Saga plc (SAGA) Earnings Call Transcript & Summary

Hello, and welcome to the Saga plc 2021 Interim Results Analyst and Investor Q&A. My name is Brinka, and I'll be the call's operator for today. There will be an opportunity for Q&A later in the call. [Operator Instructions] Now I would like to hand over to Euan Sutherland. Sir Euan, please go ahead.

Thank you very much. Good morning, everybody. Thank you for taking time to join me on today's Q&A call. I'm joined today by James Quin, our CFO. I'm sure you'll have seen our results statement and video this morning, but I'll do a quick run through of the first half highlights before handing over to questions. It's been a period of continued progress and delivery against the priorities that we laid out 12 months ago as we position the business to emerge stronger from the COVID pandemic. We have made continued progress across the group and have further strengthened Saga in financial, operational and strategic terms. The results are in line with expectations, driven by a robust performance in insurance and a successful return to cruise. Taking insurance, we delivered positive results across all key metrics, maintaining motor and home policy growth while improving margin and retention rates. We look forward to welcoming Steve Kingshott, our new insurance CEO, who joined us in November. As for travel, we've successfully proven our ability to reintroduce a safe and compelling cruise offer, including the launch of our new ship, Spirit of Adventure. While capacity restrictions remained on early sailings, and we were limited to cruising around Britain, we achieved a strong set of cruise metrics in the first half. We carried over 3,000 guests, with per diems at over GBP 294, while monthly burn costs were lower than guidance at GBP 5.9 million per month and very high customer satisfaction levels. Pleasingly, in the first half, customer demand was greater than our supply, demonstrating customer confidence in our proposition and as we return to international cruising at the beginning of half 2. A particular learning has been that shorter round Britain cruising has been a hugely popular product for first-time cruisers. And this is something that we will build into itinerary planning for the future. Across Saga, our strategic focus on delivering the required data, digital and brand transformation has continued, with all programs on track for delivery in half 2. These are incredibly important foundations in the resetting of our business for future growth. We've also continued to support our colleagues and the community across our business and have been shortlisted for the U.K.'s best mental health strategy at the National EBA Awards. All of this progress has been underpinned by a further strengthening of our financial position with the issuance of a new GBP 250 million bond, which has improved liquidity and provided greater flexibility for the business for today and for the future. Whilst we're still mindful that there is still some uncertainty around the COVID-19 pandemic, we are emerging stronger from the pandemic than we went in. And looking ahead, we plan to relaunch our brand and our business in the coming months. And I'm confident that we are well set to return Saga to sustainable growth and create significant long-term value for all shareholders in the future. So with that, I'm going to a pause and hand over to Q&A with the main business of this call. So happy to take your questions.

[Operator Instructions] We have the first question on the phone lines today from Nick Johnson of Numis.

I've got a few questions. I'll ask a couple first and then maybe come back later. But just to kick off, can you just say how much of tours revenue bookings for next year of GBP 109 million relates to postponed bookings from prior to COVID? And how much of that number is actual new bookings? And secondly, on insurance pricing, how does the rates being paid by 3-year fixed customers who took out those fixed price policies a few years ago? How does the rate that they're paying now compare to the current market rates? And will there be a sort of reset downwards of the rate for those customers once the 3-year fixed expire?

Great. Thanks, Nick. A couple of good questions to kick us off. Let me try and provide some color around the first one and perhaps pass over to James for more detail on 3-year fixed. Broadly, retention, as we reported before in both cruise and tour ops have been strong through the last 18 months. We've retained a lot of customer loyalty through that period. It's higher in cruise by 70% of retained bookings being pushed forward. It's around the 40%, 45% of bookings in general terms for 2 operations. So that will have filtered through and underpin the numbers that we are reporting in terms of the forward guidance for tours. Clearly, the relaxation of the restrictions around red, amber, green at the weekend is encouraging more first-time bookers to come back on to. Our tour operations business, we've seen a step up over the weekend of interest, but too early to call some of those very recent trends. But it's true to say that the numbers in 2022 are supported by loyal customers retaining their money with us, but more improved than on tours. Hope that helps to give you some color there. On the 3-year fixed, James, do you want to update on that?

