Saga plc (SAGA) Earnings Call Transcript & Summary

Good morning, welcome to the Saga plc interim results investor presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to James Quin, CFO, and Euan Sutherland CEO. Good morning.

Good morning, everybody, and thank you for joining the call. It's incredibly important for us to be able to reach as many investors as possible, especially in a year, which is incredibly tough for the wider economy, and we are finding it tough as you've seen with our update yesterday. So let me just run through a few of the headlines first, I'll then hand over to James to give you some more financial detail. I'll come back briefly and talk about our longer-term strategy and leave plenty of time for questions because I know that's really where the kind of value add of these calls sits. So just moving on to the summary of the half year. We are -- we've had a good first half versus consensus. So we delivered a profit before tax of GBP 14 million, which was comfortably ahead of consensus. However, as we've looked into the second half, we have lowered our guidance for the full year PBT to a range of GBP 20 million to GBP 30 million, and we'll talk you through the main driver of that. If I run through the different aspects of the Saga business, Ocean Cruise is performing well in the first half and is predicted to continue to strengthen its position as we go into the second half with strong load factors, and stronger per diems than plan, which is offsetting some of the inflationary pressure that we've got in that business. We've just relaunched our travel business into a new digital proposition, which is far wider in capturing touring and stays and we've got very strong hopes for growth of that both in the second half of this year and into '23, '24. Saga Money, our Personal Finance business, is also in growth after the relaunch of our equity release product in May, 33% up year-on-year and driving strong growth into that new business with a new CEO driving further opportunity as we get into the '23, '24 year. Insurance has had a difficult time, and we'll spend probably quite a lot of time talking about the impacts of inflation, and the perfect storm of the FCA market study followed by a wider inflationary market and the impact on claims inflation. We have been disciplined in our approach to insurance, holding our margins in the first half stable and enhancing our product range in more detail to follow on that. We have looked forward to the goodwill within the insurance business based on our prediction for lower margins, which has driven a GBP 269 million goodwill write-off, which leaves us with a reported loss before tax of GBP 257.5 million. We have a good level of cash within the business, GBP 179 million of available cash, and that includes the resumption of the Ocean Cruise ship repayments. I'll come on and talk about the strategy after James has spoken. But in the first half, we've got good evidence that we are progressing with the elements of the plan that we presented back in March. On this slide, we just go into a little bit more detail on the key metrics, both of our Cruise and Travel businesses and of our insurance business. So firstly, Cruise and Travel on the left-hand side. The Ocean Cruise load factor for the first half was 66%. As we'll present later, that rises to 84% in the second half. We were impacted, if you can remember, back that far by COVID in the first 3 or 4 months of the financial year, and we had a canceled Caribbean Cruise that is within that number, too. Per diems on Ocean Cruise are incredibly strong. We have gone ahead of our 5-year plan and taken price very sensibly. It has not impacted load factor. And indeed, we've got a stronger position that has largely offset the inflationary impacts within Ocean Cruise. We're also fully hedged for all fuel and dollar transactions through 2023 and into 2024. Guest satisfaction has been strong and continues to grow as we have taken off all of the COVID protocols in our current cruises. And the balance between loyal customers and first-time cruisers is very healthy at around 60-40 rate for the first and second half. In holidays, as I've said, we've launched our new travel offer. It is digital, highly innovative, a much wider range, and we're seeing growth in that business. It's a good average revenue value, and we've got, as I said, lots of great innovation coming into that business, including a premium jet touring product, which is a 21-night private jet tour with a retail value of GBP 28,000 per person. What ensures a slightly more challenging picture as we look at it, while the total policies in force are up 3% in the first half the key areas of motor and home policy sales were down 8% as we held pricing discipline in what was a very challenging market in the first half. Our overall motor and home retention was good and strengthened at 83%, and our direct share came off a little bit as we balance the market to 50%. Our core operating ratio was 110%, reserve releases at GBP 18 million for the first half. James will go into more detail in the next few slides on those metrics, and I'll hand over to him.

