RNS Number : 5754Q
22 June 2020
22 June 2020
("Saga" or "the Group")
AGM Trading Update
Saga plc, the UK's specialist in products and services for
people aged 50 and over, announces a trading update for the period
from 1 February to 21 June 2020, ahead of its Annual General
Meeting today at 11:00am.
The Insurance business has been resilient and continues to make
progress, with performance led by the success of our three-year
Retail Broking trading has performed well across home, motor and
private medical insurance partially offset by an expected reduction
in the sales of travel insurance.
-- Motor and Home policies for the period of 567,000 are 1%
higher than in the prior period, reflecting higher retention
partially offset by a continued disciplined approach to new
-- Customer retention across Motor and Home business of 79% is
six percentage points better than in the prior period, reflecting a
range of initiatives.
-- Motor and Home margins per policy after marketing costs in
the first four months of the year were GBP68, GBP6 below the prior
period but broadly in line with expectations.
-- Total policies for the period of 620,000 are 5% lower than in
the prior period due to a significant decline in the number of new
travel policies sold from mid-March.
-- As of 14 June 2020, the Group had sold 533,000 three-year
fixed-price policies, with over 60% of direct new business
customers choosing this product since it was fully launched.
-- 58% of new business customers are coming to Saga on a direct
basis, compared to 59% in the year ended 31 January 2020.
Market conditions continue to be challenging, in part due to
COVID-19, with an easing of competitive conditions in February and
March but with signs of a return to more competitive conditions in
motor and home in the last month.
The Group continues to innovate its Insurance offering and has
announced that treatment abroad for COVID-19 and repatriation to
the UK has been included as standard as part of its travel
insurance policies for all trips from 1 June. Saga has added the
cover to help customers feel more comfortable travelling once the
Government advice changes to say that it is safe to do so.
For the Insurance Underwriting business, reserve releases of
GBP20m in the first four months of the year are ahead of
expectations. This is due to favourable experience on large bodily
injury claims relating to prior accident years.
Current year claims frequency from March onwards has been much
reduced as a result of lower miles driven following the start of
the COVID-19 lockdown. The Group has not recognised any COVID-19
related claims upside in current year results or financial
The Group's Travel business has remained on pause since the
decision in mid-March to suspend operations due to COVID-19. The
Group has been focused on ensuring customers whose holidays have
been cancelled are re-booked on future trips or offered a cash
refund. The Group continues to expect some travel to resume this
year; retention levels continue to be high, particularly in Cruise,
and a significant number of changes have been made to how the
Travel businesses operate to provide peace of mind and ensure the
safety of customers and colleagues.
As at 31 May the Group had cancelled all travel departures up to
and including August and had refunded GBP44m of advance receipts to
customers, mainly relating to the Tour Operations business.
For Cruise, customer loyalty has been exceptional. Advance
receipts at the end of May were GBP43m, which is GBP5m lower than
at the end of March but well ahead of expectations. The Group has
retained over 70% of advance receipts on cancelled Cruise
departures, and new bookings for next year have been very
The sale of the Saga Sapphire was completed on 12 June on terms
broadly in line with previous expectations and the latest
indication for the Spirit of Adventure is that she will be
delivered by the end of October.
The Group has been working with industry bodies and the
Government to establish operational practices that would enable a
return of operations in both Tour and Cruise businesses as the
current restrictions are lifted. The Group's new mid-sized ships
are ideally placed to offer 'safe sailing' and all these measures
will be in place by the end of August.
The Group announced the sale of two domiciliary healthcare
companies, Patricia Whites and Country Cousins, in March, and
recently completed the transfer of Saga-branded healthcare
customers and colleagues to a well regarded third party care
provider for a nominal sum. This completes the exit from
The Group's liquidity position remains strong and benefits from
diversified sources of income. At 31 May 2020, the Group held
available cash balances, which exclude the Saga Tour CAA ring
fenced group, of GBP30m and continued to have access to a further
undrawn GBP50m on the Group's revolving credit facility. The
available cash balances have reduced by GBP62m from GBP92m at 31
March 2020 due to GBP56m cash support to the Travel businesses,
GBP7m restructuring costs and GBP7m interest payments, partially
offset by cash inflow relating to the normal trading activity of
the Group. The reduction in cash since the end of March is in line
with the assumptions in COVID-19 stress tests.
The Saga Tour ring fenced group held GBP45m of cash at 31 May
2020, representing 87% of the GBP52m of advance customer receipts.
