TIDMSAGA
RNS Number : 2911V
SAGA PLC
04 April 2023
4 April 2023
Saga plc
Unaudited preliminary results for the year ended 31 January
2023
Saga reports significant revenue growth and return to underlying
profit
Saga plc (Saga or the Group), the UK's specialist in products
and services for people over 50, announces its unaudited
preliminary results for the year ended 31 January 2023.
31 January 2023 (unaudited) 31 January 2022 Change
----------------------------------------- ----------------------------- ----------------- --------
Revenue GBP581.1m GBP377.2m 54%
Underlying Profit/(Loss) Before Tax(1) GBP21.5m (GBP6.7m) 421%
Loss before tax (GBP254.2m) (GBP23.5m)
Available Operating Cash Flow (1) GBP54.9m GBP75.8m (28%)
Net Debt(1) GBP711.7m GBP729.0m (2%)
Leverage ratio 7.5x 11.7x (4.2x)
Euan Sutherland, Saga's Group Chief Executive Officer, said:
"Over the past year, through what continued to be a particularly
challenging external backdrop, Saga made progress against its
strategy while achieving significant revenue growth and returning
to underlying profit.
"Our Ocean Cruise business continued to see strong customer
demand and bookings for 2023/24 are on track to meet our targets.
In Travel, bookings are significantly ahead of the same point last
year and that business will return to profit this year.
"Our Insurance Underwriting business took pricing action to
reflect the rise in claims inflation, while our Insurance Broking
business navigated a challenging landscape, adjusting to
significant regulatory changes and increased competitive
pressure.
"We also took a number of key steps to reposition the business,
consistent with the strategy we set out 12 months ago to create
'The Superbrand' for older people. Our top priorities for the next
12 months are to strengthen our financial position and continue to
build Saga into the largest and fastest-growing business for older
people in the UK, delivering long-term, sustainable growth for our
stakeholders."
Operational and financial highlights
-- The Group reports an Underlying Profit Before Tax(1) of
GBP21.5m, within the guided range of GBP20m to GBP30m.
-- Revenue growth, when compared to the prior year, was 54% due
to continued Cruise and Travel recovery following the pandemic.
-- The reported loss before tax of GBP254.2m reflects the
GBP269.0m impairment of Insurance goodwill reported within our
interim results.
-- Available Cash(1) , at 31 January 2023, was GBP157.5m with
Net Debt(1) of GBP711.7m, GBP17.3m lower than the year before.
-- The Group remains in discussions in relation to the possible
sale of its Insurance Underwriting business, consistent with the
ambition to move towards a capital-light model and reduce debt.
Divisional performance
Cruise - Strong Ocean bookings on track to meet our targets with
River set to return to profit
-- Ocean Cruise reported an Underlying Loss Before Tax(1) of
GBP0.7m for the full year but with considerable improvement in the
second half, when the business reported an Underlying Profit Before
Tax(1) of GBP6.2m.
-- Ocean Cruise revenue, of GBP168.3m, was more than 100% ahead
of 2021/22, supported by a full year load factor of 75% and per
diem of GBP318. This compares with 68% and GBP299 in the prior
year.
-- Ocean bookings for 2023/24 are strong, representing a load
factor of 72%, and per diem of GBP339 at 26 March 2023. This places
us on track to achieve our target of GBP40m EBITDA (excluding
overheads) per ship.
-- Our River Cruise business, which we now report separately
from our Travel business, reported revenue of GBP28.8m compared
with GBP1.7m in the prior year, and an Underlying Loss Before
Tax(2) of GBP5.1m.
-- River Cruise bookings for 2023/24 are very positive with the
number of booked guests 23% ahead of the same point last year,
reflecting a load factor of 63% and per diem of GBP298 at 26 March
2023.
-- Customer satisfaction across both Ocean and River Cruise
remains exceptional at 9.0 and 8.2 out of 10, respectively at 31
January 2023.
Travel - Launch of new products boosting bookings position
-- Our Travel business reported revenue of GBP108.4m, more than
10 times that in the previous year, and a small Underlying Loss
Before Tax (1) of GBP4.1m, in line with previous guidance.
-- Building from a recovery in touring revenues, in addition to
the launch of new products including our private jet tours and
'Tailor-Made by Saga' proposition, total booked revenue for
2023/24, at 26 March 2023, was GBP136.6m, 32% ahead of the
GBP103.7m booked at the same point in the prior year.
Insurance Broking - Underlying Profit Before Tax(2) in line with
the prior year
-- Overall, the business reported a written Underlying Profit
Before Tax(2) of GBP67.7m, in line with the GBP66.6m in the
previous year.
-- Total policies in force across all products, at 31 January
2023, was 1.7m, 3% behind the prior year, with total policy sales
2% behind.
-- The number of travel insurance policies sold was 103% ahead
of the prior year, achieving revenue growth of more than 200%.
-- Customer retention across motor and home insurance
strengthened further, now at 83.8% and 1.0ppt ahead of the prior
year.
-- As a result of significantly lower new business sales, the
total number of motor and home insurance policies sold was 7%
behind the prior year with an average margin of GBP71 per policy,
compared with GBP74 in the year before. The direct share of new
business was 49%, compared with 59% in the prior year, reflecting
challenging market conditions.
Insurance Underwriting - Material pricing increases applied to
offset the rise in claims inflation
-- Our Underwriting business reported an Underlying Profit
Before Tax(2) of GBP19.1m for the year ended 31 January 2023,
including underlying prior year reserve releases of GBP25.1m.
-- As indicated within our January Trading Update, the current
year underlying combined operating ratio (excluding the impact of
our quota share reinsurance arrangements) was 125.8% compared with
96.3% in the prior year. This reflects the unwind of COVID-19
frequency benefits, a sharp rise in claims inflation and an
above-average level of current year large losses.
-- This is largely offset within our result by recoveries under
our quota share reinsurance arrangements and favourable development
on prior year large losses.
-- We continued to apply material price increases to the motor
book, reflecting not only retrospective, but also our prospective
view of inflation.
Wider strategic progress - Positioning Saga for growth
-- Saga Money reported an Underlying Profit Before Tax(2) of
GBP2.3m and top line growth across our equity release and savings
products.
-- Following the launch of Saga Media in late January, our
brand-new website, Saga Exceptional, has exceeded our initial
expectations and attracted more than 500,000 visitors to date.
-- In the fourth quarter of 2022, the Group reported its highest
ever net promoter score. The score of 51 was 2 points higher than
the same point in the prior year and reflects improvements within
our contact centres which reduced wait times and improved the
customer journey.
-- Following the pandemic, and the move to our hybrid working
approach, far fewer colleagues are choosing to work regularly from
the office. We, therefore, made the decision to close our Enbrook
headquarters in Folkestone in favour of two smaller hubs in Kent,
in addition to our existing London hub. This will reduce operating
expenses while we explore longer-term options for the site.
-- To allow us to reach a wider audience, our aim is to grow our
database. In support of this we set a target to achieve three
million new customer marketing consents by 31 January 2023, which
we met.
-- Following the acquisition of the Big Window at the start of
the year, we further developed our insights through the creation of
our customer segmentation, expansion of our Experienced Voices
customer panel and, most recently, the release of our 'Generation
Experience' economic study which dispels some of the myths around
ageing and the contribution that people over 50 make to the
economy.
Financial position
The Group continues to focus on reducing leverage, with Net Debt
(1) decreasing by GBP17.3m in 2022/23. To further reduce debt and
increase liquidity ahead of the GBP150m bond maturity in May 2024,
and consistent with the ambition to move to a more capital-light
model, the Group has initiated a sale process for the Insurance
Underwriting business that is continuing.
To provide additional financial flexibility ahead of the May
2024 bond maturity, the Group has agreed a loan facility with Sir
Roger De Haan, on normal commercial terms, that enables the
business to draw down up to GBP50m of cash, if required, with 30
days' notice. The facility will be effective from 1 January 2024
and will expire on 30 June 2025, with interest incurred at 10% and
with draw down and milestone fees of up to a maximum of 6% of the
facility.
Outlook
The progress made in 2022/23 places us in good stead as we enter
2023/24. We expect to see customer demand continue to build for our
Ocean Cruises and we are aiming to achieve a load factor of at
least 80% and our targeted GBP40m EBITDA per ship, excluding
overheads. We expect both our River Cruise and Travel businesses to
significantly increase the number of passengers that travel with us
and return to profit.
While the UK insurance market remains very challenging, our
disciplined approach is the right one. We expect lower sales in
motor and home insurance but with a margin in line with previous
indications, trending towards GBP60 per policy. We expect Insurance
Underwriting to report a broadly break-even result in the current
year with material rate increases fully benefiting future
years.
Subsequent to the launch of new products planned for the second
half of 2023/24, the contribution from Saga Money is expected to
grow when compared with 2022/23 levels.
We remain focused on reducing our debt through the continued
repayment of our ocean cruise ship debt and the GBP150m bond on
maturity in May 2024 which, following actions taken to improve our
financial flexibility, we expect to repay from Available Cash(3)
.
We will also continue our strategic pivot to become a
capital-light, direct-to-customer marketing, content and
distribution business through investment in Media, data and
insight. As we increase the frequency and depth of our customer
relationships, we will transform Saga into the largest and
fastest-growing business for older people in the UK.
Management will hold a presentation for analysts and investors
at 9.30am today. The webcast can be accessed by registering at
https://www.investis-live.com/saga-group/6419aee93e92bb0c006728f0/dsgh
and a copy of the presentation slides is available at
www.corporate.saga.co.uk/investors/results-reports-presentations/.
Audited results for the year ended 31 January 2023 will be
published within the 2023 Annual Report and Accounts later in
April.
For further information, please contact:
Saga plc
Emily Roalfe, Head of Investor Relations and Treasury Tel: 07732 093 007
Email: emily.roalfe@saga.co.uk
Headland Consultancy
Susanna Voyle Tel: 07980 894 557
Will Smith Tel: 07872 350 428
Tel: 020 3805 4822
Email: saga@headlandconsultancy.com
Notes to editors
Saga is a specialist in the provision of products and services
for people over 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 travel, insurance, personal finance
and media. www.saga.co.uk
[1] Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
2 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
3 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Chairman's Statement
I am pleased to report that last year the performance of our
core Cruise, Travel and Insurance businesses enabled us to return
to underlying profitability whilst we also made good progress in
relation to the strategy we set out 12 months ago.
Saga continued to build on the progress reported at the half
year, with revenue for the Group increasing by over 50% when
compared with the previous year, following the return to more
normal Cruise and Travel operations post the pandemic.
Our Ocean Cruise business, with its new ships, performed well in
the second half of the year, sailing with an average 84% occupancy,
testament to the exceptional service we provide on board, the model
that we are now mirroring on board our River Cruise vessels.
Looking ahead, the level of revenue booked for the 2023/2024
financial year is very encouraging and we are now in a good
position to generate our targeted levels of EBITDA, GBP80m
excluding overheads, from the two ships.
There have been exciting new developments in our Travel business
in the past year, including the move to a more agile, more digital
operation, and the launch of our new "Tailor-Made by Saga"
holidays. Currently, demand for our holidays is strong,
particularly for our touring programmes.
Our Insurance business operated in the highly competitive market
last year following continued disruption and uncertainty created by
the regulatory changes to the industry's pricing and the high cost
of settling insurance claims. We continued to take a disciplined
approach to our pricing.
As we have indicated previously, we have decided to focus on
Insurance Broking and to sell our Insurance Underwriting business,
a move that will reduce the risk we take and release capital and
allow us to further reduce our debt. With this in mind, I was
pleased to be able to provide a GBP50m facility to give the Company
additional flexibility.
In order to increase the products and services we offer and the
frequency of our customer interactions and the understanding we
have of them, I am delighted that we strengthened our leadership
team during the year. Three very experienced and talented
executives were appointed to set up and lead our new Media
business, our Personal Finance operations, Saga Money and our Data
team. Each of these areas has great potential.
As I set out in my statement last year, Saga has always had a
strong sense of purpose and we have embraced our Environmental,
Social and Governance (ESG) responsibilities. During the year, we
conducted an assessment to understand fully the ESG factors that
are most material to our business. Our new sustainability strategy
will be published in our 2023 Annual Report and Accounts, and in
due course we will set out further details of the key metrics that
we will use to track our performance.
I am very positive about the future potential of Saga. We have
managed our way through three difficult years and, in 2023/24, we
expect all of our three main businesses to be profitable. I am
confident that our strategy is the right one and will lead to
growth and a significant reduction in our levels of debt.
Finally, I'd like to thank the team at Saga for their hard work
over the past year. It is evident to me that there is a tremendous
opportunity for Saga to broaden its services to its customers,
reduce its debt, enlarge its business and increase its
profitability and that the Company is now well placed to take
advantage of this.
Group Chief Executive Officer's Statement
Continued pandemic recovery
During 2022/23, we made strong progress against the growth plan
that we set out in March 2022, as our Cruise and Travel businesses
continued to recover from the pandemic, and we navigated a
particularly challenging motor insurance market as it adjusted to
regulatory changes, a sharp rise in claims inflation and a highly
competitive environment in light of those changes. This was
achieved alongside the launch of our new Media business,
significant enhancements to our data capabilities and the
strengthening of our leadership team.
Return to underlying profit
I am pleased to report that, for the year ended 31 January 2023,
Saga generated an Underlying Profit Before Tax (1) of GBP21.5m,
compared with an Underlying Loss Before Tax(1) of GBP6.7m in the
prior year. This reflects significant improvements across Cruise
and Travel as those businesses returned to more normal operations,
and consistent Insurance Broking performance, which was partially
offset by reduced earnings from our Insurance Underwriting
business.
After reflecting the GBP269.0m Insurance goodwill impairment
that we reported within our interim results, alongside other
smaller one-off below-the-line items, we report a loss before tax
of GBP254.2m. This compares to a loss before tax of GBP23.5m in the
prior year.
In addition, we reduced our level of Net Debt(1) which, at 31
January 2023, was GBP711.7m and continued to hold significant
Available Cash(1) of GBP157.5m at the same date. Net Debt(1) and
Available Cash(1) , at 31 January 2022, were GBP729.0m and
GBP186.6m respectively.
To further reduce debt and increase liquidity ahead of the
maturity of our GBP150m bond in May 2024, we have taken a series of
actions which include the initiation of a sales process in relation
to our Insurance Underwriting business and the agreement of a
GBP50m loan facility with Sir Roger De Haan.
The progress made throughout the course of the year demonstrates
that Saga is on the right track to, in time, deliver long-term
sustainable growth for our stakeholders.
Our growth plan
In March 2022, we set out our ambition to become the largest and
fastest-growing business for older people in the UK which we will
achieve through delivery of our three-step growth plan. This plan
is focused on the following three priorities:
1. Maximising our existing businesses
2. Step-changing our ability to scale while reducing debt
3. Creating 'The Superbrand' for older people
An update on our progress, during the past year, in each of
these areas is set out below.
1. Maximising our existing businesses
Cruise
Our Ocean Cruise business reported an Underlying Loss Before
Tax(1) of GBP0.7m for the year ended 31 January 2023. This
comprises an underlying loss of GBP6.9m in the first half and a
profit of GBP6.2m in the second half as the impact of COVID-19
lessened. This compares to an Underlying Loss Before Tax(1) of
GBP47.7m in the prior year.
For the 2022/23 financial year, Ocean Cruise achieved a load
factor of 75%, made up of 66% in the first half of the year and 84%
in the second, accompanied by a per diem of GBP318. This compares
with a 68% load factor and GBP299 per diem in the prior year. These
factors, when combined, result in Ocean Cruise year-on-year revenue
growth in excess of 100%.
Looking ahead to the 2023/24 financial year, our booked load
factor positions us well to meet our target of at least 80%. At 26
March 2023, we had secured bookings equivalent to a 72% load factor
and GBP339 per diem. This positions us well to deliver our target
of GBP40m EBITDA per ship, excluding overheads, in the year ending
31 January 2024.
As our Ocean and River Cruise businesses are now managed by the
same team, we have taken steps to not only ensure that our River
Cruise guests experience the same exceptional service as within
Ocean Cruise, but also provide more visibility over the performance
of our River Cruise operation.
Our River Cruise business, in line with the guidance within our
January Trading Update, reported an Underlying Loss Before Tax(2)
of GBP5.1m which compares with a GBP6.4m loss in the prior year.
This improvement was largely driven by significantly more guests
sailing with us, being 12,000 in 2022/23 compared with just 1,000
in the prior year.
For the 2023/24 financial year, the River Cruise business is
expected to generate a small Underlying Profit Before Tax(2) before
becoming a more meaningful proportion of the Group's earnings over
time. In support of this, bookings for the year ending 31 January
2024 are strong and, at 26 March 2023, we had already secured
bookings from more than 12,500 guests which equated to a load
factor of 63% and per diem of GBP298.
We actively encourage our guests to openly express their views
and provide feedback in relation to our Cruise offering as it is
this that allows us to continuously enhance our guest experience.
We are exceptionally proud that, at 31 January 2023, our guest
satisfaction score was 9.0 out of 10 for Ocean Cruise and 8.2 for
River Cruise.
Travel
Our Travel business returned to more normal operations following
the COVID-19 pandemic and, as such, revenue for the year ended 31
January 2023 increased by more than 10 times when compared with the
year before. The business reported a small Underlying Loss Before
Tax(2) of GBP4.1m.
2022/23 was a year of transformation for our Travel business,
moving from a largely traditional paper-based business to one that
offers awe-inspiring holidays through a more digital and agile
operating model.
As part of the move, we developed a series of exciting new
products, including 'Tailor-Made by Saga', which offers customers a
truly personalised travel experience, and our private jet tours
which represent our most luxurious holidays yet with a succession
of unforgettable encounters and travel exclusively by chartered
plane. In addition, all bookings now benefit from our Saga Deluxe
and Titan VIP Travel Services which include home-to-airport pick
up, airport lounge access and fast-track security clearance at
selected UK airports.
Customer feedback received to date in relation to our revamped
Travel offering has been incredibly positive and is reflected in
our forward bookings. At 26 March 2023, booked revenue totalled
GBP136.6m which is 32% ahead of the same point in the prior year.
This level of bookings places the business firmly on track to
return to profit in 2023/24.
Insurance
The UK insurance market has faced particularly challenging times
over the past year as insurers adjusted to market-wide regulatory
changes and high levels of claims inflation.
Overall, Insurance Broking reported an Underlying Profit Before
Tax(2) , on a written basis, of GBP67.7m which compares to GBP66.6m
in the previous year.
The number of policies in force across all products, at 31
January 2023, was 1.7m or 3% behind the position at 31 January
2022. Total policy sales for the year as a whole were 2% behind the
prior year, reflecting a 103% increase in the number of travel
insurance policies sold, broadly stable sales of private medical
insurance and motor and home sales that were 7% behind the prior
year.
While the level of new motor and home policies sold was
significantly behind the prior year at 50% and 17% respectively,
customer retention improved to 83.8%, or 1.0ppt ahead of the prior
year. The average margin per policy was GBP71, compared with GBP74
in the year before.
The proportion of customers coming to Saga directly, rather than
through price-comparison websites, was 49%, compared with 59% in
the prior year, reflecting the competitive nature of the
market.
Our Insurance Underwriting business reported an Underlying
Profit Before Tax(2) of GBP19.1m for the year, supported by
GBP25.1m of underlying prior year reserve releases.
Excluding the impact of these reserve releases, and our quota
share reinsurance arrangements, our current year underlying
combined operating ratio was 125.8% which compares with 96.3% in
the prior year. This reflects the expected unwind of the prior year
COVID-19 frequency benefits, a sharp rise in inflation to the cost
of settling claims and an above-average level of current year large
claims.
In response to the rise in claims inflation, throughout the
year, we applied material increases to our pricing which
incorporated both the level of inflation already observed, and the
expected inflation in the coming year.
Money
Our personal finance business, Saga Money, reported an
Underlying Profit Before Tax(2) of GBP2.3m for the 2022/23
financial year, broadly in line with that of the prior year.
In equity release, which was supported by the launch of our new
television advertising, total loan volumes were 29% ahead of the
prior year, with the average loan value also 19% higher.
Our savings product, provided in partnership with Goldman Sachs,
secured 17% more accounts than in the year ended 31 January 2022,
with assets under management of around GBP3.5bn.
2. Step-changing our ability to scale while reducing debt
The second focus within our growth plan is on reducing our level
of debt and step-changing our ability to scale the business. At 31
January 2023, Net Debt(3) was GBP711.7m, GBP17.3m lower than at 31
January 2022. This represents the Group's gross debt at that date,
less GBP157.5m of Available Cash(4) .
Following two years of agreed deferrals, we re-commenced
payments on our two ocean cruise ship facilities and a total of
GBP46.4m was repaid during 2022/23. Future Cruise bookings are
encouraging and, over time, we expect to generate sufficient cash
from Ocean Cruise to meet interest and capital repayments,
including catch-up payments on elements deferred during the
pandemic.
To maintain flexibility in relation to our short-term liquidity
needs, we concluded discussions with the lending banks behind our
revolving credit facility and agreed a series of amendments,
including changes to the leverage and interest cover covenants
attached to the facility. Full details of the changes and revised
covenant levels can be found on page 24.
As part of our property strategy, we are continuously assessing
our ways of working and how best to support colleagues. Following
the pandemic, and in line with our hybrid working approach, we saw
that far fewer colleagues were choosing to work regularly from our
Enbrook Park headquarters in Folkestone. We made the decision to
close the site in favour of two smaller hubs in Kent, in addition
to our existing London hub. This will reduce operating expenses
while we explore longer-term options for the site.
As part of our plan to reduce debt and move towards a more
capital-light model, we are continuing to evaluate our options in
relation to our Insurance Underwriting business and an active sales
process is ongoing.
3. Creating 'The Superbrand' for older people
The final step in our growth plan is to create 'The Superbrand'
for older people through focus on our brand, data, insights and
customer interactions.
Saga is a brand that has exceptionally high awareness amongst
people over 50, however, historically too many have seen Saga as
something that 'isn't for them'. Over the past couple of years, our
mission has been to reframe the conversation with a focus on
experience as opposed to age. The brand relaunch in 2021 was only
the start and, since then, we have expanded our new marketing
campaigns to cover more products, and increased our customer net
promoter score (NPS) to its highest ever level. When compared to
2021, NPS in the fourth quarter was two points higher, at 51. This
reflects improvements within our contact centres which reduce wait
times and improve the customer journey.