Thank you, Euan. I'm going to spend a few minutes just giving you an overview of our results and the outlook for the second half of the year. I'll keep the study brief because I'm sure you may have seen the results presentation yesterday. Headline in terms of revenue is revenue is up 65%. That's clearly due to the resumption of travel from the Cruise business from June last year and then back to something a bit closer to normal conditions within the broader travel business as well. Underlying profit before tax has recovered from a loss of GBP 3 million last year to GBP 14 million this year. That is driven by GBP 40 million improvement in the travel business, which is again due to the business resuming trading from the middle of last year. There is obviously a significant difference between the underlying profit before tax and the actual profit before tax. That is almost entirely due to the write-down of goodwill, write-down of goodwill is a reflection of the margins that we expect in the insurance business, particularly the insurance brokering business, in terms of where we are post the regulatory reforms and also bearing in mind the current highly competitive environment. In terms of available operating cash flow, it does show a decline year-on-year. I think if you were to strip out some of the factors that boosted the prior year, there is an improvement, which reflects the improvements in the underlying profit before tax. Essentially, in the prior year, we had about GBP 37 million of working capital positive that were within the GBP 42 million of available operating cash flow, which did not recur this year. What this means is that with a level of continued operating cash inflow, net debt is coming down. As I'll come back to it, it is coming bit down probably a bit more slow than we'd anticipated. But relative to where we were a year ago, the debt is down GBP 19 million and relative to the start of the year, it's down about GBP 8 million. Moving on to the next slide. So what this shows is more of the detail behind our results. If you look at the insurance business, for all of the channels in insurance business, still very profitable with an underlying PBT for the first half of GBP 52 million compared to GBP 69 million in the prior year. The reduction here is almost all in the underwriting business, and that is principally a function of the fact that our current year combined ratio and the prior year was about 88%, and that was benefiting from reduced motor frequency during the period of lockdown in February and March 2021. Whereas this year, what we have seen is, in essence, the reversal of that relatively high or very high claims inflation coming through and that's impacting the current year loss ratio. We expect that current year combined ratio to stay pretty elevated. It's likely to be about the same in the second half as it is in the first half. And this is principally the reason or it is the reason why our guidance for the full year moved from GBP 35 million to GBP 50 million PBT number to GBP 20 million to GBP 30 million. If you look at the other pieces of the business in terms of cost, in terms of travel, they are all within what we anticipated in the original GBP 35 million to GBP 50 million guidance that we gave in July. Moving on to the Travel business. As I mentioned before, the Cruise and the travel operations are getting back to normal. We're obviously not abnormal or even close to normal in the first half. The Cruise business had a much improved -- the load factor in the Cruise business is improving. So 66% in the first half, we expect it to be around about 75% for the full year. So you can see from simple math there that it would be around 85% level for the second half, and that is getting back pretty close to normal. And then in River Cruise and in travel, we expect a very substantial recovery compared to where we were last year. Obviously, not yet back to full capacity, but we would very much expect these businesses to be back into profit next year. Moving on to the next slide, please. So what this shows you is the changes in net debt over the course of the first half. You can see here essentially GBP 31.5 million of operating cash inflow from essentially the operations of the company, excluding travel and excluding the financing costs. That's down year-on-year, mainly because of the positive working capital benefits in the insurance business in the prior year. In terms of the travel operations, we still have a small -- or we still have A cash injection into the River Cruise and Travel business. That should be a substantially declining feature of the ongoing results of the company. And as we get that business back into profit, we'd also expect that to start to translate back into dividends from the Travel business as well. Cruise is cash positive, and that's with and without the financing costs that -- however, we're approaching some way from full run rate earnings there. Just to give you a bit of a sense of that. So we've got about GBP 10 million on one-off costs this year relating to COVID protocols that we had in place in the first half of the year and due to the earn-through of Cruise discounts that we gave people during COVID. And then the difference between the 75% load factor and what we would expect on a more run rate basis of 85% or better, that's 10 percentage points. The profit sensitivity here is about GBP 2 million for every 1% change in load factor. So you can see that there's about GBP 30 million for a full year of impact -- negative impact on the Cruise business that we don't think are sustainable. In terms of then going back to the net debt for the full year -- or for the half year, as I said, we reduced net debt overall by GBP 8 million from the 31st of January to the 31st of July. And we're probably similar -- expect a similar reduction in the second half. If I then look a bit further beyond the current year on the next slide. So this chart shows you the net debt outlook for the business. And what I'm trying to do here is anticipate some of the questions that we can see coming up on the Q&A. So if you look at where we think we will be in July 2023, net debt would have reduced. It is probably fair to say the pace of the reduction is a bit slower than we'd anticipated, and that's a function of some of the challenges within the travel business. So obviously, the fact that the load factor is still under a degree of pressure or was under pressure during the first half of the year and then some of the impacts that we've seen on the insurance business as well. We do expect, obviously, that net debt will continue to reduce. In terms of what you see on this chart, obviously, we are now repaying of the ship debt. So we resumed paying ship debt in July, we've made 2 further payments since then. So for the full year, we will have repaid about GBP 45 million of the ship debt. And next year, we would anticipate repaying around GBP 60 million of ship debt. That is essentially the regular ship debt repayment plus also some of the catch-up that we need to make from having deferred some of the ship debt payments during COVID. What you then see obviously is that the net group debt above that, essentially, will be relatively stable or will be used to some extent to fund some of those ship debt payments. So you can -- and I'm very happy to take more questions around this as we go through the Q&A. So the point here is, I mean, I don't think -- we are very clear here that net debt will continue to reduce. We will get down to a total leverage of below 3.5x. It will, however, take longer than we had anticipated at the start of the year, and that is fundamentally a function of what we're seeing within the insurance business and our expectations for the insurance business in the next few years.

