Saga (LSE:SAGA) — Preliminary results for the year ended 31 January 2024

0:00 Good morning, and welcome to the SAGA PLC Primary Results for the Year Ended 01/31/2024 Presentation. Throughout this recording meeting, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated in the right hand corner of your screen. Just click q and a, scroll to the bottom, type your question, and press send. Company may not be in a position to answer every question received 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. Good morning, everybody. My name is Mike Hazel. I'm the group's CEO, and I'm joined today by Mark Watkins, our group's CFO. Welcome to SAGA's full year results for the year ended January 2024.

0:48 Firstly, before I go into any detail, I'd like to draw out some key threads that I'll cover off in more detail as we go through this presentation. Taking the year as a whole, we've achieved a fantastic set of results, successfully delivering a profit outturn that is more than double that of the prior year and ahead of expectations. Strong cash generation has also resulted in a significant reduction in net debt, which fell by around GBP 75,000,000 over the year. This has been driven by strong performances in our cruise and travel businesses, where customer demand for our unique offering has translated into a significant increase in profits. This year, we have placed a renewed focus on our money business, increasing the number of products we have on offer to those customers and establishing a foundation for growth in the future.

1:38 Our insurance broking business continued to be hindered by challenging market conditions. This has impacted our competitiveness and in turn, the number of policies we sold. We understand the drivers of this performance and we have taken action to address it. We're encouraged by the recent performance of our insurance underwriting business, which having applied material price increases over the past eighteen months is now on a much stronger footing. We've also moved towards a leaner operating model, delivering GBP 12,000,000 of in year cost efficiencies, supported by our decision to exit some smaller loss making activities. All of this has been delivered alongside further progress in our customer and data strategy. We're focused on growing our customer numbers and deepening the connection with those customers and we've made great strides in this area.

2:31 To support our strategic objectives, we're also accelerating our capital light partnership strategy. I believe that the right partnerships in the right areas can amplify our growth ambitions and reduce our debt. We've previously spoken about potential partnership opportunities for Ocean Cruise. We're now also considering similar partnership opportunities across our insurance businesses. Meanwhile, our money business is fundamentally already based on a partnership model. I'll present more detail on these partnerships later. When I joined SAGA last year, I had clear views about the strength of the business and the brand. Since then, those opinions have only strengthened and it's clear to me that SAGA is a business with solid foundations in place, a trusted brand, brilliant colleagues and a large and loyal customer base.

3:28 Across the group, we have a database containing 9,600,000 customers, covering a significant proportion of our target over 50s demographic. It is this wealth of data and insight that has driven performance across each of our core businesses. Cruise was the standout performer this year with our boutique ocean and river offers continuing to resonate with our customer base. Load factors and per diems were materially up in ocean cruise, and both revenue and passenger numbers in our river cruise operations grew significantly. We'll see later on that bookings for the year ahead are also progressing strongly. In travel, increased passenger numbers driven by changes to our product set and improvements to our service efficiency meant that we returned to profitability for the first time since pandemic.

4:21 Our money business is now well set for growth and we've worked with a number of expert partners to launch a series of new and well received products. Challenging conditions in insurance have resulted in further decline, impacting both margins and policy numbers. I'll take you through some of the drivers of this shortly and the actions we're taking to address them. It's important that we strike the right balance between short term profitability and market competitiveness, the latter being the key to driving customer volumes ultimately necessary for long term sustainable growth. We're already seeing the early signs that the actions we are taking to rebalance that business are having the desired effect.

5:07 And I'll now hand to Mark to talk through some financials. Thanks, Mike. Good morning, everybody. I'm gonna spend the next few slides covering the financial results for the group for the year ended 01/31/2024, and I'll also cover the outlook for the year ahead. As as you can see, we've delivered a strong set of results for the year with an improvement across all of the key metrics. Underlying PBT under both the previous IFRS four and the current IFRS 17 is more than double twenty two twenty three. This reflects positives from ocean cruise performance beating our guidance, significant growth across river cruise and travel, and lower central costs. However, these were partially offset by a lower result from insurance.

6:01 The group's loss before tax is materially lower than in the prior year, but still reflects some exceptional and one off items that sit below the line. The most material of these one off items is an insurance goodwill impairment of a £104,900,000 reflecting the impact of historical action to focus on value. In addition to this, there was a restructuring cost of £40,300,000 arising from the move to a leaner operating model, the exit of some of our smaller loss making activities, and the rationalization of our property portfolio. Significant growth in available operating cash flow of £88,900,000 was driven by the underlying trading results and a positive onetime benefit from River Cruise Travel moving to a 70% escrow arrangement in the first half of the year.

