Saga ends first half as expected, raises £150m

Saga reported an underlying profit before tax of £15.9m for its first half on Thursday, down 69.9% year-on-year but in line with its expectations.

The London-listed firm said its loss before tax came in at £55.5m for the six months ended 31 July, which it put down to the £60m impairment of travel goodwill, reflecting the impact of Covid-19 on perceived travel industry risk.

Its leverage ratio, excluding cruise, was 3.6x, which the board described as being “well within” the 4.75x covenant level.

Saga said it had implemented a “robust response” to Covid-19, with all colleagues working from home and no interruption to business, while its travel businesses was reset for operation in a Covid-19 world.

Having taken “significant” actions to reduce operating costs, the board said it expected the cash burn for the travel businesses to be in the range of £6m to £8m per month in the second half of the year, including all operating and financing expenses.

Saga undertook a fully committed £150m capital raise with Sir Roger De Haan as cornerstone investor, which the board said reduced leverage and provided additional financial resources to operate through a prolonged Covid-19 disruption, and remain within banking covenants.

Its post-capital raise leverage ratio, excluding cruise, was expected to be 2.3x.

Saga also updated the market on its strategy, with the board saying it believed the company had a “fundamentally strong” proposition, with a target audience that is the “fastest growing and wealthiest” consumer segment in the UK.

Its new management team had developed a strategy to create a “refreshed, contemporary and confident” brand position, and to leverage the heritage of Saga with a data and digital-led approach to improve the customer experience.

The board said it was confident that the strategy would drive growth in revenues, profit and cash, return Saga to sustainable growth and restore significant shareholder value.

It said the strategy would be focussed on delivery under five key pillars, including a reset of people and culture, a “transformation” for data, digital and brand, “optimising” the businesses to create “exceptional experiences” for customers, lowering the cost base, and reducing debt.

Saga said that, to better position the business to deliver against the priorities, the £150m equity raise would enable the firm to reduce leverage and significantly reduce balance sheet risks.

In connection with the capital raise, the company said it intended to ask shareholders to approve a share consolidation.

Under the consolidation, every 15 ordinary shares would be consolidated into one consolidated share.

The consolidation was being undertaken because the current trading price of the ordinary shares was such that a small movement in the share price could result in a large percentage movement and “considerable” volatility, the board explained.

Thus, the purpose of the consolidation would be to try to establish a market price for the shares that was more appropriate than the market price at present.

“Saga has made significant progress in the first half,” said group chief executive officer Euan Sutherland.

“Through this year our priorities have been serving our customers and keeping colleagues safe during a period of major disruption and further strengthening our financial position.

“While taking decisive action to react to the Covid-19 outbreak, we have also continued to make progress in our businesses.”

Sutherland said that was “clearly shown” in insurance, with the success of the company’s three-year fixed-price product and its Covid-19 travel insurance product, and in cruise by the imminent arrival of its second new ship, Spirit of Adventure.

“We are excited about the opportunities ahead, whilst mindful of the fact that we face into challenges with the continuation of the Covid-19 pandemic.

“We have conducted a comprehensive review of strategy and have developed a plan which we believe will strengthen our brand, improve our focus on our customers, deliver exceptional experiences for them, and return both our insurance and travel businesses to growth.

“The capital raising, supported by Sir Roger De Haan's cornerstone investment, will allow us to build on our actions to date by enhancing our resilience and financial strength.”

Sutherland described Saga as a “proud British business”, which was “excited” about the opportunities ahead.

“With our strengthened financial position and a refreshed strategy, we expect to be well positioned to unlock all the potential in Saga, returning the business to sustainable growth and creating significant long-term value for all our investors.”

At 0954 BST, shares in Saga were down 5.24% at 15.19p.