Great. Thank you, James. So just moving on to just a couple of slides on our longer-term vision and strategy before we open up for questions. Our 5-year vision is to become the largest, fastest-growing commercial network for all the people in the U.K. The keywords in there is -- are largest, fastest and commercial. This is a very commercially driven strategy, and we put key measures and new businesses in place to capture the opportunity that we've got there. It is based on us having the largest active pool of older people on our database today, and we have a significant investment into commercializing that and driving insightful data that will support and drive growth in all of our core businesses as well as our new businesses. Our core proposition for customers is captured in the top right-hand side of the slide, so E-cube equals R-square. This is the kind of mantra that we go inside the business, which is really creating exceptional experiences every day for our customers or stabilize our customers to return and to recommend us. Our key metric here is to supplement our largely once-a-year product set, with products and services that our customers can enjoy and consume every day or every week. So that's the kind of pivot that we're talking about over the next 5 years. On the next slide, this is a slide that we presented back in March. It's the core 3-step plan that we are pursuing. It's a commonsense plan, we believe the first step is to maximize what we've got today, maximizing our existing businesses of Cruise travel, money and insurance. Step 2 is addressing the level of debt that James talked about, and we will talk, I'm sure, more about that in the Q&A. And thirdly is to create the engaging digital super brand for all the people in the U.K. driven by a reperception of the brand, driven by commercializing and growing our overall database, driving exceptional insights and then driving those higher frequency, higher engagement businesses, Saga Media and Sage Village. On the next slide, we just wanted to try and help everybody on the pivot and the shape and the size of the profitability that will come through in the next 5 to 10 years. We show on the left-hand side where we are today. So this business is dominated by insurance. It is lower growth, higher regulation, lower frequency and lower customer engagement. By next year, we will evidence quite a shift in the engagement and PBT mix of the business while growing the profitability from the base that we have at the end of this year. So insurance becomes a smaller proportion of the business as Cruise in the kind of brighter blue drive significant benefit and gets both ships back on to the business plan of GBP 40 million EBITDA per ship, and we see growth coming through in our Travel business across Titan and Saga Holidays. In the 5-year period, that shape continues. So insurance will be less than 50% of our PBT at that point, that pie chart growing. So all elements growing, but the shape and breadth of what we do will have changed very significantly from where it is today. Underpinning that 5 years, we are building a lifetime value model driven by data, which allows us to drive next best actions into each customer interaction, drives cross-sell and more value. I view into 10 years' time, and I know that 10 years' time is a long way away, especially with the markets where it is today. I guess this just demonstrates the significant PBT capability of media innovation and the concept called Saga Village that we're in pilots working on today. So the group will look very different, both in terms of the size of profitability coming through all of those businesses and the shape of profitability across what is a more balanced and diversified set of Saga businesses. So where is the progress and evidence and proof points of that starting to come through in the first half and what are we doing in the second half. These are the kind of final 2 slides for me. Firstly, on brand, our customer Net Promoter Score has increased. It's grown by 3 percentage points year-on-year to 50. Our aim is to get it to 75. And within 5 years' time, we've made significant hires in the key areas. So Jerry has come in as the CEO of Saga Money. Mike is joining on Monday as our Chief Data Officer to grow the lifetime value and Aaron has joined as CEO of our media business, having been a very senior player in Future plc before that. Colleague engagement has continued to grow, and it's now 8 out of 10, starting at 6.5 a couple of years ago. We are really driving cross-sell across all of our businesses, two examples here. One is River Cruise to Ocean Cruise and vice versa. And one is motor insurance to home insurance. It shows progress year-on-year, but also shows significant opportunity to connect a multiproduct holdings into the same customer. Our digital e-mail magazine has grown very significantly. So now over 500,000 readers and growing. We expect that to hit 800,000 readers every week by the end of the year, and there is a significant monetization opportunity within that, which Aaron and the media team are picking up with the rest of their strategy. And we're opening up, having repositioned the brand to more customers. So our consent and reconsent for customers being open for us to talk about more offers and deals has increased by more than 350% year-on-year, which is a good lead indicator to growing a valuable and worthwhile database. In the second half, on the next slide, just a couple of headlines in terms of continued progress. We expect to land a strong second half in Ocean Cruise with load factor 84% and the per diems at least GBP 320, which are both ahead of plan. Travel is starting to grow again, and we've got a new digital proposition, which we talked about yesterday. Home Insurance continues to improve its technical capability with a new pricing system landing and we've got growth in Saga Money, in Saga Media and also in the database and insight. We've been very careful to make sure that our frontline colleagues are also rewarded in what is a very difficult household budget environment with inflation. So on average, our frontline colleagues have had a pay review worth, on average, 11% this year to help them with the inflation rate environment. In January, we'll be giving a trading update, but we'll also be doing a capital markets event, which will spotlight the media, money and data strategy. So a lot more detail in a few months on those new parts of the Saga business. So in conclusion, really, before we move across into questions and answer, just on the next slide. We expect to see, our operating performance improved from here into 2023, 2024, significant growth from Saga Cruise, travel and money while we stabilize the insurance performance, and we're all about scaling up our new business opportunities in that period. And while they won't have significant PBT impact in the next couple of years, they will have significant audience impact. We are absolutely focused on our long-term plan, our strategy pivot to become a marketing content and distribution business. I guess I'll pause at that point and come back at the end of the Q&A with some closing comments, but I think it's probably best to give as much time moving over to the questions that we brought in.

