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saga Plc

Saga plc continues to be highly cash generative

Saga plc (LON:SAGA), the UK’s specialist in products and services for life after 50, today announced its interim results for the six months ended 31 July 2018.

Financial highlights

31 July 2018

31 July 2017

(restated)

Change

Profit before tax

£109.0m

£105.6m

3.2%

Underlying Profit Before Tax1

£106.8m

£110.9m

(3.7)%

Interim dividend

3.0p

3.0p

Available operating cash flow1

£89.5m

£89.6m

(0.1)%

Net debt2

£429.7m

£460.4m

(6.7)%

Debt ratio (net debt to Trading EBITDA)

1.77x

1.77x

 

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

2 Bank debt and borrowings net of available cash (excluding restricted cash)

 

· Profit before tax of £109.0m up 3.2%, benefitting from a £2.2m positive movement in the fair value of derivatives.

· Underlying Profit Before Tax 3.7% lower at £106.8m, reflecting:

– planned investment in new business and improved retention in insurance;

– increase in new business acquisition costs in a challenging insurance market;

– strong underwriting performance; and

– decline in the written to earned adjustment, as expected.

· Sustained strong cash generation of £89.5m, with operating cash conversion rising to 67.2%.

· Interim dividend of 3.0p.

Operational and divisional highlights

· Customer numbers back to H1 2017 levels driven by a 19% increase in Motor and Home new business.

· Lower operating expenses across all our businesses with administrative and selling expenses falling from £126.3m to £120.0m.

· Industry leading levels of multiple product holdings across the Group, with 44% of customers owning more than one product.

· Possibilities membership up to 850,000 members.

Insurance

· Retail Broking written profits 6.2% lower at £63.4m, reflecting planned investment in new business.

· Motor panel helped drive footprint expansion with third-party share of policies rising to 22.0% (H1 2017: 14.9%), with 67% of new business growth from under 65s.

· Strong Underwriting performance of £45.6m (H1 2017: £47.0m), with reported COR (excluding quota share) of 61.5% (H1 2017: 61.2%) and reserve releases of £38.0m.

Travel

· Solid Travel performance with profit before tax of £12.0m, as expected.

· Spirit of Discovery forward sales continue to meet our ambitious plan with over 64% of our sales target for the first 19 cruises already achieved at attractive rates.

Commenting on the results, Lance Batchelor, SAGA, Chief Executive Officer, said:

“At the end of last year, we announced our intention to invest in new customer acquisition. I am pleased to report significant progress in the first half of the year. Our Retail Broking policy count is back to the levels seen in the first half of 2017, despite a more competitive pricing landscape. Underwriting results continue to be strong, with another excellent claims management performance.

“Travel has delivered a solid performance and we are seeing encouraging demand for our new ship, Spirit of Discovery, in line with our ambitious plan. Construction is on track, with keel laying this summer, ahead of her maiden cruise next year.

“The Group is benefitting from lower operating expenses across the business, reflecting a more efficient operating structure and investment in our IT systems.

“The business continues to be highly cash generative allowing us to pay a dividend of 3.0p. We remain confident in the SAGA’s prospects.”