SAGA PLC
ANNUAL REPORT
AND ACCOUNTS 2021
OUR PURPOSE
To deliver
exceptional
experiences
every day, while
being a driver of
positive change
in our markets
and communities.
STRATEGIC REPORT
Highlights
Our business at a glance
Chairman’s Statement
Group Chief Executive Officer’s Statement
Market overview
Purpose and business model
Strategic priorities
Key performance indicators
Environmental, Social and Governance
Principal risks and uncertainties
Operating and Financial Review
Viability Statement
Key disclosure statements
GOVERNANCE
Corporate Governance Statement
Chairman’s introduction to governance
Governance in action
Governance statements
Board leadership and Company purpose
Division of responsibilities
Composition, succession and evaluation
Board of Directors
Nomination Committee Report
Audit, risk and internal control
Audit Committee Report
Risk Committee Report
Directors’ Remuneration Report
Annual Statement
Annual Report on Remuneration
Directors’ Remuneration Policy
Directors’ Report
Statements of responsibilities
1
2
4
6
10
12
14
16
18
28
30
46
47
50
52
53
56
58
61
62
64
66
70
74
77
81
95
111
116
Independent Auditor’s Report to the Members of Saga plc 117
FINANCIAL STATEMENTS
Consolidated financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Company financial statements of Saga plc
Balance sheet
Statement of changes in equity
Notes to the Company financial statements
ADDITIONAL INFORMATION
Alternative Performance Measures Glossary
Glossary
Shareholder information
131
132
133
134
135
136
204
205
206
212
213
216
ICONS APPEARING THROUGHOUT
THE ANNUAL REPORT
s172
This icon denotes
information relevant to
section 172(1) on pages
47-48
Read more
Saga plc Annual Report and Accounts 2021
Highlights
FINANCIAL HIGHLIGHTS
YEAR IN REVIEW
Underlying Profit Before Tax1
£17.1m
2020: £109.9m
Loss before tax
£(61.2m)
2020: £(300.9m)
Available operating cash flow1
£3.4m
2020: £92.7m
Basic profit/(loss) per share1
(67.0p)
2020: (381.7p)2
Underlying Earnings Per Share1
13.2p
2020: 121.0p2
Debt ratio (adjusted net debt to
adjusted Trading EBITDA)1
2.7x
2020: 2.4x
– Positive progress made against delivery of the strategy aimed
at returning Saga to sustainable growth.
– Key focus for the year has been on serving our customers
and supporting the wellbeing of our colleagues in a year of
unprecedented challenge.
– Insurance business performed resiliently in a highly
competitive market.
– Preparations complete in anticipation of the Travel business
returning to service, supported by strong customer retention
and high demand for travel in the future.
OPERATIONAL HIGHLIGHTS
Robust response to COVID-19
2,100
colleagues working from home
with no business interruption
High level of Cruise
customer loyalty with
73%
bookings retained through the
COVID-19 suspension period
Completed Cruise
transformation strategy with
delivery of Spirit of Adventure
in September 2020
Well positioned to resume
Travel operations as the first
cruise operator awarded the
new Lloyd's Register Shield+
COVID-19 safety accreditation
Resilient performance in motor and home insurance
1%
2020: (3%)
policy growth
80%
2020: 75%
customer retention
59%
2020: 57%
of new business came to
us on a direct basis
610k
2020: 320k
three-year fixed-price
policies sold
1
2
Refer to the Alternative Performance Measure (APM) Glossary on page 212 for definition and explanation
2020 figures restated to reflect the effect of the share consolidation completed in October 2020
1
Saga plc Annual Report and Accounts 2021Strategic Report Our business at a glance
INSURANCE
Saga’s Insurance business remains the largest
part of the Group and comprises:
– Retail Broking, which provides tailored products,
principally motor, home, private medical and
travel insurance; and
– Underwriting, representing the Group’s in-house
underwriter, Acromas Insurance Company
Limited (AICL), which sits on the panel of
insurers and underwrites 70% of Saga's motor
insurance policies.
Operating and Financial Review, pages 32-36
TRAVEL
The Travel business has been the heart of the Saga
brand for many years. As a consequence of the
COVID-19 pandemic, the Group suspended Travel
operations in March 2020.
The two components of the Group’s Travel
business are:
– Cruise, providing boutique ocean cruises
onboard its new luxury cruise ships, Spirit of
Discovery and Spirit of Adventure; and
– Tour Operations, offering package holidays
including escorted tours, special interest trips,
hotel stays and river cruises.
Operating and Financial Review, pages 36-37
OTHER BUSINESSES
The Group’s Other Businesses include:
Continued review of non-core businesses
– Saga Personal Finance, offering principally
equity release and savings products;
– Saga Magazine; and
– Our in-house mailing and printing business.
Operating and Financial Review, page 37
2
Strong delivery against targets set
Retail Broking Underlying
Profit Before Tax
– Growth in Saga-branded motor and home
policies, after several years in decline.
– Improvement in customer retention due
£75.9m
to the positive impact of our three-year
2020: £90.2m
Underwriting Underlying
Profit Before Tax
£58.7m
2020: £40.6m
fixed-price product.
– Increase in the proportion of customers
coming to us on a direct basis.
– Margins per policy in line with expectations.
policy count
– Launch of our new motor price-
comparison website proposition,
COVID-19 inclusive travel insurance and
online self-serve portal for customers.
1,617k
2020: 1,600k
operating ratio (COR)1
70.8%
2020: 83.0%
Core Saga branded motor and home
Underlying reported combined
Well placed to operate once government
Underlying (Loss)/Profit
restrictions allow
Before Tax
£(78.5m)
2020: £19.8m
– The Group suspended Travel operations
in March 2020.
– Safe repatriation of all customers
and crew ahead of the first lockdown.
– Implemented operational changes,
ensuring the highest level of health
and safety standards; including the
requirement that all customers are fully
vaccinated ahead of their departure.
– Reset our Tour Operations business
to focus on offering a higher-quality,
differentiated product portfolio that
is consistent with the Saga brand.
– Completed sale of the Group's
Healthcare operation.
– Launched a digital version of the Saga
Magazine which has been well received.
2020: £4.6m
Underlying Profit
Before Tax
£2.8m
Strategic ReportSaga plc Annual Report and Accounts 2021 INSURANCE
Saga’s Insurance business remains the largest
part of the Group and comprises:
– Retail Broking, which provides tailored products,
principally motor, home, private medical and
travel insurance; and
– Underwriting, representing the Group’s in-house
underwriter, Acromas Insurance Company
Limited (AICL), which sits on the panel of
insurers and underwrites 70% of Saga's motor
insurance policies.
Operating and Financial Review, pages 32-36
TRAVEL
The Travel business has been the heart of the Saga
brand for many years. As a consequence of the
COVID-19 pandemic, the Group suspended Travel
operations in March 2020.
The two components of the Group’s Travel
business are:
– Cruise, providing boutique ocean cruises
onboard its new luxury cruise ships, Spirit of
Discovery and Spirit of Adventure; and
– Tour Operations, offering package holidays
including escorted tours, special interest trips,
hotel stays and river cruises.
Operating and Financial Review, pages 36-37
OTHER BUSINESSES
– Saga Personal Finance, offering principally
equity release and savings products;
– Saga Magazine; and
– Our in-house mailing and printing business.
Operating and Financial Review, page 37
Strong delivery against targets set
– Growth in Saga-branded motor and home
policies, after several years in decline.
– Improvement in customer retention due
to the positive impact of our three-year
fixed-price product.
– Increase in the proportion of customers
coming to us on a direct basis.
– Margins per policy in line with expectations.
– Launch of our new motor price-
comparison website proposition,
COVID-19 inclusive travel insurance and
online self-serve portal for customers.
Retail Broking Underlying
Profit Before Tax
£75.9m
2020: £90.2m
Underwriting Underlying
Profit Before Tax
£58.7m
2020: £40.6m
Core Saga branded motor and home
policy count
Underlying reported combined
operating ratio (COR)1
1,617k
2020: 1,600k
70.8%
2020: 83.0%
Well placed to operate once government
restrictions allow
Underlying (Loss)/Profit
Before Tax
£(78.5m)
2020: £19.8m
– The Group suspended Travel operations
in March 2020.
– Safe repatriation of all customers
and crew ahead of the first lockdown.
– Implemented operational changes,
ensuring the highest level of health
and safety standards; including the
requirement that all customers are fully
vaccinated ahead of their departure.
– Reset our Tour Operations business
to focus on offering a higher-quality,
differentiated product portfolio that
is consistent with the Saga brand.
The Group’s Other Businesses include:
Continued review of non-core businesses
– Completed sale of the Group's
Healthcare operation.
– Launched a digital version of the Saga
Magazine which has been well received.
Underlying Profit
Before Tax
£2.8m
2020: £4.6m
1 Refer to page 35 of the Operating and Financial Review for how this measure is calculated and defined
3
Saga plc Annual Report and Accounts 2021Strategic Report Chairman’s Statement
s172
Section 172 matters are addressed throughout this statement
“ The strategy requires us all to work hard to
understand the lives and needs of people in
our market, and to deliver relevant products
and services of high quality and excellent value,
always striving to achieve the best standards
of customer service.”
SIR ROGER DE HAAN
Non-Executive Chairman
2020/21 was extraordinary for Saga. Like most other
companies, we have had to deal with the unprecedented
threats posed by the COVID-19 pandemic, including the
lockdowns and ensuing uncertainties. We also took the
opportunity to address some long-standing, fundamental
issues within our organisation. Euan Sutherland, Saga’s new
Group Chief Executive Officer (CEO) and his senior team,
most of whom have only joined the Company in the last two
years, have responded to all challenges extremely effectively.
I joined the Company as its eleventh employee in 1966.
When Saga was floated for the first time in 1978 and I was
Managing Director, our principal business was operating
holidays for older people. It was in 1984, when my father who
had founded the Company retired, that I became Chairman
and CEO and we began to focus on developing our Insurance
and Financial Services businesses. This diversification has served
Saga well through the challenges of the past financial year.
On 5 October 2020, I became Non-Executive Chairman after
the Company’s successful capital raise which generated
£150m (approximately £140m net of costs). I personally
invested £100m for just over 26% of the share capital. I did this,
not only because I realised that it would substantially improve
the Company’s position but because I thought I was making
a sound investment, and felt that my long experience with
Saga could benefit the Company today.
I was attracted by Euan Sutherland's plans for the business and
particularly by his determination to refocus the Company to
4
Strategic ReportSaga plc Annual Report and Accounts 2021 concentrate on serving its customers better. During the last
financial year, Saga sold a number of non-core businesses
which no longer fit with the new strategy, as well as our old
cruise ship, Saga Sapphire.
We renegotiated more favourable repayment terms for the
facilities which funded the purchase of our two new cruise
ships ordered in 2015 and 2017 and delivered in June 2019
and September 2020. Our balance sheet strengthened during
the year and, at our year end, our net bank debt, excluding
the two cruise ship facilities, was £115m lower than in the
prior year, enabling us to agree flexibility within the covenants
attached to our term loan and revolving credit facility (RCF).
Colleague and marketing costs were £37m lower than the
previous year and a decision was made not to draw on any
government funding.
“Our Travel
businesses are
therefore well-
prepared to start
their programmes
in 2021 when travel
is allowed again.”
During the year, we increased the number of our Insurance
customers (excluding for travel insurance) and, despite
combined losses of £78m from our Travel business that was
not able to generate revenues for 10 months of the financial
year, we earned an underlying profit of £17m. Given the global
challenges, this was a highly satisfactory result.
In January 2020, Euan Sutherland took over the executive
leadership of a company which, not long after it had been
floated in 2014, had begun to see a significant downward
trend in the number of its Travel customers and Insurance
policyholders, as well as of its income and underlying profits.
In February last year, Euan introduced a plan for Saga to
become more efficient and to reduce costs. However, by the
end of February 2020, the senior management team realised
the seriousness of the threat of the COVID-19 pandemic and
began to develop a new plan which included office-based
colleagues being able to work from home. Within a few hours
of the Prime Minister’s announcement of the first lockdown
on 23 March 2020, we contacted 95% of Saga’s office-based
colleagues. Within a week we distributed over 1,500 laptops
with access to the Company’s computer systems, ensuring
that Saga’s customers faced no interruption as we supported
the transition of over 2,000 people moving from office to
home working.
Although none of our customers have been able to travel
since the first lockdown, we needed substantial numbers of
colleagues to assist customers who had already booked
holidays and cruises, and to be able to provide a good
service to those who wished to book new holidays. We also
had to continue to work with our suppliers. All this was
without knowing when our Travel operations could start
again. We have implemented a raft of measures to ensure
that our holidays will be COVID-19 secure and have recently
announced that we will only take customers on holiday
who have been fully vaccinated. Our Travel businesses are
therefore well-prepared to start their programmes in 2021
when travel is allowed again.
Saga’s Insurance Broking arm saw a return to growth in
the number of customers for its main lines of business, motor
and home insurance. This was achieved by greatly improving
customer retention. It also generated a greater proportion
of direct sales, relying less on price-comparison websites.
Saga’s Underwriting company, AICL, experienced continued
favourable development on large bodily injury claims, alongside
reduced claims frequency in line with the rest of the market.
Saga’s magazine continued its printed circulation with over
200,000 subscribers, and recently successfully launched the
digital version of the magazine.
During the year, despite the massive distraction caused
by the pandemic, Euan Sutherland successfully launched
Saga’s new strategic plan, and this is now being embedded
in the organisation. The strategy requires us all to work hard
to understand the lives and needs of people in our market, and
to deliver relevant products and services of high quality and
excellent value, always striving to achieve the best standards
of customer service. The plan sets these objectives in
the context of our digital age and requires the Company
to continue to invest in its technology. It restructures the
business with a leaner operating model that will lead to
a more efficient and collaborative way of working.
Management layers have been reduced from 17 to 5.
To ensure excellent virtual communication within the
organisation, technology has been used very effectively
and considerable emphasis has been placed on providing
support for the wellbeing of all those working from home.
Despite the uncertainty created by the pandemic and the
major changes the organisation has been through, our
surveys show that our team morale remains strong and
is better now than at the beginning of the financial year.
During the last financial year, we sought ways to meet our
Environmental, Social and Governance (ESG) responsibilities
even more effectively and we will continue to develop our
reporting to reflect the progress we are making.
I would like to thank everyone at Saga, including our Board,
for working so hard and embracing so enthusiastically the
changes we have had and have chosen to adopt. I would
also like to congratulate Euan Sutherland and his senior
management team. Given our circumstances, the financial
results were very encouraging and we are beginning to lay
the foundations for the Company to prosper in the future.
I look forward to celebrating our 70th anniversary this year.
SIR ROGER DE HAAN
Non-Executive Chairman
6 April 2021
5
Saga plc Annual Report and Accounts 2021Strategic Report Group Chief Executive Officer’s Statement
s172
Section 172 matters are addressed throughout this statement
“ I would like to acknowledge the strength,
agility, resilience, and determination I have
witnessed from our colleagues in what has
been a particularly challenging year. ”
EUAN SUTHERLAND
Group Chief Executive Officer
6
Saga plc Annual Report and Accounts 2021
Strategic ReportSaga plc Annual Report and Accounts 2021 I could never have foreseen the challenges that Saga would
face in my first full year as Group CEO. With that being said,
I am very proud of the way we responded, and I am confident
that Saga is in a stronger position, with a clearer direction
now, than when I joined in January 2020. Despite the issues
that the year presented, we made good progress against our
strategy, all the while placing the safety of our colleagues
and customers at the forefront of our thinking.
As for many other businesses, the COVID-19 pandemic
has had a significant impact on Saga, both financially
and operationally. We have shown tremendous resilience
in navigating the impact of the pandemic and every single
one of our colleagues has played their part.
As such, I am pleased to report that despite the challenging
backdrop, the Group generated an Underlying Profit Before Tax
of £17.1m, reflecting resilient trading in the Insurance business
as it makes progress against the targets set in April 2019, and
the suspension of the Travel business from March 2020. Overall,
the Group reported a loss before tax of £61.2m, due to an
impairment of Travel goodwill in the first half of the year.
In Insurance, motor and home policies returned to growth,
with sales volumes 1.1% higher than in 2019/20, following
several years in decline. Our three-year fixed-price product
continues to improve customer loyalty with motor and home
retention at 80.5%, 5ppts higher than the prior year, with
over a third of customers choosing the three-year product.
Acquiring new business on a direct basis continued to be
a priority and in 2020/21, 59% of customers came to us
through this route, representing a 2ppt improvement on the
prior year. Motor and home margins per policy were £74, in
line with the expectations set at the beginning of the year.
Despite the Travel business being suspended, customer
demand remained strong; with £154m of total Cruise bookings
across 2021/22 and 2022/23, in comparison with £128m at the
same point last year, representing a 20% improvement.
This excludes 2020/21 bookings that have been cancelled
where the customer has indicated that they want to rebook
but have yet to do so on a specific cruise. Customer retention
across both businesses remains high with Cruise at 73% and
Tours at 43%.
Focus continued on managing our levels of debt and
maintaining sufficient liquidity through the period of Travel
disruption. Following the actions taken to provide further
flexibility, the Group had available cash of £75.4m at the
year end, excluding the £100m RCF which remained undrawn.
With the actions taken, I am certain we are on the right
path to ensuring Saga gets back to doing what it does
best, delivering exceptional experiences for our customers.
STRATEGIC UPDATE
Saga launched its strategic turnaround plan, Transforming
Saga – Experience is Everything, in September 2020.
The new strategy is firmly rooted in our heritage and
aims to create a refreshed, contemporary and confident
brand with a data and digital-led approach to improving
our customers’ experiences.
At our core, we remain the same, a unique British business
focused on providing exceptional, differentiated products
“We remain confident
that the disciplined
execution of our
turnaround strategy
will unlock the
potential that exists
within Saga, creating
significant long-term
value for our investors.”
and services to our distinct customer group. We are aligning
our people and products to focus on delivering exceptional
experiences for our customers every day, whilst being a driver
of positive change in our markets and communities. This will
strengthen our relationship with our customers, and it will
address many of the challenges the business has faced in
the last few years.
The strategy is designed to drive growth in revenues, profit
and cash over the long term, while improving the financial
strength of the business by reducing debt and delivering
sustainable returns for our investors. It is focused on delivery
under each of the following five pillars.
1. People and culture step change
We recognise our colleagues underpin our success, and so they,
and the culture in which they operate, represent our first priority.
Promoting an environment of openness, transparency, and trust,
where colleagues can feel that they are heard and be
themselves is of great importance to me. To foster this culture,
we launched our new internal communications platform,
Workplace, which encourages colleagues to share experiences,
communicate, collaborate, and also have fun. We expanded our
continuous listening strategy to include several new channels of
communication, including a series of focus groups and inclusion
forums, providing colleagues with the opportunity to feel as
though they belong, encouraging them to speak up and express
their views.
I am pleased with the way that all colleagues have
interacted with the changes and, to date, we have received
overwhelmingly positive feedback. Despite the difficult year
that we had, the result of our most recent colleague survey
was an improved engagement score of 7.3 (out of 10), and
a record 92% participation rate. This compares with a score
of 7.0 in September 2020, with the highest scores seen
in categories including management support and peer
relationships. We recognise that there is still work to do,
and that it is not something we can change overnight.
As such, we will continue to monitor engagement, building
the appropriate action plans and work with colleagues to
make the changes that matter to them.
7
Saga plc Annual Report and Accounts 2021Strategic Report Group Chief Executive Officer’s Statement continued
We have launched a set of core values that underpin our purpose
and represent who we are and the way in which we work.
These values are precision pace, empathy, curiosity and
collaboration, all of which are key qualities needed to ensure we
deliver the best experiences for each other and our customers.
Colleagues have welcomed these new values, applying them
to situations they encounter every day in life at Saga.
The unique challenges of 2020 impacted us all and our
colleagues were no different. As with many people, the
adjustment to new ways of working, separation from loved
ones and, for many, home schooling young children, have
been difficult to manage. The mental wellbeing of our
colleagues has been a key focus, with enhanced support
provided via additional on-call Mental Health First Aiders
(MHFAs), the introduction of a dedicated Wellbeing Manager
and the use of national campaigns and awareness days to
highlight the support available. We believe mental health
should be understood, nurtured and celebrated, and to ensure
our colleagues have access to the right care at the right
time, we invested in the Unmind platform. This app is aimed
at empowering colleagues to improve their mental wellbeing
through a variety of self-help tools and techniques.
Despite the fantastic progress, our people and culture step
change will continue to be a priority for the coming years, as
the changes made will take time to embed. Our immediate
focus for 2021/22 will centre around living the new values and
leadership behaviours, further building capability in key roles,
reassessing our framework for colleague reward and continuing
to create exceptional experiences for our colleagues.
2. Data, digital and brand transformation
As a leadership team, we have also been focusing on
assessing the investments made over the last few years so
that we can build on and further optimise them, repurposing
technology wherever possible in order to reduce complexity.
Given the nature and size of the ambition, our data, digital
and brand transformation represents a multi-year strategy.
Since the launch of our strategy, a key focus has been the
ease with which customers are able to interact with us in
the digital landscape. We launched a series of improvements
to our mobile app, including the addition of web chat
functionality, alongside our recently launched Saga Magazine
app, which has been well received, achieving an Apple App
Store rating of 4.7 out of 5.0.
Our priorities for the short to medium term include the relaunch
of our brand essence, Experience is Everything, planned for later
in 2021. This will form part of a multi-year campaign designed to
enhance brand awareness and optimise marketing activity,
whilst representing a contemporary brand.
Work has started on the development of a single Group-wide
customer digital data platform which builds on and optimises
the investment made in recent years. This will continue to
be a key focus for 2021/22. Once complete, it will enable
us to reduce complexity across our systems and provide
a clearer view of each customer across all our businesses.
3. Optimising our businesses
Insurance
During the COVID-19 pandemic, we have all needed a little
extra support, and our customers have been no different.
We proactively contacted customers to encourage them to
let us know if their circumstances had changed; whether that
be a reduction in mileage or the requirement to add another
driver to their policy. For customers facing financial hardship,
we offered support through payment holidays and fee
waivers, where appropriate. We continue to proactively
review our pricing, applying premium reductions to reflect
reduced driving activity throughout the pandemic.
Aside from a lower volume of claims, reflecting a reduction
in miles driven during lockdown periods, the Underwriting
business observed continued favourable experience in
relation to large claims for bodily injury. This resulted in
reserve releases of £38m for the year.
Saga continuously looks at ways to evolve our product offering
with the needs of our customers in mind. Innovation continued
within Insurance with the launch of our new motor price-
comparison website product, offering customers greater
flexibility when determining the product that is right for them.
Given the increasing number of consumers utilising digital
platforms, we also launched our self-serve portal, allowing
customers to make common policy amendments online.
Additionally, in response to the current uncertain times, we
were one of the first insurers to offer COVID-19 inclusive
travel insurance, ensuring that our customers have peace
of mind whilst travelling.
The quality of the products we sell and the exceptional
service we offer continue to be recognised formally by our
customers. Most recently, Saga was awarded ‘Best Home
Insurance Provider’ as well as ‘Best Big Insurance Company’
at the 2020 Insurance Choice Awards.
As we look to 2021/22, we continue to actively review and
develop our product offering in order to meet the desires
of our customers and the requirements of the regulatory
landscape, whilst completing the foundations required
to set the business on the track of longer-term growth.
Travel
Saga’s Travel business suspended operations in March 2020.
Through these extraordinary times, we prioritised the safety and
wellbeing of our customers and crew. This was demonstrated
through the repatriation of all guests and crew and the flexibility
we offered in relation to cancelled departures, with the option
for a cash refund, voucher towards a future booking, or the
opportunity to rebook a specific destination.
Following the arrival of Spirit of Adventure in September 2020,
Saga’s ocean cruise fleet comprises two new, technologically
advanced cruise ships. One of the key benefits of this is that
it will allow us to offer our guests the highest level of health
and safety standards in the industry at a time when that is
of paramount importance. Given the further considerations
arising from the COVID-19 pandemic, Saga has worked to
develop the very best safety protocols allowing us to operate in
the COVID-19 world once we are able. As we restart cruises, we
are keeping all our current health and safety measures in place
to ensure our cruises are as safe as possible. This includes our
vaccination policy and initially operating a reduced guest
capacity. Keeping to a restricted number of guests feels like
the right thing to do as we restart, but we will look to take more
guests and move back to full capacity over time. Our enhanced
safety procedures include:
8
Strategic ReportSaga plc Annual Report and Accounts 2021 – increasing our crew to guest ratio, to enhance our onboard
cleaning regimes;
– a private chauffeur car per household up to a range of
250 miles, for departures within the initial restart period;
– additional enhancements to our state-of-the-art air
conditioning which already provides 100% fresh air in
all cabins and public areas; and
– improved and expanded medical facilities with a new
dedicated isolation area and a doubled medical team.
Following the implementation of these and other measures,
Saga was awarded the first Lloyd’s Register Shield+
accreditation, the highest level of health assurance available.
During the COVID-19 suspension period, we took the
opportunity to reset the Tours business. Tour Operations
will return to the DNA that contributed to the success of
Saga Holidays for so many years, offering a higher-quality,
differentiated product portfolio; emphasising peace of mind,
unique and aspirational holidays tailored specifically for our
customers. Leveraging the insights gained from our Cruise
transformation programme, we are extending our Tours
product proposition to include a second new river cruise ship.
Launching in 2022, Spirit of the Danube will join its sister ship,
Spirit of the Rhine, to allow customers to enjoy our luxury
cruise experience whilst voyaging on the riverways of Europe.
We have maintained an agile approach throughout the year and
are ready to resume operations in 2021, although any changes
to government travel guidance may impact those plans.
4. Driving simplicity and efficiency
We continue to adopt a cost-conscious approach, ensuring that
where possible we maximise efficiency by reducing cost and
removing complexity, simplifying our activities across the Group.
Following our review of the organisational structure, looking at
both the services we needed to provide and the resources we
had to do so, we had no option but to make the difficult decision
to reduce our number of colleagues. Treating all colleagues with
the utmost care and respect during this process was paramount
in our approach to enhancing redundancy terms, outplacement
offers and maintaining transparent two-way conversations.
As a result of this process, the number of colleagues was
reduced by 36% (including non-core disposals, permanent
reductions and temporary travel measures).
Through disciplined cost management during the suspension
period, the Travel businesses were also able to achieve
significant savings in both marketing and administration
costs and delivered cash burn costs in the second half of
the year at the lower end of £6-8m per month guidance.
Saga remains on track to achieve run rate cost savings
of £20m over time and will continue to assess possible
efficiencies in the business to ensure that it is operating
at the optimum level for the future.
5. Reducing our debt
One of Saga’s key objectives has always been to proactively
take decisive action to strengthen the balance sheet,
reduce debt and maintain financial resilience. This has
been more important than ever given the uncertainty
of the COVID-19 pandemic.
Our focus in this area during 2020/21 was on reducing covenanted
short-term debt, with a net debt to EBITDA leverage ratio (excluding
the Cruise business) of 2.7x at 31 January 2021, marginally higher
than the prior year, despite significantly lower EBITDA.
Following the actions taken throughout the year to enhance
our financial flexibility, including the capital raise which
generated approximately £140m of proceeds and agreement
of further extensions in relation to both the corporate and ship
facilities, we remain well placed to support the delivery of our
strategy and the planned restart of the Travel business.
Acknowledging that the actions taken would not have been
possible without our shareholders or financing partners,
I would like to take this opportunity to thank them for their
continued support through a difficult year.
The Group continues to focus on the preservation of cash
and management of debt levels, with the objective of
reducing total debt leverage to under 3.5x EBITDA, providing
Saga with a strong foundation for future growth.
FCA MARKET STUDY
The final recommendations of the Financial Conduct Authority
(FCA) market study on general insurance pricing practices are
expected in the second quarter of 2021 with implementation due
to be complete by the end of 2021. The FCA is proposing that,
when a customer renews their motor or home insurance, the
price offered should be no greater than if the customer were new
to the insurance company. Although we expect some short-term
financial impact from the change, as pricing adjusts across both
new business and renewals, we approach the implementation of
the expected recommendations with confidence and, following
our recent pricing changes and planned enhancements to our
product offering, believe that we are well placed to operate
successfully in a price equalisation market.
THE FUTURE
The current financial year will be a hugely important period
of transition, against the continued backdrop of the
COVID-19 pandemic.
Within Travel, ahead of the full roll out of the vaccine
programme, we are poised to restart both operations in 2021,
as soon as government restrictions allow.
We will continue to prioritise the preservation of cash
and manage levels of debt; however, given the continued
uncertainty arising from COVID-19, we are not in a position
to provide earnings guidance for the 2021/22 financial year.
We remain confident that the disciplined execution of our
turnaround strategy will unlock the potential that exists within
Saga, creating significant long-term value for our investors.
Finally, I would like to acknowledge the strength, agility,
resilience, and determination I have witnessed from our
colleagues in what has been a particularly challenging year, and
I would like to thank each and every one for their contribution.
EUAN SUTHERLAND
Group Chief Executive Officer
6 April 2021
9
Saga plc Annual Report and Accounts 2021Strategic Report Market overview
Saga operates in a
dynamic environment
across multiple sectors
to meet the needs of its
target demographic.
Saga regularly reviews the trends and factors
influencing our customers and markets to identify
opportunities and risks.
THE SAGA CUSTOMER
Whilst Saga’s target market is people aged over 50, our
core customers are often aged over 70. This segment of the
over 50s market is large, affluent and is expected to grow.
For 2020, the number of people aged over 70 was estimated
at 9.2 million people1, representing 14% of the United
Kingdom (UK) population with total disposable wealth of
£1.8 trillion (23% of the UK’s total). As the population of the
UK ages, the number of people over 70 is expected to grow
from 9.2 million in 2020 to more than 10.9 million by 2030,
with the proportion of the population aged over 70 increasing
from 14% to 18% over the same period.
Growth of UK population over 50 by age1
(million)
10
8
6
4
2
0
Age
bracket
50-59
60-69
70-79
80+
2003
2018
2028 (estimate)
Saga’s investment in strengthening customer insight
and ability to stay abreast of the changing sentiments and
behavioural traits of our core target market have continued
to support its strong presence with people aged over 70;
78% of Saga’s Travel customers and 56% of Insurance
customers are aged 70 and over.
Vulnerable customers
s172 Saga aims to create exceptional experiences for
all customers. We recognise that we will interact with
customers who require additional support or are in a
vulnerable situation every day, and are committed to
making their experience with Saga exceptional. We take
a continuous improvement approach to identifying and
supporting vulnerability across the Group, with specialist
1
Office for National Statistics – 2018-based principal projections
10
teams and dedicated resources working to ensure all
customers receive a consistent experience.
Competition for customers
The Group faces significant competition for business within
the sectors in which it operates. Competition for customers
continues to increase, in particular in the more commoditised
parts of the insurance and travel markets, where customers can
buy simple and cheap products easily online. Within this context,
it is increasingly important that Saga continues to offer its
customers differentiated products and services that truly
meet the needs of its demographic.
Within Insurance, Saga has the data capability to accurately
price risk for our segment of the market whilst offering
compelling product propositions such as the three-year
fixed-price product and COVID-19 inclusive travel insurance.
In Travel, the nature of our Cruise offering with state of the art
mid-sized boutique ships is designed with the experience of
people over 50 in mind. These are just some of the compelling
reasons for customers to come to, and stay with Saga.
REGULATORY AND LEGISLATIVE
DEVELOPMENTS
Regulatory context
The Insurance business is regulated primarily by the FCA
and the Gibraltar Financial Services Commission (GFSC),
operating under the Solvency II Directive, with the Travel
businesses regulated by the Civil Aviation Authority (CAA).
The Travel businesses are members of the Association of
British Travel Agents (ABTA), the International Air Transport
Association (IATA) and the Federation of Tour Operators
(FTO). These are well-recognised trade bodies with
codes of conduct which members are required to adhere
to. All parts of Saga operate procedures to comply with
other key regulations and legislation including but not limited
to the Data Protection Act 2018, the Bribery Act 2010, the
Equality Act 2010 and health and safety legislation.
FCA market study
In September 2020, the FCA published the general insurance
pricing practices final report which set out proposed remedies
to address the difference between new business and renewals
pricing for loyal customers within the motor and home
insurance markets. The FCA are due to issue a Policy
Statement, which will confirm the final remedies by the end
of May 2021. Firms will have until the end of September 2021
to implement the systems, controls and product governance
rules, and until the end of 2021 to implement the pricing,
auto-renewal and reporting requirements. Saga believes that,
in aggregate, the changes proposed for the market will be good
for consumers and will benefit strong brands with a clear focus
on delivering for customers, and will be positive for its place
in the market. Work is well progressed to ensure processes
and products align to the proposed remedies and we will
further refine the changes once the final rules are published.
Cash restrictions for Travel businesses
Following discussions with the CAA, the main regulator for
the Tour Operations business, in October 2020 the Group
established a trust arrangement for new and existing
bookings. As a result, all customer cash relating to Tour
Operations is held in a separate trust and is only available
to pay suppliers and for other corporate uses once the
customer has returned from holiday.
Strategic ReportSaga plc Annual Report and Accounts 2021 Purpose and business model, pages 12-13
Strategic priorities, pages 14-15
Environmental, Social and Governance, pages 18-27
Principal risks and uncertainties, pages 28-29
MACROECONOMIC CONDITIONS
COVID-19
At the prior year end, Saga mobilised its crisis management
team to plan for and manage the impact of the global spread
of COVID-19. Over the year, the situation has evolved rapidly
into a global pandemic with far-reaching societal and market
consequences. In line with the escalating threat, we developed
and implemented operational and financial resilience plans to
ensure the safety of our customers and colleagues, and to
enable the business to trade through these uncertain times.
s172 Within one week of lockdown, Saga had over 2,000
colleagues working effectively from home, with no reduction
in customer satisfaction levels. During this time, whilst many
other firms were reliant on government financial support, Saga
has remained resilient without the need for this. Saga has also
taken this opportunity to re-evaluate our ways of working to
become more home-based permanently. We are therefore
reassessing our property portfolio with a view of simplifying
it going forward and enhancing the offices which are retained.
The Travel business has been severely impacted by the
effects of the COVID-19 pandemic since its suspension in
March 2020. Since then, the Group has been working closely
with the UK Government and industry bodies to plan for the
safe resumption of Travel which is expected in 2021, subject
to the easing of government restrictions.
s172 For all Saga Travel customers, the Group has introduced
the requirement that guests are fully vaccinated at the time of
travel. This is in addition to Saga’s previously agreed enhanced
safety procedures. In Tour Operations, these include the
implementation of strengthened due diligence across the
supplier base; stringent documentation of enhanced training
procedures; and preparation of clear guest communications
detailing destination-specific COVID-19 requirements ahead
of their departure. In Cruise, these include an initial reduction
in guest capacity; enhanced medical areas and air
conditioning to prevent the spread of infection; multi-layer
COVID-19 testing ahead of departure; increased crew to
guest ratios; enhanced cleaning regimes; and a quarantine
and testing procedure for crew.
These measures further complement the nature of Saga’s
spacious, boutique ships which offer fresh air in all cabins,
control of airflow in public spaces, and ionisation and ultra-
violet filter capability, enabling the safest experience for our
guests. Following implementation of these health and safety
standards, the highest in the industry, Saga was awarded
the first Lloyd’s Register Shield+ accreditation, the highest
level of health assurance available.
The long-term impacts of the COVID-19 pandemic remain
unclear and the Group will continue to adapt operational
resilience plans and the financial stress tests as the
situation develops.
Brexit
Under the terms of the European Union (EU) (Withdrawal
Agreement) Act 2020, the UK withdrew from membership
of the EU on 31 January 2020 and entered into a transition
period which expired on 31 December 2020. A trade deal was
agreed between the UK and the EU, effective 1 January 2021.
Saga is not currently anticipating any material adverse
impacts arising from the trade deal, however the main
risks being monitored include:
– Loss of access to the Tour Operating Membership Scheme
(TOMS) which would require tour operators to register in
each EU member state for VAT purposes.
– Potential for higher motor claims costs due to an increase
in the cost of parts imported from the EU and the
heightened risk of extended repair durations and delays.
– Dependencies on third parties who themselves may
be impacted by Brexit.
– Potential for increased costs of private medical insurance
claims for medication or prostheses sourced from the EU,
and of travel insurance claims due to removal of the
European Health Insurance Card (EHIC).
– Tour Operations employment of UK nationals in the EU.
– EU nationals working for Saga in the UK, although the
impact of this is minimal.
For all of these risks, Saga has sought to understand the
nature of the risk and taken the appropriate action to
minimise the exposure.
The Group’s underwriting business, AICL, is a Gibraltar
registered company operating through a branch in the UK.
AICL provided regulated insurance services into the UK
under its Solvency II branch passport up until the end of the
Brexit transition period that expired on 31 December 2020.
Gibraltar and the UK have established a new Gibraltar
Authorisation Regime (GAR) allowing Gibraltar-based
financial services firms continued market access to the UK
and continuing to align standards and supervisory practices
with those of the UK. This regime forms part of the UK
Financial Services Bill which was introduced to Parliament
on the 21 October 2020 but is still going through the
Parliamentary approval process. Ahead of the introduction
of the new permanent GAR regime, the UK Government
introduced the Financial Services (Gibraltar) (Amendment)
(EU Exit) Regulations 2019 and the Gibraltar (Miscellaneous
Amendments) (EU Exit) Regulations 2019 to ensure that
market access rights between Gibraltar and the UK are
protected both beyond the end of the transition period
and ahead of the commencement of the permanent market
access regime as part of the Financial Services Bill.
11
Saga plc Annual Report and Accounts 2021Strategic Report
Purpose and business model
OUR PURPOSE
Saga exists to deliver exceptional experiences
for our customers every day, whilst being a driver
of positive change in our markets and communities.
CREATING VALUE USING OUR DISTINCTIVE STRENGTHS
Saga continues to invest in
the core assets which set us
apart and drive our long-term
value creation. Our strengths
are central to the functioning
of the Saga Model, execution
of our strategy and ultimately
the delivery of value to our
key stakeholders.
Strategic priorities, pages 14-15
Key performance indicators (KPIs), pages 16-17
Environmental, Social and Governance,
pages 18-27
Principal risks and uncertainties (PRUs),
pages 28-29
Proprietary data and technology
We continue to invest in renewing
and refreshing our systems capabilities
and in strengthening our ability to
capture insights at every point of
contact with both our existing and
potential customers. This enables
us to tailor our offerings to suit their
specific needs.
Financial resilience
Insurance operations remain highly
cash generative as much of our profit
after tax is converted into cash.
Notwithstanding the Travel business
being suspended since March 2020,
the Group overall generated positive
operating cash flow for the year.
This continues to provide the
flexibility to balance investment in
the brand and core businesses with
debt reduction. Throughout these
unprecedented times, with the
support of financing partners, Saga
has continued to demonstrate its
financial resilience and ability to react
to developments in an agile manner.
Our colleagues
Our colleagues are core to our brand.
We continue to invest in building
a high-performance and highly-
supportive culture. We encourage
our people to do the best work
of their lives, creating exceptional
experiences for our customers.
Brand strength
In a highly competitive environment,
Saga’s brand remains a significant
differentiator and driver of value.
We recognise that the strength
of our brand supports our direct
marketing model, drives customer
purchases and improves retention.
Our customers
Customers remain at the heart
of our business, and our focus on
them provides insight into their
behavioural traits and sentiments,
allowing us to develop and deliver
the differentiated products that they
desire with the exceptional service
that they deserve.
Supplier partnerships
Our supplier relationships are
fundamental to our business model.
The specialist skills, knowledge and
capital that our partners provide
help us deliver the best outcomes
for our customers.
UNDERPINNED BY OUR COLLEAGUES, CULTURE AND VALUES
Our purpose is to create Exceptional Experiences Every Day. Our values represent
who we are and how we work, brought to life every day by our colleagues.
We believe that every interaction, in whatever form that takes, should reflect
these values.
Precision pace
Always owning and making
things happen
We agree clear goals and plans, we
move quickly and boldly, and we act
and take ownership.
12
DELIVERED
THROUGH THE
SAGA MODEL
CREATING VALUE FOR
OUR STAKEHOLDERS
Saga is committed to maximising value for our key stakeholders.
A strong brand
The Saga brand is both highly
trusted and well recognised
within its target demographic.
Differentiated products
We listen to our customers to
design and deliver high-quality,
differentiated products and services
that resonate with them, giving them
a compelling reason to come to
Saga and to stay.
Unique route to market
Saga’s proprietary database,
marketing model and compelling
propositions provide direct access
to both existing and new customers
across multiple channels.
Outstanding service
Our customers know what good
service looks like, expect the best,
and recognise it when they get it.
We monitor feedback and the quality
of customer service provided by
our in-house and third-party teams
to ensure we always deliver
exceptional experiences.
Customers
Partners and suppliers
Our customers are at the heart
Our partners and suppliers support
of everything we do. We recognise
our ability to deliver the products
that our customers do not define
and services our customers desire.
themselves by age, but by attitude,
Saga aims to select partners and
aspiration and an appetite for
suppliers that either have specialist
adventure. We use this knowledge
skills, knowledge, capital or whose
to design bespoke products and
causes are close to our customers'
services aimed at creating
exceptional experiences
and developing long-term
hearts. Our partners and suppliers
benefit from our brand, customer
knowledge and access to an
relationships with our customers.
attractive demographic.
Colleagues
Our success relies on having
highly engaged colleagues
who are committed to delivering
Shareholders
Saga aims to enhance long-
term value for shareholders by
optimising our core businesses,
exceptional experiences. We invest
returning to sustainable growth
and accelerating deleveraging.
in strengthening the capabilities
of our people, building a diverse
and inclusive environment where
our colleagues can feel they belong,
financial position in light of the
supporting their wellbeing and
COVID-19 pandemic, the Board
promoting reward and recognition.
announced in April 2020 that it had
s172 In order to protect the Group's
suspended dividend payments to
shareholders. The Board does not
expect to pay dividends until 2023
at the earliest, given the restrictions
under current financing arrangements.
Community
Saga is committed to being a driver
of positive change in our communities
through charitable giving, employee
volunteer programmes and minimising
the impact of our operations on the
environment. We are proud to represent
and advocate for our customers on a
range of issues that affect people over
50 in the UK.
Strategic ReportSaga plc Annual Report and Accounts 2021
CREATING VALUE USING OUR DISTINCTIVE STRENGTHS
Saga continues to invest in
the core assets which set us
apart and drive our long-term
value creation. Our strengths
are central to the functioning
of the Saga Model, execution
of our strategy and ultimately
the delivery of value to our
Our colleagues
Proprietary data and technology
Our colleagues are core to our brand.
We continue to invest in renewing
We continue to invest in building
and refreshing our systems capabilities
a high-performance and highly-
and in strengthening our ability to
supportive culture. We encourage
capture insights at every point of
our people to do the best work
contact with both our existing and
of their lives, creating exceptional
potential customers. This enables
experiences for our customers.
us to tailor our offerings to suit their
specific needs.
key stakeholders.
Brand strength
Strategic priorities, pages 14-15
Key performance indicators (KPIs), pages 16-17
Environmental, Social and Governance,
pages 18-27
pages 28-29
Principal risks and uncertainties (PRUs),
In a highly competitive environment,
Financial resilience
Saga’s brand remains a significant
Insurance operations remain highly
differentiator and driver of value.
cash generative as much of our profit
We recognise that the strength
of our brand supports our direct
after tax is converted into cash.
Notwithstanding the Travel business
marketing model, drives customer
being suspended since March 2020,
purchases and improves retention.
the Group overall generated positive
operating cash flow for the year.
This continues to provide the
flexibility to balance investment in
the brand and core businesses with
debt reduction. Throughout these
unprecedented times, with the
support of financing partners, Saga
has continued to demonstrate its
financial resilience and ability to react
to developments in an agile manner.
Our customers
Customers remain at the heart
of our business, and our focus on
them provides insight into their
behavioural traits and sentiments,
allowing us to develop and deliver
the differentiated products that they
desire with the exceptional service
that they deserve.
Supplier partnerships
Our supplier relationships are
fundamental to our business model.
The specialist skills, knowledge and
capital that our partners provide
help us deliver the best outcomes
for our customers.
DELIVERED
THROUGH THE
SAGA MODEL
CREATING VALUE FOR
OUR STAKEHOLDERS
Saga is committed to maximising value for our key stakeholders.
A strong brand
The Saga brand is both highly
trusted and well recognised
within its target demographic.
Differentiated products
We listen to our customers to
design and deliver high-quality,
differentiated products and services
that resonate with them, giving them
a compelling reason to come to
Saga and to stay.
Unique route to market
Saga’s proprietary database,
marketing model and compelling
propositions provide direct access
to both existing and new customers
across multiple channels.
Outstanding service
Our customers know what good
service looks like, expect the best,
and recognise it when they get it.
We monitor feedback and the quality
of customer service provided by
our in-house and third-party teams
to ensure we always deliver
exceptional experiences.
Partners and suppliers
Our partners and suppliers support
our ability to deliver the products
and services our customers desire.
Saga aims to select partners and
suppliers that either have specialist
skills, knowledge, capital or whose
causes are close to our customers'
hearts. Our partners and suppliers
benefit from our brand, customer
knowledge and access to an
attractive demographic.
Shareholders
Saga aims to enhance long-
term value for shareholders by
optimising our core businesses,
returning to sustainable growth
and accelerating deleveraging.
s172 In order to protect the Group's
financial position in light of the
COVID-19 pandemic, the Board
announced in April 2020 that it had
suspended dividend payments to
shareholders. The Board does not
expect to pay dividends until 2023
at the earliest, given the restrictions
under current financing arrangements.
Customers
Our customers are at the heart
of everything we do. We recognise
that our customers do not define
themselves by age, but by attitude,
aspiration and an appetite for
adventure. We use this knowledge
to design bespoke products and
services aimed at creating
exceptional experiences
and developing long-term
relationships with our customers.
Colleagues
Our success relies on having
highly engaged colleagues
who are committed to delivering
exceptional experiences. We invest
in strengthening the capabilities
of our people, building a diverse
and inclusive environment where
our colleagues can feel they belong,
supporting their wellbeing and
promoting reward and recognition.
Community
Saga is committed to being a driver
of positive change in our communities
through charitable giving, employee
volunteer programmes and minimising
the impact of our operations on the
environment. We are proud to represent
and advocate for our customers on a
range of issues that affect people over
50 in the UK.
Empathy
Always aware of others
We always understand and acknowledge
how someone else is feeling and their
experience, and we walk in their shoes.
Curiosity
Always asking why?
We are open minded, always seeking
new insights and learning about our
customers, markets, competitors and
each other, and we welcome and
provide challenge.
Collaboration
Always one team, the Saga team
We are one team, we get on the bus
and work together, we are inclusive
and value difference.
13
Saga plc Annual Report and Accounts 2021Strategic Report
Strategic priorities
Continued
disciplined
execution
against new
strategy
to unlock
Saga’s potential.
1 PEOPLE AND CULTURE
STEP CHANGE
s172
Objective
Reset and relaunch Saga's new purpose,
values and leadership behaviours to
engage colleagues in the true Saga
spirit and create a culture to deliver
and maintain Saga's transformation.
s172
TRANSFORMATION
2 DATA, DIGITAL AND BRAND
Objective
Transform the digital experience for
our customers, focusing on a faster, less
complex and familiar customer journey.
Optimising previous investments, develop
data solutions to create a unified view
of the customer across our businesses.
Enhance brand awareness and optimise
marketing activity through the launch
of our new modernised Saga brand.
4 DRIVING SIMPLICITY
AND EFFICIENCY
5 REDUCING OUR DEBT
Re-establish Saga through quality,
Maximise efficiency by continuing to
Continue to reduce debt, taking
exemplary service and by building
reduce costs and complexity across
action to strengthen the balance
sheet and maintain financial resilience.
Objective
the Group.
Objective
Performance indicators
– On track to achieve £20m of
run rate cost savings over time.
– Disciplined cost control during
the period of Travel suspension
Performance indicators
– Successfully raised approximately
£140m proceeds from the capital
raise, allowing repayment of the
RCF and part of the term loan.
with burn costs at the lower end
– Completed disposals of Healthcare,
of the £6-8m per month guidance.
Destinology and Bennetts,
– 59% of new business acquired directly,
– Resized and reshaped the
generating £31m of proceeds.
2ppts ahead of prior year. Growth in
motor and home policies of 1.1%,
organisation, with a 36%
reduction in headcount
– Leverage ratio (excl. Cruise) of 2.7x,
well within the covenant of 4.75x.
despite the competitive environment.
(including non-core disposals).
– Worked closely with lenders in order
to manage the existing bank
covenants, allowing flexibility
through the ongoing disruption
arising from COVID-19.
– Further cruise debt deferral
and covenant waiver agreed
until 31 March 2022 (in addition
to existing deferral covering the
period to 31 March 2021).
3 OPTIMISING OUR
BUSINESSES
Objective
differentiated propositions that
deliver real value for money for
our customers.
Strengthen the foundations of
our core businesses by simplifying
processes and addressing customer
concerns, while keeping costs down.
Performance indicators
Insurance
– Continued differentiation with
610,000 three-year fixed-price
policies sold and implementation
of enhanced travel insurance to
include COVID-19 cover.
– Motor and home gross margins of £74
per policy, in line with guidance.
– Launch of our new motor price-
comparison website proposition,
providing customers with greater
flexibility.
– Migration of our home product
to the Guidewire platform.
Travel
– Delivery of Spirit of Adventure in
September 2020, completing our
Cruise transformation programme.
– Strong Cruise bookings of £154m for
2021/22 and 2022/23 combined.
– First cruise operator awarded
Lloyd's Register Shield+ COVID-19
safety accreditation.
– Reset Tour Operations,
focusing on a higher-quality,
differentiated offering.
In September 2020, Saga
announced its turnaround
strategy, Transforming Saga
– Experience is Everything,
intended to build on Saga’s
heritage while responding to
the challenges faced by the
business today.
Key
£ Measures directly linked to our Annual
Bonus Plan (see pages 82-84)
Underlying Profit Before Tax
Dividend per share (pence)
Available operating cash flow
Underlying Earnings Per Share
Colleague engagement
Leverage ratio
Customer NPS
A Reference to the relevant PRU on pages
28-29
Performance indicators
– Successfully launched and
£
embedded new purpose, values
and leadership behaviours
amongst colleagues.
– Simplified operating model, reducing
management levels from 17 to 5.
– Rapid response to COVID-19 with
over 2,000 colleagues working from
home.
Performance indicators
– Launched a digital version of the
£
Saga Magazine, achieving an Apple
App Store rating of 4.7 out of 5.0.
– Launched a series of improvements
to the Saga customer app, including
web chat functionality.
– Launched our digital self-serve
portal, enabling customers to make
common policy amendments online.
– Enhanced colleague communication
– Commenced the process of
with the launch of Workplace,
alongside multiple forums allowing
colleagues to interact with senior
management on a more personal level.
– Extensive mental wellbeing support
for colleagues through our
#Sagamindsmatter initiative.
– 92% participation in most recent
colleague engagement survey,
scoring 7.3 out of 10, +0.3 higher
than in September 2020.
– Defined ambition to create a culture
where colleagues can be their
exceptional self.
– Created transparency, using data to
understand our gaps, explored and
listened to colleagues through a
series of focus groups and are now
building awareness.
migrating customer data from many
legacy platforms to a new, modern
data architecture.
– Increased the volume and frequency
of research to monitor customer
needs, attitudes and insights during
the COVID-19 pandemic.
– Implementation of Radar Live which
provides increased data capacity
and faster, more efficient
pricing capability.
– Increased customer retention across
motor and home by 5ppts to 80%.
– Record customer net promoter
score (NPS) of 44.
KPI
PRU
D F H
KPI
PRU
B E J
A B C F G H I J
KPI
PRU
KPI
PRU
KPI
PRU
C I
A
Key performance indicators, pages 16-17
Environmental, Social and Governance, pages 18-27
Principal risks and uncertainties, pages 28-29
Directors’ Remuneration Report, pages 77-110
UNDERPINNED BY OUR STRONG COMMITMENT
TO OUR SUSTAINABILITY STRATEGY
14
Saga plc Annual Report and Accounts 2021Strategic Report
1 PEOPLE AND CULTURE
STEP CHANGE
2 DATA, DIGITAL AND BRAND
TRANSFORMATION
3 OPTIMISING OUR
BUSINESSES
4 DRIVING SIMPLICITY
AND EFFICIENCY
s172
s172
5 REDUCING OUR DEBT
s172
Objective
Objective
Reset and relaunch Saga's new purpose,
Transform the digital experience for
values and leadership behaviours to
our customers, focusing on a faster, less
engage colleagues in the true Saga
complex and familiar customer journey.
spirit and create a culture to deliver
Optimising previous investments, develop
and maintain Saga's transformation.
data solutions to create a unified view
of the customer across our businesses.
Enhance brand awareness and optimise
marketing activity through the launch
of our new modernised Saga brand.
Performance indicators
– Successfully launched and
Performance indicators
– Launched a digital version of the
embedded new purpose, values
Saga Magazine, achieving an Apple
and leadership behaviours
amongst colleagues.
App Store rating of 4.7 out of 5.0.
– Launched a series of improvements
– Simplified operating model, reducing
to the Saga customer app, including
management levels from 17 to 5.
web chat functionality.
– Rapid response to COVID-19 with
– Launched our digital self-serve
over 2,000 colleagues working from
home.
portal, enabling customers to make
common policy amendments online.
– Enhanced colleague communication
– Commenced the process of
with the launch of Workplace,
migrating customer data from many
alongside multiple forums allowing
legacy platforms to a new, modern
colleagues to interact with senior
data architecture.
management on a more personal level.
– Increased the volume and frequency
– Extensive mental wellbeing support
of research to monitor customer
for colleagues through our
#Sagamindsmatter initiative.
needs, attitudes and insights during
the COVID-19 pandemic.
– 92% participation in most recent
– Implementation of Radar Live which
colleague engagement survey,
scoring 7.3 out of 10, +0.3 higher
than in September 2020.
provides increased data capacity
and faster, more efficient
pricing capability.
– Defined ambition to create a culture
– Increased customer retention across
where colleagues can be their
motor and home by 5ppts to 80%.
exceptional self.
– Record customer net promoter
– Created transparency, using data to
score (NPS) of 44.
understand our gaps, explored and
listened to colleagues through a
series of focus groups and are now
building awareness.
Objective
Maximise efficiency by continuing to
reduce costs and complexity across
the Group.
Objective
Continue to reduce debt, taking
action to strengthen the balance
sheet and maintain financial resilience.
£
Performance indicators
– On track to achieve £20m of
£
run rate cost savings over time.
– Disciplined cost control during
the period of Travel suspension
with burn costs at the lower end
of the £6-8m per month guidance.
– Resized and reshaped the
organisation, with a 36%
reduction in headcount
(including non-core disposals).
£
Performance indicators
– Successfully raised approximately
£140m proceeds from the capital
raise, allowing repayment of the
RCF and part of the term loan.
– Completed disposals of Healthcare,
Destinology and Bennetts,
generating £31m of proceeds.
– Leverage ratio (excl. Cruise) of 2.7x,
well within the covenant of 4.75x.
– Worked closely with lenders in order
to manage the existing bank
covenants, allowing flexibility
through the ongoing disruption
arising from COVID-19.
– Further cruise debt deferral
and covenant waiver agreed
until 31 March 2022 (in addition
to existing deferral covering the
period to 31 March 2021).
Objective
Re-establish Saga through quality,
exemplary service and by building
differentiated propositions that
deliver real value for money for
our customers.
Strengthen the foundations of
our core businesses by simplifying
processes and addressing customer
concerns, while keeping costs down.
Performance indicators
Insurance
– Continued differentiation with
610,000 three-year fixed-price
policies sold and implementation
of enhanced travel insurance to
include COVID-19 cover.
– 59% of new business acquired directly,
2ppts ahead of prior year. Growth in
motor and home policies of 1.1%,
despite the competitive environment.
– Motor and home gross margins of £74
per policy, in line with guidance.
– Launch of our new motor price-
comparison website proposition,
providing customers with greater
flexibility.
– Migration of our home product
to the Guidewire platform.
Travel
– Delivery of Spirit of Adventure in
September 2020, completing our
Cruise transformation programme.
– Strong Cruise bookings of £154m for
2021/22 and 2022/23 combined.
– First cruise operator awarded
Lloyd's Register Shield+ COVID-19
safety accreditation.
– Reset Tour Operations,
focusing on a higher-quality,
differentiated offering.
KPI
PRU
D F H
KPI
PRU
B E J
KPI
PRU
A B C F G H I J
KPI
PRU
KPI
PRU
C I
STRATEGIC PILLARS FOR SUSTAINABILITY
ENVIRONMENTAL
SOCIAL
COMMUNITIES
GOVERNANCE
Safeguarding the
environment
Colleagues and culture
Investing in our
communities
Responsible business
practices
A
15
Saga plc Annual Report and Accounts 2021Strategic Report
Key performance indicators
During the financial
year, the following
KPIs were used to
assess the financial
and operational
performance of the
business against
its strategy.
£
Measures directly linked to our Annual Bonus Plan
(see pages 82-84)
Reference to strategic priority from pages 14 -15
UNDERLYING PROFIT BEFORE TAX1
£17.1m
2020: £109.9m
2021
17.1
2
3
4
2020
2019
109.9
180.1
Definition
Represents profit before tax excluding a number of items
which are not expected to recur. Refer to page 212 for full
definition and explanation.
Purpose
Underlying Profit Before Tax is the Group’s primary KPI.
This measure is a meaningful representation of the
Group’s underlying trading performance, as it excludes
non-cash technical accounting adjustments and other
financial impacts that are not expected to recur.
Performance
Reduction of 84% in comparison to 2020, largely as a
result of the suspension of the Group's Travel operations
in March 2020. Refer to the Operating and Financial
Review on page 31 for full details.
DIVIDEND PER SHARE (PENCE)
5
AVAILABLE OPERATING CASH FLOW1
-p
2020: 19.5p2
–
2021
2020
2019
19.5
60.0
Definition
Represents the dividend declared per ordinary share
in the period.
Purpose
This measure highlights an element of shareholders’ return.
Performance
In order to protect the Group’s financial position in light
of the COVID-19 pandemic, the Board announced on
2 April 2020 that it had suspended dividend payments.
The Board does not expect to pay dividends until 2023
at the earliest, given the restrictions under current
financing arrangements.
£
3
5
£3.4m
2020: £92.7m
2021
3.4
2020
2019
92.7
182.3
Definition
Represents net cash flow from operating activities
which is not subject to regulatory restriction, after capital
expenditure but before tax, interest, restructuring costs,
proceeds from the disposal of businesses and other
non-trading items. Refer to page 212 for full definition
and explanation.
Purpose
This measure represents the pre-tax operating cash
generation of the Group which is not subject to
regulatory restriction.
Performance
Reduction in available cash flow largely due to the cash
support provided to the Travel businesses throughout the
period of suspension. Refer to the Operating and Financial
Review on pages 38-40 for full details.
1
2
Refer to the Alternative Performance Measure (APM) Glossary on page 212 for definition and explanation
2019 and 2020 figures restated to reflect the effect of the share consolidation completed in October 2020
16
Saga plc Annual Report and Accounts 2021Strategic Report UNDERLYING EARNINGS PER SHARE1
13.2p
2020: 121.0p2
2021
13.2
2
3
4
2020
2019
121.0
196.5
Definition
Represents the basic Earnings Per Share (EPS) excluding
the post-tax effect of a number of one-off items which
are not expected to recur. Refer to page 212 for full
definition and explanation.
Purpose
Underlying EPS is linked to Underlying Profit Before
Tax, the Group’s primary KPI, and represents what
management considers to be the underlying shareholder
value generated in the period.
Performance
Directly correlating to Underlying Profit Before Tax,
Underlying EPS has reduced following suspension of
the Group's Travel operations. Refer to the Operating
and Financial Review on pages 31-32 for full details.
LEVERAGE RATIO
2.7x
2020: 2.4x
2021
2020
2019
2.7
2.4
1.7
£
5
Definition
Leverage ratio represents adjusted net debt to Adjusted
Trading EBITDA, both excluding the Cruise business.
Purpose
This measure provides an indication of the Group’s
financial flexibility and represents one of the covenants
associated with the term loan and RCF.
Performance
Ratio of 2.7x well within the banking covenant of 4.75x.
Refer to the Operating and Financial Review on page 43
for full details.
COLLEAGUE ENGAGEMENT
7.3
February
2021
September
2020
7.3
7.0
£
1
CUSTOMER NPS
44
2020: 38
2021
2020
2019
44
38
36
£
2
Definition
Measured by responses to colleague surveys hosted
by an independent third-party and conducted quarterly.
Purpose
This metric provides an indication of how committed
and enthusiastic colleagues are towards both Saga
and their work.
Performance
Refer to Environmental, Social and Governance on pages
18-27.
During 2020/21, Saga appointed a new third-party survey
provider. As such, 2020/21 scoring is not comparable with
historic data.
Definition
Measured by customer survey responses weighted
by business unit to be representative of the Group.
Following the suspension of Travel operations in March
2020, the NPS for that business was frozen at Q1 scores.
Purpose
Represents the willingness of customers to recommend
products or services to others.
Performance
NPS increased to the highest recorded level.
Customer perceptions of value for money were enhanced
by our three-year fixed-price product and our savings
proposition. Improvements made to the claims process
have also positively contributed, with customers feeling
supported during the uncertainty of the COVID-19
pandemic. Customers also acknowledged how easy it is
to interact with Saga.
17
Saga plc Annual Report and Accounts 2021Strategic Report Environmental, Social and Governance
During the last financial
year, we sought ways
to meet our ESG
responsibilities even
more effectively and we
will continue to develop
our reporting to reflect
the progress we are
making.
The last 12 months have given us time to reflect on our
place in society. Our new purpose, Exceptional Experiences
Every Day, while being a driver for positive change in our
markets and communities, tells us how we can use
our knowledge and expertise to improve outcomes for
society. It has started us on a journey; where we want to
be seen, again, as the voice of people over 50, championing
all that’s great about being part of our communities.
Delivering a step-change in our culture is intentionally the first
priority of Saga’s strategy as we know that we must get this
right for our colleagues, in order to deliver the exceptional
experiences our customers expect. We have come a long way
through such a uniquely challenging year where the wellbeing
of our colleagues has been of utmost importance (see page 21
for further details on colleague wellbeing).
When we started the implementation of our restructure in
February 2020, treating our colleagues with respect and care,
was front of mind in our approach to reducing headcount.