So fantastic, you and James. Thank you indeed for your presentation. [Operator Instructions] Just want the team take a few moments to review those questions submitted today, I'd just like to remind you the recording of this presentation, along with the copies of slides and the published Q&A can be accessed by your investor dashboard. Investors have submitted a number of questions, both pre-submitted and during today's event. I'd now like to hand over to Emily Roalfe, Head of Investor Relations, to host the Q&A sessions. Emily, if I may, just ask you to read out the question where appropriate to do so and just direct to the same.

Brilliant. Thank you, Paul. If we start with the preregistered questions. The first one is, has there been any impact from low water levels on river cruising in 2022?

Yes, there has. We saw an impact on the Rhine and on the Danube from low water levels. It was an extraordinary summer with the heat that we all experienced that did impact, and I think it was on the BBC News, et cetera. So we've had impacts, particularly in August. We were able to run all of our river cruises. We did have to look at different sections of the river and to work operationally around it, there was a small impact to our revenue and profitability, but it was managed within that. The other impact on River Cruise has been the lower Danube obviously, out into the Black Sea, close to Ukraine. We have still operated all of our river cruise ships on those itineraries, but we've had to again adjust the operation to allow guests to go down to a largely birdwatching area at the bottom in the Danube. So in total, River Cruise is actually a growing business. It's now at a quality level aligned to our ocean business. The per diems have risen significantly. The bookings are now rising for '23, '24, but it was a particularly extraordinary set of challenges due to the climate in August, which we got around reasonably well, actually, I think, minimized the PBT impact.

Thanks, Euan. Does the leadership have a response to a huge raise against the director remuneration policy and do they have any plans to align their goals and performance incentive package rather than creating additional transformation ranges, which are on top?

So that's an interesting question. Actually, we got 80% vote for the remuneration report and the new incentive package for the business. The incentive package for the business completely aligns every colleague from the top to the bottom, the bottom to the top with investor interests. It is a very simple scheme, which basically only rewards anyone in the organization if share price target is hit, the minimum share price target for that is GBP 6. So it's incredibly stretching from where the share price is today. That has landed really well in the business, and everybody is absolutely focused on creating shareholder value. Clearly, short term, right now, the share price is under extreme pressure. That makes us feel deeply uncomfortable. And I can assure you that it's the absolute focus of every individual within the business to grow the share price while delivering exceptional experiences for our customers. But just to come back to the key points there, the REM report and the incentive package had an 80% approval and it completely aligns us to shareholders. It's a very, very simple scheme.

Thank you. Where has the market no belief in the current group's growing strategy plan, the cost and daily drop in share price to almost all-time lows is truly painful as a shareholder.

I'm a shareholder too, and it is truly painful. I agree with you. This is not where we wanted to be. As we talked about in this presentation and all aspects of the business are actually on plan apart from the inflation impact into the underwriting business. We were aiming for this update at the half year to be a relatively no news update as we return to profitability. I mean the underlying element is that we are returning to profitability, albeit a lower guidance than we put out in June. I think we've got to segregate away from the long-term strategy versus the current pressures that the wider economy and the insurance sector is suffering. We're in a I guess, a perfect storm in general insurance right now with the impact of the FCA market study landing across the sector in the last 6 months with an extraordinary period of claims inflation built on supply chain issues that were there post pandemic. So we expect to trade through that. We expect the mix of the business as we've shown to move away from those PBT drags in '23, '24. The impact of the underwriter in our profit for next year is significantly less, and we're going to see growth in cruise and in travel and in money next year, which I would estimate we get back up to pretty much consensus view of profitability next year. Totally agree that it's incredibly tough looking at the market right now. It's not just us, I guess, but we would want to be moving ahead of that. Unfortunately, we're not in that position today, but I still believe the strategy is right and that we'll move towards that new shape of growth within the business as we go through '23, '24.

