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Saga plc Challenges from commoditisation impact profitability

Saga plc (LON:SAGA), the UK’s specialist in products and services for life after 50, announces its preliminary results for the twelve months ended 31 January 2019.

Lance Batchelor, Group Chief Executive Officer, said:

“Over recent years Saga has faced increasing challenges from the commoditisation of the markets in which we operate, especially in Insurance. This has had an impact on both customer numbers and profitability. Although Underlying Profit Before Tax for the 2018/19 financial year is in line with our expectations, the long-term challenges we face and the results demonstrate that Saga cannot grow without a clearly differentiated offering to its customers.

In response, today we are launching a fundamental change to the Group’s strategy to return the whole business to its heritage as an organisation that offers differentiated products and services. This will give our customers and members a compelling reason to come to us and stay with us.

As a first step, we are announcing the launch of a new approach to Insurance. This focuses on direct channels and products that offer attractive innovative features, moving the conversation from price to value. Our new three-year fixed price insurance offering is a powerful indication of our change in approach.

As a result of lower margins in Insurance, a change in approach to renewal pricing, lower reserve releases and investment in new products, Underlying Profit Before Tax for the 2019/20 financial year is expected to be between £105m-120m. Therefore, we have taken the difficult decision to reduce our final dividend and write down goodwill. The fundamental changes we are making are essential to address the long-term challenges facing our business. They will support future growth in customers and profits, and generate attractive cash flows for Saga.”

Financial highlights

31 January


31 January 2018



Underlying Profit Before Tax1




(Loss)/Profit before tax from continuing operations




Underlying Earnings Per Share1




Basic earnings per share from continuing operations




Proposed full year dividend




Available operating cash flow1




Net debt2




Debt ratio (net debt to Trading EBITDA)



1 Alternative performance measure – refer to the glossary on pages 55-56 for definition and explanation

2 Bank debt and borrowings, excluding any overdrafts held by restricted trading subsidiaries, net of available cash

Performance in 2018

· Underlying Profit Before Tax down 5.4% at £180.3m reflecting strong reserve releases but disappointing Retail Broking result

– Retail Broking down 19.1% at £105.8m

– Underwriting up 9.3% at £86.7m, supported by underlying reserve releases of £78m

– Travel up 2.4% at £21.1m, with strong forward bookings in Cruise

– Emerging businesses and central costs (excluding finance costs) improved by 21.5% to (£21.6m)

· Loss before tax of (£134.6m) after Goodwill impairment of £310m

· Available operating cash flow £180.6m

· Net debt reduced to £391.3m with net debt to trading EBITDA at 1.7x

· Proposed full year dividend reduced to 4.0p with expected future payout of approximately 50%

Strategic Change

· Fundamental shift in strategy to address long term challenges

· Saga to refocus on its heritage as a direct to consumer brand with membership at its core, providing differentiated products and services that customers can’t get elsewhere

· Launch of new Insurance approach focused on growing direct channels, with the launch of a 3 year fixed price proposition, and with a new approach to renewal pricing

· Accelerating transformation of Tour Operations

· Continue the Cruise transformation

· Investment behind new products and membership to build on early signs of traction

· 2019/20 Underlying profit before tax expected to be £105-£120m due to a reduction in reserve releases, as well as a decline in Broking gross margins (less marketing costs) from £80 to between £71-£74 per policy

· Action on dividend and amendments to banking facilities provide robust balance sheet to support strategic change

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