Saga H1 2027 Earnings Report

Saga EPS Results

• Actual EPS: GBX 20.50
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Saga Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Saga Announcement Details

• Quarter: H1 2027
• Date: 9/30/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, September 30, 2026
• Conference Call Time: 4:30AM ET

Saga (LON:SAGA) exists to deliver exceptional experiences for our customers every day, whilst being a driver of positive change in our markets and communities.

Saga H1 2027 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong first-half performance: Underlying revenue rose 14% to £366 million, while underlying profit before tax nearly doubled to £46.6 million, driven by growth across travel and insurance.
• Positive Sentiment: Saga raised full-year underlying profit guidance to £65 million–£70 million, versus £44 million last year, and said it now expects to reach its medium-term targets of £100 million profit and leverage below two times ahead of January 2030.
• Positive Sentiment: Ocean Cruise remained the main growth engine, with profit before tax up 38%, per diems up 13% and strong forward bookings supporting continued pricing power; group net debt fell to £429.1 million and leverage improved to 2.7 times.
• Positive Sentiment: The insurance transformation is gaining traction, with Insurance Broking profit before tax up 75%, policies in force up 5% and lower operating costs expected as the Ageas partnership and simpler operating model mature.
• Negative Sentiment: Management flagged risks from low river levels, which are expected to reduce full-year River Cruise profit, and Middle East disruption affecting the Holidays business; Ageas-related exceptional costs will also continue next year, albeit at a lower level.

Presentation

[Mike Hazell, Group CEO at Saga]

Morning, everybody, and welcome to Saga's results for the six months ending 31st of July 2026. Quick look at the agenda for this morning. I am going to give you a short overview of the fantastic half that we have put in and the progress we have been making before Mark then takes you through the financial performance in more detail. I will then return to give you some more color on our individual businesses and the great progress we have been making across the group.

[Mike Hazell, Group CEO at Saga]

Look, we have put in another very strong half year performance, and it is a performance built on a really clear strategy. We have created a simple, resilient, and customer-focused platform for growth. Our newly combined travel business is continuing to grow strongly, and you will hear about the ongoing transformation we are delivering in our insurance business that is now also delivering consistent growth.

[Mike Hazell, Group CEO at Saga]

Revenues and profits are growing strongly across the group, and in light of that performance, we have updated guidance for the full year, and we now expect profits to end with the full year being between GBP 65 million and GBP 70 million profit. Compared to GBP 44 million last year, that is an increase of over 50%. I am really pleased to report that our leverage is also continuing to fall rapidly, ending the half at 2.7 times, compared to 3.7 times only in January. With another strong year being delivered this year, we are now even more confident with regards to our medium-term targets, and therefore today have announced that we expect to hit those medium-term targets earlier than the originally planned date of January 2030. We will talk more about that later. Let us now go into some of the drivers behind that strong performance.

[Mike Hazell, Group CEO at Saga]

It is a performance consistent with our plans, albeit with obvious acceleration. You can see all of our businesses are performing well, particularly Ocean Cruise, which is particularly important given that is our largest profit driver in the group. We are also focusing on product and proposition. We have launched new destinations in travel. We are taking Holidays in China, and we have launched a range of U.K. hotel stays this year, including Christmas breaks later in the year.

[Mike Hazell, Group CEO at Saga]

We are also focusing on wider brand building and engagement activities, and a little bit later you will hear about the fantastic new podcast we launched earlier this year and the great traffic that is driving to our website. We have launched the NatWest partnership this year, and that has started really well. We have already taken over GBP 2 billion worth of savings this year and introduced 50,000 new savers to Saga.

[Mike Hazell, Group CEO at Saga]

A really strong start in driving new customers into Saga. Our simplification work has not stopped either, and we have announced a new technology partnership with SCC that moves us to a modern IT group platform that is agile, efficient, and lower risk, creating a solid foundation for our operating environment as we move forward. We are not just delivering a strong trading performance, but we are also building powerful foundations upon which to build future growth. Mark will now take you through the financial performance in more detail.

[Mark Watkins, Group CFO at Saga]

Thanks, Mike, and good morning, everybody. It's a pleasure to be here today to present such a strong set of results. As usual, I'll spend the next few minutes covering the detail of the financials before summarizing the outlook for the remainder of the year. Saga delivered an exceptionally strong first half performance, driven by growth across all our core businesses. Underlying revenue increased 14% to GBP 366 million, reflecting growing and resilient customer demand in travel and growth in both margins and policies in insurance. Trading EBITDA increased 35% to GBP 90.9 million, predominantly driven by growing per diems in Ocean Cruise and strong trading in Insurance Broking. This translated into underlying profit before tax of GBP 46.6 million, an increase of 98% when compared with the prior period.