Thank you. The next question for you, Euan. What made you believe that the share price of the business should be many multiples of its current level at the last investor presentation? And can you explain why since then the prices went down by 50%, has something fundamentally changed? Or was -- or were you just completely wrong about the state of the business at the time?

So I guess I probably answered that in the last question. It's exactly the same set of impacts. We have only had one impact since we updated last, which was the inflation impact into the underwriter. Everything else is on plan. I still believe and the management team here still believes very strongly that the plans that we've got in our 3-step plan will deliver shareholder value. It is very difficult to evidence that today with the wider market that we've got, but we will stick to that plan and deliver that value. So I don't believe that it was an inaccurate statement at the time. I still believe it's the right statement and that we will add the value as we go through '23, '24 and beyond.

Why is the business adding more labor cost by decentralizing group functions having only recently centralized to reduce costs?

So there's a couple of periods here. As we went through COVID or as the new team arrived and we went through COVID, there was a need to pull the organization together into one direction, which we did pretty successfully. Over that period of time, we reduced the headcount from about -- total headcount from about 4,000 colleagues down to 2,600, where it sits today. So there has been a significant reduction in headcount in that period of time. Now we've got to the right level of focus in each business. It is right for each of those businesses with different specialisms to be run separately with a small group function that pulls everything together and consolidates the strategy. So that's what we've done. We believe that, that is the best way and the most agile way forward to maximize the existing businesses. And therefore, they are tangible for their P&L and their delivery into the 5-year plan. It's a set of very different businesses pulled together under one brand. So insurance is a very different business to running a sets of cruise ships or a quality business. So we believe that the evolution of the headcount and the evolution of the organization and operating model is right for where the business is today and will underpin the growth that we've got in the plan. Hopefully that helped.

So hopping through the preregistered questions. The next one is how does underwriting core performance compared to year-to-date market average in both long and near term?

It's a good question. Perhaps, James, do you want to come in and answer that one as I've been answering quite a few other ones?

Yes. I mean it's a bit hard for us to get a full market sensitivity that we can compare what we are booking to some of the listed companies. Even there, it's pretty hard to, again, take a precise view. So for example, if I were to compare our current year combined ratio to the guideline, it is higher, much higher. I don't think -- but equally, I think there's differences in terms of how much margin companies are booking. So a comparison -- a true comparison, I think, is very hard to make. There are sort of external consultants whose view is that the combined ratio for the motor industry is going to be somewhere around about 115 this year. So that would probably be slightly adverse. I mean, you could probably take some of those with a pinch of salt. But I mean I wouldn't say that we are going to be markedly outside of what industry averages would be here. Clearly, it is very much an industry impact. And absolutely, I think there is the expectation. This is a cyclical business, and we are in a cyclical downturn. I don't know -- I would stress to say whether we're at the cyclical bottom, but there's no question that there's a need for significant price increases across the board.

What impact will weak sterling have on your travel profitability? And how has this been factored into full year earnings projections?

James, just probably this one for you as well.

Yes. So I don't think it's going to have very much impact on this year. I mean we are hedged for this year. In terms of the impact on 2023. So we are -- there is -- I mean, some of our cruise costs are in dollars, so we pay most of the cruise in dollars and the oil price costs are also in dollars. We are hedged for next year at a rate of about $1.22. And we've also forward-bought oil requirements as well. We did that in the last few months when the price had dropped following the spike earlier this year. So I don't think there's a dramatic impact there. Obviously, it does mean that for our customers traveling to outside of Europe, that there is a material increase in what the cost of those holidays would be. The impact that will have, I guess, it's very hard for us to say right now. So that's probably where there might be some impact next year.

So just to build on that, we are obviously very sensitive to consumer demand daily looking at our cruise and holidays businesses. As I've talked about briefly in the presentation, we've repositioned both of those businesses to be a more premium set of offers. We are not seeing at the moment, an impact on demand. I think the other side of this coin in terms of sterling and inflation is interest rates going up, net, our customers are probably beneficiaries of that based on their retirement savings. And while clearly, everybody is worried about cost of living and the impact of sterling coming through in what is a rapidly changing environment, there is also the benefit of the interest rates to our customers. As we look at cruise going into next year, we have moved our per diem prices up, and it has had no impact on load factor. So we are premiumizing that product. We're adding more value into it, but we are also taking a higher retail revenue price out of that. There is a dynamic happening with our holidays and cruise customers post pandemic, which we're seeing, which is saying that customers are looking for more holidays of a lifetime, if you want to put a label on it, which is I'm going to spend more of my pent-up saved money in the next few years. And we have definitely seen evidence of that. So the product that I touched on very briefly on this, and if you watched the presentation yesterday, John talked about which was, I guess, a flagship test for us was the premium private jet touring product. This is 21 days, is 65 people in a private jet experience, private airports, 5 star, all the way through it, Europe, India, and other continents, it's GBP 28,000 per person, and that is 70% sold after 8 weeks. We're looking to add more itineraries, the spice root and others into 2023. I guess it's just an evidence of proof point of some of the other dynamics that are playing out in our consumer base. So hopefully, that's helpful color.

