Release Date: October 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Saga PLC (FRA:65J, Financial) reported a strong overall financial performance with underlying revenue growth of 11% and underlying profit before tax of GBP27.2 million, more than three times that of the prior year.
- The company is in exclusive negotiations with Ageas for a proposed transaction, which includes selling its insurance underwriting business and forming a 20-year affinity partnership, aligning with its strategy to move to a capital-light model.
- Saga's cruise and travel businesses showed significant growth, with ocean cruise achieving a load factor of 90% and river cruise a load factor of 86%, both with higher per diems compared to the previous year.
- Debt reduction remains a strategic priority, with Saga reducing net debt by GBP42.8 million over the past 12 months and GBP22.6 million in the last six months.
- Saga's focus on customer engagement has led to a 21% increase in website visits and a 16% rise in consented individuals, enhancing its customer database and cross-sell opportunities.
Negative Points
- Saga PLC (FRA:65J) reported a statutory loss before tax of GBP104 million due to a GBP138.3 million impairment of insurance broking goodwill.
- The insurance broking business faced cyclical challenges, with a 13% decrease in policy sales and market conditions impacting profitability, particularly in the home insurance segment.
- The travel insurance market became highly competitive, affecting Saga's ability to compete and resulting in lower new business volumes.
- Saga's insurance broking business experienced a decline in competitiveness due to net rate inflation and reduced panel competitiveness, impacting policy sales and profitability.
- The company anticipates net debt to be slightly higher at the end of the year due to lower cash generation from the insurance business and continued repayments on cruise ship facilities.
Q & A Highlights
Q: What impact will the GBP80 million payment from the Ageas partnership have on Saga's net cash position at go-live?
A: Michael Hazell, Group CEO, explained that the GBP80 million payment will coincide with the go-live of the partnership, which is expected to take about 12 months post-signing. Mark Watkins, Group CFO, added that the GBP80 million will offset the working capital outflow as the existing business benefits from a negative working capital profile.
Q: Can you provide details on the trajectory of policy sales in insurance, which were down 13% in the first half?
A: Michael Hazell noted that the 13% decline was partly due to fewer policies available for renewal. Steve Kingshott, CEO of Saga Insurance, added that while motor insurance competitiveness improved, the home insurance market remains challenging with increasing net prices.
Q: How will the Ageas insurance partnership affect ongoing earnings, and will the Retail Broking and Underwriting businesses be deconsolidated?
A: Mark Watkins stated that the disposal of AICL will be deconsolidated upon completion, but Saga will continue to own SSL, and commissions from Ageas will be reflected in the insurance broking business. The partnership is expected to stabilize and grow profits and volumes over time.
Q: How much of the 2026 maturing debt does Saga expect to refinance, considering the need to repay Roger's facility and the GBP80 million working capital consumption?
A: Mark Watkins expressed confidence in refinancing the 2026 maturities, highlighting the transition to a lower-risk insurance business and strong growth in travel and money businesses. Michael Hazell added that the partnership benefits and business performance set Saga up well for financing discussions.
Q: What are the expected gross margins for the travel business relative to the current reported position?
A: Mark Watkins indicated that as the travel business grows its booked position, an improved margin is expected, driven by a mix shift to higher-cost products for customers, which will deliver a higher margin.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