Yes. Thanks, Nick. So on the 3-year fixed pricing, so as customers renew this year, so we haven't been through a full cycle of sort of the policies being renewed at the end of the 3-year period. So the people who are renewing now are essentially either first-year renewals or second-year renewals. And in terms of what they are paying, they're obviously paying the flat price that they started paying at the beginning of their products. So that is essentially -- what we haven't done is we haven't started cutting price on 3-year fixed at all. The -- in terms of retention, retention has been extremely good on 3-year fixed. So we're very pleased with that. I think the point you're making is what will they pay at renewal when those policies essentially have run the course of the 3-year fix, then they then hopefully buy a new policy. The price they will pay then will be the new business price since all of that will be post the market study. And obviously, post-market study, what you will pay in renewal will be exactly the same as what you would pay for a new business price. So that would be the price that they'll start paying from April next year on, which is when there's sort of the first lots of -- the first tranche, if you like, the 3-year fixed customers will start to review brand-new policies. Does that answer your question?

Yes. That's really helpful. Just I was wondering if you have a sense for -- obviously, most of the pricing in particular has moved quite a bit up and down since you started selling 3-year fixed price policies. Just wondering if you have a sense for where market pricing is now compared to where it was when customers first started taking out 3-year fixed price policies.

Yes, you're right. So pricing did go up a bit in the first year. So if you bought that policy in 2019, yes, the equivalent price would have probably gone up a bit, then it would have come down a bit as well. We have been reasonably cautious on our pricing of 3-year fixed because we're very conscious of the fact that we're writing a policy for 3 years, not for one year. So in terms of the sort of the current new business price you would get on 3-year fixed, we've only essentially take into account an assumption that you will get a lower price for 1-year rather than 3 years. So if, for example, the new business price was down 10%, we wouldn't put the 3-year price down 10%. We would put it down 1/3 of that. So what that -- what you would see therefore is that the new business pricing on 3-year fixed is a bit more stable than the pricing on 1-year policy. So what that also then means is that it shouldn't be quite such a big impact when those customers come to renew next year. Just the other point I'm going to make is obviously there are a lot of other considerations around pricing post-market study, particularly for those customers who switch from 1-year contracts under 3-year fixed, so that's probably going beyond the scope of your question.

[Operator Instructions] We now have the next question from Ben Cohen from Investec.

Yes. I guess there were 2 things that I wanted to ask. Firstly, how quickly do you think that you can get to your target load factors and start to get to the sort of target run rate of the GBP 40 million per ship per year given the various headwinds that you're facing? And I suppose the second question is really a similar question for tour. And maybe you can just remind us actually what you are trying to achieve in tour, because it would seem from the statement today that you're sort of maybe a little bit less clear in terms of really where you're going to get to with that division.

