Saga PLC

LSE:SAGA

Earnings Call Transcript 2023-Q4

[Euan Sutherland, executive]

Okay. Good morning, everybody. Thank you for joining our results presentation for the financial year ending 31st of January 2023. I'm Euan Sutherland, Chief Executive. And with me today is James Quin, CFO. In the next 30 minutes or so, we'll take you through our key headlines, the financial results and then an update on progress on our strategy.

First, an overview of that performance last year in which the group returned to profitability and saw significant revenue growth of 54% year-on-year. There was positive progress across the group in all major business units, leading with Cruise, which drove a step change in both load factors and per diems after a very strong half 2 performance. Travel has successfully reset all of our product lines, combining touring into one team between Saga and Titan, establishing an improved hotel stays offering and creating a new tailor-made business unit. Insurance broking achieved a good result in line with last year despite adverse market conditions seen by all other general insurers. Saga Money delivered growth in both revenue and customer numbers across our savings and equity release products.

The year-end cash position was GBP 157.5 million, ahead of guidance, and net debt of GBP 711.7 million was GBP 17.3 million lower year-on-year. We continue to take significant steps to lower net debt with the planned sale of the AICL underwriting business, agreement of a new GBP 50 million loan facility from our Chairman, sir Roger De Haan, and continued rationalization of our property portfolio.

Ship debt repayments continue on plan, supported by a healthy pipeline of cruise bookings and strong per diems ahead of plan.

Our smaller and new businesses continued to progress well with a significant new product pipeline in Saga Money set for launch in the second half of 2023, and Saga Media launched in January 2023, ahead of plan already. We have developed the first iteration of our customer lifetime value model, which is in test across the group. And our global digital reconsent program continues to achieve higher customer consents year-on-year.

All in all, against a challenging backdrop, Saga has delivered a strong year of progress in 2022, '23, returning to profit, driving double-digit revenues and facing into the final pre-pandemic and pandemic legacy issues.

On this slide, I'll step into more detail on each business. Firstly, Cruise, where a very strong half 2 with load factors of 84%, so a full year load factor of 75%. Per diems were strong and delivered to the stretched budget of GBP 318, offsetting inflation and going ahead of our 5-year plan. Cruise revenues were 100% up year-on-year by the end of the financial year. Guests love Saga Cruise. And the CSAT and NPS scores are consistently market-leading, making this business a super brand in customers' eyes today with the latest transactional NPS score of 82.

Saga Travel Group completed the year of transition in 2022, working on the reset of the business with a new team, an improved range of products, better customer pricing, enhanced margins and a lower cost base. Impacted by COVID in the first half and with a stronger half 2, Saga Travel group had a small loss last year, but is set to return to profit in 2023 with exciting growth ahead. There is a lot of innovation coming through in Travel with 3 premium private jet tours and a new worldwide tailor-made holiday options for all of our customers.

Insurance was a mixed picture in 2022 with vehicle under pressure from price inflation in the market, while broking made progress in the transformation plan laid out by Steve Kingshott. Travel Insurance saw strong growth to end up 103% up year-on-year, whilst Motor and Home saw policies reduced by 7%. Motor and Home margins held up well at GBP 71 and retention improved to 84%.

Finally, Saga Money saw good progress with equity release volumes up 29% and savings up 17% year-on-year.

I'll now hand over to James to cover the financial results in detail.

[James Quin, executive]

Good morning. I'm going to spend a few minutes providing an overview of our results and on the outlook for the current year.

Despite a challenging external backdrop, we've reported a 54% increase in revenues and an underlying profit before tax of GBP 21.5 million, which is in line with the range we provided at the time of our interim results in September. This compares to an underlying loss of GBP 6.7 million in the prior year, with the improvement being due to a significant pickup in Cruise and Travel, partially offset by a lower result from insurance underwriting.

In the first half, we reflected the difficult market environment for insurance in a GBP 269 million impairment of goodwill, mainly in relation to retail broking. There was no change to this figure in our full year results, and there were no material other nonoperating items in neither our first half or second half results. Available operating cash flow of GBP 55 million was GBP 21 million below the level of the prior period, which included significant positive working capital movements in both Cruise and Insurance.

After taking into account interest payments and nonoperating cash flows, net debt reduced by GBP 17 million and the return to an underlying profit has led to an improvement in the overall group leverage ratio.

On the next slide, I set out underlying profit before tax by business unit. For Cruise and Travel, losses reduced from GBP 79 million to around GBP 10 million for last year, including a GBP 1.7 million profit in the second half. Conditions in the second half were considerably better than in the first, and we expect a further significant improvement in the current year.

Insurance result reduced from a profit of GBP 120.5 million to GBP 88.2 million due to a GBP 35 million reduction in underwriting profits, which I will come back to shortly. Net central costs increased, mainly due to lower recharges to the business units and higher interest costs following the bond refinancing in July 2021.

I'll go into more detail on the Cruise results on the next slide. While the first half of last year was a difficult operating environment for the Cruise business, we are now getting back to more normal trading conditions. For Ocean Cruise in particular, the load factor of 75% was in line with our target range and the second half load factor of 84% was in line with pre-COVID expectations. Even with a more normal trading environment, there were other challenges last year, too, with profitability impacted by some COVID-related expenses and by the high inflation environment for food and other costs.

