Saga plc ($SAGA)

Good morning, and welcome to the Saga plc preliminary results for the year ended 31st of January 2026 presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself, however, the company can review questions submitted today, and publish responses where appropriate to do so. Before we begin, we would just like to submit the following poll. I'd now like to hand over to Mike Hazell, CEO. Good morning, sir.

Good morning, everyone, and welcome to Saga's results for the year ended 31st of January 2026. My name is Mike Hazell. I'm the Group CEO, and I'm joined today by our Group CFO, Mark Watkins. I'll start with a quick overview of the year, highlighting the huge progress that we've made. Mark will then talk you through our financial results, and I'll then provide an update on our strategy and the significant progress we are making before turning to questions. As a reminder, for those of you that haven't seen our more detailed [ city ] presentation, that is available on our website together with our full set of results. This has been a transformational year for Saga, underpinned by strong full year results and a performance that was ahead of expectations. We completed our refinancing in February last year, putting in place a new 2031 corporate debt facility. This has materially enhanced the group's liquidity position, significantly increased covenant headroom and provided funding certainty as we execute our growth plans. We restructured our insurance business through the sale of AICL, our in-house underwriter and the launch of our Ageas partnership. We now have a less complex insurance business where we no longer take any underwriting risk and benefit from a more predictable income stream. Travel has now become our largest and fastest-growing driver of profits. To better support this growth, we consolidated our previously separate Travel leadership teams into one customer-centric operation. As we simplify our approach to business, we are better able to place our full attention and focus on customer with brand at the heart of our decision-making. Importantly, we've not allowed these changes to get in the way of our continued focus on trading and performance. We've grown each of our core businesses with revenues and profits up across the group and net debt reducing significantly. The progress we've made this year is clear evidence that our plans are working. As we continue to deliver on those plans, we now have even greater confidence with regard to the GBP 100 million profit target that we laid out in April last year. This slide shows more detail on the strong performance that we've delivered right across the group. As you can see, each of our core businesses have had a very successful year, delivering significant growth in revenue and profit. At the same time, we've been working to support future growth and further strengthening our brand with the launch of new innovative products such as our new savings partnership with NatWest and our brilliant new podcast, Experience is Everything. This is very much, therefore, a group-wide, indeed brand-wide turnaround. Now I'll hand you to Mark to go through our financial results in more detail.

