Saga plc · LSE:SAGA

Saga — FY2016 Earnings Presentation

47 slides from Saga's earnings presentation, May 28, 2016

  1. Slide 1: Results Presentation

    Results Presentation Preliminary Results for the year ended 31 January 2016

  2. Slide 2: Today's Agenda

    Today’s Agenda Lance Batchelor Overview and strategy CEO Jonathan Hill Financials CFO Matt Atkinson Customer engagement CMO Lance Batchelor Current trading and conclusion CEO All Q&A 1

  3. Slide 3: Lance Batchelor, Chief Executive Officer

    Lance Batchelor Chief Executive Officer Saga Plc Results Presentation 2

  4. Slide 4: Overview: Strong Results

    Overview Strong Results Strong performance with proposed dividend Trading EBITDA above expectations  Robust growth in customer numbers and profits £238.8m  Strong free cash flow – continued reduction in +5.0% leverage Trading Profit  Increase in proposed dividend – full-year pay-out ratio of 57%

  5. Slide 5: Clear strategy and delivery

    Clear strategy and delivery  Delivered growth across all key insurance lines  Launched motor insurance panel 1. Grow core insurance and travel businesses 1  Increased passenger numbers and shipping days  Invested in new shipping capacity  Launched Saga Investment Services 2. Invest in future gr

  6. Slide 6: Insurance

    Insurance 2015/16  Grew policy numbers across all key insurance lines Launched Motor  Motor insurance panel launched Panel  Maintained strong performance in motor underwriting  Completed the acquisition of Bennetts  Capitalised on competitive advantages in home insurance Grew policy numbers acr

  7. Slide 7: Passenger and profit growth

    Travel 2015/16  Passenger and profit growth - on track to deliver objectives Passenger  Won 65 Travel awards and profit  Tour operating businesses: growth – positive shift in mix of sales to longer-haul, higher value products – increasing online sales  Cruise business: – ordered new ship for del

  8. Slide 8: Emerging businesses

    Emerging businesses 2015/16  Saga Investment Services: Launched – business operational by year end Saga  Private homecare: Investment – trial progressed in Hertfordshire Services  Retirement Villages: Ongoing – continued to assess the opportunity pilots in new areas Saga Plc Results Presentation

  9. Slide 9: Developing our people

    Developing our people 2015/16  Strengthened our executive team  Combined their skills with existing talent across the Group allowing us to: – apply new thinking to our operating model – identify new opportunities and attain deeper customer understanding  Started to put in place the tools we need

  10. Slide 10: Clear strategy: priorities for 2016/17

    Clear strategy Priorities for 2016/17  Grow profits and customer numbers 1. Grow core insurance and travel businesses 1  Ensure delivery of new ship in 2019  Expand Saga Investment Services 2. Invest in future growth 2  Continue existing pilots  Generate additional free cashflow 3. Maintain our

  11. Slide 11: Jonathan Hill, Chief Financial Officer

    Jonathan Hill Chief Financial Officer Saga Plc Results Presentation 10

  12. Slide 12: Financial Highlights

    Financial Highlights From continuing operations  Robust growth in profits and customer numbers Trading Profit £211.0m 5.2 %   Strong free cash flow Available operating £178.1m 9.3%  cash flow  Continued deleveraging Debt ratio 2.3x 0.3x  Solvency II ratio – 170% Proposed  Dividend equates to

  13. Slide 13: Group Results

    Group Results 2014/15 Growth 2015/16  Revenue up across the business Revenue* £900.5m 7.0% £963.2m  Impact of full year Trading contribution of Profit* £200.6m 5.2% £211.0m Destinology Profit  PBT in prior year before tax* £113.8m 54.8% £176.2m impacted by IPO costs Profit /  Strong increase in