[Mark Watkins, Group CFO at Saga]

In statutory terms, profit before tax from continuing operations also improved significantly, increasing from GBP 3.7 million to GBP 28 million, driven by lower exceptional costs as we move through the Ageas partnership implementation. You will see we have moved to underlying available operating cash flow. This excludes the upfront proceeds and working capital adjustments associated with the Affinity partnership and dividends paid by our insurance underwriting business before it left the group. The group continues to have a highly cash generative business model, with underlying available operating cash flow increasing 27% to GBP 101 million. This reflects growth in travel and insurance alongside reduced capital expenditure. We're also making great progress in deleveraging with net debt reducing to GBP 429.1 million at the 31st of July 2026, GBP 86 million lower than at the same time a year ago, and GBP 70.4 million lower than the year end.

[Mark Watkins, Group CFO at Saga]

As a result, our leverage ratio improved from 4.3 times to 2.7 times. I'll now focus on the underlying profit contribution from each of our business units. Our travel businesses continue to generate strong customer demand, delivering GBP 60.3 million of underlying PBT in the first half, a 45% increase on the prior year. Insurance also performed well in the first half, with underlying PBT increasing 75% to GBP 15.9 million. This reflects higher home margins and lower operating costs following the move to a simpler operating model. Other businesses and central costs increased 34%, with a higher proportion of costs now remaining centrally following our insurance underwriting business leaving the group, and the ongoing transition to the new insurance model. Net finance costs remain broadly unchanged year-on-year at GBP 20.6 million, and as a result, underlying profit before tax increased 98% to GBP 46.6 million.

[Mark Watkins, Group CFO at Saga]

I'll now take you through each of our core businesses in more detail, starting with Ocean Cruise. Ocean Cruise had another excellent start to the year, with underlying PBT increasing 38% as customer demand continues to grow. Underlying revenue grew 14% to GBP 149.5 million, driven by a 13% growth in per diems to GBP 440 from GBP 391. As a reminder, the increase in per diems was largely driven by less discounting, given the high demand we are seeing and our unique price promise under which the earlier you book, the less you pay, which encourages our customers to book early. Load factors remain strong at 92%, although this is two percentage points lower than the prior period due to a different mix of itineraries year-on-year. Marketing costs were broadly flat year-on-year, while operating expenses increased as we continue to invest in the proposition to support future growth.

[Mark Watkins, Group CFO at Saga]

Finance costs reduced 13%, reflecting the continued repayment of the cruise debt facilities. Looking ahead to the full year, the booked load factor is 91%, broadly in line with the same point last year. While the momentum in per diems remains strong with 11% growth. Forward bookings into 2027/2028 are strong, with the booked load factor and per diem both ahead of the prior year by 3 percentage points and 11%, respectfully. Turning to River Cruise. In the first half of the year, River Cruise revenue increased 33% to GBP 34.9 million. This was driven by higher per diems and a 32% increase in capacity following the addition of Spirit of the Moselle to the fleet in July 2025. Including the increase in capacity, the load factor remained strong at 92%, broadly in line with the prior year.

[Mark Watkins, Group CFO at Saga]

The per diem increased 3% to GBP 376, demonstrating the continued strength of customer demand. As you'll know, across Europe, there are low water river levels. This has not impacted our first half, and I will come back to this later when I cover the outlook. Marketing and administration expenses were broadly in line with the prior year, even with the significant growth in capacity and earnings. As a result, underlying profit before tax increased 54% to GBP 6 million. Looking ahead to the full year, although the booked load factor is behind last year, this reflects the additional capacity following the Spirit of the Moselle joining in July last year, and the disruption from lower river water levels in Europe, which we continue to manage. The booked per diems is 2% ahead at GBP 357.

[Mark Watkins, Group CFO at Saga]

Bookings for next year are strong and includes the incremental capacity from our fourth purpose-built ship, the Spirit of the Lorelei. The booked load factor is behind the same point last year, but the per diem is 2% ahead. In our Holidays business, revenue grew 9% to GBP 97.7 million, with passenger numbers increasing 6% to 29,400. The business saw limited impact from the conflict in the Middle East during the first half, with very few itineraries operating in the region.

[Mark Watkins, Group CFO at Saga]

Marketing and administration expenses were broadly in line with the prior year, despite the growth in earnings. As a result, trading EBITDA increased 111% to GBP 7.6 million, while underlying profit before tax more than doubled to GBP 6.6 million. Looking ahead to the full year, bookings remain resilient despite the ongoing disruption in the Middle East. Both revenue and passenger numbers are broadly in line with the same point last year.