As we highlighted at our Capital Markets Event in January 2023,
the data we hold and the way that we use it, will be key to our
success in becoming a superbrand. At the beginning of the year, we
set a target to achieve three million new consents by 31 January
2023 which would allow us to communicate our products and services
to a wider audience than before. I am pleased to confirm that we
achieved this, and more.
The insights we hold about 'Generation Experience' are crucial
as they allow us to develop products and services that meet the
specific needs of our customers. Following the acquisition of The
Big Window Consulting Limited at the start of the year, we have
taken great strides in this space. These include developing our
detailed customer segmentation, building our Experienced Voices
panel which now consists of more than 10,000 of our customers and
championing a conversation on positive ageing, most recently
supported by the release of our 'Generation Experience' economic
study.
In addition, increasing the depth, and frequency, of our
interactions with customers is a key part of our superbrand plan.
Through this, we are able to learn more about their specific
interests and viewpoints, enabling us to continuously improve the
products and services we offer. Saga Media, which was launched in
January 2023, is pivotal to this process. Through Saga Media, and
our brand-new Saga Exceptional website, we are providing people
over 50 with an online home and a corner of the internet that is
designed specifically for them. Not only does this allow us to
become part of our customers' lives and learn more about what they
want, but it will also become a profit-generative business in its
own right within five years, through advertising and affiliate
partnerships.
In order to transform Saga into 'The Superbrand' for older
people, we need to create an exceptional colleague experience,
giving each and every colleague the opportunity to do the best work
of their lives. During 2022/23, we made great progress in this
space, providing colleagues with access to a new reward platform
and enhancing the financial support available through acceleration
of our annual pay review cycle and two additional cost of living
support payments for our colleagues with lower earnings.
The engagement of our colleagues, measured through a survey
hosted by an independent third party, remains high at 8 out of
10.
Building Saga into the largest and fastest-growing business for
older people
We are continuing with the delivery of our three-step growth
plan, focused on maximising our existing businesses, reducing debt
while step-changing our ability to scale and creating 'The
Superbrand' for older people. We will continue to pay down our
ocean cruise ship debt, and we expect to repay the GBP150m bond
maturing in May 2024 from Available Cash(4) .
Overall, I am pleased with the progress made during the year as
we began to make the strategic pivot towards becoming a
capital-light marketing, content and distribution business. We now
have the right team, strategy and structure in place that will
return Saga to sustainable long-term growth.
Finally, I would like to pass my thanks on to our colleagues for
their relentless efforts during this period of change. I recognise
that any business is only as strong as its colleagues and, looking
at the team around me, that fills me with confidence.
1 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
2 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
3 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
4 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Group Chief Financial Officer's Review
Although the last 12 months have been challenging in both
Insurance and Travel, in 2022/23 the Group returned to an
Underlying Profit Before Tax1 of GBP21.5m compared to an Underlying
Loss Before Tax(1) of GBP6.7m in the prior year. This was mainly
due to a GBP69.4m improvement in the results of our Cruise and
Travel operations, offset by a GBP35.0m reduction in the results
from Insurance Underwriting.
For Cruise and Travel, the first half of 2022/23 was far from
'plain sailing'. The Cruise business was affected by ongoing
impacts from COVID-19, which led to the curtailing of two ocean
cruises and higher cancellations on other departures. The Travel
business was impacted by lower demand and also experienced
higher-than-normal cancellations, in part due to the operational
issues impacting the industry. These factors were much less of an
issue in the second half, although revenues and profitability have
yet to recover to levels anticipated pre-pandemic.
Insurance Broking has been under pressure from a combination of
pricing reforms, inflation squeezing distribution margins and from
a generally highly competitive environment. This led to a
significant decline in new business sales for motor and home. The
overall Insurance Broking result was at a similar level to the
prior year, with lower motor and home profits offset by improved
results on other products, especially travel insurance.
Results for Insurance Underwriting were, however, much lower
than in the prior year. Part of this was expected, with the prior
year benefiting from reduced motor claims frequency during periods
of lockdown. This reduction in claims frequency reversed as we
expected, but results for the second half of the year were
adversely impacted by a sharp increase in claims inflation and an
increase in large losses. This resulted in us reporting an
underlying current year combined operating ratio (COR) of 125.8%
for the full year, considerably adverse to expectations, albeit
with a significant portion of the lower result ceded to our
reinsurers.
While the Group generated an Underlying Profit Before Tax(1) ,
we reported a loss before tax of GBP254.2m, mainly due to a
GBP269.0m impairment of the goodwill related to our Insurance
business, included in our interim results. As reported at the half
year, the combination of a very competitive motor market and
regulatory changes equalising new business and renewal pricing are
adversely impacting motor and home new business sales and pricing,
which in turn has led to a reduction in the discounted cash flows
that underpin the carrying value of Insurance goodwill.
For the 2023/24 financial year, we expect to see a further
recovery in the Cruise and Travel businesses. Ocean Cruise bookings
are positive, and we expect our load factors for the current year
to be in line with the levels expected pre-pandemic. The River
Cruise and Travel businesses are also starting to see much better
booking momentum and we are on track to return to profit in
2023/24. In Insurance Broking, we expect policy sales to continue
to reduce, as lower new business in 2022/23 translates into lower
renewals in 2023/24, with motor and home margins of around GBP60
per policy, as previously indicated. For Insurance Underwriting, we
expect a broadly break-even result; while underlying performance
should be considerably better than in 2022/23, significant rate
increases will not be fully reflected in earned premiums until the
second half and improvement in results will, in the first instance,
go towards reducing reinsurer losses. In addition, we also expect
only limited reserve releases in future years.
In terms of our financial position, in 2022/23, our Net Debt(1)
reduced from GBP729.0m to GBP711.7m with gross debt reducing by
GBP46.4m, all relating to the debt financing of our two ocean
cruise ships, of which GBP29.1m was financed from a reduction in
Available Cash(1) . While this was a lower pace of reduction than
we had anticipated, reflecting the challenges we faced in 2022/23,
we continue to have significant liquidity, with GBP157.5m of
Available Cash(1) at 31 January 2023.
Over the course of the past year, we have taken a series of
actions which increase our financial flexibility. These include
amendments in relation to our revolving credit facility, the
initiation of a sales process for our Insurance Underwriting
business and, most recently, the agreement of a loan facility with
Sir Roger De Haan. This facility, which was provided on an
arm's-length basis, commences on 1 January 2024 and would allow the
Group to draw down up to GBP50m, as required, to support liquidity
needs and specifically the repayment of GBP150m bonds maturing in
May 2024.
Our focus now is on growing earnings and significantly reducing
leverage as our Cruise and Travel businesses continue their
positive momentum and as we capitalise on investment in Media,
Money and data.
Operating performance
Group income statement
GBPm 12m Change 12m
to Jan to Jan
2023 2022
(unaudited)
----------------------------------------------- --------------- ---------- ---------
Revenue (2) 581.1 54.1% 377.2
--------------- ---------
Underlying Profit/(Loss) Before Tax (3)
Cruise and Travel (9.9) 87.5% (79.3)
Insurance Broking (earned) 69.1 4.1% 66.4
Insurance Underwriting 19.1 (64.7%) 54.1
--------------- ---------
Total Insurance 88.2 (26.8%) 120.5
Other Businesses and Central Costs (34.9) (19.1%) (29.3)
Net finance costs (4) (21.9) (17.7%) (18.6)
--------------- ---------
Underlying Profit/(Loss) Before Tax(3) 21.5 420.9% (6.7)
--------------- ---------
Impairment of Insurance goodwill (269.0) -
Other exceptional items (6.7) (16.8)
Loss before tax (254.2) (981.7%) (23.5)
--------------- ---------
Tax expense (5.0) (11.1%) (4.5)
Loss after tax (259.2) (825.7%) (28.0)
--------------- ---------
Basic earnings per share:
Underlying Earnings/(Loss) Per Share(3) 11.9p 207.2% (11.1p)
Loss per share (185.8p) (824.4%) (20.1p)
The Group's business model is based on providing high-quality
and differentiated products to its target demographic,
predominantly focused on cruise, travel and insurance. The Cruise
and Travel business comprises Ocean Cruise, River Cruise and
Travel. The Insurance business operates mainly as a broker,
sourcing underwriting capacity from selected third-party insurance
companies, and, for motor and home, also from the Group's in-house
underwriter. Other Businesses comprises Saga Money, Saga Media,
Saga Insight and CustomerKNECT (formerly MetroMail), a mailing and
printing business.
Revenue(2)
Revenue(2) increased by 54.1% to GBP581.1m (2022: GBP377.2m) due
to increased trading in the Cruise and Travel businesses. The
current year has a full year of trading in Cruise and Travel
compared to a suspension of these businesses for the majority of
the first half of the prior year.
Underlying Profit/(Loss) Before Tax(3)
The Group generated a total Underlying Profit Before Tax(3) of
GBP21.5m in the current year compared to an Underlying Loss Before
Tax(3) of GBP6.7m in the prior year. This is primarily due to a
GBP69.4m reduction in Cruise and Travel losses, of which GBP47.0m
relates to the Ocean Cruise business. This was partially offset by
a reduction in Insurance Underwriting profitability due to lower
reserve releases and an increased current year loss ratio.
Net finance costs(4) in the year were GBP21.9m (2022: GBP18.6m),
which excludes finance costs that are included within the Cruise
and Travel businesses of GBP19.2m (2022: GBP19.5m). The increase of
17.7% was due to the higher bond interest costs following the
completion of the new bond issue in July 2021. This was partially
offset by a reduction in debt issue costs in current year compared
with the prior year.
Loss before tax
Loss before tax for the year of GBP254.2m includes a GBP269.0m
impairment to Insurance goodwill and other exceptional items of
GBP6.7m. Other exceptional items are made up of GBP1.1m of
impairments to assets (net of amounts recoverable under quota share
arrangements), GBP3.7m of restructuring costs, a GBP2.0m foreign
exchange loss on river cruise ship leases, GBP0.6m IFRS 16
adjustment loss on river cruise ships, GBP0.7m acquisition costs on
the purchase of The Big Window Consulting Limited and a GBP1.4m
fair value gain on derivatives de-designated in the year.
The loss before tax in the prior year of GBP23.5m includes a
GBP2.7m fair value loss on derivatives de-designated in the year
due to the suspension of Travel operations, GBP6.3m of
restructuring costs, mainly relating to the Travel business, a
GBP2.0m charge due to the closure of the defined benefit pension
scheme and GBP2.4m of costs incurred on the ship debt holiday,
partially offset by GBP0.9m foreign exchange gains on river cruise
ship leases.
The prior year also includes a net impairment of assets of
GBP4.3m that represents GBP10.2m and GBP0.5m of impairments and
loss on disposals of software and property, plant and equipment
respectively, mainly relating to the Travel business, GBP1.0m of
impairment on assets held for sale, a GBP7.1m profit on disposal of
assets, after costs of GBP0.1m in relation to a sale of property
and a GBP0.3m gain on a lease modification within right-of-use
assets.
Tax expense
The Group's tax expense for the year was GBP5.0m (2022:
GBP4.5m), representing a tax effective rate of 33.8% (2022:
negative 19.1%), excluding the Insurance goodwill impairment
charge. In the prior year, the difference between the Group's tax
effective rate and the standard rate of corporation tax of 19%, was
mainly due to the Group's Ocean Cruise business being in the
tonnage tax regime.
There was also an adjustment in the current year for the
under-provision of prior year tax of GBP0.8m (2022: GBP1.0m). In
the prior year, there was an adjustment for the impact of the
change in the tax rate on opening deferred tax balances of a
GBP2.6m credit. Excluding the impact of the Ocean Cruise business
being in the tonnage tax regime, Insurance goodwill impairment and
adjustments to prior year tax, the tax effective rate for the
current period is 28.4%.
Earnings/(loss) per share
The Group's Underlying Basic Earnings Per Share(5) was 11.9p
(2022: Loss of 11.1p). The Group's reported basic loss per share
was 185.8p (2022: loss of 20.1p).
1 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
2 Revenue is stated net of ceded reinsurance premiums earned on
business underwritten by the Group of GBP111.3m (2022:
GBP123.8m)
3 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
4 Net finance costs exclude Cruise and Travel finance costs, net
fair value gains/(losses) on derivatives and IAS 19R pension
interest costs
5 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Cruise and Travel
12m to Jan 2023 (unaudited) 12m to Jan 2022
Total
Total Cruise
Ocean River Cruise Ocean River and
GBPm Cruise Cruise Travel and Travel Change Cruise Cruise Travel Travel
---------------- -------- --------- -------- ------------- ---------- --------- --------- -------- --------
Revenue 168.3 28.8 108.4 305.5 222.6% 82.5 1.7 10.5 94.7
-------- --------- -------- ------------- --------- --------- -------- --------
Gross
profit/(loss) 40.2 1.5 20.9 62.6 863.4% (7.7) 0.2 (0.7) (8.2)
Marketing
expenses (11.0) (3.2) (10.2) (24.4) (17.3%) (12.1) (2.2) (6.5) (20.8)
Other
operating
expenses (10.7) (3.4) (14.8) (28.9) 6.5% (9.2) (3.8) (17.9) (30.9)
Investment
return - - - - (100.0%) 0.1 - - 0.1
Finance costs (19.2) - - (19.2) 1.5% (18.8) (0.6) (0.1) (19.5)
Underlying
Loss Before
Tax (6) (0.7) (5.1) (4.1) (9.9) 87.5% (47.7) (6.4) (25.2) (79.3)
-------- --------- -------- ------------- --------- --------- -------- --------
Average
revenue per
passenger
(GBP) 4,675 2,400 2,306 3,216 5.3% 3,750 1,700 1,313 3,055
Ocean Cruise
passengers
('000) 36 36 63.6% 22 22
Ocean Cruise
load
factor 75% 75% 7ppts 68% 68%
Ocean Cruise
per diem
(GBP) 318 318 6.4% 299 299
River Cruise
passengers
('000) 12 12 1,100.0% 1 1
Travel
passengers
('000) 47 47 487.5% 8 8
Ocean Cruise
Ocean Cruise returned to more normal operating conditions and
achieved a load factor of 75% (2022: 68%) and a per diem of GBP318
(2022: GBP299). These two factors, when combined, equate to
year-on-year revenue growth in excess of 100% and have resulted in
a significantly reduced Underlying Loss Before Tax(6) from GBP47.7m
to GBP0.7m. The first half of the prior year only included a month
of Spirit of Discovery trading and a few days of Spirit of
Adventure trading, at a government-enforced load factor restriction
of 50% that was removed towards the end of July 2021.
In the first half of the current year, there were some adverse
impacts on a small number of cruises due to COVID-19, while the
conflict in Ukraine dampened customer demand for departures to the
Baltics and Black Sea, resulting in late itinerary changes and some
limited cancellations, which led to a first half load factor of
66%.
In the second half of the year, as impacts from the pandemic
lessened and customer demand continued to build, a load factor of
84% was achieved.
River Cruise
The River Cruise business has long-term leases in place for two
boutique river cruise ships, Spirit of the Rhine and Spirit of the
Danube, alongside other charters which are managed on an annual
basis. Although the business is now operating, both the Omicron
variant of COVID-19 and the conflict in Ukraine impacted the number
of passengers travelling in the current year, especially in the
first half, due to continued customer caution in relation to
Central Europe. The River Cruise business did not operate for the
majority of the prior year due to the travel restrictions that were
in place at the time.
This resulted in a reduced Underlying Loss Before Tax(6) from
GBP6.4m to GBP5.1m.
Travel
The Travel business, which includes both the Saga Holidays and
Titan brands, has seen much increased volumes compared to the prior
year, with passenger numbers increasing from 8k to 47k. The
recovery in volumes has been impacted by a level of disruption from
a variety of factors, including operational challenges faced by
airlines and airports, particularly in the first half.
The recovery in passenger volumes led to an improvement in the
Underlying Loss Before Tax(6) from GBP25.2m to GBP4.1m.
In the second half of the year, we saw customer cancellations
returning closer to pre-pandemic levels, with multiple initiatives
underway to return to growth, including the recently launched
'Tailor-Made by Saga' proposition.
6 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Forward Cruise and Travel sales
Ocean Cruise load factors for 2023/24 are behind the same point
last year for 2022/23 by 3ppts. This is partly due to the release
of itineraries in the prior year being earlier than usual as we
emerged from COVID-19 lockdowns, and partly due to the prior year
including bookings which had been postponed during the period of
COVID-19 suspension. The per diem for 2023/24 is 6.3% higher than
the same point last year for 2022/23 as the Group has reflected the
inflationary impact on operating costs in customer pricing.
River Cruise revenue and passengers booked for 2023/24 are ahead
of the same point last year for 2022/23 by 29.8% and 22.5%
respectively. This is due to increased customer demand for 2023/24
compared to customer caution in respect of Central Europe in
2022/23. For 2023/24, the Cruise team have aligned management
information for the River Cruise business to the Ocean Cruise
business so load factor and per diems are now key performance
indicators for River Cruise.
Travel bookings for 2023/24 are ahead at the same point last
year for 2022/23 by 31.7% and 17.1% for revenue and passengers
respectively. The increased revenue is due in part to higher
passengers but also increases in operating costs being incorporated
in customer pricing and a move towards a higher revenue, higher
margin product range. The increase in passengers is due to higher
uptake of long-haul travel within our Titan brand as customer
confidence returns.
Current year departures
------------------------------------------
26 March Change 27 March
2023 (unaudited) 2022
Ocean Cruise revenue (GBPm) 175.1 6.6% 164.2
Ocean Cruise load factor 72% (3ppts) 75%
Ocean Cruise per diem (GBP) 339 6.3% 319
River Cruise revenue (GBPm) 34.0 29.8% 26.2
River Cruise passengers ('000) 12.5 22.5% 10.2
River Cruise load factor 63% n/a n/a
River Cruise per diem (GBP) 298 n/a n/a
Travel revenue (GBPm) 136.6 31.7% 103.7
Travel passengers ('000) 49.2 17.1% 42.0
Insurance
Insurance Broking
The Insurance Broking business provides tailored insurance
products and services, principally motor, home, private medical and
travel insurance.
Its role is to price the policies and source the lowest cost of
risk, whether through the panel of motor and home underwriters or
through solus arrangements for private medical and travel
insurance. The Group's in-house insurer, AICL, sits on the motor
and home panels and competes for that business with other panel
members on equal terms. AICL offers its underwriting capacity on
the home panel through a coinsurance deal with a third party, and
so the Group takes no underwriting risk for that product. Even if
underwritten by a third party, the product is presented as a Saga
product and the Group manages the customer relationship.
12m to Jan 2023 (unaudited) 12m to Jan 2022
Motor Home Other Motor Home Other
GBPm Broking Broking Broking Total Change Broking Broking Broking Total
------------------- --------- --------- --------- -------- --------- --------- --------- --------- --------
Gross written
premiums
(GWP):
Broked 105.0 150.1 123.9 379.0 6.9% 105.0 153.2 96.5 354.7
Underwritten 180.9 - 3.2 184.1 (11.9%) 205.5 - 3.4 208.9
--------- --------- --------- --------
GWP 285.9 150.1 127.1 563.1 (0.1%) 310.5 153.2 99.9 563.6
--------- --------- --------- -------- --------- --------- --------- --------
Broker revenue 31.4 26.5 42.1 100.0 (5.1%) 43.2 29.0 33.2 105.4
Instalment
revenue 6.4 3.0 - 9.4 (4.1%) 6.6 3.2 - 9.8
Add-on revenue 9.2 10.4 - 19.6 (10.5%) 11.0 10.9 - 21.9
Other revenue 26.1 17.7 3.2 47.0 0.9% 27.4 17.1 2.1 46.6
Written revenue 73.1 57.6 45.3 176.0 (4.2%) 88.2 60.2 35.3 183.7
--------- --------- --------- -------- --------- --------- --------- --------
Written gross
profit 70.4 57.6 48.6 176.6 (2.6%) 85.6 60.2 35.6 181.4
Marketing
expenses (13.0) (6.7) (5.5) (25.2) 10.6% (17.5) (7.1) (3.6) (28.2)
--------- --------- --------- -------- --------- --------- --------- --------
Written gross
profit
after marketing
expenses 57.4 50.9 43.1 151.4 (1.2%) 68.1 53.1 32.0 153.2
Other operating
expenses (39.3) (28.4) (16.0) (83.7) 3.3% (38.0) (27.9) (20.7) (86.6)
Written
Underlying
Profit Before
Tax
( PBT ) (7) 18.1 22.5 27.1 67.7 1.7% 30.1 25.2 11.3 66.6
Written to earned
adjustment 1.4 - - 1.4 800.0% (0.2) - - (0.2)
Earned Underlying
PBT(7) 19.5 22.5 27.1 69.1 4.1% 29.9 25.2 11.3 66.4
--------- --------- --------- -------- --------- --------- --------- --------
Policies in force 800k 645k 207k 1,652k (2.5%) 884k 682k 129k 1,695k
Policies sold 849k 670k 206k 1,725k (2.4%) 943k 696k 129k 1,768k
Third-party panel
share (8) 32.7% 2.6ppts 30.1%
Insurance Broking Underlying Profit Before Tax(7) on a written
basis (which excludes the impact of the written to earned
adjustment) increased slightly to GBP67.7m from GBP66.6m, and on an
earned basis (which includes the impact of the written to earned
adjustment), increased to GBP69.1m from GBP66.4m.
A key metric for the Insurance Broking business is written gross
profit, after deducting marketing expenses, but before deducting
overheads. This reduced from GBP153.2m in the prior year to
GBP151.4m in the current year due to reduced new business volumes
and lower renewal margins on motor and home business. The fall of
GBP12.9m in written gross profits after marketing expenses in motor
and home was partially offset by an GBP11.1m improvement in Other
Broking, mainly due to a recovery in sales of travel insurance
compared to the prior year.
For motor and home insurance, in terms of the total gross margin
after marketing expenses, new business profits increased by
GBP9.5m, while there was a GBP22.4m reduction in renewal
profits.
The changes in profitability of motor and home business are, in
part, attributable to the equalisation of pricing between new
business and renewals following the implementation of the General
Insurance Pricing Practices (GIPP) review by the Financial Conduct
Authority (FCA) from 1 January 2022. This led to an improvement in
new business margins, partially offset by a 50% and 17% reduction
in motor and home new business policies sold respectively compared
to the prior year. The reduction in renewal profits is due to lower
motor and home renewal margins, partially offset by a 7% increase
in motor renewal policies sold.