For the current year, we expect a further improvement in load factors, and we are targeting at least 80% for the full year. We've also taken action on price with our average per diems up 6% compared to the prior year and 13% compared to 2 years ago, which will help us absorb inflation pressures. Together with the reduction in one-off factors impacting last year, we are, therefore, in a good position to achieve our pre-COVID target EBITDA of GBP 40 million per ship, excluding administration costs.

River Cruise is now reported within Cruise. This business has been through a major overhaul in the last 12 months in relation to the customer proposition and pretty much all other commercial aspects, too. We will start to see the benefits of this restructuring and a significant pickup in bookings in the current year when we expect to at least return to an underlying profit.

On the next slide, I set out the results of the Travel business. The Travel business comprises Saga Holidays and Titan, and this has also been through a major overhaul in the last 12 months as we've combined the touring operations of the 2 brands, rationalized 2 back offices into 1 and built a new proposition, which gives customers much wider and customizable choice of package holidays.

Although the first half of last year was a difficult operating environment, we have nonetheless seen a significant improvement in results, and we've also continued to invest in marketing to support the business recovery. Bookings for the current year are up 32% compared to the equivalent position a year ago, and we also expect to see upside in margins given the significant price increases that we have put through. As with River Cruise, we expect to see a return to profit for the full year, and we are aiming to increase underlying profit before tax to pre-COVID levels as a starting point for future growth.

I will now turn to the insurance broking business and show the year-on-year movement in written profit before tax on the next slide. Motor and Home written profits reduced by GBP 12.9 million, evenly split between first and second half. The renewals contribution reduced by GBP 22.4 million post the implementation of the new pricing regime, partially offset by a GBP 9.5 million improvement in new business profits. The average margin per policy across Motor and Home of GBP 71 was slightly lower than in the prior period. On a like-for-like basis, adjusted for a consistent mix of business the average margin last year would have been GBP 67, around 10% lower than in '21, '22.

Offsetting the reduction in Motor and Home profits, sales of travel insurance have picked up strongly and that led to a GBP 9.5 million increase in the travel insurance contribution. Together with the reduction in operating expenses, the result for the full year was slightly above the level of the prior year. This has, however, been a challenging period for the industry and while we were able to maintain profitable tax, Home and Motor volumes fell by 7% and with new business policy sold 41% lower than in the prior year. We are also seeing significant net rate inflation in Motor that is not at present being reflected in the same level of inflation in consumer pricing.

Together with a near-term shift towards price comparison distribution, this is leading to a decline in our average margins. In combination, we expect to see a material reduction in profit before tax for the broking business in the current year. These factors were behind our decision to write down the value of insurance goodwill by GBP 269 million in our first half results, almost all of which related to retail broking. While the industry environment has become more challenging since the half year, we remain within our modeled scenarios, including our expectation of an average margin across Motor and Home of around GBP 60 per policy. As a result, no further goodwill impairment has been recorded in the second half.

On the next slide, I set out the results of the Insurance underwriting business. For many U.K. insurers, the last year has been exceptionally challenging, and AICL has had to react to what has been a fast-changing position. AICL profit before tax reduced from GBP 54 million to GBP 19 million due to a significant increase in the current year combined ratio, which moved from 96.3% in the prior period to 125.8% last year before allowing for the benefit of our quota share reinsurance.

While the prior year benefited from much reduced motor claims frequency, particularly in February and March 2021, last year was impacted by very high claims inflation, which we estimate to be around 13.5% on average across the year as a whole, albeit higher in the later months of the year. We've also seen an increase in large losses from October onwards. This contributed an extra 10 percentage points to the current year combined ratio relative to our first half expectations.

In response, we've put through very substantial double-digit price increases. We believe that this is corrected for the high inflation experience last year, but also for an assumed ongoing high level of claims inflation as well as the unwind of any remaining COVID-related claims reductions.

We've also undertaken a very deep analysis of our large losses, and we see the experience of the latter part of the year to be an unusual pattern that does not represent a trend. In this respect, we're still talking a small number of large losses. In this case, we are projecting a total of 25 claims above GBP 250,000 for the year compared to an average of recent years of around 17. Given the rate increases we've put through, we are making prudent allowance for future large losses in our current pricing.

The impact of the high current year combined ratio on our bottom line was significantly offset by a GBP 25 million recovery from quota share reinsurers. The losses of the last year will be combined with the results for the next 2 years in determining the final outcome of the current quota share arrangement.

In terms of reserve movements, we've taken steps to align our best estimate reserves with the levels we expect to hold post the implementation of IFRS 17. This was an expected step. And as a result, we expect to see much lower reserve releases in the future than in the past.

In our next set of results, we will change our basis of reporting to IFRS 17. This will lead to significant presentational changes but is not expected to have a material impact on AICL's underlying profit before tax. Overall, we believe we've taken a comprehensive set of remedial actions to address the challenging environment, and this will restore underlying profitability pre quota share back to expected levels from '24, '25 onwards.