[Mark Watkins, Group CFO at Saga]

Looking ahead to 2027/2028, bookings are currently behind the prior year, but this primarily is due to the later launch of the season. Turning now to Insurance Broking, where underlying profit before tax increased to GBP 15.9 million from GBP 9.1 in the prior period, and exceeded our expectations. The year-on-year improvement was primarily driven by strong margins in home insurance, together with lower operating costs as the benefits of the new business model begin to emerge. It's worth noting that the GBP 10.5 million contingent consideration from Ageas had a limited impact on the first half, as the income will be recognized over the future years of the partnership. The graph on the top right highlights the key drivers of the growth. The motor contribution before overheads increased GBP 0.6 million, with higher new business margins and growth in renewal policies, partially offsetting lower new business policy sales.

[Mark Watkins, Group CFO at Saga]

Home insurance was the largest contributor to profit growth, with the increase of GBP 5.7 million, driven primarily by higher renewal margins. Private medical insurance was GBP 2.5 million lower than the prior year due to a prior year profit commission recognized in the prior period, and travel insurance reduced by GBP 0.8 million as a result of increased investment in targeted marketing, which resulted in policy growth of 51%. Interest income was GBP 1.4 million higher than the prior year, just reflecting the return on the upfront consideration from the Ageas partnership. Operating expenses have begun to reduce following the move to the new operating model, with the full benefit expected next year. Finally, alongside strong growth in profits, total policies in force grew 5%, with continued growth from three out of our four product lines. Now moving to debt.

[Mark Watkins, Group CFO at Saga]

Debt reduction continues to be a strategic priority for Saga, and we are reducing it at pace. It was only two and a half years ago that we had a leverage ratio of 5.4 times and net debt of GBP 637 million. Today, net debt is GBP 421 million, a reduction of over GBP 200 million. Our leverage ratio has halved to 2.7 times. Looking at the first half, underlying available cash flow increased 27% to GBP 101 million, driven by stronger cash generation from travel and insurance, alongside reduced capital expenditure. Debt service costs increased, reflecting a full six months of the new corporate facilities, and restructuring costs increased primarily due to the transition to the Ageas partnership, alongside other project and property costs. Let's now turn to the full year outlook. The strong start to the year means our full year guidance has increased.

[Mark Watkins, Group CFO at Saga]

We now expect group underlying profit before tax to be between GBP 65 million and GBP 70 million, compared with a consensus of GBP 60.4 million. Net debt and leverage are expected to remain broadly flat, reflecting some one-off cash items and the seasonality of working capital. In Ocean Cruise, we expect the trends seen in the first half to continue, with the full year growth expected to be similar to that delivered in the first half. In River Cruise, we expect full year underlying profit to be lower than last year due to the impact of low river water levels and the usual seasonality within this business. In Holidays, we expect earnings and passengers to be in line with last year. The second half includes our peak trading period, for which bookings earlier this year were impacted as the Middle East conflict began.

[Mark Watkins, Group CFO at Saga]

As a reminder, we are fully hedged against foreign exchange and commodity exposure through to December 2027, providing a good degree of visibility and certainty over our cost base. In Insurance Broking, underlying profit for tax is expected to be higher than last year, albeit the second half to be broadly in line with last year as a result of the first half benefiting from higher three-year fixed price margins and continued investment in motor and home pricing in the lead up to the renewal policies going live with Ageas. In other businesses and central costs, we expect the second half to be broadly similar to the first. Before I hand back to Mike, it is important to put the performance in the context of our medium-term targets.

[Mark Watkins, Group CFO at Saga]

We laid these out at the start of last year, which were to achieve GBP 100 million of underlying profit by January 2030, with leverage of less than 2 times. This year will now be the second year of us consistently outperforming our expectations. Therefore, as I look forward, and whilst mindful of the current geopolitical environment, we now expect to achieve our targets before January 2030. We will, of course, provide a further update at our full year results early next year. With that, I'll hand back to Mike.

[Mike Hazell, Group CEO at Saga]

Thanks, Mark. It really has been a very strong first half performance. Let's now get into the drivers behind that performance. I wanted to start with a reminder that we have a very clear strategy. Saga is a business built on our understanding of older people and the trust they have in our brand. Our strategic vision and our strategic principles are the foundations of that. Customer focus, customers are at the heart of everything that we do. Our customers are different, and so we in turn are different to meet their differing needs and expectations. To do that, we have to understand our customers. We're an insight-driven business with 75 years of experience and insight into this customer group, and we use that to drive every component of our business. Quality and value remains at the heart of everything that we do.