Thanks, Ben. So yes, I think this is a period of 2 halves as we look forward in the next couple of months. So I think what we're seeing is just a little bit longer to fully come out of the pandemic issues, largely impacted by national issues and government policy around everything from the booster jab, through to the clarity of the international travel requirements for passengers, which has really helped our cruise business because it's ex U.K. and door-to-door. So that's why we're seeing very strong demand and underpinning a faster start there and a slightly slower start in 2 operations. If you look ahead to the target load factors and then talk about the target GBP 40 million EBITDA per ship, we're very confident on both of those metrics coming through in the medium term. If you look at the first half of 2022 season, we're already at 80% load factor for the first half, 60% load factor for the entire year next year, looking 18 months ahead. We are carrying a little bit higher costs into that because our commitment has always been and will always be to fully protect all guests and crew on board. So we are continuing with our COVID safe protocols, everything from the VIP transport, from your house, to the ship, or an rather than mixing households, through to more protection around shore excursion, several medical teams, et cetera. We haven't had to use them all in force because we haven't had the instances of COVID on board that we -- that would fully test those, but it's a sensible precaution. So therefore, very confident in the load factor coming through in the beginning of next year, which would support the GBP 40 million EBITDA. We are carrying a little bit of costs into the next half of -- this second half, which we will be able to remove when it's sensible, probably through the early part of the first half of next year. So that then gives us more confidence that we have restated today that the GBP 40 million EBITDA per ship is more than doable. Of course, on top of that, we're seeing very healthy per diems. So the per diems in the business case, the GBP 14 million to GBP 40 million EBITDA per ship are lower than where we are today for the second half and lower than where we are seeing the numbers come in for next year. So there is an upside from very strong per diem through the cruise proposition. So for that, that gives you a bit of color on the confidence there. On tours yes, you're right. We completely reset that business within the period of the COVID hibernation. We're coming back out to the market with that now. We're confident in the new proposition. We are just waiting to see the full volume coming through. Much more encouraged by the bookings that we're seeing already for early '22. And as we said today, there, it's just taking our customers a few more weeks probably rather than significant months to get back into the confidence for international travel through international airports, et cetera. But confident in the reset of that business. Clearly, it's a much lower contributor to profitability than cruise.

The next question comes from Philip Crate of Atlanta Wealth.

A number of my questions have been answered. I've just got a few. The first is, I missed -- in terms of the load factor, did you say load factor for next year to full year was 60%? And the next question relates to cash burn. We note that the cash burn rate came in below your expectations. Would you expect to see that continue to decrease as load factors improve? And lastly, I wonder if you could provide some context in terms of CapEx. We've been looking at guidance -- sorry, CapEx numbers on Bloomberg. and it seems to be significantly higher than guidance. So I just wonder if you can confirm CapEx guidance for this year and next year.

Great. Happy to do that. So importantly, the 60% load factor for next year is where we are today. So clearly, we still have the rest of this year and all of next year to sell that load factor. So we would naturally expect that to rise as we're selling through cruises. Typically, we'll get to the end of January with about 80% of the following year sold. Where we're heading this year is to exceed that. So by the time we start effectively the next financial year, we would expect in a normal year to be 80% sold. We're well on track and indeed ahead of that forecast. So it's just a snapshot of where we are for future load factors as it looks today. Hope that helps. Cash flow, yes, very much more healthy position for that and CapEx as well. James, do you want to pick up on those...

Yes. The cash flow, cash flow is sort of a relevant metric when the ships are not operating. I think as they are operating, it sort of ceases to be meaningful because obviously, we would expect a quite positive and significantly positive cash flow. And in fact, even with load factor for the second half, we'd still be cash positive. So I'm not planning to talk about cash burn again unless we have to put the shifts into suspension mode again, which we don't think will happen. So I hope this is the last time I have to talk about cash burn. CapEx. I'm not sure what's on Bloomberg. Sometimes, I think people do include the ships in CapEx, which is one way of looking at it. Probably wouldn't be the way I would look at it. But the CapEx guidance, I'm not sure we've really given much guidance. But I would say that the CapEx that you see in our operating cash flow statement, which is the CapEx, and this doesn't include essentially the sort of ring-fences [ typically ], but there will be a small consumer of CapEx anyway. So the CapEx would probably be somewhere in the region of about GBP 20 million a year. So that's essentially the sort of group and insurance CapEx. In terms of cruise, there's a little bit of CapEx that you would expect in any one year. But certainly, nothing very much for the next few years given there's no dry docks or anything like that in the first few years for operation.

We now have a question from Alexander Evans of Credit Suisse.

