Saga : Statement

4 April 2023

Saga plc

Unaudited preliminary results for the year ended 31 January 2023

Saga reports significant revenue growth and return to underlying profit

Saga plc (Saga or the Group), the UK's specialist in products and services for people over 50, announces its unaudited preliminary results for the year ended 31 January 2023.

	31 January	31 January	Change
	2023	2022
	(unaudited)
Revenue	£581.1m	£377.2m	54%
Underlying Profit/(Loss) Before Tax1	£21.5m	(£6.7m)	421%
Loss before tax	(£254.2m)	(£23.5m)
Available Operating Cash Flow1	£54.9m	£75.8m	(28%)
Net Debt1	£711.7m	£729.0m	(2%)
Leverage ratio	7.5x	11.7x	(4.2x)

Euan Sutherland, Saga's Group Chief Executive Officer, said:

"Over the past year, through what continued to be a particularly challenging external backdrop, Saga made progress against its strategy while achieving significant revenue growth and returning to underlying profit.

"Our Ocean Cruise business continued to see strong customer demand and bookings for 2023/24 are on track to meet our targets. In Travel, bookings are significantly ahead of the same point last year and that business will return to profit this year.

"Our Insurance Underwriting business took pricing action to reflect the rise in claims inflation, while our Insurance Broking business navigated a challenging landscape, adjusting to significant regulatory changes and increased competitive pressure.

"We also took a number of key steps to reposition the business, consistent with the strategy we set out 12 months ago to create 'The Superbrand' for older people. Our top priorities for the next 12 months are to strengthen our financial position and continue to build Saga into the largest and fastest-growing business for older people in the UK, delivering long-term, sustainable growth for our stakeholders."

Operational and financial highlights

• The Group reports an Underlying Profit Before Tax1 of £21.5m, within the guided range of £20m to £30m.
• Revenue growth, when compared to the prior year, was 54% due to continued Cruise and Travel recovery following the pandemic.
• The reported loss before tax of £254.2m reflects the £269.0m impairment of Insurance goodwill reported within our interim results.
• Available Cash1, at 31 January 2023, was £157.5m with Net Debt1 of £711.7m, £17.3m lower than the year before.
• The Group remains in discussions in relation to the possible sale of its Insurance Underwriting business, consistent with the ambition to move towards a capital-light model and reduce debt.

Divisional performance

Cruise - Strong Ocean bookings on track to meet our targets with River set to return to profit

• Ocean Cruise reported an Underlying Loss Before Tax1 of £0.7m for the full year but with considerable improvement in the second half, when the business reported an Underlying Profit Before Tax1 of £6.2m.
• Ocean Cruise revenue, of £168.3m, was more than 100% ahead of 2021/22, supported by a full year load factor of 75% and per diem of £318. This compares with 68% and £299 in the prior year.
• Ocean bookings for 2023/24 are strong, representing a load factor of 72%, and per diem of £339 at 26 March 2023. This places us on track to achieve our target of £40m EBITDA (excluding overheads) per ship.
• Our River Cruise business, which we now report separately from our Travel business, reported revenue of £28.8m compared with £1.7m in the prior year, and an Underlying Loss Before Tax2 of £5.1m.

1 Refer to the Alternative Performance Measures Glossary on pages 68-69 for definition and explanation 1

• River Cruise bookings for 2023/24 are very positive with the number of booked guests 23% ahead of the same point last year, reflecting a load factor of 63% and per diem of £298 at 26 March 2023.
• Customer satisfaction across both Ocean and River Cruise remains exceptional at 9.0 and 8.2 out of 10, respectively at 31 January 2023.

Travel - Launch of new products boosting bookings position

• Our Travel business reported revenue of £108.4m, more than 10 times that in the previous year, and a small Underlying Loss Before Tax2 of £4.1m, in line with previous guidance.
• Building from a recovery in touring revenues, in addition to the launch of new products including our private jet tours and 'Tailor-Made by Saga' proposition, total booked revenue for 2023/24, at 26 March 2023, was £136.6m, 32% ahead of the £103.7m booked at the same point in the prior year.

