Saga (LSE:SAGA) — Interim Results

0:00 Good morning, and welcome to the SAGA PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Mike Hazel, CEO. Good morning, sir. Morning, everybody, and welcome to SAGA's results for the six months ended 07/31/2026. Quick look at today's agenda. I'm gonna take you through an overview of the fantastic progress we've been making in the last six months, and Mark will then take you through the financial performance in more detail.

0:51 I will then return to give some more color behind that progress and talk about our individual businesses. So let's get started. Look. We really have had a very strong first half, and that's off the back of a strong performance last year. So we're now consistently delivering strong performance and growth, and it's performance built on a clear strategy. We've created a simple, resilient, and customer focused platform for growth. Over the next half an hour, you'll hear more about our newly combined travel business and how that's growing strongly. And you hear about the ongoing transformation in our insurance business that is now also delivering consistent growth.

1:40 With revenues and profits now growing strongly across the group, we've increased our profit guidance for this year to between sixty five and seventy million pound. That compares to £44,000,000 last year, an increase of over 50%. And I'm delighted to be able to report the progress we're making on leverage, which is now reduced to 2.7 times compared to 3.7 times only in January this year. And with the continued strong progress, we're also updating on our medium term targets, which we now expect to be achieved earlier than the previous January 2030 date we previously guided to, and we'll talk more about that later. So, now let's have a look at some of the detail behind that performance.

2:30 It's a performance consistent with our plans, albeit with obvious acceleration. You can see across all of our businesses, performance is strong, particularly in ocean cruise, our largest profit driver in the group. But we're also focusing on product and proposition. We've launched new destinations in travel, launching new tools in China, and a range of UK hotel stays. We're also busy with wider activities to build band, build brand, and brand engagement, not least with our fantastic new podcast. Our NatWest Savings Partnership has started really well, now exceeding £2,000,000,000 of deposits since launching in January, and simplification hasn't stopped either.

3:30 We've launched a new technology partnership with SCC that will move us to a modern group IT platform, creating an agile, efficient, and lower risk operating environment for the group going forward. So we're not just delivering a strong trading performance. We're also building powerful foundations upon which to build future growth. Mark will now take you through the financials. Thanks, Mike, and good morning, everyone. It's a pleasure to be here today to present such a strong set of results. As usual, I'll spend the next few minutes covering the detail of the financial results before summarizing the outlook for the remainder of the year. SAGA has delivered an exceptionally strong first half performance driven by growth across all our core businesses.

4:24 Underlying revenue increased 14% to £366,000,000, reflecting growing and resilient resilient customer demand in travel and growth in both margins and policies in insurance. Trading EBITDA increased 35% to £90,900,000, predominantly driven by growing per diems in ocean cruise and strong trading in insurance broking. This translated into underlying profit before tax of £46,600,000, an increase of 98% when compared with the prior period. In statutory terms, profit before tax from continuing operations also improved significantly, increasing from £3,700,000 to £28,000,000 driven by lower exceptional costs as we move through the Aegis partnership implementation.

5:22 You'll see that we have moved to underlying available operating cash flow. This excludes the upfront proceeds and working capital adjustments associated with the Affinity partnership and dividends paid by our insurance underwriting business before it left the group. The group continues to have a highly cash generative business model with underlying available operating cash flow increasing 27% to a £101,000,000. This reflects growth in travel and insurance alongside reduced capital expenditure. We've also made strong progress in deleveraging with net debt reducing to £429,000,000 at the 07/31/2026, £86,000,000 lower than at the same time a year ago, and £70,000,000 lower than the year end.

6:14 As a result, our leverage ratio improved from 4.3 times to 2.7 times. I'll now focus on the underlying profit contribution from each of our business units. Our travel business continued to generate strong customer demand, delivering £60,300,000 of underlying profitability in the first half, a 45% increase on the prior year. Our ocean cruise business had another excellent start to the year with underlying PBT increasing 38% as customer demand continues to grow. Within river cruise, the revenue increased 33% to £34,900,000. This was driven by higher per diems and a 32% increase in the capacity of the fleet following the addition of Spirit of the Moselle in July 2025.