Firstly, just on reserve releases. I think at the trading update, you suggested that they're going to remain sort of elevated for the first half of the year. But then you also, I think, in the presentation say that you've got a partial release of prudent provisions here from last year. So is that a sort of an indication that we expect them to remain? And then secondly, just on per diems, they're very strong and ahead of guidance. How sustainable do you view that in the current market?

Great. Thanks. I'll ask James to comment on the reserve releases point. I think we're pretty confident. We're very confident that the per diems are in the right place. It has been -- we haven't particularly targeted taking price. And we're certainly seeing that we've got strong demand and strong load factors coming through. We're seeing customers not trading on price at all. They are looking for reassurance, certainty, peace of mind. So we have seen that we've taken market share based on our commitment to those factors and for our customers feeling very willing to trade a little bit of price for those benefits. So therefore, we're confident into the outlook for per diems being ahead of plan in 2022, '23 season. And indeed, there's opportunity for us to further enhance our cruise offer as we fully come out of the pandemic. So we don't think it is something that is unsustainable. But clearly, value for money is still incredibly important to us. We feel we're providing that today and in future. And customers are clearly seeing that value at the current per diem. James, [indiscernible] do you want to quick update on?

Yes. So I mean you're absolutely right. I mean I think at the half year, I think I signaled that we'd expect some sort of elevated reserve releases for certainly this year. And in terms of what we see in the first half, that sort of continues to be the case in terms of sort of ongoing sort of reserve release emergence, principally from our large loss assumptions, which are quite conservative, certainly historically, very conservative. And then the other piece of it is that we were quite -- also quite prudent on how we book the 2020 accident year. So we essentially took a sort of prudent view around claim severity and other assumptions. Now 6 months on, claims trends have been pretty well behaved. And so we have released half of that provision, so that's about GBP 10 million, and that is included within the reserve releases in the first half. And then we've still got the other half settle in reserves as well. So for the second half, I think we'd probably expect to see something that looks a bit like the first half. We're still pretty conservatively reserved. The reserve releases will start to go down and they're definitely not going to continue at the current levels forever. We've probably still got a bit of favorable momentum there to take us into the first half of next year, I'd say. Does that help with those points, Alex?

We now have another question from Leopold Bian from Tresidor.

3 quick ones, if I may. Just the first one, given the cash balances you now have in the balance sheet, do you plan to accelerate the payments of the third portion of the cruise ship debt, the GBP 52 million, if I'm not mistaken? Then second question, is it fair to say on cruises that if there are no restrictions next year in terms of sailings, is your expectation that you'd be able to achieve the GBP 40 million EBITDA per ship already next year? And then the third question is just more -- it's just a broader question. The stock is down sort of, I think, 1/3 since June. At the same time, you restarted travel. I guess the question is, what is that telling you, and if you have any plans to do anything about that? That's it.

Great. Thank you. I'll ask James to talk about the significant cash balances we got and the ship debt. I guess that in the context of your question, if we are seeing a completely unrestricted year for cruising next year, there's no reason why we cannot get to the GBP 40 million EBITDA per ship. We're clearly at the mercy of governments changing their views. We're seeing a steadily improving position. We are sailing internationally. We're sailing very successfully internationally today. And we expect to week-on-week and month-on-month for that situation to improve. So as we said in previous answer to the question, we're carrying a little bit more of sensible precautionary costs to protect crew and guests on board today. But as restrictions ease and the situation improves, clearly, that cost pressure that temporarily got into the GBP 40 million reduces pretty quickly, too. So we're seeing positive on per diems, very positive on load factors. Those are the major 2 numbers that go into driving the GBP 40 million. So in an unrestricted year next year, yes, we're very confident in the cruise proposition. I guess the comment on the stock down 1/3, largely out of our control, to be honest, I think we're kind of at the mercy of headlines that are moving around, particularly in the travel space. I think I would encourage all investors to look at the fact of our proposition and where we are winning and emerging stronger from the pandemic. Naturally, I think you would guess that I would say that I think that undervalues us in terms of the potential coming out of this on a medium- to longer-term valuation point. We're certainly seeing the strength coming through in our insurance business. We are making the right investments around data, digital and brand. And those are coming through very strongly in the second half in front of customers. And our travel businesses are bouncing back pretty fast compared to competitors in both of those sectors. That's underpinned by our target customer group that has been least economically impacted by COVID that are feeling increasingly confident to travel internationally and have got the money to do so. So I guess it's very difficult for us to comment in detail on where the market is valuing us. But we think that it's undervalued today. On the cash balances and ship debt, James?