Thank you. The next preregistered item isn't a question as such. But one investor felt that the outlook statement within the announcement yesterday had a great deal of positivity and any short reference to the PBT decrease. Perhaps you have a comment on that?

Yes. Well, I mean, look, we're always trying to make our RNS as an all statements as plain English and as clear and transparent as we can. So we try to evidence and reference the position on the PBT outlook, the stats profit position as clearly as possible. That, I think, is on the first page and is referenced in [indiscernible] too. So always take suggestions for improving the clarity of that. I know that some people go straight to one section and don't look at the others, without trying to make the statements doubly long by repeating everything in every section, take the point and will continue to be as transparent and as clear as possible.

Can you please confirm your intention to redeem the 2024 bond maturity of balance sheet cash?

Yes, but it's still our intention, as GBP 180 million of cash on the balance sheet today, that's still very much our plan. And we've still got 18 months to run until that debt maturity comes up.

Thank you. The final preregistered question before we move on to the live ones. Is given that the 2024 bonds trade at materially below par, why not repurchase at least a portion in the open market?

Yes, this came up yesterday. James, do you want to take that one up? Because that was one you handled yesterday too.

Yes. So I mean the question here is whether the -- I mean, I agree the -- if you go about the traded price or the screen price of these bonds. And it looks like we could snap them up at an actually guard them. I think there is very little liquidity in our bonds. And certainly, the indications we've had when we've had a discussion with some of our bondholders about this has been whether they would be willing to sell anything like the screen price here. And the answer that's unequivocally is no. There could be something to be done here. I think it's probably in the opportunistic camp. It could save us a bit of money, but it's not going to transform our liquidity position. It can give us a more game. It is something we might do. But as I say, it's probably not the first priority we have right now.

Thanks, James. [ Tim Arrow ] has 3 questions. His first is, in the base case is going concern statement, does the group have available cash in excess of GBP 150 million at 31 of March 2024?

This one is you can probably judge to some extent based on what you can see from the net debt chart that we have. That net debt chart is a -- it is aligned with what we expect in terms of our scenario. I think it's probably fair to say in our base case, we would probably have that lot of cash, but I think there is also level of working capital need in the business that we have in addition to that. So it is probably fair to say, it would be somewhat on the tight side of things at that point. And that is why, clearly, we are looking at what our options are with regards to the payment of the bond in 2024.

Thanks, James. So second question is, is it correct that based on your guidance, available cash will be around GBP 160 million at 31st of January 2023?

So yes, you can also infer that from the chart. And yes, that sounds about right. I mean, I think predicting cash is a slightly dangerous exercise you do get working capital movements that go forward against you. But yes, it would probably be somewhere in that order of magnitude.

A question from Stuart [indiscernible] The rebranding effort seems to have been well delivered and one cannot have missed the strong advertising campaign or TV, radio, et cetera. On advertising suites, the content is good but recent replies from customers indicate delays in the call center. But there's also been referenced in results, what is being done to counter this and when you expect to see a difference?

Yes, that's a great question. We are driving more demand into the pipe, and we've got like lots of other businesses pressure on headcount recruitment post-pandemic. We've had a particularly challenging time with our call centers, especially in Travel over the summer driven by the number of airline changes. So just to give you a sense of the -- or the scale of that given the cancellations from British Airways, EasyJet and others, we've had up to 9x the normal expected full volume into our call centers at times and at a time where we are still recruiting the right level of colleagues into the call center operations. So it's been a very stressed time. And that is starting to come down now. Actually, it was getting into a much better place on all of our metrics through September. Cruise is now back up to delivering 97% of the calls answered within 20 seconds. Holidays will be there by the end of October. Insurance for different reasons under pressure, but again, will be fully resolved as we go through the next couple of weeks. The next wave of the brand campaign, which targets the holidays relaunch hits down beginning of January. So we'll be fully resourced for that. So I think we've got a consideration challenge, which we're getting on top of with the brand activity. We've got a conversion challenge, which is a good thing to have, given that we've got increasing calls looking for our products and that should be in place as we go through the next month. But yes, it has been a tough summer especially within the travel businesses. And again, one of those impacts that we couldn't have anticipated really as it landed live with us and other travel operators.

Thank you. Euan. third question is we referred we'll need to arrange additional funding by 31st of January 2023 in order to be able to make a going concern statement at the year-end under its reasonable worst-case scenario?