On the next slide, I set out a change in our expenses. Marketing costs, excluding the written-to-earned accounting adjustment, were flat on the prior year with increases in Travel and in Money, offset by lower TV advertising costs and insurance and in central costs. Administration costs, also excluding the written-to-earned adjustment, increased by GBP 6.3 million and GBP 10 million once reduced bonus payments are taken into account. The increase in admin cost was focused on Travel as the business resumed full operations and with increased investment in our priority growth areas of Money, Media and Insight.

For the current year, we expect a further increase in investment both in marketing and admin costs. Growth in marketing costs will be focused on the new tailor-made travel product, and this will be continually tested against bookings and revenues. We expect this product to be breakeven on an in-year basis.

Our admin costs represent a bigger investment. In addition to normalization of bonus payments, we expect to see additional admin costs this year in a range of GBP 20 million to GBP 25 million split in roughly equal measure between Insurance, the Cruise and Travel businesses and Money, Data and Insights. An element of this increase is due to high inflation, but this also includes the transformation of the Insurance business, growth in the Travel businesses and investment in building out the third pillar of our strategy, which is developing our super brand aspirations. These costs are a critical part of the growth plan for the business and will drive significant value over time. We expect central costs to be flat with some investment in data, offset by other savings.

On the next slide, I set out the change in net debt over the course of last year. Operating cash, excluding Cruise and Travel, was GBP 49 million last year, below the GBP 89 million in the prior period, with the majority of the reduction being due to a GBP 21.7 million swing in working capital and a GBP 10 million reduction in dividends paid by AICL, alongside slightly lower trading EBITDA and higher CapEx costs.

Cash support to River Cruise and Travel significantly improved from a cash outflow of GBP 36.4 million in the prior period to GBP 17.8 million in the current year as the losses in these businesses reduce. This was still adverse to expectations, but we will see a much improved picture in the current year.

Ocean Cruise was cash positive in both years, including interest costs on the ship debt but before debt repayments. Despite much improved trading conditions, changes in advance receipts moved from a positive GBP 28.5 million in the prior year to a negative GBP 7.5 million in the current year. This is due to one-off factors, and we expect future advance receipts to be fairly stable.

In aggregate, net debt reduced by GBP 17.3 million, evenly split between first half and second half, in line with the expectations I set out in our interim results.

I set out an update of our debt outlook on the next slide. As you can see from this chart, we expect operating cash generation to enable a continued reduction in net debt in all our core planning scenarios, including in a prudent downside for the Cruise, Travel and Insurance businesses. This helps to refund the repayment of the Cruise debt as it forced due. And as you can see, we expect ship debt to be significantly lower in January 2025 than it was in January 2022.

While the business is generating positive operating cash flows, it is also the case that the level of cash generation will be lower than we had previously forecast. This is a function of lower insurance profitability, plus, to a lesser extent, the investments in growth businesses. We have, therefore, spent considerable time assessing different options to increase cash ahead of the 2024 bond repayment.

As we've publicly indicated, we're exploring a potential sale of the underwriting business, AICL. This is consistent with our ambition of moving to a more capital-light model, and AICL Solvency II net assets of around GBP 100 million at 31 January 2023 represents a significant store of value. There is not much we can say on the sales process other than that we are engaged actively with a range of different potential bidders. We aim to conclude the sale process by the end of the summer with completion well ahead of the end of the year.

We have also agreed a new GBP 50 million loan facility with Roger De Haan, which can be drawn at the option of the company from 1 January 2024 and matures on 30th of June 2025. And the terms are set out in the Appendix through this presentation.

Given the ongoing AICL sales process and with this new backstop facility in place, we expect to repay the 2024 bonds from available cash. While we've not included the impact of the sale of AICL in the chart on the right, this remains our primary focus and our goal remains to reduce total net debt to below 3.5x EBITDA over the next 3 years.

On my last slide, I set out a summary of our view on the outlook. As already mentioned, for Ocean Cruise, we're aiming for load factor of at least 80% compared to 75% last year. We expect a much bigger improvement in profitability as some of the one-off factors impacting us last year drop away, and we maintain our target of GBP 80 million EBITDA before admin costs.

For River Cruise and Travel, we are fully expecting a return to profit due to a significant increase in traveling passengers and revenues. Our goal is to get back to the profitability of 2019/'20 with considerable potential beyond this level in future years.

For Insurance Broking, this will be a difficult year, especially for Motor. We expect a reduction in Motor and Home sales, but we continue to expect an average Motor and Home margin of around GBP 60 per policy.

For Insurance underwriting, we expect to be operating at around breakeven due to the ongoing impact of high inflation plus lower reserve releases.

For other businesses, this year will be a year of building capability, especially for our start-up media business. We expect central cost to be flat.

In aggregate, and notwithstanding the insurance challenges, we expect to see higher underlying profits than last year and, as outlined on the previous slide, a continued reduction in net debt.

With that, I will hand back to Euan.

[Euan Sutherland, executive]

Thank you, James. In the next few slides, I'll cover the progress on our strategy and look forward to what investors can expect in the year ahead.

A reminder of our vision, plan and outcome, which we have consistently presented before is shown on this slide. Important to note, these remain on plan and unchanged. Our vision is to become the largest and fastest growing business for all the people in the U.K. based on the largest active pool of the most insightful data on what is the fastest growing and wealthiest demographic in the country.

