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 (restated) |
Change |
Revenue1 |
£355.3m |
£309.8m |
15% |
Underlying Profit Before Tax (Under Previous IFRS)2 |
£13.4m |
£14.0m |
(4%) |
Underlying Profit Before Tax0F2 |
£8.0m |
£14.6m |
(45%) |
Loss before tax3 |
(£77.8m) |
(£261.8m) |
70% |
Available Operating Cash Flow2 |
£85.9m |
£31.5m |
173% |
Net Debt2 |
£657.4m |
£721.3m |
(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
· Revenue1 increased 15%, reflecting continued momentum in Cruise and Travel.
· The Group reports an Underlying Profit Before Tax (Under Previous IFRS)2 of £13.4m, compared with £14.0m in the prior year which benefited from one-off Insurance Underwriting releases.
· Under IFRS 17, Underlying Profit Before Tax2 was £8.0m, compared with £14.6m in the prior year.
· Net Debt2, at 31 July 2023 was £657.4m, £63.9m lower than at 31 July 2022 and £54.3m lower than at 31 January 2023. This included Available Cash2 of £180.7m.
· Our reported loss before tax of £77.8m reflects a £68.1m impairment of Insurance Broking goodwill. At 31 July 2023, £381.5m 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 Tax2 when compared with the prior year, ahead of current estimates.
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1 Revenue is stated net of ceded reinsurance premiums earned on business underwritten by the Group of £8.0m (H1 2022: £7.3m) less £5.2m 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 £68.1m (H1 2022: £269.0m)
Divisional performance
Cruise - Ocean Cruise load factor exceeds 80%, while River Cruise returns to profit
Ocean Cruise
· Ocean Cruise reported an Underlying Profit Before Tax4 of £12.9m for the first half of the year, compared with an Underlying Loss Before Tax4 of £6.9m in the year before.
· Ocean Cruise Trading EBITDA (Excluding Overheads)4 in the first half of the year was £40.1m compared with £17.3m 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 £333 which was 5% higher.
· Ocean Cruise Available Operating Cash Flow4, after capital repayments and interest on the ship facilities, was £7.8m for the first six months of the year, compared with an outflow of £9.7m 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 £332, 4% ahead. We expect to report at least £40m 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 £359. This compares with 43% and £326 at the same point last year.
River Cruise
· River Cruise reported a £1.5m Underlying Profit Before Tax4 in the first half of the year, a significant improvement when compared with the £2.1m Underlying Loss Before Tax4 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 £296.
· Booked revenue at 24 September 2023 was £43.3m for the full year, 52% higher than at the same point last year, representing a load factor of 85% and per diem of £285. 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 Tax4 of £2.6m 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 £155.8m 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 Tax4 for the full year, in line with previous guidance.
· At the same date, booked revenue in relation to 2024/25 departures was £67.5m from 19.4k passengers. This compares with revenue of £58.9m 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 Tax4 of £23.8m on an earned basis, compared with £36.7m5in 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 £56, compared with £725 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 £68.1m. At 31 July 2023, £381.5m 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 £5-10m.
Insurance Underwriting
· For the first half of the year, Insurance Underwriting reported an Underlying Loss Before Tax4, after expected recoveries from reinsurance arrangements, of £3.6m, compared with an Underlying Profit Before Tax4 of £15.8m5 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 Debt4 reduced by £54.3m 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 £150m bond repayment due in May 2024 through a combination of Available Cash4 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 £35m increase to the facility, taking the total to £85m, 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 £15m 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 £40m 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 Tax4 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.
END
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 Emily Roalfe, Head of Investor Relations and Treasury |
Tel: 07732 093 007 Email: emily.roalfe@saga.co.uk |
Headland Consultancy Susanna Voyle Will Smith |
Tel: 020 3805 4822 Tel: 07980 894 557 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
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4 Refer to the Alternative Performance Measures Glossary for definition and explanation
5The 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 £50.0m facility to £85.0m, 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 £13.4m for the first half of the year, compared with £14.0m 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 Tax5F1 of £8.0m, compared with £14.6m2 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 £77.8m which includes a £68.1m impairment of Insurance Broking goodwill. This compares with a loss of £261.8m2 in the year before which included an Insurance goodwill impairment of £269.0m.
