Saga plc · LSE:SAGA
Saga — Corporate Update (April 2020)
29 slides from Saga's corporate update, Apr 2, 2020
Slide 1: Investor update 2 April 2020
Investor update 2 April 2020 Investor update 2 April 2020
Slide 2: Introduction
Introduction Euan Sutherland Chief Executive Officer Investor update 2 April 2020 2
Slide 3: Good progress last year, comprehensive response to COVID-19
Good progress last year, comprehensive response to COVID-19 2019/20 – good progress against business priorities COVID-19 – comprehensive response • Underlying PBT of £110m in line with target range • Home and Motor insurance not expected to be significantly impacted • Net bank debt reduced by £30m •
Slide 4: Insurance KPIs tracking positively
Insurance KPIs tracking positively Goal Actual • Challenging market environment through Policy count (M+H) Stable (3%) most of 2019; we maintained a disciplined approach Direct share >50% 57% • Success story with 3 year fixed – sold c320,000 policies, over 20% of the Home and Motor book Retention ~7
Slide 5: Cruise transformation programme well advanced, despite Coronavirus
Cruise transformation programme well advanced, despite the recent impact of Coronavirus Launch of Spirit of Discovery • Customer feedback is excellent Cruise NPS 59 • EBITDA generation of £20m in H2, supports the run-rate of £40m of EBITDA per ship per year £40m run-rate EBITDA Despite short-term im
Slide 6: Opportunity to refocus and reposition the Saga Tour Operations business
Opportunity to refocus and reposition the Saga Tour Operations business Saga Tour Operations Tour passengers by product mix • Tour Ops impacted by a challenging environment 10k 8k 22k 25k • Gross margins impacted by competitive markets 64k 62k and fixed cost commitments in the first half. • Total pa
Slide 7: Impact of COVID-19 to date – Cruise
Impact of COVID-19 to date – Cruise • On 12 March we suspended Cruise operation until 1 May 2020 – The two ships are in Tilbury; significant actions taken to reduce near-term costs – Estimated £15m impact on profit before tax, including £3m of losses on oil hedges – 57% of customers on cancelled dep
Slide 8: Impact of COVID-19 to date – Tour Operations
Impact of COVID-19 to date – Tour Operations • On 16 March we suspended all Saga Holidays and Titan departures until 31 May 2020 – Estimated £9m impact on profit before tax – ~20% of customers on cancelled departures have rebooked • Customer repayments met from CAA ring fenced Group cash – £7m of ca
Slide 9: Impact of COVID-19 to date – Operational resilience
Impact of COVID-19 to date – Operational resilience • Strong progress from largely unaffected Insurance business underpins cash flow and profitability. • 2,300 colleagues set up to work from home – Call centre colleagues fully enabled to work from home with no disruption – Call answer rates excellen
Slide 10: Financials
Financials James Quin Chief Financial Officer Investor update 2 April 2020 10
Slide 11: Unaudited trading update for 2019/20
Unaudited trading update for 2019/20 2019/20 2018/19 • Underlying PBT in line with target range despite challenging market environment Customer spend £1,198.0m £1,210.1m (1.0%) • Underlying PBT excludes: Revenue £797.3m £841.5m (5.3%) — Impairments of goodwill — Impairments of assets of Underlying P
Slide 12: Unaudited operating results consistent with expectations
Unaudited operating results consistent with expectations Underlying PBT (unaudited) • Insurance results in line with 2019/20 2018/19 expectations • No reliance on ‘extra’ reserve releases Retail Broking £90.2m £105.8m (15%) • Good year for Cruise Underwriting £40.6m £86.7m (53%) • Tour Operations im
Slide 13: Retail Broking results in line with expectations
Retail Broking results in line with expectations Year – on - year movements in Retail Broking Underlying PBT (Unaudited) (£4.4m) (£13.0m) £0.4m (£1.8m) £3.2m £105.8m £101.4m £88.4m £88.4m £87.0m £87.0m £90.2m 1 2 2018/19 Saga branded new Saga branded Other broking Opex Other 2019/20 business renewal
Slide 14: Underwriting also in line with expectations
Underwriting also in line with expectations Performance in line with expectations YOY movement in reserve margin (unaudited) 2018/19 2019/20 £23.5m (£40.0m) £19.8m £204.8m £196.2m 2018/19 2019/20 £32.7m £36.0m £86.7m £40.6m Jan-19 Basis change Favourable Reserve releases Jan-20 Underlying revenue Un
Slide 15: Continued strong cash generation