Yes. So we certainly could pay off those cash, the deferred elements on the ship debt. And to be honest, we're not paying very much interest on it. So actually, it's not like there's a major incentive to do so. It's something I think we might think about doing. But equally also, it's not as if the terms of the ship debt deferral are putting a lot of constraints on what we can or cannot do. So we -- I mean we can't pay a dividend until those deferred payments are made, so we wouldn't be paying a dividend anyway. So I think there's no immediate pressure on us to do that at all. It is probably something we might look at doing maybe next year. Does that help?

We have the next question from [ Johanne Carin ] from Mirabaud Asset Management.

I have a few questions, please. In terms of your 2024 bond, can you tell us when we should expect that those would start being redeemed? And also, how would that process occur? Do you expect there be as a tender, at par? Or will you do open market exercise? And the other -- my last question is just on your cash balance. When is under normal operating conditions the minimum amount of cash you would want on your balance sheet?

Right. James, do you want to take that?

Yes. So the remaining amount on the 2024 bond, we would expect to receive at par when it's potentially due for redemption. So that would probably be -- I think the point we could see that about [indiscernible] sort of early [ 2024 ]. I mean there's an opportunity to buy it back more cheaply before that, and I think that's something we might do. But that's in normal course of events, we just sort of let it run until redemption. In terms of the minimum amount of cash [indiscernible] I mean we clearly are not going to run [indiscernible] cash forever in the sense that it's a lot more than we need -- clearly, there are some sort of calls on that cash. Notably, I think, obviously, the point that we just made around the ship debt deferrals and the fact that we have the [ cash flow ] payments up at some point. I think at the moment, it's probably still a sensible policy for us to run with a lot of cash on the balance sheet to give ourselves a bit of extra security through the next 12 months given there are sort of less deal things that could happen around COVID that will be sensible for us to be protected from. And that's one of the reasons that we did the bond issue when we did it. So I think it's probably a question for us maybe in sort of 12 months' time as we start to obviously really put COVID behind us. And we also have to think about what's the size of the cash balances that we'll run with. But long term, we're not going to run with GBP 175 million of cash, that's it, for sure.

Just 2 follow-ups, one on the 2024 bonds. But under your agreement with the RCF, you must take out those bonds by 1 March of 2024, so that's ahead of maturity clearly. And given that, roughly your RCF becomes immediately due. So there is a clear agreement incentive for you to take out the bonds prior to maturity. So -- and the understanding is, within that, given that the banks have a desire for the bonds to be taken out earlier, I would assume like that there have been an incentive at the very least, for goodwill towards the bank to not wait until the actual last moment or last inquiry date to take out those bonds.

Yes. So you're right. Certainly, in the RCF, I mean, I think not surprisingly, I think the -- and quite reasonably. I think the banks were keen to essentially ensure that the duration of -- that there was an incentive for us to repay the bond. I mean, we absolutely intend to do it. I think it's just a practical question for us. So I think that if we start -- if we were to try and repay the bond early, that's when we start to get into having some penalties involved. I think it's from the 1st of February, I think, is the period -- or 1st of March, I can't remember which, is when we can redeem it without any penalty. So that would be sort of plan A. If there is an opportunity to redeem the bond a bit earlier, then I guess that's something we might do so. But certainly, by the way, we would redeem it at that point in March, if not [indiscernible].

