TIDMSAGA
RNS Number : 7545N
SAGA PLC
27 September 2023
27 September 2023
Saga plc
Interim results for the six months ended 31 July 2023
Cruise and Travel drive double-digit revenue growth
Optimising Insurance in a difficult market
Saga plc (Saga or the Group), the UK's specialist in products
and services for people over 50, announces its interim results for
the six months ended 31 July 2023. These results are reported under
International Reporting Standard (IFRS) 17 'Insurance Contracts'
and any prior year comparisons have been restated accordingly.
Six months ended 31 July 2023 31 July 2022 Change
(restated)
-------------------------------------------------------- --------------- --------------- ---------
Revenue(1) GBP355.3m GBP309.8m 15%
Underlying Profit Before Tax (Under Previous IFRS)(2) GBP13.4m GBP14.0m (4%)
Underlying Profit Before Tax 0F (2) GBP8.0m GBP14.6m (45%)
Loss before tax (3) (GBP77.8m) (GBP261.8m) 70%
Available Operating Cash Flow(2) GBP85.9m GBP31.5m 173%
Net Debt(2) GBP657.4m GBP721.3m (9%)
Leverage ratio 7.0x 8.5x (1.5x)
Euan Sutherland, Saga's Group Chief Executive Officer, said:
"I am pleased to announce a 15% increase in revenue for the
first half of the year, due to the continued growth of our Cruise
and Travel businesses, in addition to further debt reduction.
Alongside this, under consistent accounting standards, we report an
underlying half year profit that is broadly in line with the prior
year.
"In Ocean Cruise, bookings are on track to achieve our targets
for the full year , reflecting continued strong customer demand,
while our River Cruise business has returned to profit with a 34%
increase in guest numbers. Travel is also on track to return to
profit for the full year.
"In Insurance, we continue to develop our business against the
backdrop of a difficult inflationary market. While travel and
private medical insurance are achieving strong year-on-year revenue
growth, the performance in motor continues to weigh on earnings and
this has resulted in an impairment of goodwill. In Underwriting, we
have paused the process for a potential sale of the business as,
while we had established terms for the disposal, the Board believes
there is potential to generate greater value once market conditions
improve.
"Saga Money has expanded the range of financial products offered
to our customers, most recently through the launch of a range of
fixed rate savings accounts, and legal services, with more to come
shortly.
"Overall, I am pleased with the progress made in the year to
date. Looking ahead to the full year, we are keeping tight control
of our costs and are confident that we will deliver significant
double-digit growth in revenue and underlying profit that is ahead
of market estimates, and repay the May 2024 bond when it falls due.
This, alongside our continued focus on debt reduction, leaves us
well placed as we position Saga for long-term sustainable
growth."
Operational and financial highlights
-- Revenue(1) increased 15%, reflecting continued momentum in Cruise and Travel.
-- The Group reports an Underlying Profit Before Tax (Under
Previous IFRS)(2) of GBP13.4m, compared with GBP14.0m in the prior
year which benefited from one-off Insurance Underwriting
releases.
-- Under IFRS 17, Underlying Profit Before Tax(2) was GBP8.0m,
compared with GBP14.6m in the prior year.
-- Net Debt(2) , at 31 July 2023 was GBP657.4m, GBP63.9m lower
than at 31 July 2022 and GBP54.3m lower than at 31 January 2023.
This included Available Cash(2) of GBP180.7m.
-- Our reported loss before tax of GBP77.8m reflects a GBP68.1m
impairment of Insurance Broking goodwill. At 31 July 2023,
GBP381.5m of Insurance goodwill remained on the balance sheet.
-- For the full year, we expect to achieve significant
double-digit growth in revenue and Underlying Profit Before Tax(2)
when compared with the prior year, ahead of current estimates.
_______________________________
1 Revenue is stated net of ceded reinsurance premiums earned on
business underwritten by the Group of GBP8.0m (H1 2022: GBP7.3m)
less GBP5.2m onerous contract provision (H1 2022: nil)
2 Refer to the Alternative Performance Measures Glossary for
definition and explanation
3 Loss before tax includes an Insurance goodwill impairment of
GBP68.1m (H1 2022: GBP269.0m)
Divisional performance
Cruise - Ocean Cruise load factor exceeds 80%, while River
Cruise returns to profit
Ocean Cruise
-- Ocean Cruise reported an Underlying Profit Before Tax(4) of
GBP12.9m for the first half of the year, compared with an
Underlying Loss Before Tax(4) of GBP6.9m in the year before.
-- Ocean Cruise Trading EBITDA (Excluding Overheads)(4) in the
first half of the year was GBP40.1m compared with GBP17.3m in the
prior year. This was delivered through a load factor of 83%, 17ppts
ahead of the 66% in the prior year, and a per diem of GBP333 which
was 5% higher.
-- Ocean Cruise Available Operating Cash Flow(4) , after capital
repayments and interest on the ship facilities, was GBP7.8m for the
first six months of the year, compared with an outflow of GBP9.7m
for the same period in 2022.
-- At 24 September 2023, the booked load factor for the full
year was 86%, a 12ppt increase when compared with the same point
last year with the per diem of GBP332, 4% ahead. We expect to
report at least GBP40m Ocean Cruise Trading EBITDA (Excluding
Overheads)(4) per ship.
-- Looking ahead to 2024/25, the booked load factor, at 24
September 2023, was 49% and the per diem was GBP359. This compares
with 43% and GBP326 at the same point last year.
River Cruise
-- River Cruise reported a GBP1.5m Underlying Profit Before
Tax(4) in the first half of the year, a significant improvement
when compared with the GBP2.1m Underlying Loss Before Tax(4) in the
year before.
-- Revenue growth was in excess of 40%, with the number of
guests sailing with us increasing 34%, reflecting a load factor of
83% and per diem of GBP296.
-- Booked revenue at 24 September 2023 was GBP43.3m for the full
year, 52% higher than at the same point last year, representing a
load factor of 85% and per diem of GBP285. Bookings reflect a
significant increase in the number of first-time buyers following
the decision to offer more shorter seven-day cruises.
-- At the same date, the booked load factor for 2024/25 was 30%
with revenue and guests 40% and 31% higher, when compared to the
same time last year.
Travel - Profitability returning for the full year
-- In line with previous guidance, the Travel business reported
a small Underlying Loss Before Tax(4) of GBP2.6m for the six months
ended 31 July 2023, in line with the prior year.
-- At 24 September 2023, the booked revenue for the full year of
GBP155.8m was 46% ahead of the same point in the prior year, with
the volume of booked passengers 27% ahead. This places the business
on track to return to an Underlying Profit Before Tax(4) for the
full year, in line with previous guidance.
-- At the same date, booked revenue in relation to 2024/25
departures was GBP67.5m from 19.4k passengers. This compares with
revenue of GBP58.9m and 18.1k passengers at the same point in the
year before, reflecting an increase in the number of passengers
booking, but also a higher revenue per passenger.
Insurance - Optimisation in a difficult market
Insurance Broking
-- For the six months to 31 July 2023, Insurance Broking reports
an Underlying Profit Before Tax(4) of GBP23.8m on an earned basis,
compared with GBP36.7m(5) in the prior year.
-- The number of policies sold, across all products, for the
first half of the year was 0.8m, 6% behind the prior year,
reflecting lower motor and home volumes, broadly flat private
medical insurance and higher travel insurance policies. The number
of policies in force at 31 July 2023 was 1.6m, 5% behind 31 July
2022.
-- Travel insurance reported a 19% year-on-year revenue increase
supported by 2% growth in policy sales.
-- Private medical insurance revenue grew 12% on a broadly stable policy base.
-- The motor insurance market remained challenging as
underwriting rates continued to increase, reflecting the impact of
ongoing claims inflation, faster than market-wide customer pricing.
This continued to weigh on margins, particularly within our
three-year fixed-price policies. For the first half of the year,
motor and home:
o Policies sold and policies in force were 8% and 7% behind the
prior year respectively.
o Margin per policy was GBP56, compared with GBP72(5) in the
prior year. Looking ahead to the full year, we expect the margin to
remain broadly at this level.
o Customer retention continues to be strong at 84%, 1ppt higher
than in the prior year.
-- As lower policy sales in the current year translate into
fewer renewal opportunities in future years, this, alongside lower
margins, resulted in the goodwill allocated to the Insurance
Broking business being impaired by GBP68.1m. At 31 July 2023,
GBP381.5m of Insurance goodwill remained on the balance sheet.
-- We are taking action to mitigate the pressure on earnings and
have identified a series of efficiencies that will reduce annual
Insurance operating expenses by GBP5-10m.
Insurance Underwriting
-- For the first half of the year, Insurance Underwriting
reported an Underlying Loss Before Tax(4) , after expected
recoveries from reinsurance arrangements, of GBP3.6m, compared with
an Underlying Profit Before Tax(4) of GBP15.8m(5) in the year
before.
-- This performance was heavily impacted by claims inflation,
estimated at around 15% in the year to date as the applied price
increases are yet to fully flow through to insurance revenue.
-- In addition, we have observed an uptick in claims frequency,
particularly in relation to third-party damage claims and the
number of large bodily injury claims remains elevated.
-- These factors, when combined, result in a current year
combined operating ratio (COR), before reinsurance arrangements,
for the first half of the year of 136.4%, 23.1ppts higher than the
113.3%(5) in the prior year.
-- Looking ahead to the full year, the Insurance Underwriting
business is expected to report an improved gross COR as the price
increases continue to flow through to the result.
Wider strategic progress
-- Saga Money launched two new products including a range of
fixed rate savings accounts and legal services for wills, probate
and lasting powers of attorney.
-- Within Saga Media, the digital newsletter is reaching more
than 750k readers three times a week and the Saga Magazine is
distributed to 129k subscribers per month.
-- Delivery against our data strategy is progressing with our
global consent programme now live for all new customers, completion
of reconsent of existing customers on track for next year and the
successful trial of a new customer cross-sell journey.
-- Our customer transactional net promoter score continued to
grow, now at 62 compared with 61 last year.
Financial position
Reducing our level of debt remains a key priority for the Group
and good progress was made in the first half of the year as Net
Debt(4) reduced by GBP54.3m when compared with 31 January 2023. The
challenges within Insurance, and motor in particular, however,
continue to weigh on the Group's cash generation and therefore the
rate at which we are able to de-lever.
We had previously announced that we were looking to sell our
Insurance Underwriting operations and, while we were able to
establish terms for the sale, the Board believes that greater value
could be generated once conditions within the insurance market
improve. We will, however, continue to evaluate our options as the
landscape evolves.
The Group expects to meet the GBP150m bond repayment due in May
2024 through a combination of Available Cash(4) resources and
drawdown of the loan facility with Roger De Haan. To provide
additional financial flexibility following repayment of the bond,
the Group has agreed a GBP35m increase to the facility, taking the
total to GBP85m, and an extension to the expiry date, to 31
December 2025.
To further increase the Group's financial flexibility, we have
taken, and will continue to take action on costs which include
reduction of the Central Cost base by at least GBP15m per annum and
the rephasing of investments in our newer businesses.
We remain confident in the Group's ability to repay the 2024
bond and we will continue to take the necessary steps to prioritise
debt reduction.
Outlook
In Cruise, we expect to achieve at least GBP40m Ocean Cruise
Trading EBITDA (Excluding Overheads)(4) per ship for the full year,
through a load factor of around 86%, with the opportunity to grow
this further in 2024/25. River Cruise and Travel, when combined,
are anticipated to return to an Underlying Profit Before Tax(4) for
the full year, in line with pre-pandemic levels.
Insurance remains challenging as motor broking continues to
weigh on earnings, however, plans are underway to re-develop
aspects of our operation which will somewhat mitigate this. As a
result, full year Insurance Broking profitability, on a written
basis, is expected to be lower than the prior year. Repricing of
the Insurance Underwriting motor book from mid-2022 onwards is
starting to more fully benefit insurance revenues, and this is
expected to lead to an improved gross combined operating ratio in
the second half of 2023/24.
Building on the progress made during the first six months of the
year, Saga is well-placed to achieve full year double-digit growth
in revenue and underlying profitability, when compared with
2022/23, and build on the opportunities ahead as we position Saga
for sustainable growth.
Management will hold a presentation for analysts and investors
at 9.30am today. The webcast can be accessed by registering at
www.investis-live.com/saga-group/64d6149a2be9e41300ebdc0b/dwqd .. A
copy of the presentation slides is available at
www.corporate.saga.co.uk/investors/results-reports-presentations/
.
A separate live presentation for retail investors will be held
via the Investor Meet Company platform on 28 September 2023 at
9.30am. The presentation is open to all existing and potential
investors. Questions can be submitted pre-event via the Investor
Meet Company dashboard up until 9.00am on 27 September 2023, or at
any time during the live presentation. Investors can sign up to
Investor Meet Company for free and follow Saga plc via
www.investormeetcompany.com/saga-plc/register-investor. Investors
who already follow Saga plc on the Investor Meet Company platform
will automatically be invited.
Shareholders will continue to benefit from the complimentary
digital subscription to the Saga Magazine. For those that have
already taken advantage of this, the existing voucher codes will be
extended for a further 12 months and those that have not, but wish
to do so, should contact the team at www.saga.co.uk/chat.
For further information, please contact:
Saga plc Tel: 07732 093 007
Emily Roalfe, Head of Investor Relations Email: emily.roalfe@saga.co.uk
and Treasury
Headland Consultancy Tel: 020 3805 4822
Susanna Voyle Tel: 07980 894 557
Will Smith Tel: 07872 350 428
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
_______________________________
(4) Refer to the Alternative Performance Measures Glossary for
definition and explanation
(5) The prior year has been restated to reflect the adoption of
IFRS 17 'Insurance Contracts'
Chairman's Statement
Saga made progress during the first six months of the financial
year, particularly within the Cruise and Travel businesses which
reported a significant uplift in revenue. When combined, this was
more than 40% higher than in the same six-month period the year
before.
Our ocean cruise ships are seeing a high level of demand and
based on current bookings, are expected to sail with strong load
factors for the full year and with a higher revenue per guest per
night than before. We have also been working hard to develop our
River Cruise operations to provide the same levels of satisfaction
that guests experience on board our ocean cruise ships. The changes
we have made to date have been well received.
In Travel, we have seen an increase in the number of customers
booking their holidays with us and we expect this to continue into
the latter part of the year.
Motor insurance continues to be a challenge and the
profitability of that business has declined when compared with the
prior year. We are focused on re-developing aspects of our
operation which will reduce not only the costs associated with
operating the Insurance Broking business, but also our central
function.
As part of our continued focus on debt reduction and ambition to
move towards a capital-light model, we previously indicated that we
had decided to sell our Insurance Underwriting operations. While a
sale would have been possible, with terms having been established,
the current conditions within the motor insurance market mean that
a transaction now would not deliver the best value for the Group.
Consequently, I have extended my existing GBP50.0m facility to
GBP85.0m, providing incremental financial flexibility ahead of the
bond repayment in May 2024.
We are continuing to broaden the catalogue of products we are
able to offer our customers and, in Saga Money, which specialises
in supporting our customers with their financial needs, we have
recently launched two new products. These include a range of fixed
rate savings accounts and legal services in the form of support
with wills, probate and lasting powers of attorney.
We are focused on ensuring that Saga operates as efficiently as
possible as we continue to reduce debt and position Saga for
sustainable growth. While we are only six months into the financial
year, I am pleased with the progress made and look forward to
updating further as part of our full year results.
Group Chief Executive Officer's Statement
Continued progress against our growth plan
In the first half of the year, we continued to make progress
against our three-step strategic growth plan. The Cruise business
went from strength to strength with full year Ocean Cruise bookings
already ahead of our target and guest satisfaction in River Cruise
improving. Our Travel business saw a significant uplift in the
number of passengers travelling and is on track to return to profit
this year. Insurance has continued to be a challenge, particularly
in motor, however, it remains a material proportion of the Group's
earnings. Saga Money is also developing, having launched two new
products earlier this month.
Significant growth in Cruise and Travel
Saga reports an Underlying Profit Before Tax (Under Previous
IFRS) (1) of GBP13.4m for the first half of the year, compared with
GBP14.0m in the prior year which benefitted from one-off Insurance
Underwriting reserve releases. This reflects significant
improvements in Cruise and Travel but continued pressure within
Insurance from the effects of motor claims inflation and delays to
market price increases.
Following the adoption of International Financial Reporting
Standard (IFRS) 17 'Insurance Contracts', this equates to an
Underlying Profit Before Tax 5F (1) of GBP8.0m, compared with
GBP14.6m(2) for the same six months in the year before. While the
adoption of IFRS 17 changes the presentation and timing of profit
recognition, it does not impact the underlying performance of the
Group.
For the six months ended 31 July 2023, we report a loss before
tax of GBP77.8m which includes a GBP68.1m impairment of Insurance
Broking goodwill. This compares with a loss of GBP261.8m(2) in the
year before which included an Insurance goodwill impairment of
GBP269.0m.
Deleveraging also continued, benefiting from both increased
Trading EBITDA(1) and lower Net Debt(1) which, at 31 July 2023, was
GBP657.4m or GBP54.3m lower than at 31 January 2023. This included
Available Cash(1) of GBP180.7m, GBP23.2m higher than at 31 January
2023.
The progress in the first six months of the year, particularly
within Cruise, Travel and Money, provides us with a strong platform
as we move into the second half. Our drive to provide our customers
with exceptional experiences every day, supported by our focus on
data, leaves us well-positioned to return the business to long-term
sustainable growth.
Our growth plan
As we have previously published, we are focused on strategic
delivery under our three-step growth plan. An update on our
progress, during the past six months, in each of these areas is set
out below.
Step 1
The first step in our growth plan is focused on maximising our
core businesses of Cruise, Travel, Insurance and Money.
Cruise
In the first six months of the year, Ocean Cruise reported an
Underlying Profit Before Tax(1) of GBP12.9m compared with an
Underlying Loss Before Tax(1) of GBP6.9m in the prior year which
included residual impacts from the pandemic.
Revenue was 37% ahead of the prior year, delivered through a
load factor of 83% and per diem of GBP333 which were 17ppts and 5%
ahead of the same period for last year respectively. This equated
to an Ocean Cruise Trading EBITDA (Excluding Overheads)(1) of
GBP40.1m, compared with GBP17.3m in the prior year.
In addition to delivering a significant uplift in revenue,
Trading EBITDA (Excluding Overheads)(1) and Underlying Profit
Before Tax(1) , the Ocean Cruise business also reported positive
Available Operating Cash Flow(1) , even after allowing for the
capital repayments and associated interest on the two ship
facilities. In the six months to 31 July 2023, this equated to
GBP7.8m which compares with an outflow of GBP9.7m in the same
six-month period in the year before.
Bookings for the full year, at 24 September 2023 were
exceptionally strong with a load factor of 86% and per diem of
GBP332, an increase of 12ppts and 4% respectively when compared to
the same point last year. This places us on track to exceed the
targeted GBP40m Ocean Cruise Trading EBITDA (Excluding
Overheads)(1) per ship.
Looking ahead to 2024/25, the booked load factor, at the same
date, was 49%, 6ppts higher than the same time in the prior year
and the per diem of GBP359 was 10% higher.
Ocean Cruise has also continued to deliver exceptional
experiences for guests, achieving a transactional net promoter
score (tNPS)(3) of 82 in the year to date, compared with 57 in the
prior year.
River Cruise reported an Underlying Profit Before Tax(1) of
GBP1.5m for the first six months of the year which compares with an
Underlying Loss Before Tax(1) of GBP2.1m in the same period last
year. This was delivered through a load factor of 83% and per diem
of GBP296. During the period, around 8.6k guests sailed with us
which was a 34% increase when compared with last year.
Bookings for the full year are strong, with revenue, at 24
September 2023, 52% ahead of the same point in the prior year,
reflecting an 85% load factor and GBP285 per diem. Based on this
level of bookings, River Cruise is expected to report a small
Underlying Profit Before Tax(1) for the full year, compared with
the GBP5.1m Underlying Loss Before Tax(1) in 2022/23.
At 24 September 2023, secured bookings for the year ended 31
January 2025 equated to revenue of GBP16.7m, 40% ahead of the same
time last year, reflecting higher guest numbers and inflationary
increases to pricing. At the same date, the load factor and per
diem were 30% and GBP321 respectively.
River Cruise has made excellent progress in replicating the same
level of satisfaction that our guests experience on board our ocean
cruise ships. This is demonstrated in the tNPS(3) score of 57 in
the year to date which compares with 8 in the prior year,
reflecting actions taken to improve pre-cruise administration and
the quality of the food on board, alongside the benefit of fewer
pandemic-driven itinerary changes.
Travel
In line with previous guidance, the Travel business reported a
small Underlying Loss Before Tax 6F (1) of GBP2.6m in the first six
months of the year, in line with the prior year. Revenue for the
first half of the year of GBP69.7m, was 58% ahead of the prior
period and the number of passengers that travelled with us was also
ahead, by 25%.
Turning to the full year, at 24 September 2023, booked revenue
was GBP155.8m, representing a 46% increase when compared to the
same point in the prior year, with passenger numbers 27% ahead.
Based on this position and expected new bookings for the latter
part of the year, we expect that the business will return to
profit, as previously indicated, for the full year.
We are delighted that the first of our exclusive private jet
tours departed earlier this month, visiting 10 locations in just
three weeks. Following the success of this tour, a further three
tours are planned for 2024/25.
Looking ahead to next year, at 24 September 2023, booked revenue
was GBP67.5m from 19.4k passengers. This compares with GBP58.9m and
18.1k passengers at the same time last year, reflecting not only an
increase in the number of passengers choosing to book with us, but
also higher revenue per passenger arising from inflationary price
increases and a move towards higher-margin products.
Insurance
For the first six months of the year, Insurance Broking reported
an Underlying Profit Before Tax(1) , on an earned basis, of
GBP23.8m compared with GBP36.7m 2 (2) in the prior year. This
reflects continued pressure on the motor result, but broadly stable
performance in home, private medical and travel insurance.