  14. Slide 14: Trading Profit Growth Across Core Businesses

    Trading Profit Growth Across Core Businesses 2014/15 2015/6 Total core business growth +9.1% Motor £230.3m Insurance £100.4m £118.3m 17.8%  £211.0m Home Insurance £62.1m £64.1m 3.2%  Other Insurance £34.9m £30.7m (12.0%)  Travel £13.6m £17.2m 26.5%  2014/15 2015/16 Saga Plc Results Presentation

  15. Slide 15: Motor Insurance

    Motor Insurance  Strong performance in a highly 2014/15 2015/16 competitive market Revenue £312.0m £318.7m 2.1%  Trading Profit increased 17.8% Trading Profit £100.4m £118.3m 17.8%  Core policy numbers increased 14.9%, 3.1% excluding Bennetts Core Policy 1,077k 1,238k 14.9% numbers  Balance b

  16. Slide 16: Motor Underwriting

    Motor Underwriting Trading Profit and net earned premiums 2014/15 2015/16 2014/15 2015/16 – Profitability of core underwritten £82.8m £232.8m motor business improved. £75.1m 10.3% £226.5m – Lower net earned premiums (2.7%) more than offset by claims experience, other income streams and lower operati

  17. Slide 17: Motor Panel

    Motor Panel Growth beyond the core Number of insurers 6–8 5 3 Jul 15 Jan 16 Ongoing  External insurers successfully competing for volume  c.25% of net premium underwritten by the panel in January 2016  AICL competing effectively and maintaining competitive tension  Expect to further increase pan

  18. Slide 18: Reserve releases

    Reserve releases Favourable prior year development  Favourable claims experience during FY16 resulted in reduction FY 2016 Total Group Reserve in prior year reserves required Releases by Accident Year (£m)* 23.4  Driven by large and small personal injury claims and other 19.8 classes 17.3  Materi

  19. Slide 19: Solvency II

    Solvency II Solvency I Solvency II Solvency II coverage* ratio ratio* 170% 277% 170% 225% £90.8m 100% 200% £219.6m £128.8m 2013/14 2014/15 2015/16 SCR SCR Solvencycoverage Solvency Excess Solvency Solvency IIII capital capital Solvency 1 coverage ratio Solvency II coverage ratio Sensitivities  Unde

  20. Slide 20: Impact of quota share

    Impact of quota share  Arrangement announced with New Re Capital in AICL to  Favourable terms reflect quality of book and reduce, historic underwriting performance increasing free  Mitigates risk of exposure to losses cash flow and  Leads to gradual withdrawal of capital reducing capital  AICL

  21. Slide 21: Home Insurance

    2014/15 2015/16 Home Insurance Efficiency of Panel Revenue £91.8m £99.8m 8.7 %   Competitive operating environment Trading  Further reduction in net rate Profit £62.1m £64.1m 3.2 %  achieved through panel Core  Core policy growth and increased competitiveness policy 1,258k 1,287k 2.3 %  number

  22. Slide 22: Other Insurance

    Other Insurance Growth in revenues and policy numbers Trading Profit and Revenue (£m) Core policy numbers (000s) 86.1 91.6 11.3% Revenue Trading Profit 34.9 383k 30.7 344k 2014/15 2015/16 2014/15 2015/16  Revenue driven by travel insurance volumes and improved margins on private medical insurance 

  23. Slide 23: Travel

    Travel Another strong year of trading  Growth from: 2014/15 2015/16 – Shift in product mix to Revenue higher-value long-haul holidays £381.3m £423.1m 11.0 %  Trading – Improved yields in Profit £13.6m £17.2m 26.5 %  cruising – Inclusion of full year of Number of Destinology holidays 172k 189k 9.9

  24. Slide 24: Emerging businesses & Central Costs

    Emerging businesses & Central Costs First full year of Plc costs 2014/15 2015/16 Revenue £29.3m £30.0m 2.4 %  Operating expenses (£24.6m) (£31.7m) 31.5  Trading loss (£10.4m) (£19.3m) 85.6 %   Normalisation of PLC costs  Additional Group costs, including investment in Saga Investment Services S