Thanks, Mike. Good morning, everyone. It's a pleasure to be here today to present such a strong set of numbers. I'll spend the next few minutes covering the details of the financial results before covering the outlook for the year 2026-'27. Saga has exceeded our guidance, delivering a strong financial performance, driven by the trading performance of our travel businesses and insurance broking. Underlying revenue, which excludes some accounting adjustments and one-off items, increased 11% on the prior period. Underlying PBT from continuing operations of GBP 44.2 million is ahead of our expectations and 19% ahead of the prior year. This was largely driven by the continued growth in our Travel businesses and an improved performance in Insurance Broking, offset by higher finance costs associated with the successful refinancing at the beginning of last year. The group continued to be highly cash generative with available operating cash flow of GBP 205.9 million in the period, an 88% increase, supported by stronger cash generation in Ocean Cruise and the GBP 60 million receipt from Ageas, following the launch of the insurance partnership. A strategic priority for the group is to reduce net debt, and this accelerated this year. At the 31st of January, net debt was GBP 499.5 million, GBP 93.3 million lower than last year. The lower net debt and 16% growth in trading EBITDA drove a significant reduction in leverage with our ratio now at 3.7x compared with 4.4x at the same point in the prior year. I'll now focus on headline underlying profit contributions from each of our business units. Our Travel business continue to generate strong customer demand, delivering GBP 87.2 million of underlying PBT, a 37% increase on the year before. Our Cruise business performed exceptionally well. Underlying PBT of GBP 67.3 million was 38% higher than the prior period, driven by the strong trading performance in load factors and per diems alongside ongoing cost discipline. In River Cruise, it's a similar story with growing per diems with load factors consistent with the prior year as we introduced Spirit of the Moselle in July 2025. And Holidays also grew with passenger numbers up 11%. Looking ahead into '26, '27, all of our Travel businesses show strong growth in forward bookings, particularly Ocean and River Cruise. Our Insurance Broking business also performed well. Performance was ahead of our expectations with underlying PBT growing to GBP 16.9 million. The growth in profits was also achieved alongside growth in policy volumes for 3 of our 4 key products, with motor, travel and PMI, all returning to growth after a number of years of decline. Other businesses and central costs marginally increased due to lower investment income as the group is carrying less cash than in the prior year. The result of all of this is that underlying PBT increased to GBP 44.2 million, 19% higher than the prior year and ahead of our guidance. Insurance underwriting is now classified as discontinued, but the strong performance in the first half supported our ability to pay a GBP 10 million pre-completion dividend and receive an additional GBP 11.4 million of proceeds on completion of the sale in July. Debt reduction is a clear strategic priority for Saga, and I'm pleased with the progress made this year. During the year, net debt reduced by GBP 93.3 million to GBP 499.5 million. This excludes the GBP 60 million upfront Affinity partnership proceeds with a leverage ratio of 3.7x, also below the year-end level of 4.4x. Available operating cash flow for the full year was GBP 205.9 million, 88% higher than last year, supported by strong cash generation at Ocean Cruise and the GBP 60 million receipts from Ageas following the launch of the partnership in December. Debt service costs have increased due to the HPS refinancing, which was drawn in February last year, and restructuring costs have increased due to the AICL disposal with associated net cash proceeds of GBP 68.8 million. I'll now cover the outlook for '26-'27. We've made significant financial progress this year. We exceeded our expectations in profitability, net debt reduced significantly and as a group, deleveraging has accelerated. This is all underpinned by the long-term funding we secured last year. This is due in 2031 and also includes access to an additional GBP 150 million of undrawn and committed facilities. As I look ahead into '26, '27, our confidence is high. Our customers are resilient, and we already have great forward bookings for '26, '27 in our Travel businesses. Our exposure to the Middle East is minimal as we typically offer very few itineraries to the region and our fuel and foreign exchange rates are hedged well into 2027. And importantly, we have a lower risk insurance model following the Ageas deal. This gives us significant confidence in our '26-'27 outlook. We expect Ocean Cruise to continue its momentum with further underlying PBT growth expected, supported by strong load factors and per diems with no dry docks planned in the year. River Cruise load factors and per diems are expected to continue to grow alongside increased passengers in Holidays. In Insurance Broking, we expect '26-'27 profitability to be at least in line with '25-'26 and above our previous guidance as we continue to embed the Ageas partnership throughout the year. Finance costs will be marginally lower than '25-'26, reflecting the lower Ocean Cruise debt and lower group finance costs. The effective blended pro forma rate is expected to be 7.6%. What this all means for the group is that we expect underlying profitability to take a further step forward in '26, '27 and importantly, our net debt and leverage ratio to continue to reduce. And with that, I'll hand back to Mike for an update on our strategic progress.