The number of policies sold across all products was 0.8m, 6%
lower than in the year before, and the total policies in force at
31 July 2023 was 1.6m, or 5% behind the prior year.
During the first six months of the year, travel insurance
continued to recover post-pandemic, generating revenue of GBP8.7m
which was 19% higher than in the year before, with policy sales
increasing 2%. At the same time, revenue from the sale of private
medical insurance was GBP15.3m, an increase of 12% on broadly flat
policy sales, benefiting in part from a one-off contribution in
relation to the partnership agreement secured with Bupa earlier in
the year.
Motor insurance continues to be subjected to prolonged levels of
market-wide claims inflation. While this is now largely reflected
in underwriting rates and customer pricing has begun to increase,
it is currently not sufficient to offset the impact. As a result,
motor broking remains under pressure but has maintained pricing
discipline, prioritising the margin per policy over the volume of
policies sold.
Although the number of policies sold for motor and home
insurance was 11% and 3% behind the prior year respectively, or 8%
when combined, retention remained high at 84%, supported by
renewals of our three-year fixed-price policies which remain
particularly attractive to customers in the current inflationary
environment.
The margin per policy, under previous accounting standards,
across motor and home was GBP58, ahead of our GBP55 guidance. The
adoption of IFRS 17 does, however, require that some costs are
reclassified as a cost of sale as opposed to overheads, which had
been the case previously. The result of this change is that, under
IFRS 17, the margin per policy for the current year is GBP56,
compared with a restated GBP72(2) in the prior year. For the full
year, we expect the margin per policy to remain broadly at the
current level.
The proportion of motor and home customers purchasing new
policies directly, as opposed to through price-comparison websites,
was 46%, reflecting a 4ppt reduction when compared with the prior
year due to the extended inflationary pressures in the market
encouraging more consumers to use price-comparison websites.
In the short term, we expect motor insurance, in particular, to
remain a challenge as fewer policies sold in the current year
translate into a lower number of policies available for renewal in
subsequent years. This, alongside lower margins, impacts future
earnings and cash generation. As a reflection of this, Insurance
Broking goodwill has been impaired by GBP68.1m, with GBP381.5m of
Insurance goodwill remaining on the balance sheet at 31 July 2023.
To offset some of the pressure on earnings, we have initiated a
programme to re-develop our Insurance Broking business which will
reduce operating expenses by GBP5-10m per annum.
In the first six months of the year, Insurance Underwriting
reported an Underlying Loss Before Tax(1) , after accounting for
the impact of our reinsurance arrangements, of GBP3.6m, compared
with an Underlying Profit Before Tax(1) of GBP15.8m(2) in the year
before. While the business has applied significant price increases
to reflect claims inflation, these take time to be fully reflected
in the result.
In addition to prolonged high levels of claims inflation, we,
alongside the wider market, observed an increase in the frequency
of claims, and in particular, those in relation to third-party
damage. In addition, the number of large bodily injury claims has
remained elevated, albeit small in absolute terms.
The impact of these trends is that the current year combined
operating ratio, before reinsurance arrangements, rose to 136.4%
which was 23.1ppts higher than the prior year. This is, however,
expected to reduce for the full year and beyond as the benefit from
applied price increases is recognised.
Money
For the first half of the year, Saga Money reported an
Underlying Profit Before Tax(1) of GBP0.2m, compared with GBP0.9m
in the year before. This reflects the market-wide challenges within
equity release owing to higher interest rates, while performance
from our savings products was in line with the prior year.
Earlier this month, Saga Money launched two new products
designed to support our customers with a broader range of their
financial needs. These included a range of fixed rate savings
accounts in partnership with Flagstone and legal services supported
by the Co-op such as wills, probate and lasting powers of
attorney.
Step 2
The second step of our growth plan is focused on reducing our
levels of debt while scaling the business in a capital-light way,
both of which are key to our long-term success.
At 31 July 2023, our Net Debt(1) was GBP657.4m, or GBP63.9m
lower than 31 July 2022 and GBP54.3m lower than at 31 January 2023.
This included Available Cash(1) of GBP180.7m at the same date,
after GBP31.1m of capital repayments on our two ocean cruise
ships.
As we have previously indicated, we conducted a sales process
for the Insurance Underwriting business and, as part of that, we
were able to establish terms for the sale. Given the current
conditions within motor insurance, the Board believes that there is
an opportunity to generate greater value once the market improves,
however, we will continue to evaluate our options.
We expect to repay the GBP150m bond due in May 2024 from a
combination of Available Cash(1) and drawdown of the loan facility
with Roger De Haan. In addition to the existing GBP50m available
under the terms of the agreement, the Group has agreed an amendment
to provide a further GBP35m, alongside an extension to the maturity
date. To provide further financial flexibility in the medium term,
we have identified a series of actions which will reduce the
Group's central operating expenses by at least GBP15m per year,
while also rephasing investment in some of our newer
businesses.
Step 3
The third step in our growth plan is focused on positioning Saga
to deliver long-term sustainable growth through increasing the
frequency and quality of interaction with our customers through
data-driven insight.
As part of this, the role of data and increasing the number of
customers we are able to engage with is essential. Our lifetime
value model is built and operational; and we are now capturing
customer email addresses for all interactions through our website,
which equates to around 17m unique visitors per year. We have also
completed pilots for a new cross-sell journey.
Saga Media is supporting this ambition, with the digital
newsletter now reaching 750k readers three times a week and the
Saga Magazine distributed to over 129k subscribers each month.
As a measure of the strength of the Saga brand, we closely
monitor Group customer tNPS which represents the willingness of our
customers to recommend Saga products and services to their family,
friends and colleagues. In the year to date, our tNPS was 62, a 1pt
increase when compared with the same period in the previous
year.
Looking ahead to the full year
The progress made in the year to date would not have been
possible without our customers, investors, partners, communities
and colleagues. I would, therefore, like to take this opportunity
to thank you all for your ongoing support.
Turning to the remainder of the year, we are focused on
continuing to deliver exceptional experiences for our customers,
further reducing our debt and driving significant double-digit
growth in underlying profitability.
_______________________________
1 Refer to the Alternative Performance Measures Glossary for
definition and explanation
2 The prior year has been restated to reflect the adoption of
IFRS 17 'Insurance Contracts'
3 tNPS for Ocean and River Cruise is not directly comparable
with the prior year following the introduction of additional guest
surveys
Group Chief Financial Officer's Review
The Group has reported an Underlying Profit Before Tax(1) of
GBP8.0m for the first half of the year, under the new accounting
standard for insurance, International Financial Reporting Standard
(IFRS) 17, compared to a restated GBP14.6m in the prior period. On
the same basis as previous reporting, Underlying Profit Before
Tax(1) was GBP13.4m, compared to the GBP14.0m we had previously
reported for the first half of the prior year.
The reasons for the negative impact of IFRS 17 on profit this
half year, compared to a largely neutral impact in the prior
period, are fairly technical in nature. This is mainly due to
slightly different accounting for insurance claims settled via
ongoing annuity payments, known as Periodical Payment Orders
(PPOs), as well as the fact that, under IFRS 17, we are required to
discount recoveries due under quota share reinsurance arrangements.
None of this has any fundamental impact on how we see the economics
of the business, or its profit drivers, and, on an ongoing basis,
we would not expect results to be materially different between IFRS
17 and the previous standard.
In terms of overall performance and in line with expectations we
set as part of our full year results announcement, the very
different market dynamics in our two main businesses are evident in
our results. In terms of the positives, Cruise and Travel continued
to recover from the pandemic, and the first half of this year has
seen a return to normal trading. Travel and Cruise combined
returned to profit, with an GBP11.6m loss in the first half of
2022/23 reversing to a profit of GBP11.8m in the first half of
2023/24. Seasonality effects mean that we expect a much higher
level of profit in the second half of 2023/24, as roughly 60% of
Travel revenue is generated in that period, and we expect a H2
Ocean Cruise load factor of at least 87% compared with 83% in the
first half.
In relation to Insurance, market conditions have continued to be
difficult, with continued very high claims inflation putting
pressure on the Underwriting business, Acromas Insurance Company
Limited (AICL). Over the past 12 months, AICL has materially
repriced its book, with average rate increases of over 60%. As we
recognise premiums over the life of the policy, however, this means
that these rate increases will not be fully included in revenue
until next year and this is why current profitability remains under
significant pressure. Equally, the significant increases in rates
from AICL and other motor panel members have squeezed the
profitability of our Broking division, accentuated by the fact that
over 40% of the total motor book benefits from a three-year
fixed-price guarantee. This is why our average margin across motor
and home of GBP56 per policy in the first half is slightly below
our target range of around GBP60 per policy. These pressures are
not anticipated to reduce in the second half, with the motor market
likely to remain challenging into 2024/25 and this is the main
reason we have taken a further impairment of Insurance Broking
goodwill of GBP68.1m for the first half of 2023/24. In assessing
this impairment, we weighted our assumptions towards what we view
as prudent downside assumptions as to future Broking cash
flows.
While this has not been an easy period for either Insurance
Broking or Underwriting, the issues are mainly confined to motor,
with home, travel and PMI performing in line with expectations. In
addition, the three-year fixed-price challenge is relatively
short-term as all policies will be repriced to current levels
within two years; we are also pricing three-year fixed-price
policies on a prudent basis that should, over time, be positive for
margins. Finally, from an Underwriting perspective, we have taken
the necessary pricing action and claims trends now appear to be
stabilising.
Partly in response to the pressure on Insurance earnings, we
have recently launched a programme to reduce costs, particularly
focused on central functions, and a move to a more devolved
approach for core business units. We expect the run rate of Central
Costs to reduce by at least GBP15m per annum, with a smaller
improvement in the current year. Given these efficiencies and the
seasonality of Cruise and Travel earnings, Underlying Profit Before
Tax(1) for the full year is expected to be significantly higher
than in 2022/23, whether calculated under IFRS 4 or under IFRS
17.
In terms of our balance sheet, Net Debt(1) reduced by 8% from
GBP711.7m at 31 January 2023 to GBP657.4m at 31 July, supported in
the first half by an exceptionally high level of cash generation
from Cruise and Travel, which more than offset lower cash
generation from Insurance Broking and reduced AICL dividends.
Cruise and Travel operating cash flow increased from GBP0.3m in the
first half of 2022/23 to GBP73.0m in the first half of 2023/24.
While partly due to improving profitability, the first half was
also boosted by two working capital effects - a one-off release of
cash from our ring-fenced River Cruise and Travel operations, as we
moved from a 100% trust to a 70% escrow arrangement, and a recovery
in Ocean Cruise advance receipts, which is somewhat seasonal in
nature. While we still expect second half Cruise and Travel cash
flow to be positive, it will be much lower than in the first
half.
As a result of the seasonality of Cruise and Travel cash flows
and restructuring costs we will incur in connection with the new
Group operating model, we expect full year Net Debt(1) to be
slightly higher than at the half year, but still significantly
below where we started the year. When combined with the positive
outlook for Cruise and Travel businesses, lower-cost central
functions and with the increase in the loan facility with Roger De
Haan from GBP50m to GBP85m, we are very confident that we will be
able to repay the GBP150m bond due in May 2024 from Available
Cash(1) . We expect to retain a healthy level of working capital
post the bond repayment, supported by the GBP85m Roger De Haan loan
facility as well as the GBP50m revolving credit facility (RCF).
This will also give Saga a platform to continue deleveraging the
business and supporting future core business opportunities.
_______________________________
1 Refer to the Alternative Performance Measures Glossary for
definition and explanation
Operating performance
Group income statement
GBPm Unaudited Change Unaudited6m
to
6m to July
2022
July (restated)
2023
------------------------------------- ------------- ---------------------------------------- --------------
Revenue (2) 355.3 14.7% 309.8
------------- --------------
Underlying Profit Before Tax (3)
Cruise and Travel 11.8 201.7% (11.6)
Insurance Broking (earned) 23.8 (35.1%) 36.7
Insurance Underwriting (3.6) (122.8%) 15.8
------------- --------------
Total Insurance 20.2 (61.5%) 52.5
Other Businesses and Central Costs (12.5) 16.7% (15.0)
Net finance costs (4) (11.5) (1.8%) (11.3)
------------- --------------
Underlying Profit Before Tax(3) 8.0 (45.2%) 14.6
------------- --------------
Impairment of Insurance goodwill (68.1) (269.0)
Other exceptional items (17.7) (7.4)
Loss before tax ( 77.8) 70.3% (261.8)
------------- --------------
25
Tax credit/(expense) 6. 8 1.1% (4.5)
Loss after tax ( 71.0) 73.3% (266.3)
------------- --------------
Basic earnings/(loss) per share:
Underlying Earnings Per Share(3) 1.7p ( 62.2%) 4.5p
Loss per share (50.9p) 73.4% (191.3p)
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, a mailing and printing
business.
Revenue(2)
Revenue(2) increased by 14.7% to GBP355.3m (H1 2022: GBP309.8m)
due to increased trading in the Cruise and Travel businesses in the
first half of the year as customer confidence towards Cruise and
Travel returned to pre-pandemic levels.
Underlying Profit Before Tax (3)
The Group generated a total Underlying Profit Before Tax(3) of
GBP8.0m in the first half of the current year compared to GBP14.6m
in the first half of the prior year. This is primarily due to a
GBP12.9m reduction in Insurance Broking profitability due to
difficult trading conditions within motor and a GBP19.4m reduction
in Insurance Underwriting profitability due to lower changes to
liabilities for prior year incurred claims and an increased current
year loss ratio. This was broadly offset by a GBP23.4m improvement
in Cruise and Travel, moving from an GBP11.6m loss to an GBP11.8m
profit, of which GBP19.8m relates to the Ocean Cruise business.
Net finance costs(4) in the period were GBP11.5m (H1 2022:
GBP11.3m), which excludes finance costs that are included within
the Cruise and Travel businesses of GBP9.7m (H1 2022: GBP9.6m) and
Insurance Underwriting business of GBP6.5m (H1 2022: GBP1.3m).
Loss before tax
The loss before tax for the period of GBP77.8m includes a
GBP68.1m impairment to Insurance Broking goodwill and other
exceptional items of GBP17.7m consisting of:
-- restructuring costs of GBP5.9m;
-- onerous contract provisions of GBP9.2m on three-year
fixed-price policies and on insurance contracts under IFRS 17;
-- fair value loss on debt securities of GBP4.8m;
-- a GBP3.1m positive change in discount rate on non-PPO insurance liabilities;
-- arrangement fee on the unsecured loan facility with Roger De Haan of GBP1.0m;
-- a GBP0.1m acquisition cost on the purchase of The Big Window Consulting Limited;
-- fair value losses of GBP0.9m on derivatives de-designated in the period;
-- foreign exchange gains on river cruise ship leases of GBP0.6m; and
-- a positive IFRS 16 adjustment of GBP0.5m on river cruise ships.
The loss before tax in the prior period of GBP261.8m includes a
GBP269.0m impairment to Insurance goodwill and other exceptional
items of GBP7.4m including:
-- restructuring costs of GBP2.1m;
-- an onerous contract provision of GBP0.9m on insurance contracts under IFRS 17;
-- fair value loss on debt securities of GBP6.9m;
-- a GBP2.9m positive change in discount rate on non-PPO insurance liabilities;
-- acquisition costs on the purchase of The Big Window Consulting Limited of GBP0.6m;
-- fair value gain on derivatives de-designated in the period of GBP0.9m;
-- foreign exchange loss on river cruise ship leases of GBP0.3m; and
-- a negative IFRS 16 adjustment of GBP0.4m on river cruise ships.
Tax
The Group's tax credit for the period was GBP6.8m (H1 2022:
GBP4.5m expense), representing a tax effective rate of 70.1% (H1
2022: 62.5%), excluding the Insurance goodwill impairment charge.
In both the current and prior periods, the difference between the
Group's tax effective rate and the standard rate of corporation
tax, was mainly due to the Group's Ocean Cruise business being in
the tonnage tax regime.
There was also an adjustment in the current period for the
over-provision of prior year tax of GBP1.2m (H1 2022: GBP1.6m
under-provision). Excluding the impact of the Ocean Cruise business
being in the tonnage tax regime, the Insurance goodwill impairment
and adjustments to prior year tax, the tax effective rate for the
current period is 25.6%.
Earnings/(loss) per share
The Group's Underlying Basic Earnings Per Share(3) was 1.7p (H1
2022: 4.5p). The Group's reported basic loss per share was 50.9p
(H1 2022: loss of 191.3p).
Effect of IFRS 17 on profit before tax
Unaudited Unaudited
6m to 6m to
31 July 31 July
GBPm 2023 Change 2022
------------------------------------------------------ ----------- -------- -----------
Underlying Profit Before Tax (Under Previous
IFRS)(3) 13.4 (0.6) 14.0
New approach to reserve margin (1.8) (0.7) (1.1)
Change in valuation of PPO reserves (other
than due to margin) (1.6) 0.2 (1.8)
Discounting of non-PPO reserves (other than
change in discount rate) (4.0) (4.3) 0.3
Effect of expensing insurance acquisition
costs when incurred 1.0 (0.6) 1.6
Other individually immaterial adjustments 1.0 (0.6) 1.6
----------- -------- -----------
Impact of IFRS 17 on Underlying Profit Before
Tax(3) (5.4) (6.0) 0.6
Underlying Profit Before Tax(3) 8.0 (6.6) 14.6
----------- -------- -----------
For the period ended 31 July 2023, the transition to IFRS 17
resulted in an Underlying Profit Before Tax(3) reduction of
GBP5.4m, compared with a GBP0.6m benefit for the same period in the
prior year.
The material movements between the IFRS 17 impact on Underlying
Profit Before Tax(3) across the two periods are detailed below:
-- GBP4.3m negative impact arising from the discounting of
non-PPO reserves which, under previous IFRS, were not subject to
discounting. The negative impact in the current year largely arises
from the increase in recoveries under the quota share reinsurance
agreement, with these recoveries discounted over a longer duration
than that of the underlying claims. This did not represent a
significant impact in the prior period.
-- The new approach to reserve margin adjusts for differences in
reserving between IFRS 4 and IFRS 17. Specifically, management
margins included within IFRS 4 results are reversed, while new
provisions for events not in data (ENIDs) and risk adjustment are
included under IFRS 17. In the first half of 2023/24, the reversal
of the change in management margins reduced IFRS 17 profit by
GBP5.1m and this was partially offset by a reduction in ENIDs of
GBP2.0m and a reduction in the risk adjustment of GBP1.3m, net of
reinsurance.
-- The impact of expensing insurance acquisition costs when
incurred, produced a benefit to Underlying Profit Before Tax(3) in
both the current, and prior periods. This is due to decreasing
acquisition costs linked to lower sales of AICL-underwritten
policies. The GBP0.6m movement, when compared to the prior period,
reflects a slow-down of that trend.
Unaudited Unaudited
6m to 6m to
31 July 31 July
GBPm 2023 Change 2022
------------------------------------------------------ ----------- -------- -----------
Loss before tax (under previous IFRS) (66.7) 190.8 (257.5)
Impact of IFRS 17 on Underlying Profit Before
Tax(3) (5.4) (6.0) 0.6
Impact of discount rate change on non-PPO
reserves 3.1 0.2 2.9
Fair value losses on investments (4.8) 2.1 (6.9)
Net expense from onerous contracts (4.0) (3.1) (0.9)
Loss before tax (77.8) 184.0 (261.8)
----------- -------- -----------
In the six months ended 31 July 2023, the adoption of IFRS 17
increased the loss before tax by GBP11.1m (H1 2022: GBP4.3m). The
most material reasons for this are as follows:
-- GBP5.4m arising from the movements in Underlying Profit Before Tax(3) described above.
-- GBP4.0m in relation to the provision for onerous contracts.
The higher provision is due to a combination of an increase in
contracts that are onerous at initial recognition (primarily due to
renewals in years two and three of three-year fixed-price policies)
and an upwards revaluation of the existing provision due to
prolonged claims inflation.
-- GBP4.8m reduction in the value of investments backing claims
liabilities, largely offset by the related increase in the discount
rate used to value claims liabilities, which was a GBP3.1m
benefit.
_______________________________
2 Revenue is stated net of ceded reinsurance premiums earned on
business underwritten by the Group of GBP8.0m (H1 2022: GBP7.3m)
less GBP5.2m onerous contract provision (H1 2022: nil)
3 Refer to the Alternative Performance Measures Glossary for
definition and explanation
4 Net finance costs exclude Cruise, Travel and Insurance
Underwriting finance costs and net fair value gains/(losses) on
derivatives
Cruise and Travel
Unaudited 6m to July Unaudited 6m to July
2023 2022
Total Total
Cruise Cruise
Ocean River and Ocean River and
GBPm Cruise Cruise Travel Travel Change Cruise Cruise Travel Travel
--------------------- --------- --------- -------- --------- --------- --------- --------- -------- ---------
Revenue 103.8 23.4 69.7 196.9 44.6% 75.7 16.5 44.0 136.2
--------- --------- -------- --------- --------- --------- -------- ---------
Gross profit 36.1 6.5 13.6 56.2 170.2% 11.9 1.3 7.6 20.8
Marketing expenses (6.5) (2.8) (5.4) (14.7) (56.4%) (4.7) (1.6) (3.1) (9.4)
Other operating
expenses (7.0) (2.2) (10.9) (20.1) (50.0%) (4.8) (1.8) (6.8) (13.4)
Investment return - - 0.1 0.1 100.0% - - - -
Finance costs (9.7) - - (9.7) (1.0%) (9.3) - (0.3) (9.6)
Underlying
Profit/(Loss)
Before Tax (5) 12.9 1.5 (2.6) 11.8 201.7% (6.9) (2.1) (2.6) (11.6)
--------- --------- -------- --------- --------- --------- -------- ---------
Average revenue per
passenger (GBP) 4,325 2,600 2,681 3,337 5.4% 4,731 2,750 2,095 3,167
Ocean Cruise
passengers
('000) 24.3 24.3 50.0% 16.2 16.2
Ocean Cruise load
factor 83% 83% 17ppts 66% 66%
Ocean Cruise per
diem (GBP) 333 333 4.7% 318 318
River Cruise
passengers
('000) 8.6 8.6 34.4% 6.4 6.4
River Cruise load
factor 83% 83% n/a n/a n/a
River Cruise per
diem (GBP) 296 296 n/a n/a n/a
Travel passengers
('000) 25.7 25.7 24.8% 20.6 20.6
Ocean Cruise
The Ocean Cruise business owns two ocean cruise ships, Spirit of
Discovery and Spirit of Adventure.