We have a simple 3-step: Maximizing our existing businesses, reducing our legacy debt to help us scale of the business and building the super brand for older people. As a result, Saga will consistently grow PBT each year, changing the shape of the group with less reliance on Insurance; driving significant Cruise, Travel and Money growth; and the introduction of high frequency, high engagement businesses like Saga Media. We are well set for achieving these outcomes, and I will outline our next steps on the following slides.

James has covered the progress on step 2, reducing our debt. So let me focus on step 1 and step 3. In Ocean Cruise, our customer NPS scores are consistently best-in-class. And as of the end of March, we booked a load factor for '23, '24 season of 72% and also 17% for the 2024, '25 season. Per diems have stepped forward again from GBP 318 in 2022 to GBP 339 in 2023.

In River Cruise, our load factors are also well ahead of last year as 63% booked for '23, '24 and per diems of GBP 298 excluding flights. Our aim is to deliver over 80% load factor for the year. We're well on track to achieve this.

In Travel, we've seen strong customer demand for our enhanced product range with GBP 137 million of booked revenue but just 32% ahead of last year. New products are being fed in each month and include a late program and the launch of local travel advisers to help our customers with their personal service for their bookings. We are confident that the Travel business will be on plan and profitable in 2023, paving the way for more growth in travel passengers, revenue and profit in the following year.

Insurance is also innovating with new lower cost Motor products, and Steve is leading a complete transformation of the Insurance Broking business.

Saga Money is all about maximizing the growth in equity release in the savings and then building a new product pipeline, which we aim to launch in the second half of this year. Money NPS is already high, benefiting from the trust in the Saga brand and our quality partners providing a relevant and differentiated service for our customers.

The third step in our plan focuses on creating the super brand for older people and has 4 parts to it. The first, repositioning the Saga brand continues the work started in 2021, where we are moving the debate on older age away from a negative to celebrating the value of lifelong experience. Above the line brand TV adverse from travel and equity release were launched in February this year to complement the existing brand, Insurance and Cruise creatives.

Strong progress in our database work. With the new lifetime value having been built, a value management strategy created and our first recommendation engine is operational alongside progress on our global digital consent program. Exceptional.com is the first development for Saga Media and is ahead of plan with over 300,000 unique users on site by the end of March after only 2 months and with total sessions topping 500,000. Early advertising and affiliate revenues are also ahead of plan. Interestingly, our average reader age so far is 56, which delivers on our ambition to provide a funnel for new customers coming into the Saga brand.

Finally, our Insights program is stepping up both internally with all colleagues having completed the basics of aging Stage 1 in 2022 with Stage 2 to follow this year, and externally with our latest report highlighting generation experience, the U.K.'s secret economic superpower.

This is a publication of Saga's contribution measure on Budget Day last month, showing that the older generation is a net contributor to the U.K. economy. Even with costs like health and social care applied, the over 65 still drive a surplus of GBP 23 billion a year, challenging the overall narrative around age being a burden on society.

There are important themes in modern Britain here that provides Saga with greater opportunities to grow, including the changing nature of people retiring, intergenerational living and traveling and increasing longevity with our next generation of customers living to over 100. Saga is now at the forefront of this thinking both here and in the U.S.

ESG is an increasing priority at Saga as we return to growth. We have a strategy that has greater scale, ambition and importantly, impact. The 3 pillars are championing positive aging, acting on climate change and biodiversity with the Cruise business at the heart of this focus and strengthening our exceptional culture where we are seeing growth in colleague engagement, which is directly recognized by our customers in their own NPS scores. There is, of course, far more detail behind our ambitions, which will be published in our annual report and accounts, with targets and metrics to follow in the coming months.

So in conclusion, our aim is to build Saga into the largest and fastest-growing business for older people in the U.K., and we've made strong progress in the financial year '22, '23. Saga is back to an underlying profit post the pandemic and achieving strong double-digit revenue and customer growth. This continues into '23, '24 with our pivot towards a capital-light marketing content and distribution business well underway.

Progress is being made towards building Saga into the super brand for all the people with our highest NPS customer scores to date. We are on track to create and monetize audience growth from Saga Media. And there's a focus actions underway to strengthen our financial position and drive the repayment of GBP 150 million 2024 bond from available cash next year. And finally, we expect to increase underlying profit and cash generation from '22 to '23 levels and are comfortable with consensus for the year.

Thank you. We'll now take your questions from the room and then followed up by any questions online.

[Nick Johnson, analyst]

It's Nick Johnson from Numis. A couple of questions, please. Firstly on Motor and Home broking. So it feels as though conditions did worsen in the second half last year, but you've maintained the GBP 60 per policy sort of trajectory for this current year. Can you just give a bit of color on sort of how that's been achieved given the worsening market conditions and I guess, give us a feel for the sort of tolerances now in guidance on that GBP 60 per policy number and whether or not your assuming market conditions improve from here or you're assuming conditions are sort of stable as they are? And the other question on that Motor and Home broking margin policies is whether -- can you just give us a feel whether there's a risk to that number if distribution continues to shift towards more sort of expensive price comparison website channel versus direct?

