UK specialist firm Saga has provided a trading update for the period from August 1, 2023, to January 29, 2024.
Mike Hazell, Saga Group’s chief executive officer, indicated that the company is poised to achieve a notable increase in revenue and a significant boost in underlying profit, more than doubling the previous year's figures and surpassing initial projections.
The cruise and travel segments have been successful, catering to around 120,000 passengers and returning to profitability in line with expectations. However, the Insurance sector is experiencing challenges due to market-wide inflation and declining policy volumes.
For the fiscal year 2023/24, Saga expects to report revenue growth of between 10-15% and an underlying profit before tax that more than doubles that of the previous year. The ocean cruise segment is anticipated to show around 30% year-on-year revenue growth, with significant improvements in load factor and per diem rates compared to the previous year.
The river cruise segment is also expected to return to underlying profit, with a projection of around £44 million in revenue and 17,000 passengers. The travel segment is forecasted to grow in revenue by 40-45%, catering to 58,000 passengers, an increase of over 20% compared to the previous year.
In the Insurance sector, both policies in force and policy sales across all products are expected to be around 9% lower than in the prior year. In the specifics of motor and home insurance, policy sales are anticipated to be 9% behind the previous year, with customer retention at 81%, down from 84%.
The margin per policy is expected to be around £54, compared to £69 in the prior year and £56 in the first half. Insurance underwriting is expected to report an underlying profit before tax in the low-single digits and a gross current year combined operating ratio lower than the 136.4% reported in the first half of the year.
Following the cost efficiencies reported in the interim results, central costs are expected to be significantly lower than in the prior year, at around £30 million, compared with £37.7 million in the year before. Available cash is expected to be in the range of £135-145 million at January 31, 2023, excluding the £50 million revolving credit facility and the £85 million facility with Roger De Haan, which both remain undrawn. Total Net debt is expected to be slightly higher than at July 31, 2023, in line with guidance.
Looking ahead to 2024/25, the 2024/25 ocean cruise booked load factor and per diem were materially ahead of the prior year at 66% and £368 respectively, compared with 62% and £337 in the prior year. Given the ongoing momentum in ocean cruise, the business is now approaching optimum capacity, building on the continued high demand for its boutique cruise offer.
The company is also exploring opportunities to optimise the business, including potential partnership arrangements which, consistent with its move to a capital-light business model, would support further growth, reduce debt, and enhance long-term returns for shareholders. The river cruise booked load factor, at January 28 2024, was 59% with a per diem of £335, both significantly ahead of the 52% and £295 respectively at the same time last year.
The travel business is also making progress, largely in line with the dynamics over the last year. As at January 28, 2024, booked revenue for 2024/25 was £115 million, 12% ahead of the same point in the prior year, with passengers of 35,000, 2% ahead.
The conditions in the insurance sector remain challenging, and Saga maintains that it is focused on effectively balancing the protection and, ultimately, growth of policy sales with the delivery of sustainable profitability. This reshaping is expected to take place over time as the market challenges begin to wane.
However, the likely changes are expected to impact profitability in the short term. In 2023/24, Saga refocused on its core businesses of cruise, travel, insurance, and money, underpinned by its data and brand strategy, having exited its smaller loss-making businesses.
Moving into 2024/25, the company's customer-driven content will be showcased within its popular magazine and regular newsletters. The full-year impact of the central cost efficiencies delivered will continue to flow through into the coming year, in line with guidance, as Saga embeds its leaner operating model.
As previously indicated, Saga also expects to repay the £150 million bond due in May 2024 through available cash resources and the £85.0 million facility with Roger De Haan.
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