  25. Slide 25: Cash Generation

    Cash Generation £300m 100% 90%  Strong operating cash £250m flow maintained, 80% Trading £178.1m 70% EBITDA £200m 60%  Year on year increase £150m 50% Available due to higher payouts 40% operating cash flow from restricted £100m 30% businesses (travel and AICL) 20% Available £50m operating cash fl

  26. Slide 26: Capital structure

    Capital structure* Net debt to Trading EBITDA 3.5  Additional capital Ongoing ratio gradually released 3 Net debt to EBITDA from the underwriter provides increased 2.5 free cash flow 2 3.1 2.6 1.5 – 2.0  Debt guidance 1.5 2.3 unchanged and dividend guidance 1 raised to 50%-70% of IPO May 14 2014/1

  27. Slide 27: Financial outlook and guidance

    Financial outlook and guidance  Targeting profit growth in insurance businesses  Growth in tour operating businesses offset by planned Saga Sapphire II wet dock  Group targeting 5%-7% PBT growth for 2016/17, combined with ongoing customer growth (subject to market conditions)  Deleveraging to co

  28. Slide 28: Matt Atkinson, Chief Marketing Officer

    Matt Atkinson Chief Marketing Officer Customer engagement – building on Saga’s assets to create future growth Saga Plc Results Presentation 27

  29. Slide 29: Creating new growth advantages

    Creating new growth advantages 1. Rejuvenating the brand to ensure it is relevant and differentiated 2. Improving our understanding of the customer and customer experience 3. Develop a multichannel capability and customer experience 4. Improving ‘core’ product holding/customer Saga Plc Results Prese

  30. Slide 30: Rejuvenating the brand to ensure relevance and differentiation

    Rejuvenating the brand to ensure relevance and differentiation Our brand plays a key role in unlocking value  Our new brand and customer understanding is shaping how we present the brand  New brand position and way of communicating that will improve saliency and appeal  Converts awareness into sa

  31. Slide 31: A better understanding of the customer & brand

    A better understanding of the customer & brand Allows differentiation and improves performance  150% more conversations with customers – yielding new insight  A new voice of the customer programme in the business Q3  A new product improvement programme shaped by new insights  …...And its already

  32. Slide 32: This new insight is already shaping the business

    This new insight is already shaping the business Creating new traffic and improving cut through Saga Plc Results Presentation 31

  33. Slide 33: Already enabling us to drive further engagement

    Already enabling us to drive further engagement Especially in lower engagement/frequency environments  New record of 1.8 million pages viewed in a month hit in Jan 2016  Increased click through from our content to the rest of the business by 33%  Nominated for Best 50+ website for content  Devel

  34. Slide 34: Developing a multichannel capability

    Developing a multichannel capability Step change in marketing model for the multichannel world Currently implementing new toolkit to improve multichannel performance It will;  Enable us to really unlock value from our off line data  Improve conversion by adding new functionality Adobe marketing cl

  35. Slide 35: Improving our 'Core' Product holdings

    Improving our ‘Core’ Product holdings To increase value and loyalty  Historical focus has been on a product set that included ‘add-ons’, leading to an average product holding of 2.5 products per customer  Moving to a focus on ‘core’ products:  This moves the number of products per customer to 1.7

  36. Slide 36: Output

    Output ‘Improve product holding, customer value and transform brand engagement’  Our new tools are already improving how we perform  We will accelerate our ability to improve product holding/customer  What will the KPIs be  NPS  Average ‘Core’ product holdings Saga Plc Results Presentation 35

  37. Slide 37: Conclusion

    Conclusion Lance Batchelor Chief Executive Officer Saga Plc Results Presentation 36