[Mike Hazell, Group CEO at Saga]

We have an unrivaled marketing reach into this demographic. It's not just about that reach through our publishing business and our 9 million strong customer database. It's also about the experience that we have in knowing how to communicate and resonate with this different customer base. Critically, though, those principles, long enduring as they are, need actions and plans, and that's where our strategic priorities come in. In a moment, I'll take you through how we're delivering on those strategic priorities. Before I do that, let's just talk about customer. Saga really is uniquely positioned to serve this attractive and growing demographic. Over the next 20 years, over 50% of the U.K. population will fall into our target demographic, and fastest growing amongst them will be the over 65 age group, projected to grow by over 30%. Saga customers are also more affluent.

[Mike Hazell, Group CEO at Saga]

By 2040, 63% of every pound spent in the U.K. will be spent by people over 50. They're also living longer. Not just living longer, they feel younger, and they're living more active retirements. The average Saga customer feels 14 years younger than their chronological age. Gym memberships are rising. People over 75 are now still really active, and they're looking to enjoy their extended retirements. Travel is the thing they enjoy doing most. For Saga customers, travel isn't a discretionary item, it's something they prioritize. They spend 3 times more than their younger generations, but they have different needs and expectations. Who better to deliver on those than Saga, having served this market for 75 years? So there's huge potential, and Saga is better placed than many.

[Mike Hazell, Group CEO at Saga]

Having a clear strategy is critical, and strategic priorities that turn those principles into actions and plans is the driver of our success. Let's now talk about those strategic priorities. There is nothing really new on this page, but I wanted to demonstrate how everything that we do is driven by our strategic priorities. We are maximizing the growth of our core businesses. We are driving new products and business lines. You will hear about pet insurance later.

[Mike Hazell, Group CEO at Saga]

NatWest was a new product we launched earlier in the year. We are growing our customer base. You will hear from our publishing business that is doing a great job of deepening the engagement we have with existing and new customers. We are simplifying our operations and reducing our debt. Let's now talk about what is happening in our businesses. Starting with Ocean Cruise, the largest profit driver in the group and performing really well.

[Mike Hazell, Group CEO at Saga]

We have been steadily increasing load factors over the past few years, and we expect to maintain that strong performance as we go forward. With strong forward booking visibility into next year, we can already see 55% load factors into next year up on last year, and 68% repeat rate, we are confident in the strong continued performance in load factors. That will translate and is translating into continued per diem momentum. With more demand, people are booking earlier, and that means we are having to discount less to acquire customers onto our ships. It is a more customer-friendly way of driving per diem growth than pure headline price increases. We are also operating in a market that is seeing general price inflation, so our relative value continues to compare well with our cruising peers.

[Mike Hazell, Group CEO at Saga]

At Saga, though, we are also continually investing in proposition, improving the quality of onboard experiences, the number and quality of excursions, premium drinks on board, and the quality of the food and drink experience. Some of you have been on board the ship recently and will have experienced firsthand what a brilliant experience it is, so hopefully you can understand why our customers love this proposition so much and keep coming back for more. So we are confident that we will maintain the strong load factor performance and see that continue to drive per diem momentum for all the reasons that I have talked about. We are similarly confident about the outlook for our River Cruise business. River cruise is a real opportunity for us, a newer, smaller part of our group, but with lots of potential. There are two key drivers of growth in this business.

[Mike Hazell, Group CEO at Saga]

Load factors now into the 80%s and continuing to grow, which will catch up towards the 90%s that our more mature Ocean Cruise business now achieves. So we expect to see load factors continuing to grow. We are also adding additional capacity to service the clear demand that we see in this business. Last year, we launched our third Spirit class vessel, the Spirit of the Moselle. We launched that in July. I was on that ship in August, and it was already full, speaking to the strong demand for that product. Next year, we will launch the Spirit of the Lorelei, the fourth of our Spirit class vessels. We have also given a lot of attention to the onboard experience and the quality of the excursions.

[Mike Hazell, Group CEO at Saga]

You can see the combined impact of all of that in our customer satisfaction scores and the turnaround in our tNPS that has gone from 15 only a few years ago, up to 75 now. A really impressive turnaround driven by our focus on customer. River levels have obviously disrupted this year, but variable water levels are a normal part of operating River Cruises, and flexibility is key. I have been really pleased with how we have managed the disruption this year, continuing to sail throughout the summer. Our modern ships also cope well with differing water levels and with variable. They draft better in lower water levels, but they also have technology that lowers bridge decks to cope with higher water levels. So whether it is more or less water, our ships are designed to cope well with those variable levels.

[Mike Hazell, Group CEO at Saga]

Looking ahead, this remains an attractive market for us, one that there is clear demand from our customers for, and a market that is generally growing and one that we see an opportunity in. Finally, in travel, let us have a look at Holidays. By Holidays, I mean our touring Holidays and our hotel stays. This is Saga's heartland, and actually it is how most people like to travel, in particular older people. We understand how older people like to travel. We have got huge experience in this, and we are using that experience to build our holiday experiences and propositions around the differing needs that we see for older people. They have more time available to them and so tend to opt for longer duration Holidays. They typically travel outside of peak season. September and October are our busy period, unlike July and August for the mass market.