In the first half of the year, the business returned to fully
operational conditions for the first time since the pandemic and
achieved a load factor of 83% (H1 2022: 66%) and a per diem of
GBP333 (H1 2022: GBP318). These two factors, when combined, equated
to revenue growth of 37.1% and resulted in a return to
profitability from an Underlying Loss Before Tax(5) of GBP6.9m to
an Underlying Profit Before Tax(5) of GBP12.9m, an improvement of
287.0%.
In the first half of the prior 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.
River Cruise
The River Cruise business has 10-year leases in place for two
boutique river cruise ships, Spirit of the Rhine and Spirit of the
Danube, alongside other charters which are largely managed on an
annual basis.
In the first half of the year, the business returned to more
normal operating conditions. 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. The business achieved a
load factor of 83% and a per diem of GBP296. This resulted in
revenue growth of 41.8% and a return to profitability from an
Underlying Loss Before Tax(5) of GBP2.1m to an Underlying Profit
Before Tax(5) of GBP1.5m.
In the prior period, although the business was operating, both
the Omicron variant of COVID-19, and the conflict in Ukraine,
impacted the number of passengers travelling, due to continued
customer caution in relation to Central Europe.
Travel
The Travel business, which includes both the Saga Holidays and
Titan brands, has seen increased volumes compared to the prior
period, with passenger numbers increasing from 20.6k to 25.7k.
This has led to an Underlying Loss Before Tax (5) of GBP2.6m
which is comparable to the first half of last year with the
increase in revenue of 58.4% being offset by increases to both
marketing and operating expenses as the business returns to a more
normal operating environment. The September to October period in
the second half is where the majority of the business's profit
arises, as these are peak travel months for our customers. The
Travel business remains on track to return to an Underlying Profit
Before Tax (5) for the full year.
In the first half of the prior year, the recovery in volumes was
impacted by a level of disruption from a variety of factors,
including operational challenges faced by airlines and
airports.
Forward Cruise and Travel sales
Ocean Cruise load factors for 2023/24 are ahead of the same
point last year for 2022/23 by 12ppts. This is due to the business
being fully operational for the first time since the pandemic with
significant demand for the Ocean Cruise product particularly in the
summer months where load factors are above 90%. The per diem for
2023/24 is 4.1% higher than the same point last year for 2022/23 as
the Group has reflected the inflationary impact on operating costs
in customer pricing.
Ocean Cruise load factors for 2024/25 are ahead of the same
point last year for 2023/24 by 6ppts. The per diem for 2024/25 is
10.1% higher than the same point last year for 2023/24.
River Cruise revenue and passengers booked for 2023/24 are ahead
of the same point last year for 2022/23 by 52.5% and 42.7%
respectively, reflecting an 85% load factor and GBP285 per diem.
This is due to increased customer demand for 2023/24 compared to
customer caution in respect of Central Europe in 2022/23.
River Cruise revenue and passengers booked for 2024/25 are ahead
of the same point last year for 2023/24 by 40.3% and 31.1%
respectively. Load factor and per diems for 2024/25 are 30% and
GBP321 respectively.
Travel bookings for 2023/24 are ahead at the same point last
year for 2022/23 by 45.9% and 27.3% 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.
Travel bookings for 2024/25 are ahead of the same point last
year for 2023/24 by 14.6% for revenue and 7.2% for passengers.
Current year departures Next year departures
---------------------------------------- ----------------------------------------
24 September Change 25 September 24 September Change 25 September
2023 2022 2023 2022
Ocean Cruise revenue
(GBPm) 206.3 26.9% 162.6 124.1 23.1% 100.8
Ocean Cruise load
factor 86% 12ppts 74% 49% 6ppts 43%
Ocean Cruise per
diem (GBP) 332 4.1% 319 359 10.1% 326
River Cruise revenue
(GBPm) 43.3 52.5% 28.4 16.7 40.3% 11.9
River Cruise passengers
('000) 16.7 42.7% 11.7 5.9 31.1% 4.5
River Cruise load
factor 85% n/a n/a 30% n/a n/a
River Cruise per
diem (GBP) 285 n/a n/a 321 n/a n/a
Travel revenue (GBPm) 155.8 45.9% 106.8 67.5 14.6% 58.9
Travel passengers
('000) 57.8 27.3% 45.4 19.4 7.2% 18.1
_______________________________
5 Refer to the Alternative Performance Measures Glossary for
definition and explanation
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.
Unaudited 6m to July Unaudited 6m to July
2023 2022 (restated)
Motor Home Other Motor Home Other
GBPm Broking Broking Broking Total Change Broking Broking Broking Total
-------------------- --------- --------- --------- -------- ---------- --------- --------- --------- --------
Gross written
premiums
(GWP):
Broked 61.9 78.3 70.0 210.2 17.6% 45.3 71.9 61.6 178.8
Underwritten 86.9 - 1.7 88.6 (10.4%) 97.1 - 1.8 98.9
--------- --------- --------- --------
GWP 148.8 78.3 71.7 298.8 7.6% 142.4 71.9 63.4 277.7
--------- --------- --------- -------- --------- --------- --------- --------
Broker revenue 4.7 12.1 23.3 40.1 (27.1%) 22.0 11.9 21.1 55.0
Instalment revenue 1.7 1.6 - 3.3 10.0% 1.5 1.5 - 3.0
Add-on revenue 4.2 4.9 - 9.1 (7.1%) 4.6 5.2 - 9.8
Other revenue 13.4 8.1 (1.2) 20.3 (8.1%) 13.2 8.6 0.3 22.1
Written revenue 24.0 26.7 22.1 72.8 (19.0%) 41.3 27.2 21.4 89.9
--------- --------- --------- -------- --------- --------- --------- --------
Written gross
profit 20.7 26.7 25.8 73.2 (17.7%) 38.1 27.2 23.6 88.9
Marketing expenses (5.1) (2.6) (3.2) (10.9) 12.1% (6.6) (3.4) (2.4) (12.4)
--------- --------- --------- -------- --------- --------- --------- --------
Written gross
profit
after marketing
expenses 15.6 24.1 22.6 62.3 (18.6%) 31.5 23.8 21.2 76.5
Other operating
expenses (18.3) (15.5) (10.3) (44.1) (11.6%) (17.6) (13.5) (8.4) (39.5)
Written Underlying
(Loss)/Profit
Before
Tax (6) (2.7) 8.6 12.3 18.2 (50.8%) 13.9 10.3 12.8 37.0
Written to earned
adjustment 5.6 - - 5.6 (0.3) - - (0.3)
Earned Underlying
Profit Before
Tax(6) 2.9 8.6 12.3 23.8 (35.1%) 13.6 10.3 12.8 36.7
--------- --------- --------- -------- --------- --------- --------- --------
Policies in force 754k 634k 208k 1,596k (5.4%) 840k 658k 189k 1,687k
Policies sold 385k 323k 111k 819k (6.4%) 433k 333k 109k 875k
Third-party panel
share (7) 38.9% 11.2ppts 27.7%
Insurance Broking Underlying Profit Before Tax(6) on a written
basis (which excludes the impact of the written to earned
adjustment deferring the revenue on policies underwritten over the
term of the policy) decreased to GBP18.2m from GBP37.0m. On an
earned basis (which includes the impact of the written to earned
adjustment), Underlying Profit Before Tax(6) decreased to GBP23.8m
from GBP36.7m.
A key metric for the Insurance Broking business is written gross
profit, after deducting marketing expenses, but before deducting
overheads. This reduced from GBP76.5m in the prior period to
GBP62.3m in the current period due mainly to lower renewal volumes
and margins on motor business. The fall of GBP15.9m in written
gross profits after marketing expenses in motor was partially
offset by a GBP0.3m and GBP1.4m improvement in Home and Other
Broking respectively. The improvement in Other Broking was mainly
due to a one-off payment from Bupa on private medical insurance
(PMI) as part of the agreed terms for migrating the book from
AXA.
For motor and home insurance, in terms of the total gross margin
after marketing expenses, new business profits increased by
GBP0.8m, while there was a GBP16.4m reduction in renewal
profits.
The reduction in profitability of the motor business is
attributable to significant inflationary pressures on the net rates
charged by the Broking division's panel partners, which have
increased at a faster pace than the price that can be charged to
consumers in a competitive marketplace. This has been accentuated
by the fact that a significant number of motor policies are on
three-year fixed-price deals, which fixes the price to the customer
for two renewals. Lower new business volumes in the prior year have
also led to an 11% reduction in the level of renewal volumes in the
current year.
The three-year fixed-price product remains important, with 319k
policies sold in the period, 45% of total motor and home policies,
with 30% of direct new business customers taking the product
despite cost of living pressures. The Group remains of the view
that this product is highly attractive to our customer base, and
while current profitability has been impacted by high industry
inflation, this is a short-term challenge as all policies will have
been repriced by the middle of 2025 at the latest. Inflation for
the three-year fixed-price home product is within expectations.
The challenging motor environment led to 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, reducing to GBP56.1 in the current period,
compared with GBP72.2 in the prior period.
In addition, while customer retention improved from 83% to 84%,
overall motor and home policies in force decreased by 7% compared
to 31 July 2022 and direct new business sales reduced by 4ppts to
46% as the Group rebalanced volumes and renewals towards
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 these products. As at 31 July 2023, GBP11.1m (H1 2022:
GBP9.1m) of income had been deferred in relation to three-year
fixed-price policies, GBP4.5m (H1 2022: GBP3.9m) of which related
to income written in the period to 31 July 2023.
Motor Broking
Gross written premiums increased by 4.5% due to a 17.5% increase
in average premiums, partially offset by a 11.1% decrease in core
policies sold. Gross written premiums from business underwritten by
AICL decreased 10.5% to GBP86.9m (H1 2022: GBP97.1m) due to a 24.5%
decrease in core policies sold that were underwritten by AICL,
offset by a 18.6% increase in average premiums.
Written gross profit minus marketing expenses was GBP15.6m (H1
2022: GBP31.5m), contributing GBP40.5/policy (H1 2022:
GBP72.7/policy). The decrease in written gross profits and margin
per policy is mainly due to the adverse impact of inflation on
motor renewal profitability.
Home Broking
Gross written premiums increased by 8.9% due to a 12.3% increase
in average premiums, partially offset by a 3.0% reduction in core
policies sold.
Written gross profit minus marketing expenses was GBP24.1m (H1
2022: GBP23.8m) and, on a per policy basis, this was GBP74.6/policy
(H1 2022: GBP71.5/policy). The increase in new business margins was
offset by lower renewal margins and a 3.9% decrease in renewal
policies sold.
Other Broking
The Other Insurance Broking business primarily comprises PMI and
travel insurance.
Gross written premiums increased 13.1% as a result of higher
average premiums on travel insurance policies, with policy sales
broadly stable at 86k (H1 2022: 84k).
Gross profits after marketing costs relating to travel insurance
products increased by GBP0.8m.
While sales of the PMI product were stable, gross profit after
marketing costs was GBP1.3m higher. This increase is mainly due to
a one-off payment from Bupa as part of the agreed terms for
migrating the book from AXA.
Insurance Underwriting
Unaudited 6m to July Unaudited 6m to July
2023 2022 (restated)
GBPm Re- Gross Re-
Gross insurance Net change Gross insurance Net
---------------------- -------------- ----------- ----------- -------- ----------- -------- ----------- --------
Insurance revenue A 78.5 (8.0) 70.5 (4.2%) 81.9 (7.3) 74.6
Incurred claims
(current year
claims) B (91.5) 19.2 (72.3) (16.9%) (78.3) 5.4 (72.9)
Claims handling
costs in relation
to incurred claims C (7.9) - (7.9) (16.2%) (6.8) - (6.8)
Changes to
liabilities
for incurred claims
(prior year claims) D 8.6 7.4 16.0 (54.5%) 18.9 7.7 26.6
Other incurred
insurance service
expenses E (7.7) - (7.7) - (7.7) - (7.7)
Insurance service
result (20.0) 18.6 (1.4) (350.0%) 8.0 5.8 13.8
----------- ----------- -------- -------- ----------- --------
Net finance (expense)/income
from (re)insurance
(excludes impact
of change in discount
rate on non-PPO
liabilities) (12.9) 6.4 (6.5) 1.4 (2.7) (1.3)
Investment return
(excludes fair
value gains/losses
on debt securities) 4.3 - 4.3 30.3% 3.3 - 3.3
Underlying (Loss)/Profit
Before Tax (6) (28.6) 25.0 (3.6) (325.2%) 12.7 3.1 15.8
----------- ----------- -------- -------- ----------- --------
Reported loss
ratio (B+D)/A 105.6% 79.9% (33.1ppt) 72.5% 62.1%
Expense ratio (C+E)/A 19.9% 22.1% (2.2ppt) 17.7% 19.4%
Reported combined
operating ratio
(COR) (B+C+D+E)/A 125.5% 102.0% (35.3ppt) 90.2% 81.5%
Current year COR (B+C+E)/A 136.4% 124.7% (23.1ppt) 113.3% 117.2%
Number of earned
policies 278k (17.6%) 337k
Policies in force
- Saga motor 462k (22.9%) 599k
The Group's in-house underwriter, AICL, underwrites over 60% of
the motor business sold by Insurance Broking, alongside a smaller
proportion of business on other panels. Alongside this, AICL
underwrites a portion of Saga's 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.
In line with the wider market, AICL has experienced a prolonged
period of elevated claims inflation which, in the six months to 31
July 2023, was estimated at around 15%. In response to this,
material price increases have been applied over the past 12 months,
however, these take time to fully flow through to insurance
revenue.
Gross insurance revenue, in the first half of the year,
decreased by 4.2% to GBP78.5m (H1 2022: GBP81.9m) reflecting a
17.6% reduction in the number of earned policies underwritten by
AICL, particularly those underwritten for Saga as opposed to other
panels. This was only partially offset by the 16.2% increase in
average earned premiums.
While claims trends in the first half of 2022/23 were somewhat
adverse to expectations, inflationary pressures really started to
accelerate from mid-2022 onwards. Results for the second half of
the year were heavily impacted by these pressures, as well as from
an increased frequency of large losses. These trends have continued
into the first half of 2023/24, albeit with some moderation in
large loss frequency and with pricing actions over the past 12
months now starting to benefit revenues.
The above factors, when combined, result in an increased current
year gross COR of 136.4% (H1 2022: 113.3%), however, after allowing
for reinsurance arrangements, this reduces to 124.7% (H1 2022:
117.2%).
Following the increases applied over the past year, pricing now
reflects recent, and emerging trends, and, as a result, the COR is
expected to reduce over time as these higher prices flow through to
the result.
Changes to liabilities for incurred claims reduced from a
positive GBP26.6m in the prior period to GBP16.0m in the current
year result. This is in line with previous indications that we
expected lower run-off emergence in future. The net finance expense
line includes the unwind of the discount of opening claims
liabilities, which materially increased in the prior period due to
the increase in the claims discount rate over the last 12 months.
This also includes modest adjustments to the valuation of PPO
liabilities, which were a net GBP1.8m expense in the first half of
2023/24 compared with a GBP0.2m positive in the prior period.
_______________________________
6 Refer to the Alternative Performance Measures Glossary for
definition and explanation
7 Third-party underwriter's share of the motor panel for
policies
Other Businesses and Central Costs
Unaudited 6m to July Unaudited 6m to July
2023 2022 (restated)
Other Central Other Central
GBPm Businesses Costs Total Change Businesses Costs Total
--------------------------- ------------- --------- -------- ---------- ------------- --------- --------
Revenue:
Money 3.7 - 3.7 (9.8%) 4.1 - 4.1
Media and CustomerKNECT 5.8 - 5.8 13.7% 5.1 - 5.1
Insight 0.5 - 0.5 100.0% - - -
Other - - - (100.0%) - 0.8 0.8
------------- --------- -------- ------------- --------- --------
Total revenue 10.0 - 10.0 - 9.2 0.8 10.0
------------- --------- -------- ------------- --------- --------
Gross profit 4.2 2.5 6.7 (5.6%) 4.2 2.9 7.1
Operating expenses (6.4) (15.1) (21.5) 3.6% (3.8) (18.5) (22.3)
Investment income - 2.3 2.3 - 0.2 0.2
Net finance costs - (11.5) (11.5) (1.8%) - (11.3) (11.3)
Underlying (Loss)/Profit
Before Tax (8) (2.2) (21.8) (24.0) 8.7% 0.4 (26.7) (26.3)
------------- --------- -------- ------------- --------- --------
The Group's Other Businesses include Saga Money, Saga Media,
Saga Insight and CustomerKNECT.
Underlying Profit Before Tax(8) for Other Businesses combined
has decreased by GBP2.6m from GBP0.4m to an Underlying Loss Before
Tax(8) of GBP2.2m, due to net investments of GBP2.2m across Saga
Money, Saga Media and Saga Insight. In addition, revenue in Saga
Money has decreased by GBP0.4m due to a challenging equity release
market.
Central operating expenses decreased to GBP15.1m (H1 2022:
GBP18.5m). Gross administration costs, before Group recharges,
decreased by GBP2.3m in the period, mainly as a result of lower
property costs following the closure of the Group's offices and net
costs decreased by GBP3.4m due to higher Group recharges to the
business units.
Net finance costs in the period were GBP11.5m (H1 2022:
GBP11.3m), which excludes finance costs that are included within
the Cruise and Travel businesses of GBP9.7m (H1 2022: GBP9.6m) and
Insurance Underwriting business of GBP6.5m (H1 2022: GBP1.3m).
_______________________________
8 Refer to the Alternative Performance Measures Glossary for
definition and explanation
Cash flow and liquidity
Available Operating Cash Flow
Unaudited Change Unaudited
6m to
July 6m to
2023
July
2022
GBPm (restated)
-------------------------------------------------- ---- -------------- ------------------------------------------------- --------------
Insurance Broking Trading EBITDA (9) 27.5 (31.3%) 40.0
Other Businesses and Central Costs Trading
EBITDA(9) (10.0) 18.0% (12.2)
Trading EBITDA(9,) (10) from unrestricted
businesses 17.5 (37.1%) 27.8
Dividends paid by Insurance Underwriting
business 7.0 (53.3%) 15.0
Working capital and non-cash items (0.7) 85.1% (4.7)
Capital expenditure funded with Available
Cash(9) (10.9) (58.0%) (6.9)
Available Operating Cash Flow(9) before cash
repayment from/(injection into) Cruise and
Travel
operations 12.9 (58.7%) 31.2
Cash repayment from/(injection into) River
Cruise
and Travel businesses 26.0 306.3% (12.6)
Ocean Cruise Available Operating Cash Flow(9) 47.0 264.3% 12.9
Available Operating Cash Flow(9) 85.9 172.7% 31.5
Restructuring costs (4.8) (585.7%) (0.7)
Interest and financing costs (21.3) (13.3%) (18.8)
Business acquisitions - 100.0% (0.9)
Tax receipts 0.3 (87.5%) 2.4
Other payments (5.8) - (5.8)
Change in cash flow from operations 54.3 605.2% 7.7
Change in ship debt (31.1) (103.3%) (15.3)
Cash at 1 February 157.5 (15.6%) 186.6
Available Cash(9) at 31 July 180.7 0.9% 179.0
-------------- --------------
Available Operating Cash Flow (9) is made up of the cash flows
from 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
period, with an Available Operating Cash Flow (9) of GBP12.9m
compared with GBP31.2m in the prior period. Trading EBITDA (9,10)
from unrestricted businesses reduced by GBP10.3m, mainly as a
result of reduced motor margins in the Insurance Broking segment.
Changes in working capital were a GBP0.7m outflow in the current
period, compared with a GBP4.7m outflow in the first half of the
prior year, and dividends from AICL reduced by GBP8.0m, as
expected.
For River Cruise and Travel, the Group was repaid GBP26.0m in
the first half of the year. This is an improvement of GBP38.6m when
compared with the GBP12.6m provided to the businesses to cover
trading cash flows in the first half of the prior year. The
improvement is due to the businesses, in agreement with the Civil
Aviation Authority (CAA), moving from a fully ring-fenced trust
arrangement, where the businesses could not access 100% of customer
cash from the trust until they returned from their river cruise or
holiday, to a ring-fenced escrow arrangement trust where 70% of
customer cash is restricted until they return. At 31 July 2023, the
ring-fenced businesses held cash of GBP59.0m, of which GBP47.2m was
held in trust. The Group must hold a minimum of GBP8.1m of cash
outside of trust within the ring-fenced businesses as agreed with
the CAA.
The Ocean Cruise business reported an operating cash inflow of
GBP47.0m (H1 2022: GBP12.9m), with an increase in advance customer
receipts of GBP18.7m (H1 2022: GBP4.0m), and net trading income of
GBP31.4m (H1 2022: GBP10.2m), partially offset by capital
expenditure of GBP3.1m (H1 2022: GBP1.3m). Net of interest costs of
GBP8.1m (H1 2022: GBP7.3m), the Ocean Cruise business reported net
cash inflow, before any capital repayments on the ship debt, of
GBP38.9m for the first half of 2023/24 compared to GBP5.6m in the
first half of the prior year.
As a result of the significantly improved cash generation from
the Ocean Cruise business and cash repayments from the River Cruise
and Travel businesses, partially offset by a reduction in cash
generation from unrestricted businesses, Available Operating Cash
Flow (9) increased from an inflow of GBP31.5m in the prior period
to GBP85.9m in the current period.
Other cash flow movements
Interest and financing costs increased in the current period due
to higher interest costs on the ship debt deferral loans and the
debt issue costs associated with the unsecured loan facility with
Roger De Haan.
In the prior period, business acquisitions relate to the
purchase of The Big Window Consulting Limited.