Deleveraging also continued, benefiting from both increased Trading EBITDA1 and lower Net Debt1 which, at 31 July 2023, was £657.4m or £54.3m lower than at 31 January 2023. This included Available Cash1 of £180.7m, £23.2m 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 Tax1 of £12.9m compared with an Underlying Loss Before Tax1 of £6.9m 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 £333 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 £40.1m, compared with £17.3m in the prior year.
In addition to delivering a significant uplift in revenue, Trading EBITDA (Excluding Overheads)1 and Underlying Profit Before Tax1, the Ocean Cruise business also reported positive Available Operating Cash Flow1, 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 £7.8m which compares with an outflow of £9.7m 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 £332, an increase of 12ppts and 4% respectively when compared to the same point last year. This places us on track to exceed the targeted £40m 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 £359 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 Tax1 of £1.5m for the first six months of the year which compares with an Underlying Loss Before Tax1 of £2.1m in the same period last year. This was delivered through a load factor of 83% and per diem of £296. 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 £285 per diem. Based on this level of bookings, River Cruise is expected to report a small Underlying Profit Before Tax1 for the full year, compared with the £5.1m Underlying Loss Before Tax1 in 2022/23.
At 24 September 2023, secured bookings for the year ended 31 January 2025 equated to revenue of £16.7m, 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 £321 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 tNPS3 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 Tax6F1 of £2.6m in the first six months of the year, in line with the prior year. Revenue for the first half of the year of £69.7m, 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 £155.8m, 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 £67.5m from 19.4k passengers. This compares with £58.9m 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 Tax1, on an earned basis, of £23.8m compared with £36.7m22 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 £8.7m 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 £15.3m, 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 £58, ahead of our £55 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 £56, compared with a restated £722 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 £68.1m, with £381.5m 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 £5-10m per annum.
In the first six months of the year, Insurance Underwriting reported an Underlying Loss Before Tax1, after accounting for the impact of our reinsurance arrangements, of £3.6m, compared with an Underlying Profit Before Tax1 of £15.8m2 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 Tax1 of £0.2m, compared with £0.9m 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 Debt1 was £657.4m, or £63.9m lower than 31 July 2022 and £54.3m lower than at 31 January 2023. This included Available Cash1 of £180.7m at the same date, after £31.1m 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 £150m bond due in May 2024 from a combination of Available Cash1 and drawdown of the loan facility with Roger De Haan. In addition to the existing £50m available under the terms of the agreement, the Group has agreed an amendment to provide a further £35m, 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 £15m 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.
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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 Tax1 of £8.0m for the first half of the year, under the new accounting standard for insurance, International Financial Reporting Standard (IFRS) 17, compared to a restated £14.6m in the prior period. On the same basis as previous reporting, Underlying Profit Before Tax1 was £13.4m, compared to the £14.0m 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 £11.6m loss in the first half of 2022/23 reversing to a profit of £11.8m 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 £56 per policy in the first half is slightly below our target range of around £60 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 £68.1m 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 £15m per annum, with a smaller improvement in the current year. Given these efficiencies and the seasonality of Cruise and Travel earnings, Underlying Profit Before Tax1 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 Debt1 reduced by 8% from £711.7m at 31 January 2023 to £657.4m 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 £0.3m in the first half of 2022/23 to £73.0m 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 Debt1 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 £50m to £85m, we are very confident that we will be able to repay the £150m bond due in May 2024 from Available Cash1. We expect to retain a healthy level of working capital post the bond repayment, supported by the £85m Roger De Haan loan facility as well as the £50m 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
£m |
Unaudited 6m to July 2023
|
Change |
Unaudited6m to July 2022 (restated) |
|
|
|
|
Revenue2 |
355.3 |
14.7% |
309.8 |
|
|
|
|
Underlying Profit Before Tax3 |
|
|
|
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 costs4 |
(11.5) |
(1.8%) |
(11.3) |
Underlying Profit Before Tax3 |
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) |
Tax credit/(expense) |
6.8 |
251.1% |
(4.5) |
Loss after tax |
(71.0) |
73.3% |
(266.3) |
|
|
|
|
Basic earnings/(loss) per share: |
|
|
|
Underlying Earnings Per Share3 |
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.