Thanks, Mark. So a very strong financial performance and confidence in our outlook that will underpin our future growth. Let me now talk to you about the strategic progress that we've made and what you can expect going forward. As I have said, this was a transformational year for Saga and serves as the launch pad for long-term sustainable growth. We've simplified our approach to business, brought focus and strategic clarity into our decision-making and reintroduced a performance culture that is driving results. The sale of AICL and the launch of our Home and Motor partnership with Ageas means that we no longer take underwriting risk and have materially reduced the complexity of our insurance operations. Once fully transitioned next year, the headcount for our remaining insurance operations will have reduced from around 2,000 people to fewer than 400 with the majority of the colleagues affected by the Ageas transaction transferring across to their business. Meanwhile, revenues and profits are growing as we spend more of our time on customer experience and marketing, leveraging our unique experience in these areas. Travel is now the largest driver of profit in the group. And we have consolidated our 3 Travel businesses, Ocean Cruise, River Cruise and Holidays into a single operation, enabling us to create a more efficient, consistent and customer-focused approach across all of our travel products. With this simplification comes greater strategic clarity, focusing on and leveraging our core strengths. At the heart of everything we do is our customer and our brand. By simplifying our approach and leveraging partner capabilities to deal with operational complexity, we are able to adopt a more focused customer-led mindset. Saga's brand and long-standing customer principles are now the driver of decision-making across the group. And you can see the results in our performance. We have a strong streamlined management team and have combined a passion for our customer with a reset of performance that is driving success across the group. Nobody understands older people better than us, which isn't surprising because we've been doing this for a long time. This year marks the 75th anniversary of the founding of Saga, and we'll be celebrating the enduring strength of our business and our brand. Over our 75 years of business, we've built up a huge amount of information and experience that we use to ensure we deliver for our customers in ways that others simply can't. Our approach is built on recognizing that our customers have different needs and expectations and constantly working to better understand those needs and meet those expectations. Through a simple set of principles shown here at the bottom of the page, we seek to protect and leverage the unique competitive advantages that we have and in doing so, deliver products and services for our customers that keep them coming back. So we're in a great position to win in a highly attractive market with an affluent, thriving and growing demographic. In a volatile world, they are a resilient customer group with wealth and income generally well sheltered from changing market conditions. As you can see from the left-hand side of this chart, people over 50 already make up 38% of the U.K. population. And over the next 30 years, that will increase to almost 50%. It's a customer group that is typically more affluent and with improvements in medicine and health care, they are living longer and increasingly feeling younger and are more active than previous generations. It's no surprise, therefore, that travel is at the top of the list of things they wish to spend their time and money enjoying. 81% tell us that travel is the thing that makes life most fulfilling for them. Not just any travel, though, and you'll see later how we understand and cater for their range of needs through a variety of travel products designed with them in mind. But they also have needs beyond purely travel. And those needs, much like in travel are typically not well understood or served. Saga has built its business on identifying those needs and meeting them better than anyone else. All of the products that we offer derive from this. And indeed, there are plenty of opportunities to help older people in ways we don't today. At the heart of what we do is trust. Our customers trust that Saga understands them and will meet their needs in ways that others don't. And it's by getting that right that we've become the leading brand in this market. As I said, there are different stages older people go through as they approach and then enter retirement. These stages are not uniform or linear and are often shaped by events like changes in health, retirement or family circumstances. Our products are designed to meet the different needs across these different stages. Insurance and personal finance products are typically very relevant to customers in their 50s, seeking security from a brand they trust while planning their later life finances. Some of our more active tours and long-haul holidays might also start to appeal with a little more support and comfort than available elsewhere. As customers age, other parts of our proposition become more relevant. Our equity release product, for example, allows customers with more time on their hands to free up funds to start traveling more or make changes to the home that they likely now spend more time in. And at the other end of the spectrum, our Ocean Cruise customers tend to be in their 70s and ready for a slower pace, more luxurious experience without the hassle of airports and baggage to deal with and the convenience of our door-to-ship car service. These are just examples. But the point is one size doesn't fit all, and we are the trusted brand for customers through all of these stages. So we're operating in a great market with a customer group that we understand better than anyone else. But success comes from how we use this position to do things differently. This is a busy slide, and I'm not going to talk to every aspect. But what you should take away from it, is how every product we offer is designed with our customer in mind. From an Ocean Cruise experience where every aspect of your holiday is tailored for an older demographic to insurance products with features that matter to our customer base, but aren't provided by standard insurers. We don't just understand that our customers are different. We are different and our products are different because of that. I've deliberately spent some time on the long-term enduring principles that have served Saga well for 75 years, and they will continue to serve us well as we move forward. We use these principles to guide and drive our decision-making and underpin our shorter to medium-term priorities. You'll be familiar with these priorities on this page. They are consistent with the plans we laid out last year, and we will continue to deliver on them in the same way we have done so successfully this year. So let me give you some more color on how we are delivering. Ocean remains at the heart of Saga's travel offer with its enduring popularity only getting stronger. We're extremely pleased with the performance we've seen across Ocean this year and are confident in the performance in the year ahead. Load factors continue to grow, driving per diem growth and translating into sustained profit growth, as you can see from the chart in the top right-hand corner. Our River business is also growing strongly. We combined the River Cruise and Ocean Cruise leadership teams several years ago to ensure a more consistent customer experience and to better drive cross-selling. And you can see from the chart on the right, how this is translating into strong and consistent profit growth with a 48% increase this year. I'm also extremely pleased with the progress we're making in our Holidays business. It's a flexible, capital-light business model that plays to our strengths. Whether it be our range of special interest holidays designed to indulge customers' hobbies and interests or our range of touring holidays with itineraries designed to better suit the pace of older clientele, our holidays are different, and it is this difference that drives demand. And once again, you can see from the chart on the right, how this is translating into profit growth. Whatever their choice, customers feel the difference of a Saga holiday when they choose to travel with us. Looking ahead for the season, bookings are strong. With our Ocean and River Cruise business unaffected by the war in the Middle East and only a small proportion of our holiday destination impacted, we are confident in the outlook ahead. Our fuel and currency exposures are well hedged into 2027. And so we do not expect inflationary pressures to materially impact that outlook. As you are aware, we've reset our approach to insurance. We completed the sale of our underwriting business in July and began the rollout of our Ageas partnership in December, starting with motor new business. Home new business follows this month with all renewal business switching later this year. By simplifying our operations, removing underwriting risk and applying our focus more prominently towards sales, marketing and customer engagement, we have already begun to reset the performance of this business. This year, we've seen improved customer satisfaction, growth in policy numbers for the first time in 4 years and a turnaround in profitability, which is up 17% on last year. This gives us a solid platform from which to continue growing in '26-'27 as we complete the transition to Ageas to fully benefit from the powerful partnership between our 2 businesses. As a data and insight-driven business with a strategy built on our understanding of older people, our publishing business serves as a unique asset, one that we've been expanding and modernizing over the past couple of years. Our print magazine, combined with our hugely popular series of informative newsletters and the engaging multimedia content now available through our website is a powerful customer engagement engine. It is also a huge source of data and insight. A great example of how we can use our publishing skills to build brand affinity and reach new customers is our fantastic new fortnightly podcast, Experience is Everything. Having only launched in December with our Paul Merton interview, we are extremely pleased with the early success that we've seen. Viewer figures across all platforms have now exceeded 8 million views with new followers finding us all the time. During each podcast, we drive awareness of Saga products and services with exclusive Saga adverts. Finally, before I wrap up with some key takeaways, I wanted to pause on the medium-term targets that we set out this time last year and our performance against them. You'll remember the chart on the left, showing our plans to deliver GBP 100 million of underlying profit by January 2030 with leverage reduced to less than 2x, albeit with a temporary drop expected in '25, '26. You'll see from the right-hand side that our performance this year has exceeded those expectations in every respect. Having delivered this strong performance and with good visibility for '26-'27, we remain extremely confident in meeting those targets and expect this year to continue ahead of our originally planned trajectory. So to conclude, we've had a transformational year. Revenues and profits have grown at a group level, but also for each of our core businesses. We've exceeded guidance and with a strong start to '26-'27, have further confidence about our performance this year and our continued progression towards the GBP 100 million target. As you have heard, the impact on Saga of the situation in the Middle East is very limited, and we are successfully hedged. Having established a strong performance culture with consistent delivery built on our simplified and more focused business model, we remain very confident about the future we are building. I'll now move to questions. Thank you.