Insurance Broking - Underlying Profit Before Tax2 in line with the prior year

• Overall, the business reported a written Underlying Profit Before Tax2 of £67.7m, in line with the £66.6m in the previous year.
• Total policies in force across all products, at 31 January 2023, was 1.7m, 3% behind the prior year, with total policy sales 2% behind.
• The number of travel insurance policies sold was 103% ahead of the prior year, achieving revenue growth of more than 200%.
• Customer retention across motor and home insurance strengthened further, now at 83.8% and 1.0ppt ahead of the prior year.
• As a result of significantly lower new business sales, the total number of motor and home insurance policies sold was 7% behind the prior year with an average margin of £71 per policy, compared with £74 in the year before. The direct share of new business was 49%, compared with 59% in the prior year, reflecting challenging market conditions.

Insurance Underwriting - Material pricing increases applied to offset the rise in claims inflation

• Our Underwriting business reported an Underlying Profit Before Tax2 of £19.1m for the year ended 31 January 2023, including underlying prior year reserve releases of £25.1m.
• As indicated within our January Trading Update, the current year underlying combined operating ratio (excluding the impact of our quota share reinsurance arrangements) was 125.8% compared with 96.3% in the prior year. This reflects the unwind of COVID-19 frequency benefits, a sharp rise in claims inflation and an above-average level of current year large losses.
• This is largely offset within our result by recoveries under our quota share reinsurance arrangements and favourable development on prior year large losses.
• We continued to apply material price increases to the motor book, reflecting not only retrospective, but also our prospective view of inflation.

Wider strategic progress - Positioning Saga for growth

• Saga Money reported an Underlying Profit Before Tax2 of £2.3m and top line growth across our equity release and savings products.
• Following the launch of Saga Media in late January, our brand-new website, Saga Exceptional, has exceeded our initial expectations and attracted more than 500,000 visitors to date.
• In the fourth quarter of 2022, the Group reported its highest ever net promoter score. The score of 51 was 2 points higher than the same point in the prior year and reflects improvements within our contact centres which reduced wait times and improved the customer journey.
• Following the pandemic, and the move to our hybrid working approach, far fewer colleagues are choosing to work regularly from the office. We, therefore, made the decision to close our Enbrook headquarters in Folkestone in favour of two smaller hubs in Kent, in addition to our existing London hub. This will reduce operating expenses while we explore longer-term options for the site.
• To allow us to reach a wider audience, our aim is to grow our database. In support of this we set a target to achieve three million new customer marketing consents by 31 January 2023, which we met.

2 Refer to the Alternative Performance Measures Glossary on pages 68-69 for definition and explanation 2

• Following the acquisition of the Big Window at the start of the year, we further developed our insights through the creation of our customer segmentation, expansion of our Experienced Voices customer panel and, most recently, the release of our 'Generation Experience' economic study which dispels some of the myths around ageing and the contribution that people over 50 make to the economy.

Financial position

The Group continues to focus on reducing leverage, with Net Debt3 decreasing by £17.3m in 2022/23. To further reduce debt and increase liquidity ahead of the £150m bond maturity in May 2024, and consistent with the ambition to move to a more capital-light model, the Group has initiated a sale process for the Insurance Underwriting business that is continuing.

To provide additional financial flexibility ahead of the May 2024 bond maturity, the Group has agreed a loan facility with Sir Roger De Haan, on normal commercial terms, that enables the business to draw down up to £50m of cash, if required, with 30 days' notice. The facility will be effective from 1 January 2024 and will expire on 30 June 2025, with interest incurred at 10% and with draw down and milestone fees of up to a maximum of 6% of the facility.