6:53 The significantly improved cash flow drove continued deleveraging with a 74,500,000 reduction in net debt. And together with an improved trading EBITDA, leverage fell from 7.5 times to 5.4 times. Now turning to the now turning to the profit contribution from each of our business units. Our cruise and travel businesses delivered a strong result with £40,000,000 of underlying PBT returning to profit for the first time since the end of the pandemic. This has been possible because of the high level of demand from our customers, particularly in our ocean cruise business.

7:44 Our insurance businesses have had a challenging time. Underlying claims inflation has had a profound impact on both our broking and underwriting businesses, with the impact being particularly felt across our three year fixed price products in home and motor. Other businesses returned to profit following the exit of some of our smaller loss activities. And central costs, as I mentioned earlier, reflect significant savings following the efficiency gain from the move to a leaner operating model, which was delivered in the second half of last year. Presented here is the expected organic deleveraging profile across the next couple of years.

8:32 The range of expected outcomes is presented by the shaded area at the top of each bar. Debt reduction remains the group's number one priority. Twenty three twenty four benefited from some onetime cash positives, and we expect twenty four twenty five to return to a more normal cash generation profile with an expected further reduction in net debt even in a downside scenario. We expect to repay the £150,000,000 bond maturing in May for a combination of available cash and the £85,000,000, loan facility from Roger to Harm. As we continue with our deleveraging plans, we are grateful for this continued support from Roger who rigid recently extended the maturity of his facility to April 2026.

9:23 This change provides us with a runway to fully explore the partnership op op opportunities that Mike mentioned briefly. So what what what what do we expect from the year ahead? We expect to see continued growth in ocean cruise as we continue to maximize the load factor and per diems, which after a certain point dropped through entirely to the bottom line. This will lead to growth in revenue, EBITDA, and underlying PBT. In River Cruise, the introduction of our new ship Spirit of the Duro last month means we're we we also expect continued growth here. As a rough guide, each of our new river ships is expected to generate an incremental 1 to £1,500,000 underlying PBT per year.

10:14 Growth in passenger numbers and revenue is expected to continue in travel, supporting a significant increase in underlying PBT. However, the challenges in insurance are expected to continue at least in the short term. We are taking steps to stabilize the business and ultimately return insurance to growth. This this means that we are entering a transitional period with lower motor and home broking margins as we invest in price to slow the decline in policy sales. In the short term, we expect to be materially lower at an underlying PBT level, than '23, 24. Insurance underwriting is now on a significantly stronger footing, having applied this, the price increases over the past eighteen months.

11:06 As these continue to flow through, we expect to drive a return to profitability and a reduction in the combined operating ratio. The outcome of all of this is that we expect group underlying PBT to bore to be broadly flat year on year with growth in cruise and river offsetting the lower insurance outlook and, of course, a continued reduction in net debt. And with that, I'll hand you back to Mike. Thanks, Mark. So we've said that we're taking action in our insurance business to stabilize that business and then return it to growth. So I just wanted to pause on insurance for a moment. So kicking off on insurance, taking a step back, I wanted to reiterate the clear underlying strengths of SAGA Insurance.

11:59 At its heart, SAGA Insurance is a profitable business with a number of clear and differentiating attributes. These attributes set us apart from our competition in the over-50s market and provide the basis for future opportunities. Key to this is the fundamental strength of the SAGA brand amongst our loyal over fifties customer base, with whom we have a retention rate of over 81% in motor and home and more than 88% prompted brand awareness across the group. This is supported by our significant group customer database of 9,600,000 customers, 6,900,000 of which we are able to contact about our insurance products. In addition, we know that SAGA customers do not shop on price alone, and we offer products that differentiate us from our competitors.

12:51 For example, our three year fixed price products account for 41% of our motor book and 51 of our home book, and our travel and private medical products include product features, which reflect our insight into the needs of our target customer segments. In insurance broking, we have a strong distribution network, ensuring more than 1,500,000 customers. As for underwriting, we're now on a much stronger footing, having repriced our portfolio and implemented claims cost reduction actions. Our underwriting and pricing capabilities enable us to tailor our risk selection and net pricing to reflect the over-50s target market. And of course, all of these attributes are brought together by the focus on service from our colleagues, who cater for the very specific requirements of our customer base.

13:48 Given the much improved position and outlook for our underwriting business, I'm going to focus the next few slides on our insurance broking business and the actions that we're taking to address some of the challenges we've seen in that business. While SAGA has very clear points of differentiation, our insurance broking business has been affected by the specific and well publicized issues that the industry has faced over the past two years. The FCA's regulatory changes introduced in January 2022 led to a reduction in our price competitiveness. In addition, from the second half of twenty twenty two, the exceptionally high inflation in motor claims experienced across the market was passed on to us in net rate increases.