Revenue2
Revenue2 increased by 14.7% to £355.3m (H1 2022: £309.8m) 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 Tax3
The Group generated a total Underlying Profit Before Tax3 of £8.0m in the first half of the current year compared to £14.6m in the first half of the prior year. This is primarily due to a £12.9m reduction in Insurance Broking profitability due to difficult trading conditions within motor and a £19.4m 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 £23.4m improvement in Cruise and Travel, moving from an £11.6m loss to an £11.8m profit, of which £19.8m relates to the Ocean Cruise business.
Net finance costs4 in the period were £11.5m (H1 2022: £11.3m), which excludes finance costs that are included within the Cruise and Travel businesses of £9.7m (H1 2022: £9.6m) and Insurance Underwriting business of £6.5m (H1 2022: £1.3m).
Loss before tax
The loss before tax for the period of £77.8m includes a £68.1m impairment to Insurance Broking goodwill and other exceptional items of £17.7m consisting of:
· restructuring costs of £5.9m;
· onerous contract provisions of £9.2m on three-year fixed-price policies and on insurance contracts under IFRS 17;
· fair value loss on debt securities of £4.8m;
· a £3.1m positive change in discount rate on non-PPO insurance liabilities;
· arrangement fee on the unsecured loan facility with Roger De Haan of £1.0m;
· a £0.1m acquisition cost on the purchase of The Big Window Consulting Limited;
· fair value losses of £0.9m on derivatives de-designated in the period;
· foreign exchange gains on river cruise ship leases of £0.6m; and
· a positive IFRS 16 adjustment of £0.5m on river cruise ships.
The loss before tax in the prior period of £261.8m includes a £269.0m impairment to Insurance goodwill and other exceptional items of £7.4m including:
· restructuring costs of £2.1m;
· an onerous contract provision of £0.9m on insurance contracts under IFRS 17;
· fair value loss on debt securities of £6.9m;
· a £2.9m positive change in discount rate on non-PPO insurance liabilities;
· acquisition costs on the purchase of The Big Window Consulting Limited of £0.6m;
· fair value gain on derivatives de-designated in the period of £0.9m;
· foreign exchange loss on river cruise ship leases of £0.3m; and
· a negative IFRS 16 adjustment of £0.4m on river cruise ships.
Tax
The Group's tax credit for the period was £6.8m (H1 2022: £4.5m 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 £1.2m (H1 2022: £1.6m 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 Share3 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
£m |
|
Unaudited 6m to 31 July 2023 |
Change |
Unaudited 6m to 31 July 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 Tax3 |
|
(5.4) |
(6.0) |
0.6 |
||
|
|
|
|
|
||
Underlying Profit Before Tax3 |
|
8.0 |
(6.6) |
14.6 |
||
For the period ended 31 July 2023, the transition to IFRS 17 resulted in an Underlying Profit Before Tax3 reduction of £5.4m, compared with a £0.6m benefit for the same period in the prior year.
The material movements between the IFRS 17 impact on Underlying Profit Before Tax3 across the two periods are detailed below:
· £4.3m 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 £5.1m and this was partially offset by a reduction in ENIDs of £2.0m and a reduction in the risk adjustment of £1.3m, net of reinsurance.
· The impact of expensing insurance acquisition costs when incurred, produced a benefit to Underlying Profit Before Tax3 in both the current, and prior periods. This is due to decreasing acquisition costs linked to lower sales of AICL-underwritten policies. The £0.6m movement, when compared to the prior period, reflects a slow-down of that trend.