We designed redundancy terms which were enhanced and
generous for all. Each colleague was provided with an
outplacement offer to support their transition from Saga to
new opportunities. Our two-way conversations with colleagues
were open, transparent and ensured that colleagues heard
from us first and with empathy. Many colleagues have since
joined our alumni group and most of all speak highly of how
we made them feel through a most challenging time.
s172 In March, we responded to the first lockdown and
moved at pace to a working from home model, protecting
our colleagues and their loved ones. This enabled us to
continue to provide first-class service to our customers
without disruption. Working from home has, however, been
a challenge for some colleagues, either because they
have limited space, are home schooling young children,
or they simply miss the daily interaction that working in
an office brings. We ran weekly questionnaires to gauge
how colleagues were feeling and through their feedback,
we were made acutely aware of the challenges faced and
were able to respond to them quickly.
activity together and train our managers on the support
available. Ahead of the launch of our diversity, inclusion and
belonging (DI&B) strategy, we have created and filled the role
of DI&B Manager. We know that having a diverse workforce is
hugely beneficial to our business as not only does it improve
colleague engagement, but also brings a wide range of skill
sets and cultural insights which help us to better serve our
customers and communities.
Engaging with stakeholders, pages 26-27
s172 In March 2020, Saga launched a major customer
initiative to help reduce loneliness and support our
customers through the COVID-19 lockdown. The
#notgoingoutclub is packed with exclusive entertainment,
podcasts, lifestyle tips, quizzes and special offers, providing
our customers with inspired ideas to keep them entertained.
COLLEAGUE ENGAGEMENT
Workplace
We are committed to bringing colleagues together to
create Exceptional Experiences Every Day, and in May 2020
we launched a new internal communications platform
to support this, Workplace. This has given Saga and
our colleagues:
– a single, mobile-first platform that is simple to use and
accessible to everyone;
– a familiar and intuitive platform that most colleagues
already know how to use;
– a voice, through open, immediate engagement, feedback
and comments;
– a channel to build our culture, share our strategy, build
empathy, promote wellbeing, encourage curiosity and
innovation, and have fun; and
– an invaluable way of building collaboration, staying
connected during lockdowns and enforced home working,
giving a great springboard for our future vision of working
at Saga.
With 97% of colleagues activated on the platform, and
96% of colleagues interacting with Workplace at least once
a month, it has been a great tool to keep our colleagues
connected and engaged, which has been particularly
important during the COVID-19 pandemic. Our high
activation and engagement rates were recognised by
Workplace in November 2020 when we received the
award for 'Best Newcomer'.
Leadership communications
Throughout 2020, Saga’s Leadership Team (SLT) met with
our Group CEO, Euan Sutherland, on a fortnightly basis, focusing
on strategy, purpose, business priorities and colleague-related
initiatives, with Saga’s Management Team (SMT) meeting several
times over the course of the year.
People Committee and Forums
At Saga, we are committed to creating ongoing conversations
with our colleagues. Colleagues can have their say through
multiple channels, which all support our move towards
a continuous listening approach. These include:
We have also invested in a dedicated Wellbeing Manager
and focused support team, to bring the colleague wellbeing
– People Committee meetings;
– localised People Forums;
– Tell Euan About (TEA) sessions;
18
Strategic ReportSaga plc Annual Report and Accounts 2021 REMUNERATION COMMITTEE
Chaired by Eva Eisenschimmel
Non-Executive Director and People Champion
PEOPLE COMMITTEE
Chaired by Chief People Officer
12 People Committee representatives from across the Company
PEOPLE FORUMS
Insurance
People & Property
Technology
Travel
Finance & Professional Services
Risk
Strategy, Brand & Customer
– TEA inbox;
– colleague surveys; and
– Workplace.
The People Committee, which was set up in 2019 with the
aim of gathering the views and opinions of all colleagues
and providing feedback to the Board, has continued to be
a success. Representatives have helped to create a culture
of openness and drive continuous improvement by engaging
with colleagues at all levels in their business units and
functions. They enable views and ideas on key topics to be
highlighted and then represent these at the People Committee
by actively taking part in discussions and debates.
In October 2020, we also introduced People Forums for all
departments within the business to broaden the impact of
the People Committee and ensure that colleagues in all areas
of our business had a voice. They are chaired by the relevant
member of the Executive Leadership Team (ELT) and meet
monthly, feeding into the People Committee. Positive feedback
has been received from the People Forums, with meaningful
conversations taking place and clear actions arising.
Following the retirement of Gareth Williams, the Non-Executive
Director nominated as 'People Champion' was Eva Eisenschimmel.
Eva attends the People Committee regularly and provides
feedback to the Board. The terms of reference of the People
19
Saga plc Annual Report and Accounts 2021Strategic Report Environmental, Social and Governance continued
Saga spirit survey
In 2020, it was more important than ever to get real-time,
insight-driven information about the way colleagues were
feeling. We therefore made the decision to partner with a new
provider, Peakon, for our colleague surveys. Peakon not only
gathers feedback from every colleague in our organisation,
anonymously and in real time, but also provides insights
that drive decisions and actions. Importantly, the results
are owned in each business unit and enabling function, so
that leaders can work together with their teams to develop
and update Board decisions and action plans. The People
Committee tracks the action plans to see what has been
delivered, what is outstanding and the expected timeframe
for delivery. The action taken is fed back to colleagues via
their People Committee or People Forum representative.
We ran our first survey using Peakon in September 2020
and achieved our highest ever response rate of 92%.
Our overall colleague engagement score in February 2021 was
7.3 (out of 10) and our overall score for health and wellbeing
was also 7.3. This compares to a score of 7.0 in our previous
survey conducted in September 2020. The key actions taken
in 2020 centred around the following:
– Growth: Explaining the leadership levels to make sure that
every colleague understands our structure, their role, and
the opportunities we can create together; establishing
a clear framework to help each colleague build and
manage their career at Saga.
– Reward: Launching a new approach to colleague
recognition, which reflects our new purpose and values;
making contact centre remuneration simpler and more
transparent for our front line colleagues.
– Strategy: Continuing to communicate the strategy,
ensuring that colleagues have complete clarity on our
plans, progress and what this means for them; embedding
our new Saga values.
– Colleague wellbeing: Increasing our number of MHFAs;
introducing a mental wellbeing colleague support
framework and launching a vulnerable colleagues’ triage
and support team.
Colleague listening groups
In addition to the People Committee and People Forums,
our Group CEO, Euan Sutherland, runs regular TEA sessions.
These sessions enable colleagues to have an open channel
of communication with the Group CEO alongside a member
of the ELT (on a rotational basis) and facilitate discussion
around how we can all move the business towards excellence.
At the end of 2020, our Group CEO hosted specific TEA
sessions with colleagues within the SMT to discuss our
strategy, purpose and business priorities.
Committee were last reviewed and approved by the
Remuneration Committee on 22 January 2021.
Our People Committee continues to be a critical voice in
representing colleagues and their views to both the ELT and
Board, as well as supporting the roll out of key initiatives by
being a point of call to colleagues. Some of the key topics
and actions of the People Committee are summarised in the
table below:
Action taken
– Appointment of on-call MHFAs and
Saga’s first Wellbeing Manager.
– Promoted the use of the Unmind app
through Workplace, showcasing
the tools and techniques available
to aid mental wellbeing.
– Review of long service reward scheme.
– Launch of ‘colleague shout outs’ page
on Workplace, allowing colleagues to
acknowledge and praise their peers
who have gone above and beyond.
– Chair of the Remuneration Committee
and Chief People Officer (CPO) lead a
session with the People Committee on
executive remuneration elements, the
role of the Remuneration Committee
and how decisions on executive
remuneration are made.
– Discussed the outcome of the
shareholder consultation on our
Remuneration Policy and the
implementation of the Restricted
Share Plan (RSP).
– Aligned all colleagues to a universal
financial scorecard for the purpose
of 2020/21 annual bonus outcomes.
– Introduction of weekly video
sessions with our Group CEO
addressing colleague questions on
our strategy, priorities and values.
– Dedicated Operations Team teaching
colleagues how to use Workplace.
– Expansion of continuous listening
strategy, adding different forums for
colleagues to express their views.
– Promotion of staying in touch with
each other through virtual events.
– Working group sessions with
colleagues to build appropriate
action plans and make the changes
that matter most to them.
– Action plans revisited quarterly
during functional team meetings.
– Regular consultation with colleagues
to ensure they are supported whilst
working from home and are actively
involved in the design of our future
working plans.
Topics arising from
People Committee
meetings
Wellbeing and
mental health
Remuneration and
recognition
Strategy
Engagement and
communication
during lockdown
Results of Saga
spirit pulse surveys
Working@Saga
(a collaborative
initiative to design,
refit and repurpose
our offices to
support new ways
of working)
20
Strategic ReportSaga plc Annual Report and Accounts 2021 s172 COLLEAGUE WELLBEING
Colleague wellbeing is a priority, particularly given the
difficult year we have had. In order to support our colleagues,
we have trained an additional 16 colleagues to become
MHFAs, giving us a total of 25 fully-trained MHFAs able
to support their peers. We are committed to training
an additional 32 colleagues to become MHFAs in quarter
one of 2021 and have also utilised national campaigns
and awareness days to help our colleagues talk about
wellbeing and highlight the support and benefits we have
in place.
We have worked with our people managers across Saga to
ensure they are all equipped to support our more vulnerable
colleagues at times when they may be struggling. We have
also partnered with a wellness app, Unmind, to provide help
and tools to support colleagues with their mental wellbeing.
Wellbeing will continue to be a growing area of focus for
Saga, and a key workstream of our people strategy.
Diversity, inclusion and belonging
We aim to create a culture which gives everyone the
opportunity to be their exceptional self, by building a diverse
and inclusive environment where our colleagues can feel they
belong. To support our growing inclusion agenda, in 2020 we
appointed our first DI&B Manager to help drive this forward
and establish a clear strategic and tactical approach.
This year, we concentrated on understanding our diversity
data and identifying key areas in our colleague lifecycle
where we need to focus our attention. Our colleagues continue
to be open and honest with us on this important topic
through a series of Inclusion Forums. The forums, chaired by
members of the ELT, covered inclusion and belonging at Saga
on the basis of gender, disability, race and ethnicity, sexual
orientation and age. The insights are helping shape our
approach to talent, training, performance, recruitment, reward,
leadership and workspace, to ensure it is inclusive for everyone.
Equal opportunities
In support of our Equal Opportunities Policy, Saga is
committed to ensuring our attraction, recruitment, promotion
and training practices all include barrier-free, fair, objective
and inclusive processes. All decisions relating to employment
and our colleague lifecycle are free from bias and based
solely upon work criteria and individual merit.
Board1
Senior managers2
Other colleagues3
All
Notes:
1 Directors of the Company including Executive and Non-Executive
2 All business unit directors, and colleagues with strategic input and influence
3 All Saga colleagues (excluding Board and senior managers)
Providing equal opportunities for all is integral to our
approach to DI&B. Saga values diversity amongst its
colleagues and appreciates the breadth of talents and
abilities this brings to our Company. With a focus on
continuous learning, Saga actively provides an equal
opportunity for all colleagues to have access to training
and career development. We are also a committed member
of the UK Government’s Disability Confident scheme and
remain supportive of the employment and advancement
of disabled persons in the UK.
Gender pay gap
We support the commitment to address the gender pay
gap, and like many organisations we are working hard
to reduce ours, acknowledging that this is a long-term
agenda. This year, we have taken practical steps to remove
unconscious bias from our recruitment approach and have
continued to ensure our leaders understand the need to
improve gender diversity at all levels of the organisation as
part of our ongoing diversity initiatives. We are also pleased
to continue our partnership with the 30% Club cross-
company female leadership mentoring programme.
Culture
At Saga, we are inspired to deliver Exceptional Experiences
Every Day. Our colleagues feel welcome and can always be
themselves as they are part of a supportive and empathetic
team. Colleagues know how, and have the tools to speak up
and be heard.
We enable our colleagues to do the best work of their lives,
focusing on the things that really matter. Saga colleagues
take ownership and make things happen, knowing they will
be fairly rewarded for their contribution.
We are always asking why, are curious about new ideas and
use our insight for the benefit of our customers who trust us
to do the right thing. This is made possible by always working
as one team across Saga to deliver results.
It is this culture that allows us to attract talent and build
the capabilities we need to continuously innovate and evolve,
being a driver of positive change for colleagues, customers
and the communities we serve.
Male
Female
Actual
4
31
1,051
1,086
%
57%
70%
43%
43%
Actual
3
13
1,404
1,420
%
43%
30%
57%
57%
Total
7
44
2,455
2,506
21
Saga plc Annual Report and Accounts 2021Strategic Report Environmental, Social and Governance continued
HOW THE BOARD MONITORS CULTURE AND HOW THIS LINKS TO STRATEGY
The Board regularly reviews a range of information to actively monitor culture. The table below shows the key sources of data
the Board tracks, with a view to take action, as required, where adjustments or remedial action are needed.
Cultural identifier
openness Valuing diversity
Promoting
integrity and
Cultural priorities
Being responsive
to the views of
stakeholders
Culture aligned
to purpose
and values
Culture aligned
to strategy
Colleague Saga spirit survey data
People Committee and People Forum
feedback
Colleague listening groups
Sign-up and participation
on Workplace
'Speak Up' Survey and reports
Progress on diversity and inclusion
reports
Gender pay gap progress
Health and safety performance
Internal Audit reports and findings
Stretching environmental targets
22
Strategic ReportSaga plc Annual Report and Accounts 2021 s172 COMMUNITY
The impact of COVID-19 meant colleagues across the
business wanted to use their time to have a positive impact
within their communities, in a safe and practical way.
The Saga Workplace Lottery continues to be well supported
with an average of 600 colleagues playing each week and
helping to raise money for good causes. These include:
– The Silver Line, to set up its helpline from home; and
– Kent-based charities, to provide funding for their
community outreach programmes and to help them
adapt their work throughout the pandemic.
Saga is extremely proud to be a signatory of the Armed
Forces Covenant, a recognition scheme that rewards the
efforts of organisations which provide support to this
community. At Saga, we do this in several ways:
– Seeking to support the employment of veterans, young
and old.
– Through our Reservist Policy which provides support
to colleagues who choose to be members of the
Reserve Forces.
– Offering flexibility in granting leave for service spouses
and partners.
This year, to mark Armed Forces Day, we donated to four
Armed Forces charities:
– The Royal British Legion;
– The Royal Navy and Royal Marines Charity;
– The Gurkha Welfare Trust; and
– The Soldiers', Sailors', Airmen's Families Association.
Responsible investments
Our approach to investments continues to ensure robust ESG
factors are considered when making investments. Saga’s
subsidiary boards consider investment decisions and the plc
Board considers and approves all material investments.
Modern Slavery & Human Rights
Saga conducts business in an ethical and transparent way.
Policies to support recognised human rights principles
include those on non-discrimination, health and safety
and environmental issues. Our Modern Slavery Statement
can be found on our website (www.corporate.saga.co.uk/
modern-slavery-statement).
In response to this, we launched the Saga Community
Ambassadors programme in April 2020, matching over 80
colleagues to specific community projects. Saga colleagues
have carried out numerous voluntary roles including wellbeing
calls, delivery of food and medical supplies and beach cleans.
Some used their skills to update charity websites, which was
crucial during a period of constant change and uncertainty.
More than 300 hours of volunteer time were given, a great
example of how Saga colleagues are helping to drive positive
change within our communities. More recently, and in
response to the COVID-19 vaccination roll out, colleagues
have been encouraged to volunteer as marshals at local
vaccination centres.
From February 2021, we made one of our sites available
to the NHS for use as a vaccination centre for North Kent.
Alongside this, Saga has introduced a policy that all our
customers are fully vaccinated against COVID-19 before
they travel with us, putting customer safety first.
During the year, meetings were held with key members of the
Folkestone community, hosted by Saga’s Group CEO, Euan
Sutherland. These have enabled us to understand the most
pressing needs facing the community and allowed us to
discuss ways Saga could help. As one of the largest
employers in Folkestone, it is extremely important to us
that we have a strong and trusted relationship with the
immediate community. These meetings have given us the
opportunity to have an open dialogue concerning our future
plans for our office sites as we move to a predominantly
working from home model.
Charitable giving
Saga is committed to being a positive driver of change in
our community. Our focus in the year has been on supporting
our charity partners, as well as encouraging our colleagues
to participate in events that will not only support these
causes, but also help to bring us together as one team.
Following postponement of the 2020 London Marathon,
Saga took part in the nationwide 2.6 Challenge, encouraging
colleagues to get active, organising activities centred around
2.6 or 26 to support their favourite charities.
Whilst Saga promotes its preferred charities, we are
also curious to know about and support our colleagues
who are fundraising for charities which are important to
them through our matched funding scheme. Each month
colleagues tell us about their fundraising activities and apply
for matched funding.
23
Saga plc Annual Report and Accounts 2021Strategic Report Environmental, Social and Governance continued
s172 SAFEGUARDING THE ENVIRONMENT
In 2019, we set a 30% reduction target for our Scope 1 and 2
emissions by 2030. This sets out our ambition for hitting well
below the 2⁰C temperature rise global target by 2050. Due to
the pandemic and subsequent pause of our Travel business, our
emissions have decreased significantly. However, we are also
making great strides in the efficiency of our buildings and ships and
through colleague engagement to reduce our emissions footprint,
and support the achievement of our science-based target.
Understanding our Scope 3 emissions presents us with
an opportunity to work with our supply chain to reduce
emissions further. Emissions generated by colleagues working
from home fit into Scope 3 and become more significant as
we move to a predominantly working from home model.
Estate management and fleet vehicles
Company car drivers continue to be encouraged to
select more environmentally friendly vehicle options.
Currently one third of our company car fleet are either
electric or hybrid vehicles. We monitor the market regularly
as the range of new electric vehicles continues to evolve.
These could offer an opportunity for us, over time, to replace
our Saga transport fleet with all-electric vehicles.
As we have moved to a working from home model and plan
to use our headquarters as a collaborative hub, we will be
undertaking some extensive refurbishments. As part of these
refurbishments, we will be considering the environmental
benefits and opportunities available to us and how these
can be incorporated into the new design.
Waste management
Onboard our new cruise fleet, we have advanced waste
treatment systems which increase recycling, reduce
waste offload, and minimise our impact on the environment.
Our ships therefore adopted Saga’s Single-Use Plastic
Policy and have banned all non-essential single-use plastic.
In collaboration with our waste disposal provider, we are
reducing our office waste and increasing the amount of
waste that is being recycled. We continue our 'nil to landfill'
ethos at our Saga branded office sites.
Single-use plastic continues to be an area of focus for us and
from March 2021, all Saga Magazine mailings are delivered in a
paper wrap, saving the equivalent of 9.6 tonnes of plastic per year.
The paper we use is Forest Stewardship Council (FSC) certified
and comes from well-managed forests and/or recycled sources.
Energy and Carbon Statement
This statement has been prepared in accordance with
our regulatory obligation to report greenhouse gas (GHG)
emissions pursuant to the Companies (Directors’ Report)
and Limited Liability Partnerships (Energy and Carbon
Report) Regulations 2018 which implement the UK
Government’s policy on Streamlined Energy and
Carbon Reporting.
Emissions summary
During the reporting period 1 February 2020 to 31 January
2021, our measured Scope 1 and 2 emissions (location-
based) totalled 37,841 tCO2e and reported Scope 3 emissions
totalled 1,333 tCO2e. This comprised the following:
24
GREENHOUSE GAS
EMISSIONS IN TONNES OF
CARBON DIOXIDE (TCO2)
OR CARBON DIOXIDE
EQUIVALENT (TCO2E)
SCOPE 1
2020/21 emissions
36,187 tCO2e
2019/20: 100,066 tCO2e
SCOPE 2 (LOCATION-BASED)
2020/21 emissions
1,654 tCO2e
2019/20: 2,705 tCO2e
SCOPE 2 (MARKET-BASED)1
2020/21 emissions
8 tCO2
2019/20: 58 tCO2
TCO2E PER £M TRADING EBITDA2
2020/21 emissions
481
2019/20: 566
SCOPE 3
2020/21 emissions
1,333 tCO2
2019/20: 1,852 tCO2
TOTAL SCOPE 1, 2 & 3 (LOCATION-BASED)
2020/21 emissions
39,173 tCO2e
2019/20: 104,622 tCO2e
1
2
Emissions from the consumption of electricity outside the UK and emissions
from purchased electricity are calculated using the market-based approach,
using supplier-specific emission factors and are reported in tCO2 rather than
tCO2e due to the availability of emission factors
2019/20 emissions have been verified to ISO 14604-3 standard by our
sustainability partner, Carbon Intelligence. Our 2020/21 emissions will be
verified in the coming quarter
Strategic ReportSaga plc Annual Report and Accounts 2021 Overall, our Scope 1 and 2 emissions have decreased by
63% compared with the previous year which is largely due
to the impact that the COVID-19 pandemic had on our
Travel business. The pandemic also had a significant impact
on our vehicle fleet emissions in light of the government
travel restrictions.
Over the past two years we have continued to work
towards maximising the efficiency of energy in our buildings.
These savings, amounting to approximately 354 tCO2e,
have been achieved through several building management
systems control interventions related to plant schedules,
and optimising the heating and cooling plant on our key assets.
We have a colleague engagement programme which
delivers communications and training to colleagues in order
to encourage them to reduce energy, water use and waste and
to minimise travel. We used external campaigns such as World
Environment Day and Recycling Week to maximise the impact
of these communications, providing tips and sharing best
practice around our buildings, and now at home.
Saga purchases 96% of its electricity from a 100%
renewable supply from Haven Power. As in previous years,
the dual reporting of our emissions in this way demonstrates
that we are making efforts to reduce our climate impact
through the purchase of electricity generated from
cleaner sources.
This year we have expanded Scope 3 to include working
from home emissions with other reported Scope 3 categories
including business travel and fuel-and-energy-related
activities. Our measured Scope 3 emissions totalled
1,333 tCO2e.
Energy summary
During the year, our total fuel and electricity consumption
totalled 152,664,244 kWh. The split between fuel and
electricity consumption is displayed below.
Energy usage
Electricity
Fuels1
Total energy
kWh
7,092,329
145,571,915
152,664,244
1
Fuels are comprised of natural gas, diesel, petrol, marine fuel oil, marine gas oil
and refrigerants
Methodology
We quantify and report our organisational GHG emissions
in alignment with the World Resources Institute’s Greenhouse
Gas Protocol Corporate Accounting and Reporting Standard
and in alignment with the Scope 2 Guidance. We consolidate
our organisational boundary according to the operational
control approach, which includes emissions from Saga plc.
We have adopted a materiality threshold of 5% for GHG
reporting purposes. The GHG sources that constituted
our operational boundary for the year are:
– Scope 1: Natural gas combustion within boilers, marine
fuel combustion within ships, road fuel combustion
within vehicles, fuel combustion within non-road
mobile machinery and fugitive refrigerants from air-
conditioning equipment;
– Scope 2: Purchased electricity consumption for our own
use; and
– Scope 3: Business travel from grey fleet and taxis,
transmission and distribution losses associated with
electricity consumption and working from home emissions.
The Scope 2 Guidance requires that we quantify and report
Scope 2 emissions according to two different methodologies
(dual reporting):
– (i) the location-based method, using average emissions
factors for the country in which the reported operations
take place; and
– (ii) the market-based method, which uses the actual
emissions factors of the energy procured.
As in previous years, Scope 3 business travel emissions
from rail and air have been identified, but not included in
our disclosure due to a lack of accurate data. Emissions from
energy paid for within service charges have also been
excluded due to both lack of data and immateriality.
Assumptions and estimations
In some instances, where data is missing, values have been
estimated using either an extrapolation of available data
from the reporting period or data from 2019/20 as a proxy.
Carbon Disclosure Project
Saga plc made the decision in 2015 to respond to the Carbon
Disclosure Project (CDP) climate change questionnaire to
better understand and manage our climate-related impacts,
risks and opportunities. In 2020 Saga plc scored an A –
which is classified as the leadership category.
25
Saga plc Annual Report and Accounts 2021Strategic Report Environmental, Social and Governance continued
ENGAGING WITH STAKEHOLDERS
The Board engages with its stakeholders throughout the year through a variety of means, including those listed below:
Customers
s172 Colleagues
s172 Communities
s172
Partners and suppliers
s172 Shareholders
s172 Regulators
s172
Accountability
Board, Risk Committee and ELT
Accountability
Board, Remuneration Committee,
Nomination Committee, People
Committee and CPO
Accountability
Board and CPO
What we know matters to them
through our engagement
– Great value for money from
our products and services,
all delivered with excellent
customer service.
– Products and services that
are tailored specifically to
our customers.
– Ease of interactions through all
channels.
– Management of expectations
through every step of the journey.
Board role and activities
– Statutory duties under the
Companies Act 2006 – customers
at the heart of strategic and
operational discussions.
– ELT considers customer insight
and data, and reports to the plc
Board via the Group CEO.
– Board considers NPS scores as
part of a customer dashboard
presented at each meeting.
– Customer facing colleagues invited
to Board meetings to provide
details of customer experiences.
What we know matters to them
through our engagement
– Regular, clear and open
communication channels.
– Open culture where colleagues
can have their voice heard and
know action will be taken
wherever possible.
Board role and activities
– People, culture and leadership are
a key strategic priority and are
actively monitored by the Board,
via regular updates from the CPO
and through the Saga spirit survey.
– People Committee meetings
are held quarterly and chaired
by our CPO.
– Eva Eisenschimmel is our
appointed 'People Champion'
and attends People Committee
meetings periodically.
– The People Committee terms
of reference are approved by
the Remuneration Committee.
– The Remuneration Committee
considers reward and pay for
Executives and the wider workforce.
What we know matters to them
through our engagement
– Open communication with the
Group CEO, CPO and wider Saga
team, ensuring that members of
the community are aware of our
priorities, as well as how they may
be impacted.
– Opportunity to share priorities
and events where Saga may
be able to provide support.
– Ability to access the skills and
knowledge of Saga colleagues
through the Saga Community
Ambassadors programme.
Board role and activities
– Quarterly community meetings
hosted by the Group CEO, CPO
and key members of the wider
Saga team.
– The Board considers the
community in decision making and
discusses the actions being taken
at the quarterly meetings.
– Commitment to an efficient
process, evolved through ongoing
learnings and two-way dialogue.
Accountability
Accountability
Accountability
Board and Risk Committee
Board, Remuneration Committee,
Board, Risk Committee, Audit
Nomination Committee, Risk
Committee, Audit Committee and
Investor Relations (IR)
Committee and Chief Risk Officer
What we know matters to them
What we know matters to them
What we know matters to them
through our engagement
through our engagement
through our engagement
– Regular communication and
– Active engagement with the Group
– Protection of our customers
CEO, Group Chief Financial Officer
(CFO) and IR Team, to ensure that
and the markets Saga operates
in, increasing the trust of the
shareholders have a clear and
detailed understanding of the
Group’s strategy and financial
performance, as well as what
it means for them.
public and encouraging
market competition.
– Proactive and transparent
communication.
changes in contractual and
operational matters to adapt
to the COVID-19 pandemic.
– Developing new ways of working
to best utilise technology and
support remote working and
video conferencing capability.
– Active management of resource
and capacity planning to provide
maximum flexibility in customer
supply chains.
Board role and activities
Board role and activities
Board role and activities
– Partnering with charities that are
– The Board maintains open and
– Relationship with regulators
close to our customers' hearts.
regular dialogue with shareholders.
– Supplier risk management is
– IR report considered at each
Board meeting.
maintained at subsidiary level,
and monitored by their Audit,
Risk and Compliance Committees.
– The Board and ELT meet
– Material areas are overseen by
shareholders at the Annual General
the Saga plc Risk Committee and
Meeting (AGM).
escalated to the Board if necessary.
undertaken at subsidiary level,
and overseen by the Executive
Leadership Risk Committee,
which reports into the Saga plc
Risk Committee.
– Chairman, Group CEO and CFO
– Key partnerships are monitored at
meet with our shareholders,
all levels and subject to annual due
assisted by our Head of IR.
diligence to ensure compliance with
In addition, the Chair of the
current regulatory and statutory
requirements e.g. human rights
Remuneration Committee meets
with shareholders throughout
and modern slavery requirements.
the year and provides feedback
to the Board.
– Investor days, road shows, briefings
and adhoc meetings (on request)
are held where calendar and
regulatory requirements allow.
– Shareholder consultation on
key issues.
Alignment with strategy, purpose
and culture
– Driving positive change in the
markets in which we operate,
for the benefit of customers and
other stakeholders.
Alignment with strategy, purpose
and culture
– Creating exceptional workplaces
where colleagues feel they truly
belong, living the purpose and
values everyday which enables
colleagues to do the best work
of their lives.
Alignment with strategy, purpose
and culture
– Maximising the opportunities for
Saga to collaborate on community
projects and be a driver for positive
change in the communities in which
we operate.
Alignment with strategy, purpose
Alignment with strategy, purpose
Alignment with strategy, purpose
and culture
and culture
and culture
– Embedding a standardised
– Committed to providing strong
– Being responsive to regulatory
procurement approach and
operation will ensure the new
Saga values and purpose are
at the centre of all activity.
strategic rationale and cultural
alignment around remuneration
and reward.
changes whilst improving risk
maturity and culture, and ensuring
our customers receive Exceptional
Experiences Every Day.
26
Strategic ReportSaga plc Annual Report and Accounts 2021 s172 Colleagues
s172 Communities
s172
Partners and suppliers
s172 Shareholders
s172 Regulators
s172
Accountability
Board and Risk Committee
What we know matters to them
through our engagement
– Regular communication and
changes in contractual and
operational matters to adapt
to the COVID-19 pandemic.
– Developing new ways of working
to best utilise technology and
support remote working and
video conferencing capability.
– Active management of resource
and capacity planning to provide
maximum flexibility in customer
supply chains.
Accountability
Board, Remuneration Committee,
Nomination Committee, Risk
Committee, Audit Committee and
Investor Relations (IR)
What we know matters to them
through our engagement
– Active engagement with the Group
CEO, Group Chief Financial Officer
(CFO) and IR Team, to ensure that
shareholders have a clear and
detailed understanding of the
Group’s strategy and financial
performance, as well as what
it means for them.
Accountability
Board, Risk Committee, Audit
Committee and Chief Risk Officer
What we know matters to them
through our engagement
– Protection of our customers
and the markets Saga operates
in, increasing the trust of the
public and encouraging
market competition.
– Proactive and transparent
communication.
What we know matters to them
What we know matters to them
What we know matters to them
Customers
Accountability
Board, Risk Committee and ELT
through our engagement
– Great value for money from
our products and services,
all delivered with excellent
customer service.
– Products and services that
are tailored specifically to
our customers.
– Ease of interactions through all
channels.
– Management of expectations
through every step of the journey.
Accountability
Board, Remuneration Committee,
Nomination Committee, People
Committee and CPO
Accountability
Board and CPO
through our engagement
– Regular, clear and open
communication channels.
– Open culture where colleagues
can have their voice heard and
know action will be taken
wherever possible.
through our engagement
– Open communication with the
Group CEO, CPO and wider Saga
team, ensuring that members of
the community are aware of our
priorities, as well as how they may
be impacted.
– Opportunity to share priorities
and events where Saga may
be able to provide support.
– Ability to access the skills and
knowledge of Saga colleagues
through the Saga Community
Ambassadors programme.
Board role and activities
– Statutory duties under the
Board role and activities
Board role and activities
– People, culture and leadership are
– Quarterly community meetings
Companies Act 2006 – customers
a key strategic priority and are
at the heart of strategic and
operational discussions.
actively monitored by the Board,
via regular updates from the CPO
Saga team.
hosted by the Group CEO, CPO
and key members of the wider
– ELT considers customer insight
and through the Saga spirit survey.
– The Board considers the
and data, and reports to the plc
– People Committee meetings
Board via the Group CEO.
are held quarterly and chaired
– Board considers NPS scores as
by our CPO.
part of a customer dashboard
– Eva Eisenschimmel is our
presented at each meeting.
appointed 'People Champion'
– Customer facing colleagues invited
and attends People Committee
to Board meetings to provide
meetings periodically.
details of customer experiences.
– The People Committee terms
community in decision making and
discusses the actions being taken
at the quarterly meetings.
– Commitment to an efficient
process, evolved through ongoing
learnings and two-way dialogue.
of reference are approved by
the Remuneration Committee.
– The Remuneration Committee
considers reward and pay for
Executives and the wider workforce.
undertaken at subsidiary level,
and overseen by the Executive
Leadership Risk Committee,
which reports into the Saga plc
Risk Committee.
– Key partnerships are monitored at
all levels and subject to annual due
diligence to ensure compliance with
current regulatory and statutory
requirements e.g. human rights
and modern slavery requirements.
Alignment with strategy, purpose
Alignment with strategy, purpose
Alignment with strategy, purpose
and culture
and culture
and culture
– Driving positive change in the
– Creating exceptional workplaces
– Maximising the opportunities for
markets in which we operate,
for the benefit of customers and
other stakeholders.
where colleagues feel they truly
belong, living the purpose and
values everyday which enables
colleagues to do the best work
of their lives.
Saga to collaborate on community
projects and be a driver for positive
change in the communities in which
we operate.
Alignment with strategy, purpose
and culture
– Embedding a standardised
procurement approach and
operation will ensure the new
Saga values and purpose are
at the centre of all activity.
– The Board and ELT meet
– Material areas are overseen by
shareholders at the Annual General
Meeting (AGM).
the Saga plc Risk Committee and
escalated to the Board if necessary.
– Chairman, Group CEO and CFO
meet with our shareholders,
assisted by our Head of IR.
In addition, the Chair of the
Remuneration Committee meets
with shareholders throughout
the year and provides feedback
to the Board.
– Investor days, road shows, briefings
and adhoc meetings (on request)
are held where calendar and
regulatory requirements allow.
– Shareholder consultation on
key issues.
Alignment with strategy, purpose
and culture
– Committed to providing strong
strategic rationale and cultural
alignment around remuneration
and reward.
Alignment with strategy, purpose
and culture
– Being responsive to regulatory
changes whilst improving risk
maturity and culture, and ensuring
our customers receive Exceptional
Experiences Every Day.
27
Board role and activities
– Partnering with charities that are
close to our customers' hearts.
Board role and activities
– The Board maintains open and
regular dialogue with shareholders.
– Supplier risk management is
– IR report considered at each
Board role and activities
– Relationship with regulators
maintained at subsidiary level,
and monitored by their Audit,
Risk and Compliance Committees.
Board meeting.
Saga plc Annual Report and Accounts 2021Strategic Report Principal risks and uncertainties
BACKGROUND
The PRUs shown below are the principal risks facing the Company, including those that would threaten its business model,
future performance, solvency or liquidity. The table also includes the mitigating actions being taken to manage these risks.
The risk exposure outlook denotes the anticipated future direction of each risk after mitigation, which is influenced by known
key external or internal factors. Saga takes a 'bottom-up' and 'top-down' approach to developing and reviewing its PRUs, which
occurs at least twice a year with oversight from the ELT. Each PRU has been aligned to the most relevant strategic priorities.
Market overview, pages 10-11
Purpose and business model, pages 12-13
Strategic priorities, pages 14-15
Environmental, Social and Governance, pages 18-27
Audit, risk and internal control, pages 66-69
Strategic
priorities
3 5
PRU
category
A B
COVID-19
pandemic
s172
B
2 3
Cybercrime
s172
C B
3 4
Delivery and
execution
D B
1
Culture and
capability
Risk and mitigation
Risk Continuation of COVID-19 or variant thereof creates ongoing and material
disruption to business plans and ability to deliver strategy, leading to a breach of
banking covenants.
Mitigation All colleagues enabled to work from home.
COVID-19 strategies developed to support safe and sustainable Travel restart.
Ongoing review and management of financial resilience, including capital raise,
renegotiation of banking covenants and forward-looking stress and scenario
testing to anticipate any further challenges.
Risk Cyber security breach resulting in system lockdown, ransom demands and/or
compromise of confidential and/or personal data.
Mitigation Continued investment in industry leading tools and technologies to
mitigate cyber attacks, industry benchmarking and external penetration tests.
Risk exposure
outlook
Stable
Worsening
Continued programme of colleague awareness to identify and prevent
cyber threats.
Risk Key business change initiatives fail to be delivered effectively, or at all, due to
one, or a combination of the following:
Stable
- Resource capability or capacity.
- Unexpected business as usual risk issues.
- New regulation.
- Material defects in the delivery.
Mitigation Robust project governance covering how significant changes are prioritised
and delivered, with close oversight from the ELT and Board and 2nd and 3rd line
assurance conducted for the change initiatives carrying the greatest risk.
Risk Saga’s culture and resource capability do not support the strategic initiatives
and ensure fair customer outcomes.
Mitigation Launched purpose, business model and values. Increased focus on
talent management, succession planning and embedding a new reward framework
that aligns to effective risk management and delivering fair customer outcomes.
Improving
2
Risk The Saga brand and its products do not appeal sufficiently to our target
customer group resulting in loss of appeal and market share.
Stable
Mitigation Prioritisation of products and services that most appeal to our target
market. Identification and resolution of customer pain points. Focus on creating
and maintaining exceptional customer experiences by investing in brand redesign.
s172
E B
Saga brand
and relevance
s172
28
Strategic ReportSaga plc Annual Report and Accounts 2021
Key
1 People and culture step change
3 Optimising our businesses
5 Reducing our debt
2 Data, digital and brand transformation 4 Driving simplicity and efficiency
B Threat to business model
Strategic
priorities
1 3
PRU
category
F B
Regulatory
landscape
G
3
Operational
resilience
H
1 3
Climate
change
s172
I B
3 4
Third-party
suppliers
s172
J
Fraud and
financial
crime
Risk and mitigation
Risk Increasing regulation across Saga increases the risk of non-compliance.
Mitigation Change programme prioritisation is aligned to regulatory requirements.
Continued focus on effective risk management aligned to the Saga values
and strategy.
Horizon scanning reports produced to identify upcoming regulatory changes and
necessary action.
Risk Failure to prevent, adapt, respond to, recover and learn from material
operational disruptions that threaten the ability of Saga to deliver its strategy.
Mitigation Change governance ensures changes are delivered consistently within
risk appetite.
Risk Insufficient preparedness for the impacts on the Insurance and Travel business
of climate-related change.
Mitigation New cruise ships built in line with latest regulations and can operate to
near zero sulphur oxide and nitrogen oxide exhaust emissions.
Risk exposure
outlook
Stable
Stable
Worsening
(externally
driven)
Insurance business engaged in modelling the longer-term impacts of climate-
related change to its claims model and product design.
Risk Reputational impact and financial losses arising from failure to manage third
parties and partners effectively.
Stable
Mitigation Third-party risk management to ensure an appropriate risk-based
approach for selecting third-party partners and overseeing their operational and
financial resilience.
2 3
Risk Increased risk of internal or external fraud and financial crime driven by
remote working and macroeconomic conditions.
Stable
Mitigation Ongoing monitoring of claims fraud in place, with colleague awareness
communications. The key risks identified have internal controls in place with risk
management scrutiny of these.
Saga's 'Speak Up' process enhanced, with regular data monitoring in place.
29
Saga plc Annual Report and Accounts 2021Strategic Report Operating and Financial Review
The Group has reported an Underlying Profit Before Tax (PBT) of £17.1m, a decrease of 84.4% in comparison with the prior
year. This reflects:
– resilient trading in the Insurance business with both the Retail Broking and Underwriting businesses continuing to make
good progress against the targets set in April 2019, and with positive claims experience in relation to both current and
prior years; and
– the suspension of the Travel business in March 2020 due to the government advice against travel, the impact of which
is in line with the stress modelling for the 2020/21 year.
The Group has reported an overall loss before tax of £61.2m (2020: loss before tax of £300.9m) due to an impairment of Travel
goodwill in the first half of the year. The significant impact of COVID-19 on travel companies led to an increase in risk and
cost of debt levels and, therefore, market-participant views of discount rates as at 31 July 2020, particularly in the cruise
industry. Whilst the Group is confident that the Travel business will recover over time and believes that its Cruise operations
are well placed for a post COVID-19 world, given the current position and uncertainty over the pace of the recovery, the
Group took the decision to impair in full the goodwill assets allocated to the Tour Operations and Cruise businesses totalling
£59.8m as at 31 July 2020. Market risk and cost of debt levels have since reduced, reflecting a more positive outlook and
stronger recovery prospects in the travel industry than was the case at the half year. Goodwill impairments, however, are
irreversible under International Financial Reporting Standards (IFRS).
In September 2020, the Group raised approximately £140m of net proceeds from the issuance of additional equity shares,
with Roger De Haan as a cornerstone investor. The Group used these proceeds to repay the full £40m drawn on the revolving
credit facility (RCF) at that date and reduce the term loan to £70m. In addition, the Group agreed with its lending banks to
extend the maturity of the remaining term loan to May 2023, along with a series of covenant changes as reported at the time
in the interim statement.
Due to the combination of the equity capital raise and other actions taken by management to improve cash flow and costs,
the Group ends the year with a strong financial position and ample liquidity. As at 31 January 2021, the Group had £75.4m
of available cash resources in addition to the full £100m available and undrawn on the RCF that is available through to
May 2023.
The uncertainty that COVID-19 has created continues into 2021, and whilst the Group is confident of a resumption of its
Travel business later in the year, management has taken further precautionary measures to provide financial flexibility in the
event that the suspension of the Travel business continues into 2022. These measures include further amendments to the
covenant tests attached to the term loan and RCF as at 31 January 2022, combined with the extension of a repayment
holiday on the Group’s ship debt facilities to 31 March 2022. Given the priority of reducing debt levels, no final dividend is
proposed for the year.
30
Strategic ReportSaga plc Annual Report and Accounts 2021 OPERATING PERFORMANCE
Group income statement
£m
Revenue1
Underlying Profit Before Tax2
Total Retail Broking (earned)
Underwriting
Total Insurance
Travel
Other Businesses and Central Costs
Net finance costs3
Total Underlying Profit Before Tax
Net fair value gains/(losses) on derivatives
Profit on disposal/(impairment) of assets
Thomas Cook insolvency
Restructuring costs
Net profit on disposal of businesses
Impairment of goodwill
Loss before tax
Tax expense
Loss after tax
Basic Earnings Per Share:
Underlying Earnings Per Share2, 4
Loss per share4
12m to
Jan 2021
Change
12m to
Jan 2020
337.6
(57.7%)
797.3
75.9
58.7
134.6
(78.5)
(22.4)
(16.6)
(15.9%)
44.6%
2.9%
(496.5%)
17.0%
(21.2%)
17.1
(84.4%)
1.7
2.0
–
(30.8)
8.6
(59.8)
(61.2)
(6.6)
(67.8)
79.7%
44.5%
78.3%
90.2
40.6
130.8
19.8
(27.0)
(13.7)
109.9
(1.1)
(16.9)
(3.9)
(5.9)
–
(383.0)
(300.9)
(11.9)
(312.8)
13.2p
(67.0p)
(89.1%)
121.0p
82.4%
(381.7p)
The Group’s business model is based on providing high-quality and differentiated products to its target demographic,
predominantly focused on insurance and travel.
The Insurance business operates mainly as a broker, sourcing underwriting capacity from selected third-party insurance
companies, and, for motor and home, also from the Group’s in-house underwriter. Travel is comprised of Tour Operations
and Cruise. Other Businesses comprises Saga Personal Finance, Saga Publishing and MetroMail, a mailing and printing business.
Revenue
Revenue decreased by 57.7% to £337.6m (2020: £797.3m) due to the suspension of the Travel business from March 2020,
combined with lower Retail Broking revenues largely as a result of a reduction in sales of travel insurance policies combined
with the sale of the Bennetts business in August 2020.
Underlying Profit Before Tax2
Underlying Profit Before Tax decreased by 84.4% to £17.1m (2020: £109.9m).
This was primarily due to a £98.3m reduction in Travel profitability, largely resulting from the suspension of operations in
March 2020 due to government travel restrictions in response to the COVID-19 pandemic.
Net finance costs in the year were £16.6m (2020: £13.7m), an increase of 21.2%, which was largely due to the additional
debt issue costs incurred in connection with amendments to the Group’s leverage covenants in April 2019, April 2020 and
September 2020. This excludes finance costs relating to the Travel business that are included within the Travel division of
£13.6m (2020: £6.9m).
Revenue is stated net of ceded reinsurance premiums earned on business underwritten by the Group of £142.8m (2020: £145.7m)
1
2 Refer to the Alternative Performance Measures (APM) Glossary on page 212 for definition and explanation
3 Net finance costs exclude net fair value gains/(losses) on derivatives and IAS 19R pension interest costs
4 The figure for the prior year has been restated to reflect the effect of the share consolidation that was completed in October 2020
31
Saga plc Annual Report and Accounts 2021Strategic Report Operating and Financial Review continued
Loss before tax
Loss before tax for the year of £61.2m includes a £59.8m impairment to Travel goodwill and £30.8m of restructuring costs,
offset by an £8.6m profit on the disposal of non-core businesses, £2.0m of net gains on the disposal of assets and a £1.7m
fair value gain on derivatives de-designated in the period due to the suspension of Travel operations.
s172 The restructuring costs include £21.3m of expenses associated with a Group-wide restructuring programme to improve
the operating efficiency of both the trading businesses and the central support functions, including specifically the removal
of roles not required in Travel whilst that business has suspended trading in the short term. The remaining £9.5m of costs
relate to the impairment and operating losses of non-core businesses, principally the Destinology travel business.
The £8.6m net profit on disposal of non-core businesses relates to the sale of: Consolidated Healthcare Agencies Limited,
which traded as Country Cousins and Patricia White’s; Bennetts Motorcycling Services Limited, the Group’s bike insurance
broking business; and Destinology, one of the Group’s tour operating businesses.
The £2.0m net gain on the disposal of assets reflects a £3.8m profit on the sale of the Saga Sapphire ocean cruise ship and a
£3.2m gain on the curtailment of a property lease, partially offset by a £5.0m impairment to the carrying value of owned
properties that have been classified as held for sale. The corresponding £16.9m loss in the prior year primarily relates to a
£6.3m impairment of Saga Sapphire at the point when it was classified as held for sale, combined with a £7.0m impairment of
assets relating to the divested Destinology business and a £3.3m impairment of machinery in the Group’s printing business.
Tax expense
The Group’s tax expense for the year was £6.6m (2020: £11.9m) representing an abnormally high tax effective rate of 471.4%
(2020: 14.5%) when excluding the goodwill impairment charge. The Group’s tax effective rate is higher than the standard rate
of corporation tax, mainly due to the Group’s Cruise business entering the tonnage tax regime on 1 February 2020. This regime is
specific to the shipping industry and provides a source of tax efficiency by fixing an element of tax payable based on the
tonnage of each ship. While this is the appropriate long-term approach, in the short term, losses accumulated in the Cruise
business as a result of the COVID-19 suspension are not eligible for group relief to other profitable companies within the Group.
Excluding the losses on Cruise, the tax effective rate for the year was 17.6%.
Earnings Per Share
The Group’s Underlying Earnings Per Share5 were 13.2p (2020: 121.0p). The Group’s reported Earnings Per Share were a loss of
67.0p (2020: loss of 381.7p). The figures for the prior year have been restated to reflect the effect of the share consolidation
that was completed in October 2020.
Retail Broking
The Retail Broking business provides tailored insurance products and services, principally motor, home, private medical and
travel insurance. Its role is to price the policies and source the lowest cost of risk, whether through the panel of motor and
home underwriters or through solus arrangements for private medical and travel insurance. The Group’s in-house insurer,
Acromas Insurance Company Limited (AICL), sits on the motor and home panels and competes for that business with other
panel members on equal terms. AICL offers its underwriting capacity on the home panel through a coinsurance deal with
a third party, and so the Group takes no underwriting risk for that product. Even if underwritten by a third party, the product
is presented as a Saga product and the Group will manage the customer relationship.
5 Refer to the Alternative Performance Measures (APM) Glossary on page 212 for definition and explanation
32
Strategic ReportSaga plc Annual Report and Accounts 2021 £m
Gross written premiums (GWP):
Broked
Underwritten
GWP
Broker revenue
Instalment revenue
Add-on revenue
Other revenue
Written revenue
Written gross profit
Marketing expenses
Other operating expenses
Written Underlying PBT6
Written to earned adjustment
Earned Underlying PBT
Thousands
Core policies sold:
Saga-branded
Non-Saga branded
Third-party panel share7
131.3
204.6
335.9
37.6
8.1
14.5
31.3
91.5
88.8
(17.3)
(40.1)
31.4
2.1
33.5
924
144
1,068
30.4%
12m to Jan 2021
12m to Jan 2020
Motor
Broking
Home
Broking
Other
Broking
Total Change
Motor
Broking
Home
Broking
Other
Broking
373.4
208.1
581.5
(4.8%)
(8.6%)
(6.2%)
124.8
224.0
348.8
154.1
–
154.1
113.2
3.6
116.8
151.9
–
151.9
28.7
3.0
10.7
17.8
60.2
60.2
(6.0)
(26.3)
27.9
–
27.9
90.2
3.5
93.7
36.2
–
–
4.4
40.6
36.5
(2.7)
(19.3)
14.5
–
14.5
102.5
11.1
25.2
(16.7%)
0.0%
(10.0%)
53.5
192.3
185.5
(26.0)
(85.7)
73.8
(28.3%)
(18.8%)
(16.1%)
30.3%
7.6%
(19.0%)
2.1 333.3%
(15.9%)
75.9
43.6
8.1
17.9
36.8
106.4
103.6
(21.6)
(53.1)
28.9
(0.9)
28.0
Total
392.1
227.6
619.7
123.1
11.1
28.0
74.6
236.8
221.1
(37.3)
(92.7)
91.1
(0.9)
90.2
47.1
–
0.1
20.7
67.9
55.0
(7.5)
(18.4)
29.1
–
29.1
693
–
693
112
–
112
1,729
144
1,873
(5.6%)
(38.7%)
(9.4%)
5.8ppt
918
235
1,153
24.6%
232
–
232
1,832
235
2,067
32.4
3.0
10.0
17.1
62.5
62.5
(8.2)
(21.2)
33.1
–
33.1
682
–
682
Retail Broking profit before tax on a written basis (which excludes the impact of the written to earned adjustment) reduced
to £73.8m from £91.1m, and on an earned basis (which includes the impact of the written to earned adjustment) reduced to
£75.9m from £90.2m.
The reduction in profit before tax on a written basis was mainly due to a £24.3m reduction in written gross profit, after also
deducting marketing expenses but before overheads. Analysis of the main components of the change in this metric is shown
below, separately identifying the element of the change that the Group estimates is related directly to the COVID-19 pandemic.
Written gross profit after marketing costs
£m
Written gross profit after marketing costs in 2020
Saga-branded motor
Home
Bennetts
Travel
Other
Written gross profit after marketing costs in 2021
Change excluding
COVID-19
Estimated element of
change directly
attributable
to COVID-19
(0.5)
(0.1)
(7.9)
–
(3.1)
(11.6)
(1.2)
–
(0.9)
(7.2)
(3.4)
(12.7)
Total
change
183.8
(1.7)
(0.1)
(8.8)
(7.2)
(6.5)
159.5
While Retail Broking performance has been resilient in light of COVID-19 challenges, there has been some impact on the
full-year results, mainly due to a significant reduction in sales of travel insurance and lower credit hire and repair volumes.
In aggregate, the Group estimates that factors directly related to COVID-19 reduced profits by £12.7m. Excluding the impact
of COVID-19, the balance of the change in written gross profits is largely due to the disposal of Bennetts.
6 Refer to the Alternative Performance Measures (APM) Glossary on page 212 for definition and explanation
7 Third-party underwriter's share of the motor panel for Saga-branded policies
33
Saga plc Annual Report and Accounts 2021Strategic Report Operating and Financial Review continued
For Saga-branded motor and home insurance, in terms of the total gross margin after marketing expenses, new business
profits improved by £4.4m, while there was a £5.0m reduction in renewal profits. The impact of COVID-19 is estimated at
around £1.2m, reflecting a reduction in claim referral fee income.
The increase in new business profits is due to lower costs of acquisition in comparison with the prior year. The reduction
in renewal profits is principally due to pricing actions for long-tenured customers that were implemented in July 2019.
Excluding these actions, renewal profits were broadly flat, with the impact of slightly lower underlying renewal margins
offset by a 4% increase in the total number of motor and home renewals policies.
The overall gross margin per policy for Saga-branded motor and home combined, and calculated as written gross profit less
marketing expenses divided by the number of policies, was £73.8 in the year (£74.5 excluding COVID-19 impacts), compared
with £75.6 in the prior year.
Although Retail Broking earnings have reduced in the year the Insurance business has shown good progress despite the
challenges presented by COVID-19:
– After several years of a decline in policy count, Saga-branded motor and home policies increased by 1.1% in the year.
– The higher policy count is due to improved customer retention of 80.5% across motor and home, which was 5.4ppt higher than
the prior year. This includes the beneficial impact of the three-year fixed-price policy introduced in April 2019 on customer loyalty.
– 610k three-year fixed-price policies were sold in the year; 38% of total motor and home policies incepting, with 63%
of direct new business taking the product.
– The margin per policy is tracking in line with expectations set at the time of the Insurance strategy reset in April 2019,
on a basis that is consistent with how that range was calculated.
Written profit and gross margin per policy for motor and home are stated after allowing for deferral of part of the revenues from
three-year fixed-price policies, recognising inflation risk inherent in this product. As at 31 January 2021, £9.9m of income had been
deferred in relation to three-year fixed-price policies, £5.0m of which related to income written in the year to 31 January 2021.
Motor Broking
Gross written premiums decreased by 3.7% due to the sale of the Bennetts business in the year. Excluding Bennetts, gross
written premiums increased by 1.2% due to a 0.7% increase in the number of core policies and an increase in average gross
written premiums reflecting a higher contribution from the renewal book and the three-year fixed-price product. Gross written
premiums from business underwritten by AICL decreased by 8.7% to £204.6m (2020: £224.0m) in line with a 5.8ppt increase
in third-party panel share to 30.4% (2020: 24.6%). This was due to price cuts implemented by AICL in February 2019, with
third-party panel members then becoming relatively more competitive since August 2019 and therefore winning more share
in 2020. Other revenue declined by £5.5m due primarily to the sale of Bennetts.
Written gross profit minus marketing expenses was £71.5m (2020: £82.0m), contributing £66.9/policy (2020: £71.1/policy).
Excluding Bennetts, motor written gross profit minus marketing expenses was £65.0m (2020: £66.7m), contributing £70.3/
policy (2020: £72.6/policy).
The reduction in written gross profits excluding Bennetts is mainly due to pricing actions for long-tenured customers that
were implemented in July 2019 and the impact of COVID-19 on other income. This was partially offset by lower costs of
acquisition and a 0.5ppt increase in the proportion of renewal policies.
Bennetts gross profits reduced due to changes to a contractual arrangement with a third party, as well as short-term factors
relating to the impact of COVID-19. The sale of Bennetts completed on 7 August 2020, so the 2020/21 results only include six
months’ worth of trading compared with 12 months in the prior year.
The positive written to earned impact in the current year of £2.1m is due to reduced margins per policy in the current year
on a written basis relative to the margins on earned business. The negative written to earned adjustment of £0.9m in the prior
year was due to price reductions implemented by AICL in February 2019, which were included within written profits in the prior
year but on an earned basis are spread over a 12-month period.
Home Broking
Gross written premiums decreased by 1.4% due to a 4.5% decrease in average renewal premiums more than offsetting
a 1.6% increase in core policies.
Written gross profit minus marketing expenses was £54.2m (2020: £54.3m), and on a per policy basis this was £78.2/policy
(2020: £79.6/policy).
Within gross profits the impact of pricing actions for long-tenured customers was offset by lower costs of acquisition
and a 6.6% increase in the number of renewal policies, predominately due to high three-year fixed-price retention rates.
Written gross profit on a per policy basis was stable, with a reduction resulting from pricing actions implemented last year
but a positive impact from a 4ppt increase in the proportion of renewal policies written relative to total policies.
34
Strategic ReportSaga plc Annual Report and Accounts 2021 Other Broking
The other insurance broking business is primarily comprised of private medical insurance (PMI) and travel insurance.
Gross written premiums declined 19.8% as a result of lower sales of travel insurance, which declined from 171k in the prior
year to 54k. This was due to the impact of COVID-19 related travel restrictions. Gross profits after marketing costs relating
to the travel product declined by £7.2m, or 69%, as a result.
Sales for the PMI product were broadly stable, however gross profit after marketing costs was £2.9m lower. The Group is not
recognising any upside from a reduction in claims costs in the year that has occurred as a result of a significant decline in
elective procedures during the period of COVID-19 lockdown. While these amounts could be receivable under profit share
arrangements, both Saga and the solus insurance provider have committed to returning any such benefits to customers.
Profitability of the Group’s claims management and credit hire businesses was also impacted during the year due to lower
claims volumes as a result of reduced repair activity during the COVID-19 lockdown, as well as the exit from a claims
handling contract for a third party.
Insurance Underwriting
£m
Net earned premium
Other revenue
Revenue
Claims costs
Reserve releases
Other cost of sales
Gross profit
Operating expenses
Investment return
Quota share net cost
Underlying Profit Before Tax8
Reported loss ratio
Expense ratio
Reported COR
Current year COR
Number of earned policies
12m to Jan 2021
12m to Jan 2020
Reported
54.7
19.7
74.4
(42.2)
30.6
(4.9)
(16.5)
57.9
(2.9)
3.7
–
58.7
15.6%
10.5%
26.1%
67.2%
a
b
c
d
e
f
(b+c)/a
(d+f)/a
(e+f)/a
(e+f-c)/a
Quota
Share Underlying
183.4
(128.7)
(1.0)
20.7
182.4
(108.0)
(138.3)
96.1
37.6
(7.0)
(17.8)
12.9
(118.5)
102.0
63.9
(6.0)
(10.6)
7.7
(4.6)
8.3
(2.9)
2.9
58.7
–
55.2%
15.6%
70.8%
91.4%
764k
Change
(6.5%)
(42.9%)
(6.7%)
22.1%
(6.0%)
(0.6%)
23.6%
58.6%
(51.4%)
(11.7%)
(38.1%)
44.6%
(15.1ppt)
3.0ppt
(12.2ppt)
(12.0ppt)
(6.5%)
Reported
63.1
6.0
69.1
(57.3)
29.6
(2.4)
(30.1)
39.0
(2.4)
4.0
–
40.6
40.1%
6.9%
47.0%
89.9%
Quota
Share Underlying
196.2
(133.1)
(0.7)
6.7
195.5
(126.4)
(177.5)
120.2
40.0
(10.4)
(17.7)
15.3
(155.2)
125.1
40.3
(1.3)
(7.0)
4.6
9.4
(5.4)
(2.1)
2.1
40.6
–
70.3%
12.6%
83.0%
103.4%
817k
The Group’s in-house underwriter AICL continues to play an important role on the motor panel, providing a source of
competitively priced risk. AICL also underwrites a portion of the home panel, although all of the risk in the home insurance
business is passed on to a third-party insurance company.
Excluding the impact of the quota share reinsurance arrangement, net earned premiums decreased by 6.5% to £183.4m
(2020: £196.2m) in line with the decline in the number of earned policies underwritten by AICL.
Also excluding the impact of the quota share arrangement, the Underwriting business saw a decrease in the current year combined
operating ratio (COR) to 91.4% (2020: 103.4%). This was due to lower claims frequencies in the year as a result of customers driving
fewer miles during COVID-19 lockdowns. The Group has taken an appropriately cautious approach to reserving for the 2020/21
accident year and is holding an additional component of reserve margin for the increased uncertainty over claims development.
Reserve releases of £37.6m (2020: £40.0m) have resulted in a reported COR of 70.8% (2020: 83.0%), excluding the impact of the
quota share arrangement. The Group retains economic interest in motor reserve releases. To the extent they are commuted under the
quota share arrangement they are recognised within other revenue as a profit share. Reserve releases are analysed as follows:
£m
Motor insurance
Home insurance
Other insurance
12m to Jan 2021
Reported Quota share
(8.6)
–
1.6
(7.0)
28.1
(0.4)
2.9
30.6
Underlying
36.7
(0.4)
1.3
37.6
Change
(6.0%)
12m to Jan 2020
Reported Quota share
(9.3)
(1.1)
–
(10.4)
29.5
(1.1)
1.2
29.6
Underlying
38.8
–
1.2
40.0
8 Refer to the Alternative Performance Measures (APM) Glossary on page 212 for definition and explanation
35
Saga plc Annual Report and Accounts 2021Strategic Report Operating and Financial Review continued
Reserve releases primarily reflect continued favourable experience on large bodily injury claims relating to prior accident years mainly
due to a reduction in severity, with favourable settlements on claims paid and reductions in case reserves for claims outstanding.
Excluding the impact of the quota share arrangement, the investment return decreased by £1.1m to £8.3m (2020: £9.4m) due to a
reduced investment portfolio and lower reinvestment yields.
Travel
12m to Jan 2021
12m to Jan 2020
£m
Revenue
Gross profit
Marketing expenses
Other operating expenses
Investment return
Finance costs
Underlying (Loss)/Profit Before Tax9
Tour
Operations
32.7
(2.6)
(7.8)
(26.4)
–
(0.1)
(36.9)
Cruising
18.9
(13.9)
(7.1)
(7.3)
0.2
(13.5)
(41.6)
Total
Travel
51.6
(16.5)
(14.9)
(33.7)
0.2
(13.6)
(78.5)
Change
(88.9%)
(116.6%)
53.3%
17.6%
(50.0%)
97.1%
(496.5%)
Tour
Operations
346.1
61.2
(18.3)
(33.6)
0.3
(0.4)
9.2
Cruising
118.0
37.9
(13.6)
(7.3)
0.1
(6.5)
10.6
Total
Travel
464.1
99.1
(31.9)
(40.9)
0.4
(6.9)
19.8
Average revenue per passenger (£)
Holidays passengers ('000)
Stays
Escorted tours
River cruise
Third-party ocean cruise
Cruise passengers ('000)
Cruise passenger days ('000)
Load factor
Per diems (£)
2,515
3,150
2,716
12.9%
2,150
3,688
2,405
8
5
–
–
13
8
5
–
–
13
6
61
83%
241
(87.9%)
(91.9%)
(100.0%)
(100.0%)
(91.9%)
(81.3%)
(85.1%)
(1.2%)
(6.9%)
66
62
25
8
161
66
62
25
8
161
32
409
84%
259
32
409
84%
259
6
61
83%
241
The Group's Travel businesses were suspended in mid-March 2020 as a result of COVID-19, which has led to a decline in
revenues in comparison to budget expectations of around 90% for the financial year for both Tour Operations and Cruise.
The Group has focused on ensuring customers whose holidays have been cancelled are rebooked on future trips or offered a
cash refund. The Group has experienced high levels of customer loyalty, particularly in Cruise, with 73% of Cruise advance receipts
transferred to a future booking. Similarly, 43% of Tour Operations advance receipts were also transferred to a future booking.
