Saga H2 Earnings Call Highlights

Key Points

• Saga delivered a “transformational year,” with underlying revenue up 11% and underlying PBT from continuing operations of £44.2m (+19%), operating cash flow of £205.9m and net debt reduced to £499.5m after a new 2031 facility and £150m of undrawn committed lines, underpinning confidence in the £100m profit by Jan 2030 target.
• Travel was the largest profit driver—Travel underlying PBT rose to £87.2m (+37%), with Ocean Cruise delivering an “exceptional” year (underlying PBT £67.3m), high load factors and stronger forward bookings supporting continued growth.
• Insurance was materially reset by selling in‑house underwriter AICL and launching the Ageas partnership, removing underwriting risk (underwriting now discontinued), transferring most staff to Ageas and generating a £60m payment to date with ~£80m total proceeds expected as the commission‑based model is implemented.

Saga LON: SAGA reported results for the year ended Jan. 31, 2026, with management describing a “transformational year” marked by stronger-than-expected profits, significant debt reduction, and major strategic simplification—particularly in Insurance—alongside continued momentum in Travel.

Group CEO Mike Hazell said the performance was “ahead of expectations,” pointing to the completion of a refinancing, the reshaping of Insurance through the sale of the group’s in-house underwriter AICL and the launch of the Ageas partnership, and Travel becoming “our largest and fastest-growing driver of profit.” Hazell added that the progress made during the year has increased management’s confidence in the group’s previously stated target of reaching £100 million profit by January 2030.

Full-year financial performance and cash generation

Group CFO Mark Watkins said Saga “exceeded our guidance,” with performance driven by Travel and Insurance Broking. Underlying revenue rose 11% year over year, while underlying profit before tax (PBT) from continuing operations increased to £44.2 million, up 19% versus the prior year and ahead of expectations. Watkins noted that improved trading was partly offset by higher finance costs following the group’s refinancing early in the year.

Watkins highlighted strong cash generation, with available operating cash flow of £205.9 million, an 88% increase, supported by improved Ocean Cruise cash performance and a £60 million receipt from Ageas following the insurance partnership launch. Net debt at year-end fell to £499.5 million, down £93.3 million from the prior period, while leverage declined to 3.7x from 4.4x a year earlier.

On the refinancing, Hazell said the new 2031 corporate debt facility “materially enhanced the Group’s liquidity position, significantly increased covenant headroom, and provided funding certainty as we execute our growth plans.” Watkins added the structure includes access to an additional £150 million of undrawn committed facilities.

Travel profits rise as Ocean and River build forward visibility

Watkins said Saga’s Travel businesses delivered £87.2 million of underlying PBT, a 37% year-over-year increase. Management also emphasized organizational change, with Hazell noting the consolidation of Ocean Cruise, River Cruise, and Holidays leadership into a “single operation” designed to improve efficiency and create a more consistent customer experience.

Ocean Cruise posted an “exceptional year,” with revenue up 12%, load factor at 93% (up from 91%), and per diem rising to £394 (up 10%). Underlying PBT increased 38% to £67.3 million. Watkins said the cruise facilities were reduced by £54.2 million over the year, contributing to lower finance costs within the Ocean segment.

Forward indicators were also positive. Watkins said booked load factors for 2026/27 were 79%, with per diem of £447, 13% ahead of the same time last year. Hazell told analysts that as load factors move into the 90s, Saga still sees some room for improvement, and that per diem gains are supported not only by supply/demand but also by “the quality of the proposition” and itinerary changes.

Nigel Blanks, who Hazell introduced as having led the Travel business, said Saga’s differentiation means there is “no direct competitor,” allowing the company to “price our products to maximize the return” rather than competing in the mass-market cruise environment. Hazell added that Saga encourages early booking by offering “our best prices to customers that book first,” giving management earlier visibility into performance.