7:09 Including the increase in capacity, the load factor remains strong at 92%, broadly in line with the prior year. The per diem increased 3% to 376, demonstrating the continued strength of our customer demand. As you'll know, across Europe, there were low water levels. This has not impacted our first half, and I'll come back to this later when I cover the outlook. For our holidays business, revenue grew 9% to £97,700,000 with passenger numbers increasing 6% to 29,400. The business saw limited impacts from the conflict in The Middle East during the first half with very few itineraries operating in the business.

7:57 Looking ahead to 2728, our ocean business is showing strong growth in forward bookings with rivers and holidays resilient but impacted by the later launch of our marketing for the new seasons. Insurance also performed well in the first half with underlying PBT increasing 75% to £15,900,000. This reflects higher home margins and lower operating costs following the move to a simpler operating model. This growth in profits is also along a... A 5% growth in policies. Other businesses and central costs increased 34% with a higher proportion of costs now remaining centrally, following our insurance underwriting business leaving the group and the ongoing transition to the new insurance model.

8:48 Net finance costs remained broadly unchanged year on year at £20,600,000. As a result, underlying profit before tax increased 98% to £46,600,000. Now moving to debt. Debt reduction continues to be a strategic priority for SAGA, and we are reducing it at pace. It was only two and a half years ago that we had a leverage ratio of 5.4 times and a net debt of £637,000,000. Today, net debt is £429,000,000, a reduction of over £200,000,000, and our leverage ratio has halved to 2.7 times. Looking at the first half, underlying available operating cash flow increased 27% to a £101,000,000, driven by stronger cash generation from travel and insurance alongside lower capital expenditure.

9:46 Debt service costs increased increased reflecting a full six months of the new corporate facilities, and restructuring costs increased primarily due to the transition to the GS partnership alongside other project and property costs. So let's now turn to the full year outlook. The strong start to the year means our full year guidance has increased. We now expect group underlying profit before tax to be between 65 and £70,000,000 compared with a consensus of 60.4. Net debt and leverage are expected to remain broadly flat, reflecting some one off cash items and the seasonality of working capital.

10:32 In ocean cruise, we expect the trends seen in the first half to continue with full year growth expected to be similar to that delivered in the first half. In River Cruise, we expect full year underlying profit to be lower than last year due to the impact of lower water levels and the seasonality within this business. In holidays, we expect earnings and passengers to be in line with last year, the second half including our peak trading period for which bookings earlier this year were impacted as the Middle East Conflict began. As a reminder, we're fully hedged against foreign exchange and commodity exposure through to December 2027, providing a good degree of visibility and certainty over our cost base.

11:21 In insurance broking, underlying profitable tax is expected to be higher than last year, albeit the second half to be broadly in line with last year as a result of the first half benefiting from higher three year fixed price margins and continued investment in motor at home pricing in the lead up to the renewal policies going live with Aegis. In other businesses and central costs, we expect the second half to be broadly similar to the first. Before I hand back to Mike, it's important to put this performance in the context of our medium term targets. We laid these out at the start of last year, which were to achieve a £100,000,000 of underlying profits by January 2030 with leverage of less than two times.

12:09 This year would now be the second year of us consistently outperforming our expectations, and, therefore, as I look forward and whilst mindful of the current geopolitical environment, we now expect to achieve our targets before January 2030. We will, of course, provide an update at our full year results early next year. And with that, I'll hand back to Mike. Thanks, Mark. So, look, a really strong first half. Now let's get into some of the drivers behind that performance. I wanted to start with a reminder, a reminder that we have a very clear strategy. SAGA is a business built on our understanding of older people and the trust they have in our brand.