Other operating expenses and marketing costs have declined by £24.2m as a result of actions taken after the decision to
suspend operations.
s172 A significant number of changes have been made to how the Travel businesses operate to provide peace of mind and ensure
the safety of customers and colleagues once operations restart, including the requirement that all guests must be fully vaccinated
against COVID-19 at least 14 days before departure.
In April 2020, the Group indicated that, for the full year, it expected a ‘drop through’ from lower revenues to Underlying Profit Before
Tax of 15-20% for Tour Operations and 55-60% for Cruise, relative to plan assumptions. For the year, the drop through rate was 20%
and 46% respectively.
The Cruise business took delivery of its second new ship, Spirit of Adventure, on 29 September 2020. The sale of Saga
Sapphire was completed on 12 June 2020 on terms broadly in line with previous expectations.
Forward Travel sales
Tour Operations bookings for 2021/22 are below the same point last year by 52% and 51% for revenue and passengers
respectively. This is due to our decision to suspend operations as a result of the government’s COVID-19 travel restrictions.
Customer demand for 2021/22 is primarily focused on the second half and Saga has maintained a disciplined approach
to marketing activity during this period as we expect customer confidence to return when restrictions start to be lifted.
Bookings for 2022/23 departures are ahead of the same point last year by 64% and 52% for revenue and passengers
respectively, which demonstrates the strong level of pent-up demand for Saga’s holidays. Around 63% of revenue booked
for 2021/22 is from customers choosing to rebook holidays cancelled in 2020.
9 Refer to the Alternative Performance Measures (APM) Glossary on page 212 for definition and explanation
36
Strategic ReportSaga plc Annual Report and Accounts 2021 Similarly, Cruise bookings for 2021/22 are lower than the same point last year by 20% and 23% for revenue and passenger
days respectively due to our decision to suspend operations for Spirit of Discovery until at least June 2021 and for Spirit of
Adventure until at least July 2021. However, demand is very strong for 2022/23 departures, with revenue and passenger days
ahead of the prior year by 160% and 142% respectively. Around 45% of revenue booked for 2021/22 is from customers
choosing to rebook cruises cancelled in 2020. These figures exclude bookings cancelled in 2020/21 where the customer has
indicated that they want to rebook but have yet to rebook onto a specific cruise.
Trading to week ended 28 March 2021
Saga Holidays and Titan combined revenue (£m)
Saga Holidays and Titan combined passengers (‘000)
Cruise revenue (£m)
Cruise passenger days (‘000)
Other Businesses and Central Costs
2021/22
departures
2020/21
85.3
38.6
79.3
272.9
Change
(52.5%)
(51.3%)
(20.4%)
(23.5%)
2019/20
179.4
79.3
99.6
356.6
2020/21
37.4
11.7
74.9
269.8
2022/23
departures
Change
64.0%
51.9%
160.1%
141.5%
2019/20
22.8
7.7
28.8
111.7
£m
Revenue
Personal Finance
Healthcare
Media
Other
Total revenue
Cost of sales
Consolidation adjustment
Gross profit
Operating expenses
Investment income
IAS 19R pension charge
Net finance costs
Underlying Profit/(Loss) Before Tax10
12m to Jan 2021
Other
Businesses
Central
Costs
Total
Change
12m to Jan 2020
Other
Businesses
Central
Costs
6.0
0.9
9.1
–
16.0
(10.4)
–
5.6
(2.8)
–
–
–
2.8
–
–
–
2.0
2.0
(1.1)
2.8
3.7
(26.3)
–
(2.6)
(16.6)
(41.8)
6.0
0.9
9.1
2.0
18.0
(11.5)
2.8
9.3
(29.1)
–
(2.6)
(16.6)
(39.0)
(18.9%)
(85.2%)
(31.6%)
(9.1%)
(37.9%)
(33.1%)
28.9%
(21.2%)
4.2%
7.4
6.1
13.3
–
26.8
(16.5)
–
10.3
(5.7)
–
–
–
4.6
–
–
–
2.2
2.2
(1.7)
3.1
3.6
(35.2)
0.1
(0.1)
(13.7)
(45.3)
Total
7.4
6.1
13.3
2.2
29.0
(18.2)
3.1
13.9
(40.9)
0.1
(0.1)
(13.7)
(40.7)
s172 The Group’s other businesses include Saga Personal Finance, the Saga Publishing business and a mailing and printing
business. After several years of operating a trial in Healthcare, the Group has completed the closure of this business.
The non-Saga branded healthcare businesses of Country Cousins and Patricia White’s were sold in March 2020, and the
Saga-branded businesses have since been transferred to a third party with an outstanding Care Quality Commission rating.
Underlying Profit Before Tax decreased by £1.8m due to the closure of the Healthcare business coupled with a non-recurring
supplier contribution of £1.0m for the equity release product in the prior year.
Central operating expenses decreased to £26.3m (2020: £35.2m) due to a £5.2m net increase in recharges to the operating
divisions following a change in methodology, coupled with cost savings driven by the Group’s restructuring programme that
were retained centrally.
Net finance costs in the year were £16.6m (2020: £13.7m), an increase of 21.2% largely due to the additional debt issue costs
incurred in connection with amendments to the Group’s debt covenants in April 2019, April 2020 and September 2020.
10 Refer to the Alternative Performance Measures (APM) Glossary on page 212 for definition and explanation
37
Saga plc Annual Report and Accounts 2021Strategic Report Operating and Financial Review continued
CASH FLOW AND LIQUIDITY
Available operating cash flow
Available operating cash flow is made up of the cash flows of unrestricted businesses and the dividends paid by restricted
companies, less any cash injections to those businesses. Unrestricted businesses include Retail Broking (excluding specific
ring-fenced funds to satisfy Financial Conduct Authority (FCA) regulatory requirements), Other Businesses and Central
Costs, and from the start of the current financial year, the Group’s Cruise business. Restricted businesses include AICL
and Tour Operations, and prior to 1 February 2020, Cruise.
Excluding cash transfers to and from the Travel business, Group cash flows demonstrated considerable resilience in the year,
with available operating cash flow of £92.3m compared with £95.0m in the prior year. Key movements were as follows:
– Trading EBITDA for unrestricted businesses reduced by £10.1m, in part due to the impact of COVID-19 on sales of travel
insurance.
– There was an expected reduction in dividends from AICL of £15.5m.
– Working capital improved from an outflow of £9.5m to an inflow of £7.0m. The outflow in the prior year was mainly due to a
£15m one-off payment in February 2019.
– Capital expenditure reduced by £6.4m due to the Group’s focus on conserving cash in the short term.
Trading in the Group’s Travel businesses was suspended in March 2020. Since then the Group has provided additional liquidity into
the Travel businesses to meet supplier and other trading payments, and to enable repayment of customer refunds where requested.
For Tour Operations, which operates as a ring-fenced fund, a significant portion of the cash outflow was met from the £55.1m
of funds available at the start of the financial year. During the year, the Group provided an additional £64.1m of cash to the
Tour Operations business to cover trading cash flows, £46.0m of which was provided in the first half of the year when the
business experienced higher cash outflows for customer refunds and overheads. The Group has since taken action to reduce
the cash burn for the business by removing costs whilst operations are suspended, which, coupled with lower refund levels,
has resulted in much lower cash outflows in the second half of the year. The combination of cash within the ring-fenced fund
at 1 February 2020 and this additional injection of liquidity has enabled the Tour Operations business to refund £48.2m of
advance receipts (£39.5m of which was in the first half of the year), and pay £43.2m of other trading costs and capital
expenditure (£31.1m of which was in the first half of the year). The Group also disposed of Destinology in October 2020,
which incurred a £2.5m net cash outflow in the second half of the year.
In the second half of the year, following discussions with the Civil Aviation Authority (CAA), the main regulator for the Tour
Operations business, the Group created a trust arrangement for new and existing bookings within the current ring-fenced
setup. On this basis, 100% of customer cash is held in a separate trust and will only be passed back to the business once
the customer has either returned from holiday or has cancelled their booking and been refunded. The Travel business had
£22.4m of cash held in trust as at 31 January 2021, and the Group had to inject a one-off payment of £16.2m into the Tour
Operations business to fund the initial set-up of this arrangement (included in the £61.7m cash injection stated above).
The move into trust has enabled the Group to remove £32.8m of bonding facilities that it held previously to satisfy CAA
requirements. In addition to the £61.7m cash injected, the Group also funded £6.2m of restructuring costs for Tour Operations
shown below available operating cash flow.
During the year, the Cruise business reported a net cash outflow of £36.6m, of which £30.7m related to the first half and
£5.9m related to the second half. The Group paid £25.7m of trading costs, refunded £8.1m of advance customer receipts, paid
restructuring costs of £3.2m and interest costs of £8.6m. In addition, the Group had a positive cash inflow from net capital
expenditure of £9.0m relating to the sale of Saga Sapphire and the recovery of owners’ supply payments on completion of
Spirit of Adventure under ship financing arrangements entered into when the new vessel was commissioned. The higher cash
outflow in the first half is due to a reduction in working capital levels, with £14.2m of customer refunds in the first six months
compared to an increase in advance receipts of £6.1m in the second half. In addition, net capital expenditure contributed a
positive £1.4m in the first half and £7.6m in the second half.
The cash outflows for the Travel business since the onset of the COVID-19 crisis are well within modelled assumptions and
stress test scenarios.
In the prior year, the Group released £22.7m of cash relating to the Cruise business from the Travel restricted ring-fenced fund
as the two operations were financially and operationally separated following discussions with the CAA. As a result of the
cash injections to the Travel business in the last 12 months, available operating cash flow reduced from £92.7m in the prior
year to £3.4m in the current year.
38
Strategic ReportSaga plc Annual Report and Accounts 2021 £m
Retail Broking Trading EBITDA
Other Businesses and Central Costs Trading EBITDA
Trading EBITDA from unrestricted businesses11, 12
Dividends paid by Underwriting business
Working capital and non-cash items13
Capital expenditure funded with available cash
Available operating cash flow before cash injections to Travel operations
Cash injection into Tour Operations business
Cruise available operating cash flow
Available operating cash flow11
Restructuring costs paid
Interest and financing costs
Business disposals
Tax receipts/(payments)
Other payments
Dividends to shareholders
Change in cash flow from operations
Net proceeds from capital raise
Change in bank debt
Cash at 1 February
Available cash at 31 January
12m to Jan
2021
81.6
(10.0)
71.6
24.5
7.0
(10.8)
92.3
(64.1)
(24.8)
3.4
(23.0)
(27.3)
30.1
2.8
(10.2)
–
(24.2)
138.7
(80.0)
40.9
75.4
Change
(17%)
40%
(12%)
(39%)
174%
37%
(3%)
(156%)
(209%)
(96%)
(1,253%)
(38%)
100%
127%
(264%)
n/a
175%
100%
(100%)
(16%)
84%
12m to Jan
2020
98.4
(16.7)
81.7
40.0
(9.5)
(17.2)
95.0
(25.0)
22.7
92.7
(1.7)
(19.8)
–
(10.4)
(2.8)
(25.8)
32.2
–
(40.0)
48.7
40.9
The Group is in discussion with the FCA regarding the magnitude of the Threshold Condition 2.4 balance that the Retail Broking
business holds as restricted cash and the potential need to hold an additional amount on a temporary basis as a result of
COVID-19. Any additional temporary liquidity provision is not expected to be significant in a Group context and allowance has
been made for this in going concern and viability assessments on a prudent basis.
Other cash flow movements
Non-operating cash flow movements in the current year include significant cash costs relating to the restructuring activities
undertaken in the first half of the year, which principally relate to redundancy costs.
Interest and financing costs increased due to a full year of financing costs relating to the Spirit of Discovery debt facility and
the financing costs relating to the new Spirit of Adventure debt facility that was drawn down at the end of September 2020,
combined with an increase in the interest rate that was agreed as part of covenant renegotiations.
Business disposals relate to the cash received from the sale of the Healthcare, Destinology and Bennetts businesses, net of
related sale costs and expenses.
The Group continued to make the agreed payments to the defined benefit pension fund as part of the deficit recovery plan
and paid a portion of the sales proceeds relating to the Healthcare and Bennetts businesses to the fund, which totalled
£4.8m (2020: £2.8m) and is included within other payments.
s172 In October 2020 the Group raised £138.7m net proceeds from the issuance of new equity shares and used part of this
to repay £80m of bank debt. The balance of the proceeds, together with the available cash brought forward from the prior year,
provided sufficient liquidity to fund the cash injections to the Travel businesses and increase the cash reserves that the
Group takes forward into the new financial year.
11 Refer to the Alternative Performance Measures (APM) Glossary on page 212 for definition and explanation
12 Trading EBITDA includes the line item impact of IFRS 16 with the corresponding impact to net finance costs included in net cash flows used in financing activities
13 Adjusted to exclude IAS 19R pension current service costs
39
Saga plc Annual Report and Accounts 2021Strategic Report Operating and Financial Review continued
Reconciliation between operating and reported metrics
Available operating cash flow reconciles to net cash flows from operating activities as follows:
£m
Net cash flow from operating activities (reported)
Exclude cash impact of:
Trading of restricted divisions
Non-trading costs
Interest paid
Tax paid
Cash (paid to)/released from restricted divisions
Include capital expenditure funded from available cash
Include capital expenditure disposal proceeds
Include net impact of Spirit of Adventure purchase cash flows
Less cash in businesses disposed of
Available operating cash flow14
Trading EBITDA reconciles to Underlying Profit Before Tax as follows:
£m
Retail Broking Trading EBITDA
Underwriting Trading EBITDA
Tour Operations Trading EBITDA
Cruise Trading EBITDA
Other Businesses and Central Costs Trading EBITDA
Trading EBITDA14
Depreciation & amortisation (excluding acquired intangibles)
Amortisation of acquired intangibles
Pension charge IAS 19R
Net finance costs
Underlying Profit Before Tax14
12m to Jan
2021
(78.4)
12m to Jan
2020
91.9
73.8
21.6
24.1
10.7
130.2
(26.8)
(10.8)
6.9
(5.2)
(12.5)
3.4
(46.5)
4.5
19.9
25.1
3.0
15.0
(17.2)
–
–
–
92.7
12m to Jan
2021
81.6
59.2
(32.6)
(19.5)
(10.0)
78.7
(28.8)
–
(2.6)
(30.2)
17.1
Change
(56.7%)
(84.4%)
12m to Jan
2020
98.4
41.7
24.8
33.5
(16.7)
181.7
(48.0)
(3.0)
(0.1)
(20.7)
109.9
Adjusted Trading EBITDA is used in the Group’s leverage calculation and is calculated as follows:
£m
Trading EBITDA14
Less Trading EBITDA of disposed companies not disclosed below UPBT
Impact of IFRS 16
Spirit of Discovery and Spirit of Adventure Trading EBITDA15
Adjusted Trading EBITDA14
12m to Jan
2021
78.7
(1.6)
(3.0)
18.7
92.8
Change
(56.7%)
(39.0%)
12m to Jan
2020
181.7
–
(13.5)
(16.1)
152.1
14 Refer to the Alternative Performance Measures (APM) Glossary on page 212 for definition and explanation
15 EBITDA includes central Cruise overheads
40
Strategic ReportSaga plc Annual Report and Accounts 2021 BALANCE SHEET
Goodwill
The Group has assessed the carrying value of goodwill for impairment at 31 July 2020 and 31 January 2021. The impairment
test compares the recoverable amount of each cash generating unit (CGU) with the carrying value of the net assets
including goodwill for each CGU, namely Insurance, Tour Operations and Cruise.
The recoverable amount of each CGU has been determined based on a value-in-use calculation using cash flow projections
from the Group’s five-year plan to 2025/26, and after allowing for certain stress test scenarios. This stress testing has
included the latest and cautiously balanced estimates of the impact of the COVID-19 crisis as at the time of each test.
Based on this analysis, the Group remains comfortable that there is headroom over and above the carrying value of the
goodwill allocated to the Insurance CGU of £718.6m.
In the first half of the year and as reported in the interim statement in September 2020, for the Cruise and Tour Operations
businesses, the underlying forecast cash flows were updated for the impact of COVID-19 as assessed at that point in time,
with the expectation then that ocean cruises would recommence in November 2020 and Tour Operations trading would
remain suspended until April 2021. In addition to this, a further downside scenario was considered that reflected the need
for a further suspension of ocean cruises between January 2021 and May 2021, with a long-term impact on demand levels for
both cruises and package holidays. As a result of the continued uncertainty and adverse impact of COVID-19 on the travel
industry, increases in perceived travel industry risk resulting in higher asset betas and cost of debt levels, particularly in
Cruise in the first half of 2020, led to a marked increase in the market-participant view of discount rates used in the
calculation of recoverable amount. Consequently, the Group determined that the recoverable amounts of the goodwill
allocated to the Tour Operations and Cruise CGUs were below their respective carrying values and took the decision to
impair in full the £59.8m goodwill allocated to Tour Operations and Cruise in the Group’s interim results. Whilst the outlook
for the travel industry has improved since then, characterised by an improvement in industry betas and cost of debt levels,
goodwill impairments are irreversible, so the impairment charge remains in the full-year results.
Carrying value of ocean cruise ships
As at 31 January 2021, the carrying value of the Group’s ocean cruise ships totalled £635.0m, which increased by £331.1m
in the year following the purchase of Spirit of Adventure in September 2020. Due to the suspension of Cruise for most of
the year, the Group carried out an impairment review of both of its vessels. The results of the review showed that there was
headroom in both the central and stress test scenarios for Spirit of Discovery, and so it was concluded that no impairment
was required. Given its higher carrying value, the central scenario for Spirit of Adventure implied a small impairment, which
increased in the stress test scenario. Management considered a range of alternative data points and other factors, and
taking all of these into account, considered that there was no need to impair the vessel. Please refer to note 17 on pages
171-173 for further details of the review that was undertaken.
41
Saga plc Annual Report and Accounts 2021Strategic Report Operating and Financial Review continued
Investment portfolio
The majority of the Group’s financial assets are held by its underwriting entity and represent premium income received and
invested to settle claims and to meet regulatory capital requirements. The maturity profile of the invested financial assets
is aligned with the expected cash outflow profile associated with the settlement of claims in the future.
The amount held in invested funds decreased by £17.8m to £359.1m (2020: £376.9m) due to payment of £24.5m of
dividends from AICL in the year. As at 31 January 2021, 98% of the financial assets held by the Group were invested
with counterparties with a risk rating of BBB or above, which is broadly in line with the previous year and reflects the
stable credit risk rating of the Group’s counterparties.
£m
At 31 January 2021
Underwriting investment portfolio:
Deposits with financial institutions
Debt securities
Money market funds
Loan funds
Total invested funds
Hedging derivative assets
Total financial assets
£m
At 31 January 2020
Underwriting investment portfolio:
Deposits with financial institutions
Debt securities
Money market funds
Loan funds
Total invested funds
Hedging derivative assets
Total financial assets
AAA
AA
A
BBB
Unrated
Total
Risk rating
–
23.1
66.8
–
89.9
–
89.9
24.2
73.9
–
–
98.1
–
98.1
–
93.4
–
–
93.4
0.5
93.9
–
71.5
–
–
71.5
0.2
71.7
Risk rating
–
–
–
6.2
6.2
–
6.2
24.2
261.9
66.8
6.2
359.1
0.7
359.8
AAA
AA
A
BBB
Unrated
Total
–
15.3
45.9
–
61.2
–
61.2
30.4
117.5
–
–
147.9
–
147.9
–
54.1
–
–
54.1
0.7
54.8
18.6
87.3
–
1.6
107.5
0.5
108.0
–
–
–
6.2
6.2
–
6.2
Insurance reserves
Analysis of insurance contract liabilities at 31 January 2021 and 31 January 2020 is as follows:
£m
Reported claims
Incurred but not reported17
Claims handling provision
Total claims outstanding
Unearned premiums
Total
At 31 January 2021
Reinsurance
At 31 January 2020
Reinsurance
Gross
228.6
92.6
8.3
329.5
96.8
426.3
assets16
(57.8)
(7.4)
–
(65.2)
(6.4)
(71.6)
Net
170.8
85.2
8.3
264.3
90.4
354.7
Gross
250.5
79.9
7.9
338.3
105.3
443.6
assets16
(48.2)
(7.0)
–
(55.2)
(6.9)
(62.1)
The Group’s total insurance contract liabilities net of reinsurance assets have decreased by £26.8m in the year to 31 January
2021 from the previous year end due to a £31.5m reduction in reported net claims reserves coupled with a £8.0m reduction in
unearned premiums. This was partially offset by a £12.3m increase in net incurred but not reported claims reserve due to increased
uncertainty over claims reporting patterns resulting from the impact of COVID-19 necessitating a higher booked margin.
Financing
The Group’s net debt has increased by £166.3m to £760.2m since the previous year end due to the additional £280.8m
borrowed to fund the purchase of Spirit of Adventure, partially offset by repayment of £80m in bank debt and short-term
facilities, and an increase in available cash. As at 31 January 2021, the £100m RCF remained undrawn and available to
the Group.
16 Excludes funds-withheld quota share arrangement (please refer to note 28 for further detail)
17
Includes amounts for reported claims that are expected to become periodical payment orders
42
49.0
274.2
45.9
7.8
376.9
1.2
378.1
Net
202.3
72.9
7.9
283.1
98.4
381.5
Strategic ReportSaga plc Annual Report and Accounts 2021 Excluding the impact of debt and earnings relating to the new ocean cruise ships, the Group’s leverage ratio was 2.7x
as at 31 January 2021 (2020: 2.4x), well within the 4.75x covenant applicable to the Group’s term loan and RCF.
s172 No repayments were made on the ship loans during the year, with the Group agreeing two debt holidays with its
lenders as part of a package of proposals to support the wider cruise industry. The first debt holiday agreed in June 2020
allowed repayments to be deferred to March 2021, and the second debt holiday agreed in March 2021 extended this further
to March 2022. The Group expects to resume ship loan debt repayments after March 2022.
£m
Corporate bond
Term loan
Revolving credit facility
Spirit of Discovery ship loan
Spirit of Adventure ship loan
Less available cash19
Net debt
Maturity
date18
May 2024
May 2023
May 2023
June 2031
September 2032
31 January
2021
250.0
70.0
–
234.8
280.8
(75.4)
760.2
31 January
2020
250.0
140.0
10.0
234.8
–
(40.9)
593.9
Adjusted net debt is used in the Group’s leverage calculation and reconciles to net debt as follows:
£m
Net debt
Ship loans
Cruise available cash
Adjusted net debt20
31 January
2021
760.2
(515.6)
2.3
246.9
31 January
2020
593.9
(234.8)
2.6
361.7
Pensions
The Group’s defined benefit pension scheme deficit as measured on an IAS 19R basis reduced by £1.2m to £4.3m as at
31 January 2021 (2020: £5.5m deficit).
£m
Fair value of scheme assets
Present value of defined benefit obligation
Defined benefit scheme liability
31 January
2021
411.2
(415.5)
(4.3)
31 January
2020
372.3
(377.8)
(5.5)
Whilst the present value of defined benefit obligations increased by £37.7m to £415.5m, due to a 25bps reduction in the
discount rate used to value these liabilities that is based on high-quality bond yields, the fair value of scheme assets
increased by £38.9m to £411.2m. The increase in asset values has been largely driven by the fall in interest rates in the
year, which in turn has led to a marked increase in the value of liability hedging assets within the portfolio.
The pension trustees have largely completed the triennial valuation of the scheme as at 31 January 2020. Following discussions
with the Company, the trustees are proposing a new deficit recovery plan totalling £39.0m over the next seven years, with the
first payment of £4.2m paid in February 2021 and subsequent payments of £5.8m due each February thereafter until February
2027. Discussions with the trustees are ongoing but are expected to be concluded in the next two months.
Net assets
Since 31 January 2020, total assets have increased by £117.9m and total liabilities have increased by £25.4m, resulting in an
overall increase in net assets of £92.5m.
The increase in total assets is primarily as a result of the purchase of Spirit of Adventure, which, after allowing for offsetting
depreciation and a reclassification of land and buildings to assets held for sale, led to an increase in the carrying value of
property, plant and equipment of £235.2m. This was partially offset by a £59.8m impairment of Travel goodwill and the
derecognition of £33.8m of assets held for sale relating to the divestment of the Bennetts and Healthcare businesses
during the year, plus a further £15.0m of assets derecognised in respect of the Destinology business.
18 Maturity date represents the date that the principal must be repaid, other than the ship loans, which are repaid in instalments over the next 12 years
19 Refer to note 25 of the financial statements for information as to how this reconciles to a statutory measure of cash
20 Refer to the Alternative Performance Measures (APM) Glossary on page 212 for definition and explanation
43
Saga plc Annual Report and Accounts 2021Strategic Report Operating and Financial Review continued
The increase in total liabilities reflects a £136.3m increase in financial liabilities, which was due to an increase in gross debt
from the draw-down of the facility to purchase Spirit of Adventure, partially offset against the repayment of bank debt
following the equity raise in October 2020. This was offset by a £71.0m reduction in contract liabilities due to the level of
refunds made in the Travel business following the suspension of trading since March 2020, coupled with a £17.3m reduction in
insurance contract liabilities, a £10.8m decrease in trade and other payables, also driven in part by the suspension of trading
in Travel, and the derecognition of £8.5m of liabilities held for sale relating to disposed businesses.
Impact of COVID-19 and going concern
The Group’s largest business is its Insurance operations, which have been resilient over the last 12 months and have remained
profitable. In addition, the Group has been able to maintain full operational capability throughout the year despite the impact
of COVID-19, with almost all colleagues working from home.
However, the Group’s Travel business has been subject to significant disruption. Following advice from the UK Government
that people over 70 years old should avoid travel and given operational challenges in almost all countries, the Group took the
decision to suspend Cruise and Tour Operations in March 2020. Both businesses have been suspended since then and will not
resume trading until later this year.
Over the 12 months during which the Travel business has been suspended, the Group has taken a number of mitigating
actions to strengthen its financial position, including:
– The removal of more than £50m of overhead and marketing costs in comparison to the original budget for the year, both
as part of the Group’s restructuring and simplification programme and in response to the suspension of Travel operations.
– The successful disposal of the Bennetts, Healthcare and Destinology businesses, which raised net cash proceeds of £31m.
– Raising approximately £139m of net proceeds from the issuance of new equity shares in September 2020, £104m of which
was used to reduce debt outstanding under corporate lending facilities.
– Establishment of trust accounting for the Tour Operations business, enabling a reduction in bonding by £33m.
– Agreement to repayment holidays for the ship debt facilities from April 2020 until March 2022, and with a waiver of related
ship debt covenants for the same period.
– Amendments to the covenants attached to the term loan and RCF to provide increased levels of financial flexibility, and a
12-month extension to the maturity of the term loan until May 2023.
These actions, together with the cash generated by the Insurance business, enabled the Group to reduce net debt (excluding debt
relating to Cruise operations) by £115m during the year despite the provision of £104m in cash support to Travel operations.
As at 31 January 2021, the Group had significant headroom to all covenants on bank facilities. At that date, the Group was in
compliance with all requirements of its banking facilities, specifically: the leverage ratio (excluding the impact of debt and
earnings relating to the new ocean cruise ships) was 2.7x (2020: 2.4x), compared to a 4.75x maximum covenant; interest cover
was 3.3x (2020: 9.0x), well above the minimum covenant of 1.25x; and the Cruise intercompany debt was £16.2m (2020: £1.1m),
significantly below the limit in bank facilities at that date of £45m (since increased to £55m).
Although the Travel business remains suspended, customer loyalty has been exceptionally positive, especially for Cruise.
Given the large number of customers who have rebooked for 2021/22 travel departures and because of a level of pent-up
demand, demand generation is not considered to be a near-term material challenge for the Travel business.
The Group’s base case assumption is for Tour Operations to resume in July 2021 for river cruising and in September 2021
for stays and tours, and ocean cruises recommencing in June 2021 for Spirit of Discovery and in July 2021 for the inaugural
cruise of Spirit of Adventure. It is also assumed that the mid-term outlook for Cruise returns to pre COVID-19 levels.
The Group believes that the base case assumption is reasonable for the following reasons:
– All customers should have been vaccinated twice by the end of May, which will be combined with a series of other safety
measures implemented by the business, including a quarantine and testing procedure for crew.
– There is UK Government support to resume domestic and international tourism from June and they have confirmed that
cruises will be allowed to restart to the same timetable.
– The Group believes that ocean cruise – if managed properly – is a safer proposition than some other forms
of international travel. This is particularly the case for Saga given the nature of the cruise proposition and the additional
steps being taken, including mandatory vaccines before travel and our third-party accreditation for COVID-19 health and
safety protocols.
– A number of European countries have already indicated they will be welcoming Saga customers and look forward to UK
cruise ships entering their ports in the summer of 2021. The Group’s ships are particularly sought after for their modest size
(at less than 1,000 passengers) and the vaccine-only policy for customers.
– If scheduled port stops are not possible because of growing levels of COVID-19 in those countries, the flexibility of Cruise
allows for itineraries to be modified accordingly.
44
Strategic ReportSaga plc Annual Report and Accounts 2021 Although management are confident of a summer return, there is high degree of uncertainty in the outlook, with a number of
factors that could lead to a delay in the lifting of the ban on international travel. Given this situation, which is constantly
evolving, the Group has considered a range of alternative outcomes.
The main downside scenario considered assumes no Tour Operations departures until March 2022, with Cruise resuming from
November 2021 for Spirit of Discovery and from December 2021 for Spirit of Adventure. In this scenario, the Group has also
assumed a slower recovery in load factors (remaining at 80% until July 2022) and incremental costs in operating the business.
In assessing wider downside risks the Group has also considered other trading stress tests in relation to the Insurance business.
Although this scenario would be challenging, the Group expects to remain resilient and would not expect to need to take
further actions to improve financial flexibility. Specifically:
– The Group has plenty of liquidity, with £75m of available cash at 31 January 2021, and a £100m RCF that is currently
undrawn.
– The Group has agreed a working capital facility with Roger De Haan that enables the Cruise business to draw down £10m
in cash support if required, on the same terms as for the RCF.
– The Insurance business continues to perform well and with predictable cash generation.
– Tour Operations customer receipts are fully ring fenced and are not included in available cash.
– There are no debt maturities until after April 2022, with capital repayments not due on the two cruise ships until June 2022
for £15m on the Spirit of Discovery facility and until September 2022 for £16m on the Spirit of Adventure facility, and there
are no repayments due on bank facilities until their maturity in May 2023.
– The Group therefore expects to be able to operate within the debt covenants and other requirements of its banking facilities,
which have been amended to accommodate the Group’s downside scenario modelling and are summarised below.
30 April
2021*
31 July
2021
31 October
2021*
31 January
2022
30 April
2022*
31 July
2022
Leverage
(net debt to EBITDA ratio)
Interest cover
(EBITDA to net cash interest ratio) Minimum
Maximum
4.75
1.25
4.75
1.25
4.50
1.25
4.25
1.50
4.00
3.50
3.00
3.50
Cruise intercompany debt cap
Maximum
£55m
£55m
£55m
£55m
£55m
£55m
* Quarterly covenants for leverage and interest cover are only tested if leverage is above 4.0x times at the previous covenant test date.
Although the Group believes that the downside scenario above represents an appropriate reasonable worse-case (RWC),
there are a number of significant factors related to COVID-19 that are outside of the control of the Group, including the
status and impact of the pandemic worldwide; potential emergence of new variants of the virus; the availability of vaccines,
together with the speed at which they are deployed and their efficacy; and the restrictions imposed worldwide in respect of
the freedom of movement and travel. The Group is therefore not able to provide certainty that there could not be more severe
downside scenarios than the RWC.
While the Group expects the outcome of a scenario more severe than the RWC to be unlikely, further downside sensitivities
have been considered in light of the COVID-19 pandemic, including the impact of not being able to resume both Cruise and
Tour Operations until March 2022. In considering this outcome, the Group has allowed for likely ongoing lower motor claims
frequency than assumed in its base case plans, which in part offsets the adverse impact of continued delays to a resumption
of Travel. In this scenario, the Group projects that it would have limited headroom to the interest cover covenant and would be
near the limit of Cruise funding, but it would still remain in compliance with the requirements of its banking facilities for at
least the next 12 months. The Group would however consider taking further actions to increase flexibility and reduce downside
risks associated with the remote possibility of any further delay to the restart of Travel beyond March 2022. Such actions
would include seeking additional amendments to bank facilities and consideration of alternative sources of funding.
Given the above factors, the Directors have a reasonable expectation that the Group will continue to trade through the
continued COVID-19 disruption and will have sufficient liquidity for at least the next 12 months, and so have prepared the
financial statements on a going concern basis accordingly.
DIVIDENDS
Given the uncertain implications of COVID-19, the Board of Directors does not recommend the payment of a final dividend
for the 2020/21 financial year, nor would this currently be permissible during the period of the ship debt repayment holiday.
FINANCIAL PRIORITIES FOR 2021/22
The Group’s financial priorities for the current financial year continue to be the preservation of cash and managing its level
of debt, to ensure compliance with its banking covenants and to continue to focus on cost efficiencies. At the same time, the
Group is continuing the progress in delivering its Insurance strategy, has taken delivery of the second new ocean cruise ship
and has repositioned the Tour Operations business ready for trading to recommence later in 2021. Given the continued
uncertainty arising from COVID-19, the Group is not able to provide any earnings guidance for the 2021/22 financial year.
45
Saga plc Annual Report and Accounts 2021Strategic Report The three largest sensitivities in terms of financial impact
were identified as the following:
1. The impact of COVID-19 on the Travel business – as
described within the going concern disclosure on
pages 44-45.
2. General insurance regulation – uncertainty over further
regulatory developments.
3. A failure to deliver on the Insurance strategy – Insurance
has continued to perform in line with expectations and
continues to demonstrate good progress. Nonetheless,
the business continues to navigate a period of
significant change.
In scenarios beyond those considered in relation to going
concern, such as a delay to the resumption of departures
in the Travel business into the second quarter of 2022 or
later, the Group would likely need to take further mitigating
actions to ensure its continued compliance with debt
facility agreements, and to be able to meet ongoing debt
repayments as they fall due. While such scenarios are
considered unlikely and remote, such mitigating actions
would likely include further renegotiation with the Group’s
lenders to relax debt covenants further or consideration of
alternative funding options.
As set out in the Audit Committee Report on pages 70-73,
the Directors have reviewed and discussed the rationale and
conclusions of management’s viability testing.
Viability Statement
s172
Section 172 matters are addressed throughout this statement
The Directors have considered the viability of the Group
over the five-year period to January 2026. The COVID-19
pandemic continues to create an unprecedented challenge for
businesses in making judgements regarding trading prospects,
and in particular within the travel sector. The Directors and
Executive Leadership Team remain focused on protecting the
Group, and continue to take actions as necessary to navigate
the challenges that the pandemic continues to present.
The going concern disclosure on pages 44-45 provides detail
on how the Directors have considered the uncertain timing
of its Travel businesses recommencing trading.
On the assumption that the travel industry can begin
to recover during 2021, the Directors have a reasonable
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
next five years. The Directors recognise that uncertainty
increases over time and therefore future outcomes cannot
be guaranteed. The Directors have determined the five-year
period to January 2026 to be an appropriate period over
which to assess the Group’s viability, as this period:
a) is consistent with the planning horizon over which the
Directors normally consider the future performance,
capital and solvency requirements of the business;
b) includes the maturity of senior banking facilities in
2023 and the unsecured bond in 2024; and
c) includes fuller consideration of the impact of the
COVID-19 pandemic.
In making this statement, the Directors have considered
the resilience of the Group, taking account of its current
position, the principal risks facing the business in severe but
plausible scenarios and the effect of any mitigating actions.
The Directors have considered each of the Group’s principal
risks and uncertainties (PRUs) detailed on pages 28-29
and the potential impact of these risks on the business
model, future performance, solvency and liquidity over
the period. The Directors have also taken into account the
availability of the Group’s senior banking facilities, which
are considered to be sufficient to meet the Group’s needs.
The list of PRUs, derived from our robust review of risks,
was reviewed by risk owners, Group Finance and Group Risk,
to consider which risks might threaten the Group’s ongoing
viability. The PRUs have been considered and severe but
plausible outcomes for each have been identified, with an
estimate of the potential financial impact of each quantified.
Assessments of potential financial impact were derived from
both internal calculation and examples of similar incidents
in the public domain. In assessing the viability of the Group,
the Directors have considered appropriate management
actions that may be taken in order to manage the solvency
of the Group in the event of severe but plausible downside
scenarios. The assessment is also based on the assumption
that the corporate bond will be refinanced when it matures
in 2024.
46
Strategic ReportSaga plc Annual Report and Accounts 2021 Key disclosure statements
SECTION 172(1) STATEMENT
Duty to promote the success of the Company
The Directors have had regard for the matters set out in section 172(1)(a)-(f) of the Companies Act 2006 (s172(1)) when
performing their duty under section 172. The Directors consider that they have acted in good faith in the way that would be
most likely to promote the success of the Company for the benefit of its members as a whole, while also having regard to the
s172(1) matters referred to below.
The table below indicates where the relevant information is in this annual report that demonstrates how we act in accordance
with the requirements of s172(1).
s172
This icon denotes information relevant to s172(1) throughout the annual report
s172(1) matter
Likely consequences
of any decision in the
long term
The interests of the
Company’s employees
The need to foster the
Company’s business
relationships with
suppliers, customers
and others
Further information incorporated into this statement by reference
Chairman’s Statement
Governance in action
Pages 4-5
Group CEO’s Statement
Pages 6-9
Market overview
Pages 10-11
Page 52
Governance statements
Pages 53-55
Board leadership and Company purpose
Pages 56-57
Purpose and business model
Division of responsibilities
Pages 12-13
Strategic priorities
Pages 14-15
Pages 58-60
Composition, succession and evaluation
Page 61
Environmental, Social and Governance
Nomination Committee Report
Pages 18-27
Pages 64-65
Principal risks and uncertainties
Audit, risk and internal control
Pages 28-29
Pages 66-69
Operating and Financial Review
Audit Committee Report
Pages 30-45
Viability Statement
Page 46
Pages 70-73
Risk Committee Report
Pages 74-76
Chairman’s introduction to governance
Directors’ Remuneration Report
Pages 50-51
Chairman’s Statement
Pages 4-5
Group CEO’s Statement
Pages 6-9
Market overview
Pages 10-11
Strategic priorities
Pages 14-15
Pages 77-110
Operating and Financial Review
Pages 30-45
Governance in action
Page 52
Board leadership and Company purpose
Pages 56-57
Nomination Committee Report
Pages 64-65
Environmental, Social and Governance
Audit Committee Report
Pages 18-27
Pages 70-73
Principal risks and uncertainties
Directors’ Remuneration Report
Pages 28-29
Chairman’s Statement
Pages 4-5
Group CEO’s Statement
Pages 6-9
Market overview
Pages 10-11
Strategic priorities
Pages 14-15
Pages 77-110
Principal risks and uncertainties
Pages 28-29
Operating and Financial Review
Pages 30-45
Chairman’s introduction to governance
Pages 50-51
Governance in action
Page 52
Environmental, Social and Governance
Board leadership and Company purpose
Pages 18-27
Pages 56-57
47
Strategic ReportSaga plc Annual Report and Accounts 2021
Key disclosure statements continued
SECTION 172 (1) STATEMENT CONTINUED
s172(1) matter
Further information incorporated into this statement by reference
Impact of the
Company’s operations
on the community and
environment
The Company’s
reputation for high
standards of
business conduct
Chairman’s Statement
Pages 4-5
Group CEO’s Statement
Pages 6-9
Market overview
Pages 10-11
Environmental, Social and Governance
Pages 18-27
Chairman’s Statement
Pages 4-5
Group CEO’s Statement
Pages 6-9
Market overview
Pages 10-11
Principal risks and uncertainties
Pages 28-29
Operating and Financial Review
Pages 30-45
Governance in action
Page 52
Board leadership and Company purpose
Pages 56-57
Division of responsibilities
Pages 58-60
Purpose and business model
Nomination Committee Report
Pages 12-13
Strategic priorities
Pages 14-15
Pages 64-65
Audit, risk and internal control
Pages 66-69
Environmental, Social and Governance
Audit Committee Report
Pages 18-27
Pages 70-73
Principal risks and uncertainties
Risk Committee Report
Pages 28-29
Pages 74-76
Operating and Financial Review
Directors’ Remuneration Report
Pages 30-45
Viability Statement
Page 46
Chairman’s Statement
Pages 4-5
Pages 77-110
Board leadership and Company purpose
Pages 56-57
Environmental, Social and Governance
Directors’ Remuneration Report
Pages 18-27
Pages 77-110
Chairman’s introduction to governance
Directors’ Report
Pages 50-51
Pages 111-115
The need to act fairly
as between members
of the Company
48
Strategic ReportSaga plc Annual Report and Accounts 2021 NON-FINANCIAL INFORMATION STATEMENT
Disclosures of non-financial information matters, including a description of policies, due diligence processes and outcomes,
where applicable, are made as follows:
Engaging with stakeholders
Pages 26-27
Fairness, diversity and wider workforce
Pages 21, 61, 65, 80, 90-93 and 109
Succession planning and talent development
Page 65
Engaging with stakeholders
Pages 26-27
NFI matter
Environmental
Company’s
employees
Social
Respect for
human rights
Anti-corruption
and anti-bribery
Business model
Principal risks and
uncertainties
Non-financial KPIs
Standards which govern our approach
Safeguarding the environment
Pages 24-25
Colleague engagement
Pages 18-20
Diversity
Page 21
Culture
Page 21
How the Board monitors culture & how
this links to strategy
Page 22
Market overview
Pages 10-11
Community
Page 23
Modern slavery & human rights
Page 23
Financial crime and 'Speak Up' reporting
Page 72
Purpose and business model
Pages 12-13
Principal risks and uncertainties
Pages 28-29
Key performance indicators
Page 17
Environmental, Social and Governance
Pages 18-27
Composition, succession and evaluation
Page 61
Annual Report on Remuneration
Pages 83-84
Relevant policies, codes and standards are available on our website (www.corporate.saga.co.uk/about-us/governance).
This Strategic Report is presented to inform members of the company and help them assess how the Directors have
performed their duty under section 172. It has been approved by the Board and signed on its behalf by
EUAN SUTHERLAND
Group Chief Executive Officer
6 April 2021
49
Strategic ReportSaga plc Annual Report and Accounts 2021
Corporate Governance Statement
Chairman’s introduction to governance
s172
Section 172 matters are addressed throughout this statement
“2020/21 has been an extraordinary and
unprecedented year for Saga and the Board has
been kept very busy.”
SIR ROGER DE HAAN
Non-Executive Chairman
50
GovernanceSaga plc Annual Report and Accounts 2021 DEAR SHAREHOLDER,
On 5 October 2020, I became Non-Executive Chairman
of Saga plc after the Company’s successful capital raising
exercise that generated £150m (approximately £140m net of
costs). I invested £100m for just over 26% of the share capital.
Senior Independent Director
In anticipation of my appointment and the likelihood that
I would have a significant shareholding in the Company and
might not be considered independent, the Board broadened
Orna NiChionna’s role as Senior Independent Director.
Changes to Board composition
The Board now has seven Directors and all but one have
been appointed in the last two years. During the year, Patrick
O’Sullivan retired after serving two and a half years as
Chairman and Ray King and Gareth Williams retired as
Non-Executive Directors after serving six years and six and
a half years respectively. Cheryl Agius stepped down as an
Executive Director in January 2021 after serving for one year.
The Company complies with the UK Corporate Governance
Code 2018 ('Code') requirement that at least half of its
Board members, excluding the Chairman, are Independent
Non-Executive Directors.
Sub-committees of the Board
The following changes to the composition of the sub-
committees of the Board were made during the year.
They were all recommended by the Nomination Committee.
– Eva Eisenschimmel became Chair of the Remuneration
Committee in February 2020.
– Gareth Hoskin became Chair of the Audit Committee in
June 2020 and a member of the Nomination Committee
in September 2020.
– Julie Hopes became a member of the Nomination
Committee in September 2020, Chair of the Risk Committee
and a member of the Audit Committee in December 2020.
– I became a member of the Nomination Committee in
October 2020.
Subsidiary company Boards
Saga’s trading subsidiary companies have their own Boards
whose members perform the normal governance duties of
company directors. The board of Saga Services Limited (SSL),
Saga’s Insurance Broking business, has six Directors, of whom
four are non-executive. Julie Hopes, a Non-Executive Director
of the Saga plc Board, chairs the SSL Board. Acromas Insurance
Company Limited (AICL), Saga’s Underwriting business, has
seven Directors. Three are non-executive and Gareth Hoskin,
a Non-Executive Director of Saga plc, chairs the AICL Board.
This governance structure works well and it is extremely
helpful that Saga’s two regulated subsidiaries, which account
for a significant proportion of the Group's trading, are chaired
by two of our main Board Non-Executive Directors.
Board focus and decisions
As I said in my Chairman’s Statement on pages 4 to 5, 2020/21
has been an extraordinary and unprecedented year for Saga
and the Board has been kept very busy. It began the year
focusing on Euan Sutherland's, as the new Group Chief Executive
Officer's (CEO), ideas for delivering early improvements to the
Company’s operation and then on the effect of, and the plan to
deal with, the pandemic. This involved moving the Company’s
operations from being office to home based without disrupting
the quality of service afforded to our customers. The Board also
had to consider the many ramifications of the suspension of all
our Travel operations. It agreed to the sale of a number of
non-core companies within the Group. It agreed to the capital
raising exercise and was involved in considering the working
capital report, working capital memorandum and the detailed
review of historical budgeting accuracy and the current trading
update prepared by our external auditor. During the year the
Board had to consider the Financial Conduct Authority (FCA)
report on general insurance pricing practices and dedicated
considerable time to discussing the Company’s new strategy.
Risk management
The Audit and Risk Committees played an important part in
reviewing the systems, processes and controls to ensure that the
principal risks and the risk tolerance thresholds were monitored.
People and remuneration
Saga has a People Committee which is regularly attended
by Eva Eisenschimmel. She provides an important link in
communicating to the Board the views of our colleagues.
Eva is also Chair of the Remuneration Committee and
discussed with our major shareholders the Company’s
proposed Remuneration Policy and how it supported our
strategy. The Policy was approved at our Annual General
Meeting (AGM) in June 2020.
Environmental, Social and Governance (ESG)
Our ESG task force has met every two weeks since it
was established in the last financial year. A number of its
recommendations have already been agreed by the Board
and have been implemented. It is reviewing a wide range of
extremely important issues including diversity, our carbon
footprint and how we can make a positive impact,
particularly in the communities where we are based.
Board and committee evaluation
During the year we completed an evaluation of the Board and
its Committees. It concluded that the Board had navigated
through difficult circumstances presented by COVID-19 and
was working well with management in developing a well-
formed strategy supported by a clear Company purpose and
set of meaningful values. Looking forward, the Board's focus
will be on dedicating time to ensuring excellent customer
service and ensuring the foundations are in place to begin
to deliver sustainable growth.
2021 Annual General Meeting
We will set out the arrangements for our AGM, which will
be on 14 June 2021, after we have assessed government
advice nearer the time.
Finally, I would like to thank Patrick O’Sullivan, Ray King,
Gareth Williams and Cheryl Agius who all stepped down from
the Board this year for their dedication and wise counsel.
SIR ROGER DE HAAN
Non-Executive Chairman
6 April 2021
51
Saga plc Annual Report and Accounts 2021Governance Corporate Governance Statement
Governance in action
s172 HOW GOVERNANCE LINKS TO OUR STRATEGIC PRIORITIES
People and culture step
change
The Board considered and
debated the following key areas:
Group CEO's Statement, pages 7-8
Purpose and business model, pages 12-13
Strategic priorities, page 14
Environmental, Social and Governance,
pages 18-27
– The strategy announced in September 2020 and the purpose, to deliver exceptional
experiences every day, while being a driver of positive change in our markets and
communities. The conclusion was that the strategy and purpose represented who
we are and the way in which we work.
– The proposed values (precision pace, empathy, curiosity, and collaboration) and
discussed how these key qualities would ensure we deliver the best experiences
for each other and our customers.
– The new operating model for the business, which resulted in restructuring and fewer
layers, with specific focus on how we treated all colleagues with respect and care,
whether they were leaving or staying with the business.
– The valuable insight into views of the wider workforce provided by the work of the
People Committee, to strengthen colleagues’ voices in the Board room.
– An award of Free Shares to eligible colleagues under the Share Incentive Plan (SIP)
(this was approved for the sixth year running).
– Updates from the workshops held to encourage open dialogue regarding topics
relating to diversity, inclusion and belonging (DI&B).
Data, digital and brand
transformation
Board discussion included
the following:
Group CEO's Statement, page 8
Strategic priorities, page 14
– How the new platforms in our Insurance business were expected to enhance
operational and cost efficiencies. This included the Guidewire implementation for our
motor and home products and the new Radar Live system which provides increased
data capacity and faster and more efficient pricing capability.
– The development of a single Group-wide customer digital data platform which builds
on and optimises the investment made in recent years. Once complete, we will be able
to reduce complexity across our systems and we will have a clearer view of our
customers across all our businesses. This will enhance the service we are able to offer.
Optimising our businesses
The Board had to carefully
consider the impact of
COVID-19 and make brave
decisions as to how to respond,
given the pause in the Travel
business. Attention was given
to all stakeholders' requirements,
particularly the effect on
customers and colleagues. Key
areas of discussion included:
Group CEO's Statement, pages 6-9
Strategic priorities, page 15
Driving simplicity and
efficiency
The Board focused on what
action was needed to achieve
the following:
Group CEO's Statement, page 9
Strategic priorities, page 15
Operating and Financial Review, pages 30-45
Insurance
– How the Insurance business could continue to perform resiliently, with a focus on our
three-year fixed-price product.
– The plan to acquire new business on a direct basis.
– The support available to our customers during the COVID-19 pandemic by actively
reaching out, for example, by offering a reduction in mileage or the addition of another
driver to their policy, payment holidays and fee waivers, where appropriate.
Travel
– How to take the opportunity, during the COVID-19 suspension period, to reinvigorate
the Tours business and return to the DNA that contributed to the success of Saga
Holidays for so many years, offering a higher-quality, differentiated product portfolio
with aspirational holidays tailored specifically for our customers.
– The plan to extend our Tours product proposition to include a second new river cruise ship.
– Continue to adopt a cost-conscious approach, ensuring that costs were reduced
where possible across the Group.
– Have disciplined cost management during the Travel suspension period, with savings in
both marketing and administration costs.
– Remain on track to achieve further run rate cost savings of £20m over time and stay
committed to the ongoing assessment of our cost base to ensure that the business is
operating at the optimum level for the future.
Reducing our debt
The Board approved
significant projects and
transactions, which included:
– The successful capital raise, resulting in approximately £140m of net proceeds from
the issue of new shares, allowing repayment of the revolving credit facility (RCF) and
approximately half of the term loan.
– Disposals of three non-core businesses; Bennetts, Healthcare and Destinology,
Group CEO's Statement, page 9
Strategic priorities, page 15
Operating and Financial Review,
pages 30-45
generating combined net cash proceeds of £31m.
– Revision of the covenants attached to the term loan and RCF, allowing flexibility
through the ongoing disruption arising from COVID-19.
– Agreement of a payment deferral and covenant waiver until 31 March 2022 in respect
of the two ship debt facilities.
52
GovernanceSaga plc Annual Report and Accounts 2021
Governance statements
s172 KEY STATEMENTS
Compliance Statement
Viability Statement
Going concern
Fair, balanced and understandable
Assessment of risk
Statement of review
Section 172(1)
The Board is committed to high standards of corporate governance and manages
Saga’s operations in accordance with the UK Corporate Governance Code 2018
(the 'Code'). A full version of the Code can be found on the Financial Reporting
Council’s (FRC) website (www.frc.org.uk). The Company applied the Principles and
complied with the relevant Provisions of the Code throughout the year (with two
exceptions) as set out on pages 54-55. An explanation of our non-compliance
with Provisions 3 and 9 is also provided on those pages.
The Viability Statement can be found in the Strategic Report on page 46.
The going concern basis of preparation can be found in note 2.1 of the financial
statements on pages 136 to 138.
In accordance with the Code, the Board has established arrangements to evaluate
whether the information presented in the annual report is fair, balanced and
understandable. Having taken advice from the Audit Committee, the Board
considers that the annual report and accounts, taken as a whole are fair, balanced
and understandable and provides the information necessary for shareholders to
assess the Company’s position and performance, business model and strategy.
Through the risk management process detailed on page 67, the Board can
confirm that it has carried out a robust assessment of the emerging and
principal risks facing the Company, including those which would threaten our
business model, future performance, solvency or liquidity and reputation.
The risk management process detailed on pages 66-69 was in place for the year
under review and up to the date of approval of this report.
The Audit Committee, working closely with the Risk Committee and on behalf
of the Board, carried out a review of the effectiveness of the systems of internal
control and risk management covering all material controls, including financial,
operational and compliance controls and the Group risk management framework.
The conclusion was that the internal risk and control environment is broadly
effective, with controls to mitigate key risks being generally designed and
operating effectively. Whilst the refreshed risk management framework and
target operating model continue to drive greater risk management ownership
and accountability from the Risk Team into the business, the Group remains
in progress in embedding risk management ownership and accountability.
This progress in the risk transformation phase has been impacted by a number
of factors, primarily the reprioritisation arising from COVID-19 resulting in
management focus on other higher priority areas for 2020.
The section 172(1) statement can be found in the Strategic Report on
pages 47-48.
53
Saga plc Annual Report and Accounts 2021Governance Corporate Governance Statement
Governance statements continued
APPLICATION OF CODE PRINCIPLES
The Company applied the main Principles of the Code as follows:
1. Board leadership and Company purpose
A. Effective Board
The Board met formally 14 times during the year. The schedule of
matters reserved for the Board (detailed on page 56) was reviewed
on 4 September 2020. The governance structure in place sets out
delegated authorities clearly. The Board considered progress
against long-term strategy at each Board meeting. More
information on Company key performance indicators (KPIs),
strategic priorities, principal risks and uncertainties (PRUs), and
stakeholder engagement is provided in the Strategic Report.
Strategic Report, pages 1-49
Board leadership and Company purpose, pages 56-57
B. Purpose, values, strategy and culture
s172 The Company’s purpose, values and strategy are defined in
the Strategic Report. Culture played an important part in delivery
of strategy and operation of the business model. During the year,
the Company’s purpose was redefined to deliver exceptional
experiences every day, while being a driver of positive change in
our markets and communities, and new values were developed.
Strategic Report, pages 1-49
Board leadership and Company purpose, pages 56-57
Division of responsibilities, pages 58-60
Directors’ Remuneration Report, pages 77-110
C. Resources and controls system
The Board and its principal Committees’ focus was to provide
entrepreneurial leadership of the Company within a framework of
prudent and effective controls. This enabled risk to be assessed
and managed. The Board and Committee framework meant that
the Company’s strategic aims were continually assessed and
ensured that the necessary resources were in place for Group
objectives to be met and to review management performance.
Environmental, Social and Governance, pages 18-27
Principal risks and uncertainties, pages 28-29
Key disclosure statements, pages 47-49
Audit, risk and internal control, pages 66-69
Audit Committee Report, pages 70-73
Strategic Report, pages 1-49
Environmental, Social and Governance, pages 18-27
Key disclosure statements, pages 47-49
E. Workforce policies and ability to raise concerns
s172 Key policies were reviewed and submitted to the Board as
part of an annual review for discussion and approval. These were
reviewed in the context of regulatory changes as well as best
practice and to reflect the Company’s values and training,
tailored to the audience. The Company’s robust Whistleblowing
and Open Door Policy and process was repositioned as the
‘Speak Up’ Policy. Board members considered a 'Speak Up' report
and the Audit Committee Chair served as 'Speak Up Champion'.
The People Committee and People Forums provided an
effective mechanism for colleagues to speak freely.
Environmental, Social and Governance, pages 18-27
Key disclosure statements, pages 47-49
Board leadership and Company purpose, pages 56-57
Audit, risk and internal control, pages 66-69
Directors’ Remuneration Report, pages 77-110
2. Division of responsibilities
F. Role of the Chairman
s172 The Chairman set the agenda for meetings, managed
the meeting timetable (in conjunction with the Group Company
Secretary) and facilitated open and constructive dialogue during
the meetings, with particular focus on strategic issues. This year
saw the appointment of a new Non-Executive Chairman who was
not considered independent on appointment (as per Provision 9,
taking the circumstances set out in Provision 10 into account), due
to his shareholding in the Company. Taking into account Roger De
Haan’s history with the Saga brand and business, his proposed
time commitment, the terms of the Relationship Agreement
between him and the Company and his letter of appointment, the
Directors supported the appointment, concluding that it was
in the best interests of the Company. Shareholders supported
this appointment, when they voted in favour of the capital
raise at a general meeting held on 2 October 2020.
Board leadership and Company purpose, pages 56-57
Division of responsibilities, pages 58-60
Nomination Committee Report, pages 64-65
D. Stakeholder engagement
s172 The Board remains committed to understanding the
views of the Company’s key stakeholders and considering
their interests in Board discussion and decision making.
The importance of ongoing dialogue with shareholders was
recognised. The Remuneration Committee Chair consulted with
key shareholders regarding the new Remuneration Policy, which
was approved by shareholders at the Company’s AGM held on
22 June 2020.
The Company did not comply with Provision 3 of the Code.
As the Non-Executive Chairman is a significant shareholder
in the business, it was determined that it would be more
appropriate for the Senior Independent Director to engage
with major shareholders in order to understand their views
on governance and performance against the strategy.
G. Board and its responsibilities
s172 The division of responsibilities between the Non-
Executive Chairman and the Group CEO, and the role of the
Senior Independent Director were clearly defined. The Non-
Executive Chairman was responsible for the leadership and
effectiveness of the Board. The Group CEO was responsible
for leading the day to day management of the Group within
the strategy set by the Board. A document clarifying these
divisions and responsibilities was reviewed and approved by
the Board on 4 September 2020. This document is reviewed
annually by the Board. Matters reserved for the Board and the
Board and Executive Committees’ terms of reference were also
reviewed. The Board Committees’ terms of reference can be
found on the Company’s website (www.corporate.saga.co.uk/
about-us/governance).
Division of responsibilities, pages 58-60
Board of Directors, pages 62-63
In addition, the Group CEO and Group Chief Financial Officer
(CFO) met with shareholders and provided an update to the
Board. Advisers attended Board meetings to provide
feedback and analyst reports were circulated.
H. Non-Executive Directors
The Non-Executive Directors provided objective, rigorous
and constructive challenge to management and met regularly
without the Executive Directors. The Senior Independent
54
GovernanceSaga plc Annual Report and Accounts 2021
Director acted as a sounding board for the Chairman, led
an appraisal of the Non-Executive Chairman’s performance,
and attended meetings with major shareholders, some of
which were requested leading up to the capital raise.
Board leadership and Company purpose, pages 56-57
Division of responsibilities, pages 58-60
I. Information and support
The Chairman, in conjunction with the Group Company
Secretary, ensured that all Board members received accurate
and timely information, had the resources needed and were
kept informed on all governance and regulatory matters.
This included communication of the policies and procedures
needed in order to function effectively and efficiently.
A regulatory report detailing the impact of all emerging
and future changes was tabled at each Board meeting.
Environmental, Social and Governance, pages 18-27
Board leadership and Company purpose, pages 56-57
Division of responsibilities, pages 58-60
Audit, risk and internal control, pages 66-69
Audit Committee Report, pages 70-73
Risk Committee Report, pages 74-76
Directors’ Remuneration Report, pages 77-110
3. Composition, succession and evaluation
J. Appointment process
The appointment of new Directors to the Board is led by
the Nomination Committee and the process is such that
candidates are selected on merit and with due regard for
the benefits of diversity, in all forms.
Composition, succession and evaluation, page 61
Nomination Committee Report, pages 64-65
K. Board composition
s172 The Nomination Committee was responsible for
reviewing the composition of the Board, considering
succession planning and evaluating the skills, knowledge
and experience required of Board candidates. 2020/21 saw a
number of changes to the Board and Committee composition,
which went smoothly as a result of prior succession planning.
The Company requires all Directors to stand for annual
re-election by shareholders at the Company's AGM.
Division of responsibilities, page 60
Composition, succession and evaluation, page 61
Nomination Committee Report, pages 64-65
L. Board evaluation
The Board conducted an annual evaluation of its own
performance and that of its Committees. The Chairman
and Non-Executive Chairman met with individual Directors
during the year and discussed their contribution.
Composition, succession and evaluation, page 61
Nomination Committee Report, pages 64-65
4. Audit, risk and internal control
M. Independence and effectiveness of internal
and external audit functions
The Board delegated a number of responsibilities to the
Audit Committee, which was responsible for overseeing the
Group’s financial reporting processes, internal controls and
the work undertaken by, and the effectiveness of, the internal
and external auditors.
Audit, risk and internal control, pages 66-69
Audit Committee Report, pages 70-73
N. Fair, balanced and understandable assessment
The Board has established arrangements to ensure that reports
and other information published by the Group are fair, balanced
and understandable. The Strategic Report provides information
about the performance of the Group, the business model, strategy
and emerging PRUs relating to the Group’s future prospects.
Strategic Report, pages 1-49
Audit, risk and internal control, pages 66-69
Audit Committee Report, pages 70-73
Financial statements, pages 131-211
O. Risk management and internal controls
The Board set the Group’s risk appetites and Risk Policy.
The effectiveness of the Group’s risk management and internal
control systems was reviewed during the year. The Risk
Committee was responsible for monitoring the Group’s overall
risk appetite, tolerance, strategy and risk assessment processes,
effectiveness of the Group’s risk management and the
Group’s capability to identify and manage new and emerging
risks and deal with any material breaches of risk limits.
Principal risks and uncertainties, pages 28-29
Viability Statement, page 46
Audit, risk and internal control, pages 66-69
Audit Committee Report, pages 70-73
Risk Committee Report, pages 74-76
Notes to the consolidated financial statements, pages 136-203
5. Remuneration
P. Remuneration policies and practices
The Remuneration Committee was responsible for setting levels
of remuneration that supported strategy and promoted the
Company’s long-term sustainable success. Remuneration was
structured to link it to both corporate and individual performance,
so that the interests of management were aligned with those of
shareholders and the Company's key stakeholders. Annual bonus
was underpinned by personal objectives which were aligned
with the Company’s purpose and values and clearly linked to
the delivery of the Company’s strategy.