The Group continued to make the agreed payments to the defined
benefit pension fund as part of the deficit recovery plan of
GBP5.8m (H1 2022: GBP5.8m). These are included within other
payments.
In the current period, the Group continued to make capital
repayments against its ship debt facilities, with one payment
totalling GBP15.3m (H1 2022: GBP15.3m) on Spirit of Discovery's
debt facility and one payment totalling GBP15.8m (H1 2022: GBPnil)
on Spirit of Adventure's debt facility.
_______________________________
9 Refer to the Alternative Performance Measures Glossary for
definition and explanation
1 (0) 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
Reconciliation between operating and reported metrics
Available Operating Cash Flow(11) reconciles to net cash flows
from operating activities as follows:
Unaudited Unaudited
6m to 6m to
July Change July
GBPm 2023 2022 (restated)
------------------------------------------------------- ----------- ---------- ------------------
Net cash flows from/(used in) operating activities
(reported) 51.9 490.2% (13.3)
Exclude cash impact of:
Trading of restricted divisions (5.9) (125.2%) 23.4
Non-trading costs 0.2 (96.9%) 6.5
Interest paid 20.7 4.0% 19.9
Tax paid - 0.9
15.0 (70.4%) 50.7
Cash released from restricted divisions 33.0 2.4
Include capital expenditure funded from Available
Cash(11) (10.9) (58.0%) (6.9)
Include Ocean Cruise capital expenditure (3.1) (121.4%) (1.4)
Available Operating Cash Flow(11) 85.9 172.7% 31.5
----------- ------------------
Trading EBITDA (11) reconciles to Underlying Profit Before
Tax(11) as follows:
Unaudited Unaudited
6m to 6m to
July July
GBPm 2023 Change 2022 (restated)
---------------------------------------------- ----------- ---------- ------------------
Insurance Broking Trading EBITDA(11) 27.5 (31.3%) 40.0
Insurance Underwriting Trading EBITDA(11) 2.9 (83.1%) 17.2
Ocean Cruise Trading EBITDA(11,) (12) 33.1 164.8% 12.5
River Cruise and Travel Trading EBITDA(11) (0.5) 88.4% (4.3)
Other Businesses and Central Costs Trading
EBITDA(11) (10.0) 18.0% (12.2)
Trading EBITDA(11) 53.0 (0.4%) 53.2
Depreciation and amortisation (17.3) 16.4% (20.7)
Titan River Cruise commitment costs - (100.0%) 4.3
Net finance costs (including Cruise, Travel
and Underwriting) (27.7) (24.8%) (22.2)
Underlying Profit Before Tax(11) 8.0 (45.2%) 14.6
----------- ------------------
Adjusted Trading EBITDA (11) is used in the Group's leverage
calculation for the revolving credit facility (RCF) covenant and is
calculated as follows:
Unaudited Unaudited
6m to 6m to
July July
GBPm 2023 Change 2022 (restated)
------------------------------------------------- ----------- ---------- ------------------
Trading EBITDA (11) for 12m to 31 January 2023 92.6 42.0% 65.2
Less Trading EBITDA (11) for 6m to 31 July
2022 (53.2) (81.6%) (29.3)
Add Trading EBITDA (11) for 6m to 31 July 2023 53.0 (0.4%) 53.2
----------- ------------------
Trading EBITDA (11) (12 months rolling) 92.4 3.7% 89.1
Titan River Cruise commitment costs - (100.0%) 4.3
Impact of accounting standard changes since
31 January 2017 2.0 122.5% (8.9)
Spirit of Discovery and Spirit of Adventure
Trading EBITD A (11,12) (59.4) (180.2%) (21.2)
Adjusted Trading EBITDA (11) 35.0 (44.7%) 63.3
----------- ------------------
Ocean Cruise Trading EBITDA (11) reconciles to Ocean Cruise
Trading EBITDA (Excluding Overheads)(11) as follows:
Unaudited Unaudited
6m to 6m to
July July
GBPm 2023 Change 2022
-------------------------------------------------------- ----------- -------- -----------
Ocean Cruise Trading EBITDA(11) 33.1 164.8% 12.5
Ocean Cruise overheads 7.0 45.8% 4.8
----------- -----------
Ocean Cruise Trading EBITDA (Excluding Overheads)(11) 40.1 131.8% 17.3
----------- -----------
_______________________________
1 (1) Refer to the Alternative Performance Measures Glossary for
definition and explanation
1 (2) EBITDA includes Ocean Cruise overheads
Statement of financial position
Goodwill
During the first half of 2023, high claims cost inflation,
particularly in Motor, has continued to put pressure on the
Insurance business. Combined with the impact of Saga's three-year
fixed-price product and highly competitive market conditions, this
is expected to lead to lower margins per policy and lower overall
profit before tax for the broking business, compared to prior
assumptions. The Group has therefore conducted an impairment review
of the GBP449.6m Insurance goodwill asset that was included on the
statement of financial position at 31 January 2023.
The Group's revised five-year financial forecasts incorporate
the modelled impact of the changes in the market environment,
including the impact of continued pressure on margins. Further
stress tests have also been considered, including the continuation
of high claims cost inflation for an extended period and further
downsides compared to revised base case assumptions. This has
resulted in management taking the decision to impair insurance
goodwill by a further GBP68.1m as at 31 July 2023. Consistent with
the approach taken in prior years, this impairment is not included
within Underlying Profit Before Tax(13) .
_______________________________
13 Refer to the Alternative Performance Measures Glossary for
definition and explanation
Carrying value of ocean cruise ships
At 31 July 2023, the carrying value of the Group's ocean cruise
ships was GBP597.2m (31 January 2023: GBP607.0m). Trading
performance in the current year has been very positive, and with
strong bookings for 2024/25, the Directors concluded that there
were no indicators of impairment at 31 July 2023.
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 GBP38.5m to
GBP241.4m (31 January 2023: GBP279.9m), partly due to payment of
GBP7.0m of dividends from AICL in the period. At 31 July 2023, 100%
of the financial assets held by the Group were invested with
counterparties with a risk rating of BBB or above, compared with
97.9% in the prior period, reflecting the relatively stable credit
risk rating of the Group's investment holdings.
Credit risk rating
Unaudited at 31 July 2023 AAA AA A BBB Unrated Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ ------ ------ ------ --------- -------
Investment portfolio:
Deposits with financial
institutions - 4.3 6.2 - - 10.5
Debt securities 23.0 57.4 69.2 80.6 - 230.2
Money market funds 0.7 - - - - 0.7
Total invested funds 23.7 61.7 75.4 80.6 - 241.4
Derivative assets - - 1.1 - - 1.1
Total financial assets 23.7 61.7 76.5 80.6 - 242.5
------ ------ ------ ------ --------- -------
Credit risk rating
At 31 January 2023 AAA AA A BBB Unrated Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ ------ ------ ------ --------- -------
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
------ ------ ------ ------ --------- -------
Insurance reserves
Analysis of insurance contract liabilities at 31 July 2023 and
31 January 2023 is as follows:
Unaudited at 31 July At 31 January 2023
2023 (restated)
Reinsurance Reinsurance
GBPm Gross assets Net Gross assets Net
------------------------------------ ------- ------------- ------- ------- ------------- -------
Incurred claims - estimate
of the present value of
future cash flows 263.9 (115.9) 148.0 259.2 (87.6) 171.6
Incurred claims - risk adjustment 36.8 (29.8) 7.0 35.6 (27.4) 8.2
Remaining coverage - excluding
loss component 39.8 1.2 41.0 44.3 5.5 49.8
Remaining coverage - loss
component 13.1 (3.4) 9.7 8.4 (2.7) 5.7
Total 353.6 (147.9) 205.8 347.5 (112.2) 235.3
------- ------------- ------- ------- ------------- -------
The Group's total insurance contract liabilities, net of
reinsurance assets, decreased by GBP29.6m in the period to 31 July
2023 from the previous year end, primarily due to a GBP24.8m
reduction in net incurred claims reserves, coupled with an GBP4.8m
decrease in net remaining coverage claims reserves. The reduction
in net remaining coverage claims reserves is due to changes to
liabilities for prior year incurred claims that reflect continued
favourable experience on large bodily injury claims relating to
prior accident years.
Financing
At 31 July 2023, the Group's Net Debt(14) was GBP657.4m,
GBP54.3m lower than at the beginning of the financial year.
The Group's total leverage ratio was 7.0x as at 31 July 2023 (31
January 2023: 7.5x). Excluding the impact of debt and earnings
relating to the ocean cruise ships, the Group's leverage ratio
relating to the RCF was 6.4x at 31 July 2023 (31 January 2023:
4.3x), within the 6.75x covenant.
The Group made repayments on its ship debt facilities in March
2023 for Spirit of Adventure and in June 2023 for Spirit of
Discovery.
GBPm Unaudited
Maturity 31 July 31 January
date (15) 2023 2023
-------------------------------- -------------- ----------- --------------
3.375% Corporate bond May 2024 150.0 150.0
5.5% Corporate bond July 2026 250.0 250.0
RCF May 2025 - -
Spirit of Discovery ship loan June 2031 188.9 204.2
September
Spirit of Adventure ship loan 2032 249.2 265.0
Less Available Cash (14,16) (180.7) (157.5)
Net Debt (14) 657.4 711.7
----------- --------------
Net Debt(14) is analysed as follows:
Adjusted Net Debt(14) is used in the Group's leverage
calculation and reconciles to Net Debt(14) as follows:
GBPm Unaudited
31 July 31 January
2023 2023
-------------------------------------- ----------- --------------
Net Debt (14) 657.4 711.7
Exclude ship loans (438.1) (469.2)
Exclude Ocean Cruise Available Cash
(14) 3.1 1.4
Adjusted Net Debt (14) 222.4 243.9
----------- --------------
The Group has agreed an extension of the loan facility in place
with Roger De Haan, increasing the amount that can be drawn from
GBP50m to GBP85m. The facility, which can be utilised from 1
January 2024, remains unsecured, and the interest rate remains at
10% provided that drawn funds are used to repay the corporate bonds
due in May 2024. If the loan facility is drawn for general
corporate purposes, the interest rate increases to 18%. While the
Group is likely to draw down the loan facility as part of the 2024
bond repayment, it is not likely to draw the funds for any other
purpose. The revised loan agreement includes some other amendments
that are not considered significant but, for the most part, it
continues to follow the wording of the Group's RCF. The termination
date of the facility with Roger De Haan has also been extended from
30 June 2025 to 31 December 2025.
_______________________________
14 Refer to the Alternative Performance Measures Glossary for
definition and explanation
15 Maturity date represents the date that the principal must be
repaid, other than the ship loans, which are repaid in instalments
over the next nine years
16 Refer to Note 13 of the financial statements for information
as to how this reconciles to a statutory measure of cash
Pensions
The Group's defined benefit pension scheme liability, as
measured on an International Accounting Standard (IAS) 19R basis
reduced by GBP4.1m to a GBP8.0m liability as at 31 July 2023
(GBP12.1m liability as at 31 January 2023).
GBPm Unaudited
31 July 31 January
2023 2023
---------------------------------------------- ----------- --------------
Fair value of scheme assets 208.5 224.1
Present value of defined benefit obligation (216.5) (236.2)
Defined benefit pension scheme liability (8.0) (12.1)
----------- --------------
During the period ended 31 July 2023, the net liability position
of the scheme reduced by GBP4.1m, resulting in an overall scheme
deficit of GBP8.0m, mainly as a result of a recovery plan
contribution being paid by the Group. The GBP5.8m deficit funding
contribution was paid in February 2023 in relation to a recovery
plan agreed under the latest triennial valuation of the scheme as
at 31 January 2020.
The movements observed in the scheme's assets and obligations
have been impacted by macroeconomic factors during the period
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
GBP19.7m to GBP216.5m, primarily due to a 55bps 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
GBP15.6m to GBP208.5m. The decrease in asset values has been
largely driven by the rise in interest rates in the period.
Net assets
Since 31 January 2023, total assets have decreased by GBP24.6m
and total liabilities have increased by GBP46.6m, resulting in an
overall decrease in net assets of GBP71.2m.
The decrease in total assets is primarily due to:
-- a decrease in goodwill of GBP68.1m following an impairment to
insurance goodwill in the period;
-- a decrease in financial assets of GBP39.9m, mainly relating
to a reduction to the Insurance Underwriting investment portfolio,
partly to fund GBP7.0m of dividends from AICL;
-- an increase in reinsurance assets of GBP35.7m due to the
receivable on the quota share contract with AICL's reinsurance
increasing in the period;
-- an increase in cash and short-term deposits of GBP30.7m; and
-- an increase in trust accounts of GBP11.0m due to seasonality
in the River Cruise and Travel businesses.
The increase in total liabilities reflects:
-- an increase of GBP57.5m in contract liabilities due to the
seasonality of the Cruise and Travel businesses;
-- an increase in trade and other payables of GBP13.6m; and
-- a decrease of GBP33.1m in financial liabilities, which is
mainly due to a reduction of GBP29.3m in bond and bank loans, as a
result of capital repayments on Spirit of Discovery and Spirit of
Adventure facilities.
Effect of IFRS 17 on net assets
Unaudited Unaudited
31 July 31 July
GBPm 2023 Change 2022
----------------------------------------------- ----------- --------- -----------
Net assets (under previous IFRS) 303.1 (93.6) 396.7
Reversal of management margin under previous
IFRS 18.8 (12.7) 31.5
ENIDs under IFRS 17 (6.0) 5.3 (11.3)
IFRS 17 risk adjustment (7.1) 4.3 (11.4)
New approach to reserve margin 5.7 (3.1) 8.8
Revised PPO carer wage inflation, alongside
changes to other assumptions (22.6) (12.6) (10.0)
Different discount rate for PPOs and
related reinsurance assets 17.5 8.3 9.2
----------- -----------
Change in valuation of PPO reserves (other
than due to 'margin') (5.1) (4.3) (0.8)
Discounting non-PPO liabilities and related
reinsurance assets 11.2 1.4 9.8
Expense acquisition costs when incurred (12.9) 3.6 (16.5)
Onerous contract provision (net of related
reinsurance assets) (9.7) (6.9) (2.8)
Other individually immaterial items (1.0) (3.1) 2.1
Deferred taxation 2.9 3.1 (0.2)
Impact of IFRS 17 on net assets (8.9) (9.3) 0.4
----------- -----------
Net assets under IFRS 17 294.2 (102.9) 397.1
----------- -----------
At 31 July 2022, net assets under IFRS 17 were GBP0.4m higher
than under previous IFRS, however, at 31 July 2023, net assets were
GBP8.9m lower under IFRS 17 than previous IFRS. The material
components of this negative movement are included below:
-- GBP6.9m increase in the net onerous contracts provision held
in relation to motor insurance contracts. This was a driven by a
combination of an increase in contracts that were onerous at
initial recognition (due primarily due to renewals in years two and
three of three-year fixed-price policies) and an upwards
revaluation of the provision due to prolonged claims inflation.
-- GBP3.1m reduction in the positive impact of the new approach
to reserve margin. This is due to a GBP12.7m reduction in the
management margin held under previous IFRS being greater than the
GBP9.6m reduction in IFRS 'margin' (ENIDs and risk adjustment).
-- GBP4.3m negative movement due to a change in the impact of
revaluing PPO reserves under IFRS 17. The two impacts of IFRS 17
changes to PPO valuation assumptions (being the carer wage
inflation assumption and the discount rate) would typically largely
offset each other, however, this is not exact due to the
complexities of valuing PPO liabilities, including related
potential lump sum awards. This is particularly the case in a
changing economic environment.
These are, however, partially offset by:
-- GBP3.6m reduction to the negative impact of expensing
insurance acquisition costs when incurred under IFRS 17 instead of
deferring them over the life of the policy under previous IFRS.
This reduced impact reflects a trend of decreasing acquisition
costs which is related to lower sales of AICL-underwritten
policies.
-- GBP1.4m positive movement in the impact of discounting
non-PPO claim reserves at the IFRS 17 discount rate. This is due to
rising market interest rates to which the IFRS 17 discount rate is
linked.
-- GBP3.1m deferred tax impact of the above adjustments.
Going concern
The Directors have performed an assessment of going concern to
determine the adequacy of the Group's financial resources over a
period of 13 months from the date of signing these financial
statements, a period selected to include consideration of the 31
October 2024 covenant testing date attached to the Group's GBP50m
RCF.
This assessment is based on higher case 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 the second half of 2023/24 and into 2024/25,
on the back of strong booked load factors and per diems. Travel is
also expected to achieve continued growth in revenues. The outlook
for Insurance, however, remains challenging, with high cost and
claims inflation in a competitive market expected to put continued
pressure on margins.
The Group's downside scenario incorporates lower load factors
for Ocean Cruise, lower levels of demand in River Cruise , slower
growth in the Travel business and higher working capital
requirements. Downside risks modelled for the Insurance business
include the impact of worsening competitive market pressures on the
Broking business, continued high cost and claims inflation putting
pressure on margins, among other stress tests. Both scenarios
reflect further cost reduction measures focused on central
overheads and non-core activities.
Under all scenarios modelled, the Group expects to meet
scheduled Ocean Cruise debt principal repayments as they fall due
over the next 13 months, and to also meet the financial covenants
relating to its secured ocean cruise debt.
In addition, in both higher and lower case scenarios and further
incorporating a drawdown under the Group's GBP85m loan facility
from Roger De Haan, the Group expects to have sufficient resources
to enable repayment of the GBP150m senior bonds on maturity in May
2024 from Available Cash(17) resources and to have sufficient
resources to continue in operation throughout the assessment
period.
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 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 13 months
from the date of approval of the condensed consolidated interim
financial statements. They have, therefore, deemed it appropriate
to prepare the financial statements to 31 July 2023 on a going
concern basis.
_______________________________
1 (7) Refer to the Alternative Performance Measures Glossary for
definition and explanation
Dividends and financial priorities for 2023/24
Dividends
Given the Group's priority of reducing Net Debt(18) , the Board
of Directors does not recommend payment of an interim dividend for
the 2023/24 financial year, nor would this currently be permissible
under financing arrangements due to the leverage ratio being above
3.0x (excluding Ocean Cruise EBITDA and debt) 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(18) , build on the already positive load
factor and per diem in Ocean Cruise, return the Travel business to
profitability , and to continue progress in execution of its
Insurance strategy.
_______________________________
18 Refer to the Alternative Performance Measures Glossary for
definition and explanation
Principal risks and uncertainties
The Group is subject to a number of risks and uncertainties as
part of its activities. The Board regularly considers these and
seeks to ensure that appropriate processes are in place to manage,
monitor and mitigate these risks. The Board included full details
of the risk and uncertainties pertinent to the Group on pages 65 to
67 of its Annual Report and Accounts for the year ended 31 January
2023, available at
https://corporate.saga.co.uk/investors/results-reports-presentations/.
Since the publication of the latest Annual Report and Accounts,
the Board have reviewed and updated the list of principal risks and
uncertainties (PRUs) and the outlook for each. By exception, the
following changes have been made:
PRUs for which the outlook has worsened
PRU Reason for change in outlook Mitigations
Saga brand and Increasing reputational risk Consumer Duty live, with
relevance following the Financial Conduct embedding to continue in
Authority's (FCA) market-wide the second half of the year.
assessment of the General Insurance Enhanced Insurance Risk
Pricing Practices (GIPP) review Framework in place.
and introduction of Consumer
Duty.
-------------------------------------- -------------------------------
Regulatory action Increasing risk in relation Consumer Duty live, with
to the FCA's market-wide assessment embedding to continue in
of the GIPP review and introduction the second half of the year.
of Consumer Duty. Project underway focused
on enhancing the Insurance
Risk Framework.
-------------------------------------- -------------------------------
Capacity and Move towards leaner operating Ongoing retention plan for
capability models within Insurance and areas most at risk.
central functions. Review of accountability
and comprehensiveness of
process documentation.
-------------------------------------- -------------------------------
PRUs for which the outlook has improved
PRU Reason for change in outlook
Operational resilience Enhancement to infrastructure in progress.
-----------------------------------------------------------------
Third-party suppliers Audits of critical suppliers, partnerships and outsourcing
completed, alongside implementation of partnership agreements.
-----------------------------------------------------------------
New PRUs
PRU Trend Risk Mitigations
Continued inflation Worsening Risk of adverse impact Active monitoring of inflation,
within Insurance from sustained high including review of inflation
levels of inflation assumed in pricing.
on the Insurance business. Efficiencies identified to
reduce operating expenses.