Yes. So I mean, if you read our going concern statement, I mean we're obviously flagging the fact that within typical going concern analysis you look 18 months out from the balance sheet date. It obviously takes us to the end of March 2024. Obviously, I think when we phrase that, I mean, I think you can -- there is obviously a reason we phrase these things as we do, and we're not trying to be acute. We are being very factual here. I think in terms of where we -- the statement will make at the end of March, I think will obviously reflect the fact that, that 18-month period will take us beyond the repayment of the bond. And I think going back to, I guess, my previous question, it is a sensible thing for us to do to look at our options to make sure that we will be able to repay that bond from available cash and to go back to the previous point, yes, there are probably things that we would look to do to make sure that, that happens.

The next question is from [indiscernible] who asks, in data monitoring, can we assume the cohort of first-time buyers of cruise, et cetera, or monitoring for a peak business. And are there data points or incentive you can reference to ensure they come back?

Yes, we do that. And we monitor that incredibly closely now. We have a very good return rate of what our first-time buyers' behavior is. So we tend to get customers in. They're not new to cruising per se. So we are a classic switching brand because we start at age 50. Everybody's had a holiday before age 50, probably taken a cruise before they come into our products too. So we're actually very adept at managing the pipeline of customers in it from first-time buyers and bookers into repeat customers. We have a very strong conversion rate in cruise of that. We've added a particular type of cruise into our itinerary portfolio, which are shorter, 7 days, 6 and 7-day Cruises, they tend to be around the U.K. which we found are particularly good entry points for cruising customers to make the first switch. When that happens, we tend to have a metric that within 3 or 4 days on the cruise, we're already being able to see positive attributes in terms of customer comments and in the comments that they leave on the NPS and customer service score at the end of the cruise, which indicates that they will rebook. We then manage them through the pipeline. So yes, it's a good part of the business. That part of our CRM system works well.

So the next question is does the same cruise inventory levels cause customer postponement?

I'm not quite sure of what you mean by that. So in terms of us reporting our load factor is that...

How would we assume that?

Yes. So no, it doesn't. I mean, I think we've got -- we've had cruises in the last month, which have been 95%, 97% full and with very healthy per diems that go alongside that. I don't think that we've got any indication that any publication of load factors or anything else is causing customers to not book or whatever. So I don't think that's the case.

Thank you. We've had a series of questions from Yousef [indiscernible] His first is, could you please provide more color on why you're shifting away now from the 3-year fixed product?

Yes. So perhaps we can probably answer this. Between us, James can come in just to keep your questions balance here. 3-year fixed has been a great product for us. It is -- it taps into our customers' need and want for certainty. And in the last 3 years or so, we've had a particular success with launching that product. Given the pricing in the general insurance market today, that product for new customers is more expensive. And so therefore, that has been under pressure in terms of new business sales. Retention, however, within a 3-year fixed is very strong. So we are retaining customers on their 3-year fixed policies when they come up for the 3-year renewal. So it's -- there is a mix of products that we're offering. Within insurance, we have been adept and quick at changing the product portfolio. We've launched a new lower-priced standard product as the cost of living crisis hit U.K. We've launched an electric vehicle product and a multicar product as well. So we are driving innovation into the mix of our motor insurance products in particular. James, is there anything else you wanted to add on 3-year fixed?

No, not usually. I mean I think the challenge is -- it's not so much us moving away from it. It's more the fact that in the current environment, it's just not a competitive product. So we need other things to offer.

The next question from Yousef is what are the assumptions for claims inflation and your existing vertical motor policies.

James, do you want to pick that one up?

Yes. So we've set we think inflation is probably about 13%. And we also think that the trajectory here is probably for it to increase rather than decrease in the short term before it starts to come down again. And so that's obviously one of the reasons why we have changed the full year guidance from -- down to the GBP 20 million to GBP 30 million.

Next question is, I could not reconcile the statement in your report that major and home new business reduced 52% and 21%, respectively in HY '22. Do you disclose the new business figures?

James, you want to pick on.

Yes. So the point here is that new business sales are actually down quite substantially, but renewals are actually up. So if you combine the 2, that combines the down 8%.

Final question from Yousef is, it does not seem that your positioning with the over 50s that you claim is being more out in the sales of new business for insurance. What evidence can you provide that you capture the value of your over 50 database?

Yes. I think there's particular issues in the pricing post-market study of new business within motor and to a certain extent, home insurance this year. I think we are capturing growing consents. So that's customers who are saying, yes, I like the brand. Yes, I understand your proposition and please market to me, that consent capture is up 350%. We'll have added 3 million more product consent to our database by the end of the year. So I think that's a fairly significant proof point of that. We could also point to the fact that our holidays and touring business and cruise business is also growing as is our equity release business. So I think the propositions that we're putting forward based on the database and based on our segmentation of over 50s is working. I think there is a particular competitive pressure on motor and home insurance post market study. So I think we have to separate probably both of those points.