The average gross margin per policy for motor and home combined,
calculated as written gross profit less marketing expenses, divided
by the number of policies sold, was GBP71.3 in the current year,
compared with GBP73.9 in the prior year. Comparison of margins
across the two years is impacted by a significant reduction in the
sales of lower margin new business relative to the number of
renewals. Based on the same mix of new business and renewals as in
2021/22, the average gross margin per policy in 2022/23 would have
been GBP67.2.
While the pricing implications of the FCA's review into GIPP
have impacted Insurance Broking earnings in the year, it has also
impacted some of the key metrics in the past 12 months:
-- Motor and home policies in force decreased by 7.7% in the year.
-- Increase in customer retention at 83.8% across motor and home from 82.8% in the prior year.
-- 714k three-year fixed-price policies were sold in the year;
47% of total motor and home policies incepting, with 35% of direct
new business taking the product.
-- Direct new business sales for motor and home were 49% of the
total, 10ppts lower than the prior year with the Group balancing
volumes and renewals post the GIPP reforms across direct and
price-comparison website distribution channels.
Written profit and gross margin per policy for motor and home
are stated after allowing for deferral of part of the revenues from
three-year fixed-price policies, which is then recognised in profit
or loss when the option to renew those policies at a predetermined
fixed price is exercised or lapses, recognising inflation risk
inherent in this product. As at 31 January 2023, GBP9.7m (2022:
GBP8.7m) of income had been deferred in relation to three-year
fixed-price policies, GBP7.9m (2022: GBP7.3m) of which related to
income written in the year to 31 January 2023.
Motor Broking
Gross written premiums decreased by 7.9% due to a 10.0% decrease
in core policies sold, partially offset by a 2.3% increase in
average premiums. Gross written premiums from business underwritten
by AICL decreased 12.0% to GBP180.9m (2022: GBP205.5m) due to a
13.0% decrease in core policies sold that were underwritten by
AICL, offset by a 1.2% increase in average premiums.
Written gross profit minus marketing expenses was GBP57.4m
(2022: GBP68.1m), contributing GBP67.6/policy (2022:
GBP72.2/policy). The decrease in written gross profits and margin
per policy is mainly due to lower renewal margins, partially offset
by a 7% increase in renewal policies and higher new business
margins.
Home Broking
Gross written premiums decreased by 2.0% due to a 3.7% reduction
in core policies sold, partially offset by a 1.8% increase in
average premiums.
Written gross profit minus marketing expenses was GBP50.9m
(2022: GBP53.1m) and, on a per policy basis, this was
GBP76.0/policy (2022: GBP76.3/policy). The decrease is due to lower
renewal margins and a 17% decrease in new business policies sold,
partially offset by higher new business margins.
Other Broking
The Other Insurance Broking business primarily comprises private
medical insurance (PMI) and travel insurance.
Gross written premiums increased 27.2% as a result of higher
sales of travel insurance, with policy sales increasing from 77k in
the prior year to 158k as a result of increased customer confidence
in the travel outlook and fewer restrictions on travel than in the
prior year.
Gross profits after marketing costs relating to travel insurance
products increased by GBP9.5m.
While sales of the PMI product were broadly stable, gross profit
after marketing costs was GBP2.2m higher. This increase is a result
of increased renewal margins, alongside a higher profit share.
7 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
8 Third-party underwriter's share of the motor panel for
policies
Insurance Underwriting
12m to Jan 2023 (unaudited) 12m to Jan 2022
Quota Quota
GBPm Reported share Underlying(10) Change Reported share Underlying
21F (10)
---------------- ------------ ----------- -------- ----------------- ------------- ----------- --------- -------------
Net earned premium 49.6 (98.7) 148.3 (8.2%) 51.5 (110.0) 161.5
Other revenue 25.6 22.9 2.7 (38.6%) 33.2 28.8 4.4
----------- -------- ----------------- ----------- --------- ---------------
Revenue a 75.2 (75.8) 151.0 (9.0%) 84.7 (81.2) 165.9
Claims costs b (79.0) 83.0 (162.0) (22.7%) (44.3) 87.7 (132.0)
Reserve
releases c 27.0 1.9 25.1 (40.4%) 18.3 (23.8) 42.1
Other cost of
sales d (4.1) 12.7 (16.8) (1.2%) (3.9) 12.7 (16.6)
----------- -------- ----------------- ----------- --------- ---------------
e (56.1) 97.6 (153.7) (44.3%) (29.9) 76.6 (106.5)
----------- -------- ----------------- ----------- --------- ---------------
Gross profit 19.1 21.8 (2.7) (104.5%) 54.8 (4.6) 59.4
Operating
expenses f (3.7) 7.4 (11.1) - (4.2) 6.9 (11.1)
Investment return 3.7 (3.9) 7.6 (2.6%) 3.5 (4.3) 7.8
Quota share net
income/(cost) - (25.3) 25.3 1,365.0% - 2.0 (2.0)
----------- -------- ----------------- ----------- --------- ---------------
Underlying Profit Before
Tax 9 19.1 - 19.1 (64.7%) 54.1 - 54.1
----------- -------- ----------------- ----------- --------- ---------------
Reported
loss ratio (b+c)/a 69.1% 90.7% (36.5ppts) 30.7% 54.2%
Expense ratio (d+f)/a 10.4% 18.5% (1.8ppts) 9.6% 16.7%
Reported COR (e+f)/a 79.5% 109.1% (38.2ppts) 40.3% 70.9%
Current year
COR (e+f-c)/a 115.4% 125.8% (29.5ppts) 61.9% 96.3%
Number of earned
policies 662k (6.9%) 711k
Policies in force
- Saga motor 535k (15.0%) 629k
The Group's in-house underwriter, AICL, underwrites over 65% of
the motor business sold by Insurance Broking. AICL also underwrites
a portion of the home panel, although all home underwriting risk is
passed to third-party insurance and reinsurance providers. AICL
also has excess of loss and funds-withheld quota share reinsurance
arrangements in place relating to its motor underwriting line of
business, which transfer a significant proportion of motor
insurance risk to third-party reinsurers.
Excluding the impact of the quota share reinsurance
arrangements(10) , net earned premiums decreased by 8.2% to
GBP148.3m (2022: GBP161.5m) reflecting a 6.9% reduction in the
number of earned policies underwritten by AICL coupled with a 1.6%
decrease in average earned premiums. The reduction in the number of
earned policies was due to lower volumes on non-Saga panels.
Also excluding the impact of the quota share arrangements(10) ,
AICL saw an increase in the current year underlying COR to 125.8%
(2022: 96.3%) and the current year reported COR to 115.4% (2022:
61.9%).
The first half of the prior year benefited from significantly
reduced motor claims frequency due to customers driving fewer miles
during the COVID-19 lockdown, with motor claims experience in the
second half of the prior year broadly in line with pricing
assumptions.
In the current year, motor attritional claims experience and
claims inflation have been well in excess of pricing assumptions
for the current accident year, with claims inflation estimated to
have averaged around 13% for the year as a whole. In addition,
there was a modest increase in claims frequency and an
above-average level of current year large losses. In response to
these trends, we have been taking significant actions to re-price
the motor book, in line with technical pricing. These price
increases will begin to flow through to earned premium in 2023/24
and will be reflected in full in the 2024/25 result.
Underlying prior year reserve releases of GBP25.1m (2022:
GBP42.1m) resulted in an underlying reported COR of 109.1% (2022:
70.9%). The Group retains an economic interest in motor reserve
development with reserve releases on other lines typically having
limited net impact on AICL profit. Reserve releases for the past
two years can be analysed as follows:
12m to Jan 2023 (unaudited) 12m to Jan 2022
Quota Underlying Quota Underlying
GBPm Reported share (11) Change Reported share (11)
------------------ ---------- -------- ------------ -------- ---------- -------- ------------
Motor insurance 23.8 (3.2) 27.0 16.0 (26.5) 42.5
Home insurance 1.2 0.7 0.5 - 0.1 (0.1)
Other insurance 2.0 4.4 (2.4) 2.3 2.6 (0.3)
(40.4
27.0 1.9 25.1 %) 18.3 (23.8) 42.1
---------- -------- ------------ ---------- -------- ------------
Reserve releases reflect continued favourable experience on
large bodily injury claims relating to prior accident years. Also,
the final part of the additional component of reserve margin for
the increased uncertainty over claims development held in respect
of the 2020/21 accident year was released in the first half of this
year.
While the Group remains prudently reserved and expects to see a
level of reserve releases in 2023/24, these are expected to be at a
much lower level than in 2022/23.
Excluding the impact of the quota share arrangement(11) , the
investment return decreased by GBP0.2m to GBP7.6m (2022: GBP7.8m)
due to a reduced investment portfolio and lower reinvestment
yields.
During 2022/23, the Group recorded a recovery from quota share
reinsurance of GBP25.3m, compared to a cost of GBP2.0m in the prior
year. The recovery is due to the high underlying current year COR
of 125.8%, with 80% of current year losses in excess of an
underlying current year COR of around 105% ceded to quota share
reinsurers. The result for the last 12 months will be aggregated
with the results of the next two financial years in determining the
final outcome for the current quota share contract.
9 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
10 Underlying within Insurance Underwriting shows the commercial
position of the business by removing the impact of the proportional
line-item accounting of the quota share reinsurance
arrangements
11 Underlying within Insurance Underwriting shows the commercial
position of the business by removing the impact of the proportional
line-item accounting of the quota share reinsurance
arrangements
Other Businesses and Central Costs
12m to Jan 2023 (unaudited) 12m to Jan 2022
Other Central Other Central
GBPm Businesses Costs Total Change Businesses Costs Total
--------------------------- ------------- --------- -------- --------- ------------- --------- --------
Revenue:
Money 7.9 - 7.9 33.9% 5.9 - 5.9
Media and printing 10.3 - 10.3 4.0% 9.9 - 9.9
Insight 0.6 - 0.6 100.0% - - -
Other - 1.0 1.0 (33.3%) - 1.5 1.5
------------- --------- -------- ------------- --------- --------
Total revenue 18.8 1.0 19.8 14.5% 15.8 1.5 17.3
------------- --------- -------- ------------- --------- --------
Gross profit 8.1 2.6 10.7 17.6% 5.7 3.4 9.1
Operating expenses (8.9) (37.7) (46.6) (26.6%) (3.9) (32.9) (36.8)
Investment income - 1.0 1.0 100.0% - - -
IAS 19R pension charge - - - 100.0% - (1.6) (1.6)
Net finance costs - (21.9) (21.9) (17.7%) - (18.6) (18.6)
Underlying (Loss)/Profit
Before Tax (12) (0.8) (56.0) (56.8) (18.6%) 1.8 (49.7) (47.9)
------------- --------- -------- ------------- --------- --------
The Group's Other Businesses include Saga Money, Saga Media,
Saga Insight and CustomerKNECT.
Underlying Profit Before Tax(12) for Other Businesses combined
has decreased by GBP2.6m from GBP1.8m to an Underlying Loss Before
Tax(12) of GBP0.8m, partly due to an investment in marketing in the
Saga Money business of GBP2.7m above the prior year, which has been
partially offset by a GBP2.0m increase in revenue. A further
GBP1.9m of investment has been made in Saga Media and Saga Insight
in the year.
Central operating expenses increased to GBP37.7m (2022:
GBP32.9m). Administration costs, adjusted for transfers to local
business units, decreased by GBP1.0m in the year, but net costs
increased by GBP4.8m due to lower Group recharges to the business
units, particularly Travel. The IAS 19R pension charge ceased
following the closure of the defined benefit pension scheme in the
second half of the prior year.
Net finance costs in the year were GBP21.9m (2022: GBP18.6m),
which excludes finance costs that are included within the Cruise
and Travel businesses of GBP19.2m (2022: GBP19.5m). The increase of
17.7% was due to the higher bond interest costs following the
completion of the new bond issue in July 2021.
12 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Cash flow and liquidity
Available Operating Cash Flow (13)
12m Change 12m
to to
Jan Jan
2023 2022
GBPm (unaudited)
--------------------------------------------------------- -------------- -------- --------
Insurance Broking Trading EBITDA(13) 75.9 4% 73.2
Other Businesses and Central Costs Trading EBITDA(13) (29.5) (37%) (21.5)
Trading EBITDA(13,) (14) from unrestricted
businesses 46.4 (10%) 51.7
Dividends paid by Insurance Underwriting business 25.0 (29%) 35.0
Working capital and non-cash items (15) (6.5) (143%) 15.2
Capital expenditure funded with Available Cash(13) (15.8) (26%) (12.5)
Available Operating Cash Flow(13) before cash
injections to Cruise and Travel operations 49.1 (45%) 89.4
Cash injection into River Cruise and Travel
businesses (17.8) 51% (36.4)
Ocean Cruise Available Operating Cash Flow(13) 23.6 4% 22.8
Available Operating Cash Flow(13) 54.9 (28%) 75.8
Restructuring costs (1.4) 18% (1.7)
Interest and financing costs (38.0) 10% (42.4)
Business and property (acquisitions)/disposals (0.9) (120%) 4.5
Tax receipts 2.4 (58%) 5.7
Other receipts/(payments) 0.3 103% (10.7)
Change in cash flow from operations 17.3 (45%) 31.2
Change in bond debt - (100%) 150.0
Change in bank debt - (100%) (70.0)
Change in ship debt (46.4) (100%) -
Cash at 1 February 186.6 148% 75.4
Available Cash(13) at 31 January 157.5 (16%) 186.6
-------------- --------
Available Operating Cash Flow(13) is made up of the cash flows
of unrestricted businesses and the dividends paid by restricted
companies, less any cash injections to those businesses.
Unrestricted businesses include Insurance Broking (excluding
specific ring-fenced funds to satisfy FCA regulatory requirements),
Other Businesses and Central Costs, and the Group's Ocean Cruise
business. Restricted businesses include AICL, River Cruise and
Travel.
Excluding cash transfers to and from the Cruise and Travel
businesses, the Group continued to be cash generative in the year,
with an Available Operating Cash Flow(13) of GBP49.1m compared with
GBP89.4m in the prior year. Trading EBITDA(13,14) from unrestricted
businesses reduced by GBP5.3m, mainly due to lower Group recharges
from the Other Businesses and Central Costs segment. There was also
a decrease in working capital which fell from a GBP15.2m inflow to
a GBP6.5m outflow, mainly relating to the Insurance Broking
segment, and a GBP10.0m reduction in dividends paid by AICL.
For River Cruise and Travel, the Group provided GBP17.8m of cash
to the business to cover trading cash flows in the current year.
This is a reduction of GBP18.6m when compared with the GBP36.4m
funded in the prior year. The Group continues to provide additional
liquidity into the River Cruise and Travel businesses, although at
a lower level, to meet supplier and other trading payments as both
businesses operate under a ring-fenced trust arrangement and so
cannot access customer cash from the trust until they have returned
from their river cruise or holiday. At 31 January 2023, the
ring-fenced businesses held cash of GBP44.3m, of which GBP36.2m was
held in trust. The Group must hold a minimum of GBP5.9m of cash
outside of trust within the ring-fenced businesses as agreed with
the Civil Aviation Authority.
The Ocean Cruise business reported an operating cash inflow of
GBP23.6m (2022: GBP22.8m), with net trading income of GBP31.6m
(2022: net trading costs of GBP2.7m), partially offset by a
decrease in advance customer receipts of GBP4.1m (2022: increase of
GBP28.5m), and capital expenditure of GBP3.9m (2022: GBP3.0m). Net
of interest costs of GBP15.2m (2022: GBP15.2m), the Ocean Cruise
business reported net cash inflow before any capital repayments on
the ship debt of GBP8.4m for 2022/23 compared to GBP7.6m in the
prior year.
As a result of a reduction in cash generation from unrestricted
businesses, partially offset by a reduction in cash injections to
the River Cruise and Travel businesses, Available Operating Cash
Flow(13) decreased from an inflow of GBP75.8m in the prior year to
GBP54.9m in the current year.
13 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
14 Trading EBITDA includes the line-item impact of IFRS 16 with
the corresponding impact to net finance costs included in net cash
flows used in financing activities
15 Adjusted to exclude IAS 19R pension current service costs
Other cash flow movements
Interest and financing costs were higher in the prior year due
to the debt issue costs associated with the new bond, the tender of
the bond due in May 2024 and amendments to the revolving credit
facility (RCF). This has been partially offset by higher interest
costs on the new bond in the current year.
In the current year, business and property acquisitions and
disposals relate to the purchase of The Big Window Consulting
Limited. The prior year included cash received from the sale of
property, net of related sale costs and expenses.
The Group continued to make the agreed payments to the defined
benefit pension fund as part of the deficit recovery plan of
GBP5.8m (2022: GBP4.2m). These are included within other
receipts/(payments).
During the year, the Group released GBP5.0m of restricted cash
to Available Cash(16) that it had previously agreed with the FCA to
hold on a temporary basis. The Group has also released a further
GBP1.1m in respect of the Threshold Condition 2.4 balance that the
Insurance Broking business holds as restricted cash. Both of these
are included within other receipts/(payments).
In the current year, the Group restarted capital repayments
against its ship debt facilities, with two payments totalling
GBP30.6m on Spirit of Discovery's debt facility and one payment
totalling GBP15.8m on Spirit of Adventure's debt facility. In the
prior year, the Group issued a five-year GBP250m fixed-rate
unsecured bond. The proceeds of the bond were used to fund the
settlement of GBP100m of the existing bond and to repay, in full,
the GBP70m term loan.
16 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Reconciliation between operating and reported metrics
Available Operating Cash Flow(17) reconciles to net cash flows
from operating activities as follows:
12m to
Jan 2023 12m to
GBPm (unaudited) Jan 2022
------------------------------------------------------- -------------- -----------
Net cash flow from operating activities (reported) (13.9) 46.5
Exclude cash impact of:
Trading of restricted divisions 35.3 3.8
Non-trading costs 7.5 3.6
Interest paid 37.6 34.2
Tax paid 0.9 4.6
81.3 46.2
Cash released paid to restricted divisions 7.2 (1.4)
Include capital expenditure funded from Available
Cash(17) (15.8) (12.5)
Include Ocean Cruise capital expenditure (3.9) (3.0)
Available Operating Cash Flow(17) 54.9 75.8
-------------- -----------
Trading EBITDA17 reconciles to Underlying Profit/(Loss) Before
Tax(17) as follows:
12m to
Jan 2023 12m to
GBPm (unaudited) Change Jan 2022
-------------------------------------------------- -------------- -------- -----------
Insurance Broking Trading EBITDA(17) 75.9 73.2
Insurance Underwriting Trading EBITDA(17) 19.3 54.3
Ocean Cruise Trading EBITDA(17,18) 39.0 (12.7)
River Cruise and Travel Trading EBITDA(17) (8.1) (28.1)
Other Businesses and Central Costs Trading
EBITDA(17) (29.5) (21.5)
Trading EBITDA(17) 96.6 48.2% 65.2
Depreciation and amortisation (34.0) (32.2)
Pension charge IAS 19R - (1.6)
Net finance costs (including Cruise and Travel) (41.1) (38.1)
Underlying Profit/(Loss) Before Tax(17) 21.5 420.9% (6.7)
-------------- -----------
Adjusted Trading EBITDA(17) is used in the Group's leverage
calculation for the RCF covenant and is calculated as follows:
12m to
Jan 2023 12m to
GBPm (unaudited) Change Jan 2022
---------------------------------------------- -------------- --------- -----------
Trading EBITDA(17) 96.6 48.2% 65.2
Impact of IFRS 16 'Leases' (1.3) (3.1)
Spirit of Discovery and Spirit of Adventure
Trading EBITD A(17,18) (39.0) 11.5
Adjusted Trading EBITDA(17) 56.3 (23.5%) 73.6
-------------- -----------
17 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
18 EBITDA includes central Ocean Cruise overheads
Statement of financial position
Goodwill
During the first half of the current year, the Group's new
business sales of motor and home insurance were significantly lower
than expected as a result of competitive market conditions and a
challenging environment following the implementation of the FCA's
review of GIPP from 1 January 2022. In order to remain competitive
and to restore the business to policy growth in future years, the
Group launched a new standard motor product. This product, and
other actions taken to improve competitiveness, are expected to
lead to materially lower margins per policy in future years, and
lower overall profit before tax, compared to prior assumptions.
Since the lower expected future cash flows represent a potential
indicator of impairment, the Group conducted an impairment review
of the GBP718.6m goodwill asset at 31 July 2022 relating to the
Insurance business that was included on the statement of financial
position at 31 January 2022.
The Group's revised five-year financial forecasts incorporated
the modelled impact of the changes in the market environment,
including also an expected reduction in margins from a switch to
more standard products and lower sales of more feature-rich
policies. Further stress tests were also considered including the
continuation of the current competitive environment for an extended
period and further downsides compared to revised base case
assumptions. This resulted in management taking the decision to
impair Insurance goodwill by GBP269.0m in the first half of
2022/23. Consistent with the approach taken in prior years, this
impairment is not included within Underlying Profit Before Tax(19)
.
At 31 January 2023, the Group conducted a further impairment
review of the remaining GBP449.6m goodwill asset relating to the
Insurance business and concluded that its recoverable amount was
above the carrying value, and no further impairment was considered
necessary.
Carrying value of ocean cruise ships
At 31 July 2022 and 31 January 2023, the carrying value of the
Group's ocean cruise ships was GBP612.5m and GBP607.0m respectively
(31 January 2022: GBP621.3m). Due to the continued challenging
operating environment in the first half of the year for the Ocean
Cruise business, the Group carried out an impairment review of both
of its vessels at 31 July 2022. The results of the review showed
that there was headroom in the central and stress test scenarios
for both Spirit of Discovery and Spirit of Adventure, with no
impairment required.
In the second half of the year, further COVID-19 restrictions
were lifted for cruise passengers and trading was in line with
forecasts. Discount rates have risen, but not to the extent that
they materially change the headroom in the impairment calculation.
The Directors therefore concluded that there were no additional
indicators of impairment at 31 January 2023 and, accordingly, no
further impairment review was deemed necessary.
19 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Investment portfolio
The majority of the Group's financial assets are held by its
Insurance Underwriting entity and represent premium income received
and invested to settle claims and meet regulatory capital
requirements.