And then the second topic for my questions is on River Cruises. Can you just give us a feel of what the path to profitability looks like, sort of what are the main drivers on that? Is it volume per diems? What metrics do you need to hit in order to get River Cruises to profitability over the next few years?

[Euan Sutherland, executive]

Thanks, Nick. Perhaps if I go in the reverse order, just pick up Rivers and give you an overview on Motor and Home perhaps. James can come in with more of the guidance details. So we are confident that River Cruise will be profitable in '23, '24, so this financial year. It's a simple model, very much the same as Oceans now, driven by the same team. It is all around maximization of load factor and per diems. Both of those are on track, actually slightly ahead of plan. So we're confident in the Rivers market.

Clearly, there's always some nervousness around the levels of Rivers, especially in Europe, given last year's experience. We think we have offset and hedged as much of that as possible with the routes that we're traveling, but we're confident that Rivers will be profitable this year. I'm confident that the proposition is now very much what customers would see on an ocean ship to, driving that per diem level.

Load factors actually in Rivers, we're really pleased with. It's probably the -- or it is the highest levels of load factor at this stage that Saga has seen for a good few years, certainly back to well before pre-pandemic levels. So confident in that as we are confident in the ocean situation and confident that Cruise will at least hit its budget numbers for this year.

I think in terms of general guidance, I'll pass over to James. In terms of Motor and Home, we -- I think we expect the inflationary conditions to continue well into this year, probably softening as we get into the second half of this year. We don't particularly have a crystal ball to see what's going to happen in the wider market, and we are somewhat at the whim of the wider market. But certainly looking into detail in the repair network and the costs that are behind those numbers, we're still seeing ongoing pressures as I think our competitors are seeing too.

But in terms of guidance on the margin, James, do you want to update on that?

[James Quin, executive]

Yes. I mean, I think just on River Cruise, it's all about passengers really. It's volume rather than margin. And in particular, given the cost of operating River Cruise are pretty much fixed, whether you've got 50 passengers there or 150 passengers.

On the Motor and Home side of things, the -- I mean, on the GBP 60 guidance, the -- I mean when we set that back in July, we had it on the side of being a bit cautious. And that caution is probably appropriate given what's happened in the market since then. So I think we tried to give ourselves a bigger room. And therefore, that's a pretty important reason why we're sticking with the GBP 60. We're not assuming, within that, there's major market rebalancing. So we're assuming that -- and within that, the critical point is not so much. It's the pace of increase in pricing to consumers. It's the delta between the price to the consumer and the input price effectively coming from the underwriters. We're not assuming that, that materially improves certainly in this year.

In terms of the impact of shifting distribution, I mean it's a good question. It would probably require me to consult the crystal ball a bit because, obviously, it is a blend -- the GBP 60 is in itself is a blend of renewal and new business margin, and we don't make a lot of money on new business because of the acquisition costs. Of course, the underlying margin is now equal because of the pricing rules in place. But -- so I will probably not really able to give you a long-term view as to the GBP 60. But certainly, based on what we're seeing now and in the context of the market today and without assuming any magical thinking on price, then we think we should still be able to stick to the GBP 60.

[Unknown Analyst]

It's [indiscernible] from Group of Investec. Three questions, if I may. Just on Cruises and the guidance for load factor for the coming year, that seems a little bit conservative given kind of second half performance. Is there anything particular that we should be aware of? And then could you just help -- give us some context around season '24, '25 at 17% and how that compares versus kind of historical levels?

And second question just on Money. You talked about some new product launches in the year, just be useful to understand what those look like and what parts of the market they might be targeting.

And then finally, you might not be able to answer or want to answer this question. But in terms of the iterations from the recommendation engine in the first iterations. Could you just give us a sense of what those have been spitting out and kind of -- and what the outcome of that has all been.

[Euan Sutherland, executive]

Great. Okay. Let me try and do those in order. So yes, second half of last year, Ocean Cruise load factor, 84%. We were very pleased with that guidance this year, 80% overall. The shape of the load factor booking for both Ocean and Rivers is going well, i.e., we are very well booked through the first half. There is opportunity for us to step ahead. I think, given the last few years, we are giving reasonably cautious guidance. I think it's fair to say, it's a good team. They understand the markets. They've equalize both propositions. So things are pointing in the right direction. So we're very confident around the budget numbers and the delivery towards consensus of that business.

So yes, we are being, I guess, sensibly cautious as we go through into the end of the first half and into the second half. There is opportunity within that business. I'd love to see that coming through. This is a year where, hopefully, touch wood, there aren't any other macro impacts that we've had in the past. So I think our caution is probably well placed just in terms of normalizing that behavior beyond our control and our pay grade. So the shape is good and comfortable with that.

In terms of '24, '25 comps, we are, I think it's safe to say, very pleased with the load factors so far. The response on to the early bookings. It's only been on general sale for, I think, a week. So it was mostly the pre-bookings that we had. We had a record number of customers registering with us to gain cabins ahead of the season opener, and we were able to convert a higher number of those customers in the pre-booking season. So that's given us a very good head start into Ocean.