  38. Slide 38: Current trading

    Current trading Insurance  Recent price increases in UK motor market appear sustainable  Claims experience in AICL continues to be positive  Motor panel and competitive pricing from AICL, well positioned for the coming year  UK home insurance market remains highly competitive but proactive manag

  39. Slide 39: Evolution of the model

    Evolution of the model Clear strategy and delivery in 2016/17 Source of Trading Profit* Manufactured Broked 1. Grow core insurance and travel businesses 23% 2. Invest in future growth Where we are now 3. Maintain our simple and 77% efficient operating model *Manufactured is Trading Profit from AICL

  40. Slide 40: Appendix

    Appendix

  41. Slide 41: Saga Plc consolidated P&L

    Saga Plc consolidated P&L £m 12m to % 12m to Jan 2016 Growth Jan 2015 Revenue £963.2m 7% £900.5m Trading profit £211.0m 5.2% £200.6m Non-trading costs (£0.2m) (£2.4m) Amortisation of acquired intangibles (£6.3m) (£2.2m) Net fair value gains / (losses) on derivatives (£1.2m) £2.9m Profit before inter

  42. Slide 42: Motor Insurance P&L

    Motor Insurance P&L 12m to Jan 2016 12m to Jan 2015 £m Core Ancillary Broking / Total Growth Core Ancillary Broking / Total UW Other Motor UW Other Motor Revenue £237.7m £35.0m £46.0m £318.7m 2.1% £240.8m £35.2m £36.0m £312.0m Gross profit £103.7m £31.9m £31.6m £167.2m 18.0% £99.5m £31.1m £11.1m £14

  43. Slide 43: Motor Underwriting P&L

    Motor Underwriting P&L 12m to 12m to Growth Jan 2016 Jan 2015 Net earned premium A £226.5m (2.7%) £232.8m Instalment income £4.4m 22.2% £3.6m Other income £6.8m 54.5% £4.4m Revenue £237.7m (1.3%) £240.8m Claims costs B (£179.8m) (3.6%) (£186.6m) Reserve releases C £64.6m 3.2% £62.6m Claims handling

  44. Slide 44: Home Insurance P&L

    Home Insurance P&L 12m to Jan 2016 12m to Jan 2015 Ancillary Core Broking Total Ancillary Core Broking Total UW / Home Growth UW / Home Coinsured Coinsured Revenue £18.2m £81.6m £99.8m 8.7% £15.8m £76.0m £91.8m Gross profit £13.2m £80.8m £94.0m 7.7% £12.5m £74.8m £87.3m Operating expenses (£3.8m) (£

  45. Slide 45: Other Insurance P&L

    Other Insurance P&L 12m to Jan 2016 12m to Jan 2015 Core Core Total Core Core Total Growth UW Broking / Other UW Broking / Other Other Insurance Other Insurance Revenue £37.3m £54.3m £91.6m 6.4% £39.9m £46.2m £86.1m Gross profit £4.2m £54.1m £58.3m 7.8% £7.9m £46.2m £54.1m Operating expenses (£2.3m)

  46. Slide 46: Travel P&L

    Travel P&L 12m to Growth 12m to Jan 2016 Jan 2015 Revenue: Holidays £336.9m 13.3% £297.3m Cruising £86.2m 2.6% £84.0m £423.1m 11.0% £381.3m Gross profit: Holidays £68.6m 16.4% £58.9m Cruising £17.3m (2.7%) £17.8m £85.9m 12.0% £76.7m Operating expenses (£69.1m) 9.0% (£63.4m) Investment income £0.4m 3

  47. Slide 47: Cash flow and liquidity

    Cash flow and liquidity Available Cash Flow 12m to 12m to Growth Jan 2016 Jan 2015 Trading EBITDA £238.8m 5.0% £227.4m Less Trading EBITDA relating to restricted businesses (£95.8m) 21.6% (£78.8m) Intra-group dividends paid by restricted businesses £59.0m 122.6% £26.5m Working capital and non-cash i

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