14:40 Moreover, our margins were further impacted by our three year fixed product, which were unable to we were unable to reprice during the fixed period. We also reduced our marketing spend and held back our investment plans to manage our short term profitability. Against this backdrop, our strategy has been to maintain a disciplined approach to retail pricing to protect margins in the short term. As the charts show on the right, this has had the effect of reducing our customer and policy numbers as well as our profitability. This left us with a reduced customer and policy base to manage alongside a relatively fixed cost base. Before I talk about the actions that we're taking to address these challenges, I wanted to talk you through the impact of our three year fixed price policies, which is key to our portfolio.

15:38 Our three year fixed price motor and home policies introduced in 2019 were introduced in 2019 ahead of the FCA changes and are a prime example of how we differentiate ourselves within a commoditized market. These products resonate well with our demographic, who are less likely to buy on price alone and value the price certainty along with peace of mind and the value of SAGA service. However, it is a product which has been significantly impacted by the inflationary and regulatory backdrop I've described. As this chart shows, the business we wrote in early twenty twenty one was adequately priced when looking forward across the period of the fixed price.

16:25 As inflation increased beyond expected levels, new policies were underpriced as inflation far exceeded expectations in the following years and this affected some business written in the latter half of 2021 and through 2022. Looking at where we are now with three year fixed, much of the pressure on margins from that inflationary impact is now starting to reduce. New and refixed policies are being repriced with prudent inflation assumptions, and as we've referenced before, we expect all of the policies that were written pre inflation to have been fully repriced by the middle of next year. We've been prudent in our inflation assumptions, while there will be some profit drag in twenty twenty fourtwenty twenty five, the easing pressure on margins has given us the headroom to take action on pricing to stabilize the insurance business.

17:27 So why are we shifting our focus to protecting our scale as well as our margins now? The short answer is that a change of approach would not have been possible before now. During a very volatile period, we made the decision to protect short term profitability. However, now that we're beginning to see some stability emerging in the market, it's right that we begin to focus on the longer term outlook and take decisions to recover the volumes that were lost during this volatile period. Given the improving market conditions we've begun to observe in motor pricing and the easing pressure on three year fixed price margins, now is the right moment for us to change approach and begin to rebalance protection of our margins for customer growth.

18:17 We're now focused on this longer term view, switching our approach to one in which we focus even more on protecting existing customers by improving our competitive position so that we can then grow customer numbers and ensure the sustainability of the business. With this, our approach is split in two parts: firstly, short term stabilization and then preparing for growth in the longer term. On short term stabilization, we have, over the past few months, taken clear steps to steady the business. Primarily, we have taken pricing action in broking across all our products and particularly in motor and home to sharpen our competitive position. This not only protects our existing business, but it also stimulates new business which, in time, will slow the decline in policy sales.

19:09 To date, the impact of these changes is tracking in line with our expectations, with improvements seen across conversion, retention and margin, so it's working. We've also begun to increase our marketing spend and investing further in our marketing tools to more effectively target customers. This has led to increasing lead volumes aligned to our marketing spend efficiency and short term payback targets. In addition, we remain focused on keeping a tight control of costs across our operations and non operational functions. We also remain focused on offering differentiated products and we'll be launching a new travel product shortly, designed to meet the specific needs of our customer group in the second quarter.

19:59 Finally, continued development of our partnerships across all of our products remains a key part of our insurance plans. We've worked closely with Collinson to develop our new travel product and you may recall that we recently partnered with Bupa for private medical insurance. We also extended our relationship with Aegis, who now partner with us for motor and home insurance. I now move on to preparing the business for longer term growth. Our focus is very clearly on scaling the business and as part of this, we are exploring further options for partnership models in insurance. This is consistent with our group strategy to move towards a capital light business model and follows the move to explore similar partnership arrangements in Ocean Cruise.

20:46 We believe this would enable us to improve the efficiency of our customer service, while at the same time crystallizing value, reducing debt and enhancing long term shareholder returns. There are a clear range of options available and while it is too early to comment on any particular avenue, we will keep you updated as we progress. So to conclude on insurance, the actions that we're taking are absolutely the right actions and we're taking them at the right time. The easing margin pressure on our three year fixed policies gives us the headroom to make these changes, and we are already seeing encouraging signs that this is working. While we are entering a transitional period with lower profitability in the near term, the rebalancing of price and margin to grow the customer base is necessary for short term stability and long term sustainability.

