Group chief executive believes the plan will boost growth for the business, while driving sustainable returns for its investors
UK insurance business Saga revealed last week that it has restarted the detailed work to deliver its turnaround plan and has made significant progress this year, despite being hit badly by the Covid-19 pandemic.
In a move to refresh the brand, the new strategy focuses on a people and culture reset, data and digital transformation, optimising the core of the business, a lower cost base and debt reduction.Outlined by the new management team late last year, Saga’s new five pillar strategy aims to respond to pandemic-caused challenges and is ”designed to drive growth in revenues, profit and cash over the long term, while driving positive, sustainable returns for our investors”, said group chief executive Euan Sutherland.
A key financial goal for the group is to reduce debt leverage to under 3.5 times earnings before interest, taxes, depreciation, and amortisation (EBITDA). Saga’s modelling suggests that this reduction should be obtained by the end of 2023.
Sutherland said: “As a business, we were determined to emerge stronger from the Covid-19 pandemic and I am very proud of how we have responded to the tremendous upheaval caused by the pandemic.
“Our absolute focus on customer care has [been] demonstrated all the way through this year and has driven improvements in loyalty and retention across our travel and insurance businesses.”
Despite headwinds against its travel business caused by the pandemic, the company has delivered underlying profit before tax of £17.1m. Plus, its motor and home insurance policies have returned to growth with sales volumes 1.1% higher than in 2019/20 following several years of decline.
Travel disruption
Throughout the periods of travel disruption last year, Saga “kept a tight grip” on its operations, while maintaining a focus on managing the business’s levels of debt and efficient liquidity in cash.
Moving swiftly to strengthen Saga’s financial position and balance sheet, the group “disposed of businesses deemed non-core”, such as motorcycle insurance broker Bennetts as well as care agencies Patricia White’s and Country Cousins. As a result, the business completed a £150m capital raise.
The group now reports that it is in a robust position, with available cash of over £75m in the UN, excluding the £100m of revolving credit facility (RCF), which remains undrawn.
Sutherland said: “Across our travel business, we remain absolutely ready to restart operations as soon as government restrictions allow us to do so.
“Saga’s cruise fleet comprises of the newest and most technologically advanced ships on the seas. One of the key benefits of this is that it absolutely allows us to offer our guests the highest level of health and safety standards in the industry.”
During the pandemic lockdowns, the business managed to keep cash burn at the lower end of its £6m to £8m per month guidance range. Customer retention reportedly remained high despite the hibernation of the travel business.
Pent-up demand
Considering customer concerns, Saga was among the first in the industry to offer Covid-19 inclusive travel insurance. Now, its cruises are 78% booked for 2021. Holiday bookings sit at 83%.
“Our commitment to having both vaccines before you travel was met with huge comfort by our customers and has attracted customers from other travel operators,” explained Sutherland.
“We had over 97% of our customers come back to us and say they had thought vaccines as a requirement for travel was something they wanted to see, so that is overwhelmingly positive.”
Saga’s first cruise sets sail on the 27 June. The cruise itineraries are around Britain and in British waters, which has been approved by the UK government.
The insurance business also reported that it is working closely with prime minister Boris Johnson’s administration to build a “sensible policy” to open up international travel once restrictions have been eased.
“Looking ahead, while we are mindful of economic headwinds and the potential ongoing impact of Covid-19, we remain extremely confident in our plans,” Sutherland continued.
“Our core market remains attractive and in growth, and we see plenty of pent-up customer demand from our customers.
“Saga is a great British business with a strong brand, loyal customers and engaged colleagues, and we are excited about the opportunities ahead.”
The detailed strategy work around the brand’s relaunch, especially in the digital realm, continues. Saga plans to unveil the results of this project and relaunch the brand formally later this year.
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