The amount held in invested funds decreased by GBP50.3m to
GBP279.9m (31 January 2022: GBP330.2m), partly due to payment of
GBP25.0m of dividends from AICL in the year. At 31 January 2023,
98% of the financial assets held by the Group were invested with
counterparties with a risk rating of BBB or above, which is in line
with the prior period and reflects the relatively stable credit
risk rating of the Group's investment holdings.
Credit risk rating
At 31 January 2023 (unaudited) AAA AA A BBB Unrated Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------ ------ ------ ------ --------- -------
Insurance Underwriting
investment portfolio:
Debt securities 23.5 74.9 64.2 91.8 - 254.4
Money market funds 19.6 - - - - 19.6
Loan funds - - - - 5.9 5.9
------ ------ ------ ------ --------- -------
Total invested funds 43.1 74.9 64.2 91.8 5.9 279.9
Derivative assets - - 2.5 - - 2.5
Total financial assets 43.1 74.9 66.7 91.8 5.9 282.4
------ ------ ------ ------ --------- -------
Credit risk rating
At 31 January 2022 AAA AA A BBB Unrated Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------ ------ ------ ------ --------- -------
Insurance Underwriting
investment portfolio:
Deposits with financial
institutions - - 14.0 - - 14.0
Debt securities 20.2 94.4 68.0 98.2 - 280.8
Money market funds 29.2 - - - - 29.2
Loan funds - - - - 6.2 6.2
------ ------ ------ ------ --------- -------
Total invested funds 49.4 94.4 82.0 98.2 6.2 330.2
Derivative assets - - 1.8 0.1 - 1.9
Total financial assets 49.4 94.4 83.8 98.3 6.2 332.1
------ ------ ------ ------ --------- -------
Insurance reserves
Analysis of insurance contract liabilities at 31 January 2023
and 31 January 2022 is as follows:
At 31 January 2023 (unaudited) At 31 January 2022 (restated)
Reinsurance
assets Reinsurance
GBPm Gross (20) Net Gross assets(20) Net
--------------------------- --------- --------------- -------- --------- -------------- --------
Reported claims 231.1 (60.4) 170.7 227.4 (55.8) 171.6
Incurred but not
reported (21) 47.3 (1.7) 45.6 57.5 (3.3) 54.2
Claims handling
provision 6.8 - 6.8 7.9 - 7.9
--------- --------------- -------- --------- -------------- --------
Total claims outstanding 285.2 (62.1) 223.1 292.8 (59.1) 233.7
Unearned premiums 83.1 (6.7) 76.4 93.9 (6.3) 87.6
--------- --------------- -------- --------- -------------- --------
Total 368.3 (68.8) 299.5 386.7 (65.4) 321.3
--------- --------------- -------- --------- -------------- --------
The Group's total insurance contract liabilities, net of
reinsurance assets, decreased by GBP21.8m in the year to 31 January
2023 from the previous year end, primarily due to a GBP11.2m
reduction in unearned premiums, coupled with an GBP8.6m decrease in
net incurred but not reported claims reserves. The reduction in net
incurred but not reported claims reserves is due to reserve
releases that reflect continued favourable experience on large
bodily injury claims relating to prior accident years. In addition,
the final part of the additional component of reserve margin held
in respect of the 2020/21 accident year was released in the current
year. The 31 January 2022 position has been restated due to an
incorrect classification between reported claims and incurred but
not reported of GBP16.1m. The restatement had no net impact on
total claims outstanding.
20 Excludes funds-withheld quota share arrangement
21 Includes amounts for reported claims that are expected to
become periodical payment orders
Financing
At 31 January 2023, the Group's Net Debt(24) was GBP711.7m,
GBP17.3m lower than at the beginning of the financial year.
In the first half of 2022/23, the RCF agreement was reduced from
GBP100m to GBP50m and was simplified by the removal of certain
clauses that were introduced during the pandemic, including:
-- removal of the GBP40m minimum free liquidity requirement; and
-- removal of the condition that the facility is terminated on 1
March 2024, should the 2024 bond not be repaid by that date.
In the second half of the year, we concluded discussions with
our lending banks and agreed the following amendments to the
facility which, in aggregate, provide us with increased financial
flexibility:
-- The introduction of a restriction whereby no utilisation of
the facility is permitted prior to repayment of the 2024 bond if
leverage exceeds 5.5x, or liquidity is below GBP170m.
-- During 2023 and 2024, should the RCF be drawn, leverage covenant testing will be quarterly.
-- Repayment of the 2024 bond, ahead of maturity, is restricted
while leverage remains above 3.75x.
-- Amendments to the leverage and interest cover covenants
attached to the facility, as follows:
Leverage Interest
(excl. Ocean cover
Cruise)
------------------ --------------- ----------
31 January 2023 4.75x 2.5x
30 April 2023 6.75x n/a
31 July 2023 6.75x 2.5x
31 October 2023 5.5x n/a
31 January 2024 5.5x 2.75x
30 April 2024 5.5x n/a
31 July 2024 5.5x 3.0x
31 October 2024 5.5x n/a
31 January 2025 4.75x 3.0x
The Group's total leverage ratio was 7.5x as at 31 January 2023
(31 January 2022: 11.7x). Excluding the impact of debt and earnings
relating to the ocean cruise ships, the Group's leverage ratio
relating to the RCF was 4.3x as at 31 January 2023 (31 January
2022: 3.0x), within the 4.75x covenant.
The Group resumed repayments on its ship debt facilities with
repayments made on its Spirit of Discovery ship facility in June
2022 and December 2022 and on its Spirit of Adventure ship facility
in September 2022.
GBPm Maturity 31 January 31 January
date (22) 2023 (unaudited) 2022
-------------------------------- ------------- ------------------- ------------
3.375% Corporate bond May 2024 150.0 150.0
5.5% Corporate bond July 2026 250.0 250.0
Revolving credit facility May 2025 - -
(23)
Spirit of Discovery ship loan June 2031 204.2 234.8
September
Spirit of Adventure ship loan 2032 265.0 280.8
Less Available Cash(,24, 25) (157.5) (186.6)
Net Debt(24) 711.7 729.0
------------------- ------------
Net Debt(24) is analysed as follows:
Adjusted Net Debt(26) is used in the Group's leverage
calculation and reconciles to Net Debt(26) as follows:
GBPm 31 January 31 January
2023 (unaudited) 2022
------------------------------------------ ------------------- ------------
Net Debt(26) 711.7 729.0
Exclude ship loans (469.2) (515.6)
Exclude Ocean Cruise Available Cash(26) 1.4 4.7
Adjusted Net Debt(26) 243.9 218.1
------------------- ------------
The Group entered into a GBP50m unsecured loan facility with Sir
Roger De Haan on 3 April 2023. This facility can be drawn, on 30
days' notice, from 1 January 2024 and terminates on 30 June 2025.
As is the case with the senior bonds in issue and with the RCF, the
loan is guaranteed by Saga plc, Saga MidCo and Saga Services
Limited. The Group is able to use the funds drawn under the
facility for general corporate purposes although in practice would
only do so to support repayment of the GBP150m bonds due in May
2024.
The interest rate paid on the drawn funds under this facility is
10%. In addition, a drawing fee of 2% is payable, alongside
milestone payments of 2% of any uncancelled amounts of the facility
on each of 31 March 2024 and 31 December 2024. The facility would
automatically terminate on the completed sale of AICL.
Pensions
The Group's defined benefit pension scheme surplus, as measured
on an IAS 19R basis reduced by GBP13.2m to a GBP12.1m liability at
31 January 2023 (GBP1.1m surplus as at 31 January 2022).
GBPm 31 January 31 January
2023 (unaudited) 2022
----------------------------------------------------- ------------------- ------------
Fair value of scheme assets 224.1 412.0
Present value of defined benefit obligation (236.2) (410.9)
Defined benefit pension scheme (liability)/surplus (12.1) 1.1
------------------- ------------
During the year ended 31 January 2023, the net position of the
scheme decreased by GBP13.2m, resulting in an overall scheme
deficit of GBP12.1m. The movements observed in the scheme's assets
and obligations have been impacted significantly by macroeconomic
factors during the year where, at a global level, there have been
rising inflation and cost of living pressures, as well as shifts in
long-term bond yields. The present value of defined benefit
obligations decreased by GBP174.7m to GBP236.2m, primarily due to a
245bps increase in the discount rate which is based on increases in
long-term trend corporate bond yields. The fair value of scheme
assets decreased by GBP187.9m to GBP224.1m. A GBP5.8m deficit
funding contribution was paid by the Group in February 2022 in
relation to a recovery plan agreed under the latest triennial
valuation of the scheme as at 31 January 2020.
Net assets
Since 31 January 2022, total assets have decreased by GBP324.7m
and total liabilities have decreased by GBP41.3m, resulting in an
overall decrease in net assets of GBP283.4m.
The decrease in total assets is primarily due to:
-- a reduction in goodwill of GBP269.0m following the impairment
to the Insurance cash generating unit;
-- a decrease in property, plant and equipment of GBP35.5m of
which GBP19.5m has been transferred to assets held for sale,
GBP23.5m relates to depreciation in the year, partially offset by
GBP8.2m of additions in the year;
-- a decrease in financial assets of GBP49.7m, mainly relating
to a reduction to the Insurance Underwriting investment portfolio,
partly to fund GBP25.0m of dividends from AICL;
-- a decrease in cash and short-term deposits of GBP50.4m;
-- an increase in trade and other receivables of GBP43.0m due to
the quota share contract with AICL's reinsurance partners being in
a receivable position and the further ramp-up of Cruise and Travel
operations;
-- an increase in assets held for sale of GBP18.3m; and
-- an increase in trust accounts of GBP12.8m.
The decrease in total liabilities reflects:
-- a decrease of GBP18.4m in insurance contract liabilities due
to reserve releases during the year;
-- a decrease of GBP39.4m in financial liabilities, which is
mainly due to a reduction of GBP41.9m in bond and bank loans, as a
result of capital repayments on Spirit of Discovery and Spirit of
Adventure facilities; and
-- the recognition of a defined benefit pension scheme liability of GBP12.1m.
(22) Maturity date represents the date that the principal must
be repaid, other than the ship loans, which are repaid in
instalments over the next
10 years
(23) At 31 January 2022, the terms also included a requirement
to repay the RCF on 1 March 2024 if the remaining GBP150m of the
3.375% bond notes had not been redeemed prior to this date. This
term has now been removed and does not apply at 31 January 2023
24 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
25 Refer to Note 13 of the financial statements for information
as to how this reconciles to a statutory measure of cash
26 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Going concern
The Directors have performed an assessment of going concern to
determine the adequacy of the Group and Company's financial
resources over a period of 14 months from the date of issue of
these unaudited preliminary results, a period which includes the
maturity of GBP150m of senior bonds in May 2024.
This assessment is based on higher and lower case financial
projections which incorporate scenario analysis and stress tests on
expected business performance.
The Group's higher case modelling assumes good performance in
the Cruise division in 2023/24, on the back of strong booked load
factors and per diems. Travel is also expected to achieve continued
growth in revenues with encouraging bookings for 2023/24 as at the
end of March 2023. As previously indicated, the outlook for
Insurance is likely to be challenging over the next 12 to 18
months, with high cost and claims inflation in a competitive market
expected to squeeze margins.
The Group's lower case scenario incorporates lower load factors
for Ocean Cruise, lower levels of demand in River Cruise, and
slower growth in the Travel business across the going concern
period. Downside risks modelled for the Insurance business include
the impact of worsening competitive market pressures on the
Insurance Broking business, continued high cost and claims
inflation putting pressure on margins, among other stress tests.
These stresses are partially offset by discretionary cost savings
and the deferral of investment expenditure that would be achieved
in the event of downside trading risks materialising.
To increase liquidity, and consistent also with a strategy of
reducing capital intensity, in the autumn of 2022, the Group
commenced a sale process for its Insurance Underwriting business,
AICL. The Group aims for this sale process to be concluded in the
second half of 2023 .
However, given that there is no certainty that a sale of AICL
will be concluded in the next 14 months, the Group has agreed a
loan facility with Sir Roger De Haan. Under the terms of this
facility, if the sale of AICL is not completed prior to the end of
2023, the Group will, from 1 January 2024, be able to borrow up to
GBP50m to fund any liquidity needs, including repayment of the 2024
bonds. This facility is unsecured, on arms-length terms and can be
drawn at the option of the Group on 30 days' notice. The facility
matures on 30 June 2025, at which point any outstanding amounts,
including interest, must be repaid. Availability of funds under the
facility is not contingent on financial performance or on
compliance with any financial covenants.
Under both higher and lower case scenarios, the Group expects to
meet scheduled Ocean Cruise debt principal repayments as they fall
due over the next 14 months, and to also meet the financial
covenants relating to its secured cruise debt facilities (see Note
16) throughout the assessment period, except for the July 2023
testing date where lenders have agreed to a waiver of the EBITDA to
debt repayment covenant ratio (see Note 21).
In addition, in both higher and lower case scenarios and
incorporating either the expected net proceeds from a sale of the
Insurance Underwriting business or a draw down of the GBP50m loan
facility with Sir Roger De Haan, the Group expects to have
sufficient resources to continue operations for at least the next
14 months and to repay the GBP150m senior bonds on maturity in May
2024 from Available Cash27 resources.
Over the same time frame and on the same basis, the Group also
expects to remain within the renegotiated financial covenants and
other terms relating to its GBP50m RCF, as set out in Note 16,
enabling it to draw down on this currently undrawn facility in
2024/25 to meet short-term working capital requirements should the
need arise.
Noting that it is not possible to predict accurately all
possible future risks to the Group's future trading, based on this
analysis and the scenarios modelled, the Directors are confident
that the Group will have sufficient funds to continue to meet its
liabilities as they fall due for a period of at least 14 months
from the date of from the date of issue of these unaudited
preliminary results. They have therefore deemed it appropriate to
prepare the financial statements to 31 January 2023 on a going
concern basis.
Dividends and financial priorities for 2023/24
Dividends
Given the Group's priority of reducing Net Debt(27) , the Board
of Directors does not recommend payment of a final dividend for the
2022/23 financial year, nor would this currently be permissible
under financing arrangements due to the leverage ratio being above
3.0x and while the ship debt facility deferred amounts are
outstanding.
Financial priorities for 2023/24
The Group's financial priorities for the current financial year
are to reduce Net Debt(27) , build on the already positive load
factor and per diem in Ocean Cruise, return the River Cruise and
Travel businesses to profitability, and to continue progress in
execution of its Insurance strategy.
Principal risks and uncertainties (PRUs)
The PRUs shown below are the principal risks facing the Company,
including those that would threaten its
business model, future performance, solvency, or liquidity. The
table also includes the mitigating actions being
taken to manage these risks. The trend denotes the anticipated
future direction of each risk after mitigation, which is influenced
by known key external or internal factors. Saga takes a 'bottom-up'
and 'top-down' approach to developing and reviewing its PRUs, which
occurs at least twice a year with oversight from the Executive
Leadership Team (ELT) and the Board. Each PRU has been aligned to
the most relevant strategic priorities.
Key to growth plan elements
1. Maximising our existing businesses
2. Step-changing our ability to scale while reducing debt
3. Creating 'The Superbrand' for older people
27 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Risk Risk Risk category Link to Mitigation
trend strategy
Pandemic/COVID-19 disruption Improving Operational 1, 2 and Cost controls
Risk to the Cruise and 3 integrated
Travel businesses and Group-wide into annual budget
financial resilience of and five-year
Saga in the event of a plans, complete
new and significant pandemic restructuring
or extended duration of of the Saga Travel
COVID-19 arising from Group,
further variants. continuation of
remote working
capability that is
now integrated
into a hybrid
working model,
and ongoing
monitoring of
COVID-19 cases is
undertaken
on both ocean and
river cruise
ships.
----------- --------------- ------------- ----------------------
Cybercrime Stable Operational 1 Ongoing
Cyber security breach Reputational Group-wide vulnerability
resulting in system lockdown, management
ransom demands and/or programme in place,
compromise of confidential including
and/or personal data. industry
benchmarking and
external penetration
testing
to help maintain
security
posture. Continued
investment
in cyber prevention,
detection,
and intelligence
technologies
to help mitigate
attacks.
Awareness and
testing programme
in place to protect
against
social engineering
attacks
on colleagues.
Strategy in
place to further
reduce our
footprint of
potential system
targets.
----------- --------------- ------------- ----------------------
Delivery and execution Stable Operational 1 and 2 Robust project
Key business change initiatives Group-wide governance
fail to be delivered effectively, covering how
or at all, due to one, significant
or a combination of, the changes are
following: prioritised and
* Resource capability or capacity. delivered, with
close oversight
from the ELT and the
* Unexpected business as usual risk issues. Board
with 2(nd) and 3(rd)
line
* New regulation. assurance conducted
for the
change initiatives
* Material defects in the delivery. carrying
the greatest risk.
----------- --------------- ------------- ----------------------
Capability Stable Strategic 2 Increased focus on
A new strategy and purpose Operational Group-wide talent
has created a new demand management, career
for capability to deliver development,
the five-year plan, which recruitment,
requires new investment, succession planning
leadership commitment and embedding a new
and a learning culture. reward
There is a risk that this framework that
step change is not achieved. drives colleague
performance and
aligns to
effective risk
management,
delivering fair
customer
outcomes.
----------- --------------- ------------- ----------------------
Saga brand and relevance Stable Strategic 3 Delivery of the next
The Saga brand and its Reputational Group-wide phase
products do not appeal of the brand
sufficiently to our target campaign in
customer group, resulting addition to
in loss of appeal and continuous
market share, such that monitoring
competitors gain market of metrics.
share and customer volume
continues to decline.
----------- --------------- ------------- ----------------------
Regulatory action Improving Operational 1 Consumer Duty
Risk of customer harm Reputational Group-wide Project in
because of our actions/inaction progress. Continued
or failure to implement focus
regulatory change correctly. on embedding 1 (st)
line
control
self-assessment
testing.
Horizon-scanning
reports
produced to identify
upcoming
regulatory changes
and necessary
action.
----------- --------------- ------------- ----------------------
Operational resilience Stable Operational 1, 2 and Migration onto new
Failure in critical services 3 technology
or operations and inability Group-wide to increase
to recover within defined colleague
parameters, made more connectivity.
complex by remote working Change governance
arrangements. ensures
that system changes
are delivered
consistently within
risk
appetite.
----------- --------------- ------------- ----------------------
Environmental, Social Stable Strategic 2 and 3 Saga's ocean cruise
and Governance (ESG) Operational Group-wide ships
Increasing regulation Reputational were built
coupled with industry relatively recently
and societal pressure to a high
leaves Saga trailing its specification in
peers, causing reputational, terms of
customer and financial minimisation of
impacts. harmful emissions. A
Head
of ESG was appointed
who
developed Saga's ESG
strategy
and will work to
embed ESG
and ESG risk
identification
and management
within the
business. Saga has
undertaken
a stakeholder
engagement
exercise and
materiality
assessment to
identify priority
future activities.
----------- --------------- ------------- ----------------------
Third-party suppliers Stable Operational 1 and 3 Third-party risk
Reputational impact, business Group-wide management
interruption and financial ensures an
losses arising from the appropriate
failure or mis-performance risk-based
of key third parties. approach for
selecting
third-party
partners and
overseeing their
performance and
operational
and financial
resilience.
----------- --------------- ------------- ----------------------
Fraud and financial crime Stable Operational 1 2(nd) and 3(rd) line
Increased risk of internal Group-wide assurance
or external fraud and reviews conducted
financial crime driven with no
by remote working and significant issues
macroeconomic conditions. identified.
Ongoing monitoring
of claims
fraud in place, with
colleague
awareness
communications.
Operation of
effective internal
controls subject to
regular
testing and
oversight.
----------- --------------- ------------- ----------------------
Insurance pricing/modelling Stable Operational 1 Market study related
error Insurance controls
Errors in data modelling and other insurance
lead to material pricing, modelling
reserving or underwriting controls
issues that have significant incorporated into
financial impact and/or the internal control
customer harm. assurance
programme.
----------- --------------- ------------- ----------------------
Breach of Data Protection Improving Operational 1 and 3 Prioritisation of
Act/ General Data Protection Group-wide projects
Regulation to improve effective
Failure to maintain compliance data
with data privacy requirements management, coupled
in line with growing customer with
expectations in relation simplification of
to how they want their our technology
personal data to be managed. estate and
strengthening
of our Data Privacy
team
to ensure we
continue to
put the customer
first in
how we manage their
personal
information.
----------- --------------- ------------- ----------------------
Liquidity risk/debt repayment New risk Liquidity 2 The Group intends to
The more challenging macroeconomic Group-wide sell
environment, in tandem the Insurance
with the impacts of COVID-19, Underwriting
has increased Saga's liquidity business and has
risk in relation to repayment also entered
of its debt liabilities. into an
unconditional and
unsecured GBP50m
loan facility
with Sir Roger De
Haan. As
a result, the Group
expects
to repay the 2024
bonds from
Available Cash(1) .
----------- --------------- ------------- ----------------------
Culture Stable Operational 1 and 3 Ongoing measurement
Saga's culture does not Reputational Group-wide and monitoring
transform in line with of culture using
the purpose, values, and colleague
strategy to deliver the surveys.
financial results expected
per the five-year plan.