21:45 Looking further ahead, I'm confident for the future prospects of SAGA insurance, which includes the exploration of potential partnership opportunities. SAGA has an outstanding brand, a loyal customer base and a differentiated product set, leaving us well placed as we target future growth for our insurance business. As I mentioned earlier, SAGA is a business with solid foundations in place. While this represents a good platform, our success lies in building on these fundamentals and focused on achieving a clear vision for SAGA to be the largest and most trusted brand for older people in The UK.

22:36 To that end, we have tightened our strategic priorities to better deliver our growth plans while staying consistent with our previously stated goals. We'll maximize our core businesses, we'll reduce our debt through capital light growth and we will grow our customer base and deepen the relationships that we have with those customers. Now taking each of these in turn. We've covered a lot of the more quantitative progress that we've made across each of our businesses. However, it's important to also focus on some of the broader achievements and successes this year. In Cruise, not only have we delivered excellent financial results, but our customer satisfaction measured through transactional Net Promoter Score, or TNPS, increased by 16 points, reflecting particularly the improvements made to our river cruises.

23:33 Building on the strong demand for our river cruises, we are continuing to expand our river fleet with our third purpose built ship expected in 2025. Unlike our ocean cruise business, access to future river ships is not capital constrained. Apologies, I lost you for a moment there. Unlike our ocean cruise business, access to our river ships is not capital constrained and is a significant growth opportunity as we go forward. In travel, our unique offering continues to be recognized industry wide and we were proud to receive 28 wins at the recent British Travel Awards.

24:28 We've also been making changes behind the scenes with the development and launch of a new website that brings all of our products into one place, together with investment in our contact centers that enable us to service a greater volume of inquiries that ultimately translate to increased sales. Together with our fantastic customer proposition, these improvements have been key to the significantly improved travel performance this year. In insurance, we've been equally busy. As well as supporting new partnerships with Bupa for PMI and AGS for our motor panel, we've navigated regulatory change, improved our fraud detection capabilities and continued to enhance our operating systems.

25:15 We've already set out in detail what twenty fourtwenty five looks like in our insurance update a moment ago, but fundamentally, it's about positioning the business for long term growth and partnerships will be an important part in amplifying that growth. Finally, we've made great progress in positioning SAGA Money for growth. Alongside the launch of new products that I mentioned earlier, We've also developed a new website and continue to grow our sector leading TMPS, which now stands at 72 compared to 64 in the previous year. I see great potential in this relatively immature area of our business and we'll continue to build customer awareness around these great products and potential new products in the future that uniquely serve the needs of our customers.

26:11 Success for SAGA need not be capital intensive, and we remain focused on adopting capital light strategies wherever it makes sense to do so. Not only will this approach enable SAGA to significantly reduce its debt, but it will allow us to more fully leverage the SAGA brand and drive future growth. Our money business is already a substantially partner led model, successfully leveraging the SAGA brand and customer base into a broad range of personal finance products delivered via specialist partnerships. We believe there are partnership opportunities elsewhere in our business to support our strategic plans. In cruise, we are continuing to explore partnership opportunities for our ocean business. We have an incredibly popular customer offer, and our two ships are now nearing capacity.

27:00 It is therefore right for us to consider options that would harness this success, reduce capital intensity and open the path to future capacity to satisfy ongoing strong demand. While we are taking action in insurance to stabilize and then grow that business, there remain long term opportunities within our value chain to draw on partner capabilities and infrastructure to support our growth ambitions, again deliverable through capital light means consistent with our deleveraging strategy. It is by no means certain that we will ultimately pursue any of these opportunities and indeed it is unlikely we would need or want to pursue all of them. Each opportunity is therefore being reviewed in terms of its fit with our strategic objectives and the quality of the potential partnerships available.

27:50 Once we have considered these opportunities, we'll choose the path that best supports our strategic priorities and delivers the greatest shareholder value. Customers are at the heart of SAGA, and we've built our business on understanding those customers and meeting their needs. Continuing to deep deepen our relationship with customers has been a real focus for us this year and will be a key driver of future growth. We get great feedback from our customers and exceptional loyalty. As you can see, on average, we have an astonishing thirteen year relationship with our customers and this is even higher at seventeen years with our most loyal cohort.

28:39 Maximizing the volume and the quality of data we hold on this group allows us to better understand and ultimately serve their unique needs. As a reminder, we already have around 10,000,000 people 50 on our database. While there are 26,000,000 older people in The UK, this represents around 77% of our target market. There is a real opportunity to broaden our reach and convert even more of these individuals into regular customers with more frequent engagement. Our website is, of course, one way of doing this and we've recently developed functionality that allows more than 15,000,000 visitors to the website each year to sign up for email updates, providing interesting articles and offers across a range of our products.

