Trading update

RNS Number : 0752B

SAGA PLC

28 January 2020

 

28 January 2020

Saga plc

("Saga" or "the Group")

Trading update

Saga plc ("Saga" or "the Group"), the UK's specialist in products and services for life after 50, provides the following update on trading covering the period from 1 August 2019 to 27 January 2020.

Current year trading

We continue to focus on disciplined execution of the strategy set out in April, against a backdrop of a challenging external environment in Insurance and Travel. We expect full year Underlying Profit Before Tax ("Underlying PBT") to be in line with our previous guidance.

Insurance

The Insurance Broking business continues to show clear signs of progress:

·    As of 26 January 2020, we had sold 317k 3-year fixed price policies, with over 60% of direct new business customers choosing this product since it was fully launched. 

·    Around 57% of new business customers are coming to us on a direct basis, compared to 50% in the year ended 31 January 2019. 

·    Customer retention across home and motor business of 75% is around two percentage points better than in the prior period, reflecting a range of initiatives.

For the full year ended 31 January 2020 we expect Saga branded home and motor policies to be approximately 3% lower than the prior year, reflecting a highly competitive market and a disciplined approach to new business. Home and motor margins are expected to be at the higher end of our £71-£74 range, reflecting the lower new business strain.

For the Insurance Underwriting business, reserves in aggregate are tracking in line with expectations, with continued favourable experience on large bodily injury claims. In line with other insurers, we are seeing higher inflation on third party damage and theft costs, with overall inflation running at around 7% compared to longer-term expectations of around 5%. This trend is not expected to have a significant impact on the current year but will have a modest adverse impact on future year margins if retail pricing conditions remain competitive.

Travel

In Cruise, we are building on the excellent progress over the first half of the year:

·    The first six months of operation for the Spirit of Discovery have been successful. Customer feedback has been very positive and we expect the new ship to achieve EBITDA of more than £20 million for the second half.

·    The build programme for the Spirit of Adventure is on track and we remain on time and on budget for delivery in August 2020.

·    We have forward bookings for 2020/21 of 76% of full year target levels and we remain fully on track with our expectations for £40 million of EBITDA per new ship.

For Tour Operations, revenues are expected to be down around 5% compared to the prior year, in line with trading at the half year.  We are seeing a much more resilient picture in those parts of the business where our customer proposition is truly differentiated, notably in escorted tours.  The administration of Thomas Cook in the second half has resulted in approximately £4 million of one-off costs which will be taken below Underlying PBT.

FCA Market Study

Saga welcomes the work being undertaken by the FCA and believes that, over the long-term, it will be positive for Saga's customers and our place in the market.  As previously announced, we have been implementing a proactive strategy to improve renewal pricing for our long-standing customers and improve pricing practices.

The FCA published its interim report in October 2019 and the final report is expected to be published in Q1 2020.  There is a wide range of potential outcomes for the industry and the Board will consider these once the final report has been published.

Strategy

The strategy we set out in April was focused on returning Saga to its heritage as a company that delivers high quality, differentiated products and services that resonate with its core customers.  Our experience since April gives us confidence that the Group is taking the right actions, and we are seeing good progress and a significant improvement in the quality of execution.  The Insurance business is in a much more stable position than a year ago and our Cruise business is fully on track. Our customers are responding well to what we are doing and it is clear that the Saga brand remains strong with our core target market. 

There remains much to do to continue to improve our capabilities in all areas of the business and to respond to changing customer behaviours, across both Insurance and Travel.

With the recent appointments of Euan Sutherland as Group CEO, Cheryl Agius as Insurance CEO and Gilles Normand as Group COO, we have a strong team in place to improve Saga's operational and financial performance.  The Board and the executive team, with Euan's leadership, are looking at where performance and cost efficiency can be improved. The Group is also reviewing all aspects of its capital allocation priorities and where balance sheet deleveraging can be accelerated. We will update on our progress with the announcement of our preliminary full year results. 

Euan Sutherland, Group CEO, said

"I'm delighted to have joined Saga and to be working with a strong executive team.  Although Saga continues to face challenging markets in Insurance and Travel, we have a clear focus on improving performance and cost efficiencies within the Group, while strengthening our financial position and reducing debt."

ENDS

For further information please contact:

Saga plc

Mark Watkins, Director of Investor Relations                                    Tel: [phone]

Email: [e-mail]

MHP Communications

Tim Rowntree/Simon Hockridge                                                          Tel: [phone]

Email: [e-mail] 

Notes to editors

About Saga

Saga is a specialist in the provision of products and services for life after 50. The Saga brand is one of the most recognised and trusted brands in the UK and is known for its high level of customer service and its high quality, award winning products and services including cruises and holidays, insurance, personal finance and publishing. www.saga.co.uk

 

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