Fantastic, thank you very much, indeed for your presentation. [Operator Instructions] As you can see, we've had a number of questions throughout today's presentation. Thank you to all the investors for submitting those. I'd now like to hand you over to Sharnj Sandhu, Head of Investor Relations, to host the Q&A. If I may just ask you to read out the question where appropriate to do so and direct to the team, and I'll pick up from you at the end.

Okay. So when do you expect to start paying dividends?

Thank you. So look, an obvious question given the progress that we're making. Sharnj, I don't know who is in charge of the slides, but perhaps we could bring back the penultimate slide that has our deleveraging profile on that. That's the one. So I think this is a very relevant slide. This is the trajectory we laid out last year, and I've said that we're ahead of that trajectory this year and expect to continue to be ahead of that trajectory. What I will tell you is we're even more confident about delivering on that GBP 100 million profit target that we laid out only last year and in the deleveraging profile on the right-hand side. Our priority in the early phases of this turnaround is, therefore, to drive profits and reduce our leverage. That's a sensible thing to do. But clearly, as we move towards the right-hand side of that deleveraging profile, optionality opens up, including the ability to start paying dividends and choose how we deploy the rapid deleveraging that we'll be delivering by that stage. So it's right to be starting to think about dividends, but it's not a focus right now. Our priority is delevering and reducing the debt that will then pave the way for dividend and other capital decisions in the future.

