and a member of the plc Board of Bovis Homes  Karen Caddick, Group HR Director: – previously Group HR Director of Millennium & Copthorne Hotels, Morrison's plc, Punch Taverns & Spirit Group plc an

  29. Slide 29: FY 2016 Outlook

    FY 2016 Outlook Motor • Strong profitability continuing • Encouraging start to the year, albeit competitive Home pressures remain Financial Services • Continued, robust operating performance expected Travel • Positive growth expected in all business lines Confidence in 5 – 7% EBITDA Growth in FY 201

  30. Slide 30: Driving Shareholder Returns

    Driving Shareholder Returns Capital-Efficient Cash Generative Model Core Business Growth (Insurance + Travel) + Growth Options Sustainable and Balanced Shareholder Returns 30

  31. Slide 31: Q&A

    Q&A

  32. Slide 32: Appendix

    Appendix Re oe

  33. Slide 33: Total revenue from existing operations

    Total revenue from existing operations 12m to % 12m to £m 31 Jan 2015 Growth 31 Jan 2014 Revenue: Motor Insurance 312.0 (12.2%) 355.2 Home Insurance 91.8 1.4% 90.5 Other Financial Services 94.3 (2.7%) 96.9 Total Financial Services 498.1 (8.2%) 542.6 Travel 381.3 15.2% 331.0 Healthcare Services 4.3 (

  34. Slide 34: Financial Services P&L

    Financial Services P&L 12m to 31 January 2015 12m to 31 January 2014 Total Total Core Broking / Growth Core Broking / £m Ancillary Financial Ancillary Financial UW Other % UW Other Services Services Revenue 280.7 51.0 166.4 498.1 (8.2%) 318.5 58.4 165.7 542.6 Gross profit 109.6 43.6 140.3 293.5 4.3%

  35. Slide 35: Motor Insurance P&L

    Motor Insurance P&L 12m to 31 January 2015 12m to 31 January 2014 Core Broking / Total Growth Core Ancillary Broking / Total £m Ancillary UW Other Motor % UW Other Motor Revenue 240.8 35.2 36.0 312.0 (12.2%) 275.9 41.9 37.4 355.2 Gross profit 101.7 31.1 11.1 143.9 5.6% 84.7 38.5 13.1 136.3 Operating

  36. Slide 36: Motor Core Combined Operating Ratio

    Motor Core Combined Operating Ratio Reported Combined Operating Ratio* 120% 105.9% 104.3% 99.8% 98.0% 98.4% 97.7% 100% 92.2% 91.7% 89.3% 20.4% 17.0% 88.4% 22.5% 18.8% 15.4% 16.6% 16.1% 77.9% 17.2% 80% 17.3% 21.0% 23.2% 60% 85.5% 87.3% 40% 79.3% 82.2% 81.7% 77.3% 76.1% 74.5% 72.1% 67.4% 54.7% 20% 0%

  37. Slide 37: Home Insurance P&L

    Home Insurance P&L 12m to 31 January 2015 12m to 31 January 2014 Core Core Ancillary Total Ancillary Total £m Broking / Growth % Broking / UW Home UW Home Coinsured Coinsured Revenue 15.8 76.0 91.8 1.4% 16.5 74.0 90.5 Gross profit 12.5 74.8 87.3 1.4% 12.7 73.4 86.1 Operating expenses (0.8) (24.6) (2

  38. Slide 38: Other Financial Services P&L

    Other Financial Services P&L 12m to 31 January 2015 12m to 31 January 2014 Total Total Core Core Core Other Core Other £m Broking / Growth % Broking / UW Financial UW Financial Other Other Services Services Revenue 39.9 54.4 94.3 (2.7%) 42.6 54.3 96.9 Gross profit 7.9 54.4 62.3 5.8% 4.6 54.3 58.9 Op

  39. Slide 39: Underwriting

    Underwriting Reserve Releases £80m £70m £57.0m £57.8m £60m Insurance Contract Liabilities £50m As at As at £40m 31 Jan 31 Jan £m 2015 2014 £30m £20m Reported claims 284.7 278.7 £10m Incurred but not reported 197.2 221.2 £0m 12m to 12m to 31 Jan 2014 31 Jan 2015 Claims handling provision 10.3 8.7 201

  40. Slide 40: Growth demographic, unique database & great brand: An attractive place to operate

    Growth demographic, unique database & great brand: An attractive place to operate More than 22m people over 50 in the UK. Expected to grow a further 28% by 2033 35% of the population 40% of the population 75% 1993 2003 2013 2023 2033 2013-2033 Growth Homeowners crease c.7m in 29.1m 26.7m 18.1m 20.0m

  41. Slide 41: Saga’s unique database

    Growth demographic, unique database & great brand: Saga’s unique database Contactable Database 96% 12,000 Brand recognition Contactable Households 11,000 Contactable People 10,000 10.8m 000 9,000 8,000 Contactable names 7,000  A powerful and efficient 6,000 marketing machine 5,000 Jul 2010 Jul 2004

  42. Slide 42: Strong Business Model: Where our earnings come from

    Strong Business Model: Where our earnings come from Source of EBITDA* in 12m to 31 Jan 2015 Broked & Other 24% Manufactured 76% *Manufactured represents AICL Underwriting + Cruising Broked and Other represents Saga Services + Personal Finance + ClaimFast + DC + Saga Holidays + Titan + Healthcare + M

  43. Slide 43: Strong Business Model: Group Structure

    Strong Business Model: Group Structure Saga Insurance Saga Travel Personal Finance Saga Healthcare Saga Saga Saga Saga Credit Patricia Allied Savings Broking Underwriting Holidays Cruises Cards White’s Healthcare Equity Share Country Private Titan Destinology Release Trading Cousins Pay 43

  44. Slide 44: Strong Business Model: What Saga does

    Strong Business Model: What Saga does Third party Suppliers Product Customers Insights Design In-house - Motor u/w - Shipping 44

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