29:29 The SAGA magazine is also a fantastic asset and something that I'm sure you will have all heard of. With over a 120,000 subscribers and an industry leading retention rate of over 80%, our customers love it. Alongside this, we are bringing the successful elements of exceptional SAGA exceptional into our core publishing business, including our weekly digital newsletters. These provide relevant and insightful content across a range of travel, money and magazine topics. When combined, these newsletters reach more than 1,200,000 subscribers each week. While frequency of engagement is important, we're also focused on enhancing the quality and depth of our customer interactions.

30:18 Our customers are very engaged with our content and our email marketing activity benefits from strong opening rates, with over two thirds being read and our relatively new newsletter strategy is already delivering opening rates in excess of 50%. To further complement the success of our magazine and newsletters, next month, we are launching a new magazine website within saga.uk that will provide more fantastic content to our readers, creating a single hub for our customers to meet a range of their lifestyle needs. We expect this to drive further customer engagement and increase the traffic to our website. All of this with the objective of understanding our customers more, deepening our engagement with them, enabling us to better deliver products and services that meet their needs.

31:14 I just wanted to pause on this page for a moment just to highlight the fantastic work that our magazine colleagues do. It's a fantastic product and those of you that haven't had a look, I recommend that you do. So to wrap up, this has been a year of progress in which we have more than doubled our profitability and further reduced our debt. Our cruise and travel businesses have performed particularly strongly and continue to generate high levels of demand. In insurance, we're tracking we're tackling the challenging market conditions and have a plan that will stabilize the business and lay the foundations for future growth, and it's already beginning to bear fruit.

32:00 Meanwhile, the work we are doing across money and publishing businesses and in data places us in a good position to extend our customer reach and leverage our brand. We are exploring several partnership opportunities and believe these could support us in driving our business forward and contribute to our debt reduction objectives. I'd like to thank all of my colleagues for their continued hard work and support and our customers for their ongoing loyalty. I've met a lot of our customers in my short time here and they really are a special group and I'm very proud of what SAGA means to them. I remain confident that we have the right strategy, a powerful brand and a compelling set of products and services and these things will deliver our long term strategic success.

32:49 We'll now move to questions. Fantastic. Thank you very much indeed for your presentation. Ladies and gentlemen, do please continue to submit your questions just using that Q and A tab situated on the right hand corner of your screen. Just while the team take a few moments to review those questions submitted today, I'd like to remind you the recording of the presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. I'd now like to hand you over to Emily Roth, Head of Investor Relations to host the Q and A session. Emily, if I could ask you to please read out the question and direct to the team. I'll just bring your cameras up, and that will be great. Thank you. Thanks, Paul. We've had a few questions on the group's debt position, so perhaps if we start with those. David h asks, given the bond market is currently open again and your implied cost of debt given the 26 bonds trade at around 90 is circa 10%, do you expect to be able to refinance those bonds with a new issuance?

33:42 Mark, do you want to take that? Yeah. Sure. Sure. Thanks, Mike. So so as as we've said, we we we intend to repay the May 2024 bonds from available cash and drawing on facility. I think when it comes to, the facility and the 2026 bond, I I think we are exploring a number of options. That that includes, some of the partnership activity that Mike has talked talked about. But given that we are a couple of years away from the maturity of of those debt debt instruments, it's too early to say what we would intend to do.

34:28 But I think if you look at the cash flow and the performance of the business, I we're confident that we have we would be able to have a solution for the refinancing of those. Yes. Just to build on that a little bit. Look, we've put out a strong set of results today. Profit's very strong, generating a lot of cash flow. And so we continue to delever and reduce our debt. That puts us in a good position to both repay the near term debt, but also head towards the repayment or refinancing of that 2026 maturity. Over and above that, the partnership opportunities that we're exploring will give us greater opportunity to improve cash flows and further reduce debt. So all those things combined, as Mark says, to put us in a good place as we consider what our options are as we head towards 2026.

35:21 Thank you. Ignatius p asks, debt is still very high. How long do you think you need to bring down the net debt to zero? I don't think well, I think my answer a moment ago probably comes a lot of that ground, but we don't necessarily need to bring net debt down to zero. We just need to bring it down to a sustainable level. And that's exactly what we're doing through the ongoing deleveraging that we've got. And we think that the partnership opportunities can help us accelerate that and build on the the great progress we're already making. Thank you. Matthew t asks, what is the absolute level of debt you are aiming for to be able to successfully refinance the 26 bond? If you need to make assumptions on EBITDA alongside this, please do, but please do not provide debt to EBITDA ratios because there is some ambiguity around whether this does or does not include the cruise debt.