In the last two months ST&H has returned around GBP28m of net
cash to customers and has made trading payments of around GBP23m,
offset by GBP41m of cash support from the Group.
The Group remains on track to receive regulatory approval for
the sale of Bennetts Motorcycling Services in the next few weeks
and to compete the transaction by 31 July 2020, generating net
disposal proceeds of around GBP23m.
The Group has now signed an agreement for a debt holiday and
covenant waiver for the two ship facilities. This allows the
deferral of GBP32m principal payments that were due up to 31 March
2021. These deferred amounts will amortise over a four-year period.
Interest remains payable and no dividends can be paid by Saga Group
while these principal payments remain outstanding.
Costs and efficiency
As previously announced, the Group has successfully delivered
GBP15m of run-rate cost savings during the period. The Group has
continued this focus on efficiency, for example by enabling all
colleagues to work from home, and now expects to achieve a further
GBP5m of run-rate cost savings across the business.
As a result of the current period of travel suspension, the
Group has undertaken a review of costs within the Travel business
to reduce near-term marketing and other costs through the current
period of disruption. This is expected to lead to a GBP20m in-year
cost reduction over and above other savings and to reduce the
combined cash 'burn' cost of the Tour and Cruise businesses to
between GBP6m and GBP8m per month.
The Group's near-term priorities are to preserve cash and reduce
leverage, operating within amended banking covenants, and ensure
our Travel businesses are ready to re-start operations as soon as
restrictions lift. The Group will maintain the tight focus on costs
and efficiency, while continuing the progress in Insurance that
started last year, completing Cruise transformation and
repositioning the Tour Operations business.
The Group remains able to resume traveling as soon as
restrictions have been removed but has continued to run stress
tests based on a wide range of outcomes for the COVID-19 crisis,
including a further delay to the resumption of travel until next
year. Based on this analysis the Group continues to expect to
remain in compliance with key banking covenants at the next two
half-yearly testing dates, although further actions may be needed
to stay ahead given potential uncertain long-term impacts of
COVID-19 on the business and the maturity of bank facilities in May
2022 and May 2023.
The Board of Directors and Executive team are encouraged by the
progress made since the start of the year and by the resilience of
the business through a time of unprecedented challenge and change.
The current crisis highlights the strength of the Saga brand where
the Group offers differentiated products and great customer service
and against that backdrop the Board believes there is significant
potential in the business that has not been fulfilled in recent
years. An update on strategy will be provided with the interim
Euan Sutherland, Group Chief Executive Officer, said:
"Saga has made good progress against the priorities set last
year and we have accelerated this change given the backdrop of the
COVID-19 crisis. We have been clearly focused on serving our
customers and keeping colleagues safe through this period of major
disruption. We reacted quickly to the imposition of the lockdown,
moving more than 3,000 colleagues to work from home, while
maintaining our industry-leading customer service levels.
"Our Insurance business has been resilient and continues to make
progress while within Travel, more than 70% of Cruise guests have
moved their booking to later sailings, showing the continued demand
for our specialist boutique offer.
"I want to thank all our colleagues for their hard work and our
customers for the loyalty they have shown to Saga. What is clear is
that we play a really important role in the lives of our customers
and this underlines my belief in the strength of the brand. I am
excited about what we will be able to achieve with a tighter focus
on differentiated products and the right investment in
strengthening our digital capabilities and driving our brand and
The Annual General Meeting will be held at 11:00am today via a
conference call and via an online platform. To join the meeting
electronically, you will need to either: a) Download the Lumi AGM
app from the Apple Store or Google Play Store by searching for
"Lumi AGM"; or b) Visit http://web.lumiagm.com from your device.
The meeting ID is: 133-651-038. Shareholders who would like to ask
a question will require their unique pin and ID as provided within
their AGM documentation. The conference call can be accessed on:
UK: 020 3936 2999, all other locations: +44 20 3936 2999.
Participant Password: 270232.
For further information please contact:
Mark Watkins, Investor Relations Director Tel: 07738 777 479
Susanna Voyle Tel: 07980 894 557
Henry Wallers Tel: 07876 562 436
Tel: 020 3805 4822
Notes to editors
Saga is a specialist in the provision of products and services
for life after 50. The Saga brand is one of the most recognised and
trusted brands in the UK and is known for its high level of
customer service and its high quality, award winning products and
services including cruises and holidays, insurance, personal
finance and publishing. www.saga.co.uk
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(END) Dow Jones Newswires
June 22, 2020 02:00 ET (06:00 GMT)
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