Another question probably related to this slide. When you say you are ahead of schedule with the GBP 100 million target, which year do you believe you'll now meet this target? So in which year-end would you achieve GBP 100 million?

Yes. So look, we're not updating our guidance. We're not going to refresh the 5-year view every time we talk to the market. But what you can take from what we've delivered this year is if 12 months ago, our 5-year view was that we would hit that GBP 100 million, and we're ahead of that trajectory today. Then at best or at worst, we are as confident as we were last year or even more confident in delivering that. If we continue ahead of -- continue to stay ahead of that trajectory, then clearly, the prospect of hitting that earlier grows. But we're a year into that 5-year plan, and therefore, our focus is on driving the growth in profits, reducing our debt and then those upsides will materialize if we continue to focus on that.

A question around AI. Do you consider AI to be beneficial for service businesses? Or will it prove to be a distractor going forward?

Look, I think AI is a mixed bag. It's generally an opportunity for businesses to be more efficient. So we're using AI across our group. And clearly, by partnering with big powerhouse partners such as NatWest, such as Ageas, you can only imagine the sort of investment that they're putting into their AI infrastructure as well, and we benefit from that partnering with that infrastructure. But the heart of Saga is our proposition and AI isn't going to take you on holiday and give you a brilliant experience. So yes, how we show up for customers, how visible we are in their AI SEO searches and so on, how efficient we can be eliminating administration in our businesses is definitely an AI opportunity. But where we can stand out, which is the way that we always stand out, is delivering a fantastic travel product and other customer experiences in a way that nobody else can. So I think our difference is our opportunity, and that will continue to be the case when AI creates some -- makes other business potentially more generic.

Okay. So a question around shareholder discount. Would it be possible to provide [ channel discounts for cruisers ] going forward?

Yes, we get asked this a lot. And my honest answer on this is the way we drive value for shareholders is driving the share price. So that's our focus. We do value our shareholders, and we appreciate that question. But there isn't an easy way to offer shareholders value that doesn't then damage share price and my focus is on delivering shareholder value and share price increases for our shareholder.

A couple of questions on financial. What are the rates of inflation you're seeing in staff costs in the Cruise division?

I won't do all the talking. I know Mark knows the answer to this. So do you want to jump in Mark and maybe just a broader view on inflation.

Yes. No, I think on a broader view of inflation, I think we've got certainly a lot of confidence in terms of the cost base as we look forward. In terms of our exposure to sort of commodity and FX rates, as I said, we are 100% hedged through to March 2027 and then 75% hedged on oil through to December 2027. So from a broader sort of impact to inflation on the cost base, no real concerns. In terms of salary inflation specifically, I think we will -- we are seeing something akin to what the market is seeing in terms of the sort of published inflationary numbers. So again, we're not seeing anything that's sort of out of line more broadly. And we've just agreed the sort of forward salary inflation rises for the year to come with both the cruise crew and also the sort of onshore crew as well. I think from a customer perspective, our customers are resilient and generally are not impacted by sort of the wider economic environment. And I think you can -- when we have seen spikes of inflation or other disruption happening in the economy, our customers have proved to be resilient. And I think you can see that in the strong bookings we have for our travel business. So even with some of the uncertainty that is going on at the moment, our customers are still booking with us.

Perhaps I'll jump in and just give a bit more color on our customer base actually because it's highly relevant right now. and I spent a lot of my time explaining why we are not just another travel business. And indeed, our customers are not just another set of travel customers. They are very different. So if you take our typical customer and bearing in mind, travel is now the largest driver of profits in the group. So if you take that travel customer, they typically worked their entire lives and careers and have got to the point where they have time on their hands and money in the bank. And they recognize there is a sweet spot during which they can enjoy their health and their wealth and start enjoying the travels that they've waited their entire lives to enjoy. So we've seen a variety of events over the past, well, choose your period, years, decades, whatever, Saga has been around for 75 years. And what we see consistently is our customers don't slow down their travel plans because they've waited their entire lives to start enjoying their travel. I was talking to my next door neighbor over the fence and he was telling me how he's still working, but the only reason he's now working was, he wants to retire into club class rather than economy. Now, he didn't know it when he was saying it, but what he was doing was directly linking his retirement to travel. And that just tells you how people are waiting to enjoy the time and the rewards of their retirement, and that's what we do best.