36:15 We're not going to guide to a specific EBITDA or debt level, the two interplay together. Mark, feel free to comment in a moment. But what I'd suggest is that the performance of the business, both at a profit level and a cash level, puts us in a very good position as we head over the next couple of years to refinance in a sensible way. And the partnership opportunities that we're exploring will only help us in that progress. Is there anything you'd want to add to that, Mark? No. No. Nothing nothing to add. Thank you. Stephen Kay had a similar question, but also asked how do you anticipate balancing debt reduction with capital allocation for new initiatives and growth? Well, we're doing that all the way through. So I think if you we've been operating in in, frankly, a capital constrained environment over the last twelve months. It hasn't stopped us delivering strong profitability and continuing to reduce our debt. So our plans do strike the balance between ongoing deleveraging, but continue to grow our business. And you'll see the decisions we've taken in insurance are exactly that, taking long term decisions to reinvest in the competitiveness in our insurance business whilst continuing to drive debt in the right direction with the long term view of sustainability.

37:39 Thank you. Another shareholder asks, it is clear that the investment in price for insurance will generate a significant cost for shareholders, but it is less obvious what the benefit for shareholders will be. Please explain what benefits are expected to arise from this material planned investment. Okay. Well, I'll take a step back and just try and explain why we're why we're taking this decision and and why we're doing it now. So what we've seen over the past couple of years is significant volatility, particularly in insurance broking. And during that period of volatility, we've had to protect short term profitability, not least because our overall group profits were also under pressure. As we come out of that period of volatility with profits recovering, it's right that we look at the long term implications of the actions that we've taken so far.

38:32 So over the last couple of years, whilst we have protected short term profits, we have the short term profit actions have continued to drive volumes down. And you'll see from the presentation that we made earlier in the week that we've announced a 9% decline in volumes in insurance. Now sooner or later, we have to stop the decline in volumes and address our competitiveness. So the actions that we're taking to reinvest in the insurance competitiveness will mean that we can stabilize that volume decline that will ultimately lead to long term profit growth. If we don't take the actions to stabilize competitiveness, then the volume declines will continue.

39:21 And volume declines continuing on a fixed cost base that is how an insurance business operates will lead to ongoing decline in profitability. So this is the right moment to pause, address our competitiveness, and then rebuild for growth. Overall, our profitability at a group level remain broadly flat year on year, and then we can expect growth to come through after that. Thank you. Matthew t asks, all else being equal, once the full runoff on badly priced three year insurance contracts have rolled off and newly priced contracts roll in fully, what is the forecast impact on working margins? We're not guiding to specific margins, but you can see the overall shape and the impact that three year fixed has had and the positive impact it will have going forward.

40:12 Overall, the way to look at the impact on margins together with the actions we're taking to redress to address competitiveness is the there are a number of moving parts without giving specific guidance. So if we take our travel business, we've guided that, that will continue to grow and drive profits upwards in those businesses. That growth in profitability there will be offset by a decline in profitability in the current year for insurance. So you can roughly gauge how much of a profit decline in insurance is going to come through if it's offsetting the growth that we're seeing in travel and cruise this year. If you add into that a stabilization of volumes, then you start to get a rough idea as to where the the margin impact or the rough quantum of the margin impact will be. But we haven't given any public guidance beyond that.

41:09 Thanks, Mike. Andrew b asks, your insurance business is at a cyclical low in profitability. Why is it the right time to seek a partner? Does it reflect that the company is in a particularly tight corner? So just standing back on what we're doing with partnerships, We believe there are strategic partnerships, opportunities across a number of our business areas. And the objective of those partnership discussions will be to amplify our strategy and draw on partner capabilities where it makes sense to do so to scale our business and deliver efficiencies. We're also expecting some of those opportunities to for there to be the opportunity to raise capital.

41:56 Now how and where we do that and in what fashion, that remains to be seen because these we are just exploring a range of options at the moment. But we do expect, and indeed, the criteria will be that these discussions deliver strategic or deliver on our strategic ambitions, help us scale, deliver efficiencies, but we do expect there to be a release of capital somewhere across these options because we've there's plenty of capital tied up with their efficiencies opportunities across the way. Thanks, Mike. Still on partnerships, Bobby f asks, please, could you give us an example of the type of partnership agreement and how it might work? In the cruise business, SAGA leaseback would mean foregoing present fixed low cost funding for something considerably more expensive.