Paul has 2 questions. The first of which is, what percentage of cruise customers cancel after paying a deposit and what's the trend?

So cancellations are significantly down year-on-year. That's -- it's kind of -- it was an artificial cancellation period when we restarted because we were still under COVID rules, if you like, and there was still a lot of COVID around. So the cancellations were higher from restart last summer through to probably halfway into the first half of this year due to COVID mainly. So the increase, if you like, was due to COVID. I'll tell you the other reasons in a second. So there are 2 sources of that. One is some of these booked on our cruise gets COVID and therefore, knows they can't come on the cruise. Secondly, people would have COVID, not realize that they've got COVID and because we were testing them pre-departure, we would turn them around at the port. So we were kind of forcing a cancellation to keep their ships COVID free. That gave quite a significant increase in the cancellation rates. Typically, what we find is it will be a cancellation due to health issues. Most of our cruise guests will book up to 18 months in advance. And of course, life changes, as you get towards a cruise departure. It tends to be a pretty low cancellation rate. We've got a very high loyalty customer base who are just very keen to cruise. So we're coming back down to that normal level. And also in the Cruise business, we're stripping out all the cost of and all of the COVID testing, separate car service, extra medical teams and everything else as we're into a more normal post-COVID environment. Hopefully, that helps give some color around the cancellations.

Paul's second question is, you talked cross-selling river cruises to ocean customers and vice versa. But how many increases per annum will target customer take?

Yes. So on the data on wider holidays is that, on average, our customer group, when they retire, take about 3.3 holidays a year. That can be of different formats. One of those could be cruising and other ones could be a tour or it could be a straight holiday or it could be a weekend away. So that's the kind of macro stats. We've got customers on our Ocean Cruise, who do back-to-back cruising, who could be cruising for 8 to 10 weeks constantly with us. And those itineraries will come in and out of the U.K. They stay on board. So we call them back-to-back customers. Traditionally, the cross-sell between ocean and rivers has been incredibly low. It was handled in different silos in the business in the past. It's now handled by the same team. The service levels on board are exactly the same, going into '23, '24. So if you go in an ocean cruise and you get the 5-star experience, you go on a river cruise, it's exactly the same. So there is an opportunity for the same customer who likes the same product and service to intersperse bigger ocean purchases with shorter and smaller river purchases. That's our intent. So the team are now really into a cross-selling mindset, so advertising those cruises on ocean and on river to the -- to the other process and managing the database, the pipeline, the customer journeys. We'd like to think that's our best customers will take 1 or 2 of each of those products each year, and there's certainly an opportunity to do that.

Thank you. Will [indiscernible] have a question. When can we expect significant director purchases, given the claim that the share price will increase by 500% over the next 5 years? Showing that was personal investment from the Board, and will go some way to providing credibility for outlandish given the performance since then.

Yes. Well, James and I both purchased very significant share holdings previously. So we are invested with our own money, not just with incentive or deferred bonuses. Roger, our Chairman, bought significantly. I think it was last November. Clearly, we absolutely believe that the share price will go up. So we will continue to look at making those types of purchases when we can.

Thank you. Stuart [indiscernible] has clarified what he meant by his earlier question, it says that, for instance, if the custom sees 186 standards being covered to cruise next year, for example, might that for some passengers to lack a media state of book.

The short answer is no. I don't think that we're seeing any of that in the evidence. We have a reasonably sophisticated CRM marketing campaign that targets customers within our database, and we've got a good inflow of new customers. So we don't see that as a has a barrier, but thank you for clarifying. Sorry, I didn't understand.

Thank you very much. There are no questions from online.

Fantastic, Emily. Thank you very much indeed. Thank you to you all for covering every single question that we've had through from investors. Of course, if there are any further questions, the team will be able to review those. And we publish -- questions and responses will be published on the Investment Company platform. Euan, you touched on it earlier on, but if I may just ask you just for a few closing comments before we redirect the attendees to give you some feedback.

Great. Thank you very much, everybody. Thank you for joining the call, and thank you for your questions. I hope we gave enough time for everyone to have their questions answered. I think, as Emily said, we've answered every question that everybody puts to us, it is incredibly important for us to get your questions. And we're also happy to meet or to answer questions outside the session too. I fully understand the frustration on the share price today. The team and I are working night and day to deliver the plan and to improve value for shareholders. This will come through. The pivot will work. It clearly will take a bit of time to do that. But there is significant value both in our businesses and in the Saga brand. But thank you for making the time to join the call today.

That's fantastic. Thank you very much, you and James, Emily. Thank you for updating us today. Can I please ask investors not to close the session to be automatically redirected to provide your feedback in order that management team can better understand your views and expectations. This will only take a few moments to complete the most greatly valued by the company. On behalf of the management team at Saga plc, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you, and good morning to you all.