River Cruise revenue rose 8%, with load factor of 89% and per diem of £350 (up 7%). Underlying PBT increased 48% to £5.9 million. Watkins said the year included marginally higher capacity following the July launch of the Spirit of the Moselle. Forward bookings show a 73% load factor and per diems of £372, ahead of the same time last year.

In the Q&A, Hazell said River is “a year or two behind the Ocean Cruise model” as the product quality is built out, and noted that new ship additions can temporarily affect load factors as capacity is sold. He also said the next ship, Spirit of Lorelei, is due to arrive in 2027.

Holidays revenue increased 10%, supported by an 11% rise in passenger numbers. Marketing costs rose 17% to £12.7 million, which Watkins said was intended to drive passenger growth in the current year and into the next. Underlying profitability improved to £14 million from £10.7 million. Hazell said customer satisfaction improved during the year, and management noted that current full-year booked revenue for 2026/27 is 4% ahead of the prior year.

Insurance reset: underwriting exit and Ageas partnership

Management framed the year as a turning point for Insurance. Hazell said the sale of AICL and the rollout of the Ageas partnership has removed underwriting risk and reduced operational complexity. He said that once the transition completes next year, headcount for remaining insurance operations is expected to fall from “around 2,000 people to fewer than 400,” with most affected colleagues transferring to Ageas.

Watkins reported that Insurance underwriting is now classified as discontinued operations, and said the strong first-half performance supported a £10 million pre-completion dividend; Saga also received £11.4 million of proceeds on completion in July.

In continuing operations, Insurance Broking generated underlying PBT of £16.9 million. Watkins said the business invested in policy growth ahead of the Ageas partnership launch, with three of four key products returning to growth after years of decline. He said Motor rose by 73,000 policies, while Private Medical Insurance (PMI) and Travel grew by 41,000. He also walked through segment drivers:

• Motor contribution before overheads decreased by £4.6 million due to investment in pricing and marketing to support higher volumes.
• Home contribution increased by £2.2 million on higher renewal margins.
• PMI rose by £4.7 million on commissions and profit share.
• Travel insurance contribution decreased by £0.9 million due to marketing investment.

Hazell said the Ageas rollout began in December with motor new business, with home new business following “this month” and renewals switching later in the year. He characterized the end-state as “a simple, more stable and predictable commission-based income stream.”

Outlook: further profit growth expected, continued deleveraging

Watkins said confidence is “high” for 2026/27, citing resilient customers, strong forward travel bookings, and a lower-risk insurance model following the Ageas transaction. He said Saga’s exposure to the Middle East is “minimal,” and that fuel and foreign exchange are “hedged well into 2027.”

For 2026/27, Watkins said the group expects:

• Further underlying PBT growth in Ocean Cruise, with no dry docks planned in the year.
• Continued growth in River Cruise load factors and per diems, alongside increased Holidays passenger numbers.
• Insurance Broking profitability “at least in line” with 2025/26 and above previous guidance as the Ageas partnership embeds.
• Finance costs “marginally lower” than 2025/26; effective blended pro forma rate expected at 7.6%.

Watkins said underlying profitability is expected to “take a further step forward” in 2026/27, with net debt and leverage continuing to decline. In Q&A on net debt bridge items, he clarified that the £86.9 million working capital inflow includes the £60 million Ageas payment, which Saga excluded from net debt because the cash is expected to unwind as the renewal book transfers later in the year. He also noted an additional £20 million is expected in the second half of the year, consistent with the partnership’s previously communicated £80 million total proceeds.

On capital allocation and leverage targets, Hazell said management is focused on continuing deleveraging and growth, but that “optionality opens up” as leverage falls, including potential future decisions on dividends and refinancing into a more efficient capital structure. Watkins added that Saga’s current guidance does not assume the reintroduction of dividends.

Hazell also discussed early progress in Saga’s savings partnership with NatWest, calling it a “big start” to longer-term growth in personal finance offerings. He said the partnership launched “properly in January” and has already taken over £200 million of deposits, while noting that profitability is expected to build in later years rather than immediately.

About Saga LON: SAGA

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

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