42:46 How would that make financial sense? Okay. Well, I'm not gonna talk specifically about what the opportunities across ocean insurance might be because there are a myriad of different opportunities and we're deliberately exploring all of them with the criteria that they meet our strategic ambitions, but also deliver shareholder value. But if you want a a good example of how we already work well with partners, then you can look at our money business, which is a partner led business. Our our savings product, for example, is a very successful partner led savings product. We've recently launched savings platform with a company called Flagstone that enables our customers to invest their savings very efficiently across multiple different financial institutions and then every well, as as regular as they would like, reinvest and move their funds around so that they can always achieve the greatest return on their savings.

43:55 Another example is the probate and legal services that we've just launched with co op where we provide great legal services under the SAGA brand, but the back office function is delivered via co op. So we bring our brand, but we share on partner capabilities and infrastructure in a so we get the best of both worlds. So we bring our large and loyal customer base and share it with the expertise and infrastructure of a third party partner. So there are many, many different ways in which we can leverage our brand, drive growth, and do what SAGA does best, which is put great products in front of our large and loyal customer base. Thanks, Mike. Matthew t asks, last year, you mentioned that you had plans in place to sell the old headquarters and other properties amounting to proceeds of approximately £30,000,000.

44:50 Did the property sales happen? So we have restructured our property portfolio, and those properties are on the market, but we haven't got any more update to give at this point. Thank you. Matthew t asks, you mentioned that restructuring costs included property sales. So I assume if they were sold, the restructuring costs were some £30,000,000 more than you stated. Can you please provide an approximate breakdown of the various elements of the restructuring costs and guidance on how much restructuring costs are likely to come through in '24, '25, and '25, '26, and beyond? I'm not quite sure that statement's correct, but, Mark, perhaps you can just give a bit of color on restructuring costs. Yeah. Abs absolutely. So so so we incurred $440,000,000 of restructuring costs.

45:39 They they they did not include any offsetting profits from from the property disposals. So so so we incurred £440,000,000 of restructuring costs in the year. Now a large portion of that related to the restructurings that that we did during the year, specifically the one we did at the end well, in the second half of last year to to move the central cost functions to a to a leaner model. But it also included the costs of closing some of our smaller loss making activities as as well. In terms of the go forward position, while we don't expect the same level of restructuring costs, we we we would, yeah, we we would expect to incur, you know, a a small number of restructuring costs probably in both in both years looking forward.

46:34 Thanks, Mark. Christian r asks how are price rises in cruises being taken by SAGA's customers? I'm sorry. I was I was distracted. Can you repeat that question? So so Christian r asks how are price rises in cruise being taken by SAGA's customers? Then then the for pay extra for those services. The other thing that is happening comes is that the ships are now rapidly filling up, and there is a natural supply and demand. And what we're seeing is customers are coming to us earlier and earlier to book their cruises because they want to be sure they can get on the ships, and therefore, they're willing to pay more and pay earlier because they love cruising with us. And with only two ships available to us, That obviously drives significant demand with that limited supply. Therein lies the opportunity to partner with potential partners to hopefully open up routes to more capacity in the future and bring SAGA cruising to even more customers as we go forward.

47:59 Thanks, Mike. Andrew b asks, given the limited number of parties who are conceivable partners for the cruise business, is it reasonable to expect a conclusion relatively soon? Not gonna give a a clear timeline, but we said it's something that we're looking at at the moment. And you can expect this year to be the year where we make good progress on partnership discussions, but you'll have to allow us to do the work and then update you as and when we can. Thank you. Eamon s asked, what will the projected free free cash flow be in a normal cycle? Do you wanna talk to that, Mike Mark? Yeah. Abs absolutely. And I and I and I think it's probably just worth pointing out slide slide 15 in in the results presentation that we that we presented yesterday, which shows which shows a bridge in net debt, but but but also shows the available operating cash flows as as as kind of constituent parts. There's probably some one offs to draw out out of those numbers, though. So so the positive one offs that we saw last year was was a £10,000,000 £10,000,000 refund from some of our bonding arrangements. So so that was a positive £10,000,000 inflow.

49:24 We also saw a positive £20,000,000 inflow from moving our travel business to a 70% ring fence from a 100%. And then we also saw a £14,000,000 dividends from a our insurance underwriting business. Now those those those things are unlikely to reoccur in in this year. Offsetting those, clearly, are the restructuring costs. We we had cash restructuring costs of £28,800,000. And as I said said a few a few moments ago, we would not expect that same level of cash restructuring costs to be incurred in this year as well. So so we've we've got some positive one offs, but but but also some negative one offs.