----------- ----------------------------- ---------------------------------
Condensed consolidated income statement
for the period ended 31 July 2023
Unaudited Unaudited
6m to 12m to
Unaudited Jul 2022 Jan 2023
6m to (restated (restated(1)
Jul 2023 (1) ) )
Note GBPm GBPm GBPm
Revenue from Cruise and Travel
services 3 196.9 136.2 305.5
Revenue from Insurance Broking
services 3 62.5 71.9 147.8
Other revenue (non-Insurance Underwriting) 3 13.5 11.3 17.4
----------- ------------ ---------------
Non-insurance revenue 3 272.9 219.4 470.7
Insurance revenue 3 85.2 97.7 193.0
----------- ------------ ---------------
Total revenue 3 358.1 317.1 663.7
----------- ------------ ---------------
(Increase)/decrease in credit loss
allowance (0.1) 0.4(2) 1.3
Other cost of sales (143.2) (117.4)(2) (249.8)
----------- ------------ ---------------
Cost of sales (non-Insurance Underwriting) 3 (143.3) (117.0) (248.5)
Gross profit (non-Insurance Underwriting) 129.6 102.4 222.2
----------- ------------ ---------------
Insurance service expenses 15 (114.8) (92.3) (215.8)
Net income from reinsurance contracts 15 19.3 6.3 27.3
----------- ------------ ---------------
Insurance service result (10.3) 11.7 4.5
----------- ------------ ---------------
Administrative and selling expenses (101.8) (81.1) (181.5)
Increase in credit loss allowance (0.3) (0.6)(2) (0.9)
Impairment of assets (68.1) (269.5) (271.2)
Net finance (expense)/income from
insurance contracts 15 (7.6) 7.0 8.2
Net finance income/(expense) from
reinsurance contracts 15 4.2 (5.3) (3.7)
Net (loss)/profit on disposal of
property, plant and equipment and
software (0.1) 0.1 0.1
Investment income/(expense) 0.3 (5.0) (9.7)
Finance costs (23.7) (22.4) (42.2)
Finance income - 0.9 1.5
Loss before tax (77.8) (261.8) (272.7)
Tax income/(expense) 4 6.8 (4.5) (0.4)
----------- ------------ ---------------
Loss for the period (71.0) (266.3) (273.1)
=========== ============ ===============
Attributable to:
Equity holders of the parent (71.0) (266.3) (273.1)
=========== ============ ===============
Loss per share:
Basic 6 (50.9p) (191.3p) (195.7p)
Diluted 6 (50.9p) (191.3p) (195.7p)
_______________________________
(1) For details of the restatement, please see Notes 2.5, 12 and
15
2 Movements in the credit loss allowance for the period ended 31
July 2022 were not previously presented on the face of the income
statement. Amounts have been restated to separately report these
amounts
Condensed consolidated statement of comprehensive income
for the period ended 31 July 2023
Unaudited Unaudited
6m to 12m to
Unaudited Jul 2022 Jan 2023
6m to (restated (restated(3)
Jul 2023 (3) ) )
GBPm GBPm GBPm
Loss for the period (71.0) (266.3) (273.1)
Other comprehensive income
Other comprehensive income that may be
reclassified to the income statement in
subsequent periods
Net (losses)/gains on hedging instruments
during the period (1.7) 5.4 (2.0)
Recycling of previous losses/(gains) on
hedges to income statement 1.3 (2.3) 0.3
Total net (losses)/gains on cash flow hedges (0.4) 3.1 (1.7)
Associated tax effect 0.7 (0.7) (0.8)
Total other comprehensive gains/(losses)
with recycling to income statement 0.3 2.4 (2.5)
Other comprehensive income that will not
be reclassified to the income statement
in subsequent periods
Remeasurement (losses)/gains on defined
benefit plan (1.4) 10.5 (19.1)
Associated tax effect 0.3 (2.7) 4.8
----------- ------------ ---------------
Total other comprehensive (losses)/gains
without recycling to income statement (1.1) 7.8 (14.3)
Total other comprehensive (losses)/gains (0.8) 10.2 (16.8)
----------- ------------ ---------------
Total comprehensive losses for the period (71.8) (256.1) (289.9)
=========== ============ ===============
Attributable to:
Equity holders of the parent (71.8) (256.1) (289.9)
======== ========= =========
_______________________________
3 For details of the restatement, please see Notes 2.5, 12 and
15
Condensed consolidated statement of financial position
as at 31 July 2023
Unaudited Unaudited
As at As at
Unaudited 31 Jul 2022 31 Jan 2023
As at (restated (restated(4)
31 Jul 2023 (4) ) )
Assets Note GBPm GBPm GBPm
Goodwill 8 381.5 449.6 449.6
Intangible assets 9 57.9 46.5 51.3
Retirement benefit scheme surplus 14 - 17.4 -
Property, plant and equipment 10 601.2 636.5 611.0
Right-of-use assets 11 30.7 77.5 30.7
Financial assets 12 242.5 298.0 282.4
Current tax assets 4.7 3.3 4.4
Deferred tax assets 4 30.7 12.3 20.8
Reinsurance contract assets 15 147.9 89.8 112.2
Inventories 7.7 7.6 7.0
Trade and other receivables 134.3 136.9 136.0
Trust accounts 47.2 60.2 36.2
Cash and short-term deposits 13 207.2 211.8 176.5
Assets held for sale 18 31.2 12.9 31.2
Total assets 1,924.7 2,060.3 1,949.3
============== =============== ================
Liabilities
Retirement benefit scheme liability 14 8.0 - 12.1
Insurance contract liabilities 15 353.6 337.2 347.5
Provisions 9.4 4.9 5.2
Financial liabilities 12 863.7 965.1 896.8
Deferred tax liabilities 4 11.7 11.2 9.3
Contract liabilities 184.0 150.5 126.5
Trade and other payables 200.1 194.3 186.5
Total liabilities 1,630.5 1,663.2 1,583.9
-------------- --------------- ----------------
Equity
Issued capital 21.1 21.1 21.1
Share premium 648.3 648.3 648.3
Own shares held reserve (1.0) - -
Retained deficit (381.7) (283.2) (309.7)
Share-based payment reserve 10.4 9.2 8.9
Hedging reserve (2.9) 1.7 (3.2)
-------------- ---------------
Total equity 294.2 397.1 365.4
-------------- --------------- ----------------
Total equity and liabilities 1,924.7 2,060.3 1,949.3
============== =============== ================
_______________________________
4 For details of the restatement, please see Notes 2.5, 12 and
15
Condensed consolidated statement of changes in equity
for the period ended 31 July 2023
Attributable to the equity holders of the
parent
---------- ----------------------------------------------------------------------------------
Own
shares Retained Share-based Fair
Issued Share held (deficit)/ payment value Hedging Total
capital premium reserve earnings reserve reserve reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Unaudited
At 1 February 2023 (as
reported) 21.1 648.3 - (293.5) 8.9 (12.1) (3.2) 369.5
Effect of adoption of
International
Financial Reporting
Standard
(IFRS) 17 - - - (16.2) - 12.1 - (4.1)
---------- --------- --------- ------------ ------------- --------- --------- ---------
At 1 February 2023
(restated
(5) ) 21.1 648.3 - (309.7) 8.9 - (3.2) 365.4
Loss for the period - - - (71.0) - - - (71.0)
Other comprehensive
(losses)/income
excluding recycling - - - (1.1) - - 1.1 -
Recycling of previous
gains
to income statement - - - - - - (0.8) (0.8)
Total comprehensive
(losses)/income - - - (72.1) - - 0.3 (71.8)
Share-based payment
charge - - - - 2.4 - - 2.4
Own shares transferred
in
the period - - (1.0) (0.8) - - - (1.8)
Transfer upon vesting of
share options - - - 0.9 (0.9) - - -
---------- --------- --------- ------------ ------------- --------- --------- ---------
At 31 July 2023 21.1 648.3 (1.0) (381.7) 10.4 - (2.9) 294.2
========== ========= ========= ============ ============= ========= ========= =========
Unaudited
At 1 February 2022 (as
reported) 21.1 648.3 - (22.4) 7.4 (0.8) (0.7) 652.9
Effect of adoption of
IFRS
17 - - - (2.3) - 0.8 - (1.5)
---------- --------- --------- ------------ ------------- --------- --------- ---------
At 1 February 2022
(restated(5)
) 21.1 648.3 - (24.7) 7.4 - (0.7) 651.4
Loss for the period
(restated(5)
) - - - (266.3) - - - (266.3)
Other comprehensive
income
excluding recycling
(restated(5)
) - - - 7.8 - - 4.2 12.0
Recycling of previous
gains
to income statement - - - - - - (1.8) (1.8)
Total comprehensive
(losses)/income
(restated(5) ) - - - (258.5) - - 2.4 (256.1)
Share-based payment
charge - - - - 1.8 - - 1.8
At 31 July 2022
(restated(5)
) 21.1 648.3 - (283.2) 9.2 - 1.7 397.1
========== ========= ========= ============ ============= ========= ========= =========
_______________________________
5 For details of the restatement, please see Notes 2.5, 12 and
15 . The effect of adoption of IFRS 17 disclosed above includes r
elated updates to accounting policies applied under IFRS 9
Condensed consolidated statement of changes in equity
for the period ended 31 July 2023 (continued)
Attributable to the equity holders of the parent
Own
shares Retained Share-based Fair
Issued Share held (deficit)/ payment value Hedging Total
capital premium reserve earnings reserve reserve reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Unaudited
At 1 February
2022 (as
reported) 21.1 648.3 - (22.4) 7.4 (0.8) (0.7) 652.9
Effect of
adoption of
IFRS
17 - - - (2.3) - 0.8 - (1.5)
----------- ---------- ----------- ------------ ------------- ---------- ---------- ---------
At 1 February
2022
(restated
(6) ) 21.1 648.3 - (24.7) 7.4 - (0.7) 651.4
Loss for the
year
(restated(6)
) - - - (273.1) - - - (273.1)
Other
comprehensive
losses
excluding
recycling
(restated(6)
) - - - (14.3) - - (2.9) (17.2)
Recycling of
previous
losses
to income
statement - - - - - - 0.4 0.4
----------- ---------- ----------- ------------ ------------- ---------- ---------- ---------
Total
comprehensive
losses
(restated(6)
) - - - (287.4) - - (2.5) (289.9)
Share-based
payment
charge - - - - 3.9 - - 3.9
Transfer upon
vesting of
share options - - - 2.4 (2.4) - - -
----------- ---------- ----------- ------------ ------------- ---------- ---------- ---------
At 31 January
2023
(restated(6)
) 21.1 648.3 - (309.7) 8.9 - (3.2) 365.4
=========== ========== =========== ============ ============= ========== ========== =========
_______________________________
6 For details of the restatement, please see Notes 2.5, 12 and
15. The effect of adoption of IFRS 17 disclosed above includes r
elated updates to accounting policies applied under IFRS 9
Condensed consolidated statement of cash flows
for the period ended 31 July 2023
Unaudited Unaudited
6m to 12m to
Unaudited Jul 2022 Jan 2023
6m to (restated (restated(7)
Jul 2023 (7) ) )
Note GBPm GBPm GBPm
Loss before tax (77.8) (261.8) (272.7)
Depreciation, impairment and loss on
disposal, of property, plant and equipment
and right-of-use assets 18.0 19.7 32.9
Amortisation and impairment of intangible
assets and goodwill, and profit on
disposal of software 72.4 273.9 278.6
Impairment of assets held for sale - - 1.2
Share-based payment transactions 1.6 1.8 3.9
Net finance expense/(income) from insurance
contracts 15 7.6 (7.0) (8.2)
Net finance (income)/expense from reinsurance
contracts 15 (4.2) 5.3 3.7
Finance costs 23.7 22.4 42.2
Finance income - (0.9) (1.5)
Interest (income)/expense from investments (0.3) 5.0 9.7
Increase in trust accounts (11.0) (36.8) (12.8)
Movements in other assets and liabilities 37.6 (15.9) (57.8)
----------- ------------ ---------------
67.6 5.7 19.2
Investment income interest received 5.0 1.8 5.4
Interest paid (20.7) (19.9) (37.6)
Income tax paid - (0.9) (0.9)
----------- ------------ ---------------
Net cash flows from/(used in) operating
activities 51.9 (13.3) (13.9)
Investing activities
Proceeds from sale of property, plant
and equipment and right-of-use assets - 0.1 0.2
Purchase of, and payments for the construction
of, property, plant and equipment,
and intangible assets (14.4) (8.8) (20.8)
Disposal of financial assets 26.6 55.0 65.8
Purchase of financial assets (11.8) (26.6) (40.2)
Acquisition of subsidiary 7 - (0.9) (0.9)
Net cash flows from investing activities 0.4 18.8 4.1
Financing activities
Payment of principal portion of lease
liabilities (6.7) (7.8) (7.8)
Repayment of borrowings 16 (31.1) (15.3) (46.4)
Net cash flows used in financing activities (37.8) (23.1) (54.2)
Net increase/(decrease) in cash and
cash equivalents 14.5 (17.6) (64.0)
Cash and cash equivalents at the start
of the period 191.7 255.7 255.7
----------- ------------ ---------------
Cash and cash equivalents at the end
of the period 13 206.2 238.1 191.7
=========== ============ ===============
_______________________________
7 For details of the restatement, please see Notes 2.5, 12 and
15
Notes to the condensed consolidated interim 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 08804263). The Company is registered in
England and its registered office is located at 3 Pancras Square,
London N1C 4AG.
The condensed consolidated interim financial statements of Saga
plc and the entities controlled by the Company (its subsidiaries,
collectively Saga Group or the Group) for the six months ended 31
July 2023 were authorised for issue in accordance with a resolution
of the Directors on 26 September 2023.
2.1 Basis of preparation
These financial statements comprise the condensed consolidated
interim financial statements (the financial statements) of the
Group for the six-month period to 31 July 2023.
The 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 financial statements, as set out in Note
2.7. The Directors have concluded that it remains appropriate to
adopt the going concern basis in preparing the financial
statements.
The Group's financial statements are presented in pounds
sterling which is also the parent company's functional currency,
and all values are rounded to the nearest hundred thousand (GBPm),
except when otherwise indicated.
The financial statements have been prepared in accordance with
the Disclosure and Transparency Rules (DTR) of the Financial
Conduct Authority (FCA) and in accordance with International
Accounting Standard (IAS) 34 'Interim Financial Reporting' as
adopted for use in the UK. The significant accounting policies
applied by the Group are set out in the Annual Report and Accounts
for the year ended 31 January 2023, except for changes required as
a result of the transition to a new accounting standard for
insurance and reinsurance contracts, IFRS 17 'Insurance Contracts'
and related updates to accounting policies applied under IFRS 9
'Financial Instruments' (see Notes 2.3 and 2.5). These are
consistent with International Financial Reporting Standards (IFRS),
as issued by the International Accounting Standards Board and
adopted by the UK Endorsement Board for use in the United
Kingdom.
The financial statements are unaudited but have been reviewed by
KPMG LLP and include their review conclusion. The financial
statements do not constitute statutory accounts as defined in
Section 434 of the Companies Act 2006. The results from the year
ended 31 January 2023 have been taken from the Group's Annual
Report and Accounts for that year, except for changes required as a
result of the transition to IFRS 17, including related updates to
accounting policies applied under IFRS 9 (see Notes 2.3 and 2.5).
These changes have been applied retrospectively, and prior period
comparative information has been restated. Therefore, prior period
comparative information is unaudited.
Statutory financial statements for the year ended 31 January
2023 have been delivered to the Registrar of Companies. The
auditor's report on those financial statements: (i) was
unqualified; (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report; and (iii) did not constitute a statement
under Section 498 (2) or (3) of the Companies Act 2006.
2.2 Basis of consolidation
The financial statements comprise the financial position and
results of each of the companies within the Group. Where necessary,
adjustments have been made to the financial position and results of
subsidiaries to bring the accounting policies used into line with
those used by the Group. All intra-group transactions, balances,
income and expenses have been eliminated on consolidation. The
policies set out below have been applied consistently throughout
the periods presented to items considered material to the financial
statements.
2.3 Summary of significant accounting policies
The financial statements for the period ended 31 July 2023 have
been prepared applying the same accounting policies that were
applied in the preparation of the Group's published consolidated
financial statements for the year ended 31 January 2023, except for
changes required as a result of the transition to a new accounting
standard for insurance and reinsurance contracts, IFRS 17
'Insurance Contracts'.
In addition, as a result of IFRS 17 being adopted and applied,
the Group has changed the classification of debt securities under
IFRS 9 'Financial Instruments', from fair value through OCI (FVOCI)
to fair value through profit or loss (FVTPL). IFRS 17 permits
financial assets to be classified as FVTPL on transition to IFRS 17
if doing so eliminates, or significantly reduces, a measurement, or
recognition inconsistency. For the debt securities that support the
Group's insurance liabilities, this condition is met as fair value
gains or losses on these securities are expected to be offset, to a
significant degree, by the impact of changes in the discount rate
on the measurement of IFRS 17 liabilities for incurred claims (net
of the impact on related reinsurance assets).
IFRS 17 is effective for annual reporting periods beginning on,
or after, 1 January 2023. The Group has initially applied 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
condensed consolidated interim financial statements include
comparatives for the year ending 31 January 2023 restated onto an
IFRS 17 basis.
Details of the new accounting policy for insurance contracts
underwritten by the Group and reinsurance contracts is disclosed
below, with note references corresponding to the financial
statements for the year ended 31 January 2023. This includes
details of revenue and cost recognition which replace the parts of
Notes 2.3(a) and 2.3(b) of the financial statements for the year
ended 31 January 2023 that relate to insurance contracts
underwritten by the Group and reinsurance contracts.
r. Insurance contracts underwritten by the Group and reinsurance contracts
i) Classification
The Group issues insurance contracts under which it accepts
significant insurance risk from policyholders, and also enters into
reinsurance contracts under which it transfers significant
insurance risk related to underlying insurance contracts.
'Reinsurance contracts' refers to reinsurance contracts held by the
Group. The Group does not issue any reinsurance contracts.
Insurance and reinsurance contracts can also expose the Group to
financial risk.
ii) Separating components from insurance and reinsurance contracts
When the Group underwrites an insurance contract, a number of
separate contracts may be entered into at the same time. These
contracts may involve more than one legal entity within the
Group.
As the set of contracts is designed to achieve an overall
commercial effect for the Group, for accounting purposes the
following steps are taken:
-- The total cash flows arising from all contracts are initially
considered as a whole (together the host insurance contract ).
-- The Group then identifies any service components that are
'distinct' and therefore require separation for accounting purposes
. A service is distinct if the policyholder can benefit from it
either on its own or with other resources that are readily
available to the policyholder. The following distinct service
components were identified:
o The brokerage of the core insurance contract (where it has
first been subject to the competitive pricing panel that the Group
operates).
o The brokerage of any add-on cover underwritten by a
third-party.
o The promise to fix the premium for three years (where this
option is taken by the policyholder).
These distinct service components are accounted for as separate
contracts with customers under IFRS 15.
-- The total cash inflows from the combined set of contracts are
then allocated for accounting purposes between:
o any distinct service components; and
o the insurance component of the host insurance contract.
This allocation is performed based on the stand-alone selling
price of each component.
-- Cash outflows that relate directly to each component are
attributed to that component, with any remaining cash outflows
attributed on a systematic and rational basis, reflecting the cash
outflows the Group would expect to arise if that component were a
separate contract.
iii) Aggregation of insurance and reinsurance contracts
The Group applies the requirements of IFRS 17 at the level of
groups of insurance contracts issued. Groups of insurance contracts
are determined by identifying portfolios of insurance contracts,
which comprise contracts that are subject to similar risks and
managed together, and dividing each portfolio into annual cohorts
(i.e. by year of issue) and each annual cohort into three groups
based on the expected profitability of each contract at initial
recognition:
-- Any contracts that are onerous at initial recognition.
-- Any contracts that at initial recognition have no significant risk of becoming onerous.
-- Any other contracts.
Groups of reinsurance contracts are established such that each
group comprises a single contract.
iv) Recognition of insurance and reinsurance contracts
The Group recognises insurance contracts issued from the
earliest of:
-- the beginning of the coverage period;
-- when the first payment from a policyholder becomes due, or,
if there is no due date, when the first payment is received;
and
-- when facts and circumstances indicate that the contract is
onerous. This could be as early as the date on which the contract
is first entered into.
When a contract is recognised, it is added to an existing group
of contracts or, if the contract does not qualify for inclusion in
an existing group, it forms a new group to which future contracts
are added. Groups of contracts are established on initial
recognition and their composition is not revised once all contracts
have been added to the group.
The Group recognises groups of reinsurance contracts as
follows:
-- Groups of reinsurance contracts that provide proportionate
coverage (primarily quota share arrangements) are recognised when
any underlying insurance contract is initially recognised.
-- All other groups of reinsurance contacts (primarily excess of
loss arrangements) are recognised from the earlier of:
o the beginning of the coverage period of the group of
reinsurance contracts; and
o the date on which an onerous group of underlying contracts is
recognised (provided that the related reinsurance contract was
entered into on, or before, that date).
v) Contract boundaries
The measurement of groups of insurance contracts issued, and
reinsurance contracts, reflects all future cash flows arising from
insurance coverage within the boundary of each contract (the
contract boundary).
Cash flows are within the contract boundary if they arise from
substantive rights and obligations that exist during the reporting
period in which the Group can compel the policyholder to pay
premiums or has a substantive obligation to provide services.
vi) Measurement - insurance contracts
The Group measures all groups of insurance contracts issued in
accordance with IFRS 17's simplified premium allocation approach
(PAA). They are eligible for the PAA as the coverage period of each
contract in each group is one year or less.
The following sections set out the Group's approach to measuring
groups of insurance contracts under the PAA.
a) Measurement at initial recognition
On initial recognition, the liability for remaining coverage of
groups of insurance contracts issued is measured as:
-- any premiums received at initial recognition; plus
-- for groups of contracts that are onerous (expected to be loss
making) at initial recognition, a loss component measured as the
excess of the fulfilment cash flows over the carrying amount of the
liability for remaining coverage excluding the loss component. A
corresponding loss is recognised in profit or loss. At initial
recognition the loss component is only recognised and measured in
respect of policies that individually meet the recognition criteria
at that date.
b) Subsequent measurement
At the end of each reporting period, each group of contracts is
measured as the sum of the liability for remaining coverage and the
liability for incurred claims.
Liability for remaining coverage
At the end of each reporting period, the carrying amount of the
liability for remaining coverage (excluding the loss component) of
each group of contracts is equal to:
-- the opening carrying amount of the liability for remaining coverage; plus
-- premiums received in the period; less
-- the amount recognised as insurance revenue for coverage
provided in the period. Insurance revenue is the amount of total
expected premium receipts (excluding premium taxes) allocated to
each period of coverage on the basis of the passage of time (i.e. a
straight line basis). This is appropriate as, for the insurance
contracts that the Group issues, the expected pattern of release of
risk during the coverage period does not differ significantly from
the passage of time.
For groups of contracts that were onerous at initial
recognition:
-- the loss component of the liability for remaining coverage is
increased in respect of any individual policies added to the
group;
-- the loss component is reversed as coverage is provided,
reducing the liability for remaining coverage. A corresponding
credit to profit or loss means that the onerous loss is not
recognised a second time when a liability for incurred claims is
established as coverage is provided; and
-- the expected profitability of remaining coverage is
reassessed at each reporting date, with any changes since initial
recognition reflected in the valuation of the remaining loss
component of the liability for remaining coverage, with a
corresponding entry in profit or loss.