Okay. Okay. So I can see it. So you'll use either the part call option, or potentially, you could just tender at par to note holders, and there will be no penalty to you. And as -- yes. And last thing, in terms of just a clarification on the minimum cash level. Should we look -- I guess, pre-COVID levels to give an indication of where we can kind of guesstimate where, let's say, the world returns to normal where cash could go?

Yes. I mean that's probably not an unreasonable one. I mean I think -- it certainly would be a sensible thing for us to have some cash on balance sheet at all times, probably supported by some level of credit facility as a backstop as well. So again, there's not a lot of -- it's not something I've given a lot of thought to, but probably somewhere in the region of GBP 50 million of cash would be a sort of sensible number on an ongoing basis.

We now have a follow-up question from Ben Cohen from Investec.

I just wanted to ask 2 things. Could you just give us a bit more detail about the underlying cost inflation that you see in both parts of the business? I guess, particularly on the insurance side in terms of claims trends as you see them and maybe as they've changed as COVID has moved behind. But then also, just where are we with cost pressures in tour and cruise and needing to match those? And also, I think you made some reference to staffing up and needing to stay ahead of that. And the second question was just on your readiness and your confidence ahead of the rule changes for the FCA. You're obviously not giving any kind of guidance as to the outlook. But maybe any color you could give in terms of your increased preparedness since you last update it.

Thanks, Ben. Well, we're trying to cover all the aspects of it, cost inflation and cost pressures. First, I guess, looking across the board, we've seen some shorter-term pressure during the summer around some cost inflation and pressure in our claims operation through the network. That network was suffering like the rest of the U.K. from the pandemic, right away through to shortages in staff. We've seen that in our call centers as well as we ramp up. Clearly, we were ramping up both travel businesses from a period of hibernation and rehiring colleagues, frontline colleagues. That's been more challenging than we were expecting due to the national job situation that is evident across the country. We're improving that now and largely getting back into where we need to be by the middle of October. That has caused a bit of wage inflation to be honest, but nothing that is particularly significant to the numbers. And then in travel area, the only other areas of cost inflation that we see is around our crew's food supply, where we've seen some inflation coming through where we need to take a bit of a hit because it's an all-inclusive offer. Again, not particularly significant for the medium term, but we're seeing some short-term pressures as the rest of the country is seeing, all within the bound of the guidance that we've set, so there's no need to adjust any numbers on that. Wider cost inflation across insurance, James, do you want to?

Yes. So I mean there is really a bit of underlying claims inflation. Nothing I think that is particularly newsworthy, but it's a fairly typical underlying inflation, probably across motor and home. Obviously, that's been very much obscured by the impacts of lockdown on most the claims frequency. So certainly, through the early part of this year, motor frequency was well down because of the various lockdowns we went through. Right now, and certainly in the last couple of months, I would say that although motor frequency is still a bit below where it was before the pandemic, it is more or less in line with pricing assumptions. So I think we, along with everybody else in the industry is making some allowance now for an ongoing lower level of claims frequency. And that's been passed on in pricing. So at the moment, pricing and claims costs are running more or less in line with each other. Obviously, something we're going to keep a close eye on in terms of what happens next.

So I think standing back from the scenarios that we presented previously when we've spoken from crews, through the tour ops, through to insurance, it's very much within the guidance that we had previously given. Nothing that we're seeing in terms of inflationary pressures going to kind of move that away from that guidance. In terms of FDA readiness, we're well prepared. We have hit all of the milestones that we need to hit through the regulatory product development, pricing, et cetera. We're further reinforcing the team. Clearly, Steve Kingshott is joining in about 6 weeks' time as CEO of insurance. We're also announcing today that Graham Wright is the lead pricing consultant from Willis Towers Watson is joining us as the Pricing Director for Insurance in December as well. So the team is well set. The teams has been working incredibly hard over the last year to be ready for the FCA market study. We're adding to the capability so we feel confident around the prospect of that. And as we said before, we think this is the right move for our customers long term. So nothing really to report in the lead up to that other than on plan.