The Rivers 2024, '25 season hasn't launched yet, but we expect a similar pattern within that, too. So overall, in Cruise, I think we are pretty happy with what we're seeing so far. We've got good demand. The product is working well. The customer NPS is outstanding. So that's a good model.

In terms of Money, more detail from Jerry as we get into the second half, but there is a wealth of -- if you pardon the pun, a wealth of opportunity, therefore, our wealthier older customers, everything from pension consolidations through to kind of wheels and probate on the legal side through to specific retirement ISAs on the other. So there is a focused new product development pipeline, which is coming through.

Again, the combination of the Saga brand, which has got high NPS in a financial services context of 62 with very high-quality partners seems to work well with customers. So we're being able to leverage that into new financial services markets. So a lot to come in the second half. I won't steal Jerry's thunder for that, but we will launch a certain tranche of product second half. We'll then lead into more innovation as we go into '24, '25.

It's pretty early days on the recommendation engine. There are some very, very valuable customers in our mix that we're now able to identify and look at next best action. The history of this is that we spent the last 2 years putting all customers into a single customer view. We've now put the recommendation engine on top of that. We've now got a lifetime value model, which sits on top of that, which allows us to begin to look at predictive future values of customers. That's wrapped up with a global digital reconsent, which is really important because the historic consents within our business have been business by business, so siloed. So we're now going back out to customers and basically saying, would you consent to the whole of Saga because we now have a broader product offering? That reconsent as an early indication is producing higher reconsent numbers than if we were asking for individual silos.

So our first proof point, which is really important for us to say, would customers be open and trusting for the Saga brand to sell them a wider portfolio of products? They are so far. So there is a process of doing that this year to build those levels on top.

Again, not wanting to steal Mike's Thunder, our Chief Data Officer. We're planning to do a Capital Markets Day in the second half of the year, which gives us more of a significant data capture of that, but the recommendation engines will lead us to what we wanted it to, we believe, which is more focused marketing, lower cost per acquisition and hopefully a higher customer NPS as we target them with what they want to see from us. I know that's in general terms at the moment, but I think I'd rather leave the specific examples until we've got a bigger base of data. But early indications are quite exciting actually around that piece of work. That's the heart of Saga, it's really understanding its customers.

[Ruchi Gupta, analyst]

This is Ruchi Gupta from Western Asset Management. Thank you for the very detailed color you have provided in your presentation. I just was trying to seek some clarification on the outlook that you provide for 2023. On insurance underwriting, you are saying it's going to be breakeven, which we see it's GBP 19.1 million of PBT in 2023. And Insurance Broking, I think we are guiding towards a premium decline of about 11%, I think, per policy. And if you have GBP 1.4 million policy, that probably means about GBP 15 million lower PBT, I guess, if we don't have offsetting cost action. So it's about GBP 34 million of decline in the Insurance business in PBT. So are we saying if PBT improvement is expected year-on-year, we would expect the Travel and Cruise business to be more than GBP 30 million positive on the financial year? Is that how should I interpret your guidance?

[Euan Sutherland, executive]

I think the very simple answer is yes.

[Ruchi Gupta, analyst]

Okay. My other question is more on the keeping one, I think I see on your facility, you have something called milestone fee paid of 2% on March 2023. I think what is that milestone fee?

[Euan Sutherland, executive]

It's '24.

[James Quin, executive]

'24.

[Unknown Analyst]

Yes. But what is it related to? What is the milestone then?

[Euan Sutherland, executive]

Do you want to take that one?

[James Quin, executive]

Sorry about the sneeze. The -- sorry, you can take it...

[Euan Sutherland, executive]

You do...

[James Quin, executive]

The milestone fee is -- I mean, the important thing is the facility is there as a backstop, first and foremost. So the milestone fee is that if the effective facility is still in place, and it would still be in place if we haven't sold the underwriting business. If we have sold the underwriting business, then essentially, it would drop away.

[Ruchi Gupta, analyst]

And just on operating cash flow, can you guide me? I think it was lower this year. I mean what's your expectation? What are the factors that could affect it in the current financial year, the operating cash flow generation?

[James Quin, executive]

Yes. So it should be better this year. I think in terms of the moving pieces. There were some one-offs in the working capital last year. So we had a decline in advance receipts year-on-year, which was a one-off. And that was in part due to the timing of -- the fact that the Spirit of Discovery was in dry dock in January. And therefore, we did -- there were lower and a couple other factors, which meant we had one-off lever advance receipts, but we should catch up to where we were before. So that should be a positive this year rather than negative.

In terms of the Insurance Broking business as well, we had a working capital impact there. And that was mainly due to the fact that, essentially, some of the impressions on the top line, which translates into lower volumes. So those are factors, which should be one-offs.

[Ruchi Gupta, analyst]

Would you be able to tell the quantity of what was that one-off, GBP 18 million, GBP 20 million or...

[James Quin, executive]

Yes. I mean I think if we go to the actual slide, I think with -- I mean, so if I took it through afterwards actually, we've got -- we can give you all the numbers, and they're all in the cash flow slides. I think the other thing is -- I mean, I think, obviously, if we were to sell AICL, we would not have the GBP 25 million of dividends that we had last year. And -- but that would then be offset by some of the improvements that we do expect in the Travel business and in Cruise. So certainly, if we look across River Cruise and Travel last year, we had a cash inflow of around GBP 17 million. That -- I mean that should be a small positive this year.