For other groups of contracts, at each reporting date, the Group
considers whether the remaining coverage has become onerous. If so,
a loss component of the liability for remaining coverage is
established with a corresponding loss recognised in profit or
loss.
Liability for incurred claims
As coverage is provided, the Group establishes a liability for
incurred claims. The liability is estimated based on the fulfilment
cash flows relating to incurred claims, including both claims that
have been notified (i.e. outstanding claims) and claims incurred
but not reported (IBNR). These fulfilment cash flows:
-- include an estimate of claims handling costs and the expected
value of salvage and other recoveries;
-- incorporate, in an unbiased way, all reasonable and
supportable information available without undue cost or effort
about the amount, timing and uncertainty of those future cash
flows;
-- reflect current estimates from the Group's perspective;
-- are adjusted to reflect the time value of money and effect of
financial risk (a discounting adjustment). The Group has not taken
the PAA option to not discount claims expected to be paid within
one year of the loss event; and
-- include an explicit adjustment for non-financial risk (the
risk adjustment), which reflects the compensation required for
bearing uncertainty about the amount and timing of cash flows that
arises from non-financial risk.
vii) Measurement - reinsurance contracts
The Group also measures all groups of reinsurance contracts in
accordance with the PAA. Groups of excess of loss reinsurance
contracts are eligible for the PAA as each underlying contract has
a coverage period of one year or less. Groups of other reinsurance
contracts (primarily the motor quota share arrangement) are
eligible for the PAA as, at initial recognition, the Group expects
that the resulting measurement of the asset for remaining coverage
would not differ materially to that under the IFRS 17 general
measurement model.
Groups of reinsurance contracts are measured on the same basis
as the underlying insurance contracts, adapted as appropriate to
reflect the different features of reinsurance contracts,
including:
-- where the Group recognises a loss on initial recognition of
an onerous group of underlying insurance contracts, or when further
onerous underlying insurance contracts are added to a group, the
Group establishes a loss-recovery component of the asset for
remaining coverage for groups of reinsurance contracts depicting
any recovery of losses. The loss-recovery component is calculated
by multiplying the loss recognised on the underlying insurance
contracts and the percentage of claims on the underlying insurance
contracts the Group expects to recover from the group of
reinsurance contracts;
-- reinsurance cash flows that are contingent on claims
experience are treated as part of the claims expected to be
reimbursed. This applies to profit commission clauses within the
Group's motor quota share reinsurance contracts; and
-- the Group assesses the risk that that the counterparties to
its reinsurance contracts are not able fulfil their obligations
(non-performance risk, or default risk), including by considering
available data on the financial strength of the reinsurers. An
allowance is included in the relevant estimate of the present value
of future cash flows to reflect this risk.
viii) Measurement - insurance acquisition cash flows
The Group identifies insurance acquisition cash flows, being the
costs of selling, underwriting and starting insurance contracts.
The costs are primarily commissions paid to intermediaries and an
allocation of other operating expenses.
The Group has taken the IFRS 17 option to expense insurance
acquisition cash flows immediately where the coverage period of the
related contract is one year or less. As all the Group's insurance
contracts have a coverage period of one year or less, all insurance
acquisition cash flows are expensed when they are incurred.
ix) Modification and derecognition
An insurance contract is derecognised when:
-- it is extinguished (i.e. when the obligation expires or is discharged or cancelled); or
-- there is a modification of the contract that is treated as a
derecognition and recognition of a new contract. This is the case
where the modified terms, if applied at inception, would have
resulted in:
o a change in the measurement model or the applicable standard
for measuring a component of the contract;
o a substantially different contract boundary; or
o the contract being included in a different group of
contracts.
When a modification is not treated as a derecognition, the Group
recognises amounts paid or received for the modification as an
adjustment to the relevant liability for remaining coverage
relating to the existing contract.
x) Presentation
The Group disaggregates the total amount recognised in the
statement of profit or loss into an insurance service result,
comprising insurance revenue and insurance service expense, and
insurance finance income or expenses.
a) Separate presentation of portfolios in an asset or liability position
In the statement of financial position, where applicable, the
Group presents separately the carrying amount of portfolios of
insurance contracts issued that are assets, portfolios of insurance
contracts issued that are liabilities, portfolios of reinsurance
contracts that are assets and portfolios of reinsurance contracts
that are liabilities.
b) Changes in the risk adjustment
The Group disaggregates the change in risk adjustment for
non-financial risk between a financial and non-financial portion,
included within insurance finance expenses and the insurance
service result respectively.
c) Reinsurance
On the face of the consolidated income statement, income or
expenses from reinsurance contracts (other than insurance finance
income or expenses) are presented as a single amount, separately
from the income or expenses from insurance contracts issued.
d) Insurance finance income or expense
Insurance finance income or expenses comprise the change in the
carrying amount of the group of insurance contracts arising
from:
-- the effect of the time value of money and changes in the time value of money; and
-- the effect of financial risk and changes in financial risk.
This largely represents:
-- the unwind of the discounting of the liability for incurred claims;
-- the impact of changes in the discount rate used in the
measurement of the liability for incurred claims; and
-- the impact of changes in the care worker inflation assumption
used in the measurement of claims settled as periodical payment
orders (PPOs).
Reinsurance finance income or expense is the change in the
carrying value of amounts relating to reinsurance contracts arising
for the same reasons.
The Group does not disaggregate insurance finance income or
expenses between profit or loss and other comprehensive income
(OCI) as permitted by the standard.
xi) Transition
In adopting IFRS 17, the Group applied a full retrospective
approach to transition. Under the full retrospective approach to
transition, at 1 February 2022, the Group:
-- identified, recognised and measured each group of insurance
and reinsurance contracts as if IFRS 17 had always been
applied;
-- derecognised previously reported balances that would not have
existed if IFRS 17 had always been applied (e.g. insurance
receivables and payables, which under IFRS 17 are included in the
measurement of the insurance contracts); and
-- recognised any resulting net difference in equity.
Full details of all other accounting policies of the Group can
be found in the Annual Report and Accounts for the year ended 31
January 2023, available at www.corporate.saga.co.uk .
2.4 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 July 2023.
a. 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 have been endorsed
by the UK Endorsement Board.
b. 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
has been endorsed by the UK Endorsement Board.
c. Supplier finance arrangements (amendments to IAS 7 and IFRS 7)
The amendments add disclosure requirements, and 'signposts'
within existing disclosure requirements, that ask entities to
provide qualitative and quantitative information about supplier
finance arrangements. 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.
2.5 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 period ended 31 July 2023.
a. IFRS 17 'Insurance Contracts'
The Group has adopted IFRS 17 'Insurance Contracts' for the
first time in the year ended 31 January 2024, with prior period
comparatives also restated. IFRS 17 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.
The changes introduced by IFRS 17 are summarised as follows:
The Group has applied IFRS 17's simplified premium allocation
approach (PAA) to all insurance contracts issued and reinsurance
contracts held.
Applying the PAA, the measurement of liabilities for remaining
coverage continues to be based on a deferred premium approach as
under previously reported IFRS. However key differences compared to
previously reported IFRS are as follows:
-- IFRS 17 requires identification of any contracts that are
expected to be onerous at initial recognition. The expected losses
are recognised immediately in profit or loss, with a liability (a
loss component) established on the balance sheet. Under previously
reported IFRS, these losses were typically recognised in profit or
loss over the coverage period of the insurance contracts.
-- The Group has taken the PAA option to expense insurance
acquisition costs immediately in profit or loss, meaning that the
deferred insurance acquisition cost asset held under previously
reported IFRS has been written off.
The measurement of insurance contract liabilities in relation to
coverage provided before the statement of financial position date,
referred to as liabilities for incurred claims under IFRS 17, has
changed. Under IFRS 17, liabilities for incurred claims are now
measured as the sum of the following components (collectively
referred to as the fulfilment cash flows):
-- The expected future cash flows, all of which are discounted
using a risk-free rate adjusted to reflect the liquidity
characteristics of the insurance contracts.
-- A risk adjustment, being an explicit margin above the
expected future cash flows that represents the compensation
required for bearing non-financial uncertainty. The Group has
derived the risk adjustment by selecting an appropriate confidence
interval using the expected loss distribution for incurred
claims.
This differs from previously reported IFRS under which:
-- only certain long-tail claim liabilities were discounted.
This discounting used a discount rate that didn't typically move in
line with market interest rates; and
-- the reserve margin was not explicit or linked to a target confidence level.
The consolidated income statement changes under IFRS 17,
including:
-- introduction of 'Insurance revenue', which is similar to
gross earned premiums from previously reported IFRS. Further
changes to the presentation of revenue have been made as
follows:
o Revenue from Cruise and Travel services and Insurance Broking
services are shown separately (this is not required by IFRS
17).
o 'Total revenue' is no longer stated after the deduction of
reinsurance premiums (the presentation of amounts arising from
reinsurance contracts is explained below).
-- introduction of an 'Insurance service expenses' line item,
comprising all expenses relating to insurance contracts (except for
'Net finance (expense)/income from insurance contracts');
-- introduction of a single line item including all income and
expenses arising from reinsurance contracts (except for 'Net
finance income/(expense) from reinsurance contracts');
-- introduction of 'Net finance (expense)/income from insurance
contracts' and an equivalent for reinsurance. This caption
includes:
o the unwind of the discounting of the liability for incurred
claims. Under previously reported IFRS, only PPO liabilities were
discounted, with the unwind of discounting implicitly included
within gross claims incurred;
o the impact of changes in the discount rate used in the
measurement of the liability for incurred claims; and
o the impact of changes in the care worker inflation assumption
used in the measurement of claims settled as PPOs.
-- the netting down of amounts relating to quota share
reinsurance arrangements so that only amounts expected to be paid
or received are accounted for. Under previously reported IFRS,
quota share reinsurance arrangements are 'grossed up' in the income
statement, with large nominal premiums ceded and claims recovered
balances which do not necessarily reflect amounts expected to be
paid or received.
Full details of the new accounting policy for insurance and
reinsurance contracts are included in Note 2.3.
b. 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 had
no effect on the Group's financial statements.
c. 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 had no effect on the Group's financial statements.
d. 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 had no effect on the Group's financial statements.
e. International tax reform - Pillar two model rules (amendments to IAS 12)
The amendments provide a temporary exception to the requirements
regarding deferred tax assets and liabilities related to pillar two
income taxes. The application (issued 23 May 2023) of the exception
and disclosure of that fact is effective immediately, the other
disclosure requirements are effective for annual reporting periods
beginning on or after 1 January 2023, but not required in any
interim financial statements for 2023. The amendments had no effect
on the Group's financial statements.
2.6 Significant accounting judgements, estimates and
assumptions
The Annual Report and Accounts for the year ended 31 January
2023, available at www.corporate.saga.co.uk , included full details
of significant accounting judgements, estimates and assumptions
used in the application of the Group's accounting policies.
The adoption of IFRS 17 in the period has resulted in updates to
those significant accounting judgements, estimates and assumptions.
These updates, which are explained below, have also been applied to
the comparatives for the year ending 31 January 2023 which have
been restated onto an IFRS 17 basis.
a. Updates to significant judgements
i) Classification of insurance contracts
This judgment is now made by applying the principles of IFRS 17
rather than IFRS 4 (the previous international accounting standard
for insurance and reinsurance contracts). This has not resulted in
any changes to the conclusions reached.
ii) Insurance contract liabilities (and related reinsurance contract assets)
Eligibility of reinsurance contracts for the PAA
Within the Group's pool of reinsurance contracts (primarily the
motor quota share arrangement), some have a coverage period of more
than 12 months. Management has applied significant judgment in
concluding that these groups are eligible for the PAA.
Liability for incurred claims
This judgment relates to the estimation of future claims costs
for areas of uncertainty. This was also a key area of judgment
under IFRS 4, although the application of this judgment differs
under IFRS 17. Claim liabilities no longer include 'actuarial best
estimate' or 'reserve margin' elements. Instead, any areas of
uncertainty in the estimation of future claims costs are reflected
in one or both components of the IFRS 17 liability for incurred
claims, being:
-- the estimate of the present value of future cash flows; plus
-- the risk adjustment.
The approach to determining the risk adjustment within the
liability for incurred claims is a key area of judgment under IFRS
17. The Group determines the risk adjustment at the level of each
IFRS 17 portfolio of insurance contracts, the most material of
which is the motor portfolio, using a confidence level technique
(also referred to as a Value at Risk (VaR) approach). Following
this approach, the total liability for incurred claims (net of
reinsurance) is set at the 85% confidence level (ultimate basis),
with the 'net' risk adjustment being the difference between this
total net liability for incurred claims and the net estimate of the
present value of future cash flows. The gross risk adjustment is
derived in a similar way, with the reinsurance risk adjustment
being the difference between the gross and 'net' risk
adjustments.
As the risk adjustment is determined at the level of each IFRS
17 portfolio, no credit is taken for diversification of risk across
these portfolios.
A further key area of judgment relates to the discount rate that
is applied to the estimate of future cash flows. Under IFRS 17, the
discount rate used should reflect the liquidity characteristics of
the insurance liabilities. Assessing the liquidity characteristics
of the liabilities requires significant judgment. Management
concluded that cash flows relating to the liability for incurred
claims are illiquid and therefore the discount rate should include
an 'illiquidity premium' above the risk-free rate.
b. Updates to significant estimates and assumptions
i) Valuation of insurance contract liabilities (and related reinsurance contract assets)
The valuation of insurance contract liabilities - and in
particular liabilities for incurred claims - continues to be a
significant estimate under IFRS 17. Key changes following adoption
of IFRS 17 are as follows:
Discount rate applied to liabilities for incurred claims
All the Group's liabilities for incurred claims (and related
reinsurance assets) are discounted under IFRS 17, whereas
previously only PPO liabilities were discounted.
The determination of the discount rate applied to liabilities
for incurred claims is a significant estimate. This discount rate
reflects the risk-free interest rate in the currency of the
insurance liabilities (GBP) plus an illiquidity premium as
described above. Such a discount rate is not readily available and
therefore must be estimated. The discount rate is estimated by
removing from the yield curve of a portfolio of GBP-denominated
corporate bonds an estimate of the components of that yield that
relate to expected and unexpected credit losses. The portfolio of
corporate bonds used reflects the debt securities that the Group
holds to supports its insurance liabilities.
Following this approach, the GBP discount rate curves that were
applied to liabilities for incurred claims were as follows:
1 year 3 years 5 years 10 years
--------------- -------- --------- --------- ----------
31 July 2023 5.6% 5.3% 5.1% 4.9%
31 January
2023 4.2% 4.1% 4.0% 4.1%
Estimates of future cash flows to fulfil liabilities for
incurred claims
The approach to estimating the expected future cash flows
required to fulfil liabilities for incurred claims is similar to
that previously used under IFRS 4. The technical basis for this
estimate is set out in Note 2.3.
The Group has re-evaluated the rate of carer wage inflation that
is assumed in the valuation of PPO liabilities in the context of
the IFRS 17 requirements. This has resulted in the carer wage
inflation assumption being set at 1.5% above the discount rate
applied to liabilities for incurred claims at all measurement dates
since transition to IFRS 17. This appropriateness of this
assumption will continue to be assessed at future measurement
dates.
Risk adjustment
The confidence level technique used by the Group to determine
the risk adjustment requires estimation of the probability
distribution of the present value of future cash flows arising from
liabilities for incurred claims, including estimates of possible
favourable and unfavourable outcomes.
These probability distributions are estimated both gross and net
of reinsurance.
2.7 Going concern
The Directors have performed an assessment of going concern to
determine the adequacy of the Group's financial resources over a
period of 13 months from the date of signing these financial
statements, a period selected to include consideration of the 31
October 2024 covenant testing date attached to the Group's GBP50m
revolving credit facility (RCF).
This assessment is based on higher case 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 the second half of 2023/24 and into 2024/25,
on the back of strong booked load factors and per diems. Travel is
also expected to achieve continued growth in revenues. The outlook
for Insurance, however, remains challenging, with high cost and
claims inflation in a competitive market expected to put continued
pressure on margins.
The Group's downside scenario incorporates lower load factors
for Ocean Cruise, lower levels of demand in River Cruise , slower
growth in the Travel business and higher working capital
requirements. Downside risks modelled for the Insurance business
include the impact of worsening competitive market pressures on the
Broking business, continued high cost and claims inflation putting
pressure on margins, among other stress tests. Both scenarios
reflect further cost reduction measures focused on central
overheads and non-core activities.
Under all scenarios modelled, the Group expects to meet
scheduled Ocean Cruise debt principal repayments as they fall due
over the next 13 months, and to also meet the financial covenants
relating to its secured ocean cruise debt.
In addition, in both higher and lower case scenarios and further
incorporating a drawdown under the Group's GBP85m loan facility
from Roger De Haan, the Group expects to have sufficient resources
to enable repayment of the GBP150m senior bonds on maturity in May
2024 from Available Cash (8) resources and to have sufficient
resources to continue in operation throughout the assessment
period.
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 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 13 months
from the date of approval of the condensed consolidated interim
financial statements. They have, therefore, deemed it appropriate
to prepare the financial statements to 31 July 2023 on a going
concern basis.
_______________________________
8 Refer to the Alternative Performance Measures Glossary for
definition and explanation
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
Insight (the Group's online platform offering customers social
interaction and online services), Saga Media and the Group's
mailing and printing business.
Segment performance is evaluated using the Group's key
performance measure of Underlying Profit Before Tax (9) . Items not
allocated to a 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.
All revenue is generated solely in the UK.
Seasonality
The Group is subject to seasonal fluctuations in both its
Insurance, and Cruise and Travel, segments resulting in varying
profits over each quarter.
The Insurance segment experiences increased motor insurance
sales in the month of March and, to a lesser degree, September due
to the issue of new vehicle registration plates; and increased home
insurance sales in March, June and September coinciding with the
historic quarter days. In the motor Insurance Underwriting
business, a greater proportion of claims are notified in the second
half of the financial year.
Typically, increased holiday departures in the shoulder months
of May, June and September and low departure volumes during July
and August create seasonal fluctuations in the profit of the Cruise
and Travel segment. For the six months ended 31 July 2023, the
increase in the Cruise and Travel segment's revenue versus the six
months ended 31 July 2022, is due to the further resumption of
trading, as the impact of the COVID-19 pandemic on the business
began to subside and the business returned to fully operational
conditions.