£m |
|
Unaudited 6m to 31 July 2023 |
Change |
Unaudited 6m to 31 July 2022 |
||
|
|
|
|
|
|
|
Loss before tax (under previous IFRS) |
|
(66.7) |
190.8 |
(257.5) |
||
|
|
|
|
|
||
Impact of IFRS 17 on Underlying Profit Before Tax3 |
|
(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 £11.1m (H1 2022: £4.3m). The most material reasons for this are as follows:
· £5.4m arising from the movements in Underlying Profit Before Tax3 described above.
· £4.0m 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.
· £4.8m 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 £3.1m benefit.
_______________________________
2 Revenue is stated net of ceded reinsurance premiums earned on business underwritten by the Group of £8.0m (H1 2022: £7.3m) less £5.2m 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 2023 |
|
Unaudited 6m to July 2022 |
||||||
£m |
Ocean Cruise |
River Cruise |
Travel |
Total Cruise and Travel |
Change |
Ocean Cruise |
River Cruise |
Travel |
Total Cruise and 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 Tax5 |
12.9 |
1.5 |
(2.6) |
11.8 |
201.7% |
(6.9) |
(2.1) |
(2.6) |
(11.6) |
|
|
|
|
|
|
|
|
|
|
Average revenue per passenger (£) |
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 (£) |
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 (£) |
|
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 £333 (H1 2022: £318). These two factors, when combined, equated to revenue growth of 37.1% and resulted in a return to profitability from an Underlying Loss Before Tax5 of £6.9m to an Underlying Profit Before Tax5 of £12.9m, 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 £296. This resulted in revenue growth of 41.8% and a return to profitability from an Underlying Loss Before Tax5 of £2.1m to an Underlying Profit Before Tax5 of £1.5m.
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 Tax5 of £2.6m 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 Tax5 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 £285 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 £321 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 2023 |
Change |
25 September 2022 |
|
24 September 2023 |
Change |
25 September 2022 |
Ocean Cruise revenue (£m) |
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 (£) |
332 |
4.1% |
319 |
|
359 |
10.1% |
326 |
|
|
|
|
|
|
|
|
River Cruise revenue (£m) |
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 (£) |
285 |
n/a |
n/a |
|
321 |
n/a |
n/a |
|
|
|
|
|
|
|
|
Travel revenue (£m) |
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 2023 |
|
Unaudited 6m to July 2022 (restated) |
||||||
|
Motor |
Home |
Other |
|
|
Motor |
Home |
Other |
|
£m |
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 Tax6 |
(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 Tax6 |
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 share7 |
38.9% |
|
|
|
11.2ppts |
27.7% |
|
|
|
Insurance Broking Underlying Profit Before Tax6 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 £18.2m from £37.0m. On an earned basis (which includes the impact of the written to earned adjustment), Underlying Profit Before Tax6 decreased to £23.8m from £36.7m.
A key metric for the Insurance Broking business is written gross profit, after deducting marketing expenses, but before deducting overheads. This reduced from £76.5m in the prior period to £62.3m in the current period due mainly to lower renewal volumes and margins on motor business. The fall of £15.9m in written gross profits after marketing expenses in motor was partially offset by a £0.3m and £1.4m 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 £0.8m, while there was a £16.4m 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 £56.1 in the current period, compared with £72.2 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, £11.1m (H1 2022: £9.1m) of income had been deferred in relation to three-year fixed-price policies, £4.5m (H1 2022: £3.9m) 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 £86.9m (H1 2022: £97.1m) 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 £15.6m (H1 2022: £31.5m), contributing £40.5/policy (H1 2022: £72.7/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 £24.1m (H1 2022: £23.8m) and, on a per policy basis, this was £74.6/policy (H1 2022: £71.5/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 £0.8m.