Strategic Report, pages 1-49
Board leadership and Company purpose, pages 56-57
Directors’ Remuneration Report, pages 77-110
Q. Procedures for executive remuneration
Details of the work of the Remuneration Committee and the
Remuneration Policy can be found in the Directors’ Remuneration
Report. A copy of the current Remuneration Policy can also be
found on the Company’s website (www.corporate.saga.co.uk/
about-us/governance). None of the Directors were involved
in deciding their own remuneration outcome.
Directors’ Remuneration Report, pages 77-110
R. Independent judgement
The Remuneration Committee exercised independent
judgement and discretion when considering remuneration
outcomes, taking account of Company and individual
performance, and wider circumstances. The Committee had
the ability to override formulaic remuneration if necessary.
Directors’ Remuneration Report, pages 77-110
55
Saga plc Annual Report and Accounts 2021Governance
Corporate Governance Statement
Board leadership and Company purpose
The Board is responsible for providing overall
direction for management, debating our strategic
priorities and setting Saga’s values and standards.
communities in which we operate. See pages 26 and 27 for
details of the Board’s role in stakeholder engagement which
supports Directors’ duties under Section 172(1) of the
Companies Act 2006.
OUR BOARD
s172 There is an articulated set of matters which are
reserved for the Board and these are reviewed annually.
The last review took place on 4 September 2020.
Matters reserved for the Board include the following:
– Any decision likely to have a material impact on Saga
from any perspective including, but not limited to,
financial, operational, strategic or reputational.
– The strategic direction of the overall business, objectives,
budgets and forecasts, levels of authority to approve
expenditure, and any material changes to them.
– The commencement, material expansion, diversification
or cessation of any of Saga’s activities.
– Saga’s regulatory, financial and material operational policies.
– Changes relating to Saga’s capital, corporate,
management or control structures.
– Material capital or operating expenditure outside
pre-determined tolerances or beyond the
delegated authorities.
– Major capital projects (including post-investment reviews
where not considered in detail by the Audit or Risk
Committees or where the Board decides a full review is
required), corporate action or investment by Saga that will
have, or is likely to have, a financial cost greater than the
amount set out in the relevant delegated authority limits
from time to time.
– Any contract which is material strategically or by reason
of size, not in the ordinary course of business, or outside
agreed budgetary limits or that relates to joint ventures
and material arrangements with customers or suppliers.
s172 A fundamental part of this role is to consider the
balance of interests between our stakeholders including
shareholders, our customers, our colleagues and the
All Directors, members of the Executive Leadership Team
(ELT) and persons discharging managerial responsibilities
receive training on an ongoing basis.
CAPITAL RAISE AND SHARE CONSOLIDATION
s172 Governance played a vital role as the Company took
steps to improve financial resilience, strengthen its balance
sheet and complete a £150m capital raise in September
2020, with cornerstone investment from Roger De Haan.
A share consolidation took place following the capital raise.
This transaction saw Roger return as Non-Executive
Chairman. It was important to ensure there were clear,
defined responsibilities for this role, and those of the Senior
Independent Director and Group CEO. Committee composition
was also reviewed.
ANNUAL GENERAL MEETING
The AGM will be held on 14 June 2021 at 11.00am at
Enbrook Park, Sandgate, Folkestone, Kent CT20 3SE.
We are considering how this meeting will be held this
year, in light of the impact of the COVID-19 pandemic
and will set out full details in the Notice of AGM.
The Notice of AGM will also contain an explanation
of business to be considered at the meeting. A copy
will be available on Saga’s website in due course
(www.corporate.saga.co.uk).
HOW OUR PURPOSE AND VALUES UNDERPIN OUR GOVERNANCE:
Precision pace
Curiosity
– Governance and policies, protocols and processes are
structured so that Saga can move quickly, remain focused
on the right things and retain high standards.
– By applying curiosity to our processes and governance
structures, there is scope to continuously improve and
ensure that they remain aligned with the Company's
purpose and always support delivery of the strategy.
Empathy
Collaboration
– Empathy influences how we make decisions, and how we
set up our processes and procedures. Consideration is
given as to how people might feel throughout and as a
consequence of the end result.
– By working together as one team, governance is
consistent across the Group.
56
GovernanceSaga plc Annual Report and Accounts 2021 BOARD ACTIVITIES DURING THE YEAR
Meetings are structured to enable the Board to support the ELT on the delivery of strategy within a transparent and robust
governance framework as illustrated on pages 58-59.
Areas of Board focus during the year:
Strategy
s172
During the year, the Board agreed a new strategy, which was announced in September 2020.
Transforming Saga – Experience is Everything builds on the strength of the Saga brand and its heritage,
and returns our customers to the heart of the business. The Board discussed the strategy in the context
of the external environment and considered the impact of COVID-19. Regular updates were provided by
management on strategic and commercial priorities, including the plans to prepare for a resumption in the
Travel business, to remain resilient in Insurance and to develop a data, digital and brand strategy that would
ensure that Saga emerges stronger out of the crisis.
Strategic Report, pages 1-49
Purpose,
values and
culture
s172
The Board considered and discussed the revised purpose put forward by the ELT, to create Exceptional
Experiences Every Day and the proposed values of precision pace, empathy, curiosity and collaboration.
The conclusion was that these would support delivery of the strategy to ensure that colleagues were encouraged
to live the purpose and values and do the best work they can. Details of how governance links to our strategic
priorities and our core values are provided in the tables on pages 52 and 56. The People Committee and Forums
facilitated ongoing dialogue and transparency with our colleagues, and provided useful insight and feedback.
Purpose and business model, pages 12-13
Environmental, Social and Governance, pages 18-27
Stakeholder
engagement
s172
The Board considered the views of and impact of decisions on our stakeholders. Active dialogue was maintained
with our shareholders throughout the year, responding to enquiries via our Investor Relations (IR) Team, and holding
meetings with investors and financial analysts to discuss business performance and strategy. The Chair of the
Remuneration Committee held meetings with key shareholders to discuss the proposed Remuneration Policy,
which was approved by shareholders on 22 June 2020.
Environmental, Social and Governance, pages 18-27
Governance
s172
An exercise to simplify the Group’s governance structure took place, designed to clarify the role and purpose
and improve the efficiency and effectiveness of Group and subsidiary boards and committees. As a result,
an Executive Leadership Risk Committee was established at Group level and various Group committees
(including Business Continuity, Health and Safety, Financial Crime, Information Security and Data Protection
and Supplier Risk Management) were disbanded and their duties reassigned.
Division of responsibilities, pages 58-60
Risk
management
s172
The Board recognised that it was more important than ever to monitor the effectiveness of risk management
throughout the Group, to ensure that the risks associated with the impact of the COVID-19 pandemic and
suspension of the Travel business were closely monitored and effective action was taken. The Audit and Risk
Committees played a crucial part in ensuring that appropriate systems, controls and processes were in place
and that emerging and principal risks and uncertainties and risk tolerance thresholds were monitored.
Principal risks and uncertainties, pages 28-29
Audit Committee Report, pages 70-73
Risk Committee Report, pages 74-76
57
Saga plc Annual Report and Accounts 2021Governance
Corporate Governance Statement
Division of responsibilities
s172 THE BOARD’S RESPONSIBILITIES
– Approval of strategic direction and ensuring its successful implementation.
– Overall leadership and management of the Group, including setting the
Group’s values and standards.
– Approval of the Group's 'Speak Up' Policy and discussing an annual report
presented by the Non-Executive Director nominated as 'Speak Up Champion'.
The Nomination Committee’s
responsibilities
– Review the structure, size and
composition (including the need
for progressive refresh of
membership) of the Board.
– Consider how to develop a
diverse pipeline in succession
planning and talent development
of Executive Directors and other
senior executives.
– Evaluate the independence,
experience, diversity and
knowledge of the Board.
– Identify and nominate
candidates to fill Board and
Committee vacancies.
– Review Board performance
evaluation results in relation
to Board composition.
The Audit Committee’s
responsibilities
– Consider integrity of the
financial statements.
– Review the adequacy and
effectiveness of the Company’s
internal financial controls and
other internal control systems.
– Monitor the effectiveness of
the Company’s Internal Audit
function, Finance function
and the external auditor.
– Review the Internal Audit
work plan.
– Review annual and half yearly
financial statements and
accounting policies.
– Approve the remuneration
and terms of engagement,
and determine the independence
of the external auditor.
– Monitor the scope of the annual
audit and the extent of non-
audit work undertaken by the
external auditor.
– Provide recommendations on the
fair, balanced and understandable
assessment, going concern and
viability statements.
– Ensure that whistleblowing
(‘Speak Up’) and anti-fraud
systems are in place
and monitored.
Nomination Committee Report, pages 64-65
Audit Committee Report, pages 70-73
THE EXECUTIVE LEADERSHIP TEAM RESPONSIBILITIES
(reports to the Board via the Group CEO and Group CFO)
– Develop and recommend strategy to the Board, and then implement it.
– Set the Group’s business principles, and develop and implement values,
behaviours and standards.
– Ensure customers are treated fairly, in line with the Saga brand values.
– Review and monitor brand and customer KPIs, trading and
marketing performance.
– Review financial forecasts and financial performance of the Group.
A full review of our governance
structure took place during
the year. As a result, an Executive
Leadership Risk Committee was
introduced, reporting into the Risk
Committee. A Data Governance
Committee and an Environmental
Committee were established as
sub-committees, to ensure that
these vital areas were given
due attention.
Board responsibilities –
allocation of time
Strategy and business
performance
c.60%
Capital raise and
share consolidation
c.20%
Oversight of risk and
management
People and culture
c.10%
c.10%
58
The Remuneration Committee’s
responsibilities
The Risk Committee’s responsibilities
– Review and advise the Board on
– Set and monitor the Remuneration
the Group’s overall risk appetite,
Policy for senior executives,
considering relevant legal and
regulatory requirements and
all relevant factors to ensure
alignment with the delivery
of value over the long term.
– Recommend and monitor
remuneration packages for
tolerance and strategy and risk
assessment processes.
– Oversee and advise the Board on
current risk exposure and future
risk strategy.
– Monitor the effectiveness of the
Group’s risk management and
The Executive Leadership Risk
Committee's responsibilities
(reports to the Risk Committee
via the Chief Risk Officer)
– Consider a risk report from
business areas, to include
(where necessary/material
matters to report):
– business continuity;
– supplier risk management;
Executive Directors, the Chairman
risk management procedures.
– fraud;
internal control systems and conduct
– data governance;
and senior management.
– Work with the Nomination
Committee regarding workforce
structure, reward, incentives
and conditions.
– Monitor PRUs.
– Provide qualitative and
quantitative advice to the
Remuneration Committee
on risk weightings.
– Review workforce remuneration and
– Consider the Group’s capability
incentive programmes to encourage
to identify and manage new and
– financial crime;
– information security;
– health and safety; and
– environment.
– Assess opportunities
and risks across all
business areas.
desirable culture, behaviour and
emerging risk.
– Derive PRUs from strategy
responsible risk taking.
– Review material breaches of risk
and business model.
– Determine all aspects of share-
limits and adequacy of action.
based incentive arrangements.
– Review and administer employee
share schemes.
– Set KPIs for the Annual Bonus
Plan and long-term incentives.
– Prepare a Directors'
Remuneration Report annually.
– Oversee material outsourcing
contracts and management
of insurer relationships.
– Conduct thematic reviews
(to align with strategy).
– Oversee Data Governance
and Environmental
Committees.
GovernanceSaga plc Annual Report and Accounts 2021 s172 THE BOARD’S RESPONSIBILITIES
– Encourage innovation to meet the needs of our stakeholders, including
colleagues, customers and shareholders.
– Ensure compliance with statutory and regulatory obligations.
– Maintain sound systems of internal controls and risk management.
– Assess potential impact of decisions.
The Nomination Committee’s
The Audit Committee’s
responsibilities
responsibilities
– Review the structure, size and
– Consider integrity of the
composition (including the need
financial statements.
for progressive refresh of
membership) of the Board.
– Consider how to develop a
diverse pipeline in succession
– Review the adequacy and
effectiveness of the Company’s
internal financial controls and
other internal control systems.
planning and talent development
– Monitor the effectiveness of
of Executive Directors and other
the Company’s Internal Audit
senior executives.
– Evaluate the independence,
experience, diversity and
knowledge of the Board.
– Identify and nominate
candidates to fill Board and
Committee vacancies.
– Review Board performance
evaluation results in relation
to Board composition.
function, Finance function
and the external auditor.
– Review the Internal Audit
work plan.
– Review annual and half yearly
financial statements and
accounting policies.
– Approve the remuneration
and terms of engagement,
and determine the independence
of the external auditor.
– Monitor the scope of the annual
audit and the extent of non-
audit work undertaken by the
external auditor.
– Provide recommendations on the
fair, balanced and understandable
assessment, going concern and
viability statements.
– Ensure that whistleblowing
(‘Speak Up’) and anti-fraud
systems are in place
and monitored.
The Remuneration Committee’s
responsibilities
– Set and monitor the Remuneration
Policy for senior executives,
considering relevant legal and
regulatory requirements and
all relevant factors to ensure
alignment with the delivery
of value over the long term.
– Recommend and monitor
remuneration packages for
Executive Directors, the Chairman
and senior management.
– Work with the Nomination
Committee regarding workforce
structure, reward, incentives
and conditions.
– Review workforce remuneration and
incentive programmes to encourage
desirable culture, behaviour and
responsible risk taking.
– Determine all aspects of share-
based incentive arrangements.
– Review and administer employee
share schemes.
– Set KPIs for the Annual Bonus
Plan and long-term incentives.
– Prepare a Directors'
Remuneration Report annually.
Pages 90-94 of the Directors’
Remuneration Report are incorporated
into this report by reference.
The Risk Committee’s responsibilities
– Review and advise the Board on
the Group’s overall risk appetite,
tolerance and strategy and risk
assessment processes.
– Oversee and advise the Board on
current risk exposure and future
risk strategy.
– Monitor the effectiveness of the
Group’s risk management and
internal control systems and conduct
risk management procedures.
– Monitor PRUs.
– Provide qualitative and
quantitative advice to the
Remuneration Committee
on risk weightings.
– Consider the Group’s capability
to identify and manage new and
emerging risk.
– Review material breaches of risk
limits and adequacy of action.
The Executive Leadership Risk
Committee's responsibilities
(reports to the Risk Committee
via the Chief Risk Officer)
– Consider a risk report from
business areas, to include
(where necessary/material
matters to report):
– business continuity;
– supplier risk management;
– data governance;
– fraud;
– financial crime;
– information security;
– health and safety; and
– environment.
– Assess opportunities
and risks across all
business areas.
– Derive PRUs from strategy
and business model.
– Oversee material outsourcing
contracts and management
of insurer relationships.
– Conduct thematic reviews
(to align with strategy).
– Oversee Data Governance
and Environmental
Committees.
Directors' Remuneration Report, pages 77-110
Risk Committee Report, pages 74-76
– Review and discuss talent management and succession planning throughout
the Group (prior to consideration by the Nomination Committee).
– Review and monitor culture, DI&B and colleague engagement metrics.
– Manage risk and conduct, reviewing Group Risk and Internal Audit and
compliance plans, and report potential or actual breaches of regulation or
policy to the Board.
59
Saga plc Annual Report and Accounts 2021Governance Corporate Governance Statement
Division of responsibilities continued
INDEPENDENT NON-EXECUTIVE DIRECTORS AND BOARD COMPOSITION
We continue to comply with the Code recommendation that at least half of our Board, excluding the Chairman, are
Non-Executive Directors whom the Board considers to be independent. The Board considers Eva Eisenschimmel, Julie Hopes,
Gareth Hoskin and Orna NiChionna to be independent Non-Executive Directors, free from any business or other relationships
that could materially interfere with the exercise of their independent judgement or objective challenge of management.
We recognised that our Non-Executive Chairman was not considered independent on appointment and this was carefully
considered as part of the capital raise. Taking into account Roger De Haan’s history with the Saga brand and business, his
proposed time commitment, and the terms of the Relationship Agreement and his letter of appointment, the Directors
supported the appointment, concluding that it was in the best interests of the Company. This was supported by shareholders,
who voted in favour of the capital raise at a general meeting held on 2 October 2020. Other changes to the Board and its
Committees included the retirement of Ray King (who did not stand for re-election at the 2020 AGM) and Gareth Williams
(who retired on 31 December 2020). Eva Eisenschimmel assumed the role of Remuneration Committee Chair on 1 February 2020,
Gareth Hoskin became Audit Committee Chair on 22 June 2020, Julie Hopes was appointed Chair of the Risk Committee
and a member of the Audit Committee on 31 December 2020. On 5 January 2021, Cheryl Agius stepped down, for personal
reasons, from her role as CEO of Saga Insurance and as an Executive Director of Saga plc.
Composition, succession and evaluation, page 61
Board of Directors, pages 62-63
BOARD ATTENDANCE DURING THE YEAR
s172 The Board and Committees have a scheduled forward programme of meetings. During the year, the Board met formally
on 14 occasions. In addition, meetings were convened as necessary to discuss and approve strategic matters and a strategy
event was held in July, at which the strategic direction for each of the businesses was discussed. Board members made
themselves available for all discussions necessary to deal with the impact of COVID-19 and to discuss the capital raise and
share consolidation projects, over and above scheduled meetings. The Chairman meets with the Senior Independent Director
and Non-Executive Directors outside of formal meetings.
Member
Roger De Haan1
Role
Non-Executive Chairman (leadership, Board governance, sets the
agenda and facilitates open Board discussions, performance and
shareholder engagement)
Euan Sutherland Group Chief Executive Officer (Group performance and develops
James Quin
Independent
Non-Executive
Directors
Orna NiChionna
Eva
Eisenschimmel
Julie Hopes
Gareth Hoskin
strategy for Board approval)
Group Chief Financial Officer (Group financial performance, including creation
of the budget and five-year plans for recommendation to the Board)
Participate in, assess, challenge and monitor Executive Directors’
delivery of the strategy (within risk and governance structures), financial
controls and integrity of financial statements, and Board diversity.
Evaluate and appraise the performance of the Non-Executive Chairman,
Executive Directors and senior management.
Maximum
possible
meetings
3
Attendance
3
14
14
14
14
Maximum
possible
meetings
14
14
14
14
Attendance
14
14
14
14
Other executives, senior colleagues and external advisers are also invited to attend Board meetings, to present items of
business and provide insight into key strategic issues. The Group Company Secretary attends each meeting, assists the
Chairman of the Board and Committee Chairs in planning for each meeting and ensures that Board and Committee
members receive information and papers in a timely manner.
Former Directors
Patrick O’Sullivan1 Chairman
Cheryl Agius2
Chief Executive Officer of Insurance
Ray King3
Non-Executive Director
Gareth Williams4 Non-Executive Director
Notes:
1 Roger De Haan replaced Patrick O’Sullivan as Chairman on 5 October 2020
2 Cheryl Agius resigned as Chief Executive Officer of Insurance on 5 January 2021
3 Ray King retired on 22 June 2020
4 Gareth Williams retired on 31 December 2020
60
Maximum
possible
meetings
11
11
5
12
Attendance
11
11
5
12
GovernanceSaga plc Annual Report and Accounts 2021
Composition, succession and evaluation
s172 Section 172 matters are addressed throughout this page
THE MEMBERS OF THE BOARD
The Board considers its overall size and composition to be
appropriate, having regard in particular to the independence
of character, integrity, differences of approach and
experience of all the Directors.
– whether the Company focuses sufficient effort and
resource on delivering sustainable long-term growth;
– considering whether we are giving excellent customer
service and being fair to our colleagues;
– establishing if the review of performance and trends
We consider that the skills and experience of our individual
members, particularly in the areas of insurance, financial services,
customer service, brand management, strategy and risk
management, are fundamental to the pursuit of our objectives.
In addition, the experience of members of the Board in a variety
of sectors and markets is invaluable to Saga.
ANNUAL RE-ELECTION
The Directors are standing for election or re-election at the
AGM. The Board’s view is that each of the Directors standing
for re-election should be re-appointed and that Roger De
Haan, who is standing for election, should be appointed.
We believe that they have the skills required for the Board
to discharge its responsibilities, as outlined in each of their
biographies set out on pages 62 and 63. The details of the
specific reasons why each Director’s contribution continues
to be important to the Company’s long-term sustainable
success will be included in our Notice of AGM.
GENDER AND DIVERSITY
The Group has a Diversity and Dignity Policy and, during the
year, forums were held on topics relating to DI&B which
provided valuable insight around how colleagues felt relating
to matters such as age, ethnicity and gender.
Environmental, Social and Governance, pages 18-27
Nomination Committee Report, pages 64-65
GENDER ON THE BOARD AND IN SENIOR
MANAGEMENT
The Board recognises the need to develop a diverse pipeline
in succession planning. The Company currently has three
women on its Board (43%) and six in total across the
combined Board and Senior Management (37.5%).
Board
Senior Management1
Male
Female
Total
(n)
%
4
57%
5 62.5%
(n)
3
3
%
43%
37.5%
7
8
Notes:
1 Senior management for this purpose is the Executive Leadership Team or the
first layer of management below Board level, including the Company Secretary
EVALUATION OF THE BOARD, COMMITTEES
AND DIRECTORS
Directors and regular attendees were asked to complete
a questionnaire to assess the performance of the Board and
Committees over the year. The Senior Independent Director
and the other Non-Executive Directors also appraised the
Non-Executive Chairman’s performance and the Non-
Executive Directors had regular meetings with the Chairman
and Non-Executive Chairman at which their performance
was discussed. Support was provided by Independent Audit
Limited, which does not have any other connection to the
Company or individual Directors.
The evaluation was focused on assessing progress in the
areas identified during last year’s review as opportunities
for further development including:
– ensuring Saga has the right strategy;
was appropriate;
– a review of how risk is managed; and
– the performance of the Committees.
The review concluded that the Board had navigated through
difficult circumstances presented by COVID-19 and was working
well with management in developing a well-formed
strategy supported by a clear company purpose and set
of meaningful values. The evaluation confirmed that there was
a strong emphasis on the welfare of colleagues, with active
consideration of fairness to colleagues and their rewards and a
recognition of the need to support wellbeing. Respondents said
that the Board was working to an effective agenda with a clear
focus on the right issues.
DEVELOPMENT PLAN FOR 2021/22
– Dedicating time to ensuring excellent customer service.
– Focusing on ensuring that foundations are in place to
begin to deliver sustainable growth.
– Ensuring risk management procedures are effective and
embedded sufficiently.
FINDINGS FROM THE 2019/20 EVALUATION
The 2019/20 review concluded that areas of focus should
include the following:
– Increasing visibility around performance, ensuring key
messages and discussion points are highlighted.
– Simplifying the governance between subsidiary boards
and the Company.
– Ensuring that the Board had identified objectives
which were aligned with strategy.
– Developing a set of cultural indicators to monitor
and measure progress against.
As a result, various dashboards and financial and customer KPIs
were introduced and these were discussed at Board meetings,
and a full review of governance was undertaken, with the aim of
improving and simplifying the structure. The Board recognised
that culture needed support by clear values, and these were
defined and communicated to colleagues.
PROCESS FOR BOARD AND COMMITTEE EVALUATION
Chairman and Group Company Secretary prepared a questionnaire
based on the conclusions and actions arising from the 2019/20
review and which took into account recent changes to the Board
and Committees
Directors and Board/Committee attendees completed the
questionnaires and provided feedback
Report produced by the Company Secretariat Team with support
from Independent Audit Limited
Review/discussion by Chairman and Group Company Secretary
Discussed at Board (including feedback to Committee Chairs)
Action plans prepared
Progress tracked at future Board meetings
61
Saga plc Annual Report and Accounts 2021Governance
Corporate Governance Statement
Board of Directors
1
2
3
Key to Committees
A Audit Committee
R Remuneration Committee
E Executive Committee
RI Risk Committee
N Nomination Committee
Committee Chair
COMPOSITION OF THE BOARD1
Non-Executive
Directors
Executive Directors
Non-Executive
Chairman
4
2
1
1 Patrick O'Sullivan was Chairman until 5 October 2020. Cheryl Agius,
Ray King and Gareth Williams served as directors during the year
(see page 65)
1. ROGER DE HAAN
Non-Executive Chairman
Appointed
5 October 2020
N
Key strengths and experience
– Experienced business leader and board director with
extensive experience in travel and financial services
industries.
– Significant history with Saga having worked for it for 39
years, including over 20 years as Chairman and Chief
Executive.
– Instrumental in transforming Saga from a specialist tour
operator to one that offered its own cruises and
expanded the business to cover publishing, insurance
and financial services, creating the Saga brand.
– Knighted in the 2014 New Years Honours List for services
to education and to charity in Kent and overseas.
Other roles
– Director of Folkestone Harbour companies, Creative
Folkestone, Friends of Folkestone Academy; Trustee
of Roger De Haan Charitable Trust; Trustee and governor
of The Kings School, Canterbury.
2. EUAN SUTHERLAND
Group Chief Executive Officer
E
3. JAMES QUIN
Group Chief Financial Officer
E
Appointed
6 January 2020
Appointed
1 January 2019
Key strengths and experience
– Significant experience in leading major consumer-facing
businesses through periods of change to deliver a more
efficient organisation.
Key strengths and experience
– Fellow of the Institute of Chartered Accountants
in England and Wales.
– Seasoned insurance executive with over 28 years
– Leadership, senior operational experience and
of senior leadership experience.
marketing specialism.
– Corporate strategy creation, branding, large workforce
direction and motivation.
– Experience in delivering corporate strategy, investor
communications and internal/external analysis
and reporting.
– Implementing strategy focused on customer insight,
– Extensive strategic, investor and operational finance
digital innovation and wholesale expansion.
experience within the insurance industry.
– Previous senior roles include: CEO of Superdry plc, the
– Previous senior roles include: Zurich Insurance Group
global digital brand, and The Co-op Group; Group COO
& CEO UK at Kingfisher plc; and background in global
fast moving consumer goods (FMCG) brands including
Mars and Coca-Cola.
Other roles
– Non-Executive Director and member of the Audit and
Nomination Committees of Britvic plc
(appointed February 2016).
62
(UK CFO, Global Life CFO and Head of Investor
Relations), Partner at PwC and Managing Director at
Citigroup Global Markets.
GovernanceSaga plc Annual Report and Accounts 2021 4
5
6
7
4. ORNA NICHIONNA
Senior Independent Non-Executive Director
N A RI R
Appointed
Senior Independent Director on 31 March 2017
Non-Executive Director on 29 May 2014
5. EVA EISENSCHIMMEL
Independent Non-Executive Director and
'People Champion'
N R
Appointed
1 January 2019
Key strengths and experience
– Significant experience in strategy, new concept
Key strengths and experience
– Over 30 years of experience as a brand and
development and launch, business turnaround, logistics
re-design and supply chain management. Previous client
portfolio included many consumer-facing clients.
– Previous roles include: Senior Independent Director
of Royal Mail plc, HMV plc, Northern Foods plc and Bupa;
Non-Executive Director of Bank of Ireland UK Holdings
plc and Bristol & West plc; former Partner at McKinsey
& Company.
Other roles
– Non-Executive Director and Chair of the Remuneration
Committee at Burberry Group plc (appointed January
2018); Non-Executive and Chair of Founders Intelligence
Limited (appointed July 2019); Deputy Chair of the
National Trust (appointed January 2014); and Trustee
of Sir John Soane’s Museum (appointed January 2012).
marketing professional.
– Extensive experience in customer relations and all
aspects of human resources and people strategy.
– Previous roles include: Non-Executive Director (and a
member of the Audit, Nomination, Remuneration and
Risk Committees) of Virgin Money plc; Managing Director
of Marketing, Brands and Culture at Lloyds Banking
Group plc; Chief Customer Officer at Regus plc; Chief
People and Brand Officer at EDF Energy and senior
positions at Allied Domecq and British Airways.
Other roles
– Chief of Staff at Lowell (appointed February 2016).
A N RI R
7. GARETH HOSKIN
Independent Non-Executive Director, Chair of Acromas
Insurance Company Limited and 'Speak Up Champion'
A N RI
6. JULIE HOPES
Independent Non-Executive Director,
Chair of Saga Services Limited and Saga
Personal Finance Limited
Appointed
1 October 2018
Key strengths and experience
– Associate with the Chartered Institute of Bankers.
– Wealth of insurance experience coupled with over 20
years in a variety of roles, specialising in general
insurance and predominantly in personal lines.
– Highly customer focused, with a breadth of functional,
membership and affinity experience and a track record
of driving growth.
– Previous roles include: Chair of Police Mutual and its
Remuneration Committee; Non-Executive Director and
Chair of the Risk Committee of Co-operative Insurance;
Tesco Bank; and CEO of The Conservation Volunteers, a
UK community volunteering charity.
Other roles
– Deputy Chair, Senior Independent Non-Executive
Director and Remuneration Committee Chair of West
Bromwich Building Society (appointed April 2016).
Appointed
11 March 2019
Key strengths and experience
– c.20 years’ experience in insurance, in a variety of roles.
– Chartered Accountant with recent and relevant financial
experience and competence in accounting (Institute of
Chartered Accountants in England and Wales).
– Previous roles include: main Board Director and CEO
International, and finance, retail marketing and HR roles
in Legal & General; accountant at PwC; and Trustee,
Non-Executive Director and Chair of the Audit and Risk
Committee at Diabetes UK.
Other roles
– Audit Chair and Senior Independent Director at Leeds
Building Society (appointed November 2015).
63
Saga plc Annual Report and Accounts 2021Governance Corporate Governance Statement
Nomination Committee Report
s172 Section 172 matters are addressed throughout this report
GENERAL INFORMATION
The Committee’s remit
– To review the structure, size and composition
(including the independence, experience, diversity
and need for progressive refresh of membership)
of the Board.
– To prepare a description of the role, skills,
knowledge and expected time commitment
required for appointments.
– To consider how to develop a diverse pipeline in
succession planning and talent development for
Executive Directors and other senior executives.
– To review the results of the Board performance
evaluation process that relate to the composition
of the Board.
The Committee’s terms of reference (approved
by the Board on 4 September 2020) are available
on our website (www.corporate.saga.co.uk/about-
us/governance).
What we did during the year
Time spent on matters
Board composition
c.50%
Executive succession
and talent development c.30%
Board evaluation
Diversity
c.10%
c.10%
Committee composition and attendance
Members (majority of
independent Non-
Executive Directors)
Orna NiChionna1
(Chair)
Roger De Haan2
Member
since
29/05/14
05/10/20
Eva Eisenschimmel
04/04/19
Julie Hopes3
Gareth Hoskin3
Ray King4
10/09/20
10/09/20
29/05/14
Patrick O’Sullivan5
18/05/18
Gareth Williams6
29/05/14
Max.
possible
meetings Attendance
7
4
7
4
4
2
3
7
7
4
7
4
4
2
3
7
Notes:
1 Orna NiChionna was appointed Committee Chair on 5 October 2020
2 Roger De Haan became a member on 5 October 2020
3 Julie Hopes and Gareth Hoskin became members on 10 September 2020
4 Ray King retired on 22 June 2020
5 Patrick O’Sullivan stepped down as Committee Chair on 5 October 2020
6 Gareth Williams retired on 31 December 2020
64
ORNA NICHIONNA
Chair, Nomination Committee
DEAR SHAREHOLDER,
This is my first statement as Chair of the Nomination
Committee since assuming the role from Patrick O’Sullivan
when he stepped down from the Board on 5 October 2020.
I would like to formally thank Patrick for his valuable
contribution as Committee Chair.
In a year that required resilience to adapt to the impact of the
COVID-19 pandemic, and the resulting desirability of a capital
raise, it was more important than ever to continually assess
whether the Board and Committee structures supported
delivery of the strategy. As the nature of the capital raise
began to take shape, the Committee considered the proposed
role of Roger De Haan as Non-Executive Chairman in the
context of the roles of the Group CEO and Senior Independent
Director and the proposed responsibilities of each. My role
as Senior Independent Director was widened and it was
determined that I should become Chair of the Nomination
Committee as it was recognised that Roger De Haan would
not be considered independent on appointment.
Taking into account Roger’s history with the Saga brand
and business, his proposed time commitment, and the
terms of the Relationship Agreement and his letter of
appointment, the Directors supported the appointment,
concluding that it was in the best interests of the Company.
Shareholders supported this decision when they approved
the capital raise and share consolidation at a general
meeting held on 2 October 2020. It was agreed that all Non-
Executive Directors should be members of the Committee
and Julie Hopes and Gareth Hoskin were appointed as
members on 10 September 2020.
COMMITTEE EVALUATION
An evaluation of the Committee’s effectiveness took
place during the year, as part of the Board effectiveness
review (for details see page 61). The review indicated that
the Committee had focused sufficiently on succession
planning, whilst acknowledging that there is more work to
be done. Respondents confirmed that the Committee had
found its rhythm of operation and had navigated complex
issues well during the year, with strong direction from
the Chair.
GovernanceSaga plc Annual Report and Accounts 2021 Board composition
There were other changes to the Board and its Committees
during the year, which went smoothly reflecting succession
planning carried out previously by the Nomination
Committee. Gareth Williams informed us of his intention to
stand down by the end of December 2020 and we concluded
that Eva Eisenschimmel had the required experience to chair
the Remuneration Committee. She assumed this role on
1 February 2020 and Gareth remained a member until he
retired on 31 December 2020, which ensured a smooth
and efficient handover. Julie Hopes was appointed Chair
of the Risk Committee and became a member of the Audit
Committee on the same date, following the Committee's
recommendation that this would ensure the appropriate
skills and balance on these committees.
Ray King also informed us that he would not stand
for re-election at the 2020 AGM. Gareth Hoskin’s skills and
experience matched the requirement that the Chair of the
Audit Committee must have significant, recent and relevant
financial experience with competence in accounting and
accordingly, Gareth assumed this position on 22 June 2020.
Last year, we reported that the Committee had identified
the need to consider whether there was sufficient travel
experience on the Board. We explored possible options with
external advisers for adding a Board member with a travel
background. However, the appointment of Roger De Haan to
the Board changed the skills balance as he brings very deep
experience of the travel industry to the Board.
During the year, each Director completed a skills matrix
and the Committee discussed the results, to identify current or
future skills gaps and to confirm Committee membership based
on the experience and skills of each Director against each
Committee’s remit. We also considered the Code, guidance
from the FRC and best practice. Our priority with any Board
appointments over the next three years will be to address the
current lack of ethnic diversity on our Board while maintaining
our depth and breadth of experience in the functional and
sectoral areas of most importance to the Group.
In January 2021, Cheryl Agius informed the Board of her
intention to step down from her role, for personal reasons, as
CEO of Insurance and as an Executive Director of Saga plc.
Euan Sutherland has assumed the responsibilities of Interim
CEO of Insurance until a suitable replacement is appointed.
He is supported by the Executive Leadership Team (ELT) and
the senior management of the Insurance business. The search
for a successor is underway.
Re-election and election of Directors
After the year end, but prior to publication of this annual
report, the Committee considered the profiles of the Directors,
each Director’s contribution and time commitment necessary
to perform their duties and recommended to the Board that all
should be put forward for re-election or election at the 2021
AGM. Individuals did not participate in the discussion when
their own re-appointment was being considered.
Succession planning and talent development
The Board and I were aware that, as a long standing Non-
Executive Director, it was important to consider the
succession plans for my role as Senior Independent Director.
In light of the capital raise and the need for continuity on
the Board, I agreed to remain on the Board for a further term.
The Committee will continue to consider forward looking
succession and refreshment plans in detail.
During the year the Committee received an update from
the Group CEO and the Chief People Officer (CPO) on how
they were approaching talent management in line with the
new strategy. This requires intense focus on skills and cultural
change in an organisation that is considerably more
streamlined than previously, and new processes and
frameworks have been put in place to ensure success.
The Committee also reviewed the talent pipelines for the ELT
and other key roles.
Diversity
During the year, the Group organised forums on topics
relating to diversity, inclusion and belonging (DI&B), which
provided valuable insight (see page 21). The Company
has a Diversity and Dignity Policy in place, which includes
practical steps to promote a working environment in which
all colleagues are treated equally. This policy applies to
the Group, including the Board of Directors, and is linked
to Company strategy and communicated to all colleagues.
All colleagues must report any breaches, whether actual
or perceived, to their line manager or to the People team.
Whilst the policy does not set specific targets, the Committee
is keen to achieve greater ethnic diversity on the Board and
will address this in the context of Board appointments over
the next three years. Diversity is considered as part of
the appointment process, with reference to diversity of
perspective, including gender, social and ethnic backgrounds;
the need for gender balance in senior management; and the
need to develop a diverse pipeline in succession planning.
The Board currently has a 43% gender balance of women
and 37.5% in the first layer of management below Board level.
Details of gender balance of those in the senior management
and their direct reports can be found on page 61.
Board evaluation
Committee members discussed the findings of the report
produced by the Group Company Secretary (with support
from Independent Audit Limited) in relation to the composition
of the Board. All Directors and the Group Company Secretary
were asked to complete questionnaires about the dynamics
of the Board and how well Board meetings supported
discussion of the strategy and its delivery. This was a
particularly important theme given the pressures caused
in the business by COVID-19, as well as the change in the
Board composition during the year. The evaluation confirmed
that the Board dynamics were seen by colleagues to
facilitate high quality discussion and decision-making,
despite almost all Board meetings having been virtual
throughout the year.
ORNA NICHIONNA
Chair, Nomination Committee
65
Saga plc Annual Report and Accounts 2021Governance Corporate Governance Statement
Audit, risk and internal control
s172
Section 172 matters are addressed throughout this section
BOARD ASSESSMENT OF RISK MANAGEMENT
AND INTERNAL CONTROL
The Board has ultimate responsibility for the Group’s risk
management and internal control, and for the Company’s risk
culture. The Board is responsible for reviewing the effectiveness
of risk management and control systems, ensuring that:
change risk governance and ensuring an appropriate risk culture
towards speaking up and managing incidents effectively.
Key to this work was ensuring Saga’s Leadership Team
possessed the required risk management capability. This was
achieved through comprehensive training and the selection
and development of 'Risk Champions' within the first line.
– there is an ongoing systematic process for identifying,
evaluating and managing the emerging and principal risks
faced by the Company;
– this system has been in place for the year under review and up
to the date of approval of the annual report and accounts;
– the system is regularly reviewed by the Board; and
– the system accords with the FRC guidance on risk
management, internal control and related financial
and business reporting.
During 2020, risk management activity was largely focused
on responding to COVID-19 and protecting Saga’s financial
and operational resilience. In addition, the conduct risk
framework was strengthened and the wider enterprise risk
management framework continued to be improved to ensure
it remains fit for purpose. Particular areas of focus included
the improvement of internal control effectiveness, enhancing
The Board has directly, or through delegated authority to
the Risk and Audit Committees, overseen and reviewed
the development and performance of risk management
activities, practices and internal control systems in the
Group. The Board has agreed risk policies, risk appetite
and the strategic approach to risks and has overseen the
identification and mitigation of emerging and principal
risks. The Risk Committee also reviewed areas identified as
requiring improvement that related to particular subsidiaries
and activities carried out by Saga more widely. Members of
senior management were invited, when relevant, to provide
an update on areas of concern including root cause analysis
and an update on improvement action plans. Further details
regarding the involvement of the Risk and Audit Committees
in the development and review of risk management and
internal control systems can be found in the Audit and Risk
Committee Reports on pages 70-73 and 74-76 respectively.
Effective risk management and control is achieved through application of the ‘three lines of defence’ model as follows:
SAGA’S ‘THREE LINES OF DEFENCE’ RISK GOVERNANCE MODEL
BOARD/AUDIT COMMITTEE
SENIOR MANAGEMENT
1ST LINE OF DEFENCE
2ND LINE OF DEFENCE
3RD LINE OF DEFENCE
Management controls
Financial control
Internal Audit
Internal control measures
Information security
Risk management
Conduct risk
Data protection
Health and safety
REGULATORS
EXTERNAL
AUDIT
1st line of defence – Colleagues across Saga are responsible
for identifying and managing risk in line with agreed risk
appetite, risk policies and procedures.
2nd line of defence – Independent oversight is provided by the
control functions. They are responsible for designing the risk
management framework and policies, independent review of
risk management within the 1st line and reporting to senior
management and the Board.
3rd line of defence – Internal Audit is responsible for
independent assurance on the operation and effectiveness
of internal control throughout Saga, including consideration
of the effectiveness of the risk management process.
The 3rd line of defence reports to the Board by way of
the Audit Committee.
The variety of business operations throughout Saga requires
risk and internal control issues to be considered at both
subsidiary business level and aggregated Group level.
66
GovernanceSaga plc Annual Report and Accounts 2021 SAGA RISK FRAMEWORK
Y
G
E
T
A
R
T
S
A
G
A
S
K
R
O
W
E
M
A
R
F
K
S
I
R
A
G
A
S
PURPOSE &
BUSINESS
MODEL
STRATEGIC
PILLARS
EXCE PTIONAL EXPE RIE NCES EVE RY DAY WH ILST BE ING A DRIVE R
FOR POSITIVE CHANGE IN OU R MARKETS AN D COM M U N ITIES
PEOPLE AND
CULTURE STEP
CHANGE
DATA, DIGITAL
AND BRAND
TRANSFORMATION
OPTIMISING
OUR
BUSINESSES
DRIVING
SIMPLICITY AND
EFFICIENCY
REDUCING
OUR DEBT
DRIVERS OF RISK
STRATEGIC
OPERATIONAL
INSURANCE
LIQUIDITY
CREDIT
MARKET
REPUTATIONAL
RISK STRATEGY
E X C E P T I O N A L R I S K C U LT U R E A N D M I N D S E T
RISK GOVERNANCE
INCIDENT MANAGEMENT
RISK
FRAMEWORK
PROCESSES
RISK & CONTROL REGISTERS
RISK APPETITES
RISK REPORTING,
MONITORING AND
MEASUREMENT
PRINCIPAL RISKS & UNCERTAINTIES
RISK MATURITY
CONDUCT RISK
FRAMEWORK
SPECIFIC CON DUCT POLICY, APPETITE , MATU RIT Y ASSESSM E NT,
TR AIN ING AN D M ETRICS FORM PART OF TH E FR AM EWORK
CLEAR OWN E RSH IP BETWE E N 1 ST AN D 2 N D LIN ES OF DE FE NCE WITH
CUSTOM E RS CE NTR AL TO OU R BE HAVIOU RS AN D SU BSEQU E NT DECISION
MAKING . RISK L ANGUAGE IS CLEAR , SIM PLE AN D U N DE RSTOOD BY ALL
RISK CULTURE
OPE R ATES ACROSS ALL ASPECTS OF TH E ABOVE FR AM EWORK AN D ALIGNS
TO SAGA'S PU RPOSE TO CREATE EXCE PTIONAL EXPE RIE NCES EVE RY DAY
RISK STRATEGY
The Group's risk strategy is aligned with the Company's
overarching strategy, and is considered and approved annually.
oversees this activity to ensure good customer outcomes,
and that the process is managed in line with the policy.
RISK FRAMEWORK PROCESSES
Risk governance – The main consideration within
risk governance is the Board management of risk and
subsequent delegation to risk committees and other
governance forums to ensure risk is managed effectively,
and that there is appropriate oversight through reporting
and accountability defined within each committee's terms
of reference. Additionally, the suite of Saga risk policies,
including but not limited to conduct risk, incident
management, internal control and risk appetite, define
our risk management strategy, framework, and high-level
expectations of the 1st and 2nd line in respect of risk
management activity.
Incident management – The 1st line business areas are
responsible for raising any risk incidents identified in a timely
manner, conducting appropriate root cause analysis to prevent
recurrence, and resolving incidents promptly. The 2nd line
Risk & control registers – Each Saga operating company is
responsible for identifying and managing its risks, which are
captured on risk registers and scored using a consistent risk
scoring matrix that rates risk against both likelihood and
severity. Key controls are identified, regularly reviewed and
subject to periodic testing with action taken where controls
are found to be ineffective.
Risk appetites – Refers to the type and amount of risk that
Saga is willing to take to achieve its strategic objectives.
Risk appetites are approved at Group level, and adopted by
the operating companies. They are used to support formation
of strategy and decision making. A definition of Saga's key
risk appetite categories can be found on the following page.
Principal risks and uncertainties – The PRUs are informed by
the detailed functional/entity risk registers and are linked back
to the relevant strategic objectives. This gives visibility to Saga’s
management of the most significant risks which may impede
Saga’s ability to achieve its strategic objectives.
67
Saga plc Annual Report and Accounts 2021Governance
Corporate Governance Statement
Audit, risk and internal control continued
Risk maturity – Each operating entity is assessed periodically against Saga’s risk maturity framework, with targets for improvement
set and monitored.
PROCESS FEEDBACK
Outputs from the risk management cycle are fed back to the Risk Committee and Board by exception to ensure the risk
framework remains effective and supports the strategy, business model and decision making processes of the Company.
RISK APPETITES
Our risk appetites define the amount and sources of risk we are willing to accept in pursuit of our objectives. Risk appetites are
set both at a Group and operating company level where appropriate and are expressed against the following key risk categories
Appetite risk category
Credit
Definition
The risk of a change in value due to actual credit losses deviating from expected credit
losses due to the failure to meet contractual debt obligations.
Liquidity
Insurance
Market
Group
Strategic
Colleague engagement
Conduct risk
Information security and cyber
threat
Regulatory compliance
Operational resilience
Third-party risk
The inability to meet short-term cash demands.
The risk of adverse deviation from predicted outcomes in respect of insurance liabilities
for which a fixed premium has been received.
The risk of loss arising from the adverse movement in asset values over time.
The risk arising from being part of the Saga Group, including potential conflicts of strategy,
the competition for resources from other businesses, reputational impact from the activities
from other parts of the Group, intra-group transactions and concentration risk.
The risk of failing to achieve Saga’s business objectives due to poor strategy selection,
execution or modification.
The risk of loss and inability to achieve Saga’s business objectives due to lack of colleague
engagement.
The risk that the culture, integrity and ethical behaviour of Saga, its employees and
representatives (e.g. partners and suppliers) towards customers, or in the markets in which
it operates, leads to adverse customer outcomes.
The risk of loss arising from a cyber attack on one or more parts of Saga or any third party
with whom Saga shares information with who themselves suffer a successful cyber attack.
The risk of loss, sanction and/or reputational damage arising from failure to comply with
our regulatory obligations.
The risk of material disruption to key systems, access to our buildings or availability of
colleagues that could affect our ability to service customers or meet strategic objectives.
The risk of loss, business disruption or poor customer outcomes as a result of failure to
manage third parties and partners effectively.
External fraud
The risk of loss as a result of fraudulent activity by an external party.
Change management
Brand/reputation
The risk of failure to effectively manage and execute change, resulting in loss of planned
benefits, business disruption or poor customer outcomes.
The potential for loss of customers or market share due to damage to Saga's reputation.
68
GovernanceSaga plc Annual Report and Accounts 2021 The Group has a management structure with documented
levels for the authorisation of business transactions and
clear bank mandates to control the approval of payments.
Control of the Group’s cash resources is operated by a
centralised Treasury function.
Internal management reporting and external statutory
reporting timetables and delivery requirements are well
established and documented. Control of these is maintained
centrally and communicated regularly.
The Group maintains IT systems to record and consolidate all
of its financial transactions. These ledger systems are used
to produce the information for the monthly management
accounts, and for the annual statutory financial statements.
The trading subsidiaries within the Group prepare their
accounts either under Financial Reporting Standard (FRS)
101 or full International Financial Reporting Standards (IFRS).
The accounts production process ensures that there is
a clear audit trail from the output of the Group’s financial
reporting systems, through the mapping and consolidation
processes, to the Group’s financial statements.
STATEMENT OF REVIEW
As a result of its consideration and contribution to risk
management and internal control activities, the Board
is satisfied that there is an appropriate framework for
identifying, evaluating and managing the Group’s risks
and internal controls and, up to the date of the approval
of this annual report and accounts, it is regularly reviewed.
The Board’s statement of review of the effectiveness of
Saga’s risk management and internal control systems is
set out on page 53.
Our risk management framework and systems are designed
to manage rather than eliminate risk, and operate to facilitate
the achievement of our business objectives within our stated
risk appetites.
There has been regular reporting to the Audit and Risk
Committees throughout the year on the improvements to
the design of the framework. The remaining areas of focus are
strengthening our risk culture, conduct risk framework and
ownership of risk within the 1st line business. The Committees
on behalf of the Board will continue to monitor progress
throughout 2021.
INDEPENDENT PROCESS ASSURANCE
Saga’s Internal Audit function provides independent
assurance of the effectiveness of the risk management
procedures at both Group and business levels.
Governance statements, page 53
Internal Audit acts as the 3rd line of defence within Saga’s
risk management framework. The objective of Internal Audit
is to help protect the assets, reputation and sustainability
of the organisation by providing independent, reliable,
valued and timely assurance to the Board and ELT.
To preserve the independence of Internal Audit, the Internal
Audit Director's primary reporting line is to the Chair of the
Audit Committee, and the Internal Audit Team are prohibited
from performing operational duties for the business.
All activities of the Group fall within the remit of Internal
Audit and there are no restrictions on the scope of Internal
Audit’s work. Internal Audit fulfils its role and responsibilities
by delivering the annual risk-based audit plan. Each audit
provides an opinion on the control environment and details
of issues found. Internal Audit works with the businesses to
agree the remedial actions necessary to improve the control
environment, and these are tracked to completion.
The Internal Audit Director submits reports to, and/or
attends, Board and Audit Committee meetings for the
subsidiary Saga businesses, as well as meetings of the
Audit and Risk Committees.
FINANCIAL REPORTING
The Group maintains a control environment that is regularly
reviewed by the Board. The principal elements of the control
environment include comprehensive management and
financial reporting systems and processes, defined operating
controls and authorisation limits, regular Board meetings,
clear subsidiary board and operating structures, and an
Internal Audit function.
Internal control and risk management systems relating to
the financial reporting process and the process for preparing
consolidated accounts ensure the accuracy and timeliness
of internal and external financial reporting.
The Group undertakes an annual strategy process
which updates the plan for the next five years and
produces a detailed budget for the next financial year.
Detailed reforecasts are performed by each area of the
Group regularly and are consolidated to provide an updated
view of the Group's expected performance and position
for the current year. Each reforecast covers the income
statement, cash flow and balance sheet positions, phased
on a monthly basis through to the end of the financial year.
This year the Group has developed a revised strategy that
will set a platform for renewed growth in both customers
and profits.
Regular weekly and monthly reporting cycles allow
management to assess performance and identify
risks and opportunities at the earliest possible time.
Trading performance is formally reviewed on a weekly
basis by the management of the trading subsidiaries,
and the Saga ELT. Performance is reported to the Board
at each Board meeting. Performance is assessed against
budget and against the latest forecast.
69
Saga plc Annual Report and Accounts 2021Governance Corporate Governance Statement
Audit Committee Report
s172 Section 172 matters are addressed throughout this report
GENERAL INFORMATION
The Committee’s remit
Our purpose is to help the Board discharge its
responsibilities for monitoring the following:
– Integrity of the Company’s financial statements.
– Adequacy and effectiveness of the Company’s
internal financial controls and other internal
control systems.
– Effectiveness of the Company’s Internal Audit
function and the external auditor.
The Committee’s terms of reference (approved by the
Board on 4 September 2020) are available on our website
(www.corporate.saga.co.uk /about-us/governance).
GARETH HOSKIN
Chair, Audit Committee
What we did during the year
Time spent on matters
Financial statements
c.40%
Internal financial
controls
Internal audit
External audit
c.10%
c.30%
c.20%
Committee composition and attendance
Members (all
Member
independent Non-
Executive Directors)
since
Gareth Hoskin (Chair)1 04/04/19
Max.
possible
meetings Attendance
9
9
Julie Hopes2
Orna NiChionna
Ray King3
Gareth Williams4
31/12/20
29/05/14
29/05/14
29/05/14
1
9
4
8
1
9
4
8
Notes:
1 Gareth Hoskin was appointed Committee Chair on 22 June 2020
Julie Hopes was appointed as a member of the Committee on
2
31 December 2020
3 Ray King retired on 22 June 2020
4 Gareth Williams retired on 31 December 2020
On 22 June 2020 Gareth Hoskin replaced Ray King as
Chair when he retired. The Board is satisfied that both
Ray King and Gareth Hoskin have recent and relevant
financial experience and competence in accounting,
reflected by their professional qualifications as chartered
accountants and relevant experience during their careers.
The Board is also satisfied that the Committee members
possess an appropriate level of independence and offer
a depth of financial and commercial experience across
various industries, including the sector in which the
Company operates. The Board of Directors’ biographies
on pages 62-63 contain details of each Committee
member’s skills and experience.
70
DEAR SHAREHOLDER,
This is my first statement as Audit Committee Chair since
Ray King retired in June 2020 and I would like to thank him
for his valued contribution over many years. This has been
an unparalleled year, as we demonstrated financial and
operational resilience in the face of the COVID-19 pandemic,
progressed our strategic reset announced in September 2020,
laying the foundations to optimise our business and reduce
debt, and undertook a capital raise.
The COVID-19 pandemic created significant challenges for
Saga that required prompt, decisive action. Enabling all
colleagues to work from home provided maximum colleague
safety combined with no business interruption for customers.
Our focus was on the improved financial flexibility of the
Group to strengthen the balance sheet and improve liquidity.
Against this background, the Committee provided
independent scrutiny of the Group’s financial reporting and
the internal controls in its businesses.
Reporting
Interim and full-year results
The interim and full-year results were reviewed and challenged,
together with the appropriateness and application of key
accounting policies and areas of significant judgement and how
these were made. KPMG provided reports throughout the year,
with focus on areas identified as having significant audit risk.
COMMITTEE EVALUATION
An evaluation of the Committee’s effectiveness took place
during the year, as part of the Board effectiveness review
(for details, see page 61). Overall, the review concluded
that the Committee received well structured and timely
papers, with useful input from internal and external auditors.
Respondents confirmed that there was a healthy level
of challenge and debate and that the Committee had
identified priority topics. For 2021/22, more time will be
spent on probing root causes of issues.
GovernanceSaga plc Annual Report and Accounts 2021 Significant issues
– Consideration of the financial implications and impact
of COVID-19 on liquidity, going concern and viability
The Committee reviewed and challenged the assessment
that management made including the appropriateness
of the underlying forecasting assumptions used in the
base case and reasonable worse-case scenarios and
the mitigating actions that management would take.
Note 2.1 of the financial statements, pages 136-138
Viability Statement, page 46
– Working Capital Report
Discussed and agreed assumptions which underpinned the
working capital report in connection with the capital raise,
reviewed the financial reporting procedures report prepared
by an independent team at KPMG, and recommended the
working capital report to the Board for approval.
– Valuation of insurance contract liabilities
The analysis and justification prepared by management
in support of the reserves for outstanding claims, including
consideration of an independent valuation prepared by Willis
Towers Watson and analysis prepared by the Group’s
external auditor, was reviewed. The analysis and justification
was reviewed and challenged initially by the Acromas
Insurance Company Limited (AICL) Reserving and Audit
Committees, following which it was also then reviewed and
challenged by the Committee.
Note 28 of the financial statements, pages 189-193
Independent Auditor's Report to the Members of Saga plc, pages 121-122
– Valuation of goodwill
The Committee considered the recoverability of goodwill
and discussed with management the basis of its
impairment assessment. The key items considered were
the appropriateness of underlying forecast cash flows and
potential stresses to those cash flows, and the selection
of an appropriate discount rate and terminal growth rate
including the sensitivity of the assessment to changes in
those rates within a reasonable range. The review concluded
that the carrying value of the goodwill asset allocated
to the Insurance business was recoverable but that the
carrying value of the goodwill asset allocated to the Tour
Operations and Cruise businesses should be impaired in full.
Note 16a of the financial statements, pages 169-170
Independent Auditor's Report to the Members of Saga plc, page 123
– Valuation of the parent company’s investment
in subsidiaries
The Committee evaluated the recoverability of the carrying
value of the investment in subsidiaries held on the balance
sheet of the Company. The Committee reviewed and
challenged management’s internal valuation of the Group.
The Committee also considered alternative valuation data
based on market data provided by brokers. The review
confirmed that no impairment was required nor was it
appropriate to reverse any previous impairments at this stage.
Note 2.5 of the financial statements, pages 151-154
Independent Auditor's Report to the Members of Saga plc, page 123
– Carrying value of other material assets
The Committee reviewed indicators of impairment and
resultant impairment reviews of the Group’s ocean cruise
ships, and land and buildings. For the cruise ships, the key
items considered were the appropriateness of underlying
forecast cash flows and potential stresses to those cash
flows, including, in particular, the potential impact of
COVID-19 on the resumption of cruising, and the selection
of an appropriate discount rate, which has been impacted
this year in particular by an increase in cruise industry
asset betas and cost of debt levels. The Committee also
considered the sensitivity of the assessment to changes in
those rates within a reasonable range. For land and buildings,
the Committee challenged the quality of the valuations
obtained from independent valuers. The review concluded
that the carrying values of the cruise ships were recoverable
with a finely-balanced judgement having been made not
to impair the carrying value of Spirit of Adventure, and that
certain buildings should be written down to their fair value
less costs to sell.
Note 17 of the financial statements, page 171-173
Note 2.5 of the financial statements, pages 151-154
Independent Auditor's Report to the Members of Saga plc, page 124
The Committee considered the internal control observations
identified by the Group’s external auditor as part of the audit
and management attended Committee meetings to provide
context and assurance regarding appropriate actions.
The Committee was satisfied that the key accounting policy
choices and judgements were appropriate and provided a
true and fair view of the Company’s financial performance
and position.
Fair, balanced and understandable
We advised the Board that we supported the statement (see
page 53) that this annual report and accounts, taken as a
whole, are fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Group’s position and performance, business model and
strategy. This was following consideration of whether:
– the report was clear and presented a balanced view
of successes, challenges, opportunities and risks;
– key messages were prominent and an appropriate level
of KPIs were disclosed;
– business segments, significant issues and key judgements
reporting was consistent with disclosures in the financial
statements; and
– definitions provided were explained and Alternative
Performance Measures (APMs) were reconciled with the
closest IFRS measure in the financial statements.
Going concern and viability
The going concern basis of preparation disclosure note is
set out on pages 136 to 138 and the Viability Statement, and
the methodology for assessing the Group’s ongoing viability,
are set out on page 46.
Our review took account of the Company’s current position
and PRUs (as reviewed and approved by the Risk Committee
and detailed on pages 28 and 29) and the methodology
used to provide an assessment of ongoing viability over the
chosen five-year period of review. We considered the relevant
assessment time horizon, severe but plausible potential
outcomes and the appropriateness of the scenarios
71
Saga plc Annual Report and Accounts 2021Governance
Corporate Governance Statement
Audit Committee Report continued
modelled. In particular, we considered the continued impact
that the COVID-19 outbreak could have on the Group’s
financial performance and position, and how this could
affect both the viability of the Group and the going concern
basis of preparation that underpins the Group’s financial
statements. Based on this review, we confirmed to the Board
that we considered that it was reasonable for the Directors
to continue to prepare the financial statements on a going
concern basis and make the Viability Statement on page 46.
Audit and control
Internal controls
The Committee reviewed the outcome of the audits of key
financial controls included in the Internal Audit programme.
The Group Financial Controller also provided an update on
accounting issues and key aspects of financial controls at
each meeting. In December 2020, we received an update on the
transformation of the Finance function, which included progress
on establishing a new target operating model and the formation
of a shared services department, and the digitisation and
simplification of financial reporting processes. We noted how
this work would improve customer payment and refund
methods and optimise working processes for colleagues.
The Committee was also trained on the implications of IFRS 17
and continued to be briefed with regular progress updates
on the Group’s preparatory work on its adoption. This new
insurance accounting standard becomes applicable in the
financial year ending 31 January 2024.
s172 Financial crime and 'Speak Up' reporting
(formerly whistleblowing and open door reporting)
We reviewed and approved policies covering financial
crime (including anti-bribery, anti-corruption, anti-fraud,
anti-money laundering and treasury sanctions and asset
freezing). We reviewed a simplified whistleblowing policy and
renamed this the ‘Speak Up’ policy to encourage colleagues
to engage with this. As ‘Speak-Up Champion’, I am responsible
for ensuring the integrity, independence and effectiveness
of the Company’s 'Speak Up' Policy and procedures.
The Committee reviewed all reported incidents and concluded
that these had been handled appropriately, with no material
issues identified.
Internal Audit
We approved the Internal Audit programme and considered the
internal audits conducted throughout the year. In addition,
we held an extraordinary Committee meeting in May 2020
to discuss how Internal Audit were responding to, and
reprioritising focus due to, the COVID-19 pandemic and the
changing control environment. The audit plan was further
refreshed for the second half of the year, with progress being
appropriately reported by the Internal Audit Director and
amendments to the audit plan being approved by the
Committee. We were satisfied that the Internal Audit
function, a team of eight people with a broad range of
skills, when combined with the use of external resource for
specialised audits, had appropriate resources. The Internal
Audit Director attended Committee meetings and provided
regular reports on the progress of the Internal Audit plan.
The Committee monitored whether the Internal Audit
function was independent of management and so able
to exercise independent judgement throughout the year
and was satisfied that this was the case.
A quality assurance and improvement program, as required
by the Chartered Institute of Internal Auditors (CIIA) was
considered. We concluded that the Internal Audit function
complied with the CIIA’s definition of internal auditing, the core
principles of the Professional Practice of Internal Auditing and
the Code of Ethics. The Committee (in co-operation with the
Risk Committee) monitored the work of the risk, compliance
and internal audit functions to ensure that their activities
complemented each other appropriately. KPIs included
whether actions were closed within agreed timeframes and
customer satisfaction response rate. We approved the Internal
Audit Charter, which is available on the Saga website
(www.corporate.saga.co.uk/about-us/governance).
Work conducted over the year was risk-based, and covered
both financial and non-financial controls. A selection is
shown below:
– Customer sales and claims journey audits (Saga Services
Limited (SSL) and CHMC Limited): End to end review of
the sales and claims customer journeys including,
renewals, repudiated claims, complaints, and customer
outcomes.
– Cyber security: A deep dive into core focus areas,
including cyber governance, cyber resilience, user
awareness and training, and threat and
vulnerability management.
– Response to COVID-19: A review of the business’
response to the crisis, including management and
mitigation of associated financial, regulatory,
technological and operational risks.
Where improvements were identified, an action plan
was agreed with management and appropriately tracked.
Internal Audit also conducted the annual year end review
of the effectiveness of the risk management and controls
framework. This showed that the internal risk and control
environment is broadly effective, with controls to mitigate
key risks being generally designed and operating effectively.
Whilst the refreshed risk management framework and target
operating model continues to drive greater risk management
ownership and accountability from the Risk Team into the
business, the Group remains in progress in embedding risk
management ownership and accountability. This progress
in the risk transformation phase has been impacted by a
number of factors, primarily the reprioritisation arising from
COVID-19 resulting in management focus on other higher
priority areas for 2020.