Unaudited
6m to
Jul 2023 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
Non-insurance
revenue 196.9 14.1 26.7 21.7 3.5 66.0 12.9 (2.9) 272.9
Insurance
revenue - 9.8 - 0.4 75.0 85.2 - - 85.2
--------- --------- --------- --------- --------------- --------- ------------ ------------- ---------
Revenue 196.9 23.9 26.7 22.1 78.5 151.2 12.9 (2.9) 358.1
Cost of sales
(non-Insurance
Underwriting) (139.6) (4.2) - 3.8 - (0.4) (3.3) - (143.3)
--------- --------- --------- --------- --------------- --------- ------------ ------------- ---------
Gross
profit/(loss)
(non-Insurance
Underwriting) 57.3 9.9 26.7 25.5 3.5 65.6 9.6 (2.9) 129.6
========= ========= ========= ========= =============== ========= ============ ============= =========
Insurance
service
expenses - (13.6) - - (101.2) (114.8) - - (114.8)
Net income from
reinsurance
contracts - 0.2 - - 19.1 19.3 - - 19.3
--------- --------- --------- --------- --------------- --------- ------------ ------------- ---------
Insurance
service
result - (3.6) - 0.4 (7.1) (10.3) - - (10.3)
========= ========= ========= ========= =============== ========= ============ ============= =========
Administrative
and selling
expenses (35.0) (10.5) (18.1) (13.6) - (42.2) (27.7) 2.8 (102.1)
Impairment of
assets - - - - - - - (68.1) (68.1)
Net finance
expense
from insurance
contracts - - - - (7.6) (7.6) - - (7.6)
Net finance
income
from
reinsurance
contracts - - - - 4.2 4.2 - - 4.2
Net loss on
disposal
of property,
plant
and equipment (0.1) - - - - - - - (0.1)
Investment
income/(loss) 0.1 0.1 - - (0.5) (0.4) 0.6 - 0.3
Finance costs (11.2) - - - - - (12.5) - (23.7)
Profit/(loss)
before tax 11.1 (4.1) 8.6 12.3 (7.5) 9.3 (30.0) (68.2) (77.8)
========= ========= ========= ========= =============== ========= ============ ============= =========
Reconciliation
to Underlying
Profit/(Loss)
Before Tax (9)
Profit/(loss)
before tax 11.1 (4.1) 8.6 12.3 (7.5) 9.3 (30.0) (68.2) (77.8)
Net fair value
loss on
derivative
financial
instruments 0.9 - - - - - - - 0.9
Impairment of
goodwill - - - - - - - 68.1 68.1
Arrangement fee
on RDH loan - - - - - - 1.0 - 1.0
Restructuring
costs 0.9 - - - - - 5.0 - 5.9
Acquisition
costs
relating to
the
Big Window - - - - - - - 0.1 0.1
Foreign
exchange
movement on
lease
liabilities (0.6) - - - - - - - (0.6)
Fair value
losses
on debt
securities - - - - 4.8 4.8 - - 4.8
Changes in
underwriting
discount rates
on non-PPO
liabilities - - - - (3.1) (3.1) - - (3.1)
Onerous
contract
provisions - 7.0 - - 2.2 9.2 - - 9.2
IFRS 16
adjustment
on river
cruise
vessels (0.5) - - - - - - - (0.5)
--------- --------- --------- --------- --------------- --------- ------------- ---------
Underlying
Profit/(Loss)
Before Tax(9) 11.8 2.9 8.6 12.3 (3.6) 20.2 (24.0) - 8.0
========= ========= ========= ========= =============== ========= ============ ============= =========
Unaudited
6m to
Jul 2022
(restated(10) ) 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
Non-insurance
revenue 136.2 23.8 27.2 20.9 1.3 73.2 12.2 (2.2) 219.4
Insurance revenue - 16.6 - 0.5 80.6 97.7 - - 97.7
--------- --------- --------- --------- --------------- -------- ------------ ------------- ---------
Revenue 136.2 40.4 27.2 21.4 81.9 170.9 12.2 (2.2) 317.1
Cost of sales
(non-Insurance
Underwriting) (114.4) (1.9) - 2.2 - 0.3 (2.9) - (117.0)
--------- --------- --------- --------- --------------- -------- ------------ ------------- ---------
Gross
profit/(loss)
(non-Insurance
Underwriting) 21.8 21.9 27.2 23.1 1.3 73.5 9.3 (2.2) 102.4
========= ========= ========= ========= =============== ======== ============ ============= =========
Insurance service
expenses - (16.9) - - (75.4) (92.3) - - (92.3)
Net income from
reinsurance
contracts - - - - 6.3 6.3 - - 6.3
Insurance service
result - (0.3) - 0.5 11.5 11.7 - - 11.7
========= ========= ========= ========= =============== ======== ============ ============= =========
Administrative
and selling
expenses (24.5) (8.1) (16.9) (10.8) - (35.8) (23.5) 2.1 (81.7)
Impairment of
assets - - - - - - - (269.5) (269.5)
Net finance
income
from insurance
contracts - - - - 7.0 7.0 - - 7.0
Net finance
expense
from reinsurance
contracts - - - - (5.3) (5.3) - - (5.3)
Net profit on
disposal
of software - 0.1 - - - 0.1 - - 0.1
Investment loss - - - - (3.6) (3.6) (1.4) - (5.0)
Finance costs (11.1) - - - - - (11.3) - (22.4)
Finance income 0.9 - - - - - - - 0.9
--------- --------- --------- --------- --------------- -------- ------------ ------------- ---------
(Loss)/profit
before tax (12.9) 13.6 10.3 12.8 10.9 47.6 (26.9) (269.6) (261.8)
Reconciliation
to Underlying
(Loss)/Profit
Before Tax (9)
(Loss)/profit
before
tax (12.9) 13.6 10.3 12.8 10.9 47.6 (26.9) (269.6) (261.8)
Net fair value
gain on
derivative
financial
instruments (0.9) - - - - - - - (0.9)
Impairment of
goodwill - - - - - - - 269.5 269.5
Restructuring
costs 1.5 - - - - - 0.6 - 2.1
Acquisition costs
relating to the
Big Window - - - - - - - 0.1 0.1
Foreign exchange
movement on
lease
liabilities 0.3 - - - - - - - 0.3
Fair value losses
on debt
securities - - - - 6.9 6.9 - - 6.9
Changes in
underwriting
discount rates
on non-PPO
liabilities - - - - (2.9) (2.9) - - (2.9)
Onerous contract
provision - - - - 0.9 0.9 - - 0.9
IFRS 16
adjustment
on river cruise
vessels 0.4 - - - - - - - 0.4
Underlying
(Loss)/Profit
Before Tax(9) (11.6) 13.6 10.3 12.8 15.8 52.5 (26.3) - 14.6
========= ========= =============== ======== ============ ============= =========
Unaudited
12m to
Jan 2023
(restated (10)
) 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
Non-insurance
revenue 305.5 45.8 57.6 44.4 (2.4) 145.4 24.3 (4.5) 470.7
Insurance revenue - 31.2 - 0.9 160.9 193.0 - - 193.0
--------- --------- --------- ------------ ------------- ---------
Revenue 305.5 77.0 57.6 45.3 158.5 338.4 24.3 (4.5) 663.7
Cost of sales
(non-Insurance
Underwriting) (242.5) (4.0) - 4.5 - 0.5 (6.5) - (248.5)
Gross
profit/(loss)
(non-Insurance
Underwriting) 63.0 41.8 57.6 48.9 (2.4) 145.9 17.8 (4.5) 222.2
Insurance service
expenses - (32.5) - - (183.3) (215.8) - - (215.8)
Net
(expense)/income
from reinsurance
contracts - (0.1) - - 27.4 27.3 - - 27.3
Insurance service
result - (1.4) - 0.9 5.0 4.5 - - 4.5
========= ========= ============ ============= =========
Administrative
and selling
expenses (57.5) (19.4) (35.1) (22.7) - (77.2) (52.2) 4.5 (182.4)
Impairment of
assets - - - - (1.2) (1.2) (0.5) (269.5) (271.2)
Net finance
income
from insurance
contracts - - - - 8.2 8.2 - - 8.2
Net finance
expense
from reinsurance
contracts - - - - (3.7) (3.7) - - (3.7)
Net profit on
disposal
of software - 0.1 - - - 0.1 - - 0.1
Investment loss - - - - (7.5) (7.5) (2.2) - (9.7)
Finance costs (20.2) - - - - - (22.0) - (42.2)
Finance income 1.4 - - - - - 0.1 - 1.5
--------- --------- --------- ------------ ------------- ---------
(Loss)/profit
before tax (13.3) 21.1 22.5 27.1 (1.6) 69.1 (59.0) (269.5) (272.7)
Reconciliation
to Underlying
(Loss)/Profit
Before Tax (9)
(Loss)/profit
before tax (13.3) 21.1 22.5 27.1 (1.6) 69.1 (59.0) (269.5) (272.7)
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
Fair value losses
on debt
securities - - - - 15.0 15.0 - - 15.0
Changes in
underwriting
discount rates
on non-PPO
liabilities - - - - (6.3) (6.3) - - (6.3)
Onerous contract
provision - 0.8 - - 3.0 3.8 - - 3.8
IFRS 16
adjustment
on river cruise
vessels 0.6 - - - - - - - 0.6
--------- --------- ------------- ---------
Underlying
(Loss)/Profit
Before Tax (9) (9.9) 21.9 22.5 27.1 10.7 82.2 (56.8) - 15.5
a. Disaggregation of revenue
Unaudited
6m to Jul 2023 Insurance
Other
Businesses
Cruise Underwriting Broking Other Total and Central
and Travel revenue Insurance Costs Total
Major product lines GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Ocean Cruise 103.8 103.8
River Cruise and
Travel 93.1 93.1
Motor broking 9.8 14.1 - 23.9 23.9
Home broking - 26.7 - 26.7 26.7
Other broking 0.4 21.7 - 22.1 22.1
Insurance
Underwriting 75.0 - 3.5 78.5 78.5
Money 3.7 3.7
Media 5.8 5.8
Insight 0.5 0.5
196.9 85.2 62.5 3.5 151.2 10.0 358.1
Unaudited
6m to Jul 2022
(restated (10) ) Insurance
Other
Businesses
Cruise Underwriting Broking Other Total and Central
and Travel revenue Insurance Costs Total
Major product lines GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Ocean Cruise 75.7 75.7
River Cruise and
Travel 60.5 60.5
Motor broking 16.6 23.8 - 40.4 40.4
Home broking - 27.2 - 27.2 27.2
Other broking 0.5 20.9 - 21.4 21.4
Insurance
Underwriting 80.6 - 1.3 81.9 81.9
Money 4.1 4.1
Media 5.1 5.1
Insight 0.3 0.3
Other 0.5 0.5
136.2 97.7 71.9 1.3 170.9 10.0 317.1
Unaudited
12m to Jan 2023
(restated(10) ) Insurance
Other
Cruise Businesses
and Underwriting Broking Other Total and Central
Travel revenue Insurance Costs Total
Major product lines GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Ocean Cruise 168.3 168.3
River Cruise and
Travel 137.2 137.2
Motor broking 31.2 45.8 - 77.0 77.0
Home broking - 57.6 - 57.6 57.6
Other broking 0.9 44.4 - 45.3 45.3
Insurance
Underwriting 160.9 - (2.4) 158.5 158.5
Money 7.9 7.9
Media 10.3 10.3
Insight 0.6 0.6
Other 1.0 1.0
305.5 193.0 147.8 (2.4) 338.4 19.8 663.7
_______________________________
9 Refer to the Alternative Performance Measures Glossary for
definition and explanation
1 (0) For details of the restatement, please see Notes 2.5, 12
and 15
4 Tax
The major components of the income tax expense are:
Unaudited Unaudited Unaudited
6m to 6m to 12m to
Jul 2023 Jul 2022 Jan 2023
(restated (restated(11)
(11) ) )
GBPm GBPm GBPm
Condensed consolidated income statement
Current income tax
Current income tax charge - 2.3 1.1
Adjustments in respect of previous
periods (0.3) (0.5) (0.4)
(0.3) 1.8 0.7
Deferred tax
Relating to origination and reversal
of temporary differences (5.6) 0.6 (0.2)
Adjustments in respect of previous
periods (0.9) 2.1 (0.1)
(6.5) 2.7 (0.3)
Tax (income)/expense in the income
statement (6.8) 4.5 0.4
The Group's tax income for the period was GBP6.8m (July 2022:
GBP4.5m expense) representing a tax effective rate of 70.1% (July
2022: 58.4% (restated)) before the impairment of goodwill. In both
the current and prior periods, the difference between the Group's
tax effective rate and the standard rate of corporation tax, was
mainly due to the Group's Ocean Cruise business being in the
tonnage tax regime.
Adjustments in respect of previous periods include adjustments
for the over-provision of the tax charge in prior periods of
GBP1.2m (July 2022: GBP1.6m under-provision).
Reconciliation of net deferred tax assets
Unaudited Unaudited Unaudited
6m to 6m to 12m to
July 2023 Jul 2022 Jan 2023
(restated (restated(11)
(11) ) )
GBPm GBPm GBPm
At 1 February 11.5 7.2 7.2
Tax credit/(charge) recognised in
the income statement 6.5 (2.7) 0.3
Tax credit/(charge) recognised in
other comprehensive income 1.0 (3.4) 4.0
At the end of the period 19.0 1.1 11.5
On 3 March 2021, it was announced that the corporation tax rate
will 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 are expected to
be normally settled in more than 12 months.
_______________________________
11 For details of the restatement, please see Notes 2.5, 12 and
15
5 Dividends
No ordinary dividends were declared, nor paid, during the
current and prior periods.
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). The Group maintained
sufficient headroom under the RCF covenant during the six months
ended 31 July 2023 .
6 Loss per share
Basic loss per share is calculated by dividing the loss after
tax for the period 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 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:
Unaudited Unaudited Unaudited
6m to 6m to 12m to
Jul 2023 Jul 2022 Jan 2023
(restated (restated(12)
(12) ) )
GBPm GBPm GBPm
Loss attributable to ordinary equity
holders (71.0) (266.3) (273.1)
Weighted average number of ordinary
shares 'm 'm 'm
Ordinary shares as at 1 February 139.5 139.5 139.5
Movement during the period (0.1) (0.3) -
Ordinary shares as at the end of
the period 139.4 139.2 139.5
Weighted average number of ordinary
shares for basic loss per share
and diluted loss per share 139.4 139.2 139.5
Basic loss per share (50.9p) (191.3p) (195.7p)
Diluted loss per share (50.9p) (191.3p) (195.7p)
The table below reconciles between basic loss per share and
Underlying Basic Earnings Per Share (13) :
Unaudited Unaudited Unaudited
6m to 6m to 12m to
Jul 2023 Jul 2022 Jan 2023
(restated(12)
)
(restated(12)
)
Basic loss per share (50.9p) (191.3p) (195.7p)
Adjusted for:
Derivative losses/(gains) 0.2p (0.3p) (1.2p)
Impairment, and net loss on disposal,
of assets - - 0.9p
Impairment of Insurance goodwill 48.8p 193.2p 192.8p
Acquisition costs relating to the
Big Window (Note 7b) 0.1p 0.4p 0.5p
Onerous contract provision 1.9p 0.3p 3.2p
Arrangement fee on RDH loan 0.2p - -
Foreign exchange movement on lease
liabilities (0.1p) 0.1p 1.7p
Fair value losses on debt securities 1.0p 2.2p 12.4p
Changes in underwriting discount
rates (0.6p) (0.9p) (5.3p)
Restructuring costs 1.2p 0.7p 3.1p
IFRS 16 lease accounting adjustment
on river cruise vessels (0.1p) 0.1p 0.5p
Underlying Basic Earnings Per Share(13) 1.7p 4.5p 12.9p
_______________________________
12 For details of the restatement, please see Notes 2.5, 12 and
15
13 Refer to the Alternative Performance Measures Glossary for
definition and explanation
7 Business combinations and disposals
a. Acquisitions during the period ended 31 July 2023
There were no business acquisitions during the period ended 31
July 2023.
b. Acquisitions during the period ended 31 July 2022
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 GBPm
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 the period to 31 July 2022.
The Big Window contributed GBP0.3m of revenue and GBP0.1m to the
Group profit before tax from the date of acquisition to 31 July
2022.
c. Disposals
There were no business disposals in the period ended 31 July
2023 or the period ended 31 July 2022.
8 Goodwill
Goodwill acquired through business combinations has been
allocated to Cash Generating Units (CGUs) for the purpose of
impairment testing. The carrying value of goodwill by CGU is as
follows:
Unaudited Unaudited
As at Jul As at Jul As at Jan
2023 2022 2023
GBPm GBPm GBPm
Insurance 381.5 449.6 449.6
381.5 449.6 449.6
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 General
Insurance Pricing Practices 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. In the period
to 31 July 2023, high claims cost inflation in a competitive market
continued to have an adverse impact on the profitability of the
Insurance business. Management considered these trading impacts to
constitute indicators of impairment and have therefore conducted
full impairment reviews of the Insurance CGU as at 31 July 2022, 31
January 2023 and 31 July 2023.
At each review date, 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, 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 2023: 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 July 2023, the pre-tax discount rate used for the
Insurance CGU was 13.8% (July 2022: 12.7%; January 2023: 13.0%).
The Group's five-year financial forecasts incorporate the modelled
adverse impact of motor margin pressures and lower policy sales on
future profitability, partially offset by additional efficiency
measures. As per IAS 36.44, incremental cash flows directly
attributable to growth and other 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 2023: 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 +0.7ppt at 31
July 2023 (July 2022: +1.2ppt; January 2023: +1.3ppt).
The (deficit)/headroom for the Insurance CGU against the
carrying value of goodwill at the time of the review of GBP449.6m
at 31 July 2023 and 31 January 2023 and GBP718.6m at 31 July 2022
was as follows:
(Deficit)/headroom
GBPm
Central scenario Cash flow stress test Discount rate stress
scenario test scenario
31 31 31 January 31 31 31 January 31 31 31 January
July July 2023 July July 2023 July July 2023
2023 2022 2023 2022 2023 2022
Insurance 11.6 (121.8) 153.9 (88.7) (269.0) 12.0 (9.8) (146.8) 92.6
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 the goodwill by GBP269.0m, based on a probability weighted
assessment of the forecast cash flows modelled.
At 31 July 2023, the Group again determined that the recoverable
amount of the goodwill was below the carrying value, and so the
Directors took the decision to impair the goodwill by a further
GBP68.1m, based on a probability weighted assessment of the
forecast cash flows modelled.
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 costs,
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 July 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%
GBPm GBPm GBPm GBPm GBPm GBPm
( 40.6 ( 30.3
Insurance ) 50.8 37.9 ) 41.5 (41.5)
For the reasons explained in Note 7, goodwill of GBP0.5m arising
on the acquisition of the Big Window in the period to 31 July 2022
was immediately impaired in full.
9 Intangible fixed assets
During the period, the Group capitalised GBP10.9m (July 2022:
GBP3.9m) of software assets, disposed of assets with a net book
value of GBPnil (July 2022: GBPnil) and charged GBP4.3m (July 2022:
GBP4.5m) of amortisation and impairment to its intangible assets.
Profit arising on disposal was GBPnil (July 2022: GBP0.1m).
10 Property, plant and equipment
During the period, the Group capitalised assets with a cost of
GBP1.7m (July 2022: GBP1.7m), disposed of assets with a net book
value of GBP0.1m (July 2022: GBP0.1m) and charged GBP11.4m (July
2022: GBP11.6m) of depreciation and impairment to its property,
plant and equipment. Loss arising on disposal was GBP0.1m (July
2022: GBPnil).
As at 31 July 2023, capital amounts contracted for but not
provided for, in the financial statements, amounted to GBPnil (July
2022: GBPnil).
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 prior
financial 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 Energy Efficiency eXisting ships Index
and Carbon Intensity Indicator regulations were introduced
internationally during the prior 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 did not factor 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 has commenced the
retro-fit of shore power connections to one of its vessels, and is
planning on doing the same to the other vessel, 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
RWC stress test
Central scenario scenario
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.
Subsequent to 31 July 2022, further COVID-19 restrictions were
lifted for cruise passengers and the business returned to fully
operational conditions. 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 July 2023 and 31 January
2023, and accordingly no further impairment review has been deemed
necessary.
As the Group planned to vacate most of its properties (Note 18),
management concluded that this constituted an indicator of
impairment and 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 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 31 January 2023, the Group
reclassified assets with a net book value of GBP19.5m to assets
held for sale (Note 18).
11 Right-of-use assets
During the period, the Group capitalised assets with a cost of
GBP6.5m (July 2022: GBP49.6m) and charged GBP6.5m (July 2022:
GBP8.1m) of depreciation and impairment to its right-of-use assets.
Right-of-use assets capitalised in the period ended 31 July 2022
primarily relate to r iver cruise ship additions relating to the
vessels, Spirit of the Danube, MS River Discovery II and MS
Serenade 1.
a. Impairment review of right-of-use assets
The Group does not consider it necessary to conduct an
impairment review of right-of-use assets as at 31 July 2023 since
no new indicators of impairment have been identified.
12 Financial assets and financial liabilities
a. Financial assets
Unaudited
Unaudited As at Unaudited
As at 31 Jul 2022 As at
31 Jan 2023
31 Jul (restated (restated(14)
2023 (14) ) )
Note GBPm GBPm GBPm
FVTPL
Foreign exchange forward contracts 0.1 0.9 0.4
Loan funds - 5.8 5.9
Money market funds 13 0.7 27.1 19.6
Debt securities 230.2 259.9 254.4
231.0 293.7 280.3
FVTPL designated in a hedging relationship
Foreign exchange forward contracts 0.2 3.4 2.1
Fuel oil swaps 0.8 0.9 -
1.0 4.3 2.1
Amortised cost
Deposits with financial institutions 10.5 - -
10.5 - -
Total financial assets 242.5 298.0 282.4
Current 33.6 66.3 62.8
Non-current 208.9 231.7 219.6
242.5 298.0 282.4
The Group's financial assets are analysed by Moody's credit risk
rating on page 24of the Group Chief Financial Officer's Review.
b. Financial liabilities
Unaudited Unaudited
As at As at As at
31 Jul 31 Jul 31 Jan
2023 2022 2023
Note GBPm GBPm GBPm
FVTPL
Foreign exchange forward contracts 0.7 0.8 0.2
0.7 0.8 0.2
FVTPL designated in a hedging relationship
Foreign exchange forward contracts 3.8 1.6 1.0
Fuel oil swaps 0.4 0.9 4.0
4.2 2.5 5.0
Amortised cost
Bonds and bank loans 16 825.3 883.5 854.6
Lease liabilities 31.8 77.5 32.6
Bank overdrafts 13 1.7 0.8 4.4
858.8 961.8 891.6
Total financial liabilities 863.7 965.1 896.8
Current 226.3 80.6 118.6
Non-current 637.4 884.5 778.2
863.7 965.1 896.8
c. Fair value hierarchy
Unaudited Unaudited
As at 31 Jul 2023 As at 31 Jul 2022
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Financial assets measured at fair
value
Foreign exchange forwards - 0.3 - 0.3 - 4.3 - 4.3
Fuel oil swaps - 0.8 - 0.8 - 0.9 - 0.9
Loan funds - - - - 5.8 - - 5.8
Debt securities 230.2 - - 230.2 259.9 - - 259.9
Money market funds 0.7 - - 0.7 27.1 - - 27.1
Financial liabilities measured
at fair value
Foreign exchange forwards - 4.5 - 4.5 - 2.4 - 2.4
Fuel oil swaps - 0.4 - 0.4 - 0.9 - 0.9
Financial assets for which fair
values are disclosed
Deposits with institutions - 10.5 - 10.5 - - - -
Financial liabilities for which
fair values are disclosed
Bonds and bank loans - 750.9 - 750.9 - 825.5 - 825.5
Lease liabilities - 31.8 - 31.8 - 77.5 - 77.5
Bank overdrafts - 1.7 - 1.7 - 0.8 - 0.8
As at 31 Jan 2023
Level Level Level
1 2 3 Total
GBPm GBPm GBPm GBPm
Financial assets measured at fair
value
Foreign exchange forwards - 2.5 - 2.5
Loan funds 5.9 - - 5.9
Debt securities 254.4 - - 254.4
Money market funds 19.6 - - 19.6
Financial liabilities measured at
fair value
Foreign exchange forwards - 1.2 - 1.2
Fuel oil swaps - 4.0 - 4.0
Financial liabilities for which
fair values are disclosed
Bonds and bank loans - 788.9 - 788.9
Lease liabilities - 32.6 - 32.6
Bank overdrafts - 4.4 - 4.4
Full details of the valuation techniques and inputs used to
develop fair value measurements can be found in the Annual Report
and Accounts for the year ended 31 January 2023.
d. Other information
Debt securities, money market funds and deposits with financial
institutions relate to monies held by the Group's Insurance
Underwriting business and 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 period (July 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 period, the
Group designated 139 foreign exchange forward currency contracts as
hedges of highly probable foreign currency cash expenses in future
periods and designated 20 fuel oil swaps as hedges of highly
probable fuel oil purchases in future periods. As at 31 July 2023,
the Group has designated 375 forward currency contracts and 70 fuel
oil swaps as hedges.
During the period, the Group recognised net losses of GBP1.7m
(July 2022: net gains of GBP5.4m) on cash flow hedging instruments
through OCI into the hedging reserve. The Group recognised GBPnil
gains (July 2022: GBPnil gains) through the income statement in
respect of the ineffective portion of hedges measured during the
period.
During the period, the Group de-designated one foreign currency
forward contract, with a transaction value of GBPnil, where the
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 this contract of
GBPnil has been reclassified from the hedging reserve into profit
or loss during the period. The Group has not de-designated any fuel
oil swaps during the period. During the period, the Group
recognised a GBP1.3 loss (July 2022: GBP2.3m gain) through the
income statement in respect of matured hedges which have been
recycled from OCI.