[Mike Hazell, Group CEO at Saga]

They like to travel independently, but appreciate the additional comfort and assurance that Saga provides, particularly when something goes wrong. We have been extending our list of destinations and particularly our range of special interest Holidays, indulging the passions and interests that we see older people like to enjoy. We have launched a series of U.K. breaks, and we see U.K. Holidays as a particularly powerful addition to our no-fly holiday offers. But service is key. Seamless booking journeys, chauffeur-driven car service, and a Saga host resident at every hotel to help our customers enjoy their holiday to the most. These are the things that make us different. You can see the difference in our customer satisfaction scores. Only a few years ago, our tNPS was 34. We are now up to 59.

[Mike Hazell, Group CEO at Saga]

Again, a huge turnaround in customer satisfaction, driven by our focus on our customers and how they like to travel. So our newly combined travel businesses are all performing really well and are well positioned. Ocean cruise the standout performer. Now let us turn to insurance. You will be well aware of the transformation that we are delivering in insurance. With our Ageas partnership, we now no longer take any underwriting risk across the group. All of our insurance products are now delivered through partners. But it is not just a lower risk model. It is a model that significantly reduces the operational complexity in our insurance business and actually in our broader group. Our partnership strategy brilliantly combines world-class insurance, scale, infrastructure, and expertise with Saga's 75 years of understanding and expertise in how to design and deliver products for older people.

[Mike Hazell, Group CEO at Saga]

And we've seen an immediate benefit to the performance of our insurance business. After years of decline, policy numbers are now growing again. Travel and PMI, theoretically untouched by the home and motor Ageas partnership, have actually benefited from the greater focus that we're able to give those businesses, now freed from the complexity of managing day-to-day complexity of scale home and motor insurance. You'll see the massive turnaround in performance we're delivering across PMI and travel. So it's having a halo effect across the whole of insurance and more broadly across the group. It's also giving us headroom to consider new products, and you'll see pet example is a great example of a new product that we'll be delivering now we've got the headroom to think about how we can help our customer in areas that we don't currently today. We'll launch that product later in the year.

[Mike Hazell, Group CEO at Saga]

A less obvious transformation has also been taking place in our publishing business. I've tried to capture the multitude of ways that we engage with our customers through our various publishing channels, most of which didn't exist even three years ago when we were fundamentally a print magazine operation. Importantly, this is all about building engagement brand engagement and driving traffic into our businesses. But look, a PowerPoint slide is hard to get excited about, so let me show you a video clip that I think brings this to life better than I can. I think maybe we'll have our publishing team do our city presentations going forward. Might liven things up a bit. But seriously, what an amazing job the publishing team have been doing, and I think that does a great job of bringing that to life. But let's be clear. This isn't just a fantastic publishing business.

[Mike Hazell, Group CEO at Saga]

It's a powerful brand and engagement tool, and it's growing. Last year, we drove 17 million visits to our website, and that was up 39% year-on-year. But we're also focused on converting that traffic into onward traffic into our business units, and we drove 1.9 million visits onto our business websites, and that was up 77% year-on-year. Our award-winning magazine, and you've got copies in the room with you, some of you in the demographic, others, not so much. But that's now got a readership of 390,000 people. It's a really powerful tool for us and a shop window for our business. 2.8 million customers now regularly engage with all of our publishing content. It's a key source of insight, and it's a particularly powerful tool when it comes to the increased importance that our wider publishing business has for AI visibility.

[Mike Hazell, Group CEO at Saga]

It extends our reach well beyond traditional direct channels through mainstream and social media pickup. On the right-hand side, you can see the latest example of the work the team have been doing with our fantastic new podcast. Lorraine Kelly is our new podcast host. A fantastic launch, now reaching over 15 million views since we started in January. So before I wrap up on the next slide, I just wanted to pause on our medium-term targets again, the targets we laid out in April last year. We said we were confident of achieving GBP 100 million profit and 2 times leverage by January 2030. Since then, we've been consistently outperforming that trajectory, and we expect to continue to outperform.

[Mike Hazell, Group CEO at Saga]

As we approach two years in of our five-year turnaround plan, we are now confident that we will achieve those targets earlier than the originally intended date of January 2030. We will update you more about that in the full year. To conclude, we have had a really strong half across all of our businesses. Our strategic transformation is progressing well. We are increasing our full year guidance. We expect to hit our medium-term targets early. All round, it is a very strong performance and one all of my Saga colleagues should be extremely proud of. We will now move to questions, starting with people in the room before we take any online.