----------- --------------- ------------- ----------------------
1 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Consolidated income statement
for the year ended 31 January 2023
Note 2023 (unaudited) 2022
GBP'm GBP'm
Gross earned premiums 189.5 203.0
Earned premiums ceded to reinsurers (111.3) (123.8)
------------------ ------------
Net earned premiums 78.2 79.2
Other revenue 502.9 298.0
------------------ ------------
Total revenue 3 581.1 377.2
Gross claims incurred (157.2) (94.6)
Reinsurers' share of claims incurred 99.1 63.3
------------------ ------------
Net claims incurred (58.1) (31.3)
Decrease in credit loss allowance 1.3 1.6(1)
Other cost of sales (250.4) (113.6)(1)
------------------ ------------
Total cost of sales 3 (307.2) (143.3)
Gross profit 273.9 233.9
Administrative and selling expenses (216.9) (212.1)(1)
Increase in credit loss allowance (0.9) (0.7)(1)
Impairment of assets (271.2) (11.2)
Gain on lease modification 11 - 0.3
Net profit on disposal of assets held for sale 19 - 7.2
Net profit/(loss) on disposal of property, plant
and equipment, right-of-use assets and software 0.1 (0.4)
Investment income 1.5 0.3
Finance costs (42.2) (40.8)
Finance income 1.5 -
Loss before tax (254.2) (23.5)
Tax expense 4 (5.0) (4.5)
Total loss for the year (259.2) (28.0)
================== ============
Attributable to:
Equity holders of the parent (259.2) (28.0)
================== ============
Loss per share:
Basic 6 (185.8p) (20.1p)
Diluted 6 (185.8p) (20.1p)
================== ============
1 Movements in the credit loss allowance for the year ended 31
January 2022 have been restated due to an incorrect allocation
between amounts written off during the year and changes in the
provision recognised in the income statement
Consolidated statement of comprehensive income
for the year ended 31 January 2023
Note 2023 (unaudited) 2022
GBP'm GBP'm
Loss for the year (259.2) (28.0)
Other comprehensive income
Other comprehensive income to be reclassified to income
statement in subsequent years
Net (losses)/gains on hedging instruments during the
year 12 (2.0) 2.1
Recycling of previous losses/(gains) to income statement
on matured hedges 12 0.3 (1.2)
Total net (losses)/gains on cash flow hedges (1.7) 0.9
Associated tax effect (0.8) 0.3
Net losses on fair value financial assets during the
year (15.1) (10.3)
Recycling of previous losses to income statement on
fair value financial assets during the year - 0.1
------------------ --------
Total net losses on fair value financial assets during
the year (15.1) (10.2)
Associated tax effect 3.8 2.1
------------------ --------
Total other comprehensive losses with recycling to
income statement (13.8) (6.9)
Other comprehensive income not to be reclassified to
income statement in subsequent years
Re-measurement (losses)/gains on defined benefit plans (19.1) 4.8
Associated tax effect 4.8 (1.2)
------------------ --------
Total other comprehensive (losses)/gains without recycling
to income statement (14.3) 3.6
Total other comprehensive losses (28.1) (3.3)
------------------ --------
Total comprehensive losses for the year (287.3) (31.3)
================== ========
Attributable to:
Equity holders of the parent (287.3) (31.3)
========= ========
Consolidated statement of financial position
as at 31 January 2023
Note 2023 (unaudited) 2022
Assets GBP'm GBP'm
Goodwill 8 449.6 718.6
Intangible assets 9 51.3 47.1
Retirement benefit scheme surplus 14 - 1.1
Property, plant and equipment 10 611.0 646.5
Right-of-use assets 11 30.7 36.0
Financial assets 12 282.4 332.1
Current tax assets 4.4 4.3
Deferred tax assets 4 16.1 12.3
Reinsurance assets 15 68.8 65.4
Inventories 7.0 6.3
Trade and other receivables 212.5 169.5
Trust accounts 36.2 23.4
Cash and short-term deposits 13 176.5 226.9
Assets held for sale 19 31.2 12.9
Total assets 1,977.7 2,302.4
================== =========
Liabilities
Retirement benefit scheme liability 14 12.1 -
Gross insurance contract liabilities 15 368.3 386.7
Provisions 5.2 6.7
Financial liabilities 12 896.8 936.2
Deferred tax liabilities 4 5.9 5.6
Contract liabilities 122.2 114.6
Trade and other payables 197.7 199.7
Total liabilities 1,608.2 1,649.5
------------------ ---------
Equity
Issued capital 17 21.1 21.1
Share premium 648.3 648.3
Retained deficit (293.5) (22.4)
Share-based payment reserve 8.9 7.4
Fair value reserve (12.1) (0.8)
Hedging reserve (3.2) (0.7)
Total equity 369.5 652.9
------------------ ---------
Total equity and liabilities 1,977.7 2,302.4
================== =========
Consolidated statement of changes in equity
for the year ended 31 January 2023
Attributable to the equity holders of the parent
Retained Share-based
Issued (deficit)/ payment Fair value Hedging
capital Share premium earnings reserve reserve reserve Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 February 2022 21.1 648.3 (22.4) 7.4 (0.8) (0.7) 652.9
Loss for the year - - (259.2) - - - (259.2)
Other comprehensive
losses
excluding
recycling - - (14.3) - (11.3) (2.9) (28.5)
Recycling of
previous
losses to income
statement - - - - - 0.4 0.4
Total comprehensive
losses - - (273.5) - (11.3) (2.5) (287.3)
Share based payment
charge
(Note 18) - - - 3.9 - - 3.9
Transfer upon
vesting
of share options - - 2.4 (2.4) - - -
At 31 January 2023
(unaudited) 21.1 648.3 (293.5) 8.9 (12.1) (3.2) 369.5
=========== =============== ============= ============= ============ ========== =========
Attributable to the equity holders of the parent
Retained Share-based
Issued earnings/ payment Fair value Hedging
capital Share premium (deficit) reserve reserve reserve Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 February 2021 21.0 648.3 0.2 5.8 7.3 (1.9) 680.7
Loss for the year - - (28.0) - - - (28.0)
Other comprehensive
income/(losses)
excluding recycling - - 3.6 - (8.2) 3.3 (1.3)
Recycling of previous
losses/(gains) to
income
statement - - - - 0.1 (2.1) (2.0)
Total comprehensive
(losses)/income - - (24.4) - (8.1) 1.2 (31.3)
Issue of share
capital
(Note 17) 0.1 - - - - - 0.1
Share based payment
charge
(Note 18) - - - 3.4 - - 3.4
Transfer upon vesting
of share options - - 1.8 (1.8) - - -
At 31 January 2022 21.1 648.3 (22.4) 7.4 (0.8) (0.7) 652.9
=========== =============== ============ ============= ============ ========== ========
Consolidated statement of cash flows
for the year ended 31 January 2023
Note 2023 (unaudited) 2022
GBP'm GBP'm
Loss before tax (254.2) (23.5)
Depreciation, impairment and loss on disposal,
of property, plant and equipment and right-of-use
assets 32.9 22.2
Amortisation and impairment of intangible assets
and goodwill, and (profit)/loss on disposal of
software 278.6 20.6
Impairment of assets held for sale 19 1.2 1.0
Gain on lease modification - (0.3)
Share-based payment transactions 3.9 3.4
Profit on disposal of assets held for sale 19 - (7.2)
Finance costs 42.2 40.8
Finance income (1.5) -
Interest income from investments (1.5) (0.3)
Increase in trust accounts (12.8) (1.0)
Movements in other assets and liabilities (65.7) 29.3
------------------ ---------
23.1 85.0
Investment income interest received 1.5 0.3
Interest paid (37.6) (34.2)
Income tax paid (0.9) (4.6)
------------------ ---------
Net cash flows (used in)/from operating activities (13.9) 46.5
Investing activities
Proceeds from sale of property, plant and equipment,
and right-of-use assets 0.2 0.3
Net proceeds from disposal of assets held for
sale 19 - 10.2
Purchase of, and payments for the construction
of, property, plant and equipment and intangible
assets (20.8) (18.9)
Net disposal/(purchase) of financial assets 25.6 (18.9)
Acquisition of subsidiary 7 (0.9) -
Net cash flows from/(used in) investing activities 4.1 (27.3)
Financing activities
Payment of principal portion of lease liabilities (7.8) (3.6)
Proceeds from borrowings - 250.0
Repayment of borrowings (46.4) (170.0)
Debt issue costs - (6.8)
Net cash flows (used in)/from financing activities (54.2) 69.6
------------------ ---------
Net (decrease)/increase in cash and cash equivalents (64.0) 88.8
------------------ ---------
Cash and cash equivalents at the start of the
year 255.7 166.9
Cash and cash equivalents at the end of the year 13 191.7 255.7
================== =========
Notes to the consolidated financial statements
1 Corporate information
Saga plc (the Company) is a public limited company incorporated
and domiciled in the United Kingdom under the Companies Act 2006
(registration number 8804263). The Company is registered in England
and its registered office is located at Enbrook Park, Folkestone,
Kent, CT20 3SE.
The consolidated financial statements of Saga plc and the
entities controlled by the Company (its subsidiaries, collectively
Saga Group or the Group) for the year ended 31 January 2023 will be
approved by the Board of Directors and reported on by the auditors,
KPMG LLP (KPMG), in April 2023. Accordingly, the financial
information for the year ended 31 January 2023 is presented
unaudited in this preliminary announcement.
2.1 Basis of preparation
The results in this preliminary announcement have been taken
from the Group's 2023 unaudited Annual Report and Accounts. The
unaudited consolidated financial statements of the Group have been
prepared in accordance with UK-adopted international accounting
standards.
The basis of preparation, basis of consolidation and summary of
significant accounting policies applicable to the Group's
consolidated financial statements will be published in the Notes to
the audited consolidated financial statements in the 2023 Annual
Report and Accounts.
The unaudited consolidated financial statements have been
prepared on a going concern basis and on a historical cost basis
except as otherwise stated. The Group has reviewed the
appropriateness of the going concern basis in preparing the
unaudited financial statements, details of which are included
below. Based on those assumptions, the Directors have concluded
that it remains appropriate to adopt the going concern basis in
preparing the financial statements.
The preliminary announcement for the year ended 31 January 2023
does not constitute statutory accounts as defined in Section 434 of
the Companies Act 2006. The consolidated financial statements for
the full year ended 31 January 2022 have been audited by KPMG.
Their report was unqualified and did not contain any statement
under Section 498(2) or Section 498(3) of the Companies Act 2006.
The consolidated financial statements for the full year ended 31
January 2023 will be audited by KPMG.
Going concern
The Directors have performed an assessment of going concern to
determine the adequacy of the Group and Company's financial
resources over a period of 14 months from the date of issue of
these unaudited preliminary results, a period which includes the
maturity of GBP150m of senior bonds in May 2024.
This assessment is based on higher and lower case financial
projections which incorporate scenario analysis and stress tests on
expected business performance.
The Group's higher case modelling assumes good performance in
the Cruise division in 2023/24, on the back of strong booked load
factors and per diems. Travel is also expected to achieve continued
growth in revenues with encouraging bookings for 2023/24 as at the
end of March 2023. As previously indicated, the outlook for
Insurance is likely to be challenging over the next 12 to 18
months, with high cost and claims inflation in a competitive market
expected to squeeze margins.
2.1 Basis of preparation
The Group's lower case scenario incorporates lower load factors
for Ocean Cruise, lower levels of demand in River Cruise, and
slower growth in the Travel business across the going concern
period. Downside risks modelled for the Insurance business include
the impact of worsening competitive market pressures on the
Insurance Broking business, continued high cost and claims
inflation putting pressure on margins, among other stress
tests.
These stresses are partially offset by discretionary cost
savings and the deferral of investment expenditure that would be
achieved in the event of downside trading risks materialising.
To increase liquidity and consistent also with a strategy of
reducing capital intensity, in the autumn of 2022, the Group
commenced a sale process for its Insurance Underwriting business,
Acromas Insurance Company Limited (AICL). The Group aims for this
sale process to be concluded in the second half of 2023.
However, given that there is no certainty that a sale of AICL
will be concluded in the next 14 months, the Group has agreed a
loan facility with Sir Roger De Haan. Under the terms of this
facility, if the sale of AICL is not completed prior to the end of
2023, the Group will, from 1 January 2024, be able to borrow up to
GBP50m to fund any liquidity needs, including repayment of the 2024
bonds. This facility is unsecured, on arms-length terms and can be
drawn at the option of the Group on 30 days' notice. The facility
matures on 30 June 2025, at which point any outstanding amounts,
including interest, must be repaid. Availability of funds under the
facility is not contingent on financial performance or on
compliance with any financial covenants.
Under both higher and lower case scenarios, the Group expects to
meet scheduled Ocean Cruise debt principal repayments as they fall
due over the next 14 months, and to also meet the financial
covenants relating to its secured cruise debt facilities (see Note
16) throughout the assessment period, except for the July 2023
testing date where lenders have agreed to a waiver of the EBITDA to
debt repayment covenant ratio (see Note 16).
In addition, in both higher and lower case scenarios and
incorporating either the expected net proceeds from a sale of the
Insurance Underwriting business or a draw down of the GBP50m loan
facility with Sir Roger De Haan, the Group expects to have
sufficient resources to continue operations for at least the next
14 months and to repay the GBP150m senior bonds on maturity in May
2024 from Available (Cash2) resources.
Over the same time frame and on the same basis, the Group also
expects to remain within the renegotiated financial covenants and
other terms relating to its GBP50m revolving credit facility (RCF),
as set out in Note 16, enabling it to draw down on this currently
undrawn facility in 2024/25 to meet short-term working capital
requirements should the need arise.
Noting that it is not possible to predict accurately all
possible future risks to the Group's future trading, based on this
analysis and the scenarios modelled the Directors are confident
that the Group will have sufficient funds to continue to meet its
liabilities as they fall due for a period of at least 14 months
from the date of issue of these unaudited preliminary results. They
have therefore deemed it appropriate to prepare the financial
statements to 31 January 2023 on a going concern basis.
2.2 Summary of significant accounting policies
There have been no significant changes to the accounting
policies of the Group during the year ended 31 January 2023. Full
details of the accounting policies of the Group will be published
in the Annual Report and Accounts for the year ended 31 January
2023 available at www.corporate.saga.co.uk .
2 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
2.3 Standards issued but not yet effective
The following is a list of standards, and amendments to
standards, that are in issue but are not effective or adopted as at
31 January 2023. Except where separately disclosed, these standards
are endorsed by the UK Endorsement Board.
i. IFRS 17 'Insurance Contracts'
IFRS 17 'Insurance Contracts' is a comprehensive new accounting
standard that applies to all insurance and reinsurance contracts
covering the principles of recognition, measurement, presentation
and disclosure.
IFRS 17 only applies to insurance contracts that are
underwritten by the Group and related reinsurance contracts held.
It does not affect the accounting for the Group's Insurance Broking
activities.
IFRS 17 is effective for annual reporting periods beginning on,
or after, 1 January 2023. The Group will initially apply IFRS 17 in
its consolidated financial statements for the year ending 31
January 2024, with the date of initial application being 1 February
2023 and the transition date being 1 February 2022. The Group's
consolidated financial statements for the year ending 31 January
2024 will include comparatives for the year ending 31 January 2023
restated onto an IFRS 17 basis.
i. Classification of liabilities as current or non-current (amendments to IAS 1)
The amendments aim to promote consistency in applying the
requirements by helping companies determine whether, in the
statement of financial position, debt and other liabilities with an
uncertain settlement date should be classified as current (due, or
potentially due, to be settled within one year) or non-current. The
amendments are effective for annual periods beginning on, or after,
1 January 2024 and are not likely to have a material effect on the
Group's financial statements. These amendments are not currently
endorsed by the UK Endorsement Board.
ii. Deferred tax related to assets and liabilities arising from
a single transaction (amendments to IAS 12)
The amendments clarify that the initial recognition exemption
does not apply to transactions in which equal amounts of deductible
and taxable temporary differences arise on initial recognition.
They will typically apply to transactions such as leases of lessees
and will require the recognition of additional deferred tax assets
and liabilities. The amendments are effective for annual reporting
periods beginning on, or after, 1 January 2023. The amendments are
not expected to have a material impact on the Group's financial
statements.
iii. Disclosure of accounting policies (amendments to IAS 1 and IFRS Practice Statement 2)
The amendments require that an entity discloses its material
accounting policies, instead of its significant accounting
policies. Further amendments explain how an entity can identify a
material accounting policy. The amendments are effective for annual
reporting periods beginning on, or after, 1 January 2023. The
amendments are not expected to have a material impact on the
Group's financial statements.
iv. Definition of accounting estimates (amendments to IAS 8)
The amendments replace the definition of a change in accounting
estimates with a definition of accounting estimates. Under the new
definition, accounting estimates are "monetary amounts in financial
statements that are subject to measurement uncertainty". The
amendments clarify that a change in accounting estimate that
results from new information or new developments is not the
correction of an error. The amendments are effective for annual
reporting periods beginning on, or after, 1 January 2023. The
amendments are not expected to have a material impact on the
Group's financial statements.
v. Definition of lease liability in a sale and leaseback (amendment to IFRS 16)
The amendment clarifies how a seller-lessee subsequently
measures sale and leaseback transactions that satisfy the
requirements in IFRS 15 to be accounted for as a sale. The
amendment is effective for annual reporting periods beginning on,
or after, 1 January 2024. The amendment is not expected to have a
material impact on the Group's financial statements. This amendment
is not currently endorsed by the UK Endorsement Board.
2.4 First time adoption of new standards and amendments
The following is a list of standards, and amendments to
standards, that became effective, or were adopted, for the first
time during the year ended 31 January 2023.
i. COVID-19-related rent concessions beyond 30 June 2021 (amendment to IFRS 16)
The amendment extends, by one year, the May 2020 amendment that
provides lessees with an exemption from assessing whether a
COVID-19-related rent concession is a lease modification. The
amendment was effective for annual reporting periods beginning on,
or after, 1 April 2021. The Group did not take advantage of the
exemption available under this amendment. The amendment has had no
effect on the Group's financial statements.
ii. Property, plant and equipment - proceeds before intended use (amendments to IAS 16)
The amendments prohibit deducting from the cost of an item of
property, plant and equipment, any proceeds from selling items
produced while bringing that asset to the location and condition
necessary for it to be capable of operating in the manner intended
by management. Instead, an entity recognises the proceeds from
selling such items, and the cost of producing those items, in
profit or loss. The amendments are effective for annual reporting
periods beginning on, or after, 1 January 2022. The amendments have
had no effect on the Group's financial statements.
iii. Onerous contracts - cost of fulfilling a contract (amendments to IAS 37)
The amendments specify that the "cost of fulfilling" a contract
comprises the "costs that relate directly to the contract". Costs
that relate directly to a contract can either be incremental costs
of fulfilling that contract (examples would be direct labour and
materials) or an allocation of other costs that relate directly to
fulfilling contracts (an example would be the allocation of the
depreciation charge for an item of property, plant and equipment
used in fulfilling the contract). The amendments are effective for
annual reporting periods beginning on, or after, 1 January 2022.
The amendments have had no effect on the Group's financial
statements.
iv. Annual improvements to IFRS 2018-2020
The improvements make minor amendments to the following
standards: IFRS 1, IFRS 9, IFRS 16 and IAS 41. The amendments are
effective for annual reporting periods beginning on, or after, 1
January 2022. The amendments have had no effect on the Group's
financial statements.
v. Reference to the Conceptual Framework (amendments to IFRS 3)
The amendments update an outdated reference to the Conceptual
Framework in IFRS 3 without significantly changing the requirements
in the standard. The amendment is effective for annual reporting
periods beginning on, or after, 1 January 2022 and apply
prospectively. The amendment has had no effect on the Group's
financial statements.
2.5 Significant accounting judgements, estimates and
assumptions
The preparation of financial statements requires the Group to
select accounting policies and make estimates and assumptions that
affect items reported in the primary consolidated financial
statements and notes to the consolidated financial statements.
The major areas of judgement used as part of accounting policy
application are summarised below:
Accounting policy references above are to the Notes to the
Annual Report and Accounts for the year ended 31 January 2023.
Significant judgements
Acc. Items involving Critical accounting judgement
policy judgement
--------- ------------------------- --------------------------------------------------------------
2.3a Revenue recognition Identification of performance obligations within
- identification insurance contracts with customers. In particular,
of performance management has exercised judgement in defining
obligations within separate performance obligations as part of
insurance contracts the Group's Insurance Broking services, namely:
not underwritten * the option to fix the customer's premium at renewal
by the Group for three-year fixed-price insurance policies, which
results in the deferral of a portion of revenue from
policy years one and two to policy years two and
three; and
* the arrangement of each insurance policy at the point
the insurance cover is arranged, as separate from the
premium charged in respect of the insurance cover,
which occurs on, or before, the cover start date of
each policy and results in a portion of revenue being
recognised a number of days in advance of the cover
start date.
Please refer to Note 2.3a for further information
on the Group's performance obligations relating
to revenue recognition.
--------- ------------------------- --------------------------------------------------------------
2.3ai, Classification Management has exercised judgement in defining
2.3r of insurance contracts which insurance policies that it arranges and
and underwrites constitute an insurance policy
2.3s that is subject to the accounting principles
of IFRS 4. This assessment is based on whether
significant insurance risk is transferred under
each insurance contract and also includes the
assessment of reinsurance contracts that the
Group enters into.
Policies that are arranged, and not underwritten,
by the Group, primarily a portion of the motor
and home insurance panels, private medical
insurance (PMI) and travel insurance, are not
deemed to constitute insurance policies as
defined by IFRS 4, and so they are accounted
for in line with the principles of IFRS 15.
Policies that are both arranged and underwritten
by the Group, primarily a portion of the motor
and home insurance panels, are deemed to constitute
insurance policies as defined by IFRS 4 and
so are accounted for in line with the requirements
of that standard.
The Group's excess of loss and funds-withheld
quota share reinsurance arrangements relating
to its motor underwriting line of business
are deemed to transfer significant insurance
risk to the reinsurer, and so they are also
accounted for in line with the requirements
of IFRS 4.
--------- ------------------------- --------------------------------------------------------------
2.3h Impairment testing The Group determines whether goodwill needs
of goodwill and to be impaired on an annual basis, or more
other major classes frequently as required.
of assets New pricing rules set by the FCA came into
effect on 1 January 2022, following the conclusion
of the General Insurance Pricing Practices
market study (GIPP). As a result of the impact
of the GIPP changes on customer pricing, especially
in the highly competitive motor insurance market,
there has been a fall in policy volumes in
the period to 31 July 2022 and the year to
31 January 2023, with a consequential adverse
impact on the profitability of the Insurance
business. Management have considered this to
be an indicator of impairment and have therefore
conducted full impairment reviews of the Insurance
CGU as at 31 July 2022 and 31 January 2023.
As a result of these reviews, management deemed
it necessary to impair the goodwill allocated
to the Insurance CGU by GBP269.0m at 31 July
2022. No further impairment was deemed necessary
in the six months to 31 January 2023.
In the year to 31 January 2022, management
did not deem it necessary to impair goodwill.
Please refer to Note 16a for further detail.
Since acquisition, the addition of the Big
Window insights and capabilities has added
significant value to all Saga business units,
in line with pre-acquisition expectations.
However, because these benefits are largely
associated with the continued employment of
a small number of individuals, which under
IFRS 3 cannot be separately capitalised, and
given the low materiality of the amounts in
question, the Group decided to write-off in
full the GBP0.5m goodwill arising on acquisition
in the period to 31 July 2022.