12:58 Our strategic vision and our strategic principles are the foundations to that. Customer focus. Customers at the heart of everything that we do. Our customers are different. They have different needs and expectations, and so we, in turn, are different to meet those differing needs and expectations. All of that is built on the seventy five years experience that we have as an insight driven business that understands older people better than anyone else. Quality and value remain central to our proposition, and we have unrivaled reach into our target demographic through our marketing database and our powerful publishing business.

13:45 But it's not just about reach. It's about experience and under... Understanding how to best communicate with our demographic in a way that's relevant and resonates with them. Critically, though, we also had clear strategic priorities to translate these principles into actions and plans, and we're delivering on those actions and plans, and you'll see that in a moment. Before we get to that, though, I just wanted to pause on customer for a moment. SAGA really is uniquely positioned to serve this attractive and growing demographic. Over the next twenty years, over 50% of The UK population will fall into our target demographic And fastest growing amongst that age group will be the people 65, a segment growing by over 30%.

14:44 SAGA customers are also more affluent. By 2040, 63% of every pound spent in The UK will be spent by people 50. They're also living longer, but not just living longer. They feel younger and are living more active retirement. The average SAGA customer feels fourteen years younger than their chronological age. Gym memberships are rising. People 75 now are still really active, and they're looking to enjoy their extended retirements. And travel is the thing that they enjoy doing most. For SAGA customers, travel isn't a discretionary item.

15:34 They spend three times more than younger generations on their travel, but they also have differing needs and expectations. And who better to meet those needs and expectations than a brand that's been taking older people on holiday for seventy five years? So there's huge potential here, and SAGA is better placed than anyone to meet that potential. But having a clear strategy is critical and strategic priorities that tran... Translate that strategy into action. So let's talk about those strategic priorities. There's nothing really new on this page. These are the strategic priorities I laid out three years ago, but I wanted to put everything down on one page to remind you what they are and show you how all of the things that we're doing fit neatly into these strategic priorities and indeed are driven by those strategic priorities.

16:34 We are maximizing the growth of our core businesses. We are driving new products and new business lines. You'll see later we're talking about pet insurance launching later this year. We're growing our customer base and deepening our relationship with those customers. You'll hear more about our publishing business in particular that's doing a great job there. And we're continuing to simplify our operations and reduce our debt. So let's now talk about our core businesses. Starting with ocean cruise, the largest profit driver in the group and performing really well. That's really important given the underpin it provides to group profits as we go forward. We've steadily increased load factors over the past few years, and we expect to maintain that strong performance, with forward booking visibility into next year strong and 68% repeat rates underpinning that strong load factor performance.

17:33 And this translates into strong per diem momentum. More demand means that people are booking earlier, and we meet... We need to discount less to attract customers, providing natural momentum and growth into per diems. That's a more customer friendly way of growing per diems than pure headline price increases that are being seen across the market. But we are operating in a market that is seeing general overall price inflation, and so our relative value is holding up very well. For SAGA, though, we're also continually improving and investing in our proposition, the quality of onboard experience, the number and quality of excursions, which will add to the perceived value and customer satisfaction underpinning that per diem performance.

18:35 And you can see the result of that in our customer satisfaction levels with our market leading TMPS of 82 being something we're extremely focused on and proud of. So we're confident that we can maintain strong load factors, and we see that performance driving continued per diem momentum over the coming years. We're similarly confident about our river cruise business. We see real opportunity in river cruising, a newer, smaller part of our group but with lots of potential. There are two key drivers of growth in river cruising. Load factors, now in their 80%, have room to grow into the 90% aligned with our ocean cruise business.

19:28 And we're also adding new capacity with new ships launching. We launched the Spirit of the Mazel last year. We launched that in July, and I was on that ship in August, and it was already full, demonstrating the strong demand for our river cruising proposition. And next year, we'll launch the Spirit of the Lorelei. We've also given a lot of attention to the onboard experience and excursions, and the progress we're making there can be clearly seen in the turnaround in the TMPS. You can see that only a few years ago, our river cruising TMPS was at below par 15. It's now at a very strong 75 and indeed has been growing in the last twelve months.