[Sahill Shan, Analyst at Singer Capital Markets]

Morning, it is Sahill here from Singer Capital Markets. Congratulations on an excellent set of numbers and a very useful presentation. I have just got a few questions. I will kick off with River Cruise. Given what has happened this year and what is happening to climate change, how are you thinking about contingency plans or how things may play out going forward if lower river levels is likely to be more normal going forward? Allied to that is, are you thinking about diversifying your River Cruise itinerary beyond Europe at this moment in time?

[Mike Hazell, Group CEO at Saga]

Yeah. Look, all really good points. Firstly, I have been really pleased with the way we have handled the disruption this year. We have managed to sail throughout the summer. We have got modern ships that cope, as I said, with varying water levels very well actually. We are also very adept in managing the year-on-year changes in itineraries that are required around river levels.

[Mike Hazell, Group CEO at Saga]

Our modern ships draft in lower water levels and cope with higher water levels very well. We manage the itineraries very flexibly. We have been doing that this year. As we go forward, you are absolutely right, that we will look at new rivers. Importantly, we are not just on the Rhine and the Danube this year. That is where the disruption has been. We have actually seen customers switching across to the Douro and enjoying cruises on the Douro this year that are not interrupted.

[Mike Hazell, Group CEO at Saga]

Diversification into new rivers is something that is on the horizon. Actually, river volatility is nothing new. It is something that we manage very well and have managed through this year.

[Sahill Shan, Analyst at Singer Capital Markets]

Thank you. Just moving on to Holidays, notwithstanding the ebbs and flows of this year, it's a fantastic business. You made a lot of progress over the last two years or so. It's niche. There's a degree of fragmentation in that end of the market. How should we be thinking about growth, particularly from a consolidation and an M&A point of view? Is that something you would consider?

[Mike Hazell, Group CEO at Saga]

Yeah. It's not a major part of our thinking. Look, my view on Holidays is we've only just got started. It takes a while to turn around a proposition in the way that we're doing, targeting it for our customer demographics. Having consolidated our travel business under one leadership, Nigel's in the room today, we're now starting to accentuate the Saga differences through our special interest Holidays and the differences you'd expect when you go on a Saga holiday. Therefore, this year is the first year where those changes actually will be experienced by customers because the changes we made last year will be delivered this year. Now we're in the process of building that out into next year. You should expect organic growth coming through our Holidays business.

[Mike Hazell, Group CEO at Saga]

What's really important, if you think about cruising is a really important business for us, and Ocean Cruise is the lion's share of our travel profits. It does provide an important underpin. But actually, in terms of passenger numbers, most people choose to go on holiday, not on a cruise, but on the type of Holidays we offer in our Holidays business. There is a huge opportunity for us to grow from the 60,000 very small base that we take on holiday in that way in the future, and we'll do that by curating our experiences to resonate with older people, and we're seeing, as you've seen in our customer satisfaction, the changes we're making are resonating, and that's what we'll build on in future years.

[Mike Hazell, Group CEO at Saga]

Special interest is a great example how that really does play to our strengths in terms of understanding older people and delivering a very different experience for our customers.

[Sahill Shan, Analyst at Singer Capital Markets]

Just two quick ones for Mark. Slide 11. Mark, I noticed PMI and Travel had good sort of momentum in terms of new memberships, so in terms of new policies but I noticed they are still loss-making. How should we be thinking about that going forward?

[Mark Watkins, Group CFO at Saga]

I do not think they are loss-making. That is the variance versus the prior period but both the products make a positive contribution to the business.

[Sahill Shan, Analyst at Singer Capital Markets]

Why the variance?

[Mark Watkins, Group CFO at Saga]

I think I covered PMI. PMI, there was a GBP 2.5 million profit share in the prior period. Excluding that, it would be flat. Travel is a reflection of the fact that we are investing in that product, and you can see that investment paying back through the policy growth of 51%.

[Sahill Shan, Analyst at Singer Capital Markets]

Okay. Just one final one.

[Mike Hazell, Group CEO at Saga]

Sorry, just on that, if you strip out the commission share in PMI, I think an important point is, although they are broadly flat year-on-year, you will see the policy numbers are growing because we have been investing in future growth there as well. That is an important point.

[Sahill Shan, Analyst at Singer Capital Markets]

Okay, thanks for clarifying. Just one final one from me. We have been through a period of quite a bit of restructuring costs, both at P&L and at a cash flow level. Are we nearing the end of the exceptionals?

[Mark Watkins, Group CFO at Saga]

Yeah. Look, the exceptionals are primarily related to the Ageas partnership implementation. We have done a lot of the heavy lifting this year. The renewals book is due to go live towards the end of this financial year. Then there will be a 12-month transition as those policies migrate across to Ageas. I would expect exceptionals to be present next year as we continue that project and the migration. But they should be lower, and therefore, they then should step down the year after as we move into a more steady state.