Audit, risk and internal control, pages 66-69
Risk Committee Report, pages 74-76
An external review of the effectiveness of the Internal Audit
function (in line with the CIIA Standards) was last conducted
during the financial year ended 31 January 2017. A tender
process was undertaken in the year and PwC were selected
by the Committee to carry out an external quality assessment
(EQA). The outcome of the EQA is due to be presented to the
Committee in July 2021.
Subsidiary audit committees
I have regular meetings with the independent Non-Executive
Directors who chair the SSL, Saga Personal Finance Limited
and AICL audit and risk committees to ensure an appropriate
level of oversight and enable a sufficient level of
72
GovernanceSaga plc Annual Report and Accounts 2021 transparency. Minutes from these meetings were also
noted at each Committee meeting.
Audit quality and effectiveness of external auditor
The following was considered when assessing the
effectiveness of KPMG:
– Our perception of KPMG’s understanding and insight into
the Group’s business model.
– How key areas of judgement were approached by KPMG,
the extent of challenge and the quality of reporting.
– The content of (and management’s responsiveness to)
KPMG’s management letter.
– Feedback from management following completion of
an evaluation survey on the audit process (including
audit scope, audit communication, independence
and objectivity).
The evaluation concluded that the external auditor had
continued to challenge the key accounting judgements
and estimates rigorously and maintain a high level of
independence. Both planning of the audit and communication
between the external auditor and management had improved
in response to feedback provided in the previous year.
The review also confirmed that there remained an opportunity
to continue to improve the efficiency of how the audit
operates. Overall, the audit was judged to be high-quality.
The Committee is satisfied that the audit continues to be
effective and provides independent and objective challenge
to management. A recommendation was made to the Board
for the re-appointment of KPMG as the Company’s auditor
at the forthcoming AGM.
GARETH HOSKIN
Chair, Audit Committee
External audit
KPMG was appointed as the Company’s external auditor
for the financial year ended 31 January 2018 (following
a competitive tender process in 2016) and has been
re-appointed annually since then. The current audit
partner, Stuart Crisp, has been in place since its appointment.
The audit partner is due to be rotated after completion of
the January 2022 year end reporting process.
Audit planning
KPMG presented an audit plan for the financial year, together
with an outline of its risk assessments, materiality thresholds
and planned approach. The key aspects of the plan are set
out in the Independent Auditor’s Report on pages 117-130.
The Committee considered the audit scope, materiality and
coverage, areas of audit focus and KPMG’s planned response
to identified significant audit risks, taking size, complexity
and susceptibility to fraud and error into account. We also
considered and approved KPMG’s engagement terms and fee
proposal for 2020/21.
Auditor independence and non-audit services
During the year, the Committee met three times with
the external auditor without members of management
being present.
The objectivity, challenge and independence of KPMG were
continuously monitored by the Committee and independence
was confirmed by the auditor throughout the year in letters
to the Committee.
In line with the Revised Ethical Standard issued by the
FRC in 2016, the Committee has adopted a robust Auditor
Independence Policy on non-audit fees and employment
of former employees of the external auditor. This policy
includes a list of non-audit services where we are satisfied
that the external auditor can carry out those services without
affecting its independence as external auditor. There are clear
approval levels where the Committee Chair (or the whole
Committee) is required to authorise assignments.
Competitive tendering is used for substantial work.
The audit fees payable to KPMG in respect of the year
ended 31 January 2021 were £1.6m (2020: £1.7m) and
non-audit service fees incurred were £0.8m (2020: £0.2m),
the latter being incurred for work to review the Group’s
interim results, essential reporting to our banks and travel
industry regulators and, in 2020 specifically, work as
reporting accountant in support of the Group’s equity
capital raise. This equates to a non-audit to audit fee ratio
of 0.5 (2020: 0.12). A summary of fees paid to the external
auditor is set out in note 4a to the consolidated financial
statements on page 160. KPMG has discontinued the
provision of non-audit services to the current and recent
members of the FTSE 350 index that they audit other
than those required by law or closely related to the audit.
73
Saga plc Annual Report and Accounts 2021Governance Corporate Governance Statement
Risk Committee Report
s172 Section 172 matters are addressed throughout this report
GENERAL INFORMATION
The Committee’s remit
Our main purpose is to assist the Board in discharging
its responsibilities for monitoring the following:
– The Group’s overall risk appetite, tolerance,
strategy and risk assessment processes.
– The effectiveness of the Group’s risk management
and internal control systems and conduct risk
management procedures.
– The Group’s capability to identify and manage new
and emerging risk.
– Any material breaches of risk limits and adequacy
of action.
The Committee’s terms of reference (approved by the
Board on 4 September 2020) are available on our website
(www.corporate.saga.co.uk/about-us/governance).
What we did during the year
Time spent on matters
Management and
reporting
Risk strategy, policy
and appetite
Compliance
In depth reviews
c.40%
c.25%
c.10%
c.25%
Committee composition and attendance
Members (all
independent Non-
Executive Directors)
Julie Hopes (Chair)1
Orna NiChionna
Gareth Hoskin
Ray King2
Gareth Williams3
Notes:
1
Member
since
04/04/19
29/05/14
04/04/19
29/05/14
29/05/14
Max.
possible
meetings Attendance
6
6
6
6
3
5
6
6
3
5
Julie Hopes was appointed as Committee Chair with effect from
31 December 2020
2 Ray King retired on 22 June 2020
3 Gareth Williams retired on 31 December 2020
74
JULIE HOPES
Chair, Risk Committee
DEAR SHAREHOLDER,
This is my first statement as Chair of the Risk Committee since
taking over the role from Orna NiChionna on 31 December 2020.
I am pleased that Orna remains a Committee member and
would like to formally thank her for her support and
commitment to ensuring a smooth handover.
During the year, as the Group focused on transformation of
the business and operational and financial resilience amidst
unprecedented challenge and change, the Committee
considered the relevant risks and interdependencies within
the Group. The Committee reviewed progress against the
Group's turnaround strategy and considered the risks
associated with the COVID-19 pandemic and the end
of the Brexit transition period.
The Committee also received regular updates on the external
regulatory and macroeconomic landscape, dedicating
a significant amount of time to our regulated entities and
regulator relationships. We continued to measure and discuss
emerging and principal risks and uncertainties (PRUs), aiming
to ensure that processes were aligned with strategy, ahead
of a pivotal year of transition.
COMMITTEE EVALUATION
An evaluation of the Committee’s effectiveness took
place during the year, as part of the Board effectiveness
review (for details, see page 61). The review indicated
that the Committee was chaired effectively, and
that the restructured annual plan would ensure that
the right discussions took place, at the right time.
The effort to remove duplication across the Group was
welcomed. The focus for 2021/22 will be on embedding
risk management in all business areas and to increase
consideration of long-term risks.
GovernanceSaga plc Annual Report and Accounts 2021 Management and reporting
Group risk reports, considered by the Committee at each
meeting, provided a comprehensive dashboard spanning
the entire Group portfolio. The Committee considered the
rationale behind the selection of the PRUs, as well as the
risk and conduct risk monitoring plans for each business.
The Committee received regular updates on the developing
COVID-19 pandemic, and reviewed related topics such as
contagion risk, stress testing and the expectations of the
Group’s regulators. The impact of the pandemic on business
operations and sustainability of the balance sheet were
key areas of focus.
We also considered risks relevant to our business
transformation programme, including culture. The Committee
reviewed the risks relating to the performance of each
business and those arising from incidents in relation to
control failures or weaknesses. We discussed these incidents
in the context of the risk framework to identify causes,
necessary actions, lessons learnt and monitoring
requirements. All business CEOs certified compliance
with the risk management framework at the year end.
The Committee received updates on the Group insurance
programme, including whether any additional cover was
required, and noted the impact on premiums caused by
the COVID-19 pandemic.
The Committee understands that climate and environmental
risk are a feature of executive and senior management
planning and will continue to feature in Saga’s strategy.
Reporting and oversight of risk matters, including those
pertaining to climate risk, takes place through subsidiary
risk governance committees, who will escalate material
points for consideration to the Committee and through the
Committee's oversight of the PRUs.
The Group’s PRUs are refreshed on at least an annual basis,
ensuring that new and emerging risks and opportunities are
captured and remain at the forefront of the Group’s
strategic planning.
Risk management and internal controls
The Committee considered changes to the Group Risk
function as part of the wider business simplification.
The new structure provided an improved profile for the
Enterprise Risk and Conduct Risk functions. The Committee
concluded that the restructure of the Group Risk function
was working as intended.
In co-ordination with the Audit Committee, the Committee
discussed a review of the effectiveness of the risk
management framework and internal control systems.
This included reference to all material financial, operational
and compliance controls.
The conclusion was that the internal risk and control
environment is broadly effective, with controls to mitigate
key risks being generally designed and operating effectively.
Whilst the refreshed risk management framework and target
operating model continues to drive greater risk management
ownership and accountability from the Risk Team into the
business, the Group remains in progress in embedding risk
management ownership and accountability. This progress
in the risk transformation phase has been impacted by a
number of factors, primarily the reprioritisation arising from
COVID-19 resulting in management focus on other higher
priority areas for 2020.
We recommended to the Board that the appropriate
statements could be made regarding robust assessment
of emerging and principal risks facing the Group and the
review of the effectiveness of the risk management process
(see page 53).
Risk strategy, policy and appetite
The risk reporting framework continues to provide a holistic
approach linked to the Company’s strategy and business
model. The Committee recognised the strength of our brand
and the economic resilience of our customer demographic
while considering opportunities and threats.
Changes and additions to the PRUs were scrutinised in line
with the agreed strategy and business model and the results
of this review are shown in the Strategic Report on pages 1
to 49. These formed the basis of the scenario testing used
for the production of the Viability Statement (see page 46).
Our risk management processes are described on pages 66
to 69. These are designed to manage rather than eliminate
the risk of failure to achieve business objectives and can
only provide reasonable and not absolute assurance against
material misstatement or loss.
We also considered conduct risk and how our decisions and
behaviour could impact our customers, or affect our reputation
with stakeholders, including shareholders and regulators.
Actions were reviewed against risk appetite and tolerance.
We concluded that where scenarios were outside of risk
appetite, the probability of occurrence was low and that
mitigating actions were appropriate. We remain satisfied
that controls are in place, meaning that the risk of
significant failing across the business model is unlikely.
The Committee is focused on a continued robust response to
the COVID-19 pandemic and ongoing resilient trading in our
Insurance business. The safe resumption of our Travel business
is also a key topic of consideration, alongside the need for
financial flexibility.
Supplier risk management continues to be an ongoing
process. As a Committee, we are acutely aware of the need
for the organisation to focus on the risks associated with
larger suppliers and those that carry reputational risk.
The Group has implemented a revised governance framework
and system of delegated authorities that allows the
Committee to focus on the material issues which are
escalated to it.
In depth reviews
COVID-19
Saga responded quickly to the COVID-19 pandemic.
Our priorities for the year have been serving our customers
and keeping our colleagues safe during a period of major
disruption, alongside strengthening our financial position
for longer-term recovery and growth. The initial focus of the
Committee was around the ability to respond to a pandemic
scenario, including the threat of a full lockdown. This initial
phase was followed by a focus on managing colleagues
75
Saga plc Annual Report and Accounts 2021Governance Corporate Governance Statement
Risk Committee Report continued
taking the right approach but would benefit from clarifying the
division of responsibilities and accountabilities at business levels.
The Committee noted that there were initiatives in progress
which should address these issues.
Relationship between the Committee
and businesses
In January 2021, the Committee revisited its remit to ensure
that there was an efficient flow of reporting and escalation of
material matters from subsidiary risk committees and that the
Committee focused on the most material risk issues for the
Group. The Committee agreed changes to the standing
agenda items as a result of the discussion.
JULIE HOPES
Chair, Risk Committee
effectively from home, ensuring there was a continued focus
on fair customer outcomes, and identifying new business
priorities. Saga engaged with its regulators, including
the Financial Conduct Authority (FCA), to ensure steps
were taken to confirm customers remained protected.
Going forward, the Committee will focus on next steps
to emerge stronger from the crisis, as the Travel business
resumes operation.
Contagion risk
The Committee considered the threat of contagion risk
across the Group and between Group entities, including
cash arrangements and the impact on debt covenants.
The Committee concluded that the risk mitigations in
place were appropriate and that it was important for the
Committee to continue to receive updates on these areas.
Impact of the corporate transaction
As part of the process for the capital raise, the Committee
considered a risk assessment prepared by the Chief Risk
Officer which set out the risks associated with the
transaction, including the controls in place to safeguard
confidentiality. The Committee concluded that the control
systems in place were appropriate, risks were being managed
well and that the disclosures included in the prospectus
were adequate.
Organisational culture
The Committee received a detailed report on organisational
culture across the Group, including the creation a new
Company purpose, to deliver exceptional experiences every
day, while being a driver of positive change in our markets
and communities, and set of values (precision pace, empathy,
curiosity and collaboration). The Committee heard how
leadership skills would be developed to achieve the desired
change. The Committee recognised the importance of culture
to support organisational success and concluded that the
steps being taken were appropriate.
Purpose and business model, pages 12-13
Cyber security and business continuity
Cyber security remains a key priority. The Chief Information
Security Officer provided an update to the Committee
regarding the integration of cyber controls across the Group,
particularly in light of the elevated threat associated with
opportunistic cyber attacks following the move to working
from home. The Committee also reviewed logical access
management controls and the Group’s approach to data
classification and retention periods. The Committee noted
that the Group’s revised governance structure sought
to identify continuous improvements to security controls,
through both the Cyber Security and Data Governance
Forums, each chaired by the Chief Information Officer.
Processes are in place to deal with malware and
ransomware threats; these are kept under constant
review as threats evolve. The Committee concluded that
this would continue to be a risk and that the controls in
place needed to be monitored closely.
Data protection and ethics
Data protection continues to be an area of focus. The Committee
discussed a review of resource and controls within the data
protection and governance functions. This included discussion
around the 'right to be forgotten' and the Group’s approach to
retention of data. The conclusion was that the business was
76
GovernanceSaga plc Annual Report and Accounts 2021 Directors’ Remuneration Report
Annual Statement
CONTENTS
Annual Statement
Annual Report on Remuneration
Single total figure of remuneration
Annual bonus outcomes
Scheme interests awarded
Directors’ shareholdings
Summary of the Remuneration Policy
and its implementation in 2021/22
Wider workforce pay policies
Shareholder voting at the Annual
General Meeting (AGM)
Directors’ Remuneration Policy
Pages 77-80
Pages 81-94
Page 81
Page 82-84
Page 85
Pages 85-86
Pages 87-89
Page 90-93
Page 94
Pages 95-110
GENERAL INFORMATION
The Committee's remit
The Committee’s main purpose is to assist the Board in
discharging its responsibilities for:
– determining the Remuneration Policy for the
Executive Directors;
– setting remuneration for the Chairman and
Non-Executive Directors;
– recommending and monitoring the level and structure of
remuneration for senior management;
– governing all share schemes; and
– reviewing any major changes in colleague compensation
and benefit structures throughout the Company or Group.
The Remuneration Committee's terms of reference were
approved by the Board on 4 September 2020 and are
available on our website (www.corporate.saga.co.uk/
about-us/governance). These are reviewed and updated as
required, annually.
What we did during the year
Time spent on matters
Remuneration Policy
Regulatory
c.10%
developments
c.15%
Senior management
remuneration
Share schemes
Colleague
compensation and
benefits structure
c.25%
c.30%
c.20%
EVA EISENSCHIMMEL
Chair, Remuneration Committee
DEAR SHAREHOLDER,
On behalf of the Remuneration Committee, I am pleased
to present the Directors’ Remuneration report for the year
ended 31 January 2021.
As described in our Strategic Report, this has been
an extraordinary year for Saga and global society as
a whole. The Company has embraced a huge amount
of transformation with pace and precision, despite the
pressures caused by the COVID-19 pandemic. Our Leadership
Team have made significant strides in creating a more
robust, innovative and lower-cost business that is focused
tightly on the customer, leveraging digital technology far more
broadly than before, and has moved into 2021 with confidence.
During these challenging times, morale has improved,
as we’ve enhanced colleague engagement through our
purpose and step-changed communication and approach
to wellbeing. Customer retention is growing. Our Insurance
business has performed robustly and has prepared well for
compliance with the requirements of the FCA market study;
the team has also designed several new products, to be
launched in the autumn. Our Personal Finance business has
performed well, exceeding plans for the year with our new
savings product.
Committee composition and attendance
Member
since
Eva Eisenschimmel (Chair) 04/04/19
04/04/19
Julie Hopes
Ray King1
29/05/14
29/05/14
Orna NiChionna
Gareth Williams2
29/05/14
Max.
possible
meetings Attendance
13
11
7
12
12
13
13
7
13
12
1 Ray King retired on 22 June 2020
2 Gareth Williams retired on 31 December 2020
COMMITTEE EVALUATION
An evaluation of the Committee’s effectiveness took
place during the year as part of the Board effectiveness
review (for details, see page 61). The review indicated
that the Committee was chaired well, was focused on
the key issues and had covered an extensive amount
of work during the year, with healthy discussion and an
appropriate level of challenge. The evaluation concluded
that the shareholder consultation was handled well.
In future, there will be a focus on the actions being taken
to address the gender pay gap and develop the alignment
between Environmental, Social and Governance (ESG) and
executive remuneration.
77
Saga plc Annual Report and Accounts 2021Governance
Directors’ Remuneration Report
Annual Statement continued
We all recognise the disruption that the pandemic caused
our business in 2020, particularly in Travel where, as a result
of restrictions, our cruise ships were forced to remain docked
for most of the year. However, our Cruise business is planning
to sail as soon as government restrictions are lifted, having
adapted to COVID-19 conditions, being the only company
awarded the Shield+ accreditation from Lloyd's Register, and
only accepting passengers who have been fully vaccinated.
Our Tour Operations business has been redesigned to be truly
distinctive for our target customers and is ready for relaunch.
s172 Against this backdrop, the Committee has carefully
considered how it should operate executive remuneration
arrangements for 2020/21 in the context of business
performance, shareholders’ experience and the experience of
other stakeholders including the wider colleague population.
In developing the proposed approach, the Committee has
considered the following:
– Shareholder and proxy publications and communications
regarding the approach to executive remuneration in the
current environment. We are fully aware of the need to manage
executive remuneration sensitively in the context of the global
pandemic which has resulted in greater reputational and
business risks associated with remuneration decisions.
– Saga’s decision not to take government support in the form of
the Coronavirus Job Retention Scheme (CJRS) or government
loans. In our view, this is the primary consideration
relating to the operation of executive remuneration, and
we acknowledge that businesses which took this support
would not be expected, for example, to award cash bonuses.
– The nature of the capital raising during the year, specifically
that this was primarily via a firm placing from a single
investor, and that this investor has also joined the Board as
Non-Executive Chairman. In our view this makes the capital
raising event substantially different from others, where some
investors and proxies have indicated that the payment of
bonuses, for example, may not be appropriate.
Importantly in this consideration, the new Non-Executive
Chairman has been consulted regarding the proposed
approach to remuneration and is fully supportive.
– The largely new Leadership Team, under Euan Sutherland,
who joined Saga at what was already an incredibly
challenging time, have worked tirelessly to begin the
process of rebuilding our business in order to realise the
potential which we believe exists in the Saga brand and
business model.
Company performance for the 2020/21
financial year
The implementation of our strategy (as outlined on pages
14-15) has been measured against the key performance
indicators (KPIs) set out below:
– Underlying Profit Before Tax (PBT) decreased by 84.4%
to £17.1m.
– Underlying Earnings Per Share was 13.2p.
– Declared dividend per share (pence) was nil.
– As a result of the cash injections to the Travel business in
the last 12 months, available operating cash flow reduced
from £92.7m in the prior year to £3.4m in the current year.
– Excluding the impact of debt and earnings relating to the
new ocean cruise ships, the Group’s leverage ratio was 2.7x.
– Customer net promoter score of 44.
– Colleague engagement was 7.3 out of 10.
78
Changes to the Board
On 5 January 2021 we announced the departure, for personal
reasons, of Cheryl Agius, our Chief Executive Officer (CEO)
of Insurance. Given the relatively short period since her
appointment to the position, we carefully considered the
most appropriate approach to the treatment of her
remuneration arrangements. Full details of the approach
taken are set out in the section 430 (2B) announcement
available on our corporate website (www.corporate.saga.co.uk/
about-us/governance), and are repeated on page 87.
On 5 October 2020, Roger De Haan joined the Board as Non-
Executive Chairman as part of the successful capital raising
event. Roger De Haan has waived his annual Chairman’s fee
of £200,000. Patrick O’Sullivan stepped down as Chairman
on 5 October 2020 having served in that role since February
2018 and the Board thanks Patrick for his commitment
and service.
On 31 December 2020, Gareth Williams stepped down from the
Saga Board. Gareth served as a Non-Executive Director since
September 2014 and was my predecessor as Remuneration
Committee Chair. I would personally like to thank Gareth for
his invaluable service, both prior to my joining the Board and
for the support he has given me as part of the Remuneration
Committee Chair handover process. On 22 June 2020, Ray
King stepped down as Non-Executive Director having been
with Saga for six years. Again I would like to thank Ray for his
contribution as part of the Remuneration Committee.
2020 Remuneration Policy review
Whilst, under the normal three-year Remuneration Policy cycle,
shareholder approval for a binding policy would have been
sought at the 2021 AGM, the Committee consulted with
shareholders and presented a new policy at the AGM held
in June 2020.
The key reasons for the change were:
– to support the implementation of the new strategy
previously communicated;
– to align the interests of the new team of Executive
Directors with shareholders as soon as possible;
– a drive to simplify our remuneration;
– a desire to incentivise the creation of long-term
shareholder returns through sustainable long-term
performance; and
– to address the historical challenge the Company had
experienced in determining the right performance conditions
and targets for its long-term incentive arrangements, as
demonstrated by the number of consultations held with
shareholders since the Company's listing and the wide
range of shareholder views on the issue.
Director’s Remuneration Policy, pages 95-110
GovernanceSaga plc Annual Report and Accounts 2021 Salary increases for 2020/21
Euan Sutherland's salary remained unchanged for the
financial year 2020/21.
Having delayed the increase proposed last year, James
Quin's salary was increased from £370,000 to £430,000.
We previously indicated that his salary would rise over
time to a more market competitive level. In the two years
that he has been with us, he has delivered an extremely
strong performance and is seen by all stakeholders as
a sophisticated and highly skilled plc CFO. Whilst we faced
a challenging environment in which to implement this
change, the Committee agreed that we would honour
this promise to James and award the salary increase.
2020/21 bonus
In April 2020, when targets were being set as illustrated
above, it was already clear that this would not be a normal
year. The Committee took this into account when setting the
annual bonus measures, targets and weightings and this was
done in order to incentivise our management team to focus
on the few, critical activities required in the short term.
We set out the four criteria which would be used to measure
the performance of our Executive Directors (as well as all
managers and leaders) in the 2020 Notice of AGM.
The specific targets set are shown on pages 83-84, together
with the degree of achievement of each. The team have
delivered strongly on all of these, despite the huge difficulty
posed by our Travel business being suspended for 10 months
of the year. Noting that government support was not sought
or used, and the successful completion of the capital raise,
the whole team is rightly proud of its achievements. As a result,
the Committee supports a bonus payout for this financial year.
Page 82 sets out the calculation for the 2020/21 bonus
which paid out at between 71% and 86% of maximum for
the Executive Directors. The bonus for Cheryl Agius reflects
the portion of the year worked before she resigned from the
Board on 5 January 2021: £326,260.
Euan Sutherland will receive a bonus of £872,830.
James Quin will receive a bonus of £459,318.
All bonus awards are paid one-third in deferred shares and
two-thirds in cash.
Open Offer and share consolidation
s172 As described earlier in the Strategic Report, the
Company completed a successful capital raising event and
adjustments were made to existing share schemes to ensure
that participants neither benefited, nor lost out, as a result.
The adjustments to share schemes are set out on page 86.
The key elements can be summarised as follows:
Restricted Share Plan (RSP)
– Removal of the long-term incentive plan (LTIP), replaced
with an RSP.
– Three-year vesting period for shares and two-year
holding period.
– Underpin for the Committee to adjust vesting if business
performance, individual performance or wider Company
considerations mean, in its view, that an adjustment
is required.
– Reduction in the maximum award for the Group CEO from
200% of salary (other Executive Directors 150% of
salary) under the LTIP to:
– Initial 2020 RSP award of:
– 70% of salary for the Group CEO;
– 65% of salary for the Group Chief Financial Officer
(CFO); and
– 56% of salary for the CEO of Insurance.
– Ongoing RSP award of a maximum of:
– 100% of salary for the Group CEO; and
– 85% of salary for the Group CFO.
– The Committee was conscious of the volatility and low share
price of the Company, due to the impact of the COVID-19
pandemic on its Cruise and Tour Operations businesses,
amongst other factors, and in order to protect all
stakeholders reduced the 2020 RSP award levels as above.
– The Committee will review each year the size of the award
under the RSP within the maximums set out above, taking
into account the considerations outlined.
– The Committee retains discretion to adjust the number
of RSP awards, and the factors it will consider in doing
so are set out on page 99.
– The Committee will review the share price performance
at the end of the vesting period to determine whether
there are any inappropriate windfall gains.
Other changes to the Policy
Changes were made to bring the Remuneration Policy into
line with the UK Corporate Governance Code 2018 (the
'Code') and best practice:
– Alignment on Company pension contributions for new
and incumbent Executive Directors with the majority
of colleagues at 6% of salary (currently).
– Introduced post-cessation of employment shareholding
requirement for the full in-employment requirement
(250% of salary for the Group CEO, 200% of salary
for other Executive Directors) to apply for two years
following cessation.
– Reduced the target level of bonus to 50% of the
maximum bonus opportunity.
The Committee did not propose any changes to the structure
of the annual bonus; however the following performance
conditions and weightings were agreed after the start of the
COVID-19 pandemic, as these best aligned with the strategy
and current position of the Company:
– 25% balance sheet protection (covenant compliance).
– 15% cost efficiency (admin costs).
– 30% Insurance business delivery (EBITDA, cash, retention).
– 30% operational and strategic objectives (personal
objectives).
79
Saga plc Annual Report and Accounts 2021Governance Shareholder consultation and looking ahead
Following the extensive consultation last year, ahead of the
adoption of our Policy, which I'm delighted to say received
very strong (97.98%) support, we have largely been focused
on implementing this policy as anticipated, whilst taking into
account all of the extraordinary circumstances associated
with the global pandemic on our business.
At the time of publication of this report, on behalf of the
Committee I intend to engage in a consultation with our major
shareholders with a view to providing additional context and
insights regarding the remuneration implementation decisions
which are set out in this letter and in the rest of the
Remuneration Report.
The Committee is aware of the increasing importance
attached to the use of ESG to inform executive remuneration.
At present, the Committee considers this as part of its holistic
assessment of performance and related remuneration
decisions and expects to consider this in more detail
going forwards ensuring alignment with our core strategy.
Conclusion
I hope you find the information contained in this report
helpful, thoughtful and clear.
I welcome any feedback from the Company’s shareholders, and
you can contact me at any time at eva.eisenschimmel@saga.co.uk
if you have any questions or comments on this report. I look
forward to receiving your views.
EVA EISENSCHIMMEL
Chair, Remuneration Committee
Directors’ Remuneration Report
Annual Statement continued
s172 What we achieved during the year – matters
discussed, decisions made and actions taken
– Approved the business and personal objectives for
2020/21. The Committee considered the societal and
business disruption caused by the COVID-19 pandemic
when setting the performance expectations for 2020/21
against the medium-term business strategy. Details of the
personal objectives for the Executive Directors are on
pages 83-84.
– Made grants in June 2020 under the RSP for the Executive
Committee and senior management of the Company.
Grant levels were reduced for 2020 to reflect the volatility
and low share price of the Company at the time of the
award, due to the impact of COVID-19 on our Cruise and
Tour Operations businesses, amongst other factors.
– Recommended that the Board approve the award of Free
Shares to all eligible colleagues in November 2020.
– Approved adjustments to share incentives as a result
of the Open Offer and share consolidation.
– Reviewed the governance and processes of the three Saga
Share Plans in operation and confirmed that they met the
necessary standards and were well communicated.
– Agreed that Non-Executive Director fees would remain
at their current level.
– Reviewed a risk evaluation for the subsidiary regulated
businesses (Saga Personal Finance Limited, SSL and
AICL) and considered whether they highlighted any
material adverse activities, decisions or outcomes that
should impact subsidiary or Group bonus calculations.
We concluded that these evaluations were robust and full
consideration was given to individual bonus outcomes.
– Strengthened risk management ethos through the design
and delivery of objectives and reviews.
– Reviewed and approved the bonus outcomes for Executive
Directors for 2020/21 as detailed above.
– Discussed how the Committee would review wider
workforce pay and ensure alignment of incentives
throughout the Company with its culture and
strategy and reviewed terms of reference for the
People Committee.
– Approved remuneration for outgoing and new Directors.
Wider workforce considerations
In making decisions on executive pay, the Committee
considers wider workforce remuneration and conditions
as outlined on page 90. We continue to be as focused on
our colleagues as we are on our customers and we are proud
of the reward, benefits and overall career packages that we
offer our colleagues. We continue to engage with colleagues
through our People Committee on executive reward matters.
Details of our People Committee can be found on pages 18-20.
As part of our commitment to fairness, this report contains
details of the pay and conditions of our wider workforce,
the cascade of incentives throughout our business and
our Group CEO to colleague pay ratio. Details of Saga’s
gender pay report can be found on our corporate website
(www.saga.co.uk/gender-pay-review).
80
GovernanceSaga plc Annual Report and Accounts 2021 Annual Report on Remuneration
ACTUAL PERFORMANCE AND REMUNERATION OUTCOMES FOR 2020/21
Single total figure of remuneration for Executive Directors for the 2020/21 financial year (audited)
The table below sets out the single total figure of remuneration and breakdown for each Director in respect of the 2020/21
financial year. Comparative figures for the 2019/20 financial year have also been provided. Figures provided have been
calculated in accordance with Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 as amended in 2013.
58,079
659,226
Total
Bonus
Other
fixed
£
£
£
– 1,245,641 872,830
–
58,456
459,318
–
– 432,505 308,980
326,260
24,532
–
–
–
–
–
58,456
Single
Total
LTIP3
figure
variable
£
£
£
– 872,830 2,118,471
–
116,535
– 459,318 1,118,544
– 308,980
741,485
– 326,260 1,013,125
57,711
–
–
0
–
–
24,532
0
–
338,795 11,092 20,328 204,400 112,2504 686,865
33,179
0
–
30,417
0
–
1,825
–
–
Taxable
benefits
£
–
–
–
–
–
–
–
–
–
–
–
–
Period
3,231
1,002
–
–
–
Salary
£
Pension
£
937
–
–
73,672
63,672
2020/21
2019/20
220,417
2020/21
2019/20 325,000
RSP2
£
Euan Sutherland 2020/21 700,000 13,641 42,000 490,000
2019/20
53,846
(Group CEO)
–
2020/21
374,583 13,035 31,108 240,500
James Quin
2019/20 370,000 25,505 37,000
(Group CFO)
–
Cheryl Agius1
2020/21
(CEO of Insurance)2019/20
2020/21
Roger De Haan
2019/20
(Non-Executive
Chairman)
Patrick
O'Sullivan5
(Chairman)
Eva
Eienschimmel6
(Non-Executive
Director,
Remuneration
Committee Chair)
Julie Hopes7
(Non-Executive
Director, Risk
Committee
Chair)
Gareth Hoskin8
(Non-Executive
Director, Audit
Committee
Chair)
Ray King9
(Non-Executive
Director)
Orna NiChionna10 2020/21
2019/20
(Senior
Independent
Non-Executive
Director,
Nomination
Committee Chair)
Gareth Williams11 2020/21
2019/20
(Non-Executive
Director)
2020/21
178,216
2019/20 125,788
2020/21
2019/20
2020/21
2019/20
102,710
93,672
133,447
84,896
58,366
73,672
29,091
73,672
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
220,417
– 325,000
–
–
–
–
–
–
–
–
73,672
63,672
178,216
125,788
133,447
84,896
29,091
73,672
– 102,710
93,672
–
–
–
58,366
73,672
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
220,417
–
– 325,000
–
–
–
–
–
–
–
–
–
–
–
–
73,672
63,672
178,216
125,788
133,447
84,896
29,091
73,672
102,710
93,672
58,366
73,672
Notes:
1 Cheryl Agius’ single total figure for 2020/21 is for the period up to 5 January 2021 when she stepped down from the Board
2 The face value on grant of the RSP awards is shown in the table above as there are no performance conditions other than underpins tested on vesting
3 None of the Executive Directors had an LTIP award which was eligible to vest in the year
4 Payment in respect of buyout award as disclosed in last year’s report
5 Patrick O’Sullivan resigned as Chairman on 5 October 2020 and was Nomination Committee Chair up to this date
6 Eva Eisenschimmel replaced Gareth Williams as Remuneration Committee Chair on 1 February 2020
7 Julie Hopes became Chair of the Saga Personal Finance Board on 1 February 2020 and is also Chair of SSL. She was appointed Risk Committee Chair on 31 December
2020
8 Gareth Hoskin was appointed on 11 March 2019 and is also Chair of AICL
9 Ray King retired on 22 June 2020 and was Chair of the Audit Committee until this date
10 Orna NiChionna’s responsibilities as Senior Independent Director increased on 5 October 2020. She became Nomination Committee Chair with effect from the
same date. Orna stood down as Risk Committee Chair on 31 December 2020 when Julie Hopes assumed this position
11 Gareth Williams retired on 31 December 2020
81
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Annual Report on Remuneration continued
How we have performed in 2020/21
Bonus (audited in conjunction with details on page 161)
The details of the performance conditions and outcomes against the targets for the annual bonus in respect of the 2020/21
financial year are shown in the table below:
Weighting
(based on
100%
max)
Threshold
performance
required
50% Target
performance
required
Maximum
performance
required
Actual
performance
25%
4.75x
4.56x
4.25x
4.15x
15% £165.0m £157.5m £145.0m £157.5m
10% £108.0m £115.5m £128.0m £144.0m
10% £94.0m £101.5m £114.0m £101.4m
10%
77.0%
78.5%
81.0%
80.5%
30%
100%
Performance
condition
Covenant
compliance
Admin costs
Insurance/
other EBITDA2
Insurance/
other cash
SSL retention
Personal
objectives
Total
Total
Calculated (£)
Total Payable
(£)
Annual
bonus value
for threshold
and
maximum
performance
(% of max)
20%
100%
20%
100%
20%
100%
20%
100%
20%
100%
0%
100%
Actual annual bonus value achieved
(% of salary)3
Percentage
of maximum
performance
achieved
Euan
Sutherland
James
Quin
Cheryl
Agius1
100%
37.5%
31.3%
29.1%
50%
11.3%
9.4%
8.7%
100%
15.0%
12.5%
11.6%
50%
7.4%
6.2%
5.8%
90%
13.5%
11.3%
10.5%
40%
37.5%
124.7% 108.1%
23.6%
89.4%
£872,830 £459,318 £326,260
£872,830 £459,318 £326,260
Notes:
1 The bonus for Cheryl Agius was pro-rated for the period up to 5 January 2021 when she stepped down from the Board and ceased to be a Director
2
3 The annual bonus percentage achieved for each Executive Director is based on their maximum bonus potential and shown as a percentage of annual salary
'Other' relates to Saga Personal Finance, MetroMail and Publishing
82
GovernanceSaga plc Annual Report and Accounts 2021 Individual performance assessment
s172 The Remuneration Committee assessed Executive Directors on their individual performance in the year against three
key areas: people, growth and customers (financial resilience and risk management has been used as an alternative to
customers for the CFO) with a focus on risk for each element. This underpins the leadership responsibility to create a risk-
aware and responsible culture, ensuring a robust risk framework was embedded across the Group.
Details of the individual’s achievements are set out in the table below, which is supported in the Chairman's introduction to
governance on pages 50-51.
Committee assessment and basis of achievement for 2020/21
Objectives overview
Euan Sutherland – Maximum: 30% of overall bonus. Achievement: 27% of overall bonus.
People
– Strategy, purpose
– Over 80% of colleagues tell us they are aware of the Saga strategy, purpose, brand and values
and values.
and that they feel able to speak up and feel heard.
– Increase employee
– Strong colleague engagement across Saga: 92% participation in most recent colleague
engagement.
engagement survey, scoring 7.3 out of 10, +0.3 higher than in September 2020.
– Focus on wellbeing
and mental health.
Growth
– Oversee completion
of Cruise
transformation
programme.
– Transform digital
and data capability.
– Insurance retention,
new business and
profitability.
Customers
– Oversee expansion
of consumer
research
programme and
leverage insights to
improve customer
experience.
– Continued focus on colleague wellbeing. Extensive mental wellbeing support for colleagues
through our #Sagamindsmatter initiative.
– Delivery of Spirit of Adventure in September 2020, completing our Cruise transformation programme.
– Strong Cruise bookings of £154m combined for 2021/22 and 2022/23, in comparison with £128m
at the same point last year.
– First cruise operator awarded Lloyd's Register Shield+ COVID-19 safety accreditation.
– Reset Tour Operations, focusing on a smaller, higher quality, differentiated offering.
– Launched a digital version of the Saga magazine, achieving an Apple App Store rating of 4.7
(out of 5.0).
– Commenced the process of migrating customer data from many legacy platforms to a new,
modern data architecture.
– Implemented Radar Live which provides increased data capacity and faster, more efficient
pricing capability.
– Increased customer retention across motor and home by 5ppts to 80%.
– Continued differentiation with 610,000 three-year fixed-price policies sold in Insurance and
implementation of enhanced travel insurance to include COVID-19 cover.
– 59% of new business acquired directly, 2ppts ahead of prior year.
– Growth in motor and home policies of 1.1%.
– Motor and home underlying gross margins of £74 per policy, in line with guidance.
– Increased the volume and frequency of research to monitor customer needs, attitudes and
insights during the COVID-19 period.
– Launched our digital self-serve portal, enabling customers to make common policy amendments online.
– Launched a series of improvements to the Saga customer app, including web chat functionality.
– Increased customer net promoter score (NPS) at 44.
83
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Annual Report on Remuneration continued
Individual performance assessment (continued)
Committee assessment and basis of achievement for 2020/21
Objectives overview
James Quin – Maximum: 30% of overall bonus. Achievement: 30% of overall bonus.
People
– Strategy, purpose
– Achievement assessed in line with Group CEO:
and values.
– Increase employee
engagement.
– Focus on wellbeing
and mental health.
Growth
– Support completion
of Cruise
transformation
programme.
– 80%+ colleagues are aware of the strategy, purpose, brand and values.
– 92% participation in recent survey with 7.3 out of 10 scored.
– Continued focus on wellbeing through our #Sagamindsmatter initiative.
– Supported the delivery of Spirit of Adventure in September 2020, completing our Cruise
transformation programme.
– Supported and constructively challenged the Insurance Team to reset strategy in the first half of
the year, with fixing phase largely completed in the second half.
– Support
– Identified significant operational savings to mitigate COVID-19 impacts, without compromising
development of
Insurance strategy.
– Identify and deliver
cost reductions.
Financial resilience
and risk management
– Successfully deliver
equity raise.
– Ensure robust
finances in
response to the
challenges of the
pandemic.
good customer outcomes. On track to achieve £20m of run rate cost savings over time.
Displayed disciplined cost control during the period of Travel suspension with burn costs at the
lower end of the £6-8m per month guidance.
– Successfully raised c.£140m equity capital, allowing repayment of the revolving credit facility (RCF)
and part of the term loan.
– Completed disposals of Healthcare, Destinology and Bennetts, generating c.£31m of proceeds.
– Leverage ratio (excl. Cruise) of 2.7x, well within the covenant of 4.75x.
– Worked closely with lenders in order to manage the existing bank covenants, allowing flexibility
through the ongoing disruption arising from COVID-19.
– Further cruise debt deferral and covenant waiver agreed until 31 March 2022 (in addition to existing
deferral covering the period to 31 March 2021).
Cheryl Agius – Maximum: 30% of overall bonus. Achievement: 20.4% of overall bonus
People
– Strategy, purpose
– Achievement assessed in line with Group CEO:
– 80%+ colleagues are aware of the strategy, purpose, brand and values.
– 92% participation in recent survey with 7.3 out of 10 scored.
– Continued focus on wellbeing through our #Sagamindsmatter initiative.
– Continued differentiation with 610,000 three-year fixed-price policies sold and implementation of
enhanced travel insurance to include COVID-19 cover.
– 59% of new business acquired directly, 2ppts ahead of prior year.
– Growth in motor and home policies of 1.1%.
– Motor and home underlying gross margins of £74 per policy, in line with guidance.
– Migrated our home product to the Guidewire platform.
– Delivered a ‘Customer First’ service capability plan which has digital capabilities and multi-skilled
agents aligning to single view and broader reach across products.
– Launched our new motor price-comparison website proposition, providing customers with greater
flexibility.
– Built initial core foundations for pricing and data in AICL both in terms of capability, sources of
data and technology.
– Built investor confidence that met the external market changes; regulatory red, amber, green
(RAG) rating lowered, reset the home proposition in the short-term and medium-term by delivering
Guidewire implementation and end-to-end customer experience.
– Increased Insurance NPS of 43.
and values.
– Increase employee
engagement.
– Focus on wellbeing
and mental health.
Growth
– Insurance retention,
new business and
profitability.
– Successfully
implement digital
migration.
Customers
– Leverage customer
insights to improve
customer
experience.
84
GovernanceSaga plc Annual Report and Accounts 2021 Long-term incentives (audited)
Basis on which
award made
Award type
2019 LTIP Annual
Name
Euan
Sutherland
Face value
of award
(% of
salary)
100%1
Shares
awarded
99,1132
Percentage of
award vesting
at threshold
performance
25%
Maximum
percentage
of face value
that could
vest (%)
100%
2020 RSP Annual
2019 LTIP Annual
70%
200%3
198,8312
121,5662
25%
100%
2020 RSP Annual
65%
97,5892
James
Quin
Notes:
Performance conditions
– Organisational and
strategic measures: 50%
– Comparative total
shareholder return (TSR):
25%
– Return on Capital
Employed (ROCE): 25%
No performance conditions
– Organisational and
strategic measures: 50%
Comparative TSR: 25%
– ROCE: 25%
No performance conditions
1 100% LTIP agreed on recruitment on the same terms as the 2019 LTIP scheme; the award was officially made on 6 January 2020
2 Post consolidation number of shares
3 As part of James Quin’s recruitment it was agreed he would be awarded a 200% one-off award. Following this, his LTIP returned to 150% in line with the
Remuneration Policy
Directors’ share interests (audited)
The following table and chart set out the equity interests held by the Executive and Non-Executive Directors:
Unvested nil-cost options held
Shares
counting
towards
share-
holder
require-
ments4
Current
share-
holding
(% salary)
Beneficially
owned
LTIP
nil-cost
options
subject to
perform-
ance
conditions
RSP
nil-cost
options
not
subject to
perform-
ance
conditions
Deferred
bonus
nil-cost
options
subject to
perform-
ance
conditions
Vested
but un-
exercised
nil-cost
options
held
Unvested
SIP
shares not
subject to
perform-
ance
conditions
Share-
holding
require-
ment
met?
Other
awards
Share-
holding
require-
ment
(% salary)1
Director
Executive Directors
Euan
Sutherland
James Quin
Cheryl Agius2
Non-Executive
Directors3
Roger De Haan
Eva
Eisenschimmel
Julie Hopes
Gareth Hoskin
Orna NiChionna
250%
200%
200%
48% 135,223
49% 84,906
37% 55,386
26,339
14,825
9,894
99,113
121,566
–
198,831
97,589
82,941
6,407
34,436
–
–
2,689 34,171
–
–
–
–
–
–
–
–
–
–
– 36,855,555
–
–
–
–
4,288
4,419
14,018
3,027
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
108
108
108
–
–
–
–
–
No
No
No
n/a
n/a
n/a
n/a
n/a
Notes:
1 Shareholding requirements are those that were in existence throughout the course of the year and as at 31 January 2021
2 Cheryl Agius resigned on 5 January 2021
3 Values not calculated for Non-Executive Directors as they are not subject to shareholding requirements
4 The number of shares counting towards the shareholding requirement is calculated by summing beneficially owned shares with unvested nil-cost options which are
not subject to performance conditions on a net of tax basis as well as any vested but unexercised options on a net of tax basis
85
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Annual Report on Remuneration continued
Directors’ share interests (audited) (continued)
Executive Directors are required to build up their shareholdings over a reasonable amount of time, which would normally be
five years, and then subsequently hold a shareholding equivalent to a percentage of base salary. The number of shares in
which current Directors had a beneficial interest, and details of long-term incentive interests as at 31 January 2021 are set
out below:
Euan Sutherland
(% of salary)
Shareholding
requirement
709,076 shares
Current shareholding
(as per table on page 85)
135,223 shares
Value of/gain on interests over shares
(i.e. unvested awards subject to
performance conditions)
52,530 shares
James Quin
(% of salary)
Shareholding
requirement
348,460 shares
0%
50%
100%
150%
200%
250%
300%
Current shareholding
(as per table on page 85)
84,906 shares
Value of/gain on interests over shares
(i.e. unvested awards subject to
performance conditions)
64,430 shares
0%
50%
100%
150%
200%
250%
300%
Notes:
The mid-market quoted share price of 246.8p as at 31 January 2021 has been used for the purpose of calculating the current shareholding (i.e. value of beneficially
owned shares and value of/gain on interests over shares) as a percentage of salary
Unvested LTIP shares and options do not count towards satisfaction of the shareholding guidelines
Open Offer and share consolidation
The Committee adjusted the number of nil-cost options under in-flight share schemes to take account of the Placing and
Open Offer and share consolidation which completed in October 2020.
The adjustments were made uniformly for all colleagues who were recipients of nil-cost options and were made so that
participants would neither benefit, nor lose out, as a result of these events.
The calculation for the adjustment is set out below and uses the following parameters:
– Closing price on day prior to the ex-entitlement date: £0.16
– Offer price: £0.12
– Open Offer entitlement: five new shares for nine existing shares
Theoretical ex-entitlement price (T) = ((ex-entitlement price x existing shares) + (offer price x new shares)) / (new shares
+ old shares)
T = ((£0.16 x 9) + (£0.12 x 5)) / 14
T = £0.1457
The number of nil-cost options was adjusted by the ratio between the ex-entitlement price and the theoretical price:
Adjustment factor for number of options = £0.16 / £0.1457 = 1.0980 (i.e. multiply current number of options by 1.0980).
The adjustment factor for the share consolidation is determined simply by reducing the number of nil-cost options (after the
Open Offer) by a factor of 15.
Pension entitlements
Pension contributions for all Executive Directors are aligned with that of the majority of colleagues (6%). In September 2020
the pension contribution for James Quin reduced from 10% to 6% to align with colleagues.
86
GovernanceSaga plc Annual Report and Accounts 2021 Payments to past Directors / payments for loss of office (audited)
On 5 January 2021, we announced that Cheryl Agius would be stepping down from the Board of Directors as the CEO
of Insurance due to personal reasons. The Committee determined that she will be treated as a good leaver under the
Remuneration Policy approved by shareholders at the AGM on 22 June 2020. The full details of the remuneration
arrangements are outlined below:
– Cheryl stepped down on 5 January 2021 and will remain a colleague and be on garden leave, receiving salary, benefits and
her pension allowance until cessation of employment on 5 January 2022 (the 'Termination Date').
– Her annual bonus in respect of 2020/21 will be pro-rated to reflect the time worked during the year. The bonus will be paid in
the form of cash and deferred in shares as set out on page 82.
– Awards made to Cheryl under the Deferred Bonus Plan (DBP) on 28 May 2020 will vest at the normal vesting date and remain
subject to the plan rules, including malus and clawback provisions. Awards will be exercisable for six months after vesting.
– Awards made to Cheryl under the Saga plc 2020 RSP granted on 24 June 2020 will be pro-rated to reflect the period from
award date to the Termination Date and vest at the normal vesting date subject to the plan rules, including malus and
clawback provisions. Awards will be exercisable for six months after vesting.
– Cheryl received buyout awards in respect of long-term incentives forfeited from her previous employer. These awards which
were granted on 1 June 2020 will be pro-rated to reflect the period from the award date to the Termination Date and vest at
their normal vesting dates subject to the terms of the buyout agreement, including malus and clawback provisions.
Awards will be exercisable until the later of six months after vesting or six months after cessation. Full details of these awards
can be found in the 2020 Annual Remuneration Report.
– Cheryl will not be eligible to receive an annual bonus in respect of 2021/22.
– No further RSP awards will be granted to Cheryl.
– Cheryl is required to retain 200% of her salary or (if lower) her final shareholding in shares for a period of two years from the
Termination Date i.e. until 5 January 2024.
Patrick O’Sullivan ceased to be Chairman on 5 October 2020 and received no payments for loss of office.
Fees retained for external non-executive directorships
Executive Directors may hold positions in other companies as Non-Executive Directors and retain the fees. Euan Sutherland
is a Non-Executive Director of Britvic plc for which he receives a fee of £58,365 per annum. Neither James Quin nor Cheryl
Agius hold any external directorships.
IMPLEMENTATION OF THE POLICY IN 2021/22
The current Remuneration Policy was approved by shareholders at the Company’s AGM on 22 June 2020. The Remuneration
Policy is set out later in this report and can also be found on our website (www.corporate.saga.co.uk/about-us/governance) or
from the Group Company Secretary at Saga’s registered office.
Remuneration Policy
The graphic below illustrates the time horizons for each of the key elements of our Policy:
Key elements of the Policy and time horizon
Financial year
2021/22
2022/23
2023/24
2024/25
2025/26
Base salary
Benefits and pension
Annual bonus – cash
Annual bonus – deferred shares
RSP
Shareholding requirement
All colleague share plan
Chairman and Non-Executive Director fees
Key
Performance period:
Vesting period:
Holding period:
(Ongoing)
Details of each of these elements and their implementation are included in the table overleaf, which provides the following information:
– A summary of the key elements of the Remuneration Policy.
– The operation of the Policy in 2020/21 and its proposed operation in 2021/22.
87
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Annual Report on Remuneration continued
IMPLEMENTATION OF THE POLICY IN 2021/22 (CONTINUED)
Remuneration Policy element
Base salary
When determining an appropriate level
of salary, the Committee considers:
– pay increases to other colleagues;
– remuneration practices within
the Group;
– any change in scope, role and
responsibilities;
– the general performance of the
Group and each individual;
– the experience of the relevant
Director; and
– the economic environment.
Benefits
The Executive Directors receive family
private health cover, death in service
life assurance, a car allowance,
subsistence expenses and discounts
in line with other colleagues.
Pension
Maximum pension contributions
for Executive Directors are aligned
with those of the wider workforce
(6% of salary).
Bonus
The Remuneration Committee
will determine the maximum annual
participation in the Annual Bonus
Plan for each year, which will not
exceed 150% of salary.
Operation in 2020/21
Proposed operation in 2021/22
Executive Directors did not receive
any increase in base salary on
1 February 2020 (the increase
awarded to the broader all
colleague group was 1.5%).
The salaries for the Executive
Directors were:
– Euan Sutherland: £700,000
– James Quin: £370,000
– Cheryl Agius: £365,000
Euan Sutherland received a salary increase of 1.5%,
consistent with other Saga colleagues.
Having delayed the increase last year, James
Quin’s salary increased from £370,000 to
£430,000. We previously indicated that his salary
would rise over time to a more market competitive
level. In the two years that he has been with us,
he has demonstrated an extremely strong
performance and is seen by all stakeholders
as a sophisticated and highly skilled plc CFO.
Whilst we faced a challenging environment to
implement this change, the Committee agreed
that we would honour this promise to James
and award the salary increase.
As a result, the salaries for the Executive
Directors are:
– Euan Sutherland: £710,500
– James Quin: £430,000
Standard benefits.
No change.
No change.
Executive Directors received
the following:
– Euan Sutherland: 6% of salary
– James Quin: Reduced from 10%
to 6% of salary
– Cheryl Agius: 6% of salary
Maximum bonus opportunity:
– Euan Sutherland: 150% of salary
– James Quin: 125% of salary
– Cheryl Agius: 125% of salary
The maximum opportunities for Executive
Directors are unchanged and are as follows:
– Euan Sutherland: 150% of salary
– James Quin: 125% of salary
At least one third of the bonus will
be deferred into shares vesting after
three years.
Two-thirds of the total bonus to
be paid immediately in cash and
one-third deferred into shares for
three years.
Performance measures were:
– Covenant compliance: 25%
– Administrative costs: 15%
– Insurance/other EBITDA: 10%
– Insurance/other cash: 10%
– SSL retention: 10%
– Personal objectives: 30%
(See page 82 for full details on the
2020/21 targets.)
The current intention is to set performance
measures and weightings for the 2021/22
bonus as follows:
– Insurance PBT: 21%
– SSL retention: 14%
– 2021 Cruise load factor and per diem: 14%
– Net debt at January 2022: 21%
– Personal objectives: 30%
In relation to the Travel metrics, the Committee
will review the appropriateness of these metrics
in light of government announcements and
restrictions regarding the travel industry. If it
is not possible to operate these metrics due to
external factors, the annual bonus performance
measures will be adjusted accordingly.
The Committee is of the view that targets
for the 2021/22 annual bonus are currently
commercially sensitive and these targets will
be disclosed retrospectively in the 2022 Annual
Report on Remuneration.
88
GovernanceSaga plc Annual Report and Accounts 2021 Remuneration Policy element
RSP
Awards of nil-cost options are
granted annually up to a maximum
of 100% of salary.
RSP awards do not have any
performance conditions but are
subject to an underpin on vesting.
Awards vest after three years and are
subject to a further two-year holding
period, during which shares may not
be sold other than for tax.
Shareholding requirement
The Remuneration Committee sets
formal shareholding guidelines that
will encourage the Executive Directors
to build up over a five-year period,
and then subsequently hold,
a shareholding equivalent to
a percentage of salary.
All colleague share plan
The Company operates a HM Revenue
and Customs (HMRC) SIP.
Chairman and Non-Executive
Director fees
The fees for Non-Executive Directors
are set at broadly the median of the
comparator group. In general, the level
of fee increase for the Non-Executive
Directors will be set taking account of
any change in responsibility and will
take into account the general rise in
salaries across the UK workforce.
Operation in 2020/21
Proposed operation in 2021/22
The Committee assessed share price
performance since the 2020 RSP awards and
has determined that awards will be made at
the normal levels:
– Euan Sutherland: 100% of salary
– James Quin: 85% of salary
RSP awards were made in June
2020 shortly after approval of the
Policy. The Committee decided to
reduce award levels to reflect the
impact of the COVID-19 pandemic
on the share price:
– Euan Sutherland: 70% of salary
– James Quin: 65% of salary
– Cheryl Agius: 56% of salary
The Committee will review share
price performance on vesting to
determine whether any windfall
gains were made.
– Euan Sutherland: 250% of salary
– James Quin: 200% of salary
No change.
Saga continued to operate the SIP
for all colleagues in 2020, with a
Free Share award of £300 made in
November 2020 to all eligible
full-time colleagues.
Saga will continue to provide all colleagues
the opportunity to participate in colleague
equity arrangements.
Increases in Board fees were waived
this year, with the exception of our
Senior Independent Director fee
which was increased to £40,000.
No change to Non-Executive Directors or
Senior Independent Director fee. Roger De
Haan has waived his fee for 2021.
– Patrick O'Sullivan: £325,000
– Roger De Haan: £nil
– Board member fee: £63,672
– Committee Chair fee: £10,000
– Senior Independent Director
fee: £40,000
89
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Annual Report on Remuneration continued
GOVERNANCE OF REMUNERATION
Wider workforce
s172 In order for the Committee to review the wider workforce pay, policies and incentives, reports are regularly considered
at Remuneration Committee meetings, setting out key details of remuneration throughout the Company. Alongside its review
of the wider workforce remuneration, the Committee considers the approach applied to the Executive Directors and senior
management. In particular, the Committee is focused on ensuring the approach to the remuneration of the Executive
Directors and senior management is consistent with that applied to the wider workforce.
The table summarises some of the key workforce reward elements that are regularly discussed by the Committee:
Bonus
Other incentive schemes
Pay
National living wage
RSP
Winter payment
Free Shares and SIP
Pension
Bonus schemes contain both financial and personal triggers. A universal financial
scorecard is used for all colleagues at Saga, including Executive Directors. Malus and
clawback are in place for the colleagues in our Senior Leadership Team (SLT).
Incentive arrangements that are paid more frequently are also operated in our contact
centres. These incentive schemes are reviewed regularly to ensure best practice
and market alignment. The method of calculation and frequency of payment varies
depending on business area and product.
All colleagues received a performance-related increase ranging from 0.5% to 2.7%
of base pay.
Saga continues to be committed to paying 20p above national living wage for Saga
colleagues and 5p above for MetroMail colleagues with a view of aligning all colleagues
in 2021.
RSP awards are granted across senior leadership at Saga. Eligible colleagues received
an RSP grant in 2020, ranging from 20% to 50%.
All front line colleagues received a one-off winter payment of £120 in November 2020
after tax and National Insurance.
We want all colleagues at Saga to feel invested in the Company’s success, hence we gave
each full-time colleague £300 of Free Shares. We also continue to promote our SIP, which
enables colleagues to purchase shares through payroll.
Saga operates a Defined Benefit (DB) scheme and Defined Contribution (DC) scheme.
There were 1,264 colleagues in the DB scheme and 856 colleagues in the DC scheme as at
31 January 2021.
The Committee engages regularly with the People Committee, gaining regular feedback and also sharing executive
remuneration. Further details of the People Committee can be found on pages 18-20 of the annual report.
Competitive pay and cascades of incentives
Organisational level
Group CEO
Group CFO
Executive Leadership Team
Senior Leadership Team
Senior Management Team
Other bonused colleagues
Other non-bonused
colleagues
Number of
colleagues1
1
1
5
31
149
1,547
Range bonus
percentage
of salary
150%
125%
100%
40-80%
10-40%
2.5-7.5%
Maximum
proportion of
bonus payable in
cash
67%
67%
67%
100%
100%
100%
Minimum
proportion of
bonus deferrable in
shares
33%
33%
33%
0%2
0%
0%
Range of RSP
award
100%
85%
50%
20-40%
n/a
n/a
772
n/a
n/a
n/a
n/a
SIP
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Notes:
1 Colleagues as at 31 January 2021
2 Colleagues in the SLT within Insurance also receive one-third of their bonus in deferrable shares
90
GovernanceSaga plc Annual Report and Accounts 2021 Pay comparisons
CEO ratio
Our CEO to average colleague pay ratio for 2020/21 is 76:1. To give context to this ratio, we have set out below a chart
tracking the CEO to average colleague pay ratio since 2014/15 alongside Saga’s TSR performance since the Company
was listed. We also show this against the performance of the FTSE 250 during the same time span.
258:1
200
150
100
50
0
116:1
78:1
76:1
41:1
40:1
48:1
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Saga TSR
FTSE 250 TSR
CEO to average colleague pay ratio
The Remuneration Committee considers that the FTSE 250 is the appropriate index because the Company was a long-
standing member of this index since the Initial Public Offering (IPO) and has strong aspirations to re-join in the future.
This graph has been calculated in accordance with the Listing Regulations.
It should be noted that the Company listed on 23 May 2014 and therefore only has a listed share price for the period
of 23 May 2014 to 31 January 2021.
In summary, there has been significant volatility in Group CEO pay, and we believe that this is caused by the factors set out
below. Please note that pay for Lance Batchelor (former Group CEO) has been used for this calculation.
– Our Group CEO's pay is made up of a higher proportion of incentive pay than that of our colleagues, in line with the expectations
of our shareholders and accepted market practice for senior executive roles. This introduces a higher degree of variability in pay
each year which affects the ratio.
– The value of long-term incentives which measure performance over three years is disclosed in the year it vests, which
increases the Group CEO's pay in that year, again impacting the ratio for that year.
– Long-term incentives are provided in shares, and therefore an increase in share price over the three years magnifies the
impact of a long-term incentive award vesting in a year.
– We recognise that the ratio is driven by the different structure of the pay of our Group CEO versus that of our colleagues,
as well as the make-up of our workforce. This ratio varies between businesses even in the same sector. What is important
from our perspective is that this ratio is influenced only by the differences in structure, and not by divergence in fixed pay
between the Group CEO and wider workforce.
Where the structure of remuneration is similar, as for the Executive Leadership Team (ELT) and the Group CEO, the ratio is
much more stable over time.
91
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Annual Report on Remuneration continued
GOVERNANCE OF REMUNERATION (CONTINUED)
Colleague and Executive Committee ratios
The table below sets out the total remuneration delivered to the Group CEO using the methodology applied to the single total
figure of remuneration. The Remuneration Committee believes that the remuneration payable in its earlier years as a private
company to the Executive Chairman does not bear comparative value to that which has been and will be paid to the Group CEO,
and has therefore chosen only to disclose remuneration for the Group CEO:
Group Chief Executive Officer
Total single figure
Annual bonus payment level
achieved (percentage of
maximum opportunity)
LTIP vesting level achieved
(percentage of maximum
opportunity)
Ratio of CEO single total
remuneration figure to
all colleagues3,4
Ratio of single total
remuneration figure shown to
executive members
2015/16
£1,600,287
2016/17
2017/18
£2,490,617 £1,025,1461
2018/19
2019/20
£1,191,743 £1,062,887
2020/21
£2,118,471
78.6%
67.5%
0%
35.1%
33.6%
83.1%
n/a2
65.6%
26.0%
0%
0%
n/a2
25th
percentile
Median
75th
percentile
n/a
78:1
n/a
n/a
116:1
8:1
40:15
n/a
33:1
59:1
48.16
36.1
46:1
41:17
29:1
97:1
76:18
55:1
2:1
4:1
3:1
3:1
2:1
4:1
Notes:
1 For 2017/18 the final value of the 2015 LTIP award as at vesting date is shown and has been restated from the 2017/18 annual report. The share price at vesting date
of 30 June 2018 was 125.6p
2 No LTIP awards eligible to vest for the Group CEO in post in 2015/16 and 2020/21
3 For the colleague ratio Saga has chosen to use Option B, identifying colleagues using our gender pay gap data. This was the preferred option due to the availability
of data for our many UK-based, overseas and part-time colleagues for whom single total figure data is difficult to calculate. Figures have been completed for
2017/18, 2018/19, 2019/20 and 2020/21 using the April gender pay gap data for that year. In order to mitigate any anomalies, 11 individuals have been identified at
each percentile point from the gender pay gap data, and the median of pay in the year up to 31 January 2018, 2019, 2020 and 2021 for these colleagues calculated in
line with the single total figure methodology. For colleagues who participate in a DB scheme, the value of the pension for the purposes of total pay has been
estimated based on the individual’s accrual rate and length of service
4 The median ratios shown for 2015/16 and 2016/17 have been recalculated to allow a comparison to the 2017/18, 2018/19, 2019/20 and 2020/21 figures which have
been calculated in line with the methodology prescribed by the regulations
5 The fall in the ratio in 2017/18 is due to the forfeiture of bonus by the Group CEO and the relatively low payout on the LTIP. This reflects the fact that shareholders
want Executives to have a higher proportion of pay at risk and this is reflected in the volatility in the chart. The percentage change in Group CEO remuneration set
out in the table on page 93 shows that year-on-year when the volatility of payouts from equity-based awards is excluded, the changes in remuneration for the Group
CEO and average colleague are broadly in line. This demonstrates that the underlying compensation ratio is not increasing year-on-year
6 The increase in ratio for 2018/19 is due to the Group CEO receiving a bonus in 2018/19. This increase has remained low due to a relatively low bonus and LTIP payout
7 The fall in ratio for 2019/20 is due to the rebalancing of base pay and commission in our call centres
8 The increase in ratio in 2020/21 is due to the relatively high bonus payout in 2020/21 and RSP award granted to the Group CEO in 2020/21 which was fully vested on grant
The colleague pay figures used to calculate the ratio are as follows:
2020/21
Salary
Total pay
25th
percentile
£19,339
£21,840
Median
£23,465
£27,837
75th
percentile
£33,495
£38,312
92
GovernanceSaga plc Annual Report and Accounts 2021 Annual percentage change in remuneration of Directors and other colleagues
The following table sets out the change in the remuneration paid to each Director from 2019/20 to 2020/21 compared with
the average percentage change for other colleagues.