[Operator Instructions] And we now have a question from Nick Johnson from Numis.

Just this one follow-up for me, please. Just on the footprint expansion in motor underwriting due to the model upgrade. Can you just give us a feel for what segments that might be in? And then perhaps how significant -- talk about how significant that is as a development in terms of future growth potential and the capability in insurance.

Yes. So I think we've made some really good progress in underwriting under Steve McGuinness coming into the business. About 9 months ago, we're trading that business very strongly back into policy growth there for the first time in quite a long time. Electric vehicles have been added to the book, and we're seeing successful uptick there. Number of other areas that we're looking to expand the footprint, but that's a positive indication of where we're moving with the footprint. James, anything else do you want to [indiscernible]?

Yes. I mean -- I think at the moment, it's probably as much about [ Accor's ] competitiveness versus the panel as opposed to necessarily opening up new types of business that the broking business would not have been competitive on previously. But it is also about that second piece as well. And so there is a piece there, which I think we -- I mean it's still early days in terms of what we could expand that into. So it's probably more a case of small steps at the moment in terms of that second piece of opening up a footprint expansion from a broking perspective as opposed to the sort of the competitiveness of [ Accor ] versus other people on the panel.

We have no questions registered at this time. [Operator Instructions] We now have a question from [ David Collin ] of [ Howei Investments ].

Can I just ask about debt? What does the Board of Saga think now is the right level of debt of the business? If you could answer that both inclusive and exclusive of the ships there, because I guess, going forward, any cash generated, you're just paying down debt. I'm curious what's the point raise of debt, I guess, think of capital allocation strategy.

Okay. So in terms of the right level of debt, I mean, I think the right level of debt would be probably quite a lot less than we had at the moment without as being facetious about it. But I mean, I think that, clearly, what we've done in the short term is take on more debt -- more gross debt, hasn't changed the net debt particularly in the interest of really giving ourselves more security over the next few years no matter really what happens with COVID and also to extend the maturity profile as well. So we've got no refinancing needs really at all for quite some time from now. The goal here clearly has to be then to reduce both gross and net debt. But -- and I think that this goal that we set ourselves of having debt-to-EBITDA of below 3.5x, I think, is -- I mean that is definitely a sort of minimum objective, I think, that we would have. And what we've said really, that puts a priority over other calls in terms of dividends as well. So I think minimum is to get it below 3.5x debt-to-EBITDA, including the cruise ships, obviously. And that will take us a few years to do. But I think once you're down to that level, then the balance sheet would look very different. I think there's obviously other questions that we will look at over time. But I think that would be the objective for now anyway. Does that help?

Would you say it's 3x or 3.5x?

So I think 3.5x would be the minimum that we want to get it down to, so below 3.5s. Now I think that you could argue, well, why not go further than that? And I think the question then obviously is one about -- I mean, the reality here is that cruise is an asset that, I think, it probably wouldn't make sense to try and run that on a totally debt-free basis. And so it's a business that can support a reasonable amount of debt now. You want to get the loan to values down to probably somewhere below 50%. But at that point, that seems like a reasonable place to be. And then if you look across the insurance business, you'd run with much lower levels of leverage, maybe 1x EBITDA or something like that. And if you put the 2 together, then you probably end up with somewhere around about 3x EBITDA as an ongoing level. I think the question then is, is that the right shape of the balance sheet for the future? It's a good question. It's probably not top of mind right now, but it's certainly something we'll be looking at in the next 18 months.

We have no further questions registered at this time. So I'll hand it back to the team.

Thank you very much. Thanks for joining the call. Just to remind people who are on the call, we are also hosting a retail shareholder call on Friday morning. So we're happy to take further questions then. And if there are any other follow-up questions, please feel free to call through. Thanks very much.

Thank you. This does conclude today's call. Thank you all again for joining. You can disconnect your lines.