While sales of the PMI product were stable, gross profit after marketing costs was £1.3m 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 2023 |
|
Unaudited 6m to July 2022 (restated) |
||||
£m |
|
Gross |
Re- insurance |
Net |
Gross change |
Gross |
Re- 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 Tax6 |
|
(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 £78.5m (H1 2022: £81.9m) 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 £26.6m in the prior period to £16.0m 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 £1.8m expense in the first half of 2023/24 compared with a £0.2m 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 2023 |
|
Unaudited 6m to July 2022 (restated) |
||||
£m |
Other Businesses |
Central Costs |
Total |
Change |
Other Businesses |
Central 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 Tax8 |
(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 Tax8 for Other Businesses combined has decreased by £2.6m from £0.4m to an Underlying Loss Before Tax8 of £2.2m, due to net investments of £2.2m across Saga Money, Saga Media and Saga Insight. In addition, revenue in Saga Money has decreased by £0.4m due to a challenging equity release market.
Central operating expenses decreased to £15.1m (H1 2022: £18.5m). Gross administration costs, before Group recharges, decreased by £2.3m in the period, mainly as a result of lower property costs following the closure of the Group's offices and net costs decreased by £3.4m due to higher Group recharges to the business units.
Net finance costs in the period were £11.5m (H1 2022: £11.3m), which excludes finance costs that are included within the Cruise and Travel businesses of £9.7m (H1 2022: £9.6m) and Insurance Underwriting business of £6.5m (H1 2022: £1.3m).
_______________________________
8 Refer to the Alternative Performance Measures Glossary for definition and explanation
Cash flow and liquidity
Available Operating Cash Flow
£m |
|
Unaudited 6m to July 2023
|
Change |
Unaudited 6m to July 2022 (restated) |
|
|
|
|
|
|
|
Insurance Broking Trading EBITDA9 |
|
27.5 |
(31.3%) |
40.0 |
|
Other Businesses and Central Costs Trading EBITDA9 |
|
(10.0) |
18.0% |
(12.2) |
|
Trading EBITDA9,10 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 Cash9 |
|
(10.9) |
(58.0%) |
(6.9) |
|
Available Operating Cash Flow9 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 Flow9 |
|
47.0 |
264.3% |
12.9 |
|
Available Operating Cash Flow9 |
|
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 Cash9 at 31 July |
|
180.7 |
0.9% |
179.0 |
|
Available Operating Cash Flow9 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 Flow9 of £12.9m compared with £31.2m in the prior period. Trading EBITDA9,10 from unrestricted businesses reduced by £10.3m, mainly as a result of reduced motor margins in the Insurance Broking segment. Changes in working capital were a £0.7m outflow in the current period, compared with a £4.7m outflow in the first half of the prior year, and dividends from AICL reduced by £8.0m, as expected.
For River Cruise and Travel, the Group was repaid £26.0m in the first half of the year. This is an improvement of £38.6m when compared with the £12.6m 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 £59.0m, of which £47.2m was held in trust. The Group must hold a minimum of £8.1m 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 £47.0m (H1 2022: £12.9m), with an increase in advance customer receipts of £18.7m (H1 2022: £4.0m), and net trading income of £31.4m (H1 2022: £10.2m), partially offset by capital expenditure of £3.1m (H1 2022: £1.3m). Net of interest costs of £8.1m (H1 2022: £7.3m), the Ocean Cruise business reported net cash inflow, before any capital repayments on the ship debt, of £38.9m for the first half of 2023/24 compared to £5.6m 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 Flow9 increased from an inflow of £31.5m in the prior period to £85.9m 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 £5.8m (H1 2022: £5.8m). 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 £15.3m (H1 2022: £15.3m) on Spirit of Discovery's debt facility and one payment totalling £15.8m (H1 2022: £nil) on Spirit of Adventure's debt facility.