Outlook

The progress made in 2022/23 places us in good stead as we enter 2023/24. We expect to see customer demand continue to build for our Ocean Cruises and we are aiming to achieve a load factor of at least 80% and our targeted £40m EBITDA per ship, excluding overheads. We expect both our River Cruise and Travel businesses to significantly increase the number of passengers that travel with us and return to profit.

While the UK insurance market remains very challenging, our disciplined approach is the right one. We expect lower sales in motor and home insurance but with a margin in line with previous indications, trending towards £60 per policy. We expect Insurance Underwriting to report a broadly break-even result in the current year with material rate increases fully benefiting future years.

Subsequent to the launch of new products planned for the second half of 2023/24, the contribution from Saga Money is expected to grow when compared with 2022/23 levels.

We remain focused on reducing our debt through the continued repayment of our ocean cruise ship debt and the £150m bond on maturity in May 2024 which, following actions taken to improve our financial flexibility, we expect to repay from Available Cash3.

We will also continue our strategic pivot to become a capital-light,direct-to-customer marketing, content and distribution business through investment in Media, data and insight. As we increase the frequency and depth of our customer relationships, we will transform Saga into the largest and fastest-growing business for older people in the UK.

END

Management will hold a presentation for analysts and investors at 9.30am today. The webcast can be accessed by registering at https://www.investis-live.com/saga-group/6419aee93e92bb0c006728f0/dsghand a copy of the presentation slides is available at www.corporate.saga.co.uk/investors/results-reports-presentations/.

Audited results for the year ended 31 January 2023 will be published within the 2023 Annual Report and Accounts later in April.

For further information, please contact:
Saga plc
Emily Roalfe, Head of Investor Relations and Treasury	Tel: [phone]
	Email:[e-mail]
Headland Consultancy
Susanna Voyle	Tel: [phone]
Will Smith	Tel: [phone]
	Tel: [phone]
	Email:[e-mail]

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

3 Refer to the Alternative Performance Measures Glossary on pages 68-69 for definition and explanation 3

Chairman's Statement

I am pleased to report that last year the performance of our core Cruise, Travel and Insurance businesses enabled us to return to underlying profitability whilst we also made good progress in relation to the strategy we set out 12 months ago.

Saga continued to build on the progress reported at the half year, with revenue for the Group increasing by over 50% when compared with the previous year, following the return to more normal Cruise and Travel operations post the pandemic.

Our Ocean Cruise business, with its new ships, performed well in the second half of the year, sailing with an average 84% occupancy, testament to the exceptional service we provide on board, the model that we are now mirroring on board our River Cruise vessels. Looking ahead, the level of revenue booked for the 2023/2024 financial year is very encouraging and we are now in a good position to generate our targeted levels of EBITDA, £80m excluding overheads, from the two ships.

There have been exciting new developments in our Travel business in the past year, including the move to a more agile, more digital operation, and the launch of our new "Tailor-Made by Saga" holidays. Currently, demand for our holidays is strong, particularly for our touring programmes.

Our Insurance business operated in the highly competitive market last year following continued disruption and uncertainty created by the regulatory changes to the industry's pricing and the high cost of settling insurance claims. We continued to take a disciplined approach to our pricing.

As we have indicated previously, we have decided to focus on Insurance Broking and to sell our Insurance Underwriting business, a move that will reduce the risk we take and release capital and allow us to further reduce our debt. With this in mind, I was pleased to be able to provide a £50m facility to give the Company additional flexibility .

In order to increase the products and services we offer and the frequency of our customer interactions and the understanding we have of them, I am delighted that we strengthened our leadership team during the year. Three very experienced and talented executives were appointed to set up and lead our new Media business, our Personal Finance operations, Saga Money and our Data team. Each of these areas has great potential.