50:13 And and then and then broadly, I think we we would expect the cash the cash flow from the underlying operating businesses to to broadly follow our guidance on underlying PBT. Thanks, Mark. Also asks, what is the anticipated EV to EBITDA for the full year 2425? Can we guide on that, Mark? Well, I mean, it's it's it's gonna be impossible to guide to that on an EEV is a is a is a is a metrics that's determined by our share price. So so so it it is gonna be it's gonna be very difficult to guide on on something which is outside of our control.

50:58 I think you can take your view on where the share price will end up. You can take out cash flow and profit projections and and reach your own conclusions from there. Thank you. We've had two similar questions from shareholders, one from AS, one from Ignatius P. Essentially, given the current share price, would management consider buying at the current levels? Okay. So look. I've I've only recently joined, but I think probably answer that question in a slightly different way. I I spend a lot of time talking to our shareholders, and the starting point I take with those investors is they have invested their capital in our business.

51:45 My remuneration and the other directors' remunerations include share allocations over time that will vest depending on the performance of the business. So we are inherently tied to the shareholder performance. But let's be clear, I've just joined this business and invested my career in this business as well. So trust me, I'm very incentivized for the success of this business, and I think our our overall remuneration being heavily tied towards share performance and future share allocation means interests are very much aligned. Thanks, Mike. Andrew b asks, is there scope to reduce the overhead base further? Will partnerships drive further overhead reductions? So we'll always be looking for opportunities to manage our business effectively.

52:34 So I wouldn't rule out finding further efficiencies. Partnerships are certainly a route where we believe there may be efficiency opportunities, but you'll need to let us do the work to understand what those might look like and whether whether that's possible. Thanks, Mike. Has two similar questions. One is, is SAGA money profitable, and the other is SAGA magazine profitable? So taking the first one, SAGA money, yes, SAGA money is profitable. Having launched four new products, there is significant growth potential in that business. So it's profitable, and we can expect a lot more profits to come from that business. So that's certainly an exciting area for us built off very low overheads and strong partnerships.

53:22 And SAGA Magazine, yes, SAGA Magazine is profitable, but actually, to to think about the profits of SAGA Magazine, that's not the point. SAGA magazine is a really powerful route through which we can communicate to our customers and engage and drive and deepen relationships with them. What that leads to is greater conversion into sales. So, actually, I view SAGA magazine. Whilst it's helpful that it is profitable, it is much more importantly a marketing channel for us to drive, be it through the physical magazine or through the new SAGA magazine website that's being launched, drive traffic towards our businesses to drive future sales. And customers that write read the magazine, guess what? They love SAGA, and they tend to want to buy our products.

54:12 So the more magazine the more magazines that get in people's hands, the greater the prospect that they're going to buy products. So very much focused on driving that business, not for profit purposes, but for marketing purposes. Thanks, Mike. Matthew t has another question regarding debt. Investec currently have EBITDA estimates for 2026 at a £130,000,000. Please, can you answer a straightforward question? If that level of EBITDA does materialize, where do you expect net debt will need to be to repay the 2026 bond? I don't don't think we can give any more guidance. We've already given on that. Can we, Mark? No. I don't I don't I don't I don't think we can. No. I think I think we've I think we've addressed the 26 bond in in in a numb number of different ways.

55:01 Thank you. One more question on properties from Amon s. Did you sell any of the properties in the year, and what was the value of this? I'm trying to think of the timing. So most of the properties have been put up for sale and the process is running. I think we're we're maybe due to announce one of those shortly. Is that right, Mark? Yeah. We we've we've we've exchanged subject to planning on on one of on one of the on one of the properties. The the the proceeds would be the low single digit millions. So so so not not not material to not material to the overall balance sheet. But by that, you should read progress is being made.

55:48 Thank you. And there are no further questions. Okay, Emily. Thank Good. Well, look, thanks for your time, everybody. Just to summarize or Paul, you going to hand back to me before I summarize? No. You please go ahead, mate. Thank you very much. Look, we think we've delivered a great set of results. I'm very pleased with the performance this year. They set us well up for the year ahead. And I'm very excited to see where we can take this business having created some foundations for growth over the past twelve months. So appreciate all of your support everybody. Fantastic. Mike, Mark, Emily, thank you very much indeed for updating investors today. Can I please ask investors not to close the session as you'll be automatically redirected to provide your feedback in order the team can better understand your views and expectations? This will only take a few moments to complete and it's greatly valued by the company. On behalf of the management team of SAGA PLC, we'd like to thank you for attending today's presentation, and good morning to you all.

56:42 Thanks, everyone.