The percentage change for each Directors’ remuneration in the table below is based on the figures in the single total figure
table on page 81.
Average colleague pay has been calculated using the following elements:
– Annual salary: base salary and standard monthly allowances.
– Taxable benefits: car allowance and private medical insurance premiums.
– Annual bonus: company bonus, management bonus, commission and incentive payments.
Euan Sutherland
James Quin
Cheryl Agius
Roger De Haan
Patrick O'Sullivan
Eva Eisenschimmel
Julie Hopes
Gareth Hoskin
Ray King
Orna NiChionna
Gareth Williams
Average per colleague
Salary/fees
(2020/21)
0%
Taxable
benefits
(2020/21)
9.3%
1.2% -48.9%1
5.9%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2.7%
0%
n/a
0%
15.7%2
41.7%3
9.3%4
0%
9.6%5
-13.6%6
3.2%7
Annual
bonus
(2020/21)
25.2%
48.7%
19.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
67.8%
Notes:
1 The decrease in benefits for James Quin is due to his move to a reduced cost electric vehicle
2
3
Increase in salary for Eva Eisenschimmel is due to becoming Chair of the Remuneration Committee on 1 February 2020
Increase in salary for Julie Hopes is due to becoming Chair of the Saga Personal Finance Board on 1 February 2020 and assuming the position of Risk Committee
Chair on 31 December 2020
Increase in salary for Gareth Hoskin is due to becoming Chair of the Audit Committee with effect from 22 June 2020
4
5 The increase in salary for Orna NiChionna is due to increasing responsibilities as Senior Independent Director from 5 October 2020
6 Reduction in salary for Gareth Williams is due to step down as Chair of the Remuneration Committee on 1 February 2020
7 Average salary per colleague increased due to a combination of annual salary increase, Company restructuring which altered our colleague base and the impacts of
the COVID-19 pandemic
Relative importance of the spend on pay
The table below sets out the relative importance of spend on pay in the 2020/21 financial year and 2019/20 financial year
compared with other disbursements. All figures provided are taken from the relevant Company accounts.
Profit distributed by way of dividend
Total tax contributions1
Overall spend on pay including Executive Directors
Note:
1 Total tax contributions include corporation tax, national insurance contributions, VAT and air passenger duty
Disbursements
from profit in
2020/21
financial year
£m
0.1
44.2
125.3
Disbursements
from profit in
2019/20
financial year
£m
25.8
50.1
125.6
Percentage
change
(99.6%)
(11.8%)
(0.2%)
93
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Annual Report on Remuneration continued
Advisers to the Remuneration Committee
During the financial year, PwC advised the Remuneration Committee on all aspects of the Remuneration Policy for Executive
Directors and members of the ELT.
PwC also provided the Company with tax and assurance work during the year. The Remuneration Committee reviewed the
nature of the services provided and was satisfied that no conflict of interest exists, or existed in the provision of these services.
Following a selection process carried out prior to, and then following, the IPO of the Company, PwC was formally appointed by
the Remuneration Committee. PwC is a member of the Remuneration Consultants Group and the voluntary code of conduct
of that body is designed to ensure objective and independent advice is given to remuneration committees. Other PwC teams
provide certain non-audit services to the Company in areas of tax and consulting. The Committee is satisfied that no conflict
of interests exist in the provision of these services and that the advice provided is independent and objective. Fees of
£109,000 (2020: £97,250) were provided to PwC during the year in respect of remuneration advice received. The increase
from the prior year is due to additional support in relation to the renewal of the Remuneration Policy.
The Committee receives support from Jane Storm (Chief People Officer (CPO)) and Vicki Haynes (Group Company Secretary).
Shareholder voting
The Directors’ Remuneration Policy was approved by shareholders at the AGM held on 22 June 2020.
Outlined below are the voting outcomes in respect of approving the Directors’ Remuneration Report, the Directors’
Remuneration Policy and the RSP.
Results of shareholder voting at the 2020 Annual General Meeting
Votes for
Resolution
To approve the Directors’
Remuneration Report
To approve the Directors’
Remuneration Policy
To approve the Saga plc
2020 Restricted Share Plan 604,360,644
609,404,573
536,042,769
% of votes
cast Votes against
% of votes
cast
Votes cast
% of issued
share capital
voted
Votes
withheld
82.92
110,416,414
17.08 647,040,963
57.67%
581,780
97.98
12,534,190
2.02 647,040,963
57.67% 25,102,200
97.16
17,653,018
2.84 647,040,963
57.67% 25,026,393
94
GovernanceSaga plc Annual Report and Accounts 2021 Directors’ Remuneration Policy
s172 This section of the report sets out the Company’s Policy on remuneration for Executive and Non-Executive Directors,
as approved by shareholders at the AGM on 22 June 2020. The Policy has been prepared in accordance with the requirements
of the UK’s Companies Act 2006 (the 'Act'), Schedule 8 of the Large and Medium-Sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations 2013 (the 'Regulations') and the Listing Rules. The Committee has built in a degree of
flexibility to ensure the practical application of the Policy. Where such discretion is reserved, the extent to which it may be
applied is described. The Company’s Policy retains its primary goal to attract, retain and motivate its leaders and to ensure
they are focused on delivering business priorities within a framework designed to promote the long term success of Saga,
aligned with shareholder interests.
CHANGES MADE TO THE PREVIOUS POLICY
Element
Pension
Long-term incentives
Post-cessation shareholding
requirements
Malus and clawback
Changes to Policy
Pension contributions for incumbent
and new Executive Directors to be
aligned to that of majority of
colleagues (6%).
Introduction of RSP to replace LTIP.
Formal post-cessation employment for
full employment requirement for two
years following cessation.
Provisions expanded to refer specifically
to risk management failure and
corporate failure.
Rationale
Provision in line with corporate
governance best practice.
Simplified long-term incentive
arrangements and addresses challenges
of setting performance targets given
the Company’s new strategy.
Ensures Executives’ focus on long-term
sustainable performance and extended
the length of alignment between
management and shareholders.
Provision brought in line with
best practice.
95
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Directors’ Remuneration Policy continued
DIRECTORS’ REMUNERATION POLICY TABLE
Element and link to strategy
Salary
Provides a base level of
remuneration to support
recruitment and retention
of Executive Directors with
the necessary experience
and expertise to deliver
the Group’s strategy.
Operation
Maximum
Performance conditions and
recovery provisions
A broad assessment of individual
and business performance is used
as part of the salary review.
No recovery provisions apply.
An Executive Director’s basic
salary is set on appointment
and reviewed annually, or
when there is a change in
position or responsibility.
When determining an
appropriate level of salary,
the Committee considers:
– pay increases to other
colleagues;
– remuneration practices
within the Group;
– any change in scope, role
and responsibilities;
– the general performance
of the Group and each
individual;
– the experience of the
relevant Director; and
– the economic environment.
Individuals who are recruited
or promoted to the Board
may, on occasion, have
their salaries set below the
targeted policy level until
they become established
in their role. In such cases
subsequent increases
in salary may be higher
than the general rises for
colleagues until the target
positioning is achieved.
The Committee
ensures that maximum
salary levels are
positioned in line with
companies of a similar
size and complexity
to Saga and validated
against an appropriate
comparator group,
so that they are
competitive against
the market.
The Committee
intends to review the
comparators each year
and will add or remove
companies from the
comparator group as it
considers appropriate.
In general, salary
increases for Executive
Directors will be in line
with the increase for
colleagues. However,
larger increases may
be offered if there
is a material change
in the size and
responsibilities of
the role (which covers
significant changes
in Group size and/or
complexity).
The Company
will set out, in the
section headed
'Implementation of the
Remuneration Policy',
in the following
financial year, the
salaries for that
year for each of the
Executive Directors.
96
GovernanceSaga plc Annual Report and Accounts 2021 Performance conditions and
recovery provisions
No performance or recovery
provisions applicable.
No performance or recovery
provisions applicable.
Element and link to strategy
Pension
Provides a fair level of pension
provision for all colleagues.
Benefits
Provides a market-standard
level of benefits.
Operation
Maximum
The maximum
value of the pension
contribution allowance
for both current
and newly appointed
Executive Directors
is aligned with that of
the wider workforce.
The Company
will set out, in the
section headed
'Implementation of
Remuneration Policy',
in the following
financial year, the
pension contributions
for that year for
each of the
Executive Directors.
The maximum is the
cost of providing the
relevant benefits set
out adjacent.
The Company provides
a pension contribution
allowance that is fair,
competitive and in line with
governance best practice.
Pension contributions will
be a non-consolidated
allowance and will not impact
any incentive calculations.
Benefits may include family
private health cover, death
in service life
assurance, car allowance,
subsistence expenses and
discounts in line with other
colleagues.
The Committee recognises
the need to maintain suitable
flexibility in the benefits
provided to ensure it is able
to support the objective of
attracting and retaining
personnel in order to deliver
the Group strategy.
Additional benefits which
are available to other
colleagues on broadly similar
terms may therefore be
offered such as relocation
allowances on recruitment.
97
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Directors’ Remuneration Policy continued
DIRECTORS’ REMUNERATION POLICY TABLE (CONTINUED)
Element and link to strategy
Annual bonus
The Annual Bonus Plan
provides a significant
incentive to the Executive
Directors linked to
achievement in delivering
goals that are closely aligned
with the Company’s strategy
and the creation of value
for shareholders.
In particular, the Annual Bonus
Plan supports the Company’s
objectives allowing the setting
of annual targets based
on the business’ strategic
objectives at that time,
meaning that a wider range
of performance metrics can
be used that are relevant
and achievable.
Operation
Maximum
Performance conditions and
recovery provisions
The Remuneration
Committee will
determine the
maximum annual
participation in the
Annual Bonus Plan
for each year, which
will not exceed
150% of salary.
Percentage of bonus
maximum earned for
levels of performance:
– Threshold: up
to 20%
– Target: 50%
– Maximum: 100%
The Remuneration Committee
will determine the maximum
annual participation in the
Annual Bonus Plan for each
year, which will not exceed
150% of salary.
The Company will
set out in the section
headed 'Implementation
of Remuneration Policy', in
the following financial year,
the nature of the targets and
their weighting for each year.
Details of the performance
conditions, targets and their
level of satisfaction for the
year being reported on will be
set out in the Annual Report
on Remuneration.
The Remuneration Committee
can determine that part
of the bonus earned under
the Annual Bonus Plan is
provided as an award of
shares under the DBP
element. The minimum
level of deferral is one-third
of the bonus; however, the
Committee may determine
that a greater portion or in
some cases the entire bonus
be paid in deferred shares.
The main terms of these
awards are:
– minimum deferral period of
three years; and
– the participant’s continued
employment at the end of
the deferral period unless
they are a good leaver.
The Committee may award
dividend equivalents on those
shares to plan participants
to the extent that they vest.
The Committee has the
discretion to apply a holding
period of two years post-vesting
for deferred bonus shares.
The Annual Bonus Plan is based
on a mix of financial and strategic/
operational conditions and is
measured over a period of one
financial year. The financial
measures will account for no less
than 50% of the bonus opportunity.
The Remuneration Committee
retains discretion in exceptional
circumstances to change
performance measures and
targets and the weightings
attached to performance measures
part-way through a performance
year if there is a significant and
material event which causes the
Committee to believe the original
measures, weightings and targets
are no longer appropriate.
Discretion may also be exercised
in cases where the Committee
believes that the bonus outcome
is not a fair and accurate reflection
of business, individual and wider
Company performance. The exercise
of this discretion may result in
a downward or upward movement
in the amount of bonus earned
resulting from the application
of the performance measures.
Any adjustments or discretion
applied by the Remuneration
Committee will be fully disclosed
in the following year’s Remuneration
Report. The Committee is of the
opinion that given the commercial
sensitivity arising in relation to
the detailed financial targets used
for the annual bonus, disclosing
precise targets for the Annual
Bonus Plan in advance would
not be in shareholder interests.
Actual targets, performance
achieved, and awards made will
be published at the end of the
performance period so shareholders
can fully assess the basis for any
payouts under the annual bonus.
Both the Annual Bonus Plan
and the DBP contain malus
and clawback provisions.
98
GovernanceSaga plc Annual Report and Accounts 2021 Element and link to strategy
Restricted Share Plan
Awards are designed to
incentivise the Executive
Directors over the longer-term
to successfully implement
the Company’s strategy.
Operation
Maximum
Performance conditions and
recovery provisions
Awards are granted annually
to Executive Directors in the
form of Restricted Shares.
Restricted Shares vest at the
end of a three year period
subject to:
Maximum value of
100% of salary per
annum based on the
market value at the
date of grant set in
accordance with
the rules of the plan.
– the Executive Director’s
continued employment
at the date of vesting; and
– the satisfaction of an
underpin as determined
by the Remuneration
Committee whereby the
Committee can adjust
vesting for business,
individual and wider
Company performance.
A two-year holding period
will apply following the
three-year vesting period
for all awards granted to
the Executive Directors.
Upon vesting, sufficient
shares may be sold to
pay tax on the shares.
The Remuneration Committee
may award dividend
equivalents on awards to
the extent that these vest.
No specific performance conditions
are required for the vesting of
Restricted Shares but there
will be an underpin in that the
Remuneration Committee will
have the discretion to adjust
vesting taking into account
business, individual and wider
Company performance.
The Committee will take into account
the following factors (amongst
others) when determining whether
to exercise its discretion to adjust
the number of shares vesting:
– Whether threshold performance
levels have been achieved for
the performance conditions for
the Annual Bonus Plan for each
of the three years covered by
the vesting period for the
restricted shares.
– Whether there have been any
sanctions or fines issued by
a regulatory body; participant
responsibility may be allocated
collectively or individually.
– Whether there has been material
damage to the reputation of the
Company; participant
responsibility may be allocated
collectively or individually.
– The potential for windfall gains.
– The level of colleague and
customer engagement over
the period.
The RSP is subject to clawback
and malus provisions.
99
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Directors’ Remuneration Policy continued
DIRECTORS’ REMUNERATION POLICY TABLE (CONTINUED)
Element and link to strategy
Legacy LTIP
Awards were designed to
incentivise the Executive
Directors over the longer-
term to successfully
implement the
Company’s strategy.
Operation
Maximum
Performance conditions and
recovery provisions
Awards were granted annually
to Executive Directors in the
form of a conditional share
award or nil-cost option.
These vest at the end of a
three-year period subject to:
– the Executive Director’s
continued employment at
the date of vesting; and
– satisfaction of the
performance conditions.
A two-year holding period
applies following the three-
year vesting period for LTIP
awards granted to the
Executive Directors.
Upon vesting, sufficient
shares can be sold to pay tax.
The Remuneration
Committee may award
dividend equivalents on
awards to the extent that
these vest.
No further awards
will be made under
the LTIP to Executive
Directors.
Awards already
granted will be eligible
to vest in line with
their original criteria.
Maximum value of
200% of salary per
annum based on the
market value at the
date of grant set in
accordance with the
rules of the plan.
25% of the award
vests for threshold
performance. 100%
of the award will
vest for maximum
performance. Straight-
line vesting between
these points.
Awards vest based on
performance against stretching
targets, measured over a three-year
performance period. The Committee
reviews and sets weightings and
targets before each grant to
ensure they remain appropriate.
The Committee may change the
balance of the measures, or use
different measures for subsequent
awards, as appropriate.
No material change will be made
to the type of performance conditions
without prior shareholder consultation.
The Remuneration Committee
retains discretion in exceptional
circumstances to change
performance measures and
targets and the weightings
attached to performance
measures part-way through
a performance period if there is
a significant and material event
which causes the Remuneration
Committee to believe the original
measures, weightings and targets
are no longer appropriate.
Discretion may also be exercised
in cases where the Remuneration
Committee believes that the
outcome is not a fair and accurate
reflection of business performance.
The exercise of this discretion
may result in a downward or
upward movement in the amount
of the LTIP vesting resulting
from the application of the
performance measures.
Details of the performance
conditions for grants made in
the year were set out in the relevant
Annual Report on Remuneration.
The LTIP contains clawback
and malus provisions.
100
GovernanceSaga plc Annual Report and Accounts 2021 Shareholding requirement
The Committee already had in place strong shareholding requirements (as a percentage of base salary) that encourage
Executive Directors to build up their holdings over a five year period. Adherence to these guidelines is a condition of
continued participation in the equity incentive arrangements. This policy ensures that the interests of Executive Directors
and those of shareholders are closely aligned.
In addition, Executive Directors will be required to retain 50% of the post-tax amount of vested shares from the Company
incentive plans until the minimum shareholding requirement is met and maintained. The following table sets out the
minimum shareholding requirements:
Role
Group Chief Executive Officer
Other Executive Directors
Shareholding requirement (percentage of salary)
250%
200%
The Committee retains the discretion to increase the shareholding requirements.
The Committee has introduced a post-cessation shareholding requirement of the full in-employment requirement as listed
above (or the Executive’s actual shareholding on cessation if lower) for two years following cessation.
Element and link to strategy
Operation
Maximum
Non-Executive Chairman and Non-Executive Director fees
Provides a level of fees to
support recruitment and
retention of a Non-Executive
Chairman and Non-Executive
Directors with the necessary
experience to advise and
assist with establishing and
monitoring the Group’s
strategic objectives.
The Board is responsible for
setting the remuneration of
the Non-Executive Directors.
The Remuneration Committee
is responsible for setting
the Non-Executive
Chairman’s fees.
Non-Executive Directors are
paid an annual fee and
additional fees for chairing
of Committees. The Company
retains the flexibility to pay
fees for the membership of
Committees. The Non-
Executive Chairman does
not receive any additional
fees for membership
of Committees.
Fees are reviewed annually
based on equivalent roles in
the comparator group used
to review salaries paid to the
Executive Directors. Non-
Executive Directors and the
Non-Executive Chairman
do not participate in any
variable remuneration or
benefits arrangements.
The fees for Non-
Executive Directors
are broadly set
at a competitive
level against the
comparator group.
In general, the level
of fee increase for
the Non-Executive
Directors and the
Non-Executive
Chairman will be
set taking account
of any change in
responsibility and
will take into account
the general rise in
salaries across the
UK workforce.
The aggregate fee
for the Non-Executive
Directors and the
Chair will not exceed
£2,000,000.
The Company will pay
reasonable expenses
incurred by the
Non-Executive
Directors and Non-
Executive Chairman
and may settle any
tax incurred in relation
to these.
Performance conditions and
recovery provisions
No performance or recovery
provisions applicable.
101
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Directors’ Remuneration Policy continued
ILLUSTRATION OF APPLICATION OF REMUNERATION POLICY
The chart below shows an estimate of the remuneration that could be received by Executive Directors under the
Remuneration Policy set out in this report and is based on the normal RSP award level, rather than the lower initial award.
Figures shown are £’000
Fixed
Annual bonus
RSP
Share price growth
3000
2500
2000
1500
1000
500
0
6
5
8
2
£
,
12%
6
0
5
2
£
,
28%
25%
42%
37%
1
8
9
1
£
,
35%
6
5
4
1
£
,
48%
27%
5
5
5
1
£
,
12%
23%
2
7
3
1
£
,
27%
39%
34%
3
0
1
1
£
,
33%
24%
4
3
8
£
44%
12%
25%
24%
42%
35%
52%
38%
30%
26%
56%
43%
34%
31%
33%
30%
Minimum
Target
Maximum
Maximum
(with 50%
share price
appreciation)
Minimum
Target
Maximum
Maximum
(with 50%
share price
appreciation)
Euan Sutherland,
Group CEO
James Quin,
Group CFO
Assumptions used in determining the level of payout under given scenarios are as follows:
Element
Fixed elements
Minimum
Base salary for 2020/21.
Target
Maximum
Maximum with 50% share
price growth
Benefits paid for 2020/21 annualised for full year equivalent figures.
Pension in line with policy at 6% of salary.
Nil.
100% vesting of
Restricted Shares.
50% of the maximum
opportunity.
100% vesting of
Restricted Shares.
100% of the maximum
opportunity.
100% vesting of
Restricted Shares.
Award levels are
100% of salary for
the CEO, 85% of salary
for the CFO.
Award levels are
100% of salary for
the CEO, 85% of salary
for the CFO.
Award levels are
100% of salary for
the CEO, 85% of salary
for the CFO.
100% of the maximum
opportunity.
100% vesting of
Restricted Shares
plus the increase in
value from 50% share
price growth.
Award levels are
100% of salary for
the CEO, 85% of salary
for the CFO.
Annual bonus
Restricted Shares
102
GovernanceSaga plc Annual Report and Accounts 2021 Scenario charts show 'minimum', 'target' and 'maximum' scenarios in accordance with the regulations as well as the impact
of a 50% share price growth on the long-term incentives for the 'maximum' scenario. All scenarios do not account for
dividend equivalents on DBP shares or RSP shares.
DISCRETION WITHIN THE DIRECTORS' REMUNERATION POLICY
The Committee has discretion in several areas of policy as set out in this report. The Committee may also exercise
operational and administrative discretions under relevant plan rules as set out in those rules. In addition, the Committee has
the discretion to amend the Remuneration Policy with regard to minor or administrative matters where it would be, in the
opinion of the Committee, disproportionate to seek or await shareholder approval.
MALUS AND CLAWBACK
Malus is the adjustment of the annual bonus payments or unvested long-term incentive awards (including RSPs) because
of the occurrence of one or more circumstances listed below. The adjustment may result in the value being reduced to nil.
Clawback is the recovery of payments made under the Annual Bonus Plan or vested long-term incentive awards (including
RSPs) as a result of the occurrence of one or more circumstances listed below. Clawback may apply to all or part of a
participant’s payment under the Annual Bonus Plan, RSP or LTIP award and may be effected, among other means, by requiring
the transfer of shares, payment of cash or reduction of awards or bonuses. The circumstances in which malus and clawback
could apply are as follows:
– Discovery of a material misstatement resulting in an adjustment in the audited accounts of the Group or any
Group company.
– The discovery that any information used to determine the award was based on error, or inaccurate or misleading
information.
– Action or conduct of a participant which amounts to fraud or gross misconduct.
– Events, or the behaviour of a participant, which have led to the censure of a Group company by a regulatory authority or
have had a significant detrimental impact on the reputation of any Group company, provided that the Committee is
satisfied that the relevant participant was responsible for the censure or reputational damage and that the censure or
reputational damage is attributable to the participant.
– Failure of risk management including but not limited to a material breach of risk appetite and regulatory standards.
– Corporate failure.
Malus
Clawback
Annual bonus (cash)
Up to the date of
the cash payment.
Two years post
the date of any
cash payment.
Annual bonus
(deferred shares)
To the end of
the three-year
vesting period.
n/a
Restricted Shares
To the end of
the three-year
vesting period.
Two years post vesting. Two years post vesting.
LTIP
To the end of
the three-year
vesting period.
The Committee believes that the rules of the plans provide sufficient powers to enforce malus and clawback where required.
103
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Directors’ Remuneration Policy continued
LOSS OF OFFICE POLICY
When considering compensation for loss of office, the Committee will always seek to minimise the cost to the Company
whilst applying the following philosophy:
Remuneration element
General
Salary, benefits
and pension
Bonus cash
Treatment on cessation of employment
The Committee will honour Executive Directors’ contractual entitlements. Service contracts
do not contain liquidated damages clauses. If a contract is to be terminated, the Committee
will determine such mitigation as it considers fair and reasonable in each case. There are no
contractual arrangements that would guarantee a pension with limited or no abatement on
severance or early retirement. There is no agreement between the Company and its Directors
or other colleagues, providing for compensation for loss of office or employment that occurs
because of a takeover bid. The Committee reserves the right to make additional payments
where such payments are made in good faith in discharge of an existing legal obligation (or by
way of damages for breach of such an obligation); or by way of settlement or compromise of
any claim arising in connection with the termination of an Executive Director’s office or
employment.
These will be paid over the notice period. The Company has discretion to make a lump sum
payment in lieu.
Good leaver reason
Performance
conditions will be
measured at the bonus
measurement date.
Bonus will normally
be pro-rated for the
period worked during
the financial year.
Discretion
The Committee has the following elements
of discretion:
a good leaver. It is the Committee’s intention
to only use this discretion in circumstances
where there is an appropriate business case
which will be explained in full to shareholders.
– To determine whether to pro-rate the bonus
Other reason
No bonus payable
for year of cessation.
– To determine that an Executive Director is
Bonus deferred share
awards
All subsisting
Deferred Share
Awards will vest.
Lapse of any
unvested Deferred
Share Awards.
to time. The Committee’s normal policy is that
it will pro-rate bonus for time. It is the
Remuneration Committee’s intention to use
discretion to not pro-rate in circumstances
where there is an appropriate business case
which will be explained in full to shareholders.
The Committee has the following elements
of discretion:
– To determine that an Executive Director is
a good leaver. It is the Committee’s intention
to only use this discretion in circumstances
where there is an appropriate business case
which will be explained in full to shareholders.
– To vest deferred shares at the end of the
original deferral period or at the date of
cessation. The Remuneration Committee
will make this determination depending on
the type of good leaver reason resulting in
the cessation.
– To determine whether to pro-rate the maximum
number of shares to the time from the date of
grant to the date of cessation. The Remuneration
Committee’s normal policy is that it will not
pro-rate awards for time. The Remuneration
Committee will determine whether or not to
pro-rate based on the circumstances of the
Executive Directors’ departure.
104
GovernanceSaga plc Annual Report and Accounts 2021 Remuneration element
LTIP
Treatment on cessation of employment
Good leaver reason
Pro-rated to time
and performance
in respect of each
subsisting LTIP award.
Other reason
Lapse of any unvested
LTIP awards
Discretion
The Committee has the following elements
of discretion:
– To determine that an Executive Director is
a good leaver. It is the Committee’s intention
to only use this discretion in circumstances
where there is an appropriate business case
which will be explained in full to shareholders.
– To measure performance over the original
performance period or at the date of
cessation. The Committee will make this
determination depending on the type of
good leaver reason resulting in the cessation.
– To determine to vest shares at the end of the
original performance period or at the date
of cessation. The Committee will make this
determination depending on the type of
good leaver reason resulting in the cessation.
– To determine whether the holding period
will apply in full or in part. The Committee
will make this determination depending on
the type of good leaver reason resulting in
the cessation.
– To determine whether to pro-rate the
maximum number of shares to the time from
the date of grant to the date of cessation.
The Remuneration Committee’s normal policy
is that it will pro-rate awards for time. It is the
Remuneration Committee’s intention to use
discretion to not pro-rate in circumstances
where there is an appropriate business case
which will be explained in full to shareholders.
RSP for the year
of cessation
The award will normally
be pro-rated for the
period worked during
the financial year.
No award for year
of cessation.
The Committee has the following elements
of discretion:
– To determine that an Executive Director is
a good leaver. It is the Committee’s intention
to only use this discretion in circumstances
where there is an appropriate business case
which will be explained in full to shareholders.
– To determine whether to pro-rate the
Company award to time. The Remuneration
Committee’s normal policy is that it will
pro-rate for time. It is the Committee’s
intention to use discretion to not pro-rate in
circumstances where there is an appropriate
business case which will be explained in full
to shareholders.
– To determine whether the award will vest
on the date of cessation or the original
vesting date. The Committee will make
its determination based amongst other
factors on the reason for the cessation
of employment.
105
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Directors’ Remuneration Policy continued
LOSS OF OFFICE POLICY (CONTINUED)
Remuneration element
Subsisting awards
Treatment on cessation of employment
Good leaver reason
Awards will be
pro-rated to time
and will vest on their
original vesting dates
and remain subject
to the holding period.
Other reason
Unvested awards
will be forfeited
on cessation
of employment.
Vested awards will
remain subject to
the holding period.
Discretion
The Committee has the following elements
of discretion:
– To determine that an Executive Director is
a good leaver. It is the Committee’s intention
to only use this discretion in circumstances
where there is an appropriate business case
which will be explained in full to shareholders.
– To determine whether to pro-rate the award
to the date of cessation. The Committee’s
normal policy is that it will pro-rate.
The Committee will determine whether
to pro-rate based on the circumstances
of the Executive Directors’ departure.
– To determine whether the awards vest on the
date of cessation or the original vesting date.
The Committee will make its determination
based amongst other factors on the reason
for the cessation of employment.
– To determine whether the holding period
for awards applies in part or in full.
The Committee will make its determination
based amongst other factors on the reason
for the cessation of employment.
Other contractual
obligations
There are no other contractual provisions other than those set out above agreed prior to
27 June 2012.
The following definition of leavers will apply to all the above incentive plans. A good leaver reason is defined as cessation in
the following circumstances:
– Death.
– Ill-health.
– Injury or disability.
– Retirement.
– Employing company ceasing to be a Group company.
– Transfer of employment to a company which is not a Group company.
– At the discretion of the Committee (as described above).
Cessation of employment in circumstances other than those set out above is cessation for other reasons.
106
GovernanceSaga plc Annual Report and Accounts 2021 CHANGE OF CONTROL POLICY
Name of incentive plan
Cash bonus
Change of control
Pro-rated to time and performance to
the date of the change of control.
Deferred Share Awards
Subsisting Deferred Share Awards will
vest on a change of control.
LTIP
RSP
The number of shares subject to
subsisting LTIP awards will vest on a
change of control, pro-rated to time
and performance.
The number of shares subject to
subsisting RSPs will vest on a change
of control pro-rated for time and
performance against any underpins.
Discretion
The Committee has discretion regarding
whether to pro-rate the bonus to time.
The Committee’s normal policy is that
it will pro-rate the bonus for time.
It is the Committee’s intention to
use its discretion to not pro-rate in
circumstances only where there is an
appropriate business case which will
be explained in full to shareholders.
The Committee has discretion regarding
whether to pro-rate the award to time.
The Committee’s normal policy is that
it will not pro-rate awards for time.
The Committee will make this
determination depending on the
circumstances of the change of control.
The Committee has discretion regarding
whether to pro-rate the LTIP awards to
time. The Committee’s normal policy is
that it will pro-rate the LTIP awards for
time. It is the Committee’s intention to
use its discretion to not pro-rate in
circumstances only where there is an
appropriate business case which will
be explained in full to shareholders.
The Committee has discretion regarding
whether to pro-rate the RSPs for time.
The Committee’s normal policy is
that it will pro-rate the RSPs for time.
It is the Committee’s intention to
use its discretion to not pro-rate
in circumstances only where there is
an appropriate business case which
will be explained in full to shareholders.
The Committee also has discretion to
consider attainment of any underpins.
RECRUITMENT AND PROMOTION POLICY
The Company’s principle is that the remuneration of any new recruit will be assessed in line with the same principles as for the
Executive Directors, as set out in the Remuneration Policy table. The Committee is mindful that it wishes to avoid paying more
than it considers necessary to secure a preferred candidate with the appropriate calibre and experience needed for the role.
In setting the remuneration for new recruits, the Committee will have regard to guidelines and shareholder sentiment regarding
one-off or enhanced short-term or long-term incentive payments as well as giving consideration for the appropriateness of any
performance measures associated with an award. The Company’s policy when setting remuneration for the appointment of new
Directors is summarised in the table below:
Remuneration element
Salary, benefits and pension
Annual bonus
RSP
Maximum variable
remuneration
Recruitment policy
Salary and benefits will be set in line with the policy for existing Executive Directors.
Maximum pension contribution will be aligned with that of the majority of colleagues.
Maximum annual participation will be set in line with the Company’s policy for existing
Executive Directors and will not exceed 150% of salary.
Maximum annual participation will be set in line with the Company’s policy for existing
Executive Directors and will not exceed 100% of salary for RSPs.
The maximum variable remuneration which may be granted is the sum of the annual bonus
and RSP (excluding the value of any buyouts). The maximum variable remuneration will be
250% of salary.
107
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Directors’ Remuneration Policy continued
RECRUITMENT AND PROMOTION POLICY (CONTINUED)
Remuneration element
Buyout of incentives forfeited
on cessation of employment
Recruitment policy
Forfeited on cessation of employment.
Where the Committee determines that the individual circumstances of recruitment justify
the provision of a buyout, the equivalent value of any incentives that will be forfeited on
cessation of an Executive Director’s previous employment will be calculated taking into
account the following:
– The proportion of the performance period completed on the date of the Executive
Director’s cessation of employment.
– The performance conditions attached to the vesting of these incentives and the
likelihood of them being satisfied.
– Any other terms and conditions having a material effect on their value ('lapsed value');
The Committee may then grant up to the same value as the lapsed value, where possible,
under the Company’s incentive plans. To the extent that it was not possible or practical
to provide the buyout within the terms of the Company’s existing incentive plans,
a bespoke arrangement would be used.
In instances where the new Executive Director is required to relocate or spend significant
time away from their normal residence, the Company may provide one-off compensation to
reflect the cost of relocation for the Executive Director. The level of the relocation package
will be assessed on a case by case basis but will take into consideration any cost of living
differences/housing allowance and schooling and will not exceed a period of two years
from recruitment.
Relocation policies
Where an existing colleague is promoted to the Board, the policy set out above would apply from the date of promotion
but there would be no retrospective application of the policy in relation to subsisting incentive awards or remuneration
arrangements. Accordingly, prevailing elements of the remuneration package for an existing colleague would be honoured
and form part of the ongoing remuneration of the person concerned. These would be disclosed to shareholders in the
Remuneration Report for the relevant financial year.
The Company’s policy when setting fees for the appointment of a new Chairman or Non-Executive Director is to apply the
policy which applies to current Non-Executive Directors.
SERVICE CONTRACTS AND LETTERS OF APPOINTMENTS
The Remuneration Committee’s policy for setting notice periods is that normally they will be a maximum of 12 months.
The Remuneration Committee may, in exceptional circumstances arising on recruitment, allow a longer period, which would
in any event reduce to 12 months following the first year of employment. The Non-Executive Directors of the Company do
not have service contracts and are appointed by letters of appointment. Each independent Non-Executive Director’s term
of office runs for a three-year period. The Company follows the Code’s recommendation that all Directors be subject to annual
re-appointment by shareholders.
Executive Directors
Notice periods
Name
Euan Sutherland
James Quin
Date appointed
6 January 2020
1 January 2019
Nature of contract
Rolling
Rolling
From Company
12 months
12 months
From Director
12 months
12 months
Non-Executive Directors
Name
Orna NiChionna
Julie Hopes
Eva Eisenschimmel
Gareth Hoskin
Original appointment
29 May 2014
1 October 2018
1 January 2019
11 March 2019
Appointment of current term Arrangement
29 May 2020
1 October 2018
1 January 2019
11 March 2019
Letter of appointment
Letter of appointment
Letter of appointment
Letter of appointment
Compensation
provisions for
early termination
None
None
Notice period/unexpired
term at AGM
3 months/23 months
3 months/3 months
3 months/6 months
3 months/8 months
The Board allows Executive Directors to accept appropriate outside Non-Executive Director appointments provided the
aggregate commitment is compatible with their duties as Executive Directors. The Executive Directors concerned may retain
fees paid for these services, which will be subject to approval by the Board.
108
GovernanceSaga plc Annual Report and Accounts 2021 CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN THE GROUP
Each year, prior to reviewing the remuneration of the Executive Directors and the members of the ELT, the Remuneration
Committee considers a report prepared by the CPO detailing base pay and share schemes practice across the Company.
The report provides an overview of how colleague pay compares to the market and any material changes during the year and
includes detailed analysis of basic pay and variable pay changes within the UK.
While the Company does not directly consult with colleagues as part of the process of reviewing executive pay and
formulating the Remuneration Policy, the Company does receive an update and feedback from the broader colleague
population on an annual basis using an engagement survey which includes a number of questions relating to remuneration.
The Company does not use remuneration comparison measurements.
The Group aims to provide a remuneration package for all colleagues that is market competitive and operates the same core
structure as for the Executive Directors. The Group operates colleague share and variable pay plans, with pension provisions
provided for all Executive Directors and colleagues. In addition, any salary increases for Executive Directors are expected to
be generally in line with those for UK-based colleagues. The Committee annually publishes a section on fairness, diversity
and wider workforce considerations as part of the Directors’ Remuneration Report.
CONSIDERATION OF SHAREHOLDER VIEWS
The Remuneration Committee takes the views of the shareholders seriously and these views are taken into account in
shaping remuneration policy and practice. Shareholder views are considered when evaluating and setting remuneration
strategy and the Remuneration Committee welcomes an open dialogue with its shareholders on all aspects of remuneration.
The Committee consulted its major shareholders and the main shareholder representative bodies IA, ISS and Glass Lewis
prior to proposing this Policy. The Committee is grateful for the time taken to consider the Committee proposals and provide
feedback. At the end of the consultation the majority of shareholders consulted indicated they were supportive of this Policy.
COMPLIANCE WITH UK CORPORATE GOVERNANCE CODE
The following table sets out how the Policy aligns with the UK Corporate Governance Code whose objective is to ensure the
remuneration operated by the Company is aligned with all stakeholder interests including those of shareholders:
Key remuneration element of the 2018
UK Corporate Governance Code
Five-year period between the
date of grant and realisation
for equity incentives
Phased release of equity awards
Discretion to override
formulaic outcomes
Post-cessation shareholding
requirement
Pension alignment
Extended malus and clawback
Alignment with Remuneration Policy
The RSP meets this requirement through the implementation of the two-year
post-vesting holding period.
The RSP meets this requirement as awards are made in an annual cycle.
Included in the terms and conditions of the Annual Bonus Plan and the RSP.
The full in-employment requirement for two years following cessation
of employment.
The pension contribution for all Executive Directors aligned with the majority of
colleagues at 6%.
The malus and clawback provisions align with the Financial Reporting Council’s
(FRC) Board Effectiveness Guidance.
Provision 40 element
Clarity – remuneration arrangements
should be transparent and promote
effective engagement with
shareholders and the workforce.
How the Remuneration Policy aligns
The Annual Bonus Plan performance conditions are based on the core strategic
objectives and therefore there is a clear link to all stakeholders between their
delivery and reward provided to management.
Simplicity – remuneration structures
should avoid complexity and their
rationale and operation should be
easy to understand.
The RSP provides annual grants of shares which have to be retained for the longer
term to ensure a focus on sustainable performance. This provides complete clarity
of the alignment of the interests of management and shareholders.
The performance conditions for the Annual Bonus Plan are based on the Company’s
strategic objectives. This alignment of reward with the delivery of key markers of the
success of the implementation of the strategy ensures simplicity.
RSPs are a simple mechanism and avoid the setting of long-term performance
conditions which tend to inherently make the remuneration more complex.
109
Saga plc Annual Report and Accounts 2021Governance Directors’ Remuneration Report
Directors’ Remuneration Policy continued
COMPLIANCE WITH UK CORPORATE GOVERNANCE CODE (CONTINUED)
How the Remuneration Policy aligns
The Remuneration Policy includes:
– setting defined limits on the maximum awards which can be earned;
– requiring the deferral of a substantial proportion of the incentives in shares for
a material period of time;
– aligning the performance conditions with the strategy of the Company;
– ensuring a focus on long-term sustainable performance through the RSP; and
– ensuring there is sufficient flexibility to adjust payments through malus and
clawback and an overriding discretion to depart from formulaic outcomes.
These elements mitigate against the risk of target-based incentives by:
– limiting the maximum value that can be earned;
– deferring the value in shares for the long-term which helps ensure that the
performance earning the award was sustainable and thereby discouraging
short-term behaviours;
– aligning any reward to the agreed strategy of the Company;
– the use of an RSP which supports a focus on the sustainability of the
performance over the longer term;
– reducing the awards or cancelling them if the behaviours giving rise to the
awards are inappropriate; and
– reducing the awards or cancelling them, if it appears that the criteria on which
the award was based do not reflect the underlying performance of the Company.
The Remuneration Policy sets out clearly the range of values, limits and discretions
in respect of the remuneration of management.
The introduction of an RSP increases the predictability of the rewards received
by management.
The Remuneration Policy sets out clearly the range of values and discretions in
respect of the remuneration of management.
The introduction of an RSP increases the predictability of the rewards received by
Executive Directors, and the bonus plan, being based on annual targets, operates
over a more predictable time cycle compared with traditional LTIP schemes thereby
allowing the Remuneration Committee to more effectively ensure desirable
remuneration outcomes. The Committee’s overriding discretion to depart from
formulaic outcomes ensures there is no reward for poor performance.
The bonus plan drives behaviours consistent with Saga’s strategy.
The RSP drives behaviours consistent with the Company’s purpose and values which
are focused on the long-term future of the business throughout the business cycle.
Provision 40 element
Risk – remuneration arrangements
should ensure reputational and other
risks from excessive rewards, and
behavioural risks that can arise from
target-based incentive plans, are
identified and mitigated.
Predictability – the range of possible
values of rewards to individual directors
and any other limits or discretions
should be identified and explained
at the time of approving the Policy.
Proportionality – the link between
individual awards, the delivery
of strategy and the long-term
performance of the Company
should be clear. Outcomes should
not reward poor performance.
Alignment to culture – incentive
schemes should drive behaviours
consistent with Company purpose,
values and strategy.
EVA EISENSCHIMMEL
Chair, Remuneration Committee
6 April 2021
This report has been prepared in accordance with Schedule 8 to The Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 as amended in 2013, 2018 and 2019, the Provisions of the current Code and the
Listing Rules.
110
GovernanceSaga plc Annual Report and Accounts 2021 Directors’ Report
MANAGEMENT REPORT
The Directors’ Report, together with the Strategic Report set out on pages 1 to 49, form the Management Report for the
purposes of Disclosure Guidance and Transparency Rule (DTR) 4.1.5R (the 'Management Report').
STATUTORY INFORMATION CONTAINED ELSEWHERE IN THE ANNUAL REPORT
Information required to be part of this Directors’ Report can be found elsewhere in the Annual Report as indicated in the table
below and is incorporated into this report by reference.
Information
Likely future developments in the business of the Company or its subsidiaries
Environmental, Social and Governance
Greenhouse gas emissions
Suppliers, customers and others in a business relationship engagement
Colleagues (employment of disabled persons, workforce engagement and policies)
Corporate Governance Statement
Directors’ details (including changes made during the year)
Related-party transactions
Diversity
Share capital
Employee share schemes (including long-term incentive schemes)
Financial instruments: information on the Group’s financial instruments and risk management
objectives and policies, including our policy for hedging
Statements of responsibilities
Additional information
Location in
annual report
Pages 1-49
Pages 18-27
Pages 24-25
Pages 26-27
Pages 18-22 and 26
Pages 50-76
Pages 50, 61-63 and
65
Not applicable
Pages 21, 61 and 65
Note 33 on page 197
Note 36 on pages
199-200
Notes 2, 3, 7, 8, 19
and 20 on
pages 136-159, 161
and 174-184
Page 116
Pages 212-216
DISCLOSURE TABLE PURSUANT TO LISTING RULE (LR) 9.8.4C
The following table provides references to where the information required by Listing Rule 9.8.4C R is disclosed:
Listing
Rule
9.8.4(1)
9.8.4(2)
9.8.4(4)
9.8.4(5)
9.8.4(6)
9.8.4(7)
9.8.4(8)
9.8.4(9)
Listing Rule requirement
Interest capitalised by the Group and any related
tax relief
Unaudited financial information (LR 9.2.18R)
Long-term incentive schemes (LR 9.4.3R)
Directors’ waivers of emoluments
Directors’ waivers of future emoluments
Non pre-emptive issues of equity for cash
Non pre-emptive issues of equity for cash by any
unlisted major subsidiary undertaking
Parent company participation in a placing by a
listed subsidiary
Disclosure
Note 17 on pages 171-173
Operating and Financial Review, pages 30-45
Directors’ Remuneration Report, pages 77-110
Directors’ Remuneration Report, pages 77-110
Directors’ Remuneration Report, pages 77-110
Directors’ Report on page 114
Not applicable
Not applicable
9.8.4(10) Contract of significance in which a Director is or was
Not applicable
materially interested
9.8.4(11) Contract of significance between the Company (or one
Not applicable
of its subsidiaries) and a controlling shareholder
9.8.4(12) Waiver of dividends by a shareholder
9.8.4(13) Waiver of future dividends by a shareholder
9.8.4(14)
Board statement in respect of relationship agreement
with a controlling shareholder
Directors’ Report on page 115 (under paragraph ‘Rights
attaching to shares’)
Directors’ Report on page 115 (under paragraph ‘Rights
attaching to shares’)
Not applicable. See Directors’ Report on page 112 (under
‘Relationship agreement with Director shareholder’)
111
Saga plc Annual Report and Accounts 2021Governance Directors’ Report continued
RESULTS AND DIVIDENDS
The Group made a loss after taxation of £67.8m for the financial year ended 31 January 2021. The Board did not pay an
interim dividend. The Board of Directors is not in a position to recommend the payment of a final dividend for the 2020/21
financial year, for the reasons stated below.
The Directors have adopted a Dividend Policy (which is reviewed by the Board on an annual basis). While the Directors
intend to resume dividend payments in the future, the Group will assess its Dividend Policy for current and future years as
the COVID-19 situation becomes more certain. No dividends can be paid while leverage is greater than 3.0x, nor while the
principal amounts deferred under the two ship facilities remain outstanding. Any decision to declare and pay dividends is
made at the discretion of the Directors and depends on, among other things, applicable law, regulation, restrictions, the
Group’s financial position, regulatory capital requirements, working capital requirements, finance costs, general economic
conditions and other factors the Directors deem significant from time to time.
POLITICAL DONATIONS
No political donations were made during the year.
DIRECTORS’ INTERESTS
A list of the Directors, their interests in the long-term performance share plan, contracts and ordinary share capital of the
Company are given in the Directors’ Remuneration Report on pages 77-110.
RELATIONSHIP AGREEMENT WITH DIRECTOR SHAREHOLDER
Any person who exercises or controls, on their own or together with any person with whom they are acting in concert, 30% or
more of the votes able to be cast at general meetings of a company are known as a ‘controlling shareholder’ under the Listing
Rules. The Listing Rules require companies with controlling shareholders to enter into an agreement which is intended to
ensure that the controlling shareholders comply with certain independence provisions stated in the Listing Rules.
The Board confirms that, in accordance with the Listing Rules, there are no controlling shareholders in the Company.
However, the Company entered into a relationship agreement with Roger De Haan on 10 September 2020 (the ‘Relationship
Agreement’). Roger De Haan holds 36,855,555 shares of 15p each (constituting 26.4% of issued share capital immediately
after the capital raise and 26.31% of total issued capital as at 31 January 2021). The Relationship Agreement regulates the
relationship between the Company and Roger De Haan and contains undertakings that transactions and arrangements with
the shareholder will be conducted on an arm's length basis and on normal commercial terms. It also provides that dilutions
caused by new issuances of shares shall be disregarded when determining investor rights under its terms.
RULES ON APPOINTMENT AND REPLACEMENT OF DIRECTORS
A Director may be appointed by ordinary resolution of the shareholders in a general meeting following nomination by the
Board or a member (or members) entitled to vote at such a meeting. In addition, the Directors may appoint a Director to
fill a vacancy or as an additional Director, provided that the individual retires at the next Annual General Meeting (AGM).
A Director may be removed by the Company in certain circumstances set out in the Company’s Articles of Association or
by an ordinary resolution of the Company. The Relationship Agreement between the Company and Roger De Haan provides
for the nomination for appointment (and removal or re-nomination) to the Board of one Non-Executive Director for as long
as he or she holds at least the higher of (i) 10% or more of the issued ordinary share capital of the Company and (ii) the
percentage of the issued ordinary share capital of the Company represented by 60% of the investor’s holding of ordinary
shares immediately following the capital raise.
All Directors will seek re-election, or election in the case of Roger De Haan, at the AGM in accordance with the Company’s
Articles of Association and the recommendations of the UK Corporate Governance Code.
DIRECTORS’ INDEMNITIES
As at the date of this report, indemnities are in force under which the Company has agreed to indemnify the Directors, to
the extent permitted by law and the Company’s Articles of Association, in respect of all losses arising out of, or in connection
with, the execution of their powers, duties and responsibilities, as Directors of the Company or any of its subsidiaries.
No amount was paid under any of these indemnities during the year.
112
GovernanceSaga plc Annual Report and Accounts 2021 CHANGE OF CONTROL – SIGNIFICANT AGREEMENTS
There are some arrangements which give rights to third parties to terminate agreements upon a change of control of the
Company, including following a takeover bid, for example insurance, commercial contracts and distribution agreements.
There are a number of contracts and arrangements throughout the Group for which the legal risk arising out of a change
of control is managed as part of the contractual governance process.
The Group’s corporate debt is unsecured and in place for general purposes. It consists of a £250m seven-year public listed
bond at 3.375%, due to expire in May 2024, which has 101% put at change of control leading to a 1 notch credit rating
downgrade, a five-year £200m term loan expiring in May 2023 (£70m outstanding at 31 January 2021) and a £100m five-
year revolving credit facility (RCF), expiring in May 2023.
Twelve-year Export Credit Agency (ECA) backed funding is in place to finance 80% of the cost of the Group’s two new ocean
Cruise ships. The first of these facilities was drawn on completion of the build of Spirit of Discovery and is secured by way of
a charge over the asset. The second facility was drawn on completion of the build of Spirit of Adventure and is also secured
by way of a charge over the asset. The Company has provided a guarantee for the ship debt. The Group has secured a debt
holiday and covenant waiver for the ship debt up to 31 March 2022.
In the event of a change of control, the facilities would either require repayment or renegotiation. If the ship financing
is terminated, significant break fees may be incurred. Further details on banking facilities are shown in note 30 to the
consolidated financial statements on pages 194-195.
The rules of the Company’s employee share plans generally provide for the accelerated vesting and/or release of share
awards in the event of a change of control of the Company.
The Company does not have any agreements with colleagues (including Directors) which would pay compensation in the
event of a change of control.
CONFLICT OF INTEREST
Each Director is obliged to disclose any potential or actual conflict of interest in accordance with the Company’s Conflict
of Interest Policy. The policy and declarations made are subject to annual review and Directors are required to update any
changes to declarations as they occur. Internal controls are in place to ensure that any related party transactions are
conducted on an arm’s length basis.
SHARE CAPITAL AND INTERESTS IN VOTING RIGHTS
The Company’s share capital (including movements during the year) is set out on page 197. At the date of this report, the
Company’s issued share capital comprised a single class of share capital which is divided into ordinary shares of 15p each.
As at 31 January 2021, 140,102,227 ordinary shares of 15p each had been issued, are fully paid up and quoted on the London
Stock Exchange (LSE).
During the year, the Company undertook a capital raise, which resulted in the new issue of 971,918,208 shares of 1p each on
5 October 2020. Roger De Haan subscribed for 348,583,026 shares of 1p each in the firm placing and 204,250,307 shares of
1p each in the placing and Open Offer representing 26.4% of the share capital at the time. The Company undertook a share
consolidation on 13 October 2020, consolidating every 15 ordinary shares of 1p each into a single ordinary share of 15p each.
507,458 shares of 15p each were issued on 18 November 2020 and transferred into an Employee Benefit Trust to satisfy
employee incentive arrangements. As a result Roger De Haan holds 26.31% of the Company’s issued share capital.
In accordance with DTR 5.1, the Company needs to disclose where it has been notified of the interests in the Company’s total
voting rights. The obligation to notify sits with the shareholder, and the Company must report on the notifications received,
as at 31 January 2021 and also the date of signing of this annual report and accounts. Details of such notifications are
included on the following page.
Since the date of disclosure to the Company, the interest of any person may have increased or decreased. There is no
requirement to notify the Company of any increase or decrease unless the holding passes a notifiable threshold in
accordance with DTR 5.1.
As the Company is aware that the disclosures set out on page 114 do not reflect current shareholders an exercise was
undertaken (under section 793 of the Companies Act 2006) to identify those shareholders who hold over 3% of the
Company's issued share capital, as summarised in the table on page 114.
Information regarding other interests in voting rights provided to the Company pursuant to the FCA DTRs is published on the
Company’s website and a Regulatory Information Service.
113
Saga plc Annual Report and Accounts 2021Governance Directors’ Report continued
SHARE CAPITAL AND INTERESTS IN VOTING RIGHTS (CONTINUED)
The following table summarises shareholders who hold over 3% of the Company's issued share capital (based on section
793 requests):
Name
Aggregate of Standard Life Aberdeen plc
Setanta Asset Management Limited
Roger De Haan
Ordinary shares of 15p each
(post-consolidation)
7,348,655
5,500,845
36,855,555
Percentage of capital held
5.25%
3.93%
26.31%
Nature of holding
Indirect
Indirect
Indirect
In accordance with DTR 5.1, the Company had been notified of the following interests in the Company’s total voting rights
as at 31 January 2021:
Name
Majedie Asset Management Limited
Artemis Investment Management LLP
Royal London Asset Management Limited
Pelham Capital Ltd
BlackRock, Inc.
Aggregate of Standard Life Aberdeen plc
Setanta Asset Management Limited
Pictet Asset Management Ltd
Roger De Haan
Mário Nuno dos Santos Ferreira
Ordinary
shares of 1p
each (pre-
consolidation)
56,074,666
111,601,253
55,282,337
49,867,633
56,034,496
62,905,217
–
56,064,854
552,833,333
33,660,000
Ordinary
shares of 15p
each (post-
consolidation
3,738,311
7,440,083
3,685,489
3,324,508
3,735,633
4,193,681
9,738,336
3,737,656
36,855,555
2,244,000
Percentage of
capital as
disclosed to
Nature of holding
the Company
Indirect
4.99%
Indirect
9.98%
Direct
4.93%
Contract for Difference
4.44%
Indirect
4.99%
Indirect
5.61%
Indirect
6.95%
Direct
4.99%
Indirect
26.31%
3.00% Direct (0.2%), Indirect (2.8%)
Note:
The Company is aware that some shareholdings referenced above may have been diluted as a result of the capital raise, and the number of shares quoted are disclosed
either pre or post the consolidation which took place on 13 October 2020
As at 6 April 2021, the Company had been notified of the following interests in the Company’s total voting rights:
Name
Setanta Asset Management
Limited
Ordinary shares
of 15p each
Percentage of
capital as disclosed to the
Company
5,500,845
3.93%
Nature of
holding
Indirect
AUTHORITY TO ALLOT/PURCHASE OWN SHARES
A shareholders’ resolution was passed at the AGM on 22 June 2020 which authorised the Company to make market purchases
within the meaning of section 693(4) of the Companies Act 2006 (the ‘Act’) (up to £1,122,003.32 representing 10% of the
aggregate nominal share capital of the Company following admission). This is subject to a minimum price of 1p and a
maximum price of the higher of 105% of the average mid-market quotations for five business days prior to purchase or
the price of the last individual trade and highest current individual bid as derived from the LSE trading system.
The Company did not exercise this authority during the year, and it will expire at the forthcoming AGM. A special resolution
to authorise the Company to make market purchases representing 10% of current nominal share capital will be proposed.
The authority to repurchase the Company’s ordinary shares in the market will be limited to £2,101,533.41 and will set out the
minimum and maximum price which would be paid.
The Directors of the Company were also granted authority at the 2020 AGM to allot relevant securities up to a nominal
amount of £3,736,271. This authority will apply until the conclusion of the 2021 AGM, at which shareholders will be asked to
grant the Directors authority (for the purposes of section 551 of the Act) to allot relevant securities (i) up to an aggregate
nominal amount of £6,935,060; and (ii) comprising equity securities (as defined in the Act) up to an aggregate nominal
amount of £13,870,120 (after deducting from such limit any relevant securities issued under (i) in connection with a rights
issue). These amounts will apply until the conclusion of the AGM to be held in 2022, or, if earlier, 31 July 2022.
Special resolutions will also be proposed to give the Directors authority to make non pre-emptive issues wholly for cash in connection
with rights issues and otherwise up to an aggregate nominal amount of £1,050,766.70 and to make non pre-emptive issues
wholly for cash in connection with acquisitions or specified capital investments up to an aggregate amount of £1,050,766.70.
114
GovernanceSaga plc Annual Report and Accounts 2021 RIGHTS ATTACHING TO SHARES
The Company has a single class of ordinary shares in issue. The rights attached to the shares are governed by applicable law
and the Company’s Articles of Association (which are available at www.corporate.saga.co.uk/media/1195/saga-plc-articles-
of-association.pdf).
Ordinary shareholders have the right to receive notice, attend and vote at general meetings; and to receive a copy of the
Company’s report and accounts and a dividend when approved and paid. On a show of hands, each shareholder present
in person, or by proxy (or an authorised representative of a corporate shareholder), shall have one vote. In the event of a poll,
one vote is attached to each share held. No shareholder owns shares with special rights as to control. The Notice of AGM
(‘Notice’) states deadlines for exercising voting rights and for appointing a proxy/proxies.
The Saga Employee Benefit Trust (the ‘Trust’) is an Employee Benefit Trust which holds property (the ‘Trust Fund’) including
inter-alia money, and ordinary shares in the Company, in trust in favour or for the benefit of colleagues of the Saga Group.
The Trustee of the Trust has the power to exercise the rights and powers incidental to, and to act in relation to, the Trust Fund
in such manner as the Trustee in its absolute discretion thinks fit. The Trustee has waived its rights to dividends on ordinary
shares held by the Trust. Details of employee share schemes are set out in note 36 to the consolidated financial statements.
RESTRICTIONS ON THE TRANSFER OF SHARES
Pursuant to the relationship agreement dated 10 September 2020, Roger De Haan is limited in the transfer of his shares
prior to 5 October 2021 (12 months from the date of admission) without the written consent of the Company. Other than this
arrangement, or where imposed by law or regulation, or where the Listing Rules require certain persons to obtain clearance
before dealing, there are no restrictions regarding the transfer of shares in the Company. The Company is not aware of any
further agreement which would result in a restriction on the transfer of shares or voting rights.
ARTICLES OF ASSOCIATION
Any amendment to the Company’s Articles of Association may only be made by passing a special resolution of the
shareholders of the Company.
RESEARCH AND DEVELOPMENT
The Group does not undertake any material activities in the field of research and development.
BRANCHES OUTSIDE THE UK
The Company does not have any branches outside the UK.
POST-BALANCE SHEET EVENTS
There were no post-balance sheet events.
AUDITOR
KPMG LLP has confirmed its willingness to continue in office as auditor of the Company and resolutions for its
re-appointment and for the Audit Committee to determine its remuneration will be proposed at the forthcoming AGM.
ANNUAL GENERAL MEETING
The AGM will be held on 14 June 2021 at 11am at Enbrook Park, Sandgate, Folkestone, Kent CT20 3SE. The Notice of AGM will
contain an explanation of special business to be considered at the meeting and will be available on our website,
www.corporate.saga.co.uk, in due course.
By order of the Board
V. HAYNES
Group Company Secretary
6 April 2021
Saga plc (Company no. 08804263)
115
Saga plc Annual Report and Accounts 2021Governance
Statements of responsibilities
DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the annual report and the Group and parent company financial statements in
accordance with applicable laws and regulations.
Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under that
law, they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (EU), and in conformity with the
requirements of the Companies Act 2006, and have elected to prepare the parent company financial statements in accordance
with UK accounting standards, including FRS 101 'Reduced Disclosure Framework'.
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and parent company and of their profit or loss for that period (see Key statements
on page 53). In preparing each of the Group and parent company financial statements, the Directors are required to:
– select suitable accounting policies and then apply them consistently;
– make judgements and estimates that are reasonable, relevant, reliable and prudent;
– for the Group financial statements, state whether they have been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and in accordance with IFRSs as adopted by the EU;
– for the parent company financial statements, state whether applicable UK accounting standards have been followed, subject to
any material departures disclosed and explained in the parent company financial statements;
– assess the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
– use the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
DISCLOSURE OF INFORMATION TO THE AUDITOR
Having made the requisite enquiries, so far as each of the Directors is aware, there is no relevant audit information (as
defined by section 418(3) of the Act) of which the Company’s auditor is unaware and the Directors have taken all the steps
they ought to have taken as Directors to make themselves aware of any relevant audit information and to ensure that the
Company’s auditor is aware of that information.
MAINTENANCE OF WEBSITE
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
DIRECTORS’ RESPONSIBILITY STATEMENT
Each of the Directors, who were in office at the date of this report, whose names and responsibilities are listed on pages 60
and 62-63, confirm that, to the best of their knowledge:
– the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
– the Management Report includes a fair review of the development and performance of the business and the position of
the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face.
By order of the Board
V. HAYNES
Group Company Secretary
6 April 2021
Saga plc (Company no. 08804263)
116
GovernanceSaga plc Annual Report and Accounts 2021 Independent Auditor’s Report
to the Members of Saga plc
1. OUR OPINION IS UNMODIFIED
We have audited the financial statements of Saga plc (‘the Company’) for the year ended 31 January 2021 which comprise
the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial
position, consolidated statement of changes in equity and consolidated statement of cash flows, Company balance sheet,
Company statement of changes in equity, and the related notes, including the accounting policies in note 2 to the Group
financial statements and note 1 to the Company financial statements.
In our opinion:
– the financial statements give a true and fair view of the state of the Group’s and of the Company’s affairs as at
31 January 2021 and of the Group’s loss for the year then ended;
– the Group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
– the Company financial statements have been properly prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS Regulation to the extent applicable.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is consistent with our report to the Audit Committee.