_______________________________
14 For details of the restatement, please see Note 2.3. As a
result of the adoption of IFRS 17 during the period, the Group has
changed classification of debt securities under IFRS 9, from FVOCI
to FVTPL, for the periods ended 31 July 2022 and 31 January
2023
13 Cash and cash equivalents
Unaudited Unaudited
As at As at
31 Jul 31 Jul 2022 As at
2023 31 Jan 2023
GBPm GBPm GBPm
Cash at bank and in hand 84.3 99.6 52.0
Short-term deposits 122.9 112.2 124.5
Cash and short-term deposits 207.2 211.8 176.5
Money markets funds (Note 12a) 0.7 27.1 19.6
Bank overdraft (Note 12b) (1.7) (0.8) (4.4)
Cash and cash equivalents in the
cash flow statement 206.2 238.1 191.7
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 GBP25.5m (July 2022: GBP59.1m).
Available Cash (15) 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.
_______________________________
1 (5) Refer to the Alternative Performance Measures Glossary 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 schemes
There are three defined contribution schemes in the Group. 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. 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:
Unaudited Unaudited
As at As at
31 Jul 31 Jul 2022 As at
2023 31 Jan 2023
GBPm GBPm GBPm
Fair value of scheme assets 208.5 331.9 224.1
Present value of defined benefit
obligation (216.5) (314.5) (236.2)
Defined benefit scheme (liability)/asset (8.0) 17.4 (12.1)
The present value of the defined benefit obligation at 31
January 2023 was measured using the projected unit credit method.
Liabilities at 31 July 2023 have been estimated by rolling forward
from 31 January 2023, allowing for changes in market conditions and
estimating the value of benefits accrued and paid out over the
period.
During the period ended 31 July 2023, the net liability position
of the Saga Scheme reduced by GBP4.1m, resulting in an overall
scheme deficit of GBP8.0m, mainly as a result of a recovery plan
contribution being paid by the Group, although this has been
partially offset by higher than expected inflation experience. The
GBP5.8m deficit funding contribution was paid by the Group in
February 2023 in relation to a recovery plan agreed under the
latest triennial valuation of the scheme as at 31 January 2020.
The movements observed in the scheme's assets and obligations
have been impacted by macroeconomic factors during the period
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
GBP19.7m to GBP216.5m, primarily due to a 55bps 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
GBP15.6m to GBP208.5m. The decrease in asset values has been
largely driven by the rise in interest rates in the period.
15 Insurance and reinsurance contract liabilities and assets
The Group has adopted IFRS 17 'Insurance Contracts' for the
first time in 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 comparatives for the period ended 31
July 2022 and the year ended 31 January 2023 have been restated
onto an IFRS 17 basis. For further details of the restatement,
please see Note 2.5.
Liabilities for Liabilities for
remaining coverage incurred claims
Estimate
of the
present
value
of future
Excluding cash
loss component Loss component flows Risk adjustment Total
Unaudited GBPm GBPm GBPm GBPm GBPm
As at 1 February 2023
(restated)
Insurance contract
liabilities (44.3) (8.4) (259.2) (35.6) (347.5)
Insurance revenue 85.2 - - - 85.2
Incurred claims and
related expenses - 5.3 (92.0) (6.6) (93.3)
Changes to liabilities
for incurred claims - - 2.2 6.3 8.5
Insurance acquisition
cash flows incurred (12.4) - - - (12.4)
Losses on onerous contracts
and reversals of those
losses - (10.0) - - (10.0)
Other incurred insurance
service expenses - - (7.6) - (7.6)
Insurance service expenses (12.4) (4.7) (97.4) (0.3) (114.8)
Insurance finance expense - - (6.7) (0.9) (7.6)
Total changes in the
consolidated income
statement 72.8 (4.7) (104.1) (1.2) (37.2)
Cash flows
Premiums received (80.7) - - - (80.7)
Insurance acquisition
cash flows paid 12.4 - - - 12.4
Claims and other expenses
paid - - 99.4 - 99.4
Total cash flows (68.3) - 99.4 - 31.1
Unaudited
As at 31 July 2023
Insurance contract
liabilities (39.8) (13.1) (263.9) (36.8) (353.6)
Assets for remaining Amounts recoverable
coverage on incurred claims
Estimate
of the
present
value
Excluding of future
loss-recovery Loss-recovery cash
component component flows Risk adjustment Total
Unaudited GBPm GBPm GBPm GBPm GBPm
As at 1 February 2023
(restated)
Reinsurance contract
(liabilities)/assets (5.5) 2.7 87.6 27.4 112.2
Allocation of reinsurance
premiums (8.0) - - - (8.0)
Amounts recoverable
for incurred
claims and other expenses - (0.9) 17.1 2.1 18.3
Changes to amounts recoverable
for incurred claims - - 8.8 (0.9) 7.9
Loss-recovery on onerous
underlying contracts
and adjustments - 1.6 - - 1.6
Effect of changes in
the risk of non-performance
of reinsurance contracts - - (0.5) - (0.5)
Net (expense)/income
from reinsurance contracts (8.0) 0.7 25.4 1.2 19.3
Reinsurance finance
income - - 3.0 1.2 4.2
Total changes in the
consolidated income
statement (8.0) 0.7 28.4 2.4 23.5
Cash flows
Premiums received 12.3 - - - 12.3
Amounts received - - (0.1) - (0.1)
Total cash flows 12.3 - (0.1) - 12.2
Unaudited
As at 31 July 2023
Reinsurance contract
(liabilities)/assets (1.2) 3.4 115.9 29.8 147.9
Liabilities for Liabilities for
remaining coverage incurred claims
Estimate
of the
present
value
of future
Excluding cash
loss component Loss component flows Risk adjustment Total
Unaudited GBPm GBPm GBPm GBPm GBPm
As at 1 February 2022
(restated)
Insurance contract
liabilities (54.9) (1.9) (267.6) (35.2) (359.6)
Insurance revenue 97.7 - - - 97.7
Incurred claims and
related expenses - 1.8 (82.1) (5.1) (85.4)
Changes to liabilities
for incurred claims - - 12.3 6.6 18.9
Insurance acquisition
cash flows incurred (15.8) - - - (15.8)
Losses on onerous contracts
and reversals of those
losses - (3.2) - - (3.2)
Other incurred insurance
service expenses - - (6.8) - (6.8)
Insurance service
(expenses)/income (15.8) (1.4) (76.6) 1.5 (92.3)
Insurance finance income - - 6.2 0.8 7.0
Total changes in the
consolidated income
statement 81.9 (1.4) (70.4) 2.3 12.4
Cash flows
Premiums received (93.9) - - - (93.9)
Insurance acquisition
cash flows paid 15.8 - - - 15.8
Claims and other expenses
paid - - 88.1 - 88.1
Total cash flows (78.1) - 88.1 - 10.0
Unaudited
As at 31 July 2022 (restated)
Insurance contract
liabilities (51.1) (3.3) (249.9) (32.9) (337.2)
Assets for remaining Amounts recoverable
coverage on incurred claims
Estimate
of the
present
value
Excluding of future
loss-recovery Loss-recovery cash
component component flows Risk adjustment Total
Unaudited GBPm GBPm GBPm GBPm GBPm
As at 1 February 2022
(restated)
Reinsurance contract
liabilities (1.1) - - - (1.1)
Reinsurance contract
assets (5.1) - 63.7 22.5 81.1
Net reinsurance contract
(liabilities)/assets (6.2) - 63.7 22.5 80.0
Allocation of reinsurance
premiums (7.3) - - - (7.3)
Amounts recoverable
for incurred
claims and other expenses - (0.1) 4.7 0.7 5.3
Changes to amounts recoverable
for incurred claims - - 8.3 (0.3) 8.0
Loss-recovery on onerous
underlying contracts
and adjustments - 0.5 - - 0.5
Effect of changes in
the risk of non-performance
of reinsurance contracts - - (0.2) - (0.2)
Net (expense)/income
from reinsurance contracts (7.3) 0.4 12.8 0.4 6.3
Reinsurance finance
expense - - (3.9) (1.4) (5.3)
Total changes in the
consolidated income
statement (7.3) 0.4 8.9 (1.0) 1.0
Cash flows
Premiums paid 13.7 - - - 13.7
Amounts received - - (4.9) - (4.9)
Total cash flows 13.7 - (4.9) - 8.8
Unaudited
As at 31 July 2022 (restated)
Reinsurance contract
assets 0.2 0.4 67.7 21.5 89.8
Liabilities for Liabilities for
remaining coverage incurred claims
Estimate
of the
present
value
of future
Excluding cash
loss component Loss component flows Risk adjustment Total
Unaudited GBPm GBPm GBPm GBPm GBPm
As at 1 February 2022
(restated)
Insurance contract
liabilities (54.9) (1.9) (267.6) (35.2) (359.6)
Insurance revenue 193.0 - - - 193.0
Incurred claims and
related expenses - 4.4 (182.7) (10.7) (189.0)
Changes to liabilities
for incurred claims - - 19.0 9.3 28.3
Insurance acquisition
cash flows incurred (29.5) - - - (29.5)
Losses on onerous contracts
and reversals of those
losses - (10.9) - - (10.9)
Other incurred insurance
service expenses - - (14.7) - (14.7)
Insurance service expenses (29.5) (6.5) (178.4) (1.4) (215.8)
Insurance finance income - - 7.2 1.0 8.2
Total changes in the
consolidated income
statement 163.5 (6.5) (171.2) (0.4) (14.6)
Cash flows
Premiums received (182.4) - - - (182.4)
Insurance acquisition
cash flows paid 29.5 - - - 29.5
Claims and other expenses
paid - - 179.6 - 179.6
Total cash flows (152.9) - 179.6 - 26.7
Unaudited
As at 31 January 2023
(restated)
Insurance contract
liabilities (44.3) (8.4) (259.2) (35.6) (347.5)
Assets for remaining Amounts recoverable
coverage on incurred claims
Estimate
of the
present
value
Excluding of future
loss-recovery Loss-recovery cash
component component flows Risk adjustment Total
Unaudited GBPm GBPm GBPm GBPm GBPm
As at 1 February 2022
(restated)
Reinsurance contract
liabilities (1.1) - - - (1.1)
Reinsurance contract
assets (5.1) - 63.7 22.5 81.1
Net reinsurance contract
(liabilities)/assets (6.2) - 63.7 22.5 80.0
Allocation of reinsurance
premiums (14.8) - - - (14.8)
Amounts recoverable
for incurred
claims and other expenses - (0.3) 29.2 3.9 32.8
Changes to amounts recoverable
for incurred claims - - 4.2 2.0 6.2
Loss-recovery on onerous
underlying contracts
and adjustments - 3.0 - - 3.0
Effect of changes in
the risk of non-performance
of reinsurance contracts - - 0.1 - 0.1
Net (expense)/income
from reinsurance contracts (14.8) 2.7 33.5 5.9 27.3
Reinsurance finance
expense - - (2.7) (1.0) (3.7)
Total changes in the
consolidated income
statement (14.8) 2.7 30.8 4.9 23.6
Cash flows
Premiums paid 15.5 - - - 15.5
Amounts received - - (6.9) - (6.9)
Total cash flows 15.5 - (6.9) - 8.6
Unaudited
As at 31 January 2023
(restated)
Reinsurance contract
(liabilities)/assets (5.5) 2.7 87.6 27.4 112.2
16 Loans and borrowings
Unaudited Unaudited
As at As at As at
31 Jul 31 Jul 31 Jan
2033 2022 2023
GBPm GBPm GBPm
Bonds 400.0 400.0 400.0
Ship loans 438.1 500.3 469.2
RCF - - -
Accrued interest payable 5.0 5.7 5.5
843.1 906.0 874.7
Less: deferred issue costs (17.8) (22.5) (20.1)
825.3 883.5 854.6
Term loan, RCF and bonds
At 31 July 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 (expiring 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 period to 31 July 2022, 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, in the six-month period to 31 January
2023, 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 July 2023, the Group's GBP50.0m RCF remained undrawn.
Accrued interest payable on the Group's bonds at 31 July 2023 is
GBP1.8m (July 2022: GBP2.5m).
During the period ended 31 July 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.
In the period to 31 July 2023, and as amended since the end of
the period, the Group has entered into a forward starting loan
facility agreement with Roger De Haan, commencing on 1 January
2024, under which the Group may draw down up to GBP85.0m (GBP50.0m
per the original terms) with 30 days' notice to support liquidity
needs and specifically the repayment of GBP150.0m 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 amended
facility matures on 31 December 2025 (previously 30 June 2025), at
which point any outstanding amounts, including interest, must be
repaid. T he interest rate paid on funds drawn under this facility
to finance the repayment of notes issued by Saga plc, or to provide
cash collateral demanded by providers of bonding facilities to the
Group, is 10%, increasing to 18% for any amounts drawn to support
general corporate purposes. In addition, a drawing fee of 2% is
payable (increasing to 5% for drawdowns for general corporate
purposes), alongside milestone payments of 2% of any uncancelled
amounts of the facility on each of 31 March 2024 and 31 December
2024. The amended facility has been provided on the basis of
certain conditions being met; including:
-- no professional advisors may be appointed to or retained by
Saga plc without prior approval of the Board; and
-- no incremental financial indebtedness, over and above the
facilities already in place, may be incurred by Group companies,
including contracts classed as finance lease arrangements under
previous IFRS.
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.
In the period to 31 July 2023, the Group concluded discussions
with its Cruise lenders in respect of the covenant restrictions
attaching to its two ship debt facilities. Lenders agreed to a
waiver of the EBITDA to debt repayment covenant ratio for the 31
July 2023 testing date.
After the end of the period, the Group concluded discussions
with its Cruise lenders to amend the covenants on the two ship debt
facilities as follows:
-- Reduction in the EBITDA to debt repayment ratio from 1.2x to
1.0x for the additional periods up to and including 31 January
2025.
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 July 2023 is GBP3.2m (July 2022: GBP3.2m).
Total debt and finance costs
At 31 July 2023, deferred debt issue costs were GBP17.8m (July
2022: GBP22.5m). The movement of GBP4.7m, year-on-year, represents
expense amortisation for the period between these two dates.
During the period, the Group charged GBP20.6m (July 2022:
GBP20.5m) 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
GBP0.9m (July 2022: GBP1.9m) relating to interest and finance
charges on lease liabilities, GBP0.3m (July 2022: GBPnil) relating
to net finance expense on pension schemes, GBP1.0m (July 2022:
GBPnil) in respect of an arrangement fee associated with the
forward starting loan facility agreement with Roger De Haan, as
disclosed above, and net fair value losses on derivatives of
GBP0.9m (July 2022: GBPnil). The Group has complied with the
financial covenants of its borrowing facilities during the current
and prior periods.
17 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 or approved during the six months ended 31 July 2023 were
as follows:
-- On 26 May 2023, nil cost options over 376,557 shares were
issued under the Deferred Bonus Plan to Executive Directors
reflecting their deferred bonus in respect of 2022/23, 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.
-- On 12 June 2023, nil cost options over 1,991,234 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.
The fair values of all awards granted during the period 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 GBP2.4m
during the period (July 2022: GBP1.8m) to the income statement in
respect of equity-settled share-based payment transactions.
On 1 August 2023, Saga plc issued 1,458,551 new ordinary shares
of 15 pence each for transfer into an employee benefit trust to
satisfy employee incentive arrangements. The newly issued shares
rank pari passu with existing Saga shares.
18 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 (January 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 period.
As at 31 July 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. No gains or losses were recognised with respect
to the properties during the six months ended 31 July 2023.
19 Related party transactions
Related party transactions during the six months ended 31 July
2023 were consistent in nature, scope and quantum with those
disclosed in the Group's Annual Report and Accounts for the year
ended 31 January 2023 available at www.corporate.saga.co.uk .
20 Events after the reporting period
On 1 August 2023, Saga plc issued 1,458,551 new ordinary shares
of 15 pence each for transfer into an employee benefit trust to
satisfy employee incentive arrangements. The newly issued shares
rank pari passu with existing Saga shares.
Since the end of the period, to provide additional financial
flexibility, the Group has agreed an increase and extension to the
existing loan facility with Roger De Haan. This increase is for the
value of GBP35m, taking the total facility to GBP85m, and will now
expire on 31 December 2025, previously 30 June 2025. Please refer
to Note 16 for further details.
In addition, after the end of the period, the Group concluded
discussions with its Cruise lenders to amend the covenants on the
two ship debt facilities as follows:
-- Reduction in the EBITDA to debt repayment ratio from 1.2x to
1.0x for the additional periods up to and including 31 January
2025.
Please refer to Note 16 for further details relating to the
Group's cruise ship debt facilities.
Responsibility Statement
We confirm that to the best of our knowledge:
-- the condensed consolidated interim financial statements have
been prepared in accordance with UK-adopted IAS 34 'Interim
Financial Reporting' as issued by the IASB; and
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed consolidated set of interim financial statements;
and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last Annual Report and Accounts that
could do so.
On behalf of the Board
E A Sutherland J B Quin
Group Chief Executive Officer Group Chief Financial Officer
26 September 2023 26 September 2023
Independent Review Report to Saga plc
Conclusion
We have been engaged by Saga plc (the Company or the Group) to
review the condensed consolidated set of financial statements in
the interim financial report for the six months ended 31 July 2023
which comprises the condensed consolidated income statement,
condensed consolidated statement of comprehensive income, condensed
consolidated statement of financial position, condensed
consolidated statement of changes in equity, condensed consolidated
statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated set of
financial statements in the interim financial report for the six
months ended 31 July 2023 is not prepared, in all material
respects, in accordance with International Accounting Standard
(IAS) 34 'Interim Financial Reporting' as adopted for use in the
United Kingdom (UK) and the Disclosure Guidance and Transparency
Rules (DTR) of the UK's Financial Conduct Authority (FCA).
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity (ISRE (UK) 2410) issued for use in the UK. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the interim financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
consolidated set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusion relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the 'Basis for
conclusion' section of this report, nothing has come to our
attention that causes us to believe that the Directors have
inappropriately adopted the going concern basis of accounting, or
that the Directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Company to cease to continue as a going
concern, and the above conclusion is not a guarantee that the
Company will continue in operation.
Directors' responsibilities
The interim financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the interim financial report in accordance with the DTR
of the UK FCA.
As disclosed in Note 2.1, the annual financial statements of the
Company are prepared in accordance with UK-adopted international
accounting standards.
The Directors are responsible for preparing the condensed
consolidated set of financial statements included in the interim
financial report in accordance with IAS 34 as adopted for use in
the UK.
In preparing the condensed consolidated set of financial
statements, the Directors are responsible for assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated set of financial statements in the
interim financial report based on our review. Our conclusion,
including our conclusion relating to going concern, is based on
procedures that are less extensive than audit procedures, as
described in the 'Basis for conclusion' section of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusion we have
reached.
Timothy Butchart
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
26 September 2023
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 (IFRS), 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, rather than a substitute, for GAAP measures.
Underlying Profit Before Tax
Underlying Profit Before Tax represents the loss before tax
excluding:
-- unrealised fair value gains and losses on derivatives;
-- the net loss on disposal of assets;
-- impairment of the carrying value of assets, including goodwill;
-- impact of changes in the discount rate on non-periodical
payment order (PPO) liabilities(1) ;
-- fair value losses on debt securities;
-- foreign exchange movements on river cruise ship leases;
-- the arrangement fee on the facility with Roger De Haan;
-- movements in the insurance onerous contract provisions (net of reinsurance recoveries)(2) ;
-- 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 11.
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.
Underlying Profit Before Tax (Under Previous IFRS)
Underlying Profit Before Tax (Under Previous IFRS) represents
Underlying Profit Before Tax, as described above, but under the
previous IFRS 4 'Insurance Contracts', as opposed to IFRS 17
'Insurance Contracts'.
The measure is consistent with the forecasts of external
analysts which are collated into the company-compiled consensus and
allows stakeholders to make meaningful comparisons to historic
reporting.
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 Before Tax within the Group Chief Financial Officer's Review
on page 22. Underlying Profit Before Tax is reconciled to statutory
loss before tax within the Group Chief Financial Officer's Review
on page 11.
This measure is linked to the covenant on the Group's RCF, being
the denominator in the Group's leverage ratio calculation.
Ocean Cruise Trading EBITDA (Excluding Overheads)
Ocean Cruise Trading EBITDA (Excluding Overheads) reflects the
Trading EBITDA for the Ocean Cruise business, adjusted to exclude
the corresponding overheads for those operations.
This measure is comparable with the GBP40m per annum per ship
target that was set at the time the cruise ships were purchased and
is reconciled to Ocean Cruise Trading EBITDA on page 22 of the
Chief Financial Officer's Review.
Underlying Basic Earnings Per Share
Underlying Basic Earnings Per Share represents basic loss per
share excluding the post-tax effect of:
-- unrealised fair value gains and losses on derivatives;
-- the net loss on disposal of assets;
-- impairment of the carrying value of assets, including goodwill;
-- impact of changes in the discount rate on non-PPO liabilities(1) ;
-- fair value losses on debt securities;
-- foreign exchange gains on river cruise ship leases;
-- the arrangement fee on the facility with Roger De Haan;
-- movements in the insurance onerous contract provisions (net of reinsurance recoveries)(2) ;
-- 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 page 55.
This measure is linked to the Group's key performance indicator
Underlying Profit 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
63.
Available Operating Cash Flow
Available Operating Cash Flow is net cash flow 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 22.
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 25.
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.
_______________________________
(1) This adjustment reduces the risk of residual volatility from
changes in market interest rates adversely affecting Underlying
Profit Before Tax
(2) The IFRS 17 onerous contract requirements create a timing
mismatch between when claims are incurred and when they are
recognised in profit before tax. Underlying Profit Before Tax
adjusts for this timing mismatch by reversing the impact of these
requirements
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IR SEUEEMEDSEEU
(END) Dow Jones Newswires
September 27, 2023 02:00 ET (06:00 GMT)
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