_______________________________
9 Refer to the Alternative Performance Measures Glossary for definition and explanation
10 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 Flow11 reconciles to net cash flows from operating activities as follows:
£m |
|
Unaudited 6m to July 2023
|
Change |
Unaudited 6m to July 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 Cash11 |
|
(10.9) |
(58.0%) |
(6.9) |
||
Include Ocean Cruise capital expenditure |
|
(3.1) |
(121.4%) |
(1.4) |
||
Available Operating Cash Flow11 |
|
85.9 |
172.7% |
31.5 |
Trading EBITDA11 reconciles to Underlying Profit Before Tax11 as follows:
£m |
|
Unaudited 6m to July 2023
|
Change
|
Unaudited 6m to July 2022 (restated) |
|
|
|
|
|
Insurance Broking Trading EBITDA11 |
|
27.5 |
(31.3%) |
40.0 |
Insurance Underwriting Trading EBITDA11 |
|
2.9 |
(83.1%) |
17.2 |
Ocean Cruise Trading EBITDA11,12 |
|
33.1 |
164.8% |
12.5 |
River Cruise and Travel Trading EBITDA11 |
|
(0.5) |
88.4% |
(4.3) |
Other Businesses and Central Costs Trading EBITDA11 |
|
(10.0) |
18.0% |
(12.2) |
Trading EBITDA11 |
|
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 Tax11 |
|
8.0 |
(45.2%) |
14.6 |
Adjusted Trading EBITDA11 is used in the Group's leverage calculation for the revolving credit facility (RCF) covenant and is calculated as follows:
£m |
|
Unaudited 6m to July 2023
|
Change
|
Unaudited 6m to July 2022 (restated) |
|
|
|
|
|
Trading EBITDA11 for 12m to 31 January 2023 |
|
92.6 |
42.0% |
65.2 |
Less Trading EBITDA11 for 6m to 31 July 2022 |
|
(53.2) |
(81.6%) |
(29.3) |
Add Trading EBITDA11 for 6m to 31 July 2023 |
|
53.0 |
(0.4%) |
53.2 |
Trading EBITDA11 (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 EBITDA11,12 |
|
(59.4) |
(180.2%) |
(21.2) |
Adjusted Trading EBITDA11 |
|
35.0 |
(44.7%) |
63.3 |
Ocean Cruise Trading EBITDA11 reconciles to Ocean Cruise Trading EBITDA (Excluding Overheads)11 as follows:
£m |
|
Unaudited 6m to July 2023 |
Change |
Unaudited 6m to July 2022 |
|
|
|
|
|
Ocean Cruise Trading EBITDA11 |
|
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 |
_______________________________
11 Refer to the Alternative Performance Measures Glossary for definition and explanation
12 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 £449.6m 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 £68.1m as at 31 July 2023. Consistent with the approach taken in prior years, this impairment is not included within Underlying Profit Before Tax13.
_______________________________
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 £597.2m (31 January 2023: £607.0m). 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 £38.5m to £241.4m (31 January 2023: £279.9m), partly due to payment of £7.0m 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 |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
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 |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
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 2023 |
At 31 January 2023 (restated) |
||||
£m |
Gross |
Reinsurance assets |
Net |
Gross |
Reinsurance 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 £29.6m in the period to 31 July 2023 from the previous year end, primarily due to a £24.8m reduction in net incurred claims reserves, coupled with an £4.8m 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 Debt14 was £657.4m, £54.3m 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.
£m |
Maturity date15 |
Unaudited 31 July 2023 |
|
31 January 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 |
Spirit of Adventure ship loan |
September 2032 |
249.2 |
|
265.0 |
Less Available Cash 14,16 |
|
(180.7) |
|
(157.5) |
Net Debt14 |
|
657.4 |
|
711.7 |
Net Debt14 is analysed as follows:
Adjusted Net Debt14 is used in the Group's leverage calculation and reconciles to Net Debt14 as follows:
£m |
|
Unaudited 31 July 2023 |
|
31 January 2023 |
|
|
|
|
|
Net Debt14 |
|
657.4 |
|
711.7 |
Exclude ship loans |
|
(438.1) |
|
(469.2) |
Exclude Ocean Cruise Available Cash14 |
|
3.1 |
|
1.4 |
Adjusted Net Debt14 |
|
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 £50m to £85m. 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 £4.1m to a £8.0m liability as at 31 July 2023 (£12.1m liability as at 31 January 2023).