20:18 River levels have obviously disrupted this year, but variable water levels are a normal part of operating river cruises, and flexibility is key. I've been really pleased with how we've managed the disruption this year, generally continuing to sail throughout the summer. Our modern ships cope well with differing water levels, drafting in reduced water levels well and with variable bridge decks that adjust for higher water levels. So we may remain confident about the outlook for river cruising and see this as an attractive and growing market opportunity for us. And finally in travel, let's have a look at holidays.

21:05 By holidays, we mean our touring and hotel holidays. This is SAGA's heartland and is actually how most people like to travel. We understand how older people like to travel, and we are building our propositions around that. They generally have more time available to them and therefore seek longer duration holidays, usually outside of the peak season. They enjoy socializing with people their own age. They like to travel independently, but with the additional comfort and assurance that SAGA provides, particularly when something goes wrong. We've been extending our list of destinations and our range of special interest holidays with our UK breaks, a particularly interesting no fly opportunity for us this year.

22:02 But service remains key. Seamless booking journeys, chauffeur driven car service, and a SAGA host resident at every hotel to help guests get the most out of their holiday. Whatever the holiday, SAGA customers should feel the difference in the service we offer. An evidence of the progress we're making, again, can be seen in our TMPS, now at 59 compared to only 34 a few years ago. So our newly combined travel businesses are now all well positioned with Ocean Cruise, the standout performer. Now let's turn to insurance.

22:50 You'll be well aware of the transformation that we're delivering in insurance. The Aegis partnership means that we're no longer taking any underwriting risk across the group, and all of our insurance products are delivered through partners. That does... Doesn't just represent a lower risk business model, but it significantly reduces the operational complexity in the business. Our partnership strategy brilliantly combines our first class insurance partners' infrastructure, and expertise with SAGA's unrivaled experience in designing and delivering insurance products for older people.

23:38 And we've seen an immediate benefit. After years of decline, policy numbers are now growing again. Travel and PMI, theoretically untouched by the Aegis Home and Motor partnership, are now also benefiting from the greater focus we're able to give those products freed from the complexity we were previously managing across a larger scale, more complex insurance operation. So the halo effect is being seen across the whole of insurance and indeed more widely across SAGA. It also gives us headroom to consider new product lines with pet insurance being a great example. We launch a new pet insurance later this year with Allianz, market leader provider in pet insurance.

24:28 Finally, I wanted to touch on a slightly less obvious transformation that has been taking place in our publishing business. This page captures the multiple ways that our publishing business now engages with customers. Most of these didn't exist only three years ago. Over the past three years, this critical part of our business has evolved from a largely print driven magazine business, and an excellent one, by the way, to a multifaceted publishing engine for the group. Full credit to the team. They've done a may... An amazing job in transforming that operation.

25:17 But let's be clear. This isn't just a fantastic publishing business. It's a powerful brand engagement and in... And insight tool, and it's growing. 17 millions... 17,000,000 visits to our website last year is up 39% year on year, And we use that traffic to drive traffic into our business websites with 1,900,000 onward visits to our business websites up 77% year on year. Our award winning magazine is read by 390,000 readers, and 2,800,000 customers now regularly engage with all of this content.

26:09 It's a key source of insight. And in an increasingly AI driven world, it's a powerful tool to enhance our AI visibility. It extends reach well beyond the traditional direct channels through mainstream and social media pickup. And an addition... And an important addition to this, on the right hand side, you can see is our fantastic new podcast hosted by Lorraine Kelly, queen of morning TV, with views of that podcast already exceeding 15,000,000 since launching at the start of the year. Before I wrap up on the next slide, I just wanted to pause again on our medium term targets.

27:02 We laid these out in April last year. We said we had a five year plan within which we would deliver a £100,000,000 profit and leverage of less than two times by January 2030. Over the past couple of years, we've been consistently outperforming that trajectory, and we expect to continue to outperform that trajectory. And, therefore, as we approach the end of year two, we're now confident that we will achieve those medium term targets early, and we'll update more on that at the end of the year. So to conclude, we've had a very strong first half to the year across all of our businesses.