[Sahill Shan, Analyst at Singer Capital Markets]

Thank you.

[Jack Cummings, Analyst at Berenberg]

Morning. Jack Cummings, Berenberg here. First question is on the guidance bridge. When you are thinking about that kind of GBP 65 million to GBP 70 million level, what are the building blocks that get you to the bottom end, and what are the building blocks that get you to the top end? Is it low water levels? Is it the Middle East impact? How should we think about the bottom and the top end of the range?

[Mike Hazell, Group CEO at Saga]

I will kick off, and Mark, you can tell me if you want to add anything in terms of numbers. I think it is a pretty straightforward story. If you look at the very strong first half performance, and then you look at the second half, to the extent there is any impact to the Middle East in Holidays, it will land in September and October for us, and therefore, that is going to be a second half impact. Our River Cruise business, again, to the extent there is disruption, that will typically impact the second half rather than the first half.

[Mike Hazell, Group CEO at Saga]

That combined with some phasing differences in insurance, will mean that overall, if you take that first half performance and significant growth year-on-year, and then expect the second half to trade more in line with last year, allowing for those phasing differences, then you will get to the bottom end of that range. That is roughly how to look at it. Is there anything you want to add to that, Mark?

[Mark Watkins, Group CFO at Saga]

Not really. Ocean underpins the number. I think the performance of Ocean gives us confidence certainly at the bottom end of the range. As Mike has said, there are various factors around that H1, H2 splits. I think it is the Ocean underpin that gives us confidence.

[Jack Cummings, Analyst at Berenberg]

Okay, perfect. My second question is on the midterm outlook slide. You were saying you were outperforming in pretty much all of the different divisions with the exception of River Cruise and Holidays. If we hadn't experienced the lower levels of water and the Middle East impact, would those two divisions have been outperforming your expectations compared to where we were 12 months ago?

[Mike Hazell, Group CEO at Saga]

Yeah, look, you'll see that we've said that we're on track in Holidays and River, in a year where there's been unprecedented water level issues in River and a Middle East war. So, to be on track despite that, means we're doing pretty well. Therefore, absent that, we would've been ahead.

[Jack Cummings, Analyst at Berenberg]

Perfect. My final question is just on leverage. Obviously, a huge amount of de-leveraging over the past 12 to 18 months. You're now at 2.7 times, so kind of within touching distance of that 2 times that you've talked to in the midterm. When you're thinking about capital allocation here and the best use of cash, how do you weigh up the differences between investing in the asset light businesses, the River Cruise, the Holidays business, potentially a new Ocean Cruise ship or shareholder returns in the form of dividends and buyback?

[Mike Hazell, Group CEO at Saga]

Yeah, it's a pretty simple equation right now. We said we'd laid out those targets to get to 2 times leverage and GBP 100 million profit, and that is what's driving our decisions right now. As we get closer towards that 2 times, then the question will open up as to, and you haven't asked it explicitly yet, but when will we switch on dividends and when's the third ship going to arrive? My answer to that right now is that it's too early to start talking about those things right now. We're focused on getting to that 2 times and that GBP 100 million target. As we get much closer, then we can start to talk about capital allocation. In terms of a third ship, look, there's a significant timeframe associated with any third ship, if and when we get to that decision further down the line.

[Mike Hazell, Group CEO at Saga]

You should look at a third ship as not touching any of our numbers within the timeframes we are talking about because the cash flows and the timing of any ship would be beyond the timeframe of these plans anyway.

[Jack Cummings, Analyst at Berenberg]

Thank you.

[Mike Hazell, Group CEO at Saga]

Thanks for your patience, Tim.

[Tim Barrett, Analyst at Deutsche Numis]

No worries. Tim Barrett from Deutsche Numis. A couple of questions on Ocean Cruise, please. One number that stands out we haven't really talked about is the 8% decrease in operating costs, which has obviously been a big positive. Can you talk about what's driven that and outlook for 2028 financial year? Then obviously 11% per diem growth in the forward year is great. Presumably that tells us a lot about your views of pricing power. Be interested in those points.

[Mike Hazell, Group CEO at Saga]

Perhaps I will take per diems. Mark, you can talk about operating costs in a second.

[Tim Barrett, Analyst at Deutsche Numis]

Yeah.

[Mike Hazell, Group CEO at Saga]

Look, I touched on it in the presentation. Before I go to per diems, I think it is probably worth just looking forward into next year to just give some confidence in terms of the outlook actually, because we have 55% load factors going into next year now and very strong per diem growth going into next year. As the largest profit driver in the group, I think that is a really solid starting point before we then talk about other business. The drivers of that, you will be well aware of the load factor performance that we have been driving. That is very relevant when it then comes to the per diem drivers because I see there being three components to per diem growth. Firstly, the level of load factor, and frankly the excess demand that now starts to emerge, creates a very strong supply and demand dynamic.