As I set out in my statement last year, Saga has always had a strong sense of purpose and we have embraced our Environmental, Social and Governance (ESG) responsibilities. During the year, we conducted an assessment to understand fully the ESG factors that are most material to our business. Our new sustainability strategy will be published in our 2023 Annual Report and Accounts, and in due course we will set out further details of the key metrics that we will use to track our performance.

I am very positive about the future potential of Saga. We have managed our way through three difficult years and, in 2023/24, we expect all of our three main businesses to be profitable. I am confident that our strategy is the right one and will lead to growth and a significant reduction in our levels of debt.

Finally, I'd like to thank the team at Saga for their hard work over the past year. It is evident to me that there is a tremendous opportunity for Saga to broaden its services to its customers, reduce its debt, enlarge its business and increase its profitability and that the Company is now well placed to take advantage of this.

4

Group Chief Executive Officer's Statement

Continued pandemic recovery

During 2022/23, we made strong progress against the growth plan that we set out in March 2022, as our Cruise and Travel businesses continued to recover from the pandemic, and we navigated a particularly challenging motor insurance market as it adjusted to regulatory changes, a sharp rise in claims inflation and a highly competitive environment in light of those changes. This was achieved alongside the launch of our new Media business, significant enhancements to our data capabilities and the strengthening of our leadership team.

Return to underlying profit

I am pleased to report that, for the year ended 31 January 2023, Saga generated an Underlying Profit Before Tax1 of £21.5m, compared with an Underlying Loss Before Tax1 of £6.7m in the prior year. This reflects significant improvements across Cruise and Travel as those businesses returned to more normal operations, and consistent Insurance Broking performance, which was partially offset by reduced earnings from our Insurance Underwriting business.

After reflecting the £269.0m Insurance goodwill impairment that we reported within our interim results, alongside other smaller one-offbelow-the-line items, we report a loss before tax of £254.2m. This compares to a loss before tax of £23.5m in the prior year.

In addition, we reduced our level of Net Debt1 which, at 31 January 2023, was £711.7m and continued to hold significant Available Cash1 of £157.5m at the same date. Net Debt1 and Available Cash1, at 31 January 2022, were £729.0m and £186.6m respectively.

To further reduce debt and increase liquidity ahead of the maturity of our £150m bond in May 2024, we have taken a series of actions which include the initiation of a sales process in relation to our Insurance Underwriting business and the agreement of a £50m loan facility with Sir Roger De Haan.

The progress made throughout the course of the year demonstrates that Saga is on the right track to, in time, deliver long-term sustainable growth for our stakeholders.

Our growth plan

In March 2022, we set out our ambition to become the largest and fastest-growing business for older people in the UK which we will achieve through delivery of our three-step growth plan. This plan is focused on the following three priorities:

1. Maximising our existing businesses
2. Step-changingour ability to scale while reducing debt
3. Creating 'The Superbrand' for older people

An update on our progress, during the past year, in each of these areas is set out below.

1. Maximising our existing businesses

Cruise

Our Ocean Cruise business reported an Underlying Loss Before Tax1 of £0.7m for the year ended 31 January 2023. This comprises an underlying loss of £6.9m in the first half and a profit of £6.2m in the second half as the impact of COVID-19 lessened. This compares to an Underlying Loss Before Tax1 of £47.7m in the prior year.

For the 2022/23 financial year, Ocean Cruise achieved a load factor of 75%, made up of 66% in the first half of the year and 84% in the second, accompanied by a per diem of £318. This compares with a 68% load factor and £299 per diem in the prior year. These factors, when combined, result in Ocean Cruise year-on-year revenue growth in excess of 100%.

Looking ahead to the 2023/24 financial year, our booked load factor positions us well to meet our target of at least 80%. At 26 March 2023, we had secured bookings equivalent to a 72% load factor and £339 per diem. This positions us well to deliver our target of £40m EBITDA per ship, excluding overheads, in the year ending 31 January 2024.

1 Refer to the Alternative Performance Measures Glossary on pages 68-69 for definition and explanation 5