£m |
Unaudited 31 July 2023 |
|
31 January 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 £4.1m, resulting in an overall scheme deficit of £8.0m, mainly as a result of a recovery plan contribution being paid by the Group. The £5.8m 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 £19.7m to £216.5m, 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 £15.6m to £208.5m. 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 £24.6m and total liabilities have increased by £46.6m, resulting in an overall decrease in net assets of £71.2m.
The decrease in total assets is primarily due to:
· a decrease in goodwill of £68.1m following an impairment to insurance goodwill in the period;
· a decrease in financial assets of £39.9m, mainly relating to a reduction to the Insurance Underwriting investment portfolio, partly to fund £7.0m of dividends from AICL;
· an increase in reinsurance assets of £35.7m 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 £30.7m; and
· an increase in trust accounts of £11.0m due to seasonality in the River Cruise and Travel businesses.
The increase in total liabilities reflects:
· an increase of £57.5m in contract liabilities due to the seasonality of the Cruise and Travel businesses;
· an increase in trade and other payables of £13.6m; and
· a decrease of £33.1m in financial liabilities, which is mainly due to a reduction of £29.3m 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
£m |
|
Unaudited 31 July 2023 |
Change |
Unaudited 31 July 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 £0.4m higher than under previous IFRS, however, at 31 July 2023, net assets were £8.9m lower under IFRS 17 than previous IFRS. The material components of this negative movement are included below:
· £6.9m 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.
· £3.1m reduction in the positive impact of the new approach to reserve margin. This is due to a £12.7m reduction in the management margin held under previous IFRS being greater than the £9.6m reduction in IFRS 'margin' (ENIDs and risk adjustment).
· £4.3m 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:
· £3.6m 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.
· £1.4m 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.
· £3.1m 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 £50m 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 £85m loan facility from Roger De Haan, the Group expects to have sufficient resources to enable repayment of the £150m senior bonds on maturity in May 2024 from Available Cash17 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 £50m 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.
_______________________________
17 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 Debt18, 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 Debt18, 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 relevance |
Increasing reputational risk following the Financial Conduct Authority's (FCA) market-wide assessment of the General Insurance Pricing Practices (GIPP) review and introduction of Consumer Duty. |
Consumer Duty live, with embedding to continue in the second half of the year. Enhanced Insurance Risk Framework in place. |
Regulatory action |
Increasing risk in relation to the FCA's market-wide assessment of the GIPP review and introduction of Consumer Duty. |
Consumer Duty live, with embedding to continue in the second half of the year. Project underway focused on enhancing the Insurance Risk Framework. |
Capacity and capability |
Move towards leaner operating models within Insurance and central functions. |
Ongoing retention plan for areas most at risk. 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 within Insurance
|
Worsening |
Risk of adverse impact from sustained high levels of inflation on the Insurance business. |
Active monitoring of inflation, including review of inflation assumed in pricing. Efficiencies identified to reduce operating expenses. |
Condensed consolidated income statement
for the period ended 31 July 2023
|
|
|
Unaudited 6m to Jul 2023
|
|
Unaudited 6m to Jul 2022 (restated1) |
|
Unaudited 12m to Jan 2023 (restated1) |
|
Note |
|
£m |
|
£m |
|
£m |
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) |
|
0.42 |
|
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 6m to Jul 2023
|
|
Unaudited 6m to Jul 2022 (restated3) |
|
Unaudited 12m to Jan 2023 (restated3) |
|