[Mike Hazell, Group CEO at Saga]

Customers are booking earlier and therefore, we have to discount less to acquire the next customer. Therefore, that is providing natural lift to per diems. It is also in an environment where our competitors are raising their prices, so value is still holding up really well. We are also improving continually the quality of the experience on board and the excursions onshore. That is adding more value and supports the general momentum we are seeing in per diem. So it is a more customer friendly way of driving per diem growth. The end product for me is in the customer satisfaction levels which remain really high. You can see demand into next year remaining strong as a result of that.

[Mark Watkins, Group CFO at Saga]

Tim, just on the operating expenses, which are you looking at? Are you talking about the ship operating costs or the?

[Tim Barrett, Analyst at Deutsche Numis]

Yeah.

[Mark Watkins, Group CFO at Saga]

I am not sure where I see an 8% reduction.

[Tim Barrett, Analyst at Deutsche Numis]

Sorry. Just the margin increase was more than I thought.

[Mark Watkins, Group CFO at Saga]

Yeah. So look, I'll talk to the margin. I think what we've got is a strong pricing dynamic where we are clearly we've got load factors and per diems growing, driving revenue. And the cost of operating the ship is largely fixed. We continue to invest in the proposition. Not all of the incremental revenue will drop to the bottom line as the team invest in that proposition and make sure that we maintain the high level of repeat rates and the high level of NPS that we have on board the ships. I'm sure Nigel can talk about what the proposition changes are that he's investing in but that's the step up in the cost base, but we would see the revenue step up to be higher than that step up in the cost base, and therefore the margin should improve.

[Tim Barrett, Analyst at Deutsche Numis]

Just one last one if I may. The insurance business is not an area where I think many of us in the room are experts, so the margin outlook for that would be really interesting. Just it's a bit harder to model, so any thoughts?

[Mike Hazell, Group CEO at Saga]

Yeah, look, I think we're deliberately not guiding on the component parts of insurance, for two reasons. One is, actually, with a very different model being adopted, we're now changing our revenues and our cost base by virtue of that partnership. Therefore, we're guiding to the profit outlook, as opposed to the costs and revenues and margin guidance. But in that respect, what you should be paying attention to is the improvements in policy numbers. Because for me, the business model shows that it's working when you look at the strength coming through in our policy numbers, not just in the partnership itself. We're seeing policy growth, but we're also seeing profit performance being driven through the partnership.

[Mike Hazell, Group CEO at Saga]

But we're also seeing a huge benefit through the wider insurance business with growth in travel insurance and PMI, and it's easy to think that's separate, but actually, that business is directly benefiting from the management team being able to now focus on customer across all of our products and drive growth across the business, rather than spending 90% of their time grappling with complexity of what is necessarily a complex insurance business. So it's absolutely fantastic to spend time all day, every day now thinking about customer, and you can see that in insurance performance. So I'd focus on profit rather than the individual component parts. Mark, do you want to give any clearer guidance on the profit trajectory?

[Mark Watkins, Group CFO at Saga]

Yeah. So I think when we originally signed the agreement, we said in the first full year of the partnership it was going to make at least GBP 14.5 million, which was the profit the business made the year before we signed. So you can see from the numbers we are out achieving that guidance based on the trading in the business today. So I think the start point has changed. The growth trajectory is still the same. But we've clearly got a higher starting point. But Mike is right. The simplicity of that business model will come through in the simplicity of the P&L as well. So our revenue will change from a highly volatile number to one that is driven as commission, i.e. a percentage of premiums that customers pay. And there will be a lower cost base associated with that as well.

[Mark Watkins, Group CFO at Saga]

So a simpler operating model sort of plays through into a less volatile, simpler P&L as well.

[Tim Barrett, Analyst at Deutsche Numis]

Thank you, both.

[Mike Hazell, Group CEO at Saga]

Any other questions in the room? Where is Emily? Do we have questions online? Perfect. Well, look, just to wrap up, really pleased with the performance we put in the first half of this year. I wouldn't underestimate the drivers of that and the importance of the strategic turnaround we are delivering that is underpinning that performance and gives us great confidence as we go into the rest of this year and beyond. Thanks for listening. Cheerio.

[Mark Watkins, Group CFO at Saga]

Thanks.

Participants

Executives

• Mike Hazell, Group CEO
• Mark Watkins, Group CFO

Analysts

• Sahill Shan, Analyst at Singer Capital Markets
• Jack Cummings, Analyst at Berenberg
• Tim Barrett, Analyst at Deutsche Numis