Specific accounting question. So property assets held for sale within 12 months, can you elaborate on this any further on the resolution in place?

Should I take this one, Mike?

Yes.

So I think, look, we are in active sales processes for all of our sort of noncore properties. I won't comment in terms of those individual processes just because they are ongoing. But clearly, we would expect to exit those properties as those transactions sort of come to completion. And then we will update the market and update investors on the results. I think the 12 months is driven by -- is effectively driven by our view that we will reach a conclusion on those transactions within 12 months.

And look, it's worth just pausing more broadly on that. So was it May last year, I think it was. So we changed our office strategy last year, and we chose to move everybody back to a main head office in Folkestone, which is where our heritage started. And that then meant that we've got a series of disparate properties around the -- well, mostly around Kent that served historic purposes, but are no longer required. So I'm very keen that we simplify our property estate and having everybody in a single office environment where they come in every day. We still have a hybrid working model, but generally, people are gravitating towards that office and it means we can run the business properly, embed the Saga culture that is different and continue to do the great work that we're doing. So Enbrook is our main head office, and we've got our London office as well.

Thank you. So well done on hedging, on FX and oil. Do you have any concern about supplies in certain ports, any potential supply issues because of the Middle East?

So look, just taking the question more broadly, we're not concerned about the access to fuel supply in our cruises. So we access multiple ports, and we're not seeing any potential disruption risks there. There's a lot of talk about aviation fuel risk. The majority of our flights are through BA and easyJet. And whilst those businesses will be talking about inflationary risks, we've already talked about how we've protected ourselves there. We're not talking about any fears of disruption like some businesses might be seeing in the Far East.

Thank you. A question around Ageas. Are you on track to receive the additional GBP 30 million payment in relation to policies for Motor and Home?

Yes. Look, just to reminder what that is, and I'll perhaps ask Mark to do the balance and consideration point as well. But I think what you're referring to there is a bonus payment that was effectively saying, look, we struck a deal and depending on volumes by the end of May, then there could potentially be an extra payment. I'm not going to guide as to what that pain would be, but what I would help you understand is the GBP 30 million was pretty much a sort of open-ended shoot for the stars target as opposed to somebody -- something that anybody should reasonably say, oh, when do we get the GBP 30 million? The answer is somewhere between 0 and GBP 30 million depending on how far we outperform the expectations that were built into the transaction. So I would caution people against sort of banking the GBP 30 million. That's not going to be a sensible assumption, but the answer won't be 0 either. Mark, I don't know if you got anything you want to add to that, but you can probably give some color to the remainder of the consideration.

Yes. So there's a number of moving parts around the Ageas consideration and the monies they were paying to us. I think just to try and keep this relatively simple, we have now received everything we are due on the AICL sale. So that was all received last year. We received the GBP 60 million on the go-live of the Affinity partnership deal in December. And we are due to receive a further GBP 20 million when the renewal book starts to transition over to Ageas, which will happen sort of beginning of H2 this year or sort of Q3 this year. So that will bring us to the GBP 80 million, which we were due to receive for the Affinity partnership. And then as Mike has said, there are a couple of contingent sort of payments that are due, the first one in 2026, and then there is another one in 2032. And I sort of agree with Mike's assessment here. I think they range from sort of 0 to GBP 30 million. The GBP 30 million was a genuine sort of how high can you get the business. But equally, it's not going to be 0 either.

Question on Britannia loyalty scheme.

Yes, you can take that. I'll take that, Sharnj, if you want to read.

Okay, fine. So Britannia loyalty scheme can expand on membership levels, concentration of the tiers, any further developments to expand this offering across other products.