Continued strong cash generation Movement in net debt February 2019 to January 2020 £19.8m £4.5m £25.8m £10.4m (£15.0m) £17.2m (£22.7m) £9.5m (£181.7m) £100.0m 1 2 3 £391.3m £359.1m Available operating cash flow £92.7m Opening net Trading Restricted Transfers Working Capital Cruise carve Dividends T
Slide 16: Adverse stress test scenarios for the development of COVID-19
We have considered several adverse stress test scenarios for the development of the COVID-19 crisis Central scenario assumptions • Cruise suspended from mid-March to mid-September • Delay for Spirit of Adventure of 3 months until November • Impacts 26 departures • Tour Ops suspended from 16 March un
Slide 17: Insurance cash flows expected to remain resilient
Insurance cash flows expected to remain resilient Some areas of potential downside • Although we do not underwrite travel insurance, we expect demand for travel insurance to decline significantly in the next 6 months • Motor claims costs exposed to supply chain issues • Full service PMI proposition
Slide 18: Strong starting point enables the group to absorb additional liquidity requirements
Strong starting point enables the group to absorb additional short-term liquidity requirements Shareholder cash resources of £92m at 31 March 2020 • This includes the £14m cash received from sale of healthcare companies • Precautionary £50m drawdown on RCF in March • Less £7m cash injection to ST&H
Slide 19: Group debt facilities support strong liquidity position
Group debt facilities support strong liquidity position Summary of our banking facilities Outstanding Expiry (as at 31 March) • Corporate bond maturity > 4years • Spirit of Discovery loan repayments of Corporate bond £250m May 2024 £20m per annum • No payments on Spirit of Adventure Spirit of Discov
Slide 20: Amended covenants provide the flexibility needed
Amended covenants provide the flexibility needed to respond to this challenging market environment Key covenants are in the term loan and RCF Term loan and RCF • Short-term amendments agreed to Covenants banking covenants given exceptional circumstances Corporate bond None • Headroom to amended cove
Slide 21: Debt expected to significantly reduce over the next few years
Debt expected to significantly reduce over the next few years Deleverage profile with stress test applied • Resilient balance sheet after applying stress test scenarios and allowing for mitigating actions, including: – Suspension of dividends inline with our banking covenants – Announced disposals –
Slide 22: Priorities
Priorities Euan Sutherland Chief Executive Officer Investor update 2 April 2020 22
Slide 23: Current priorities
Current priorities Current focus is on navigating COVID-19 challenges • Supporting customers and colleagues • Operational resilience and business continuity continues • Ensuring we have sufficient short term liquidity • Mitigating actions taken in travel business • Tight control of costs and cash fl
Slide 24: Q&A
Q&A Investor update 2 April 2020 24
Slide 25: Appendix
Appendix Investor update 2 April 2020 25
Slide 26: Insurance goodwill impairment expected of £370m
Insurance goodwill impairment expected of £370m due to an increase in the pre-tax discount rate from 9.6% to 12.6% • Accounting standards require an annual impairment test for goodwill • Goodwill assessment is based on latest internal plans and cash flow projections – Underlying cash flows little ch
Slide 27: Simplified the Group with £37m of non-core disposals and £15m of cost savings
Simplified the Group with £37m of non-core disposals and £15m of cost savings for 2020/21 Non-core disposals Signed in February Completion expected in May/June £23m net proceeds Completed in March £14m net proceeds Costs efficiencies £15m Simplified our organisation cost savings* Review of all non-e
Slide 28: Amended term loan and RCF covenants
Amended term loan and RCF covenants Leverage Interest ratio cover • Covenants tested quarterly if leverage July 2020 4.75x 2.5x (excluding Cruise) is greater than 4.0x Oct 2020 4.75x 1.75x • No plc dividends if leverage (excluding Cruise) is Jan 2021 4.75x 1.0x greater than 3.0x Apr 2021 4.75x 2.0x
Slide 29: ST&H Limited (Saga Tours) balance sheet and ring fence
ST&H Limited (Saga Tours) balance sheet and ring fence • The CAA require us to hold cash and bonding Ring fenced Group within the ring fence to support customers advanced receipts. ST&H Limited • At the end of March balances included: Saga Transport Ltd Advanced receipts £69m Cash deposits £55m ST&H