[Ruchi Gupta, analyst]

And just probably a little bit of a silly question, I guess. Do you have any exposure to any of these troubled banks in terms of your insurance portfolio or in terms of your credit lines?

[James Quin, executive]

Simple answer is no. I think we own some Credit Suisse bonds, but they're not the [indiscernible] ones.

[Ruchi Gupta, analyst]

And my last question, probably, what is your expectation with the capital expenditure for the current financial year?

[James Quin, executive]

It will be a little bit higher than last year, and that's partly because of some of the investments in the transformation of the insurance business. I mean I wouldn't -- I mean it's not like it's going to be massively high. It will probably be a little bit higher than last year.

[Unknown Analyst]

[ Marcus ] from Jefferies. I've got 3 questions, please. First of all, could you update why was available cash better at full year versus the trading statement view? And was that due to genuine improvement or sort of timing issues or management action?

Secondly, you previously gave guidance on that GBP 40 million EBITDA figure per ship on Ocean Cruises, and that gave you a lot of flexibility factor. That business became very much self-financing from a debt perspective with room to spare as well. Could you sort of roll forward that analysis today, let us know what that means today?

And then finally, A lot of people talk about putting through double-digit rate increases in insurance, and that's the number they maybe post an price comparison website that gets walked back significantly. So is that a genuine achieved price figure ahead of claims inflation figures? So you're actually genuinely seeing now margin improvement in that business.

[Euan Sutherland, executive]

Pick up the cash flow.

[James Quin, executive]

The cash at year-end -- there was a few management actions in there. A little bit of it is timing. Some of it is also underlying improvement as well. So we were a little cautious probably in our guidance in the trading statement. So it's all of those factors sort of wrapped up together. So yes, so it was a little bit better than the trading statement. And as I said, part of that is one-offs, part of it is -- sort of gives us a stronger starting point for this year.

In terms of GBP 40 million EBITDA and sort of funding of the Cruise business, so the -- obviously, at the moment, we've got slightly higher CapEx repayment -- sorry, CapEx, debt repayments for the ships because we've got the element of the ship that was not repaid during COVID. So the ship debt that is due to be repaid this year and next year is GBP 62 million, of which I think about GBP 17 million is due to the repayment on the deferred elements.

So certainly, if you look back at the structure of the facility, if you like, from when it was put in place, I think we should be able to cover the cash outflows of certainly the interest cost and the regular repayments probably this year because of the -- next year because of the catch-ups on the debt deferrals. It probably requires a little bit of funding from sort of group cash flows, but certainly beyond that. And also as the goes down, the interest cost goes down. It doesn't -- it should be within a couple of years that it is generating a cash surplus after the payment of the debt and the interest costs.

Last one on double-digit price increases. So these are -- the price increases we're talking about here are the price increases that are going through in the underwriting business. So effectively, that's the sort of the input price in the broking business. And absolutely, these are real achieved price increases, and they are pretty significant double digit. I mean we're not talking 15, we're talking a lot higher than that. And absolutely, that will translate into higher earned premium starting now, but obviously it takes until really the end of the year for all of that to be earned through.

[David Reynolds, analyst]

David Reynolds here from Davy. Apologies, I'm a digital technology analyst, so I might be a bit too soon to the game here. Question one, I know it's early days in terms of the content offer. But clearly, it's critical to your long-term development. Could you give us some color on who these users are, how do they consume, what platforms they go to, what your early experiences of kind of giving you in terms of insight in terms of what to do next?

[Euan Sutherland, executive]

Yes. It's still very early days. Some color around it, I think within 2 months, actually slightly less than 2 months, the unique users on exceptional.com have topped the total subscriber rate of the paper magazine. So there's a kind of headline in terms of the rate of growth.

In terms of the dwell time on site, we're setting ourselves a pretty stringent target above the kind of industry average, and we're beating that. So we're seeing fairly sticky customers. Total number of sessions coming in is ahead of where we thought they would be, but they're still relatively small in kind of global terms because the site has only been up running for 8 weeks.

Early monetization and affiliate revenues, again, small numbers, but ahead of what the team are used to seeing, and most of the team are from future PLC. So they've seen that sort of growth in fairly major titles before and they've run those titles before. So it's early days. The key stat that I put into the voice over was that the average age of our audience at 56, albeit again early sample data from that group is very encouraging in terms of encouraging a new audience to come into the Saga funnel and pipe to be able to move across.

We're also capturing a large number of customers into our newsletter build. Newsletters, as you know, is kind of quite a potent currency. And within the reconsent base, that's going to be a major enabler of the lifetime value model. So it's probably worth at the next update to do a full deep dive. So we can probably add that into the September results or maybe even some more headlines by the time we get to the AGM in June. At that period, we've got a bigger sample base rather than just the 2 months that we're looking at.

I think we've appeared as #1 on search for a number of our articles, which for a very, very new website and proposition is very rare, I'm told. So I think the team are doing some interesting things and tailoring their offer. So really confident in the 5-year plan. I'm confident that the team will probably exceed that from an early base, but it's still early days yet.