We were first appointed as auditor by the shareholders on 22 June 2017. The period of total uninterrupted engagement is for the
four financial years ended 31 January 2021. We have fulfilled our ethical responsibilities under, and we remain independent of
the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that standard were provided.
2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of
audit significance, in arriving at our audit opinion above together with our key audit procedures to address those matters and
our findings from those procedures in order that the Company’s members as a body may better understand the process by
which we arrived at our audit opinion. These matters were addressed, and our findings are based on procedures undertaken,
in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion
thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
117
Saga plc Annual Report and Accounts 2021Governance Independent Auditor’s Report
to the Members of Saga plc continued
2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT (CONTINUED)
Going concern and
disclosures
The risk compared
to the prior year
is unchanged.
Refer to pages
28-29 (principal
risks and
uncertainties),
pages 44-45
(Strategic Report
– Operating and
Financial Review),
page 46 (Viability
Statement), page 53
(going concern
statement), pages
70-73 (Audit
Committee Report)
and note 2.1 on
pages 136-138
(basis of
preparation), note
30 on page 194-195
and note 41 on
page 203 (financial
disclosures).
The risk
Unprecedented levels of uncertainty
The financial statements explain how the
Directors have formed a judgement that it
is appropriate to adopt the going concern
basis of preparation for the Group and the
Company. The judgement is based on an
evaluation of the inherent risks to the
Group and Company’s business model and
how those risks might affect the Group and
Company’s financial resources or ability to
continue operations over a period of at
least a year from the date of approval of
the financial statements.
The prolonged impact of COVID-19 may
cast significant doubt on the entity’s ability
to continue as a going concern and may
indicate the existence of a material
uncertainty.
The risks most likely to adversely affect the
Group and Company’s available financial
resources and metrics relevant to debt
covenants over the period to April 2022 are:
– the length of time that the impact of
COVID-19 will continue to significantly
disrupt the Group’s Travel operations and
constrain its ability to operate, given
that the Group’s customer demographic
is most at risk from this pandemic and
the restrictions imposed worldwide in
respect of the freedom of movement
and travel;
– the financial and operational resilience
of the Group’s Insurance business and
its ability to deliver the business plan in
light of heightened levels of regulatory
change and increased uncertainty
brought on by this pandemic; and
– the impact on the Group’s ability to
meet the terms of its ship debt and
Group bank debt covenants.
Our response
Our procedures included:
– Funding assessment: We considered the Directors’
assessment of COVID-19 related sources of risk to the
Group’s financial and operational resilience compared
with our own understanding of these risks and
knowledge of the business. Our procedures included:
– We agreed the Group’s committed level of financing,
the availability of facilities and related covenant
requirements to signed agreements;
– We critically evaluated management’s assessment
of compliance with debt covenants. We assessed
the ability of the Group to meet the terms and
financial covenants within recently amended facility
agreements in reasonably foreseeable downside
scenarios brought about by the COVID-19
pandemic. These included challenge and assessment
of the ability of the Group to withstand an extended
and prolonged period of no Cruise or Tour Operations
and, once business returns to normal, to respond to
new ways of operation;
– We critically evaluated management’s risk
assessment process to identify and assess business
risks relating to events and conditions that may cast
significant doubt on the Group and Company's
ability to continue as a going concern and whether
the method used by management is appropriate;
– We evaluated the models used by management in
its assessment and evaluated how the information
system captures events and conditions that may
cast significant doubt on the Group and Company's
ability to continue as a going concern; and
– Through inquiry and inspection of correspondence,
we considered the likelihood of the Group’s financial
services and travel regulators (Financial Conduct
Authority (‘FCA’), the Gibraltar Financial Services
Commission (‘GFSC’) and the Civil Aviation
Authority (‘CAA’)), imposing additional financial
or operational constraints on the Group and how
such risks had been factored into the stress
testing performed.
118
Saga plc Annual Report and Accounts 2021Governance The risk
Disclosure quality
Clear and full disclosure of the assessment
undertaken by the Directors and the
rationale for the use of the going concern
assumption represents a key financial
statement disclosure requirement.
There is a risk that insufficient details are
disclosed to allow a full understanding of the
going concern assessment.
Our response
– Key dependency assessment: The continued operation
of the Group’s Insurance business is an important
factor in assessing the risk of failure; as is the
continued availability of the Group’s revolving credit
facility (refer above) throughout the assessment period.
Our procedures included:
– We gained an understanding of and assessed the
Group’s plans and progress to ensure the continued
operation of the Insurance business in the face of
the disruption caused by COVID-19, and the
assessment of the likely impact of regulatory
change in the insurance industry on its business
plan; and
– Using our insurance industry experience, we
challenged and evaluated the degree to which
reasonably foreseeable downside scenarios that
would impact the Group’s Insurance business were
factored into the financial resilience modelling that
the Group has performed.
– Historical comparisons: We evaluated the
appropriateness of management’s cashflow forecast
process by comparing historic forecasts and the
related underlying assumptions considered in the prior
period with the actual and forecasted cashflows.
– Benchmarking assumptions and our sector experience:
We evaluated and challenged the assumptions used in
cash flow forecasts using our knowledge of the
business and our travel and insurance sector
experience and assessing the potential risk of
management bias.
– Sensitivity analysis: We considered sensitivities over
the level of available financial resources indicated
by the Group’s financial forecasts taking account
of reasonably possible (but not unrealistic) adverse
effects that could arise from these risks individually
and collectively. This included an assessment of the
Group’s ability to continue to meet its amended debt
covenants in this scenario.
– Evaluating Directors’ intent: We evaluated the
achievability of the actions the Directors may consider
they would take to improve the position as risks
materialise. This included inspecting the temporary
working capital facility agreement the Group has
entered into, to enable additional funding to be provided
to the Cruise business, should this be necessary.
119
Saga plc Annual Report and Accounts 2021Governance Independent Auditor’s Report
to the Members of Saga plc continued
2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT (CONTINUED)
The risk
Our response
– Assessing transparency: In order to assess the
completeness and accuracy of the disclosures
we performed the following procedures:
– We critically assessed the matters covered in the
going concern disclosure by agreeing to supporting
evidence and performing inquiries of the Directors,
which included challenging the transparency of
assumptions in the severe but plausible downside
stress scenarios performed in making this
assessment;
– We assessed whether the disclosures in the annual
report describe the principal risks by comparing with
our understanding of the business and evaluated
how these are mitigated by considering the specific
management actions; and
– We challenged the basis of preparation and
determined whether any change from the method
used in the prior period is appropriate.
We performed the tests above rather than seeking to
rely on any of the Group's controls because the nature
of the balance is such that we would expect to obtain
audit evidence primarily through the detailed
procedures described.
Our findings: We found the going concern disclosure
without any material uncertainty to be proportionate
(2020 result: proportionate). However, no audit should be
expected to predict the unknowable factors or all possible
future implications for a company and this is particularly
the case in relation to COVID-19.
120
Saga plc Annual Report and Accounts 2021Governance Valuation of claims
outstanding – large
BI case reserves and
IBNR (gross and net)
The risk compared
to the prior year has
increased.
(Gross £329.5 million,
2020: £338.3 million;
Net £117.2 million,
2020: £149.1 million)
Refer to pages
70-73 (Audit
Committee Report),
note 2.3r and 2.3s on
page 148
(accounting
policies); note 2.5
on pages 151-154
(significant
accounting
judgements,
estimates and
assumptions), note
20 on page 178-184
and note 28 on
pages 189-193
(financial
disclosures).
The risk
Subjective valuation:
Valuation of claims outstanding –large bodily
injury (‘BI’) case reserves and incurred but
not reported (‘IBNR’) estimates is highly
judgemental and requires a number of
assumptions to be made that have high
estimation uncertainty and can have material
impacts on the valuation. Further, valuation
of these liabilities involves selection of
appropriate methods, which are highly
subjective, and involves complex calculations.
Key assumptions include development
patterns and estimates of the frequency
and severity of claims used to value the
liabilities, particularly those relating to
the amount and timing of IBNR claims.
The inherent risks of material misstatement
relating to valuation of claims outstanding
has been impacted by the COVID-19
pandemic and current economic conditions.
We expect that recent data used to
determine the assumptions used in setting
reserve estimates will be affected by
COVID-19 and therefore management will
need to consider the extent to which this
influences the choice of the assumptions.
Certain areas of the claims outstanding
balance contain greater uncertainty, for
example third-party bodily injury (‘TPBI’)
claims exhibit greater variability and are
more long-tailed than the damage classes.
In particular the allowances made for the
likelihood of a claim to settle as a Periodic
Payment Order (‘PPO’) rather than a lump
sum is uncertain and has a high reserving
risk, following the change in the Ogden rate.
Similar estimates are required in establishing
the reinsurers’ share of claims outstanding,
in particular the share of IBNR claims.
A margin is added to the actuarial best
estimate (ABE) of claims outstanding to
make allowance for risks and uncertainties
that are not specifically allowed for in
establishing the ABE. The appropriate
margin to recognise is a subjective
judgement and estimate taken by the
Directors, based on the perceived
uncertainty and potential for volatility in
the underlying claims, which has increased
given the impacts of COVID-19.
Our response
Our procedures included:
– Control design and implementation: Tested, with
the support of our IT specialists, the design and
implementation of key controls over the completeness
and accuracy of claims and premiums data used in the
calculation of IBNR claims (including both current and
prior year case reserve data). The controls included
reconciliations between data in the actuarial reserving
systems and data in the policy administration
systems; and
– tested the design and implementation of controls
over setting and monitoring of case reserves over
large bodily inquiry claims. We involved our actuarial
specialists to perform the following procedures:
– Evaluate the work of internal actuaries: We analysed
and evaluated the results of reserving reports issued by
the internal actuaries and assessed their competence
and the appropriateness of their methodology and
their conclusions;
– Benchmarking assumptions and methodology:
Through critical assessment of the actuarial reports
and supporting documentation, including the use
of benchmarking against market data and through
discussion with the actuaries, we analysed and
challenged the reserving methodology as well as the
key assumptions used – including claims frequency,
claims severity, claims inflation, development patterns,
PPO propensities, allowances for subrogation and the
impact of legislative and process developments and
considered the need for additional allowances as a
result of COVID-19; and
– Independent re-performance in respect of the
actuarial best estimate: We used our own modelling
tools to re-project ultimate losses for substantially
all perils and compared this to the Group’s estimates.
Our other procedures included:
– Margin evaluation: We evaluated the appropriateness
of the Group recommended margin held at year end.
In order to do this, we assessed the Directors’ approach,
and supporting analysis for margin to be held, having
regard to additional allowances made this year for
what is considered heightened uncertainty in the
notification and development of claims brought about
as a result of COVID-19 that may not yet be reflected
in the data and assumptions used in developing the
ABE. We then considered the relative strength of the
margin held against peers and versus the prior period
in order to be satisfied that before allowing for the
increase in uncertainty arising from COVID-19, no
additional prudence had been recognised in the level
of overall reserves held including margin.
121
Saga plc Annual Report and Accounts 2021Governance Independent Auditor’s Report
to the Members of Saga plc continued
2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT (CONTINUED)
The risk
Data capture
The valuation of these reserves depends
on complete and accurate data about the
volume, amount and pattern of current and
historical claims since they are used to
form expectations about future claims.
If the data used in calculating IBNR, or for
forming judgements over key assumptions,
is not complete and accurate, then material
impacts on the valuation of claims
outstanding may arise.
The effect of these matters is that, as part
of our risk assessment, we determined that
the valuation of claims outstanding has a
high degree of estimation uncertainty, with
a potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole, and possibly many
times that amount.
Our response
– Data comparisons: We agreed the relevant financial
and non-financial claims and premiums data recorded
in the claims and premiums administration systems to
the data used in the actuarial reserving calculations,
to assess the integrity of the data used by the internal
actuaries in the actuarial reserving process and
assessed that the output of the actuarial re-
projections reconciled.
– Tests of detail: We corroborated a targeted sample of
large BI case reserves, for example, large third party
bodily injury claims, to appropriate documentation such
as reports from loss adjusters or third party experts, to
identify and test the application of significant
assumptions applied in determining the level of case
reserves and to evaluate the valuation against
prescribed reserving methodology.
We assessed the risk transfer elements of the
reinsurance contracts and the accuracy of a sample of
reinsurance recoveries recorded, including reinsurance
recoveries related to IBNR, against the terms of
relevant reinsurance agreements.
– Assessing transparency: We assessed whether the
Group’s disclosures about the degree of estimation
uncertainty and the sensitivity of the balance to
changes in key assumptions reflected the risks inherent
in the valuation of claims outstanding.
We performed the tests above rather than seeking to
rely on any of the group's controls because the nature
of the balance is such that we would expect to obtain
audit evidence primarily through the detailed
procedures described.
Our findings: We found the estimate of claims outstanding
to be cautious where we exercised judgement to determine
the acceptability of the amount recognised. We took into
account the relative strength of the estimates versus the
prior period in order to be satisfied that, before allowing
for the increase in uncertainty arising from COVID-19, no
additional prudence had been recognised. In concluding on
the overall estimate of the valuation of claims outstanding,
we took into account heightened uncertainty in a portfolio
that is monoline in nature and in the development
and notification of claims as a result of the impact of
COVID-19. We also considered the clarity of the associated
disclosure of the direction of estimation uncertainty and
of the sensitivity of key assumptions.
As noted above, overall we found that the assumptions
and estimate were cautious (2020: mildly cautious) with
proportionate (2020: proportionate) disclosure of the
sensitivities to changes in key assumptions and estimate
as inputs to the valuation.
122
Saga plc Annual Report and Accounts 2021Governance Recoverability
of Group goodwill
and the Parent
Company’s
investment in
subsidiaries
The risk compared
to the prior year is
unchanged
(Group goodwill:
£718.6 million,
2020: £778.4 million;
Company’s
investment in
subsidiaries:
£552.3 million,
2020: £552.3 million)
Refer to pages
70-73 (Audit
Committee Report),
note 2.3g and 2.3h
on pages 142-143
and note 1.1b on
page 206
(accounting
policies), note 2.5 on
pages 151-154 and
note 1.2 on page 209
(significant
accounting
judgements,
estimates and
assumptions), note 5
on page 160, note 14
on page 168 and
note 16 on pages
169-171 and note 2
on pages 209-210
(financial
disclosures).
The risk
Forecast-based valuation:
Goodwill in the Group and the carrying
amount of the Company’s investment
in subsidiaries are significant and at risk
of irrecoverability if forecast business
performance for the Group’s Insurance,
Cruise and Tour Operations businesses,
in particular, were to fall significantly
short of business plans. The estimated
recoverable amount of goodwill and the
Company’s investment in subsidiaries are
subjective due to the inherent uncertainty
involved in forecasting and discounting
future cash flows and auditor judgement
is required to assess whether the Directors’
overall estimate, taking into account
the below assumptions, falls within an
acceptable range. Current economic
conditions including the prolonged closure
of the Group’s Travel businesses that has
arisen as a result of COVID-19 also have a
significant impact on estimation uncertainty.
The assessment of the recoverability of
the goodwill balance involves a high degree
of subjectivity due to the supporting
calculation of Value in Use (‘VIU’) being
reliant on expectations of future
performance. Multiple inputs into the
goodwill calculation, such as weighted
average cost of capital (‘WACC’) and
terminal growth rates are at risk of
manipulation in order to demonstrate that
the value of an underlying intangible asset
is not impaired.
The risk premium in relation to these assets
has been impacted by increased
uncertainty in the economic outlook as a
result of a COVID-19 and therefore there is
risk of impairments to goodwill and
investments in subsidiaries at the
Company level if the share price does not
recover; and particularly if the Group is not
able to deliver at or ahead of plan in
2021/22 and years to come.
The effect of these matters is that, as part
of our risk assessment, we determined that
the valuation of Group goodwill and the
Company’s investment in subsidiaries has a
high degree of estimation uncertainty, with a
potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole, and possibly many
times that amount.
Our response
Our procedures included:
– Control design and implementation: We evaluated the
design and implementation of the Group’s impairment
assessment procedures, including those controls over
the approvals of business plans, including as applied
to the Company.
– Historical comparisons: We assessed the
reasonableness of cash flow projections against
historical performance;
– Our sector experience: We evaluated and challenged
the assumptions used in cash flow forecasts using our
sector knowledge and experience.
– Benchmarking assumptions: We compared the Group’s
and the Company’s assumptions to externally derived
data in relation to key inputs such as WACC and
terminal growth rates with the support of our
valuation specialists.
– Comparing valuations: We compared the recoverable
amount of each significant cash generating unit
(‘CGU’) by reference to VIU relative to the carrying
value and evaluated the outcome against comparator
industry multiples; and, for the Company’s investment
in subsidiaries, we compared the sum of the VIUs for
all of the Group’s CGUs to the carrying value, market
capitalisation and implied multiples of the Group; and
corroborated reasons for any significant differences.
– Sensitivity analysis: We used our analytical tools to
assess the sensitivity of the goodwill headroom and
concluded on the appropriateness of any impairment
recognised. We considered the impact of COVID-19
on key assumptions and changes therein.
– Assessing transparency: We assessed whether the
Group disclosures about the sensitivity of the outcome
of the impairment assessment to changes in key
assumptions reflects the risks inherent in the valuation
of goodwill and in the carrying value of the Company’s
investment in subsidiaries.
We performed the tests above rather than seeking to
rely on any of the Group's controls because the nature
of the balance is such that we would expect to obtain
audit evidence primarily through the detailed
procedures described.
Our findings: We found that the resulting estimates over
the recoverable amount of Group goodwill and the related
impairment charge in the period and of the Company’s
investment in subsidiaries to be balanced (2020 finding:
mildly cautious). We found the disclosures of the drivers
of impairment and the sensitivities of goodwill headroom
and the carrying value of the Company’s investment in
subsidiaries to changes in key assumptions, to be
proportionate (2020: proportionate).
123
Saga plc Annual Report and Accounts 2021Governance Independent Auditor’s Report
to the Members of Saga plc continued
2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT (CONTINUED)
Recoverability of
the carrying value
of cruise ships
This is a new key
audit matter
(Cruise ships:
£635.0 million,
2020: £303.9 million)
Refer to pages
70-73 (Audit
Committee Report),
note 2.3h and 2.3i
on page 143
(accounting
policies), note 2.5
on pages 151-154
(significant
accounting
judgements,
estimates and
assumptions) and
note 17 on pages
171-173 (financial
disclosures).
The risk
Forecast-based valuation:
The estimated recoverable amount of the
Group’s cruise ships is subjective due to the
inherent uncertainty involved in forecasting
and discounting future cash flows.
The carrying amount of the cruise ships is
at risk of irrecoverability if the resumption
of trading in Cruise was to be delayed
beyond that assumed in the latest business
plan forecasts approved or if the speed at
which the business is expected to recover,
fell short of expectations.
There is a higher level of subjectivity and
therefore more risk in estimating VIU for
these assets this year, caused by the impact
of COVID-19 on the prolonged closure
of the Cruise business and in ongoing
uncertainty as to the economic outlook.
Further, there are multiple inputs into the
estimate of VIU, such as the per ship cash
flows, estimated useful life and residual
value of the cruise ships, WACC and the
annual growth rate, that are at risk of
manipulation in order to demonstrate that
the value of cruise ships assets is not
impaired.
The effect of these matters is that, as part
of the reassessment of the risks in our
audit, we determined that the recoverability
of the carrying value of cruise ships has a
high degree of estimation uncertainty, with
a potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole, and possibly many
times that amount.
Our response
Our procedures included:
– Control design and implementation: We evaluated the
design and implementation of the Group’s controls over
the impairment assessment procedures, including those
over the cash flow forecasts applied to the cruise ships.
– Benchmarking assumptions: We challenged the
forecast cash flow and growth assumptions for the
cruise ship assets, including comparison of the
estimated useful life, residual values and annual growth
rates to external sources.
– We worked with our valuation specialists to independently
develop a discount rate range considered appropriate
using market data for comparable assets, adjusted by risk
factors specific to the asset.
– We considered the appropriateness of, and assessed
the integrity of the VIU models applied by the Group for
impairment testing.
– We compared the forecast cash flows and capital
expenditure contained in the VIU models to the Board
approved five-year plan.
– Sensitivity analysis: We used our analytical tools
to assess the sensitivity of the recoverability of the
carrying value of cruise ships and concluded on the
appropriateness of no impairment being recognised.
We considered the impact of COVID-19 on key
assumptions including annual assumed load factors,
restart dates, discount rates, and the speed at which
cruising is assumed to return to pre-COVID-19 levels.
– Assessing transparency: We assessed whether the
Group disclosures around the valuation of cruise ships
and the sensitivity to changes in key assumptions
reflects the risks inherent in the valuation of cruise
ship assets.
We performed the tests above rather than seeking to
rely on any of the Group's controls because the nature
of the balance is such that we would expect to obtain
audit evidence primarily through the detailed
procedures described.
Our findings:
Having found the Group's estimate of the recoverable
amount of the cruise ships to be at the high end of the
range, we consider it to be acceptable. We exercised
judgement, based on our assessment of reasonably possible
assumptions, as to whether it is acceptable not to record an
impairment, and we exercised judgement to determine the
appropriateness of disclosures of the risk that a reasonable
change in assumptions could lead to an impairment, taking
into account the fact that these cruise ships are recently
acquired assets and the fact that a faster return to pre-
COVID-19 levels of trading in Cruise would support the
recoverability of the carrying values of these assets.
As noted above, overall we found that the resulting
estimate of the recoverable amount of the carrying
value of the cruise ships to be optimistic (2020 finding:
balanced). We found the disclosures of management
judgments and the sensitivities of the carrying value
of cruise ships to changes in key assumptions to be
proportionate (2020: proportionate).
124
Saga plc Annual Report and Accounts 2021Governance In the prior year we reported a key audit matter in respect of the impact of uncertainties due to the UK exiting the European
Union (‘EU’). Following the trade agreement between the UK and the EU, and the end of the EU-exit implementation period,
the nature of these uncertainties has changed. We continue to perform procedures over material assumptions in forward
looking assessments of key audit matters such as going concern, the valuation of claims outstanding – large BI case
reserves and IBNR, the recoverability of Group goodwill and the Company’s investment in subsidiaries and the recoverability
of the carrying value of cruise ships, however we no longer consider the effect of the UK’s departure from the EU to be a
separate key audit matter.
3. OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Materiality for the Group financial statements as a whole was set at £3.5m (2020: £3.9m), determined with reference to a
benchmark of Group profit before tax, normalised by averaging a three year period to exclude goodwill and other impairment
charges as disclosed in note 5, of £65.0m (2020: £400.5m), which represents 3.7% (2020: 3.9%).
Normalised profit before tax
from continuing operations
£95.0m (2020: £99.6m)
Group materiality
£3.5m (2020: £3.9m)
£3.5m
Whole financial statements materiality
(2020: £3.9m)
Whole financial statements performance
materiality £2.3m (2020: £2.5m)
Range of materiality at 8 components
(2020: 8 components) (£0.6m-£2.6m)
(2020: £0.6m-£2.8m)
Profit before tax
Group materiality
£0.14m
Misstatements reported to the Audit
Committee (2020: £0.16m)
Materiality for the Company financial statements as a whole was set at £2.2m (2020: £2.5m), which represents 0.3% of net
assets of £713.4m (2020: 0.4% of net assets of £587.3m). The increase in net assets of the Company is attributable to the
issuance of share capital during the year by the Company.
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements
in individual account balances add up to a material amount across the financial statements as a whole.
Performance materiality for both the Group and Company was set at 65% (2020: 65%) of materiality for the financial
statements as a whole, which equates to £2.3m (2020: £2.5m) and £1.4m (2020: £1.5m). We applied this percentage in our
determination of performance materiality based on the level of control deficiencies and changes in key senior management
during the prior period.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.14m
(2020: £0.16m), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Of the Group's 8 (2020: 8) reporting components, we subjected 4 (2020: 4) to full scope audits for Group purposes and 4
(2020: 4) to specified risk-focused audit procedures. The latter were not individually financially significant enough to require a
full scope audit for Group purposes but did present specific individual risks that needed to be addressed. For the residual
components, we conducted reviews of financial information (including enquiry) at an aggregated Group level to re-examine
our assessment that there were no significant risks of material misstatement within these.
The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed
above and the information to be reported back. The Group team approved the component materiality, which ranged from
£0.6m to £2.6m (2020: £0.6m to £2.8m), having regard to the mix of size and risk profile of the Group across the components.
The work on 2 of the 8 components (2020: 2 of the 8 components) was performed by component auditors and the rest,
including the audit of the Company, was performed by the Group team. The Group audit team performed specific procedures
on the impairments of £65.0m (2020: £400.5m) which was excluded in arriving at the normalised Group profit before tax for
the year as identified above.
125
Saga plc Annual Report and Accounts 2021Governance Independent Auditor’s Report
to the Members of Saga plc continued
3. OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT
(CONTINUED)
The Group team also routinely reviews the audit documentation of all component audits. This year for one component that is reported
by KPMG Gibraltar, who were also the component auditors during 2019 and 2020, the work arrangement was re-organised, and the
underlying work was managed and delivered by the KPMG Group senior staff with oversight and review by KPMG Gibraltar.
Whilst it would be conventional practice to visit the component team, the impact of the COVID-19 restrictions on travel
required an alternative approach this year, which required more extensive use of video and telephone conference meetings
with all component auditors. During these video and telephone conference meetings, an assessment was made of audit risk
and strategy, the findings reported to the Group audit team were discussed in more detail, key working papers were inspected
and any further work required by the Group audit team was then performed by the component auditor.
These components within the scope of our work accounted for the following percentages of the Group’s results:
Group revenue
Total profits and losses that made
up the Group loss before tax
Group total assets
3
3
96%
(2020:
96%)
93
93
Full scope for Group audit purposes 2021
Specified risk-focused audit procedures 2021
Full scope for Group audit purposes 2020
Specified risk-focused audit procedures 2020
Residual components
15
16
95%
(2020:
95%)
79
81
5
2
99%
(2020:
99%)
97
94
4. GOING CONCERN
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have concluded that the Group’s and the Company’s financial
position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast
significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the
financial statements (‘the going concern period’).
In our evaluation of the Directors' conclusions, we considered the inherent risks to the Group's and Company's business model
and analysed how those risks might affect the Group and Company's financial resources or ability to continue operations
over the going concern period.
An explanation of how we evaluated management’s assessment of going concern is set out in the related key audit matter in
section 2 of this report.
Our conclusions based on this work:
– we consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is
appropriate;
– we have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events
or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company's ability to continue as
a going concern for the going concern period;
– we have nothing material to add or draw attention to in relation to the Directors’ statement in note 2.1 to the financial
statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant
doubt over the Group and Company’s use of that basis for the going concern period, and we found the going concern
disclosure in note 2.1 to be acceptable; and
– the related statement under the Listing Rules set out on page 53 is materially consistent with the financial statements and
our audit knowledge.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee
that the Group or the Company will continue in operation.
126
Saga plc Annual Report and Accounts 2021Governance 5. FRAUD AND BREACHES OF LAWS AND REGULATIONS – ABILITY TO DETECT
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (’fraud risks’) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
– enquiring of Directors, the Audit Committee, the Internal Audit Director, the Chief Risk Officer and inspection of key
policies and papers provided to those charged with governance as to the Group’s high-level policies and procedures to
prevent and detect fraud, including the Group’s channel for “whistleblowing” and the process for engaging local
management to identify fraud risks specific to their business units, as well as whether they have knowledge of any actual,
suspected, or alleged fraud;
– reading Board, Audit and Risk Committee minutes and in the case of Audit and Risk Committee meetings for the Group,
attendance of the external audit partner at these meetings;
– considering remuneration incentive schemes and performance targets for Directors and senior management.
– using analytical procedures to identify any unusual or unexpected relationships;
– consulting with professionals with forensic knowledge to assist us in identifying fraud risks based on discussions of the
circumstances of the Group and Company; and
– reading broker reports and other public information to identify third-party expectations and concerns.
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout
the audit. This included communication from the group to component audit teams of relevant fraud risks identified at the
Group level and request to component audit teams to report to the Group audit team any instances of fraud that could give
rise to a material misstatement at group.
As required by auditing standards, and taking into account possible pressures to meet profit targets, we perform procedures
to address the risk of management override of controls and the risk of fraudulent revenue recognition, in particular the risk
that broking and travel revenue is recorded in the wrong period and the risk that Group and component management may be
in a position to make inappropriate accounting entries.
We also identified fraud risks related to inappropriate assessment of the recoverability of Group goodwill, the recoverability
of the carrying value of cruise ships and the valuation of claims outstanding – large BI case reserves and IBNR, in response
to possible pressures to meet profit targets.
In determining the audit procedures to address the identified fraud risks, we took into account the results of our evaluation
and testing of the operating effectiveness of the Group-wide fraud risk management controls. Further detail in respect of
the procedures performed over the recoverability of Group goodwill, the recoverability of the carrying value of cruise ships
and the valuation of claims outstanding – large BI case reserves and IBNR, including how we have used specialists to assist
in our challenge of management is set out in the key audit matter disclosures in section 2 of this report. We challenged
management in relation to the selection of assumptions and the appropriateness of the rationale for any changes, the
consistency of the selected assumptions across different aspects of the financial reporting process and comparison to
our understanding of the business, trends in experience, customer behaviour and economic conditions including the impact
of COVID-19 and also by reference to market practice.
To address the pervasive risk as it relates to management override, we also performed procedures including:
– identifying journal entries to test for all in scope components, based on risk criteria and comparing the identified entries
to supporting documentation. These included those posted by senior management, those including specific words based
on our risk criteria, those journals which were unbalanced, those posted to unusual accounts, those posted at the end
of the period and/or post-closing entries with little or no description and unusual journal entries posted to either cash
or borrowings; and
– assessing significant accounting estimates for bias.
Identifying and responding to risks of material misstatement due to non-compliance with laws
and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience, and through discussion with the Directors and other
management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence
and discussed with the Directors and other management the policies and procedures regarding compliance with laws and
regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the
entity’s procedures for complying with regulatory requirements.
127
Saga plc Annual Report and Accounts 2021Governance Independent Auditor’s Report
to the Members of Saga plc continued
5. FRAUD AND BREACHES OF LAWS AND REGULATIONS – ABILITY TO DETECT (CONTINUED)
Identifying and responding to risks of material misstatement due to non-compliance with laws
and regulations (continued)
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-
compliance throughout the audit. This included communication from the group to full-scope component audit teams of
relevant laws and regulations identified at the Group level, and a request for full scope component auditors to report to the
group team any instances of non-compliance with laws and regulations that could give rise to a material misstatement
at group.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting
legislation (including related companies legislation), distributable profits legislation, taxation legislation and pension
legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the
related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a
material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation
or the loss of the Group’s license to operate. We identified the following areas as those most likely to have such an effect:
regulatory capital, regulatory compliance and liquidity, and certain aspects of company legislation recognising the financial
and regulated nature of the Group’s activities and its legal form, with the Insurance business regulated primarily by the FCA
and the GFSC, with the Travel business regulated by the CAA. The Travel businesses are members of the Association of British
Travel Agents (ABTA), the International Air Transport Association (IATA) and the Federation of Tour Operators (FTO). These are
well-recognised UK trade bodies with codes of conduct which members are required to adhere to. All parts of Saga operate
procedures to comply with other key regulations and legislation including but not limited to the Data Protection Act 2018, the
Bribery Act 2010, the Equality Act 2010 and Health and Safety legislation. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and regulations to enquiry of the Directors and other management
and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed
to us or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have properly planned and performed our audit in accordance
with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE ANNUAL REPORT
AND ACCOUNTS
The Directors are responsible for the other information presented in the annual report together with the financial statements.
Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material misstatements in the other information.
Strategic Report and Directors’ Report
Based solely on our work on the other information:
– we have not identified material misstatements in the Strategic Report and the Directors’ Report;
– in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
– in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006.
128
Saga plc Annual Report and Accounts 2021Governance Disclosures of emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures
in respect of emerging and principal risks and the Viability Statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
– the Directors’ confirmation within the Viability Statement on page 46 that they have carried out a robust assessment of
the emerging and principal risks facing the Group, including those that would threaten its business model, future
performance, solvency and liquidity;
– the principal risks and uncertainties disclosures on pages 28 to 29 describing these risks and how emerging risks are
identified, and explaining how they are being managed and mitigated; and
– the Directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what
period they have done so and why they considered that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to review the Viability Statement, set out on page 46 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our
audit knowledge.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these
statements is not a guarantee as to the Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ corporate
governance disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial
statements and our audit knowledge:
– the Directors’ statement that they consider that the annual report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information necessary for shareholders to assess the Group’s position and
performance, business model and strategy;
– the section of the annual report describing the work of the Audit Committee, including the significant issues that the
Audit Committee considered in relation to the financial statements, and how these issues were addressed; and
– the section of the annual report that describes the review of the effectiveness of the Group’s risk management and
internal control systems.
We are required to review the part of Corporate Governance Statement relating to the Group’s compliance with the
provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report
in this respect.
7. WE HAVE NOTHING TO REPORT ON THE OTHER MATTERS ON WHICH WE ARE REQUIRED
TO REPORT BY EXCEPTION
Under the Companies Act 2006, we are required to report to you if, in our opinion:
– adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
– the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
– certain disclosures of Directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
129
Saga plc Annual Report and Accounts 2021Governance Independent Auditor’s Report
to the Members of Saga plc continued
8. RESPECTIVE RESPONSIBILITIES
Directors’ responsibilities
As explained more fully in their statement set out on page 116, the Directors are responsible for: the preparation of the
financial statements including being satisfied that they give a true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error; assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the
Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the
financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
9. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and the terms of our engagement by the Company. Our audit work has been undertaken so that we might state to
the Company’s members those matters we are required to state to them in an auditor’s report, and the further matters we are
required to state to them in accordance with the terms agreed with the Company and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
members, as a body, for our audit work, for this report, or for the opinions we have formed.
STUART CRISP
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square, London
E14 5GL
6 April 2021
130
Saga plc Annual Report and Accounts 2021Governance Consolidated income statement
FOR THE YEAR ENDED 31 JANUARY 2021
Gross earned premiums
Earned premiums ceded to reinsurers
Net earned premiums
Other revenue
Total revenue
Gross claims incurred
Reinsurers’ share of claims incurred
Net claims incurred
Other cost of sales
Total cost of sales
Gross profit
Administrative and selling expenses
Impairment of assets
Gain on lease modification
Net profit on disposal of businesses
Net profit on disposal of property, plant and equipment, right-of-use assets and software
Investment income
Finance costs
Finance income
Loss before tax
Tax expense
Loss for the year
Note
3
3
3
3
3
28
28
28
3
4
5
18
13
15, 17, 18
6
7
8
10
2021
£’m
221.7
(142.8)
78.9
258.7
337.6
(131.4)
113.2
(18.2)
(82.0)
(100.2)
237.4
(224.2)
(65.0)
3.2
8.6
6.6
0.7
(30.2)
1.7
(61.2)
(6.6)
(67.8)
2020
(restated)
£’m
233.9
(145.7)
88.2
709.1
797.3
(140.6)1
109.81
(30.8)
(395.1)
(425.9)
371.4
(252.6)
(400.5)
–
–
1.3
1.2
(21.8)
0.1
(300.9)
(11.9)
(312.8)
Attributable to:
Equity holders of the parent
Earnings Per Share:
Basic
Diluted
(67.8)
(312.8)
(67.0p)
(67.0p)
(restated)
(381.7p)2
(381.7p)2
12
12
The notes on pages 136 to 203 form an integral part of these consolidated financial statements.
1 Gross claims incurred and reinsurers’ share of claims incurred for the year ended 31 January 2020 have been restated due to an incorrect allocation between these
2
classifications. Gross claims incurred have decreased by £19.3m and reinsurers’ share of claims incurred has decreased by £19.3m
In accordance with IAS 33 ‘Earnings per Share’, basic and diluted EPS figures for the year ended 31 January 2020 have been restated and adjusted for: (a) the bonus
factor of 1.1 to reflect the bonus element of the Firm Placing and Open Offer (note 33); and (b) the consolidation of the Company’s shares during the year (note 33).
Amounts as originally stated were (27.9p) for basic and diluted EPS, and 8.9p for basic and diluted Underlying Basic EPS
131
Saga plc Annual Report and Accounts 2021Financial Statements Consolidated statement of comprehensive income
FOR THE YEAR ENDED 31 JANUARY 2021
Loss for the year
Other comprehensive income
Other comprehensive income to be reclassified to income statement in subsequent years
Net gains/(losses) on hedging instruments during the year
Recycling of previous gains to income statement on matured hedges
Total net gains/(losses) on cash flow hedges
Associated tax effect
Net gains on fair value financial assets during the year
Associated tax effect
Note
19
19
2021
£’m
(67.8)
2020
£’m
(312.8)
22.3
(2.5)
19.8
(3.5)
3.2
(0.8)
(11.2)
(2.6)
(13.8)
2.4
8.1
(1.4)
Total other comprehensive gains/(losses) with recycling to income statement
18.7
(4.7)
Other comprehensive income not to be reclassified to income statement
in subsequent years
Remeasurement losses on defined benefit plans
Associated tax effect
Total other comprehensive losses without recycling to income statement
Total other comprehensive gains/(losses)
Total comprehensive losses for the year
Attributable to:
Equity holders of the parent
27
(1.2)
0.2
(5.4)
0.9
(1.0)
(4.5)
17.7
(9.2)
(50.1)
(322.0)
(50.1)
(322.0)
The notes on pages 136 to 203 form an integral part of these consolidated financial statements.
132
Saga plc Annual Report and Accounts 2021Financial Statements Consolidated statement of financial position
FOR THE YEAR ENDED 31 JANUARY 2021
Assets
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Financial assets
Current tax assets
Deferred tax assets
Reinsurance assets
Inventories
Trade and other receivables
Assets held for sale
Trust accounts
Cash and short-term deposits
Total assets
Liabilities
Retirement benefit scheme obligations
Gross insurance contract liabilities
Provisions
Financial liabilities
Deferred tax liabilities
Current tax liabilities
Contract liabilities
Trade and other payables
Liabilities held for sale
Total liabilities
Equity
Issued capital
Share premium
Retained earnings
Share-based payment reserve
Fair value reserve
Hedging reserve
Total equity
Total equity and liabilities
Note
14
15
17
18
19
10
28
22
23
13, 17, 38
24
25
27
28
31
19
10
29
26
13, 38
33
2021
£’m
2020
£’m
718.6
56.6
660.2
2.8
359.8
3.1
12.5
71.6
3.5
183.1
16.9
22.4
101.6
2,212.7
4.3
426.3
11.7
826.6
5.8
–
82.2
175.1
–
1,532.0
21.0
648.3
0.2
5.8
7.3
(1.9)
680.7
2,212.7
778.4
57.1
425.0
25.7
378.1
–
22.3
62.1
5.4
209.0
33.8
–
97.9
2,094.8
5.5
443.6
7.7
690.3
4.2
7.7
153.2
185.9
8.5
1,506.6
11.2
519.3
65.4
7.8
4.9
(20.4)
588.2
2,094.8
The notes on pages 136 to 203 form an integral part of these consolidated financial statements.
Signed for and on behalf of the Board on 6 April 2021 by
E A SUTHERLAND
Group Chief Executive Officer
J B QUIN
Group Chief Financial Officer
133
Saga plc Annual Report and Accounts 2021Financial Statements Total
£’m
588.2
(67.8)
(20.4)
–
18.4
19.8
(2.1)
16.3
2.2
–
–
–
–
–
(1.9)
17.5
–
(2.1)
(50.1)
2.2
(0.1)
150.4
(11.6)
2.4
(0.7)
680.7
960.9
(312.8)
(9.3)
(7.1)
(2.1)
(11.4)
(2.1)
(322.0)
(26.5)
–
–
–
(20.4)
(26.5)
(25.8)
2.2
(0.6)
588.2
Consolidated statement of changes in equity
FOR THE YEAR ENDED 31 JANUARY 2021
Attributable to the equity holders of the parent
Issued
capital
£’m
Share
premium
£’m
Retained
earnings
£’m
Share-
based
payment
reserve
£’m
Fair value
reserve
£’m
Hedging
reserve
£’m
At 1 February 2020
Loss for the year
Other comprehensive (losses)/income
excluding recycling
Recycling of previous gains to income
statement
Total comprehensive (losses)/income
Recognition of non-financial asset from
hedging reserve (note 19)
Dividends paid (note 11)
Issue of share capital (note 33)
Transaction costs associated with issue of
share capital
Share-based payment charge (note 36)
Exercise of share options
At 31 January 2021
At 1 February 2019
Loss for the year
Other comprehensive (losses)/income
excluding recycling
Recycling of previous gains to income
statement
Total comprehensive (losses)/income
Recognition of non-financial asset from
hedging reserve (note 19)
Dividends paid (note 11)
Share-based payment charge (note 36)
Exercise of share options
At 31 January 2020
11.2
–
519.3
–
–
–
–
–
–
9.8
–
–
–
21.0
11.2
–
–
–
–
–
–
–
–
11.2
–
–
–
–
–
140.6
(11.6)
–
–
648.3
519.3
–
–
–
–
–
–
–
–
519.3
65.4
(67.8)
(1.0)
–
(68.8)
–
(0.1)
–
–
–
3.7
0.2
401.4
(312.8)
(4.5)
–
(317.3)
–
(25.8)
–
7.1
65.4
7.8
–
–
–
–
–
–
–
–
2.4
(4.4)
5.8
13.3
–
–
–
–
–
–
2.2
(7.7)
7.8
4.9
–
2.4
–
2.4
–
–
–
–
–
–
7.3
(1.8)
–
6.7
–
6.7
–
–
–
–
4.9
The notes on pages 136 to 203 form an integral part of these consolidated financial statements.
134
Saga plc Annual Report and Accounts 2021Financial Statements Consolidated statement of cash flows
FOR THE YEAR ENDED 31 JANUARY 2021
Loss before tax
Depreciation, impairment and profit on disposal, of property, plant & equipment and
right-of-use assets
Amortisation and impairment of intangible assets and loss on disposal of software
Gain on lease modification
Share-based payment transactions
Profit on disposal of assets held for sale
Loss on disposal of subsidiaries
Finance costs
Finance income
Interest income from investments
Increase in trust accounts
Movements in other assets and liabilities
Interest received
Interest paid
Income tax paid
Net cash flows (used in)/from operating activities
Investing activities
Proceeds from sale of property, plant and equipment, and right-of-use assets
Purchase of and payments for the construction of property, plant and equipment and
intangible assets
Net disposal of financial assets
Disposal of subsidiaries, net of cash in businesses disposed of
Net cash flows used in investing activities
Financing activities
Payment of principal portion of lease liabilities
Proceeds from borrowings
Repayment of borrowings
Debt issue costs
Proceeds from issue of share capital
Transaction costs associated with issue of share capital
Dividends paid
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the start of the year
Cash and cash equivalents at the end of the year
The notes on pages 136 to 203 form an integral part of these consolidated financial statements.
Note
13
32
32
32
32
33
25
2021
£’m
(61.2)
14.9
72.5
(3.2)
2.4
(12.2)
3.6
30.2
(1.7)
(0.7)
(22.4)
(66.5)
(44.3)
0.7
(24.1)
(10.7)
(78.4)
2020
£’m
(300.9)
43.7
408.1
–
2.1
–
–
21.8
(0.1)
(1.2)
–
(37.8)
135.7
1.2
(19.9)
(25.1)
91.9
8.3
6.3
(285.1)
41.9
23.1
(211.8)
(295.3)
32.8
–
(256.2)
(4.0)
330.8
(130.0)
(17.4)
150.3
(11.6)
(0.1)
318.0
27.8
139.1
166.9
(15.0)
279.0
(84.2)
(7.9)
–
–
(25.8)
146.1
(18.2)
157.3
139.1
135
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements
1 CORPORATE INFORMATION
Saga plc (the ‘Company’) is a public limited company incorporated and domiciled in the United Kingdom under the
Companies Act 2006 (registration number 08804263). The Company is registered in England and its registered office
is located at Enbrook Park, Folkestone, Kent CT20 3SE.
Saga offers a wide range of products and services to its customer base which includes general insurance products, package
and cruise holidays, personal finance products and a monthly subscription magazine.
2.1 BASIS OF PREPARATION
The consolidated financial statements of the Group have been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (EU).
The consolidated financial statements have been prepared on a going concern basis and on a historical cost basis except as
otherwise stated. The Group has reviewed the appropriateness of the going concern basis in preparing the financial statements,
particularly in light of the COVID-19 pandemic, details of which are included below. Based on those assumptions, the Directors
have concluded that it remains appropriate to adopt the going concern basis in preparing the financial statements.
The Group’s consolidated financial statements are presented in pounds sterling which is also the parent company’s functional
currency, and all values are rounded to the nearest hundred thousand (£’m), except when otherwise indicated. Each company
in the Group determines its own functional currency and items included in the financial statements of each entity are
measured using that functional currency.
The preparation of financial statements in compliance with international accounting standards (IFRS) as adopted by the
EU, and in conformity with the requirements of the Companies Act 2006, requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement in applying the Group’s accounting policies. The areas
where significant judgements and estimates have been made in preparing the financial statements and their effect are
disclosed in note 2.5.
The principal accounting policies adopted, which have been applied consistently, unless otherwise stated, are set out in note 2.3 below.
Going concern
The Directors have considered the appropriateness of the going concern basis of preparation for the financial statements
prepared to 31 January 2021 and in doing so have considered a range of possible scenarios that factor in the potential
ongoing impact of the COVID-19 pandemic and other key risks and uncertainties.
The Group’s business activities, together with the factors likely to affect its future development and performance, its
exposure to risk and its management of these risks, details of its financial instruments and derivative activities, and details
of other financial and non-financial liabilities, are described throughout the annual report (see (i) Principal risks and
uncertainties (PRUs) on pages 28 and 29; (ii) Operating and Financial Review on pages 30 to 45; (iii) Audit, risk and internal
control on pages 66 to 69; (iv) Audit Committee Report on pages 70 to 73; (v) Risk Committee Report on pages 74 to 76; and
(vi) notes on pages 136 to 203). The Directors believe that the Group is well placed to successfully manage its business risks.
The Group’s largest business is its Insurance operations, which have been resilient over the last 12 months and have remained
profitable. In addition, the Group has been able to maintain full operational capability throughout the year despite the impact
of the COVID-19 pandemic, with almost all colleagues working from home.
However, the Group’s Travel business has been subject to significant disruption. Following advice from the UK Government
that people over 70 years old should avoid travel and given operational challenges in almost all countries, the Group took the
decision to suspend Cruise and Tour Operations in March 2020. Both businesses have been suspended since then and will not
resume trading until later this year.
Over the 12 months during which the Travel business has been suspended, the Group has taken a number of mitigating
actions to strengthen its financial position, including reductions in costs, conclusion of disposals, an equity capital raise
and amendments to both ship debt and banking facilities. These actions, together with the cash generated by the Insurance
business, enabled the Group to reduce net debt (excluding debt relating to Cruise operations) by £115m during the year
despite the provision of £104m in cash support to Travel operations.
As at 31 January 2021, the Group had significant headroom to all covenants on bank facilities. At that date, the Group was
in compliance with all requirements of its banking facilities, specifically: the leverage ratio (excluding the impact of debt and
earnings relating to the new ocean cruise ships) was 2.7x (2020: 2.4x), compared to a 4.75x maximum covenant; interest cover
was 3.3x (2020: 9.0x), well above the minimum covenant of 1.25x; and the Cruise intercompany debtor was £16.2m (2020: £1.1m),
significantly below the limit in bank facilities at that date of £45m (since increased to £55m).
136
Saga plc Annual Report and Accounts 2021Financial Statements 2.1 BASIS OF PREPARATION (CONTINUED)
Going concern (continued)
Although the Travel business remains suspended, customer loyalty has been exceptionally positive, especially for Cruise.
Given the large number of customers who have rebooked for 2021/22 travel departures and because of a level of pent-up
demand, demand generation is not considered to be a near-term material challenge for the Travel business.
The Group’s base case assumption is for Tour Operations to resume in July 2021 for river cruising and in September 2021 for
stays and tours, and ocean cruises recommencing in June 2021 for Spirit of Discovery and in July 2021 for the inaugural
cruise of Spirit of Adventure. It is also assumed that the mid-term outlook for Cruise returns to pre COVID-19 levels.
The Group believes that the base case assumption is reasonable for the following reasons:
– All customers should have been vaccinated twice by the end of May, which will be combined with a series of other safety
measures implemented by the business, including a quarantine and testing procedure for crew.
– There is UK Government support to resume domestic and international tourism from June and they have confirmed that
cruises will be allowed to restart to the same timetable.
– There is a growing recognition that ocean cruise – if managed properly – is a safer proposition than some other forms of
international travel. This is particularly the case for Saga given the nature of the cruise proposition and the additional
steps being taken, including mandatory vaccines before travel and our third-party accreditation for COVID-19 health and
safety protocols.
– A number of European countries have already indicated they will be welcoming Saga customers and look forward to UK
cruise ships entering their ports in the summer of 2021. The Group’s ships are particularly sought after for their modest size
(at less than 1,000 passengers) and the vaccine-only policy for customers.
– If scheduled port stops are not possible because of growing levels of COVID-19 in those countries, the flexibility of Cruise
allows for itineraries to be modified accordingly.
Although management are confident of a summer return, there is high degree of uncertainty in the outlook, with a number of
factors that could lead to a delay in the lifting of the ban on international travel. Given this situation, which is constantly
evolving, the Group has considered a range of alternative outcomes.
The main downside scenario considered assumes no Tour Operations departures until March 2022, with Cruise resuming from
November 2021 for Spirit of Discovery and from December 2021 for Spirit of Adventure. In this scenario the Group has also
assumed a slower recovery in load factors (remaining at 80% until July 2022) and incremental costs in operating the business.
In assessing wider downside risks, the Group has also considered other trading stress tests in relation to the Insurance business.
Although this scenario would be challenging, the Group expects to remain resilient and would not expect to need to take further
actions to improve financial flexibility. Specifically:
– The Group has plenty of liquidity, with £75m of available cash at 31 January 2021, and a £100m revolving credit facility
(RCF) that is currently undrawn.
– The Group has agreed a working capital facility with Roger De Haan that enables the Cruise business to draw down £10m
in cash support if required, on the same terms as the RCF.
– The Insurance business continues to perform well and with predictable cash generation.
– Tour Operations customer receipts are fully ring fenced and are not included in available cash.
– There are no debt maturities until after April 2022, with capital repayments not due on the two cruise ships until June 2022
for £15m on the Spirit of Discovery facility and until September 2022 for £16m on the Spirit of Adventure facility, and there
are no repayments due on bank facilities until their maturity in May 2023.
– The Group therefore expects to be able to operate within the debt covenants and other requirements of its banking facilities,
which have been amended to accommodate the Group’s downside scenario modelling and are summarised below.
Leverage
(net debt to EBITDA ratio)
Interest cover
(EBITDA to net cash interest ratio)
30 April
2021*
31 July
2021
31 October
2021*
31
January
2022
30 April
2022*
31 July
2022
Maximum
4.75
4.75
4.50
4.25
4.00
3.00
Minimum
1.25
1.25
1.25
1.50
3.50
3.50
Cruise intercompany debt cap
Maximum
£55m
£55m
£55m
£55m
£55m
£55m
* Quarterly covenants for leverage and interest cover are only tested if leverage is above 4.0x times at the previous covenant test date.
137
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
2.1 BASIS OF PREPARATION (CONTINUED)
Going concern (continued)
Although the Group believes that the downside scenario above represents an appropriate reasonable worse-case (RWC),
there are a number of significant factors related to COVID-19 that are outside of the control of the Group, including the
status and impact of the pandemic worldwide; potential emergence of new variants of the virus; the availability of vaccines,
together with the speed at which they are deployed and their efficacy; and the restrictions imposed worldwide in respect of
the freedom of movement and travel. The Group is therefore not able to provide certainty that there could not be more severe
downside scenarios to that described above.
While the Group expects the outcome of a scenario more severe than the RWC to be unlikely, further downside sensitivities
have been considered in light of the COVID-19 pandemic, including the impact of not being able to resume both Cruise and
Tour Operations until March 2022. In considering this outcome, the Group has allowed for likely ongoing lower motor claims
frequency than assumed in its base case plans, which in part offsets the adverse impact of continued delays to a resumption
of Travel. In this scenario, the Group projects that it would have limited headroom to the interest cover covenant and would be
near the limit of Cruise funding, but it would still remain in compliance with the requirements of its banking facilities for at
least the next 12 months. The Group would however consider taking further actions to increase flexibility and reduce downside
risks associated with the remote possibility of any further delay to the restart of Travel beyond March 2022. Such actions
would include seeking additional amendments to bank facilities and consideration of alternative sources of funding.
The impact of the COVID-19 pandemic cannot be accurately predicted and it is not possible to assess all possible future
implications for the Group; however, based on this analysis and the scenarios modelled, the Directors are confident that the
Group will have sufficient funds to continue to meet its liabilities as they fall due for a period of at least 12 months from the
date of approval of the financial statements. The Directors have therefore deemed it appropriate to prepare the financial
statements to 31 January 2021 on a going concern basis.
2.2 BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries) made up to 31 January each year. Control is achieved when the Group is exposed, or has rights,
to variable returns from its involvement with an investee entity and has the ability to affect those returns through its power
over the investee entity. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity.
Subsidiary companies are consolidated using the acquisition method.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtained control, and
continue to be consolidated until the date when such control ceases.
In preparing these consolidated financial statements, any intra-group receivables, payables, income and expenses arising
from intra-group trading are eliminated. Where accounting policies used in individual financial statements of a subsidiary
company differ from Group policies, adjustments are made to bring these policies in line with Group policies.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from
the effective date of acquisition or up to the effective date of disposal, as appropriate. Where a subsidiary which constituted
a separate major line of business is disposed of, it is disclosed as a discontinued operation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling
interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment
retained is recognised at fair value.
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Revenue recognition
Revenue represents amounts receivable from the sale or supply of goods and services provided to customers in the ordinary
course of business and is recognised to the extent that it is probable that the future economic benefits will flow to the Group
and the revenue can be reliably measured, regardless of when payment is received. The recognition policies for the Group’s
various revenue streams by segment are as follows:
i) Insurance
Twelve month insurance policies with no option to fix the premium at renewal (‘annual policies’):
Insurance premiums received for risks underwritten by the Group are recognised on a straight-line time-apportioned basis
over the period of the policy. The portion of those premiums ceded to reinsurers is also recognised on a straight-line time-
apportioned basis over the duration of the policy as a reduction to revenue.
138
Saga plc Annual Report and Accounts 2021Financial Statements 2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Revenue recognition (continued)
i) Insurance (continued)
Brokerage revenue received in connection with insurance policies not underwritten by the Group is recognised on inception
of the policy when the obligation to arrange insurance for the customer has been satisfied. The portion of insurance premiums
received for risks which are not underwritten by the Group that are passed to a third-party insurer is not recognised in the
income statement.
Insurance premiums and sales revenues received in advance of the inception date of a policy are treated as advance receipts
and included as contract liabilities in the statement of financial position.
Premiums in respect of insurance policies underwritten by the Group that have a period of unexpired risk at the reporting date,
and which relate to the period after the reporting date, are treated as unearned and included in gross insurance contract liabilities
in the statement of financial position. The portion of those unearned premiums ceded to excess of loss reinsurers is recognised
as a reinsurance asset on the face of the statement of financial position. The portion of those unearned premiums ceded to
quota share reinsurers is recognised as an asset within trade payables, since there is a right of set-off within the contract.
Changes to premiums are recognised on the effective date of the mid-term adjustment. For those policies that are underwritten
by the Group, these changes are recognised on a straight-line time-apportioned basis over the period remaining on the policy.
Reduction in premiums from mid-term cancellations are recognised on the effective date of the cancellation. Fee income from
mid-term adjustments and cancellations is recognised on the date which the mid-term adjustment or cancellation occurs.
Twelve month insurance policies with the option to fix the premium over three years (‘three-year fixed-price policies’):
Insurance premiums received over the duration of three-year fixed-price policies underwritten by the Group are recognised
over the three years of cover. Premiums are allocated to each of the three policy years based on the relative expected claims
costs in each year, and are then recognised on a straight-line time-apportioned basis within each policy year. The carrying
value of the revenue deferred in this instance is recognised as unearned premium within gross insurance contract liabilities in
the statement of financial position. The portion of premiums ceded to reinsurers is recognised in the same manner as for
annual policies.
Brokerage revenue received in connection with three-year fixed-price policies not underwritten by the Group is allocated to
the performance obligations of the contract, being the arrangement of the insurance in each year and the option to fix the
customer price at renewal. The revenue allocated to the option to renew at a fixed price is recognised in profit or loss either
when the customer exercises the option at the first and second renewal dates, or sooner if the customer cancels the policy
mid-term or makes a claim that releases the Group from its obligation to fix the customer’s price. The carrying value of the
revenue deferred in this instance is recognised within contract liabilities in the statement of financial position.
Where there is a switch of underwriter between the Group and a third-party underwriter at either of the renewal points within
the three-year price fix, the Group applies the relevant accounting policy for the subsequent policy year in line with either of
the two methods described above.
All insurance policies (both three-year fixed-price policies and annual policies):
Income from credit provided to customers to facilitate payment of their insurance premiums over the life of their policy is
treated as part of the revenue from insurance operations and recognised over the period of the policy in proportion to the
outstanding premium balance.
Profit commissions due under co-insurance or reinsurance arrangements are recognised and valued in accordance with the
contractual terms to which they are subject, when it is highly probable that a significant reversal of revenue will not occur,
and on the same basis, where appropriate, as the related reinsured liabilities.
For revenue earned from credit hire and repair services for non-fault claims (‘credit hire’ and ‘credit repair’), the Group
initially recognises the revenue at fair value, which is based on a historical assessment of debt recovery and discount
levels. Credit hire revenue is recognised from the date that a vehicle is placed on hire equally over the duration of the hire.
Credit repair revenue represents income from the recovery of the costs of repair of customers’ vehicles. Credit repair revenue
is recognised when the work has been completed. Late payment penalties afforded under the terms of the Association of
British Insurers General Terms of Agreement (ABI GTA) are recognised as they become payable by the insurance company.
ii) Travel
Revenue from tour operations and cruise holidays where the Group does not operate the cruise ship is recognised in line
with the performance obligations that are included in a package holiday, namely the provision of flights, accommodation,
transfers and travel insurance. Revenue is recognised as and when each performance obligation is satisfied.
139
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a. Revenue recognition (continued)
ii) Travel (continued)
Revenue in respect of cruise holidays where the Group operates the cruise ship is also recognised in line with the
performance obligations, being the cruise itself, flights (where applicable), travel insurance and transfers. The portion of
revenue allocated to the cruise itself is recognised on a per diem basis over the duration of the cruise in line with when the
performance obligation is satisfied. The portion of revenue allocated to each of flights (where applicable), travel insurance
and transfers is recognised as and when each performance obligation is satisfied.
An element of revenue which represents the non-refundable deposit received at the time of booking is recognised in the
income statement immediately in line with the prevailing rate of cancellation.
Revenue from sales in resort, for example for optional excursions, or onboard a cruise ship operated by the Group, for example
bar sales or optional excursions, is recognised as it is earned.
Revenue from tour operations and cruising holidays received in advance of when each performance obligation is satisfied
is included as deferred revenue within contract liabilities in the statement of financial position.
iii) Other Businesses and Central Costs
Personal finance
Revenue from personal finance products is recognised when the customer contracts with the provider of the relevant
personal finance product where the revenue comprises a one-off payment by the provider of the product.
Where the personal finance product is one that delivers a recurring income stream, the present value of the future expected
revenue to be received is recognised when the customer contracts with the provider of the relevant personal finance product,
and it is highly probable that a significant reversal of revenue recognised will not occur. For the Saga Savings product,
commissions are earned over the duration of the contract in line with the contractual amount due to the Company.
Magazine subscriptions
Magazine subscription revenue is recognised on a straight-line basis over the period of the subscription. Revenue generated
from advertising within the magazine is recognised when the magazine is provided to the customer.
The element of subscriptions and advertising revenue relating to the period after the reporting date is recognised as deferred
revenue within contract liabilities in the statement of financial position.
Printing and mailing
Revenue from printing and mailing services is recognised in line with the performance obligations within customer contracts.
b. Cost recognition
i) Insurance acquisition costs
Acquisition costs arising from the selling or renewing of insurance policies underwritten by the Group are recognised on
a straight-line time-apportioned basis over the period of the policy in which the related revenues are earned. The proportion of
acquisition costs relating to premiums treated as unearned at the reporting date are deferred and included as other receivables
in the statement of financial position.
Incremental costs of obtaining an insurance contract not underwritten by the Group, namely fees charged by
price-comparison websites, are recognised as an asset within trade and other receivables on the face of the statement
of financial position. Such costs are amortised in line with the pattern of revenue for the related insurance contract, which
incorporate the propensity for that contract to renew in future periods based on the prevailing rate of renewal for these types
of contract. If the expected amortisation period is one year or less, then incremental costs are expensed when incurred.
ii) Claims costs
Claims costs incurred in respect of insurance policies underwritten by the Group include estimates for claims made for losses
reported as occurring during the period together with the related handling costs, any adjustments to claims outstanding from
previous periods, and an estimate for the cost of claims incurred during the period but not reported as at the reporting date.
The portion of costs recovered from reinsurance is recognised as a reduction to those costs in the same period in which the
costs are recognised.
Further detail is provided in note 28.