27:50 That's driven by the strategic transformation that we're delivering, and that too is progressing well. We're increasing our full year guidance. We expect to hit our medium term targets early. And so in the round, this is another set of really strong results and one I'd like to thank all of my SAGA colleagues for. They should all be very proud of another strong set of results. We'll now move to questions. Thank you. That's great. Thank you very much for your presentation. If I may just bring up your cameras. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the top right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via investor dashboard.

28:43 As you can see, we have received a number of questions throughout today's presentation. And, Emily, could I please ask you to read out the questions and give responses where appropriate to do so? I'm a pick up from you at the end. Brilliant. Thank you. The first question is the drivers of profit growth to a £100,000,000 by 2029 seem likely to include better load factors per diems and the addition of spirit of Lorelei in River Cruise in addition to reduced OpEx and higher count and insurance. What are the likely drivers of profit growth from a £100,000,000 in 2029 to a £100,000,000 plus from 2030 onwards? Let's not get ahead of myself. We need to get the 100,000,000 first. So just to remind you, we have a very clear plan that gets us to that 100,000,000. And as we get close to that, we'll talk about the progress we expect to make beyond that 100,000,000.

29:34 So as a reminder is that the building blocks that, it was a very clear plan. We said we would continue to grow our ocean cruise business built on the two ship model that's inherited that £100,000,000 target. We're delivering on that. We said we would grow our river cruise business model, and we're doing exactly that with load factors and capacity growing in rivers. We said we'd grow our holidays business, and we're doing exactly that. And through our fantastic partnership with the GS and the wider progress making in insurance, we're also growing our insurance business. That's combining into a very strong deleveraging that you're also seeing that is reducing and will reduce our interest costs over the coming years. Put all those things together, and that's the road map to the £100,000,000 that we now expect to get there early.

30:26 We haven't given guidance as to what happens beyond that, but, clearly, you can see a strong trajectory, and we don't expect to stop at the 100,000,000. But we'll talk more about that closer to the time. Thanks, Mike. With net debt falling, once we see this below the two times target, how will you look at capital allocation? Reduce debt further, pay dividends, or invest for growth? Do you wanna take that, Mark? Sure. No. I think I think that less than two times target is is is the key point here. Look. We're not there yet. It is clearly getting closer, but but we're very focused on on on hitting that target. Clearly, once we do, you know, the broader sort of capital allocation discussion, it it it becomes becomes one that we'll need to engage with.

31:13 So while I'm I'm I'm not gonna give guidance in in terms of how how we will think about that beyond beyond that target, it is it is something that we'll consider as as we get closer and closer to it. Thanks, Mark. How much of the improved cash generation do you see as repeatable? Well, I'll cover that. Sure. So so, look, we've we've had a really strong cash performance in the in the first half. So we talked about that in the presentation. Leverage, you know, falling to 2.7 times with with net debt of £429,000,000. So that's a... It's a really, really strong performance. We've guided to, you know, net debt remaining flat at at the year end, and therefore, sort of leverage also being flat at the year end. I don't I don't think we need to think necessarily about first half having lots of one offs in it. I think it is just a natural sort of factor of the seasonality and and some of the trading things that we've talked talked about sort of impacting the business. So big driver of our cash flow, sort of h one, h two is is the ocean cruise business and and particularly working capital.

32:18 That business has its peak season in the summer months. Therefore, we sort of benefit from that in in terms of cash. And then as we go into sort of q four and and and our year end, clearly, that's the sort of lower season for for the Ocean Creek cruise cruise business. We do expect some cash one offs in in in the second half, which which will sort of have a small impact in in terms of our cash cash position. And then from an e... EBITDA perspective, clearly, which is a big, big driver of our cash flow, we've talked about river water levels impacting us in the second half, and we've talked about the bookings impacting our peak trading periods in our holidays business, again, which is in the second half of the year. So sort of all combined, that's driving our sort of net debt leverage numbers to be flat for for the year end.