Following the continued impact of the COVID-19
pandemic on the Group's Cruise and Travel operations,
management concluded that potential indicators
of impairment existed and conducted impairment
reviews at 31 July 2022 and 31 January 2022
of the Group's two ocean cruise ships, Spirit
of Discovery and Spirit of Adventure. Management
considered a range of scenarios and used its
judgement to conclude that no impairment was
necessary.
As at 31 January 2023, management did not consider
it necessary to conduct an impairment review
of the Group's two ocean cruise ships since
no new indicators of impairment were identified.
Please refer to Note 17 for further detail.
In the prior year, given the delay in taking
delivery of the river cruise ship, Spirit of
the Rhine, along with the ongoing adverse impacts
of the COVID-19 pandemic on the wider travel
industry, management concluded that indicators
of impairment existed and deemed it necessary
to conduct an impairment review of the vessel
at 31 January 2022. Management considered a
range of scenarios and used its judgement to
conclude that no impairment was necessary.
Please refer to Note 18a for further detail.
In the year to 31 January 2023, management
did not consider it necessary to conduct an
impairment review of right-of-use river cruise
ship assets, since no new indicators of impairment
were identified.
--------- ------------------------- --------------------------------------------------------------
2.3h Impairment testing In year ended 31 January 2022, following the
of goodwill and continued impact of the COVID-19 pandemic on
other major classes the travel industry, management decided to
of assets (continued) restructure the Group's Tour Operations CGU
(now River Cruise and Travel). In light of
this exercise, management exercised its judgement
in relation to the impairment of software assets
and performed an impairment review of software
assets used by the Tour Operations business.
As a result of this review, management deemed
it necessary to impair these software assets
by GBP9.4m and the software assets in the Central
Costs division by GBP0.5m. No further impairment
was deemed necessary in the period to 31 January
2023. Please refer to Note 16b for further
detail.
In the years to 31 January 2023 and 31 January
2022, in light of the Group obtaining freehold
property market valuation reports, management
exercised judgement in relation to the impairment
of property assets held for sale. A net impairment
charge of GBP1.2m (2022: GBP1.0m) was accordingly
recognised. Please refer to Note 38 for further
detail.
--------- ------------------------- --------------------------------------------------------------
2.3r Insurance contract Judgement is required in relation to the areas
liabilities of uncertainty that may give rise to claims
costs in excess of the actuarial best estimate
of claims incurred, and the level of additional
reserve margin to recognise in the financial
statements above that estimate.
In the year to 31 January 2022, the Group considered
the additional latency risk to claims cost
development caused by the impact of the COVID-19
pandemic and recognised an additional claims
reserve above actuarial best estimate to cover
this specific risk. The latency risk provision
in relation to the COVID-19 pandemic was released
over the year to 31 January 2023, reflective
of the improvement in the COVID-19 outlook.
Please refer to Note 20d for further detail.
--------- ------------------------- --------------------------------------------------------------
Significant estimates
All estimates are based on management's knowledge of current
facts and circumstances, assumptions based on that knowledge and
predictions of future events and actions. Actual results may
therefore differ from those estimates.
The table below sets out those items the Group considers
susceptible to changes in critical estimates and assumptions,
together with the relevant accounting policy.
Accounting policy references above are to the Notes to the
Annual Report and Accounts for the year ended 31 January 2023.
Acc. Items involving Sources of estimation uncertainty
policy estimation
--------- ------------------------- ------------------------------------------------------------------
2.3ai Revenue recognition The standalone selling price of the option to fix
- three-year within the Group's three-year fixed-price insurance
fixed-price policies has been estimated using the expected cost
insurance plus a margin approach as set out in paragraph 79
policies (b) of IFRS 15.
An allowance has also been made for the likelihood
that the option will be exercised by factoring in
the expected rate of renewal at the first and second
renewal dates. The amount of revenue deferred upon
initial recognition is therefore reduced to the
extent that it is estimated that customers will
not exercise the option because they either decide
not to renew, or they make a claim that releases
the Group from its obligation to fix the customer
price.
--------- ------------------------- ------------------------------------------------------------------
2.3f Useful economic The useful economic lives and residual values of
& 2.3i lives and software assets classified as intangible assets
residual values (Note 15), and ocean cruise ship assets classified
of software, as property, plant and equipment (Note 17) are assessed
intangible upon the capitalisation of each asset, and at each
assets and reporting date, and are based upon the expected
ocean cruise consumption of future economic benefits of the asset.
ships
----------- ------------------------- ------------------------------------------------------------------ ---
2.3h Goodwill impairment The Group determines whether goodwill needs to be
testing impaired on an annual basis, or more frequently
as required. This requires an estimation of the
value-in-use of the CGUs to which goodwill is allocated.
The value-in-use calculation requires the Group
to estimate the future cash flows expected to arise
from the CGUs, discounted at a suitably risk-adjusted
rate to calculate present value.
The impact of changes to pricing rules set by the
FCA following the completion of the GIPP market
study, especially the highly competitive motor insurance
market, and the adverse impact on profit before
tax for the current year, has increased the estimation
uncertainty in the Insurance CGU. The outcome of
the impairment reviews conducted concluded that
an impairment charge of GBP269.0m be recognised
against the Group's Insurance CGU as at 31 July
2022. No further impairment was deemed necessary
in the six months to 31 January 2023.
Sensitivity analysis was undertaken to determine
the effect of changing the discount rate, the terminal
value and future cash flows on the present value
calculation, as shown in Note 16a.
----------- ------------------------- -----------------------------------------------------------------------
2.3h Impairment Following the continued impact of the COVID-19 pandemic
of ocean and on the Group's operations, management conducted
river cruise impairment reviews at 31 July 2022 and 31 January
ships 2022 of the Group's two ocean cruise ships, Spirit
of Discovery and Spirit of Adventure. Based on these
impairment reviews, and looking at the probability
of a range of outcomes, the Group remains comfortable
that there is headroom over and above the carrying
value of the two ocean cruise ship assets, and therefore
concluded that no impairment charges were necessary.
No additional impairment indicators were identified
as at 31 January 2023, and therefore no further
impairment review was conducted at this date.
Sensitivity analysis was undertaken to determine
the effect of changing the residual value, load
factor and useful economic life on the present value
calculation, as shown in Note 17.
At 31 January 2022, management conducted an impairment
review of its river cruise ship, Spirit of the Rhine.
Based on this review, the Group was comfortable
that there was sufficient headroom over and above
the carrying value of the river cruise ship asset,
and therefore concluded that no impairment charge
was necessary. No additional impairment indicators
were identified in relation to river cruise ships
as at 31 January 2023, and therefore no further
impairment review was conducted at this date.
--------- ------------------------- ------------------------------------------------------------------
2.3r Valuation For insurance contracts, estimates have to be made
of insurance for the expected cost of claims known but not yet
contract liabilities settled (case reserves) and for the expected cost
of claims IBNR, as at the reporting date. It can
take a significant period of time before the ultimate
claims cost can be established with certainty.
The ultimate cost of outstanding claims is estimated
by using a range of standard actuarial claims projection
techniques, such as the Chain-Ladder and Bornhuetter-Ferguson
methods. The main assumption underlying these techniques
is that past claims development experience can be
used to project future claims development and hence
ultimate claims costs. As such, these methods extrapolate
the development of paid and incurred losses, average
costs per claim and claim numbers based on the observed
development of earlier years. Historical claims
development is primarily analysed by accident year,
geographical area, significant business line and
peril. Additional qualitative judgement is used
to assess the extent to which past trends may not
apply in the future (e.g. to reflect one-off occurrences,
changes in external or market factors such as public
attitudes to claiming, economic conditions, levels
of claims inflation, judicial decisions and legislation,
as well as internal factors such as portfolio mix,
policy features and claims handling procedures)
in order to arrive at the best estimate of the ultimate
cost of claims.
The ultimate cost of claims is not discounted, except
for those in respect of PPOs, which have been discounted
at -1.5% for the year ended 31 January 2023 (2022:
-1.5%). The valuation of these claims involves making
assumptions about the rate of inflation and the
expected rate of return on assets to determine the
discount rate. Due to the size of PPO claims, the
ultimate cost is highly sensitive to changes in
these assumptions. The assumptions are reviewed
at each reporting date, and the sensitivity of this
assumption is shown in Note 20d.
In calculating the level of reserve margin to recognise
above the actuarial best estimate of incurred claims,
the Group considered an array of risks (including
cost inflation) to future claims experience, and
estimated the financial impact that those risks
could have, to derive an appropriate level of margin
to hold.
--------- ------------------------- ------------------------------------------------------------------
2.3u Valuation The cost of defined benefit pension plans and the
of pension present value of the pension obligation are determined
benefit obligation using actuarial valuations. Actuarial valuations
involve making assumptions about discount rates,
expected rates of return on assets, future salary
increases, mortality rates and future pension increases.
Due to the complexity of the valuation, the underlying
assumptions and its long-term nature, a defined
benefit obligation is highly sensitive to changes
in these assumptions. All assumptions are reviewed
at each reporting date.
All significant assumptions and estimates involved
in arriving at the valuation of the pension scheme
obligation are set out in Note 27.
--------- ------------------------- ------------------------------------------------------------------
3 Segmental information
For management purposes, the Group is organised into business
units based on their products and services. The Group has three
reportable operating segments as follows:
-- Cruise and Travel: comprises the operation and delivery of
ocean and river cruise holidays as well as package tour and other
holiday products. The Group owns and operates two ocean cruise
ships. All other holiday and river cruise products are packaged
together with third-party supplied accommodation, flights and other
transport arrangements.
-- Insurance: comprises the provision of general insurance
products. Revenue is derived primarily from insurance premiums and
broking revenues. The segment is further analysed into four product
sub-segments:
o Insurance Broking, consisting of:
-- Motor broking
-- Home broking
-- Other broking
o Insurance Underwriting
-- Other Businesses and Central Costs: comprises the Group's
other businesses and its central cost base. The other businesses
include Saga Money (the personal finance product offering), Saga
Media and the Group's mailing and printing business.
Segment performance is evaluated using the Group's key
performance measure of Underlying Profit/(Loss) Before Tax(3) .
Items not included within a specific segment relate to transactions
that do not form part of the ongoing segment performance or which
are managed at a Group level.
Transfer prices between operating segments are set on an
arm's-length basis in a manner similar to transactions with third
parties. Segment income, expenses and results include transfers
between business segments which are then eliminated on
consolidation.
Goodwill, corporate bonds and bank loans are not included within
segments as they are managed on a Group basis.
3 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
2023
(unaudited) Insurance
-----------------------------------------------------------
Other
Businesses
Cruise and
and Motor Home Other Central Adjustments Total
Travel broking broking broking Total Costs
GBPm GBPm GBPm GBPm Under-writing GBPm GBPm GBPm GBPm
Revenue 305.5 77.7 57.6 45.3 75.2 255.8 24.3 (4.5) 581.1
Cost of sales (242.5) (2.7) - 3.2 (56.1) (55.6) (9.1) - (307.2)
--------- --------- --------- --------- --------------- --------- ------------ ------------- ---------
Gross
profit/(loss) 63.0 75.0 57.6 48.5 19.1 200.2 15.2 (4.5) 273.9
========= ========= ========= ========= =============== ========= ============ ============= =========
Administrative
and selling
expenses (57.5) (55.6) (35.1) (21.4) (3.1) (115.2) (49.6) 4.5 (217.8)
Impairment of
assets - - - - (1.2) (1.2) (0.5) (269.5) (271.2)
Net profit on
disposal
of software - 0.1 - - - 0.1 - - 0.1
Investment
income/(loss) - - - - 3.7 3.7 (2.2) - 1.5
Finance costs (20.2) - - - - - (22.0) - (42.2)
Finance income 1.4 - - - - - 0.1 - 1.5
--------- --------- --------- --------- --------------- --------- ------------ ------------- ---------
(Loss)/profit
before tax (13.3) 19.5 22.5 27.1 18.5 87.6 (59.0) (269.5) (254.2)
========= ========= ========= ========= =============== ========= ============ ============= =========
Reconciliation
to Underlying
(Loss)/Profit
Before Tax (4)
(Loss)/profit
before tax (13.3) 19.5 22.5 27.1 18.5 87.6 (59.0) (269.5) (254.2)
Net fair value
gain on
derivative
financial
instruments (1.4) - - - - - - - (1.4)
Impairment of
goodwill - - - - - - - 269.5 269.5
Impairment of
assets - - - - 0.6 0.6 0.5 - 1.1
Restructuring
costs 2.2 - - - - - 1.5 - 3.7
Acquisition
costs
relating to
the
Big Window - - - - - - 0.2 - 0.2
Foreign
exchange
movement on
lease
liabilities 2.0 - - - - - - - 2.0
IFRS 16
adjustment
on river
cruise
vessels 0.6 - - - - - - - 0.6
--------- --------- --------- --------- --------------- --------- ------------- ---------
Underlying
(Loss)/Profit
Before Tax 4 (9.9) 19.5 22.5 27.1 19.1 88.2 (56.8) - 21.5
========= ========= ========= ========= =============== ========= ============ ============= =========
Total assets
less
liabilities 93.7 57.7 167.9 50.2 369.5
========= ========= ============ ============= =========
All revenue is generated solely in the UK.
4 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
2022 Insurance
-----------------------------------------------------------
Other
Businesses
Cruise and
and Motor Home Other Central Adjustments Total
Travel broking broking broking Under-writing Total Costs
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 94.7 85.0 60.2 35.3 84.7 265.2 21.5 (4.2) 377.2
Cost of sales (102.9) (2.6) - 0.3 (29.9) (32.2) (8.2) - (143.3)
--------- --------- --------- --------- --------------- --------- ------------ ------------- ---------
Gross
(loss)/profit (8.2) 82.4 60.2 35.6 54.8 233.0 13.3 (4.2) 233.9
========= ========= ========= ========= =============== ========= ============ ============= =========
Administrative
and selling
expenses (54.9) (52.4) (35.0) (24.3) (4.2) (115.9) (46.2) 4.2 (212.8)
Impairment of
assets (9.7) - - - (1.0) (1.0) (0.5) - (11.2)
Gain on lease
modification - - - - - - 0.3 - 0.3
Net profit on
disposal
of assets held
for sale - - - - - - 7.2 - 7.2
Net
profit/(loss)
on disposal of
software and
right-of-use
assets 0.1 (0.1) - - - (0.1) (0.4) - (0.4)
Investment
income/(loss) 0.1 - - - 3.5 3.5 (3.3) - 0.3
Finance costs (22.2) - - - - - (18.6) - (40.8)
--------- ---------
(Loss)/profit
before tax (94.8) 29.9 25.2 11.3 53.1 119.5 (48.2) - (23.5)
=========
Reconciliation
to Underlying
(Loss)/Profit
Before tax (5)
(Loss)/profit
before tax (94.8) 29.9 25.2 11.3 53.1 119.5 (48.2) - (23.5)
Net fair value
loss on
derivative
financial
instruments 2.7 - - - - - - - 2.7
Impairment/loss
on disposal of
assets 9.8 - - - 1.0 1.0 0.7 - 11.5
Restructuring
costs 3.9 - - - - - 2.4 - 6.3
Net profit on
disposal
of assets held
for sale - - - - - - (7.2) - (7.2)
Foreign exchange
movement on
lease
liabilities (0.9) - - - - - - - (0.9)
Costs incurred
for ocean
cruise
ship loan
holiday - - - - - - 2.4 - 2.4
Charge on
closure
of defined
benefit
pension scheme - - - - - - 2.0 - 2.0
Underlying
(Loss)/Profit
Before Tax 5 (79.3) 29.9 25.2 11.3 54.1 120.5 (47.9) - (6.7)
Total assets
less
liabilities
(re-presented) 67.2 77.0 189.1 319.6 652.9
Total assets less liabilities have been re-presented due to a
revision in the way that inter-company debtors and creditors are
reported between segments. Inter-company debtors and creditors are
excluded from re-presented total assets less liabilities.
All revenue is generated solely in the UK.
5 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
Total assets less liabilities detailed as adjustments relates to
the following unallocated items:
2023 (unaudited) 2022
GBP'm GBP'm
Goodwill (Note 8) 449.6 718.6
Group bond and bank loans (excluding ocean cruise
ship loans) (399.4) (399.0)
50.2 319.6
a) Disaggregation of revenue
In the following table, the Group's revenue has been
disaggregated by major product line, analysed by Group's three
operating segments.
2023 (unaudited)
Earned
premium
on insurance Other
underwritten Businesses
Cruise by the Group Other and Central
and Travel revenue Insurance Costs Total
Major product lines GBPm GBP'm GBP'm GBPm GBPm GBPm
Ocean Cruise 168.3 168.3
River Cruise and Travel 137.2 137.2
Gross earned premium on
insurance underwritten
by the Group 189.5
Less: ceded to reinsurers (111.3)
Net revenue on:
- Motor broking 27.7 50.0 77.7 77.7
- Home broking - 57.6 57.6 57.6
- Other broking 0.9 44.4 45.3 45.3
- Insurance Underwriting 49.6 25.6 75.2 75.2
Money 7.9 7.9
Media 10.3 10.3
Insight 0.6 0.6
Other 1.0 1.0
305.5 78.2 177.6 255.8 19.8 581.1
2022
Earned premium Other
on insurance Businesses
Cruise underwritten Other and Central
and Travel by the Group revenue Insurance Costs Total
Major product lines GBPm GBP'm GBP'm GBPm GBPm GBPm
Ocean Cruise 82.5 82.5
River Cruise and Travel 12.2 12.2
Gross earned premium on
insurance underwritten
by the Group 203.0
Less: ceded to reinsurers (123.8)
Net revenue on:
- Motor broking 26.7 58.3 85.0 85.0
- Home broking - 60.2 60.2 60.2
- Other broking 1.0 34.3 35.3 35.3
- Insurance Underwriting 51.5 33.2 84.7 84.7
Money 5.9 5.9
Media 9.9 9.9
Other 1.5 1.5
94.7 79.2 186.0 265.2 17.3 377.2
Included in Insurance Broking other revenue is instalment
interest income on premium financing of GBP9.4m (2022:
GBP9.8m).
4 Tax
The major components of the income tax expense are:
2023 (unaudited) 2022
GBP'm GBP'm
Consolidated income statement
Current income tax
Current income tax charge 1.1 3.4
Adjustments in respect of previous years (0.4) (0.1)
0.7 3.3
Deferred tax
Relating to origination and reversal of
temporary differences 3.1 2.7
Effect of tax rate change on opening balance - (2.6)
Adjustments in respect of previous years 1.2 1.1
4.3 1.2
Tax expense in the income statement 5.0 4.5
The Group's tax expense for the year was GBP5.0m (2022: GBP4.5m)
representing a tax effective rate of 32.7% before the impairment of
goodwill (2022: negative 19.1%). In the prior year, the difference
between the Group's tax effective rate and the standard rate of
corporation tax of 19% is mainly due to the Group's Ocean Cruise
business entering the tonnage tax regime on 1 February 2020.
Adjustments in respect of previous years include a charge for
the under-provision of tax charge in prior years of GBP0.8m (2022:
GBP1.0m) and the impact of the change in the tax rate on opening
deferred tax balances of GBPnil (2022: GBP2.6m credit).
Reconciliation of net deferred tax assets
2023 (unaudited) 2022
GBP'm GBP'm
At 1 February 6.7 6.7
Tax charge recognised in the income statement (4.3) (1.2)
Tax credit recognised in other comprehensive
income 7.8 1.2
At 31 January 10.2 6.7
On 3 March 2021, it was announced that the corporation tax rate
would increase from 19% to 25% from 1 April 2023. This increase was
substantively enacted on 24 May 2021. As a result, the closing
deferred tax balances at the statement of financial position date
have been reflected at 25%. Net deferred tax assets/(liabilities)
are expected to be normally settled in more than 12 months.
5 Dividends
The Board of Directors does not recommend the payment of a final
dividend for the 2022/23 financial year (2022: nil pence per
share).
For the current and prior year, no interim or final dividends
were declared, or paid, during the year.
The distributable reserves of Saga plc are GBP386.6m deficit as
at 31 January 2023, which are equal to the retained earnings
reserve. If necessary, its subsidiary companies hold significant
reserves from which a dividend can be paid. Subsidiary
distributable reserves are available immediately, with the
exception of companies within the River Cruise, Travel and
Underwriting businesses which require regulatory approval before
any dividends can be declared and paid. Under the terms of the ship
debt facilities, dividends remain restricted until the ship debt
principal repayments that were deferred as part of the ship debt
repayment holiday are fully repaid (Note 16). In addition, under
the terms of the RCF, dividends also remain restricted while
leverage is above 3.0x (excluding Ocean Cruise EBITDA and
debt).
6 Loss per share
Basic loss per share is calculated by dividing the loss after
tax for the year attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period. Diluted loss per share is calculated
by also including the weighted average number of ordinary shares
that would be issued on conversion of all potentially dilutive
options.
There have been no other transactions involving ordinary shares,
or potential ordinary shares, between the reporting date and the
date of authorisation of these financial statements.
The calculation of basic and diluted loss per share is as
follows:
2023 (unaudited) 2022
GBP'm GBP'm
Loss attributable to ordinary equity
holders (259.2) (28.0)
Weighted average number of ordinary 'm 'm
shares
Ordinary shares as at 1 February 139.5 139.4
Long-term Incentive Plan (LTIP) share
options exercised - 0.1
Ordinary shares as at 31 January 139.5 139.5
Weighted average number of ordinary
shares for basic loss per share and
diluted loss per share 139.5 139.5
Basic loss per share (185.8p) (20.1p)
Diluted loss per share (185.8p) (20.1p)
The table below reconciles between basic loss per share and
Underlying Basic Earnings/(Loss) Per Share(6)
2023 (unaudited) 2022
Basic loss per share (185.8p) (20.1p)
Adjusted for:
Derivative (gains)/losses (1.1p) 1.4p
Impairment, and net loss on disposal, of assets 0.8p 2.3p
Impairment of Insurance goodwill 192.8p -
Acquisition costs relating to the Big Window 0.5p -
Charge on closure of defined benefit pension scheme - 1.1p
Foreign exchange movement on lease liabilities 1.5p (0.5p)
Costs incurred for ocean cruise ship loan holiday - 1.3p
Restructuring costs 2.7p 3.4p
IFRS 16 lease accounting adjustment on river cruise 0.5p -
vessels
Underlying Basic Earnings/(Loss) Per Share (6) 11.9p (11.1p)
6 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
7 Business combinations and disposals
a) Acquisitions during the year ended 31 January 2023
On 16 February 2022, the Group acquired The Big Window
Consulting Limited (the Big Window), a specialist research and
insight business focusing on ageing.