In terms of an example, high frequency, high engagement capital-light model, though, there is real engagement from the existing and the potential new Saga audience. So it's kind of watch the space. We are intending to launch our new digital platform business in June. It has a working title moment of Saga Village. We've mentioned that in a couple of previous updates. The full operational title will be coming out in June. And the build on that is taking lots of the queues from Saga Media. It's a kind of sister business, which again is capital-light, high growth, high engagement business. So in the next couple of years, I think much more of our presentation will be focused on the growth digitally of those businesses. But early signs so far are positive there. A follow-up question here.

[Ruchi Gupta, analyst]

Sorry for this one, you might have already answered this while you were presenting, but it has not registered with me. I just see that the load factors for -- as of 26 March 2023 are 3 percentage points lower compared to last year. Do you have any color on that? Or is that something...

[Euan Sutherland, executive]

I think that was probably only because we had a stored load factor from canceled cruises the previous year. So I think it was the last -- it was that last year will have been a number of bookings, which were retained from the pandemic years, which were loaded into the beginning of the previous year. I think it probably was.

[Ruchi Gupta, analyst]

I see. It's probably inline with what it is normally at this time of the year or...

[Euan Sutherland, executive]

Yes. Yes, probably inline with this, but yes. A follow-up over here.

[Unknown Analyst]

I know you can't say much about the sale of the insurance carrier. But given the failed sale process, and there's been others elsewhere outside of Saga Group about Motor insurers not necessarily being the flavor of the day, you sounded though quite confident that you can conclude a transaction this year. I mean you talked about end of summer concluding and closing finalization by the end of the year. So can you give us a bit more color about exactly how active the process is? I mean elsewhere, people would suggest is that is a dodo buying, looking back to sell an insurance company at the moment in Motor. But does it doesn't sound like you're thinking that way.

[Euan Sutherland, executive]

Yes. The simple answer is yes and no. So we are confident that the process is vibrant, and it's not an easy time to sell any form of organization as you see some of the results from the other brokers today. So I think it's not an ideal market. We are confident in the process. We have a number of very interested parties in the process. Clearly, I can't comment on any more detail at the moment. As you've said, we're confident within the time scales. And I think the new backstop loan facility gives us even more confidence in the wider macro picture on that, which we think is very helpful as a pragmatic backstop. But yes, we are confident in the process as we see it today.

Great. I think that's it from the room. Are there any online, Emily?

[Emily Roalfe, executive]

Yes. Thanks, Euan. [ Bruno Reed ] from PGIM has 3 questions. Firstly, is the new GBP 50 million loan facility really ranked pari passu with existing debt.

[Euan Sutherland, executive]

Do you want to do that?

[James Quin, executive]

Yes, it's unsecured, effectively ranks alongside the bonds against the RCF.

[Emily Roalfe, executive]

Thank you. I appreciate that we've already touched on River Cruise, but he asks what's the run rate EBITDA of that business?

[Euan Sutherland, executive]

I think -- what's growing? Yes. So I mean, I think we take it -- I mean there's not a lot of difference between PBT and EBITDA, so the number is sort of effectively the same. Last year, a loss of GBP 5 million, but with a depressed level of passengers. And essentially, what we had last year was they need to run pretty much all of the cruises but with lower load factors. And therefore, with a high load factor, we don't really have a lot more cost, but a lot more revenue.

So clearly, we get back into profit territory this year. That would be -- and I think there's a lot of scalability in that business if you then add more River Cruise ships into the mix, which we would intend to do over the next few years. So effectively, at the moment, we've got 2 in operation, and we'd like to get to 5 or 2 charters, which are on a long-term basis with very modern vessels. We think we get to 5 and effectively, we get to scale the business up pretty proportionately by doing that.

And yes, so it's not really a run rate that we're looking at in these numbers. This is better profitability and reasonable levels of profit this year. But as James said, scaling that up over the next 4 to 5 years is eminently doable because we have availability of hardware, either our own through the leasing that we do or through carefully selected charters. So that is a scalable business, which is very doable and certainly in our 5-year plan.

[Emily Roalfe, executive]

Finally, from Bruno. He asked whether you could elaborate further on the change in advance receipts and how this will evolve. I know you've already had a question on this, but was there anything you wanted to add?

[Euan Sutherland, executive]

Not really. I mean I think that, obviously, advance receipts is a sort of point in time number. Typically, we would expect advanced receipts to be around about GBP 75 million. And obviously, with 2 ships that -- I mean, allowing for inflation in per diems, that number will just effectively roll forward. It just so happened at 31st of January, at that point of time, we have slightly lower advance receipts, but I would expect that to go back to a more normal level and effectively to stay there. But there'll always be a little bit of volatility on any 1 month, so I wouldn't guarantee it will be the same number every month.

[Emily Roalfe, executive]

Thank you. There are no further questions from online.

[Euan Sutherland, executive]

Great. Thank you. Unless any other questions, we'll draw the meeting to a close, happy to take any more questions after the meeting. Thank you for coming along.

[James Quin, executive]

Thank you, all.