£m |
|
£m |
|
£m |
|
|
|
|
|
|
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 As at 31 Jul 2023
|
|
Unaudited As at 31 Jul 2022 (restated4) |
|
Unaudited As at 31 Jan 2023 (restated4) |
|
Assets |
Note |
|
£m |
|
£m |
|
£m |
|
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 |
|||||||
|
Issued capital |
Share premium |
Own shares held reserve |
Retained (deficit)/ earnings |
Share-based payment reserve |
Fair value reserve |
Hedging reserve |
Total equity |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
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 (restated5) |
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 (restated5) |
21.1 |
648.3 |
- |
(24.7) |
7.4 |
- |
(0.7) |
651.4 |
|
Loss for the period (restated5) |
- |
- |
- |
(266.3) |
- |
- |
- |
(266.3) |
|
Other comprehensive income excluding recycling (restated5) |
- |
- |
- |
7.8 |
- |
- |
4.2 |
12.0 |
|
Recycling of previous gains to income statement |
- |
- |
- |
- |
- |
- |
(1.8) |
(1.8) |
|
Total comprehensive (losses)/income (restated5) |
- |
- |
- |
(258.5) |
- |
- |
2.4 |
(256.1) |
|
Share-based payment charge |
- |
- |
- |
- |
1.8 |
- |
- |
1.8 |
|
At 31 July 2022 (restated5) |
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 related 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 |
|||||||
|
Issued capital |
Share premium |
Own shares held reserve |
Retained (deficit)/ earnings |
Share-based payment reserve |
Fair value reserve |
Hedging reserve |
Total equity |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
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 (restated6) |
21.1 |
648.3 |
- |
(24.7) |
7.4 |
- |
(0.7) |
651.4 |
Loss for the year (restated6) |
- |
- |
- |
(273.1) |
- |
- |
- |
(273.1) |
Other comprehensive losses excluding recycling (restated6) |
- |
- |
- |
(14.3) |
- |
- |
(2.9) |
(17.2) |
Recycling of previous losses to income statement |
- |
- |
- |
- |
- |
- |
0.4 |
0.4 |
Total comprehensive losses (restated6) |
- |
- |
- |
(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 (restated6) |
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 related updates to accounting policies applied under IFRS 9
Condensed consolidated statement of cash flows
for the period ended 31 July 2023
|
|
|
Unaudited 6m to Jul 2023
|
|
Unaudited 6m to Jul 2022 (restated7) |
|
Unaudited 12m to Jan 2023 (restated7) |
|
Note |
|
£m |
|
£m |
|
£m |
|
|
|
|
|
|
|
|
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 (£m), 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 £50m 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 £85m loan facility from Roger De Haan, the Group expects to have sufficient resources to enable repayment of the £150m senior bonds on maturity in May 2024 from Available Cash8 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 £50m 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 Tax9. 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 |
Cruise and Travel £m |
Insurance |
|
|
|
||||
Motor broking £m |
Home broking £m |
Other broking £m |
Under-writing £m |
Total £m |
Other Businesses and Central Costs £m |
Adjustments £m |
Total £m |
||
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 Tax9 |
|
|
|
|
|
|
|
|
|
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 Tax9 |
11.8 |
2.9 |
8.6 |
12.3 |
(3.6) |
20.2 |
(24.0) |
- |
8.0 |
Unaudited 6m to Jul 2022 (restated10) |
Cruise and Travel £m |
Insurance |
|
|
|
||||
Motor broking £m |
Home broking £m |
Other broking £m |
Under-writing £m |
Total £m |
Other Businesses and Central Costs £m |
Adjustments £m |
Total £m |
||
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 Tax9 |
|
|
|
|
|
|
|
|
|
(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 Tax9 |
(11.6) |
13.6 |
10.3 |
12.8 |
15.8 |
52.5 |
(26.3) |
- |
14.6 |
Unaudited 12m to Jan 2023 (restated10) |
Cruise and Travel £m |
Insurance |
|
|
|
||||
Motor broking £m |
Home broking £m |
Other broking £m |
Under-writing £m |
Total £m |
Other Businesses and Central Costs £m |
Adjustments £m |
Total £m |
||
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 Tax9 |
|
|
|
|
|
|
|
|
|
(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 |
|
||||||
Major product lines |
Cruise and Travel £m |
Underwriting £m |
Broking £m |
Other revenue £m |
Total Insurance £m |
Other Businesses and Central Costs £m |
Total £m |
||
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 |
|
|
|
|