The fair values of the identifiable assets and liabilities of
the Big Window acquired on the date of acquisition were:
Assets GBP'm
Trade and other receivables 0.1
Cash 1.3
Total assets 1.4
Liabilities
Trade and other payables 0.1
Corporation tax liability 0.1
Total liabilities 0.2
Total identifiable net assets at fair value 1.2
Goodwill arising on acquisition 0.5
Cash purchase consideration transferred 1.7
The purchase consideration of GBP1.7m was settled in cash. In
addition to the GBP1.7m cash purchase consideration transferred, as
part of the purchase agreement, the Group granted a GBP0.5m
share-based payment arrangement which vests over three years
subject to a number of conditions being met. The GBP0.5m was
transferred in cash to the Group's share administrators on the date
of completion. Cash of GBP1.3m was acquired with the Big Window,
resulting in a net cash outflow of GBP0.9m.
Since acquisition, the addition of the Big Window insights and
capabilities has added significant value to all Saga business
units, in line with pre-acquisition expectations. However, because
these benefits are largely associated with the continued employment
of a small number of individuals, which under IFRS 3 cannot be
separately capitalised, and given the low materiality of the
amounts in question, the Group has written-off the GBP0.5m goodwill
arising on acquisition in full in the year to 31 January 2023 (Note
8).
The Big Window contributed GBP0.6m of revenue and a loss of
GBP1.0m to the Group loss before tax from the date of acquisition
to 31 January 2023.
b) Acquisitions during the year ended 31 January 2022
There were no business acquisitions in the year ended 31 January
2022.
c) Disposals
There were no business disposals in the years ended 31 January
2023 and 31 January 2022.
8 Goodwill
Goodwill acquired through business combinations has been
allocated to CGUs for the purpose of impairment testing. The
carrying value of goodwill by CGU is as follows:
2023 (unaudited) 2022
GBP'm GBP'm
Insurance 449.6 718.6
449.6 718.6
The Group tests all goodwill balances for impairment at least
annually, and twice-yearly if indicators of impairment exist at the
interim reporting date of 31 July. The impairment test compares the
recoverable amount of each CGU to the carrying value of its net
assets including the value of the allocated goodwill.
On 1 January 2022, new pricing rules arising from the
implementation of recommendations included in the FCA's GIPP market
study came into effect. As a result, and against the background of
a highly competitive motor insurance market, the Group saw a fall
in policy volumes in the period to 31 July 2022 and year to 31
January 2023, with a consequential adverse impact on the
profitability of the Insurance business. Management considered this
to be an indicator of impairment and therefore conducted full
impairment reviews of the Insurance CGU as at 31 July 2022 and 31
January 2023.
The recoverable amount of the Insurance CGU has been determined
based on a value-in-use calculation using nominal cash flow
projections from the Group's latest five-year financial forecasts
to 2027/28, which are derived using past experience of the Group's
trading, combined with the anticipated impact of changes in
macroeconomic and regulatory factors. A terminal value has been
calculated using the Gordon Growth Model based on the fifth year of
those projections and an annual growth rate of 2.0% (July 2022:
2.0%, January 2022: 2.0%) as the expected long-term average nominal
growth rate of the UK economy. The cash flows have then been
discounted to present value using a suitably risk-adjusted nominal
discount rate based on a market-participant view of the cost of
capital and debt relevant to the insurance industry.
As at 31 January 2023, the pre-tax discount rate used for the
Insurance CGU was 13.0% (July 2022: 12.7%; January 2022: 11.5%).
The Group's five-year financial forecasts incorporate the modelled
impact of the new pricing rules and the estimated impact this will
likely have on future new business pricing and retention rates. As
per IAS 36.44, incremental cash flows directly attributable to
growth initiatives not yet enacted at the balance sheet date have
then been removed for the purpose of the value-in-use
calculation.
The Group has also considered the impact of downside stresses,
both in terms of adverse impacts to the cash flow projections and
to the discount rate. For the cash flow stress test, the Group has
modelled the impact of a more prudent outlook of the current
competitive challenges seen in the insurance broking market, in
combination with a more cautious nominal terminal growth rate of
1.5% (July 2022: 1.5%, 31 January 2022: 1.5%), reflecting a more
conservative outlook for growth in the UK economy. For the discount
rate stress test, the Group applied risk premia of +1.3ppt at 31
January 2023 (July 2022: +1.2ppt; January 2022: +1.5ppt).
The headroom/(deficit) for the Insurance CGU against the
carrying value of goodwill at the time of the review of GBP449.6m
at 31 January 2023 and GBP718.6m at 31 July 2022 and 31 January
2022 was as follows:
Headroom GBP'm
Central scenario Cash flow stress test Discount rate stress
scenario test scenario
31 January 31 31 31 January 31 31 31 January 31 31
2023 July January 2023 July January 2023 July January
(unaudited) 2022 2022 (unaudited) 2022 2022 (unaudited) 2022 2022
Insurance 153.9 (121.8) 146.3 12.0 (269.0) 89.7 92.6 (146.8) (10.2)
As at 31 July 2022, the Group determined that the recoverable
amount of the goodwill asset allocated to the Insurance CGU was
below the carrying value, and so the Directors took the decision to
impair goodwill allocated to the Insurance CGU by GBP269.0m.
At 31 January 2023, the recoverable amount of the Insurance
goodwill asset is above the carrying value, and no further
impairment is considered necessary.
The headroom calculated is sensitive to the discount rate and
terminal growth rate assumed, and to changes in the projected cash
flow of the CGU. Increased inflationary pressures on claims, the
evolving market response to the regulatory changes introduced in
early 2022 and in particular the extent to which market prices move
against Saga in a period of heightened global economic uncertainty,
combine to increase the range of possible cash flow outcomes in
management's modelling. A quantitative sensitivity analysis for
each of these as at 31 January 2023 and its impact on the central
scenario headroom against the carrying value of goodwill at the
time of the review of GBP449.6m is as follows:
Pre-tax discount Terminal growth Cash flow (annual)
rate rate
+1.0ppt -1.0ppt +1.0ppt -1.0ppt +10% -10%
GBP'm GBP'm GBP'm GBP'm GBPm GBPm
Insurance (47.7) 57.6 59.2 (46.6) 57.2 (57.2)
For the reasons explained in Note 7, goodwill of GBP0.5m arising
on the acquisition of the Big Window was immediately impaired in
full.
9 Intangible fixed assets
During the year, the Group capitalised GBP13.4m (2022: GBP11.2m)
of software assets, disposed of assets with a net book value of
GBPnil (2022: GBP0.2m) and charged GBP9.2m of amortisation and
impairment to its intangible assets (2022: GBP20.5m).
In the prior year, following the continued impact of the
COVID-19 pandemic on the travel industry, management decided to
restructure the Group's former Tour Operations business (now River
Cruise and Travel). As a result of this restructuring exercise,
management performed an impairment review of software assets used
by the Tour Operations business. The outcome of the impairment
review concluded that an impairment charge of GBP9.4m be recognised
against the Group's software assets as at 31 January 2022, all of
which related to the Tigerbay platform. In addition, the Group
concluded that an impairment charge of GBP0.5m to software assets
was required in the Group's Central Costs division.
10 Property, plant and equipment
During the year, the Group capitalised assets with a cost of
GBP8.2m (2022: GBP7.1m), reclassified to assets held for sale
assets with a net book value of GBP19.5m (2022: GBPnil), disposed
of assets with a net book value of GBP0.2m (2022: GBP0.6m) and
charged GBP24.0m of depreciation and impairment to its property,
plant and equipment (2022: GBP19.6m).
a) Impairment review of property, plant and equipment
Due to the continued impact of the COVID-19 pandemic on the
Group's Cruise and Travel operations in the first half of the year,
management concluded that potential indicators of impairment
continued to exist as at 31 July 2022 for both of its ocean cruise
ships, Spirit of Discovery and Spirit of Adventure. Management
therefore conducted impairment reviews at 31 July 2022 for both
vessels, following previous reviews conducted at 31 January
2022.
The impairment test was conducted using a methodology consistent
with that applied as at 31 January 2022. The recoverable amount of
each ocean cruise ship was determined based on a value-in-use
calculation using cash flow projections from the Group's five-year
financial forecasts to 2026/27 and applying a constant annual
growth rate of 2% thereafter for subsequent periods until the end
of the ship's useful economic life of 30 years, at which point a
residual value of 15% of original cost was assumed. This was then
discounted back to present value using a suitably risk-adjusted
discount rate. The underlying forecast cash flows were updated for
the latest impact of the COVID-19 pandemic. In addition, a stress
test of the potential adverse medium-term impact that the pandemic
may have on demand for ocean cruises was also considered, with load
factors capped at 80% throughout 2023/24. The annual growth rate
beyond the fifth year of management forecasts was reduced to 1.5%
in the stress test scenario, reflecting a more cautious outlook for
long-term growth in the UK economy.
Potential environmental regulatory changes were also considered
as part of this assessment. The shipping industry has made a
commitment to reduce CO(2) emissions by 40% by 2030 (from a 2008
baseline), and the UK Government has made commitments to reach net
zero emissions by 2050. The EEXI (carbon design/technical
efficiency indicator) and CII (in-service/operational carbon
intensity efficiency indicator) regulations were introduced
internationally during the year to enable the industry to meet the
2030 target, and both of Saga's ocean cruise ships meet the
requirements of these regulations. The end of their useful economic
lives of 30 years will have been reached by 2049 in the case of
Spirit of Discovery and 2051 in the case of Spirit of
Adventure.
The Group has not factored in any potential fuel modifications
that may occur in the future into the cash flow forecasts used for
the impairment assessment of either ship. Whilst alternative fuels
may present a viable route to decarbonisation for the Ocean Cruise
business, there are significant upstream supply challenges which
will need to be resolved before these become viable for deployment.
The main engines currently installed in the Group's ocean cruise
ships are capable of being modified for use with certain
alternative fuels. Being new vessels, the design and specification
of the Group's ocean cruise ships was guided by a desire to
maximise efficiency through deployment of the most up-to-date
technology. Their hull design maximises fuel efficiency, onboard
technology minimises fuel consumption and catalytic converters
reduce carbon emissions. Additionally, the Group is planning to
retro-fit shore power connections to both vessels, allowing them to
use clean energy, where available, in ports of call and has
commenced a study to evaluate other emerging technologies. The
capital expenditure required for the shore power connections has
been included in the forecast cash flows used in the
assessment.
There is also currently no technological alternative to either
oil or gas to power large vessels and it is not clear if such
technology will ever be commercially viable, or in what time frame
this might be achieved.
The cash flows were discounted to present value using a pre-tax
discount rate of 8.6% (January 2022: 9.9%) for both vessels. As at
31 July 2022, the headroom for each of the ships against the
carrying value was as follows:
Headroom GBPm
Central Lower trading
scenario stress test
scenarios
Spirit of Discovery 169.0 146.5
Spirit of Adventure 114.7 91.6
Based on these impairment tests, and looking at the likelihood
of a range of outcomes, the Group was satisfied that no impairment
of either vessel was necessary as at 31 July 2022.
In the second half of the year, further COVID-19 restrictions
were lifted for cruise passengers and trading was in line with
forecasts. Discount rates have risen, but not to the extent that
they materially change the headroom in the impairment calculation.
The Directors therefore concluded that there were no additional
indicators of impairment at 31 January 2023, and accordingly no
further impairment review has been deemed necessary.
As the Group is planning to vacate most of its properties (Note
19), management has concluded that this constitutes an indicator of
impairment and has duly conducted an impairment review as at 31
January 2023 of the Group's freehold, and long leasehold, land and
buildings, and related fixtures and fittings. In relation to these
freehold and long leasehold properties, value-in-use is negligible
and so the Group has obtained market valuations to determine the
fair value of each building. The outcome of these impairment
reviews concluded that an impairment charge totalling GBP0.5m
relating to fixtures and fittings should be recognised against the
Group's assets as at 31 January 2023. At the year end, the Group
reclassified assets with a net book value of GBP19.5m to assets
held for sale (Note 19).
In the prior year, the Group declassified one of the properties
classified as held for sale at 31 January 2021, to property, plant
and equipment since it was no longer being actively marketed for
disposal (Note 19). The carrying value of this property as at 31
January 2021 was GBP3.0m. During the year ended 31 January 2023, a
unsolicited conditional offer for sale was accepted by the Group in
respect of this property. As a consequence, the property has been
reclassified back to assets held for sale as at the statement of
financial position date.
In addition, during the year ended 31 January 2022, following
management's decision to restructure the Group's Tour Operations
CGU, the Group impaired property, plant and equipment in its Tour
Operations CGU by GBP0.3m.
11 Right-of-use assets
During the year, the Group capitalised assets with a cost of
GBP25.6m (2022: GBP35.8m), disposed of assets with a net book value
of GBPnil (2022: GBP0.8m), reduced net book value for modification,
or reassessment, of lease terms by GBP22.0m (2022: GBP0.1m) and
charged GBP8.9m of depreciation and impairment to its right-of-use
assets (2022: GBP2.3m).
The total cash outflow for leases amounted to GBP9.1m (2022:
GBP4.4m).
River cruise ship additions in the year ended 31 January 2023
relate to the river cruise vessels, Spirit of the Danube, MS River
Discovery II and MS Serenade 1. River cruise ship additions in the
year ended 31 January 2022 related to the river cruise vessel,
Spirit of the Rhine.
During the year ended 31 January 2023, management reviewed the
allocation of costs under its river cruise charter agreements. As a
consequence, a proportion of costs previously included as lease
costs for Spirit of the Rhine were reassessed as costs of ongoing
service provision. Accordingly, the right-of-use asset and
liability relating to this ship have been adjusted in the current
year, reflecting a prospective change in estimate as required under
IAS 8.
In the year ended 31 January 2022, the modification of lease
terms relating to long leasehold land and buildings resulted in a
gain of GBP0.3m being reported in the income statement in the
year.
a) Impairment review of right-of-use assets
During the year ended 31 January 2022, the Group took delivery
of the river cruise ship, Spirit of the Rhine, under a 10-year
lease. The ship's first cruise season was initially planned to
commence on 1 April 2021, but due to the impact of the COVID-19
pandemic, the start of the first season was delayed for several
months. The Group did not therefore take control of the asset until
the ship's inaugural cruise took place in September 2021, at which
point a right-of-use asset was recognised and a corresponding lease
liability was capitalised on the statement of financial
position.
Given the carrying value of the asset is quantitatively material
to the Group, combined with the ongoing adverse impacts of the
COVID-19 pandemic on the wider travel industry, which constitute an
indicator of impairment, management deemed it necessary to conduct
an impairment review on Spirit of the Rhine at 31 January 2022.
Based on the impairment tests undertaken, and looking at the
likelihood of a range of outcomes, the Group was satisfied that
there was headroom over and above the carrying value of Spirit of
the Rhine.
The Group does not consider it necessary to conduct an
impairment review of right-of-use assets as at 31 January 2023
since no new indicators of impairment exist in relation to the
Spirit of the Rhine, Spirit of the Danube, MS River Discovery II or
MS Serenade 1.
12 Financial assets and financial liabilities
a) Financial assets
2023 (unaudited) 2022
GBP'm GBP'm
Fair value through profit and loss (FVTPL)
Foreign exchange forward contracts 0.4 0.4
Loan funds 5.9 6.2
Money market funds 19.6 29.2
25.9 35.8
FVTPL designated in a hedging relationship
Foreign exchange forward contracts 2.1 0.3
Fuel oil swaps - 1.2
2.1 1.5
Fair value through other comprehensive income
(FVOCI)
Debt securities 254.4 280.8
254.4 280.8
Amortised cost
Deposits with financial institutions - 14.0
- 14.0
Total financial assets 282.4 332.1
Current 62.8 110.0
Non-current 219.6 222.1
282.4 332.1
b) Financial liabilities
2023 (unaudited) 2022
GBP'm GBP'm
FVTPL
Foreign exchange forward contracts 0.2 1.3
0.2 1.3
FVTPL designated in a hedging relationship
Foreign exchange forward contracts 1.0 2.7
Fuel oil swaps 4.0 -
5.0 2.7
Amortised cost
Bond and bank loans (Note 16) 854.6 896.5
Lease liabilities 32.6 35.3
Bank overdrafts 4.4 0.4
891.6 932.2
Total financial liabilities 896.8 936.2
Current 118.6 56.1
Non-current 778.2 880.1
896.8 936.2
c) Fair value hierarchy
As at 31 January 2023
(unaudited) As at 31 January 2022
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Financial assets measured at fair value
Foreign exchange forwards - 2.5 - 2.5 - 0.7 - 0.7
Fuel oil swaps - - - - - 1.2 - 1.2
Loan funds 5.9 - - 5.9 6.2 - - 6.2
Debt securities 254.4 - - 254.4 280.8 - - 280.8
Money market funds 19.6 - - 19.6 29.2 - - 29.2
Financial liabilities measured at fair value
Foreign exchange forwards - 1.2 - 1.2 - 4.0 - 4.0
Fuel oil swaps - 4.0 - 4.0 - - - -
Financial assets for which fair
values
are disclosed
Deposits with institutions - - - - - 14.0 - 14.0
Financial liabilities for which
fair values
are disclosed
Bond and bank loans - 788.9 - 788.9 - 879.0 - 879.0
Lease liabilities - 32.6 - 32.6 - 35.3 - 35.3
Bank overdrafts - 4.4 - 4.4 - 0.4 - 0.4
d) Other information
Debt securities, loan funds, money market funds and deposits
with financial institutions relate to monies held by the Group's
Insurance business (included within discontinued operations (Note
19), are subject to contractual restrictions and are not readily
available to be used for other purposes within the Group. The
values of the debt securities, money market funds and loan funds
are based upon publicly available market prices.
There have been no transfers between Level 1 and Level 2 and no
non-recurring fair value measurements of assets and liabilities
during the year (2022: none).
Foreign exchange forwards are valued using current spot and
forward rates discounted to present value. They are also adjusted
for counterparty credit risk using credit default swap curves. Fuel
oil swaps are valued with reference to the valuations provided by
third parties, which use current Platts index rates, discounted to
present value.
The Group operates a programme of economic hedging against its
foreign currency and fuel oil exposures. During the year, the Group
designated 352 foreign exchange forward currency contracts as
hedges of highly probable foreign currency cash expenses in future
periods and designated 68 fuel oil swaps as hedges of highly
probable fuel oil purchases in future periods. As at 31 January
2023, the Group has designated 446 forward currency contracts and
68 fuel oil swaps as hedges.
During the year, the Group recognised net losses of GBP2.0m
(2022: GBP2.1m gains) on cash flow hedging instruments through OCI
into the hedging reserve. The Group recognised GBPnil gains (2022:
GBPnil) through the income statement in respect of the ineffective
portion of hedges measured during the year.
During the year, the Group has de-designated 12 foreign currency
forward contracts, with a transaction value of GBP0.7m, where
forecast cash flows are no longer expected to occur with a
sufficiently high degree of certainty to meet the requirements of
IFRS 9. The accumulated gains in relation to these contracts of
GBPnil have been reclassified from the hedging reserve into profit
or loss during the year. The Group has not de-designated any fuel
oil swaps during the year. During the year, the Group recognised a
GBP0.3m loss (2022: GBP1.2m gain) through the income statement in
respect of matured hedges which have been recycled from OCI.
13 Cash and cash equivalents
2023 (unaudited) 2022
GBP'm GBP'm
Cash at bank and in hand 52.0 174.6
Short-term deposits 124.5 52.3
Cash and short-term deposits 176.5 226.9
Money markets funds 19.6 29.2
Bank overdraft (4.4) (0.4)
Cash and cash equivalents in the cash flow
statement 191.7 255.7
Included within cash and cash equivalents are amounts held by
the Group's River Cruise, Travel and Insurance businesses, which
are subject to contractual or regulatory restrictions. These
amounts held are not readily available to be used for other
purposes within the Group and total GBP34.2m (2022: GBP69.1m).
Available cash(7) excludes these amounts and any amounts held by
disposal groups.
Cash at bank earns interest at floating rates based on daily
bank deposit rates. Short-term deposits are typically made for
varying periods of between one day and three months, depending on
the immediate cash requirements of the Group, and earn interest at
the respective short-term deposit rates.
The bank overdraft is subject to a guarantee in favour of the
Group's bankers and is limited to the amount drawn. The bank
overdraft is repayable on demand.
7 Refer to the Alternative Performance Measures Glossary on
pages 68-69 for definition and explanation
14 Retirement benefit schemes
The Group operates retirement benefit schemes for the employees
of the Group consisting of defined contribution plans and a legacy
defined benefit plan.
In July 2021, following the completion of a review of the
Group's pension arrangements, a consultation process with active
members was launched. The consultation process concluded during
October 2021, and with effect from 31 October 2021, the Group
closed both its existing schemes to future accrual: the Saga
Pension Scheme (its defined benefit plan) and the Saga Workplace
Pension Plan (its defined contribution plan). In their place, the
Group launched a new defined contribution pension scheme
arrangement, operated as a Master Trust. This move served to reduce
the risk of further deficits developing in the future on the
defined benefit scheme, while moving to a fairer scheme for all
colleagues.
a) Defined contribution plans
There are three defined contribution schemes in the Group at 31
January 2023 (2022: three). The total charge for the year in
respect of the defined contribution schemes was GBP9.9m (2022:
GBP4.5m). The assets of these schemes are held separately from
those of the Group in funds under the control of Trustees.
b) Defined benefit plan
The Group operated a funded defined benefit scheme, the Saga
Pension Scheme, which was closed to future accrual on 31 October
2021. From 1 November 2021, members moved from active to deferred
status, with future indexation of deferred pensions before
retirement measured by reference to the Consumer Price Index.
During the prior year, a net expense of GBP2.0m was recognised as a
past service cost (within administrative and selling expenses)
relating to the closure. The assets of the scheme are held
separately from those of the Group in independently administered
funds.