So I'm not going to do the detail on the Britannia loyalty scheme, but I think the tone of the question is, can we broaden that more across the wider group? And look, I don't think you should expect us to be saying that we're going to roll out the Britannia program more widely. But I think the more relevant question is customer loyalty more generally. We have a lot of customers. We brought the businesses a lot closer together now, not least in travel where we're all under one leadership team, but actually all of our businesses are working very closely with each other now. And therefore, how do we look at rewarding customers that are both Insurance customers and Travel customers, for example, and then those that are opening that we're savings. So look, watch this space. It's not something that has been the key priority right now because clearly, we've had a lot of heavy lifting to do to get the business to this stage. But how we drive cross-sell and reward loyalty is definitely something that's on our mind as we move forward. But we'll need some time to continue to do the things we're doing because there's a whole lot of things that I'd love to be doing, but we need to be patient in terms of where we choose our priorities. But it's certainly a relevant consideration for us as we move on from here.

A question on the blended pro forma rate of 7.6%. I think maybe just talk through the component part of that please.

Yes. So the question is, if you multiply the 7.6%, which we've stated by the GBP 499 million of net debt, you don't get -- you get to a much lower number. Now the net debt number of GBP 499 million is net of the cash that the group is carrying and the interest cost relates to the gross debt. So I think on Page 26 of our preliminary statement, there is an analysis of net debt that allows -- that shows you the sort of gross debt that the group is carrying. So there are 2 lots of effective debt in the business. There's the term loan that we have from HPS, the GBP 335 million and then there are the 2 loans for the ships. So in total, our gross debt is GBP 623 million. And therefore, the sort of effective interest rate is based off that higher number and not net debt as well. So while there is going to be a savings in interest costs this year versus last year, as you pointed out, it is not based -- you would get to the wrong answer if you use the net debt number.

And Mark, just to elaborate on that because the obvious question that will fall off the back of that is, well, hold on a second, if you're holding all of that cash, doesn't it make sense to repay some of the debt that is costing you that net 7.6%. Do you want to just cover the thinking around that and the opportunities going forward?

Yes, absolutely. So I think our ability to repay sort of debt is dictated to by the sort of terms of the facilities. So I think the most immediate opportunity we have is to repay some of the Cruise debt around the COVID deferrals that we had. That's a relatively small balance now, but it's something that we're sort of actively thinking about. And then clearly, the sort of bigger opportunity, I think, is when does a sort of full refinancing come on to the table. And I think we are sort of thinking through sort of options around that. But I would just caveat we have got a bit of delivery and a bit of deleveraging to do before I think that comes on to the table.

And the corporate debt that we put in place last year with HPS has an 18-month non-call period to mean that we've got to get through that and probably a little bit beyond it before it becomes price effective to start considering repaying that. So it's not that far down the line together with our deleveraging. But yes, interest is an opportunity, as you will have seen actually in that chart we've got on the page there. We do expect to be able to bring interest costs down materially over the life of this plan.

There's no further questions.

Right. I'll do a going, going, gone. Just in case anybody has got a question, they've been storing up for the last moment. No further questions? Okay.

Now I was going to say, Mike, just before we redirect the investors to give you some feedback which is greatly appreciated by you and the team. If I could just ask you just for a few closing comments, please.

Yes. Perfect. Look, hopefully, you will see that we've had a great year. There's been a significant amount of heavy lifting over the last couple of years. The team have done a great job. I'd really leave you with 2 thoughts. Firstly, the level of strategic change that we have delivered really underpins not just the future performance, but is already translating into strong performance today. So that strategic change is directly linked to our ability to drive performance. Secondly, you can see how having a more focused and simplified business model means we can focus on our customer and drive that performance reset that you're seeing in this year's results. So we've underpinned performance going forward, and that performance culture is going to then compound that. So I'm very happy with the results. And hopefully, you as shareholders can see the progress that we're making. So thank you.

Fantastic. Look, thank you all for updating investors today. Could I please ask investors not to close this session. You should be automatically redirected to provide your feedback in order the team can better understand your views and expectations. It's going to take a few moments to complete and it's greatly valued by the company. On behalf of the team at Saga plc, we'd like to thank you for attending today's presentation. That concludes today's session.