33:09 But as as we go into next year, we we we we expect the deleveraging to continue at pace. So let's stand back on cash as you'll see seasonality in cash flows throughout each year, but this is a very cash generative business model that we've created, and you can expect that to continue to drive deleveraging as we go forward. It's important to note that this is also a capital light growth model. So, yes, we have two ships that we own, but actually all of the growth we're achieving in ocean ship... Open crew... Ocean cruise, sorry, is is capital light. It's not requiring significant capital investment. Likewise, with the river cruise, likewise with holidays, and indeed, our broking model is now a capital light insurance model. So the great thing about this model is it is indeed very cash generative and is driving the deleveraging we can see through strongly.

34:04 Thank you. And from a river cruise perspective, the adaptability of the fleet of vessels has been clear. But from a customer point of view, how were their trips amended during the year? What percentage continued with amended itineraries? And how do you think about the future year development across European river locations? Yeah. So look. I've been really pleased with the way we've managed the disruption in rivers this year. Sorry. Can you keep the question up? Because it's component parts, so it's not possible. Look. I think customers are really important as we manage through this. We're not looking to protect profits. We're looking to protect customers, which is the best way to protect profits. And you can see that in the customer satisfaction levels as we've managed through disruption.

34:49 The way we'll approach this is we're very open with customers that the Rhine and the Danube has experienced disruption this year. We'll contact those customers that are due to cruise with us and give them advanced warning to the extent we think there is going to be disruption. And then nearer the time, we will speak to each of them and explain what an adjusted itinerary looks like, and they'll have the choice as to whether they want to continue on that cruise or defer to a later cruise or indeed cancel. So generally speaking, most people have opted to stay on those cruises. We're not gonna disclose the specific cancellation rates, but they are in the minority as opposed to the majority. So we're confident in the way that we've managed through the disruption. But nonetheless, there has been disruption in the second half, and therefore, you will see that in the phasing between h one and h two profits.

35:41 But I think your your question is asking exactly the right question, which is how do we look after our customers in this because that's where SAGA shows up. And I want everybody saying, thank god we cruised with SAGA this year because when things go wrong, they look after us, and therefore, we're coming back next year. Thank you. And related to that and partially covered, but whether you want to add anything, did that river cruise disruption have an adverse financial impact? If so, what was that? So actually, I can see I didn't answer one aspect of that last question, which is the benefit of this deck on the screen. So look, in terms of future years, we've seen unprecedented disruption this year. There is varying water levels every year, which is something our ships cope with very well, as you can see. So we're not expecting the unprecedented levels this year. We also cruise on multiple rivers.

36:29 We see no disruption on the Douro, for example. So you can expect us to launch new ships on different rivers and to diversify. In terms of the impact of this year, the guidance we've given is because the disruption lands in the second half, then you can expect overall profits to be marginally down in rivers year on year. But it's really important to remember that last year, we made £67,000,000 in ocean cruise profit and £6,000,000 just under in river cruising. So when we're talking about disruption to a river cruise business, it's a pretty small part of the overall profits in our travel business. And indeed, the ocean cruise business is still growing very, very strongly and actually is offsetting any marginal impact to the river.

37:23 That's great. Thank you for answering all those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Mike, could I please just ask you for a few closing comments? Look. I think, look, we've had a brilliant first half. We're making great progress on our strategy. That is driving that performance, and I think it's really important to link the two. Yes. We're all working hard, but we're also working smarter, and that's the the product of a very clear strategy. Delighted that we can improve our guidance for this year, and actually, that's translating into greater confidence and acceleration of our medium term targets. So once again, I'd like to thank all of you for your support and indeed all of my SAGA colleagues who have made this happen. So thanks, everyone.

38:15 That's great. Thank you for updating investors today. So please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good morning to you all.