The fair value of the assets and present value of the
obligations of the Saga defined benefit scheme are as follows:
2023 (unaudited) 2022
GBP'm GBP'm
Fair value of scheme assets 224.1 412.0
Present value of defined benefit obligation (236.2) (410.9)
Defined benefit scheme (liability)/asset (12.1) 1.1
The present values of the defined benefit obligation, the
related current service cost and any past service costs have been
measured using the projected unit credit valuation method.
During the year ended 31 January 2023, the net position of the
Saga Scheme has decreased by GBP13.2m, resulting in an overall
scheme deficit of GBP12.1m. The movements observed in the scheme's
assets and obligations have been impacted significantly by
macroeconomic factors during the year where, at a global level,
there have been rising inflation and cost of living pressures, as
well as shifts in long-term market yields. The present value of
defined benefit obligations decreased by GBP174.7m to GBP236.2m,
primarily due to a 245bps increase in the discount rate which is
based on increases in long-term trend corporate bond yields. The
fair value of scheme assets decreased by GBP187.9m to GBP224.1m.
The decrease in asset values has been largely driven by the sharp
rise in interest rates in the year. Liability driven investment
(LDI) strategies resulted in assets being sold in order to meet the
liquidity calls required by the fall in leveraged LDI values. The
Saga scheme has a hedged component, but this is relative to gilt
yields, rather than corporate bond yields, which are used to derive
the defined benefit obligation. A GBP5.8m deficit funding
contribution was paid by the Group in February 2022 in relation to
a recovery plan agreed under the latest triennial valuation of the
scheme as at 31 January 2020.
15 Insurance contract liabilities and reinsurance assets
The analysis of gross and net insurance liabilities is as
follows:
2023 (unaudited) 2022
Gross GBP'm GBP'm
Claims outstanding 285.2 292.8
Provision for unearned premiums 83.1 93.9
Total gross liabilities 368.3 386.7
2023 (unaudited) 2022
Recoverable from reinsurers GBP'm GBP'm
Claims outstanding 62.1 59.1
Provision for unearned premiums 6.7 6.3
Total reinsurers' share of insurance liabilities
(as presented on the face of the statement of
financial position) 68.8 65.4
Amounts recoverable under funds-withheld quota
share agreements recognised within trade receivables/payables:
- Claims outstanding 123.1 133.0
- Provision for unearned premiums 44.6 50.7
Total reinsurers' share of insurance liabilities
after funds-withheld quota share 236.5 249.1
Analysed as:
Claims outstanding 185.2 192.1
Provision for unearned premiums 51.3 57.0
Total reinsurers' share of insurance liabilities
after funds-withheld quota share 236.5 249.1
2023 (unaudited) 2022
Net GBP'm GBP'm
Claims outstanding 223.1 233.7
Provision for unearned premiums 76.4 87.6
Total net insurance liabilities 299.5 321.3
Amounts recoverable under funds-withheld quota
share agreements recognised within trade receivables/payables:
- Claims outstanding (123.1) (133.0)
- Provision for unearned premiums (44.6) (50.7)
Total net insurance liabilities after funds-withheld
quota share 131.8 137.6
Analysed as:
Claims outstanding 100.0 100.7
Provision for unearned premiums 31.8 36.9
Total net insurance liabilities after funds-withheld
quota share 131.8 137.6
Reconciliation of movements in claims outstanding
2023 (unaudited) 2022
GBP'm GBP'm
Gross claims outstanding at 1 February 292.8 329.5
Less: reinsurance claims outstanding (192.1) (212.3)
Net claims outstanding at 1 February 100.7 117.2
Gross claims incurred 157.2 94.6
Less: reinsurance recoveries (99.1) (63.3)
Net claims incurred 58.1 31.3
Gross claims paid (164.8) (131.3)
Less: received from reinsurance 106.0 83.5
Net claims paid (58.8) (47.8)
Gross claims outstanding at 31 January 285.2 292.8
Less: reinsurance claims outstanding (185.2) (192.1)
Net claims outstanding at 31 January 100.0 100.7
The development of the gross loss ratios (before deducting
reinsurance recoveries) on an accident year basis over the last 10
years is as follows:
Financial year ended 31 January
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(unaudited)
2014 76% 72% 67% 63% 61% 58% 57% 56% 56% 56%
Accident
year 2015 70% 73% 70% 66% 61% 58% 55% 55% 55%
2016 77% 78% 75% 65% 62% 62% 59% 59%
2017 70% 69% 65% 61% 56% 56% 55%
2018 76% 78% 74% 70% 67% 65%
2019 78% 80% 79% 75% 71%
2020 78% 82% 78% 75%
2021 64% 58% 50%
2022 67% 77%
2023 88%
The development of the net incurred claims ratios (after
deducting reinsurance recoveries) on an accident year basis over
the last 10 years is as follows:
Financial year ended 31 January
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(unaudited)
2014 75% 71% 65% 62% 59% 56% 55% 54% 54% 54%
Accident
year 2015 67% 69% 66% 63% 58% 56% 54% 53% 53%
2016 70% 71% 66% 59% 56% 54% 53% 52%
2017 56% 56% 54% 53% 51% 51% 50%
2018 66% 65% 64% 62% 60% 56%
2019 71% 71% 71% 69% 59%
2020 63% 64% 62% 62%
2021 53% 47% 44%
2022 55% 53%
2023 101%
Favourable claims development over the year resulted in a
GBP27.0m (2022: GBP18.4m) reduction in the net claims incurred in
respect of prior years.
16 Loans and borrowings
2023 (unaudited) 2022
GBP'm GBP'm
Bond 400.0 400.0
Ship loan 469.2 515.6
Revolving credit facility - -
Accrued interest payable 5.5 5.9
874.7 921.5
Less: deferred issue costs (20.1) (25.0)
854.6 896.5
Bonds, RCF and term loan
At 31 January 2023, the Group's financing facilities consisted
of a GBP150.0m seven-year senior unsecured bond (repayable May
2024), a GBP250.0m five-year senior unsecured bond (repayable July
2026) and a GBP50.0m five-year RCF (expiry in May 2025). The bonds
are listed on the Irish Stock Exchange and are guaranteed by Saga
Services Limited and Saga Mid Co Limited.
Interest on the 2024 corporate bond is incurred at an annual
interest rate of 3.375%. Interest on the 2026 corporate bond is
incurred at an annual interest rate of 5.5%. Interest payable on
the Group's RCF, if drawn down, is incurred at a variable rate of
SONIA plus a bank margin which is linked to the Group's leverage
ratio.
During the year to 31 January 2023, the Group agreed amendments
with its banks to simplify the RCF arrangement to remove certain
clauses that were introduced during the COVID-19 pandemic and
reduce the aggregate facility cost. The amendments to the RCF
include:
-- removal of the GBP40.0m minimum liquidity requirement;
-- removal of the condition that the facility (if drawn) is
repaid on 1 March 2024, if the existing 2024 bond has not been
redeemed prior to this date; and
-- reduction of the RCF commitment from GBP100.0m to
GBP50.0m.
In addition, dividends remain restricted while leverage
(excluding Cruise) is above 3.0x.
Subsequent to the above, the Group had further discussions with
its lending banks behind the RCF and agreed the following
amendments to the facility:
-- The introduction of a restriction whereby, no utilisation of
the facility is permitted prior to repayment of the 2024 bond if
leverage exceeds 5.5x, or liquidity is below GBP170.0m.
-- During 2023 and 2024, should the RCF be drawn, leverage
covenant testing will be quarterly.
-- Repayment of the 2024 bond, ahead of maturity, is restricted
while leverage remains above 3.75x.
-- Amendments to the leverage and interest cover covenants
attached to the facility, as follows:
Leverage (excl. Ocean Interest cover
Cruise)
31 January 2023 4.75x 2.5x
30 April 2023 6.75x n/a
31 July 2023 6.75x 2.5x
31 October 2023 6.75x n/a
31 January 2024 5.5x 2.75x
30 April 2024 5.5x n/a
31 July 2024 5.5x 3.0x
31 October 2024 5.5x n/a
31 January 2025 4.75x 3.0x
At 31 January 2023, the Group's GBP50.0m RCF remained undrawn.
Accrued interest payable on the Group's bonds at 31 January 2023 is
GBP2.2m (2022: GBP2.8m).
During the year ended 31 January 2022, the Group repaid its
GBP200.0m five-year term loan (repayable May 2023) in full.
Interest was incurred at a variable rate of London Inter-Bank
Offered Rate (LIBOR, since replaced by SONIA) plus a bank margin
which was linked to the Group's leverage ratio.
Ocean cruise ship loans
In June 2019, the Group drew down GBP245.0m of financing for its
ocean cruise ship, Spirit of Discovery. The financing represents a
12-year fixed-rate sterling loan, secured against the Spirit of
Discovery cruise ship asset, and backed by an export credit
guarantee. The initial loan was repayable in 24 broadly equal
instalments, with the first payment of GBP10.2m paid in December
2019.
The Board announced on 22 June 2020 that it had secured a debt
holiday and covenant waiver for the Group's ship facilities. The
Group's lenders agreed to a deferral of GBP32.1m in principal
payments under the ship facilities that were due up to 31 March
2021. These deferred amounts were to be paid between June 2021 and
December 2024 for Spirit of Discovery and between September 2021
and March 2025 for Spirit of Adventure, and interest remained
payable.
On 29 September 2020, the Group drew down GBP280.8m of financing
for its ocean cruise ship, Spirit of Adventure. The financing,
secured against the Spirit of Adventure cruise ship asset,
represents a 12-year fixed-rate sterling loan, backed by an export
credit guarantee. The loan is repayable in 24 broadly equal
instalments, with the first payment originally due six months after
delivery in March 2021, but initially deferred to September 2021 as
a result of the debt holiday described above.
In March 2021, the Group reached agreement of a one-year
extension to the debt deferral on its ocean cruise ship facilities.
As part of an industry-wide package of measures to support the
cruise industry, an extension of the existing debt deferral was
agreed to 31 March 2022. The key terms of this deferral were:
-- all principal payments to 31 March 2022 (GBP51.8m) deferred
and repaid over five years;
-- all financial covenants until 31 March 2022 waived; and
-- dividends remain restricted while the deferred principal is
outstanding.
After the year end, the Group concluded discussions with its
Cruise lenders in respect of the covenant restrictions attaching to
its two ship debt facilities (Note 21). Lenders have agreed to a
waiver of the EBITDA to debt repayment covenant ratio for the 31
July 2023 testing date.
Interest on the Spirit of Discovery ship loan is incurred at an
effective annual interest rate of 4.31% (including arrangement and
commitment fees). Interest on the Spirit of Adventure ship loan is
incurred at an effective annual interest rate of 3.30% (including
arrangement and commitment fees). Interest payable on the Group's
ocean cruise ship debt deferrals is incurred at a variable rate of
SONIA plus a bank margin.
Accrued interest payable on the Group's ocean cruise ship loans
at 31 January 2023 is GBP3.3m (2022: GBP3.1m).
Also since the year end, on 3 April 2023, the Company entered
into a forward starting loan facility agreement with Sir Roger De
Haan, commencing on 1 January 2024, under which the Company may
draw down up to GBP50m with 30 days' notice to support liquidity
needs and specifically the repayment of GBP150m bonds maturing in
May 2024. The facility is provided on an arm's length basis.
Interest will accrue on the facility at the rate of 10% and is
payable on the last day of the period of the loan. The facility
matures on 30 June 2025, at which point any outstanding amounts,
including interest, must be repaid. The facility is subject to a 2%
arrangement fee, payable on entering into the arrangement. A draw
down fee of 2% on any amount drawn down under the facility is
payable on the drawing date; and milestone fees of 2% on any
uncancelled amount of the facility become payable on 31 March 2024
and 31 December 2024 respectively.
Total debt and finance costs
At 31 January 2023, debt issue costs were GBP20.1m (2022:
GBP25.0m). The movement in the year represents expense amortisation
for the period.
During the year, the Group charged GBP41.0m (2022: GBP37.4m) to
the income statement in respect of fees and interest associated
with the bonds, RCF, term loan and ship loans. In addition, finance
costs recognised in the income statement include GBP1.2m (2022:
GBP0.7m) relating to interest and finance charges on lease
liabilities and net fair value losses on derivatives are GBPnil
(2022: GBP2.7m). The Group has complied with the financial
covenants of its borrowing facilities during the current year and
prior year.
17 Called up share capital
Ordinary shares
Nominal
value Value
Number GBP GBP'm
Allotted, called up and fully paid
As at 1 February 2021 140,102,227 0.15 21.0
Issue of shares - 12 November 2021 235,044 0.15 0.1
As at 31 January 2022 and 31 January
2023 (unaudited) 140,337,271 0.15 21.1
On 12 November 2021, Saga plc issued 235,044 new ordinary shares
of 15p each, with a value of GBP0.1m, for transfer into an EBT to
satisfy employee incentive arrangements.
18 Share-based payments
The Group has granted a number of different equity-based awards
which it has determined to be share-based payments. New awards
granted during the year were as follows:
a) On 28 April 2022, nil cost options over 345,353 shares were
issued under the Deferred Bonus Plan to Executive Directors
reflecting their deferred bonus in respect of 2021/22, which vest
and become exercisable on the third anniversary of the grant date.
Under the Deferred Bonus Plan, executives receive a maximum of
two-thirds of the bonus award in cash and a minimum of one-third in
the form of rights to shares of the Company.
b) During the year, nil cost options over 2,548,775 shares were
issued under the Restricted Share Plan to certain Directors and
other senior employees which vest and become exercisable on the
third anniversary of the grant date, subject to continuing
employment.
c) In July 2022, the Board and shareholders approved the issue
of an additional new award called the Saga Transformation Plan
(STP). The STP has a five-year vesting period and participants
receive a 12.5% share in shareholder value (share price plus
dividends) created above a GBP6 per share hurdle over a five-year
performance period commencing from the grant date, subject to
continuing employment. For Directors and senior leaders, the STP
will be equity-settled. For other employees, the STP will be
settled in cash. There is a cap of GBP88.0m on the value of awards
that may vest, and the awards have a range of grant dates based on
the tranche that each participant falls into.
On 5 July 2022, nil cost options were issued under the STP to
certain Directors and other senior employees which vest and become
exercisable on the fifth anniversary of the grant date, subject to
continuing employment.
The fair values of all awards granted during the year under the
equity-settled and cash-settled share-based remuneration schemes
operated by the Group are assessed using techniques based upon the
"Black-Scholes" pricing model. The Group charged GBP3.9m (2022:
GBP3.4m) during the year to the income statement in respect of
equity-settled share-based payment transactions.
19 Assets held for sale
At the end of the year ended 31 January 2021, the Group made the
decision to initiate an active programme to locate buyers for a
number of its freehold properties. At the point of reclassification
to held for sale, the carrying values of GBP16.9m were considered
to be equal to, or below, fair value less costs to sell and hence
no revaluation at the point of reclassification was required.
During the year ended 31 January 2022, the Group disposed of a
property reclassified from property, plant and equipment to held
for sale in the period. Cash consideration received (net of
transaction costs) was GBP10.2m and the carrying value of the
property at the date of disposal was GBP3.0m. Profit arising on
disposal was GBP7.2m.
In addition, during the year ended 31 January 2022, the Group
declassified one of the properties from held for sale back to
property, plant and equipment, since it was no longer being
actively marketed for disposal. The carrying value of this property
as at 31 January 2021 was GBP3.0m.
Management conducted impairment reviews of the freehold property
assets held for sale as at 31 January 2022 and 31 January 2023. In
relation to these freehold properties, value-in-use continued to be
negligible and so the Group obtained updated market valuations to
determine the fair value of each building. The outcome of these
impairment reviews concluded that net impairment charges totalling
GBP1.2m (2022: GBP1.0m) should be recognised against the Group's
property assets held for sale as at 31 January 2023 and 31 January
2022 respectively.
At the end of the year ended 31 January 2023, the Group made the
decision to initiate an active programme to locate buyers for a
further two of its freehold properties and one of its long
leasehold properties. The Group also reclassified to held for sale
the related fixtures and fittings associated with one of these
freehold properties. At the point of reclassification to held for
sale, the carrying values of GBP15.9m for the properties and
GBP3.6m for the related fixtures and fittings, total GBP19.5m, were
considered to be equal to, or below, fair value less costs to sell
and hence no revaluation at the point of reclassification was
required. These properties are being actively marketed and the
disposals are expected to be completed within 12 months of the end
of the financial year.
As at 31 January 2023, the carrying values of the properties
classified as held for sale, totalling GBP31.2m, are representative
of either each property's fair value or historic cost less
accumulated depreciation and any impairment charges to date,
whichever is lower.
20 Related party transactions
There were no related party transactions in the year ended 31
January 2023.
A working capital facility of GBP10.0m, agreed with Sir Roger De
Haan, the Non-Executive Chairman of Saga plc, to fund the
short-term liquidity needs of the Cruise business was cancelled in
July 2021.
As set out in Note 16, on 3 April 2023, the Company entered into
a forward starting loan facility agreement with Sir Roger De Haan,
commencing on 1 January 2024, under which the Company may draw down
up to GBP50m with 30 days' notice to support liquidity needs and
specifically the repayment of GBP150m bonds maturing in May 2024.
The facility is provided on an arm's length basis. Interest will
accrue on the facility at the rate of 10% and is payable on the
last day of the period of the loan. The facility matures on 30 June
2025, at which point any outstanding amounts, including interest,
must be repaid. The facility is subject to a 2% arrangement fee,
payable on entering into the arrangement. A draw down fee of 2% on
any amount drawn down under the facility is payable on the drawing
date; and milestone fees of 2% on any uncancelled amount of the
facility become payable on 31 March 2024 and 31 December 2024
respectively.
21 Events after the reporting period
After the year end, the Group concluded discussions with its
Cruise lenders in respect of the covenant restrictions attaching to
its two ship debt facilities (Note 16). Lenders have agreed to a
waiver of the EBITDA to debt repayment covenant ratio for the 31
July 2023 testing date.
Also since 31 January, the Company has agreed a GBP50m loan
facility with Sir Roger De Haan, to commence on 1 January 2024,
details of which are set out in Note 20 above.
Alternative Performance Measures Glossary
The Group uses a number of Alternative Performance Measures
(APMs), which are not required or commonly reported under
International Financial Reporting Standards, the Generally Accepted
Accounting Principles (GAAP) under which the Group prepares its
financial statements, but which are used by the Group to help the
user of the accounts better understand the financial performance
and position of the business.
Definitions for the primary APMs used in this report are set out
below. APMs are usually derived from financial statement line items
and are calculated using consistent accounting policies to those
applied in the financial statements, unless otherwise stated. APMs
may not necessarily be defined in a consistent manner to similar
APMs used by the Group's competitors. They should be considered as
a supplement to, rather than a substitute for, GAAP measures.
Underlying Profit/(Loss) Before Tax
Underlying Profit/(Loss) Before Tax represents the loss before
tax excluding unrealised fair value gains and losses on
derivatives, the net profit on disposal of assets, impairment of
the carrying value of assets including goodwill, the charge on
closure of the defined benefit pension scheme, foreign exchange
movements on river cruise ship leases, costs incurred for the ship
debt holiday, costs in relation to the acquisition of the Big
Window, the IFRS 16 lease accounting adjustment on river cruise
vessels and restructuring costs. It is reconciled to statutory loss
before tax within the Group Chief Financial Officer's Review on
page 10.
This measure is the Group's key performance indicator and is
useful for presenting the Group's underlying trading performance,
as it excludes non-cash technical accounting adjustments and
one-off financial impacts that are not expected to recur.
Trading EBITDA/Adjusted Trading EBITDA
Trading EBITDA is defined as earnings before interest payable,
tax, depreciation and amortisation, and excludes the IAS 19R
pension charge, exceptional costs and impairments. Adjusted Trading
EBITDA also excludes the impact of IFRS 16 leases and the Trading
EBITDA relating to the two ocean cruise ships, Spirit of Discovery
and Spirit of Adventure in line with the covenant on the Group's
revolving credit facility (RCF). It is reconciled to Underlying
Profit/(Loss) Before Tax within the Group Chief Financial Officer's
Review on page 21. Underlying Profit/(Loss) Before Tax is
reconciled to statutory loss before tax within the Group Chief
Financial Officer's Review on page 10.
This measure is linked to the covenant on the Group's RCF, being
the denominator in the Group's leverage ratio calculation.
Underlying Basic Earnings/(Loss) Per Share
Underlying Basic Earnings/(Loss) Per Share represents basic loss
per share excluding the post-tax effect of unrealised fair value
gains and losses on derivatives, the net profit on disposal of
assets, impairment of the carrying value of assets including
goodwill, the charge on the closure of the defined benefit pension
scheme, foreign exchange gains on river cruise ship leases, costs
incurred for the ship debt holiday, costs in relation to the
acquisition of the Big Window, the IFRS 16 lease accounting
adjustment on river cruise vessels and restructuring costs. This
measure is reconciled to the statutory basic loss per share in Note
6 to the accounts on pages 50-51.
This measure is linked to the Group's key performance indicator
Underlying Profit/(Loss) Before Tax and represents what management
considers to be the underlying shareholder value generated in the
period.
Available Cash
Available Cash represents cash held by subsidiaries within the
Group that is not subject to regulatory restrictions, net of any
overdrafts held by those subsidiaries. This measure is reconciled
to the statutory measure of cash in Note 13 to the accounts on page
59.
Available Operating Cash Flow
Available Operating Cash Flow is net cashflow from operating
activities after capital expenditure but before tax, interest paid,
restructuring costs, proceeds from business and property disposals
and other non-trading items, which is available to be used by the
Group as it chooses and is not subject to regulatory restriction.
It is reconciled to statutory net cash flow operating activities
within the Group Chief Financial Officer's Review on page 21.
Net Debt
Net Debt is the sum of the carrying values of the Group's debt
facilities less the amount of Available Cash it holds and is
analysed further within the Group Chief Financial Officer's Review
on page 24.
Adjusted Net Debt
Adjusted Net Debt is the sum of the carrying values of the
Group's debt facilities less the amount of Available Cash it holds
but excludes the ship debt and the Ocean Cruise business Available
Cash. It is linked to the covenant on the Group's RCF, being the
numerator in the Group's leverage ratio calculation, and is
analysed further within the Group Chief Financial Officer's Review
on page 25.
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END
FR DZGGDDDVGFZG
(END) Dow Jones Newswires
April 04, 2023 02:00 ET (06:00 GMT)
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