140
Saga plc Annual Report and Accounts 2021Financial Statements 2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
b. Cost recognition (continued)
iii) Finance costs
Finance costs comprise interest paid and payable that is calculated using the effective interest rate (EIR) method, and it is
recognised in the income statement as it accrues. Accrued interest is included within the carrying value of the interest bearing
financial liability in the statement of financial position. Finance costs also include debt issue costs that were initially recognised in
the statement of financial position and amortised over the life of the debt, debt issue costs in respect of renegotiating existing
facilities that are immediately recognised in the income statement and net fair value losses on derivative financial instruments.
iv) All other expenses
All other expenses are recognised in the income statement as they are incurred.
c. Recognition of other income statement items
i) Investment income
Investment income in the form of interest is recognised in the income statement as it accrues and is calculated using the
effective interest rate method. Fees and commissions which are an integral part of the effective yield of the financial asset
or liability are recognised as an adjustment to the EIR of the instrument.
ii) Dividend income
Income in the form of dividends is recognised when the right to receive payment is established. For listed securities, this is
the date that the security is listed as ex-dividend.
iii) Gains and losses on financial investments at fair value through profit or loss (FVTPL)
Realised and unrealised gains and losses on financial investments are recorded as finance income or finance costs in the income
statement. Unrealised gains and losses arising on financial assets measured at FVTPL, which have not been derecognised as a
result of disposal or transfer, represent the difference between the carrying value at the year end and the carrying value at the
previous year end or the purchase value for investments acquired during the year, net of the reversal of previously recognised
unrealised gains and losses in respect of disposals made during the year. Realised gains and losses on the sale of investments are
calculated as the difference between net sales proceeds and the carrying value at the date of sale.
d. Taxes
i) Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted at the reporting date. Current income tax assets and liabilities also include adjustments in respect
of tax expected to be payable or recoverable in respect of previous periods. Current income tax relating to items recognised
in other comprehensive income and directly in equity is recognised in other comprehensive income or equity and not in the
income statement.
ii) Deferred tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences and the
carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset
is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the reporting date. Deferred tax is charged or credited in the income statement, except when it relates to items charged
or credited in other comprehensive income or equity, in which case the deferred tax is recognised in other comprehensive
income or equity as appropriate.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
141
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e. Foreign currencies
Transactions in foreign currencies are initially recorded by the Group at their respective functional currency spot rate at the
date that the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the functional currency spot rate of exchange prevalent at the reporting date.
f. Intangible assets
Intangible assets acquired are measured on initial recognition at cost. Intangible assets acquired in a business combination
are measured at their fair value at the date of acquisition and, following initial recognition, are carried at cost less any
accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding internally
developed software, are not capitalised and the related expenditure is reflected in the income statement in the period
in which the expenditure is incurred.
The useful lives of intangible assets and goodwill are assessed as either finite or indefinite. Estimated useful lives are
as follows:
Goodwill
Brands
Customer relationships
Contracts acquired
Software
Indefinite
10 years
Over the life of the customer relationship
Over the life of the contract
3-10 years
Intangible assets with finite lives are amortised over their useful economic life on a basis appropriate to the consumption
of the asset and are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least
at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and
are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised
in the income statement in the expense category that is consistent with the function of the intangible assets.
Goodwill and intangible assets with indefinite useful lives are not amortised but are tested for impairment at least annually,
either individually or at the cash generating unit (CGU) level. Where the carrying value of the asset exceeds the recoverable
amount, an impairment loss is recognised in the income statement immediately. The assessment of indefinite life is reviewed
annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to
finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.
g. Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred measured at acquisition date at fair value and the amount of any non-controlling
interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests
in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets.
When the Group acquires a business, it assesses the financial and non-financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Contingent consideration classified as an asset or liability that is a financial instrument within the scope of IFRS 9 ‘Financial
Instruments’ is measured at fair value with the changes in fair value recognised in the income statement.
Any excess of the cost of acquisition over the fair values of the identifiable assets and liabilities is recognised as goodwill.
If the cost of acquisition is less than the fair values of the identifiable assets and liabilities of the acquired business, the
difference is recognised directly in the income statement in the year of acquisition.
Acquisition-related costs are expensed as incurred and included in administrative expenses.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated to CGUs
at the point of acquisition and is reviewed at least annually for impairment.
142
Saga plc Annual Report and Accounts 2021Financial Statements 2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h. Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. If such an
indication exists, the recoverable amount is estimated and compared with the carrying amount. If the recoverable amount
is less than the carrying amount, the asset is considered impaired and is written down to its recoverable amount and the
impairment loss is recognised immediately in the income statement.
Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If there is any indication that an asset may be impaired, recoverable amount is estimated for the
individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount
is determined of the CGU to which the asset belongs.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business
combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
Recoverable amount is calculated as the higher of fair value less costs to sell, and value-in-use. In assessing value-in-use,
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal,
recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model
is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or
other available fair value indicators. The Group bases its value-in-use calculations on detailed budgets, plans and long-term
growth assumptions, which are prepared separately for each of the Group’s CGUs to which individual assets are allocated.
i. Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment losses. Where an item of
property, plant and equipment comprises major components having different useful lives, they are accounted for separately.
Assets in the course of construction at the balance sheet date are classified separately. These assets are transferred to
other asset categories when they become available for their intended use.
Depreciation is charged to the income statement on a straight-line basis so as to write off the depreciable amount of
property, plant and equipment over their estimated useful lives. The depreciable amount is the cost of an asset less its
residual value. Land and assets in the course of construction are not depreciated. Estimated useful lives are as follows:
Buildings, properties and related fixtures:
Buildings
Fixtures & fittings
Cruise ships
Computers
Plant, vehicles and other equipment
50 years
3-20 years
30 years
3-6 years
3-10 years
Costs relating to cruise ship mandatory dry-dockings are capitalised and depreciated over the period up to the next
dry-docking, where appropriate. All other repairs and maintenance costs are recognised in the income statement as incurred.
An item of property, plant and equipment is derecognised upon disposal, or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising on derecognition of an asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
Estimated residual values and useful lives are reviewed annually.
j. Non-current assets held for sale
The Group classifies non-current assets as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. To be classified as held for sale, an asset must be available for immediate
sale in its present condition subject only to terms that are usual and customary for the sale of such assets, and the sale
must be highly probable. Sale is considered to be highly probable when management is committed to a plan to sell an
asset and an active programme to locate a buyer and complete the plan has been initiated at a price that is reasonable
in relation to its current fair value, and there is an expectation that the sale will be completed within one year from the date
of classification. Non-current assets classified as held for sale are carried on the Group’s statement of financial position
at the lower of their carrying amount and fair value less costs to sell.
Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.
143
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
k. Financial instruments
i) Financial assets
On initial recognition, a financial asset is classified as either amortised cost, fair value through other comprehensive income
(FVOCI); or fair value through profit or loss (FVTPL). The classification of financial assets is based on the business model in
which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where
the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as
a whole is assessed for classification.
Amortised cost
FVOCI
FVTPL
Initial recognition
A financial asset is measured at amortised cost
if it meets both of the following conditions and
is not elected to be designated as FVTPL:
– it is held within a business model whose
objective is to hold assets to collect
contractual cash flows; and
– its contractual terms give rise on specified
dates to cash flows that are solely payments
of principal and interest on the principal
amount outstanding.
A debt investment is measured at FVOCI if it
meets both of the following conditions and is
not elected to be designated as FVTPL:
– it is held within a business model whose
objective is achieved by both collecting
contractual cash flows and selling financial
assets; and
– its contractual terms give rise on specified
dates to cash flows that are solely payments
of principal and interest on the principal
amount outstanding.
On initial recognition of an equity investment that
is not held for trading, the Group may irrevocably
elect to present subsequent changes in the
investment’s fair value in other comprehensive
income. This election is made on an
investment-by-investment basis.
All financial assets not classified as amortised
cost or FVOCI as described above are classified
as FVTPL and held at fair value. This includes all
derivative financial assets.
On initial recognition, the Group may irrevocably
elect to designate a financial asset that otherwise
meets the requirements to be measured at
amortised cost or FVOCI as FVTPL if doing so
eliminates, or significantly reduces an accounting
mismatch that would otherwise arise. This election
is made on an individual instrument basis.
Subsequent measurement
These assets are subsequently measured at
amortised cost using the effective interest rate
method. The amortised cost is reduced by any
impairment losses (see (ii) below). Interest income,
foreign exchange gains and losses and impairments
are recognised in profit or loss as they are incurred.
Any gain or loss on derecognition is recognised in
profit or loss immediately.
Debt instruments are subsequently measured
at fair value. Interest income calculated using the
effective interest rate method, foreign exchange
gains and losses and impairments are recognised
in profit or loss. Other net gains and losses are
recognised in other comprehensive income (OCI).
On derecognition, gains and losses accumulated
in OCI are recycled to profit or loss.
Equity investments are measured at fair value.
Dividends are recognised as income in profit
or loss unless the dividend clearly represents
a recovery of part of the cost of the investment.
Other net gains and losses are recognised in
OCI and are never reclassified to profit or loss.
These assets are subsequently measured at fair
value. Net gains and losses, including any interest
or dividend income, are recognised in profit or loss,
unless such instrument is designated in a hedging
relationship (see (vi) below).
Derecognition
A financial asset is derecognised when the rights to receive cash flows from the asset have expired or when the Group has
transferred substantially all the risks and rewards relating to the asset to a third party.
144
Saga plc Annual Report and Accounts 2021Financial Statements 2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
k. Financial instruments (continued)
ii) Impairment of financial assets
The expected credit loss (ECL) impairment model applies to financial assets measured at amortised cost and debt
investments at FVOCI.
The Group measures loss allowances at an amount equal to 12 month ECLs, except for the following, which are measured
as lifetime ECLs:
– Debt securities that are determined to have high credit risk at the reporting date.
– Other debt securities and bank balances for which credit risk has increased significantly since initial recognition.
– Trade receivables and contract assets that result from transactions within the scope of IFRS 15.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical
experience and informed credit assessment and including forward-looking information.
The Group considers a debt security to have low credit risk when its credit risk rating is equivalent to the definition
of ‘investment grade’. The Group considers this to be BBB- or higher as per Standard & Poor’s rating scale.
Measurement of ECLs
ECLs are measured as a probability-weighted estimate of credit losses. Credit losses are measured as the probability of default in
conjunction with the present value of the Group’s exposure. Loss allowances for ECLs on financial assets measured at amortised
cost are deducted from the gross carrying amount of the assets, with a corresponding charge to the income statement. For debt
instruments measured at FVOCI the loss allowance for debt investments at FVOCI is recognised in profit or loss and reduces the
fair value loss otherwise recognised in the statement of comprehensive income, and deducted from the gross carrying value of the
financial asset in the statement of financial position
iii) Financial liabilities
Initial recognition and measurement
All financial liabilities are classified as financial liabilities at amortised cost on initial recognition except for derivatives, which
are classified at FVTPL, the gains or losses for which are recognised through OCI if the instrument is designated as a hedging
instrument in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable
transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings, derivative financial instruments and
lease liabilities.
Subsequent measurement
After initial recognition, interest bearing loans and borrowings and other payables are subsequently measured at amortised
cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the
income statement.
iv) Derivatives
Derivatives are measured at fair value both initially and subsequent to initial recognition. All changes in fair value of
non-designated derivatives are recognised in the income statement immediately. Changes in fair value of derivatives
designated as cash flow hedges are initially recognised in OCI until such a point that they are recycled to profit or loss in the
same period as the hedged item is recognised in profit or loss, or immediately if the hedged item is no longer expected to occur.
Derivatives are presented as assets when the fair values are positive and as liabilities when the fair values are negative.
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more
than 12 months and it is not expected to be realised or settled within 12 months.
145
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
k. Financial instruments (continued)
v) Fair values
The Group measures all financial instruments at fair value at each reporting date, other than those instruments measured
at amortised cost.
Fair value is the price that would be required to sell an asset or to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell
the asset or transfer the liability takes place either in the principal market accessible by the Group for the asset or liability or,
in the absence of a principal market, in the most advantageous market accessible by the Group for the asset or liability.
The fair values are quoted market prices where there is an active market or are based on valuation techniques when there
is no active market or the instruments are unlisted. Valuation techniques include the use of recent arm’s-length market
transactions, discounted cash flow analysis and other commonly used valuation techniques.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period.
vi) Hedge accounting
The Group designates certain derivative financial instruments as cash flow hedges of certain forecast transactions.
These transactions are highly probable to occur and present an exposure to variations in cash flows that could ultimately
affect amounts determined in profit or loss.
The Group has elected to adopt the general hedge accounting model in IFRS 9. This requires the Group to ensure that hedge
accounting relationships are aligned with its risk management objectives and strategy and to apply a qualitative and
forward-looking approach to assessing hedge effectiveness.
The Group uses forward foreign exchange contracts and commodity swap contracts to hedge the variability in cash flows
arising from changes in foreign currency rates and oil prices respectively. For foreign exchange contracts, the Group designates
the fair value change of the full forward price as the hedging instrument in cash flow hedging relationships. For commodity
hedging, the Group designates the fair value change of the benchmark oil price. The effective portion of changes in fair value
of hedging instruments is accumulated in a cash flow hedge reserve as a separate component of equity. Any ineffective portion
of the fair value gain or loss is recognised immediately within the income statement.
When a hedging instrument no longer meets the criteria for hedge accounting (through maturity, sale, or other termination),
hedge accounting is discontinued prospectively. If the hedged forecast transaction is still expected to occur, the associated
cumulative gain or loss remains in the hedging reserve and is recognised in accordance with the above policy when the
hedged forecast transaction occurs. If the hedged forecast transaction is no longer expected to occur, the cumulative
unrealised gain or loss is recognised in the income statement immediately.
l. Leases
The Group leases various river cruise ships, buildings, equipment and vehicles. The contract length of the lease varies
considerably and may include extension or termination options as described below.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:
the contract involves the use of an identified asset; the Group has the right to obtain substantially all of the economic
benefits from use of the asset throughout the period of use; and the Group has the right to direct the use of the asset.
Leases are initially recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased
asset is available for use by the Group. The lease liability is initially measured at the present value of the lease payments
that are not paid at the commencement date. Where it is reasonably certain that an extension option will be triggered in
a contract, lease payments to be made in respect of the option will be included in the measurement of the lease liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the Group’s incremental borrowing rate is used. This is the rate that
the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset,
in a similar economic environment, with similar terms, security and conditions.
146
Saga plc Annual Report and Accounts 2021Financial Statements 2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
l. Leases (continued)
Lease payments are allocated between principal and finance cost. The finance cost is charged to the income statement
over the lease period using the EIR method and the lease liability is measured at amortised cost using the EIR method.
Right-of-use assets are initially measured at cost comprising the present value of future lease payments plus any initial
direct costs and restoration costs. Right-of-use assets are depreciated over the lease term on a straight-line basis except
for the Group’s river cruise ships. The unit of production method is used to depreciate river cruise ships in order to accurately
reflect the usage of the asset, which is seasonal.
Payments associated with short-term leases of equipment and all leases of low-value assets are expensed in profit or loss as
incurred in line with the exemption allowed under paragraph 6 of IFRS 16. Short-term leases are leases with a lease term
of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture with an individual item value
of US$5,000 or less.
Extension and termination options are included in a number of property and river cruise ship leases across the Group.
These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations.
The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
– the lease term has changed or there is a significant event or change in circumstances resulting in a change in the
assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised
lease payments using a revised discount rate; or
– a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a
revised discount rate at the effective date of the modification.
Income arising from operating leases where the Group acts as lessor is recognised on a straight-line basis over the lease
term and is included in operating income.
m. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes
a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective
asset. All other borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and fees that an entity incurs in connection with the borrowing of funds.
n. Cash and short-term deposits
Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand, and short-term
deposits with a maturity of three months or less from their inception date.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash, short-term deposits
as defined above and short-term highly liquid investments (including money market funds) with original maturities of three
months or less that are subject to an insignificant risk of change in value, net of outstanding bank overdrafts.
o. Trust accounts
All customer monies received in advance in relation to Air Travel Organiser’s Licence (ATOL) licensable bookings are held
in trust accounts until after the customer has travelled, when the Group has fulfilled all its performance obligations with
customers.
The trust arrangement is governed by a deed between the Group, the Civil Aviation Authority Air Travel Trustees and an
independent Trustee, PT Trustees Limited, which determines the inflows and outflows from the accounts. The Group does
not use advance receipts from customers in its Tour Operations business to fund its business operations.
p. Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost.
Loss allowances are measured as lifetime ECLs.
q. Inventories
Inventories are stated at the lower of cost and net realisable value. Costs include all costs incurred in bringing each product
to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected
to be incurred prior to completion and disposal.
147
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
r. Insurance contract liabilities
Insurance contract liabilities include an outstanding claims provision, a provision for unearned premiums and, if required,
a provision for premium deficiency.
Outstanding claims provision
The provision for outstanding claims is set on an individual claim basis and is based on the ultimate cost of all claims notified
but not settled less amounts already paid by the reporting date, together with a provision for related claims handling costs.
The provision also includes the estimated cost of claims incurred but not reported at the statement of financial position date,
which is estimated using actuarial methods. The outstanding claims provision is not discounted for the time value of money,
with the exception of claims settled as periodical payment orders (PPOs).
The amount of any anticipated reinsurance, salvage or subrogation recoveries is separately identified and reported within
reinsurance assets and insurance contract liabilities respectively.
Differences between the provisions at the reporting date and settlements and provisions in the following year (known as
‘run off deviations’) are recognised in the income statement as they arise.
Provision for unearned premiums
The provision for unearned premiums represents the portion of premiums received or receivable that relates to risks
that have not yet expired at the reporting date. The provision is recognised when contracts are entered into and
premiums are charged, and is recognised in the income statement as premium income over the term of the contract
on a straight-line basis.
Provision for premium deficiency
At each reporting date, the Group reviews its unexpired risks and a liability adequacy test is performed to determine whether
there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses
current estimates of future contractual cash flows after taking account of the investment return expected to arise on assets
relating to the relevant insurance technical provisions. If these estimates show that the carrying amount of the unearned
premiums (less related deferred acquisition costs) is inadequate, the deficiency is recognised in the income statement by
setting up a provision for premium deficiency.
s. Reinsurance assets
Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on insurance contracts
issued are classified as reinsurance contracts. A contract is only accounted for as a reinsurance contract where there is
significant insurance risk transfer between the insurer and reinsurer.
Reinsurance assets include balances due from reinsurance companies for ceded insurance liabilities under excess of loss
cover. Amounts recoverable from reinsurers are estimated in a consistent manner with the outstanding claims provisions
in accordance with the relevant reinsurance contract.
The Group assesses its reinsurance assets for impairment at each balance sheet date. For assets that are directly exposed
to long tail PPO liabilities a general provision for impairment is provided, calculated on a wholesale basis by reference to
published credit rating default curves. For all other reinsurance assets, the carrying value is written down to its recoverable
amount only if there is objective evidence of impairment.
For the funds-withheld quota share agreement in motor insurance, the obligation to pay funds and the right to receive
reimbursement for incurred claims are presented on a net basis because there is a legally enforceable right to offset these
amounts and there is an intention to settle on a net basis or realise both the asset and settle the liability simultaneously.
The reinsurance assets recognised under these agreements are therefore recognised as an offset against premium ceded
under the same agreement, within trade and other payables.
t. Share-based payments
The Group provides benefits to employees (including Executive Directors) in the form of share-based payment transactions,
whereby employees render services as consideration for equity instruments (‘equity-settled transactions’). The cost of
equity-settled transactions is measured by reference to the fair value on the grant date and is recognised as an expense
over the relevant vesting period, ending on the date on which the employee becomes fully entitled to the award.
Fair values of share-based payment transactions are calculated using Black-Scholes and Monte-Carlo modelling techniques.
In valuing equity-settled transactions, assessment is made of any vesting conditions to categorise these into market
performance conditions, non-market performance conditions and service conditions.
148
Saga plc Annual Report and Accounts 2021Financial Statements 2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
t. Share-based payments (continued)
Where the equity-settled transactions have market performance conditions (that is, performance which is directly or
indirectly linked to the share price), the fair value of the award is assessed at the time of grant and is not changed, regardless
of the actual level of vesting achieved, except where the employee ceases to be employed prior to the vesting date.
For service conditions and non-market performance conditions, the fair value of the award is assessed at the time of grant
and is reassessed at each reporting date to reflect updated expectations for the level of vesting. No expense is recognised
for awards that ultimately do not vest.
At each reporting date prior to vesting, the cumulative expense is calculated, representing the extent to which the vesting
period has expired and, in the case of non-market conditions, the best estimate of the number of equity instruments that will
ultimately vest or, in the case of instruments subject to market conditions, the fair value on grant adjusted only for leavers.
The movement in the cumulative expense since the previous reporting date is recognised in the income statement, with the
corresponding increase in share-based payments reserve.
Upon vesting of an equity instrument, the cumulative cost in the share-based payments reserve is reclassified to retained
earnings in equity.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted Earnings
Per Share.
u. Retirement benefit schemes
During the year, the Group operated a defined benefit pension plan that requires contributions to be made to separately
administered funds. The cost of providing benefits under the defined benefit plan is determined separately using the
projected unit credit valuation method.
Actuarial gains and losses arising in the year are credited/charged to other comprehensive income and comprise the effects
of changes in actuarial assumptions and experience adjustments due to differences between the previous actuarial
assumptions and what has actually occurred. In particular, the difference between the interest income and the actual return
on plan assets is recognised in other comprehensive income.
Other movements in the net surplus or deficit, which include the current service cost, any past service cost and the effect of
any curtailment or settlements, are recognised in the income statement. Past service costs are recognised in the income
statement on the earlier of the date of plan curtailment and the date that the Group recognises restructuring-related costs.
The interest cost less interest income on assets held in the plans is also charged to the income statement.
The defined benefit schemes are funded, with assets of the schemes held separately from those of the Group, in separate
Trustee administered funds. Scheme assets are measured using market values and scheme liabilities are measured using the
projected unit actuarial method and are discounted at the current rate of return on a high-quality corporate bond of
equivalent term and currency to the liability. Full actuarial valuations are obtained at least triennially and are updated at each
reporting date. The resulting defined benefit asset or liability is presented separately on the face of the statement of financial
position. The value of a pension benefit asset is restricted to the amount that may be recovered either through reduced
contributions or agreed refunds from the scheme.
For defined contribution schemes, the amounts charged to the income statement are the contributions payable in the year.
v. Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the income
statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using
a current pre-tax rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision
due to the passage of time is recognised as a finance cost.
A provision is recognised for onerous contracts in which the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it. The unavoidable costs reflect the least net cost of exiting the
contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.
w. Trade and other payables
Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost. They represent
liabilities to pay for goods or services that have been received or supplied in the normal course of business, invoiced by the
supplier before the year end, but for which payment has not yet been made.
149
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
x. Equity
The Group has ordinary shares that are classified as equity. Incremental external costs that are directly attributable to the
issue of these shares are recognised in equity, net of tax.
2.4 STANDARDS ISSUED BUT NOT YET EFFECTIVE
The following is a list of standards and amendments to standards that are in issue but are not effective or adopted
as at 31 January 2021. Except where separately disclosed, these standards are yet to be endorsed by the EU and UK
Endorsement Board.
a. IFRS 17 ‘Insurance contracts’
IFRS 17 was issued in May 2017 and it establishes a principles-based accounting approach for insurance contracts and will
replace IFRS 4. The Group has begun work to determine the full impact of this standard on the Group’s financial statements.
Our initial assessment is that the standard is likely to have a material impact on the Group’s financial statements as it
represents a significant change to current insurance accounting requirements. The standard is effective for annual reporting
periods beginning on or after 1 January 2023.
b. Classification of liabilities as current or non-current (amendments to IAS 1)
The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the
statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current
(due or potentially due to be settled within one year) or non-current. The amendments are effective for annual periods
beginning on or after 1 January 2023 and are not likely to have a material effect on the Group’s financial statements.
c. Reference to the Conceptual Framework (amendments to IFRS 3)
The amendments update an outdated reference to the Conceptual Framework in IFRS 3 without significantly changing the
requirements in the standard. The amendment is effective for annual reporting periods beginning on or after 1 January 2022
and apply prospectively. The amendment will have no effect on the Group’s financial statements.
d. Property, plant and equipment – proceeds before intended use (amendments to IAS 16)
The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling
items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the
manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the cost of
producing those items, in profit or loss. The amendments are effective for annual reporting periods beginning on or after
1 January 2022. The amendments are not expected to have a material impact on the Group’s financial statements.
e. Onerous contracts – cost of fulfilling a contract (amendments to IAS 37)
The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’.
Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct
labour and materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the
allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).
The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The amendments are not
expected to have a material impact on the Group’s financial statements.
f. Annual improvements to IFRS 2018-2020
Makes minor amendments to the following standards: IFRS 1, IFRS 9, IFRS 16 and IAS 41. The amendments are effective
for annual reporting periods beginning on or after 1 January 2022. The amendments will have no effect on the Group’s
financial statements.
g. COVID-19-related rent concessions (amendment to IFRS 16)
The amendment provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease
modification. The amendment is effective for annual reporting periods beginning on or after 1 June 2020. The amendment was
endorsed by the EU on 9 October 2020. The amendment will have no effect on the Group’s financial statements.
h. Amendments to IFRS 17
Amends IFRS 17 to address concerns and implementation challenges that were identified after IFRS 17 ‘Insurance Contracts’
was published in 2017. As described above, our initial assessment is that the standard is likely to have a material impact on
the Group’s financial statements as it represents a significant change to current insurance accounting requirements.
The standard is effective for annual reporting periods beginning on or after 1 January 2023.
150
Saga plc Annual Report and Accounts 2021Financial Statements 2.4 STANDARDS ISSUED BUT NOT YET EFFECTIVE (CONTINUED)
i. Interest rate benchmark reform – phase 2 (amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
The amendments introduce a practical expedient for modifications required by the reform, clarify that hedge accounting is
not discontinued solely because of the inter-bank offered rate (IBOR) reform, and introduce disclosures that allow users to
understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity
manages those risks as well as the entity’s progress in transitioning from IBORs to alternative benchmark rates, and how the
entity is managing this transition. The amendments are effective for annual reporting periods beginning on or after 1 January
2021. The amendments were endorsed by the EU on 13 January 2021. The amendments are not expected to have a material
impact on the Group’s financial statements.
j. Disclosure of accounting policies (amendments to IAS 1 and IFRS Practice Statement 2)
The amendments require that an entity discloses its material accounting policies, instead of its significant accounting
policies. Further amendments explain how an entity can identify a material accounting policy. The amendments are effective
for annual reporting periods beginning on or after 1 January 2023. The amendments are not expected to have a material
impact on the Group’s financial statements.
k. Definition of accounting estimates (amendments to IAS 8)
The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates.
Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to
measurement uncertainty”. The amendments clarify that a change in accounting estimate that results from new information
or new developments is not the correction of an error. The amendments are effective for annual reporting periods beginning
on or after 1 January 2023. The amendments are not expected to have a material impact on the Group’s financial statements.
2.5 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements requires the Group to select accounting policies and make estimates and
assumptions that affect items reported in the primary consolidated financial statements and notes to the consolidated
financial statements.
The major areas of judgement used as part of accounting policy application are summarised below:
Significant judgements
Items involving judgement
Revenue recognition – performance
obligations
Critical accounting judgement
Identification of performance obligations within contracts with
customers, and the subsequent allocation of the transaction price
to each performance obligation.
Classification of insurance contracts Assessment of whether significant insurance risk is transferred, and
Acc. policy
2.3a
2.3ai
2.3h
Impairment testing of goodwill and
other major classes of assets
in particular assessment of whether reinsurance arrangements
constitute a reinsurance contract under IFRS 4, for example the
funds-withheld quota share contract.
The Group determines whether goodwill needs to be impaired on an
annual basis, or more frequently as required. In the year to 31 January
2021, management deemed it necessary to impair the goodwill
allocated to the Cruise and Tour Operations CGUs in full.
Following the continued impact of the COVID-19 pandemic on the
Group’s operations, especially in Travel, management has concluded
that indicators of impairment exist and has conducted impairment
reviews at 31 January 2021 of the Group’s two cruise ships, Spirit of
Discovery and Spirit of Adventure. Management have considered a
range of scenarios and used their judgement to conclude no
impairment was necessary.
In the year to 31 January 2021, in light of the Group’s decision to
vacate most of its properties, management exercised its judgement
in relation to the impairment of the freehold land and buildings.
In the year to 31 January 2021, in relation to the Destinology
business, management also exercised its judgement in relation to the
impairment of property, plant and equipment and right-of-use assets.
Assessment of whether it is probable that the Group will exercise any
extension of termination options included within lease contracts
151
2.3l
Leases – extension and termination
options
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
2.5 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
Significant judgements (continued)
Acc. policy
2.3r
Items involving judgement
Insurance contract liabilities
Critical accounting judgement
Judgement as to areas of uncertainty that may give rise to claims
costs in excess of the actuarial best estimate of claims incurred, and
the level of additional reserve margin to recognise in the financial
statements above that estimate.
In the year to 31 January 2021, the Group has considered the
additional latency risk to claims cost development caused by the
impact of COVID-19 and has recognised an additional claims reserve
above actuarial best estimate to cover this specific risk.
Significant estimates
All estimates are based on management’s knowledge of current facts and circumstances, assumptions based on that
knowledge and predictions of future events and actions. Actual results may therefore differ from those estimates.
The table below sets out those items the Group considers susceptible to changes in critical estimates and assumptions
together with the relevant accounting policy.
Acc. policy
2.3ai
Items involving estimation
Revenue recognition – three-year
fixed-price insurance policies
2.3bi
Cost recognition – incremental
costs of obtaining an insurance
contract
2.3f & 2.3i
Useful economic lives and residual
values of intangible assets and
property, plant and equipment
Sources of estimation uncertainty
The stand-alone selling price of the option to fix within the Group’s
three-year fixed-price insurance policies has been estimated using
the expected cost plus a margin approach as set out in paragraph 79
(b) of IFRS 15.
An allowance has also been made for the likelihood that the option
will be exercised by factoring in the expected rate of renewal at the
first and second renewal dates. The amount of revenue deferred
upon initial recognition is therefore reduced to the extent that it
is estimated that customers will not exercise the option due to the
fact that they either decide not to renew or they make a claim that
releases the Group from its obligation to fix the customer price.
Incremental costs of obtaining an insurance contract not underwritten
by the Group, namely fees charged by price-comparison websites, are
recognised as an asset on the statement of financial position.
Such costs are amortised in line with the pattern of revenue for the
related insurance contract, which incorporates the propensity for that
contract to renew in future periods based on the prevailing rate of
renewal for these types of contract.
The useful economic lives and residual values of intangible
assets and property, plant and equipment are assessed upon
the capitalisation of each asset and at each reporting date, and
are based upon the expected consumption of future economic
benefits of the asset.
Assets which are in the course of construction are not amortised and
are assessed for impairment in line with the requirements of IAS 36.
152
Saga plc Annual Report and Accounts 2021Financial Statements 2.5 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
Significant estimates (continued)
Acc. policy
2.3h
Items involving estimation
Goodwill impairment testing
2.3h
Impairment of property, plant and
equipment, and right-of-use assets
Sources of estimation uncertainty
The Group determines whether goodwill needs to be impaired on an
annual basis, or more frequently as required. This requires an
estimation of the value-in-use of the CGUs to which goodwill is
allocated. The value-in-use calculation requires the Group to
estimate the future cash flows expected to arise from the CGUs,
discounted at a suitably risk-adjusted rate in order to calculate
present value. The COVID-19 pandemic has increased the estimation
uncertainty in our Tour Operations and Cruise CGUs. The outcome of
the impairment reviews concluded that an impairment charge of
£59.8 be recognised against the Group’s Cruise and Tour Operations
CGUs as at 31 July 2020.
Sensitivity analysis has been undertaken to determine the effect of
changing the discount rate, the terminal value and future cash flows
on the present value calculation, which is shown in note 16a on pages
169 and 170.
Management has performed an impairment review on its freehold
land and buildings, and has estimated the recoverable amount based
on the fair value less costs to sell of each property the Group plans to
dispose of. The outcome of the impairment reviews concluded that an
impairment charge of £4.5m be recognised against the Group’s
freehold land and buildings assets as at 31 January 2021.
These properties were subsequently transferred to assets held for
sale.
Following the continued impact of the COVID-19 pandemic on the
Group’s operations, management conducted impairment reviews at
31 January 2021 of the Group’s two cruise ships, Spirit of Discovery
and Spirit of Adventure. Based on these impairment reviews, and
looking at the probability of a range of outcomes, the Group remains
comfortable that there is headroom over and above the carrying
value of the two cruise ship assets, and therefore concluded that
no impairment charges were necessary.
153
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
2.5 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
Significant estimates (continued)
Sources of estimation uncertainty
For insurance contracts, estimates have to be made both for the
expected cost of claims known but not yet settled (case reserves)
and for the expected cost of claims incurred but not yet reported
(IBNR), as at the reporting date. It can take a significant period
of time before the ultimate claims cost can be established
with certainty.
The ultimate cost of outstanding claims is estimated by using
a range of standard actuarial claims projection techniques, such
as the Chain-Ladder and Bornhuetter-Ferguson methods. The main
assumption underlying these techniques is that past claims
development experience can be used to project future claims
development and hence ultimate claims costs. As such, these
methods extrapolate the development of paid and incurred losses,
average costs per claim and claim numbers based on the observed
development of earlier years. Historical claims development is
primarily analysed by accident year, geographical area, significant
business line and peril. Additional qualitative judgement is used to
assess the extent to which past trends may not apply in the future
(e.g. to reflect one-off occurrences, changes in external or market
factors such as public attitudes to claiming, economic conditions,
levels of claims inflation, judicial decisions and legislation, as well as
internal factors such as portfolio mix, policy features and claims
handling procedures) in order to arrive at the best estimate of the
ultimate cost of claims.
The ultimate cost of claims is not discounted except for those in
respect of PPOs, which have been discounted at -1.5% for the year
ended 31 January 2021 (2020: -1.5%). The valuation of these claims
involves making assumptions about the rate of inflation and the
expected rate of return on assets to determine the discount rate.
Due to the size of PPO claims, the ultimate cost is highly sensitive to
changes in these assumptions. The assumptions are reviewed at each
reporting date, and the sensitivity of this assumption is shown in note
20d on pages 182 and 183.
In calculating the level of reserve margin to recognise above the
actuarial best estimate of incurred claims, the Group considered an
array of risks to future claims experience and estimated the financial
impact that those risks could have to derive an appropriate level of
margin to hold. This included an assessment of the magnitude of the
claims latency risk due to the impact of the COVID-19 pandemic.
The cost of defined benefit pension plans and the present value
of the pension obligation are determined using actuarial valuations.
Actuarial valuations involve making assumptions about discount rates,
expected rates of return on assets, future salary increases, mortality
rates and future pension increases. Due to the complexity of the
valuation, the underlying assumptions and its long-term nature,
a defined benefit obligation is highly sensitive to changes in these
assumptions. All assumptions are reviewed at each reporting date.
All significant assumptions and estimates involved in arriving at the
valuation of the pension scheme obligation are set out in note 27 on
pages 186 to 189.
Acc. policy
2.3r
Items involving estimation
Valuation of insurance contract
liabilities
2.3u
Valuation of pension benefit
obligation
154
Saga plc Annual Report and Accounts 2021Financial Statements 3 SEGMENTAL INFORMATION
For management purposes, the Group is organised into business units based on their products and services. The Group
has three reportable operating segments as follows:
– Insurance: the segment comprises the provision of general insurance products. Revenue is derived primarily from insurance
premiums and broking revenues. This segment is further analysed into four product sub-segments:
– Retail broking, consisting of:
– Motor broking
– Home broking
– Other insurance broking
– Underwriting.
The Group classifies the CGU at its lowest level to be at the Insurance segment level.
– Travel: the segment comprises the operation and delivery of package tours and cruise holiday products. The Group
owns and operates two ocean cruise ships. All other holiday products are packaged together with third-party supplied
accommodation, flights and other transport arrangements.
– Other Businesses and Central Costs: the segment comprises the Group’s other businesses and its central cost base.
The other businesses include the financial services product offering, a monthly subscription magazine product and the
Group’s mailing and printing business.
Segment performance is evaluated using the Group’s key performance measure of Underlying Profit Before Tax. Items not
allocated to a segment relate to transactions that do not form part of the ongoing segment performance or which are
managed at a Group level.
Transfer prices between operating segments are set on an arm’s-length basis in a manner similar to transactions with third
parties. Segment income, expenses and results include transfers between business segments which are then eliminated
on consolidation.
Goodwill, corporate bond and bank loans are not allocated to segments as they are managed on a Group basis.
155
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
3 SEGMENTAL INFORMATION (CONTINUED)
2021
Revenue
Cost of sales
Gross profit
Administrative and selling
expenses
Impairment of assets
Gain on lease
modification
Net (loss)/profit on
disposal of businesses
Net profit/(loss) on
disposal of property,
plant and equipment,
right-of-use assets and
software
Investment income
Finance costs
Finance income
Profit/(loss) before tax
Reconciliation to
Underlying Profit/(Loss)
Before Tax
Profit/(loss) before tax
Net fair value loss on
derivative financial
instruments
Impairment of goodwill
(Profit) on disposal/
impairment of assets
Restructuring costs
Net loss/(profit) on
disposal of businesses
Underlying Profit/(Loss)
Before Tax
Total assets
less liabilities
Motor
broking
Home
broking
Insurance
Other
insurance
broking
£’m
92.7
(2.7)
90.0
(56.5)
–
–
–
–
–
–
–
33.5
£’m
60.2
–
60.2
(32.3)
–
–
–
–
–
–
–
27.9
£’m
40.7
(4.2)
36.5
(22.0)
–
–
–
–
–
–
–
14.5
Under-
writing
£’m
74.4
(16.5)
57.9
Total
£’m
268.0
(23.4)
244.6
Travel
£’m
51.6
(68.1)
(16.5)
Other
Businesses
and Central
Costs
£’m
22.6
(8.7)
13.9
Adjustments
£’m
(4.6)
–
(4.6)
Total
£’m
337.6
(100.2)
237.4
(2.9)
–
(113.7)
–
(64.4)
(0.2)
–
–
–
–
–
(1.7)
–
3.7
–
–
58.7
–
3.7
–
–
134.6
6.8
0.2
(13.6)
1.7
(87.7)
(50.7)
(5.0)
3.2
10.3
(0.2)
(3.2)
(16.6)
–
(48.3)
4.6
(59.8)
(224.2)
(65.0)
–
–
3.2
8.6
–
–
–
–
(59.8)
6.6
0.7
(30.2)
1.7
(61.2)
33.5
27.9
14.5
58.7
134.6
(87.7)
(48.3)
(59.8)
(61.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1.7)
–
(3.8)
13.0
–
–
1.8
17.8
1.7
(10.3)
33.5
27.9
14.5
58.7
134.6
(78.5)
(39.0)
–
59.8
–
–
–
–
(1.7)
59.8
(2.0)
30.8
(8.6)
17.1
284.4
19.3
(18.0)
395.0
680.7
All revenue is generated solely in the UK.
156
Saga plc Annual Report and Accounts 2021Financial Statements 3 SEGMENTAL INFORMATION (CONTINUED)
2020
Revenue
Cost of sales
Gross profit
Administrative and selling
expenses
Impairment of assets
Net profit on disposal of
property, plant and
equipment and right-of-
use assets
Investment income
Finance costs
Finance income
Profit/(loss) before tax
Reconciliation to
Underlying Profit/(Loss)
Before Tax
Profit/(loss) before tax
Net fair value loss on
derivative financial
instruments
Impairment of assets
Impairment of goodwill
Impact of insolvency of
Thomas Cook
Restructuring costs
Underlying Profit/(Loss)
Before Tax
Total assets
less liabilities
Motor
broking
Home
broking
Insurance
Other
insurance
broking
£’m
104.7
(2.8)
101.9
(73.9)
–
–
–
–
–
28.0
£’m
62.5
–
62.5
(29.4)
–
–
–
–
–
33.1
£’m
67.9
(12.9)
55.0
(25.9)
–
–
–
–
–
29.1
Under-
writing
£’m
69.1
(30.1)
39.0
Total
£’m
304.2
(45.8)
258.4
Travel
£’m
464.1
(365.0)
99.1
Other
Businesses
and Central
Costs
£’m
35.6
(15.1)
20.5
Adjustments
£’m
(6.6)
–
(6.6)
Total
£’m
797.3
(425.9)
371.4
(2.4)
–
(131.6)
–
(78.4)
(13.3)
(49.2)
(4.2)
6.6
(383.0)
(252.6)
(400.5)
–
4.0
–
–
40.6
–
4.0
–
–
130.8
1.0
0.4
(8.0)
–
0.8
0.3
(3.2)
(13.8)
0.1
(49.5)
–
–
–
–
(383.0)
1.3
1.2
(21.8)
0.1
(300.9)
28.0
33.1
29.1
40.6
130.8
0.8
(49.5)
(383.0)
(300.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.1
13.6
–
3.9
0.4
–
3.3
–
–
5.5
28.0
33.1
29.1
40.6
130.8
19.8
(40.7)
–
–
383.0
–
–
–
1.1
16.9
383.0
3.9
5.9
109.9
283.2
71.9
(144.6)
377.7
588.2
All revenue is generated solely in the UK.
Total assets less liabilities detailed as adjustments relates to the following unallocated items:
Goodwill (note 14)
Group bond and bank loans
2021
£’m
718.6
(323.6)
395.0
2020
£’m
778.4
(400.7)
377.7
157
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
3 SEGMENTAL INFORMATION (CONTINUED)
a. Disaggregation of revenue
Major product lines
Gross earned premium on insurance underwritten
by the Group
Less: ceded to reinsurers
Net revenue on:
– Motor broking
– Home broking
– Other broking
– Underwriting
Tour Operations
Cruise
Personal Finance
Healthcare
Media
Other
Major
product lines
Gross earned premium on insurance underwritten
by the Group
Less: ceded to reinsurers
Net revenue on:
– Motor broking
– Home broking
– Other broking
– Underwriting
Tour Operations
Cruise
Personal Finance
Healthcare
Media
Other
Insurance
2021
Earned premium
on insurance
underwritten by
the Group
£’m
Other
revenue
£’m
Total
insurance
£’m
Travel
£’m
Other
Businesses
and Central
Costs
£’m
221.7
(142.8)
23.2
–
1.1
54.6
221.7
(142.8)
92.7
60.2
40.7
74.4
69.5
60.2
39.6
19.8
32.7
18.9
6.0
0.9
9.1
2.0
Total
£’m
221.7
(142.8)
92.7
60.2
40.7
74.4
32.7
18.9
6.0
0.9
9.1
2.0
78.9
189.1
268.0
51.6
18.0
337.6
Insurance
2020
Earned premium
on insurance
underwritten by
the Group
£’m
Other
revenue
£’m
Total
insurance
£’m
Travel
£’m
Other
Businesses
and Central
Costs
£’m
233.9
(145.7)
23.8
–
1.3
63.1
233.9
(145.7)
104.7
62.5
67.9
69.1
80.9
62.5
66.6
6.0
346.1
118.0
88.2
216.0
304.2
464.1
7.4
6.1
13.3
2.2
29.0
Total
£’m
233.9
(145.7)
104.7
62.5
67.9
69.1
346.1
118.0
7.4
6.1
13.3
2.2
797.3
Included in other revenue is instalment interest income on premium financing of £11.1m (2020: £11.1m).
158
Saga plc Annual Report and Accounts 2021Financial Statements 3 SEGMENTAL INFORMATION (CONTINUED)
b. Contract balances
The following table provides information about contract assets and contract liabilities from contracts with customers as
accounted for under IFRS 15 (the amounts stated here do not include amounts accounted for under IFRS 4):
Contract cost assets
Contract liabilities
2021
£’m
2.9
82.2
2020
£’m
2.6
153.2
The contract cost assets relate to commissions paid to price-comparison websites to acquire new business policies not
underwritten by the Group.
Management expects that incremental commission fees paid to price-comparison websites as a result of obtaining
insurance contracts are recoverable. The Group has therefore capitalised them as contract assets amounting to £4.5m for
the year ended 31 January 2021 (2020: £5.9m). These fees are amortised over the period of the expected renewal cycle. In the
year to 31 January 2021, the amount of amortisation was £4.2m (2020: £5.9m) and there was no impairment loss in relation
to the costs capitalised.
Applying the practical expedient in paragraph 94 of IFRS 15, the Group recognises the incremental costs of obtaining
contracts as an expense when incurred if the amortisation period of the assets that the Group otherwise would have
recognised is one year or less.
The contract liabilities relate to the deferral of revenue for performance obligations not satisfied as at 31 January 2021 and
the advance consideration received from customers for holidays or cruises booked but not travelled, and insurance premiums
received in advance of the inception date. There was no revenue recognised in the current reporting year that related to
performance obligations that were satisfied in a prior year.
Significant changes in the contract assets and the contract liabilities during the year are as follows:
Balance as at 1 February
Released to the income statement in the period
Additional contract balances incurred during the period
Amounts refunded to customers
Disposed of with subsidiary undertakings
Reclassification to assets/liabilities held for sale
Balance as at 31 January
2021
2020
Contract
cost
assets
Contract
liabilities
Contract
cost
assets
Contract
liabilities
£’m
2.6
(4.2)
4.5
–
–
–
2.9
£’m
153.2
(86.2)
149.9
(133.1)
(1.6)
–
82.2
£’m
4.5
(5.9)
5.9
–
–
(1.9)
2.6
£’m
144.7
(131.3)
140.4
–
–
(0.6)
153.2
c. Transaction price allocated to the remaining performance obligations
The transaction price allocated to three-year fixed-price insurance policy renewal options where the remaining performance
obligations are not expected to be satisfied within the next 12 months is £1.0m (2020: £0.8m). This is expected to be
recognised as revenue in the subsequent one to three years.
The transaction price allocated to customer contracts within the Travel segment where the remaining performance
obligations are not expected to be satisfied within the next 12 months is £14.3m (2020: £1.1m). This is expected to be
recognised as revenue in the subsequent one to two years.
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining
performance obligations that have original expected durations of one year or less.
159
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
4 ADMINISTRATIVE AND SELLING EXPENSES
Staff costs (excluding restructuring costs)
Marketing and fulfilment costs
Short-term lease rentals
Auditors’ remuneration
Other administrative costs
Amounts ceded under reinsurance contracts
Depreciation – property, plant and equipment (note 17)
Depreciation – right-of-use assets (note 18)
Amortisation of intangible assets (note 15)
Restructuring costs
Cost of Thomas Cook insolvency
a. Auditors’ remuneration
Audit of the parent company and consolidated financial statements
Audit of subsidiary financial statements
Audit-related assurance services
Total auditors’ remuneration
2021
£’m
90.1
41.4
0.2
1.8
60.0
(7.7)
3.8
1.5
11.8
21.3
–
2020
(restated)
£’m
98.7
69.3
0.3
1.9
58.7
(4.6)
4.1
2.0
16.7
1.6
3.9
224.2
252.6
2021
£’m
0.6
1.0
0.2
1.8
2020
£’m
0.7
1.0
0.2
1.9
In addition to the auditors’ remuneration disclosed above, a further £0.6m was paid by the Group in relation to corporate
finance services provided. These costs were expensed against the share premium reserve as part of the transaction costs
associated with issue of share capital during the year.
5 IMPAIRMENT OF ASSETS
During the year, the Group has impaired the carrying value of the goodwill balance allocated to the Tour Operations CGU by
£15.0m (2020: £nil) and the Cruise CGU by £44.8m (2020: £nil). In the prior year the Group impaired the carrying value of the
goodwill balance allocated to the Insurance CGU and Destinology business by £370.0m and £13.0m respectively. (See note
16a for further details.)
In light of the Group’s decision to vacate most of its properties, it has estimated the recoverable amount based on the fair
value less costs to sell of each property the Group plans to dispose of. The outcome of the impairment reviews concluded
that an impairment charge of £4.5m (2020: £nil) be recognised against the Group’s freehold land and buildings assets as
at 31 January 2021 (note 17). These properties were subsequently transferred to assets held for sale (note 38).
The Group has impaired property, plant and equipment and software in its Central Costs division by £0.4m (2020: £nil) and
£0.1m (2020: £nil) respectively.
The Group has impaired property, plant and equipment and right-of-use assets in its Destinology business by £0.1m (2020: £nil)
and £0.1m (2020: £nil) respectively. In the prior year the Group impaired software and acquired intangibles in the Destinology
business by £1.3m and £5.7m respectively.
In the prior year the Group impaired property, plant and equipment and right-of-use assets in its mailing business by £3.1m
and £0.2m respectively. The Group has also impaired software and property, plant and equipment in the prior year in its
Healthcare business by £0.8m and £0.1m respectively.
In the prior year management recalculated the recoverable amount of Saga Sapphire based on the higher of its fair value less
costs to sell and value-in-use. The recoverable amount was below that calculated by management previously and as such, an
impairment charge was recognised. The impairment charge of £6.3m reflected a write down of the carrying value of property,
plant and equipment.
160
Saga plc Annual Report and Accounts 2021Financial Statements 6 INVESTMENT INCOME
Interest income recognised using the EIR method
Gains on assets measured at FVTPL
Amounts ceded under reinsurance contracts
7 FINANCE COSTS
Interest and charges on debt and borrowings
Net fair value loss on derivative financial instruments
Net interest and finance charges payable on lease liabilities
8 FINANCE INCOME
Net finance income on pension schemes
Net fair value gain on derivative financial instruments
9 DIRECTORS AND EMPLOYEES
Amounts charged to the income statement for the year are as follows:
Wages and salaries
Social security costs
Pension costs (note 25)
Total staff costs
2021
£’m
5.0
0.3
(4.6)
0.7
2021
£’m
29.4
–
0.8
30.2
2021
£’m
–
1.7
1.7
2020
£’m
5.7
0.9
(5.4)
1.2
2020
£’m
19.5
1.1
1.2
21.8
2020
£’m
0.1
–
0.1
2021
£’m
102.5
11.6
11.2
125.3
2020
£’m
104.5
10.5
10.6
125.6
Staff costs (including restructuring and redundancy costs) of £13.9m (2020: £25.8m) and £111.4m (2020: £99.8m) have been
allocated to cost of sales and to administrative and selling expenses respectively.
Average monthly number of employees:
Insurance
Travel
Other Businesses and Central Costs
Total staff numbers
2021
1,509
1,001
697
3,207
2020
1,766
2,408
1,030
5,204
Directors’ remuneration
The information required by the Companies Act 2006 and the Listing Rules of the FCA is contained on pages 77 to 110 in
the Directors’ Remuneration Report.
161
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
9 DIRECTORS AND EMPLOYEES (CONTINUED)
Compensation of key management personnel of the Group
Key management personnel are defined as those persons having authority and responsibility for planning, directing and
controlling the activities of the Group and comprise the Directors of the Company and the Chief Executive Officers of the
major businesses within the trading segments.
The amounts recognised as an expense during the financial year in respect of key management personnel are as follows:
Short-term benefits
Termination costs
Share-based payments
10 TAX
The major components of the income tax expense are:
Consolidated income statement
Current income tax
Current income tax charge
Adjustments in respect of previous years
Deferred tax
Relating to origination and reversal of temporary differences
Effect of tax rate change on opening balance
Adjustments in respect of previous years
Tax expense in the income statement
Reconciliation of tax expense to loss before tax multiplied by the UK corporation tax rate:
Loss before tax
Tax at rate of 19.0% (2020: 19.0%)
Adjustments in respect of previous years
Effect of tax rate change on opening balance
Expenses not deductible for tax purposes:
Impairment of goodwill
Other non-deductible expenses/non-taxed income
Effect of Cruise business entering Tonnage Tax regime
Tax expense in the income statement
2021
£’m
6.6
0.4
0.4
7.4
2020
£’m
5.1
-
0.5
5.6
2021
£’m
2020
£’m
3.5
(3.7)
(0.2)
3.2
(1.7)
5.3
6.8
16.4
(0.8)
15.6
(1.1)
–
(2.6)
(3.7)
6.6
11.9
2021
£’m
(61.2)
(11.6)
1.6
(1.7)
11.4
(0.5)
7.4
6.6
2020
£’m
(300.9)
(57.2)
(3.4)
–
72.8
(0.3)
–
11.9
The Group’s tax expense for the year was £6.6m (2020: £11.9m) representing a tax effective rate of 471.4% before the
impairment of goodwill and associated deferred tax (2020: 14.5%). The Group’s tax effective rate is higher than the standard
rate of corporation tax, mainly due to the Group’s Cruise business entering the Tonnage Tax regime on 1 February 2020, which
has resulted in the losses accumulated in the Cruise business due to the COVID-19 pandemic during the period not being
eligible for group relief to other profitable companies within the Group. If the Cruise business had not entered the Tonnage Tax
regime the Group’s tax effective rate would have been 17.6%.
Adjustments in respect of previous years includes an adjustment for the over-provision of tax charge in prior years of £1.6m
(2020: £3.4m credit).
No tax charge or credit arose on the disposal of the Bennetts, Destinology and Healthcare businesses.
162
Saga plc Annual Report and Accounts 2021Financial Statements 10 TAX (CONTINUED)
Deferred tax
Excess of depreciation over capital allowances
Intangible assets
Retirement benefit scheme liabilities
Short-term temporary differences:
– Designated hedges recognised through OCI
– Share-based payment reserve
– General bad debt provision
– Capitalised borrowing costs
– Other
Deferred tax charge/(credit)
Net deferred tax assets
Deferred tax is reflected in the statement of financial position as follows:
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
Reconciliation of net deferred tax assets
At 1 February
Tax (charge)/credit recognised in the income statement
Tax (charge)/credit recognised in other comprehensive income
Tax (charge)/credit recognised directly into the hedging reserve
At 31 January
Consolidated
statement of
financial position
Consolidated
income statement
2021
£’m
3.9
–
0.8
0.2
1.0
2.8
(2.2)
0.2
2020
£’m
8.5
–
0.9
4.2
1.2
3.9
(1.5)
0.9
6.7
18.1
2021
£’m
4.6
–
0.3
–
0.2
1.1
0.7
(0.1)
6.8
2021
£’m
12.5
(5.8)
6.7
2021
£’m
18.1
(6.8)
(4.1)
(0.5)
6.7
2020
£’m
(4.0)
(1.3)
0.5
–
0.8
(1.2)
2.2
(0.7)
(3.7)
2020
£’m
22.3
(4.2)
18.1
2020
£’m
7.1
3.7
1.9
5.4
18.1
On 11 March 2020, it was announced that the corporation tax rate would remain at 19% from 1 April 2020 and this has been
enacted at the statement of financial position date. As a result, the closing deferred tax balances have been reflected at
19%. We expect net deferred tax assets/(liabilities) to be normally settled in more than 12 months.
On 3 March 2021, it was announced that the corporation tax rate will increase to 25% from 1 April 2023 and has not been
enacted at the statement of financial position date. As a result, the closing deferred tax balances have not been updated to
reflect this rate change. If the rate change had been enacted at the statement of financial position date, the impact would
have been to increase the net deferred tax asset by £2.1m.
The Group has tax losses which arose in the UK of £4.2m (2020: £4.2m) that are available indefinitely for offsetting against
future taxable profits of the companies in which the losses arose.
Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits
elsewhere in the Group. They have arisen in subsidiaries that have been loss-making for some time, and there are no other
tax planning opportunities or other evidence of recoverability in the near future. If the Group was able to recognise all
unrecognised deferred tax assets, the profit would increase by £0.8m (2020: £0.7m).
163
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
11 DIVIDENDS
Declared and paid during the year:
Final dividend for the year ended 31 January 2021: nil pence per share (2020: 1.0 pence per share)
Interim dividend for the year ended 31 January 2021: nil pence per share (2020: 1.3 pence per share)
Proposed after the end of the reporting period and not recognised as a liability:
Final dividend for the year ended 31 January 2021: nil pence per share (2020: nil pence per share)
2021
£’m
–
–
–
–
2020
£’m
11.2
14.6
25.8
–
Given the uncertain implications of the COVID 19 pandemic, the Board of Directors does not recommend the payment of
a final dividend for the 2020/21 financial year. In addition to the dividends declared and paid during the year stated above,
dividend equivalents of £0.1m (2020: £nil) have been paid. These dividend equivalents relate to previously declared dividends
which only become payable when certain share options are exercised.
The distributable reserves of Saga plc are £38.2m as at 31 January 2021 which are equal to the retained earnings reserve.
If necessary, its subsidiary companies hold significant reserves from which a dividend can be paid. Subsidiary distributable
reserves are available immediately with the exception of companies within the Tour Operations and Underwriting segments,
which require regulatory approval before any dividends can be declared and paid. However, due to the debt holidays agreed
with our ship facilities lenders up to 31 March 2022 (notes 30 and 40), the Group is prohibited from declaring dividends during
this time.
12 EARNINGS PER SHARE
Basic Earnings Per Share (EPS) is calculated by dividing the loss after tax for the year attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is calculated by also
including the weighted average number of ordinary shares that would be issued on conversion of all potentially dilutive options.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date
and the date of authorisation of these financial statements.
The calculation of basic and diluted EPS is as follows:
Loss attributable to ordinary equity holders
Weighted average number of ordinary shares
Ordinary shares as at 1 February
Initial Public Offering (IPO) share options exercised
Long-Term Incentive Plan (LTIP) share options exercised
Issue of shares – 5 October 2020 (note 33)
First Firm Placing
Second Firm Placing
Placing and Open Offer
Bonus factor impact reflecting bonus element of October 2020 rights issue
Sub-total before share consolidation
Share consolidation – 13 October 2020 (note 33)
Issue of shares – 18 November 2020 (note 33)
Ordinary shares as at 31 January
2021
£’m
(67.8)
2020
(restated)
£’m
(312.8)
m
1,119.4
–
–
224.4
124.2
623.3
–
2,091.3
(1,951.9)
0.5
139.9
m
1,119.1
0.2
0.1
–
–
–
109.7
1,229.1
(1,147.2)
–
81.9
Weighted average number of ordinary shares for basic EPS and diluted EPS
101.2
81.9
Basic EPS
Diluted EPS
164
(67.0p)
(381.7p)
(67.0p)
(381.7p)
Saga plc Annual Report and Accounts 2021Financial Statements 12 EARNINGS PER SHARE (CONTINUED)
The table below reconciles between basic EPS and Underlying Basic EPS:
Basic EPS
Adjusted for:
Derivative (gains)/losses
Impairment, and profit on disposal, of property, plant and equipment and software
Impairment of goodwill and associated deferred tax
Impact of insolvency of Thomas Cook
Net profit on disposal of businesses
Restructuring costs
Underlying Basic EPS
2021
(67.0p)
2020
(restated)
(381.7p)
(1.9p)
(2.2p)
59.1p
–
(8.5p)
33.7p
13.2p
1.4p
21.5p
467.4p
4.9p
–
7.5p
121.0p
In accordance with IAS 33 ‘Earnings per Share’, basic and diluted EPS figures for the year ended 31 January 2020 have been
restated and adjusted for: (a) the bonus factor of 1.1 to reflect the bonus element of the Firm Placing and Open Offer (note
33); and (b) the consolidation of the Company’s shares during the year (note 33). Amounts as originally stated were (27.9p)
for basic and diluted EPS, and 8.9p for basic and diluted Underlying Basic EPS.
13 BUSINESS COMBINATIONS AND DISPOSALS
(a) Acquisitions during the year ended 31 January 2021
There were no acquisitions in the year ended 31 January 2021.
(b) Disposals during the year ended 31 January 2021
(i) Healthcare business
During the year ended 31 January 2020, the Group made the decision to exit the Healthcare business and initiated an
active programme to locate a buyer for its Healthcare operation. Having met the requirements of IFRS 5, the associated
assets and liabilities were consequently presented as a held for sale disposal group in the statement of financial position as
at 31 January 2020. The disposal group did not meet the requirements of IFRS 5 to be classified as a discontinued operation.
On 3 March 2020 the Group reached agreement for the sale of its Country Cousins and Patricia White’s branded Healthcare
businesses to Limerston Capital LLP for an enterprise value of £14.0m. Country Cousins and Patricia White’s were introductory
care agencies, and represented two of the three divisions comprising the Group’s Healthcare business. The remaining division,
Saga Care at Home, was sold on 31 May 2020 to a third-party care provider, Care By Us, for a nominal sum of £1.
This completed the Group’s exit from the Healthcare business.
Details of the sale of the Healthcare business operation are as follows:
Cash consideration received (net of transaction costs)
Cash and short-term deposits disposed of as part of the transaction
Carrying value of net assets disposed
Gain on disposal before tax
Tax expense on gain
Gain on disposal after tax
The carrying amounts of assets and liabilities as at the date of disposal were:
Intangible assets
Trade receivables and other receivable
Total assets
Trade and other payables
Total liabilities
Net assets disposed
2021
£’m
12.8
(1.4)
(1.0)
10.4
–
10.4
At date of
disposal
£’m
0.2
1.0
1.2
0.2
0.2
1.0
165
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
13 BUSINESS COMBINATIONS AND DISPOSALS (CONTINUED)
(b) Disposals during the year ended 31 January 2021 (continued)
The following assets and liabilities were reclassified as held for sale in relation to the Healthcare business operation as at
31 January 2020:
Intangible assets
Property, plant and equipment
Trade receivables and other receivables
Cash and short-term deposits
Total assets
Trade and other payables
Total liabilities
Net assets directly associated with disposal group
2020
£’m
0.3
0.3
1.3
1.5
3.4
0.2
0.2
3.2
(ii) Bennetts
During the year ended 31 January 2020, the Group made the decision to initiate an active programme to locate a buyer for
its insurance biking brand within the Insurance segment, Bennetts. Having met the requirements of IFRS 5, the associated
assets and liabilities were consequently presented as a held for sale disposal group in the statement of financial position as
at 31 January 2020. The disposal group did not meet the requirements of IFRS 5 to be classified as a discontinued operation.
On 17 February 2020 the Group announced that it had reached agreement for the sale of Bennetts for an enterprise
value of £26m to Atlanta Investment Holdings C Limited (‘Atlanta’). Atlanta is part of The Ardonagh Group, one of the
largest independent insurance brokers in the UK. Completion was subject to receiving regulatory approval and other
closing conditions.
On 7 August 2020 the disposal of Bennetts Motorcycling Services Limited (‘Bennetts’) to Atlanta Investment Holdings C
Limited was completed following the receipt of regulatory approvals, generating net disposal proceeds of £24.0m.
Details of the sale of Bennetts are as follows:
Cash consideration received (net of transaction costs)
Cash and short-term deposits disposed of as part of the transaction
Carrying value of net assets disposed
Gain on disposal before tax
Tax expense on gain
Gain on disposal after tax
The carrying amounts of assets and liabilities as at the date of disposal were:
Goodwill
Intangible assets
Property, plant and equipment
Trade receivables and other receivable
Total assets
Provisions
Contract liabilities
Trade and other payables
Total liabilities
Net assets disposed
166
2021
£’m
24.0
(9.5)
(12.7)
1.8
–
1.8
At date of
disposal
£’m
13.6
3.2
0.1
11.2
28.1
0.2
0.9
14.3
15.4
12.7
Saga plc Annual Report and Accounts 2021Financial Statements 13 BUSINESS COMBINATIONS AND DISPOSALS (CONTINUED)
(b) Disposals during the year ended 31 January 2021 (continued)
The following assets and liabilities were reclassified as held for sale in relation to Bennetts as at 31 January 2020:
Goodwill
Intangible assets
Property, plant and equipment
Trade receivables and other receivables
Cash and short-term deposits
Total assets
Provisions
Contract liabilities
Trade and other payables
Total liabilities
Net assets directly associated with disposal group
2020
£’m
13.6
3.3
0.3
9.9
3.3
30.4
0.1
0.6
7.6
8.3
22.1
(iii) Destinology
Early in the year, the Group made the decision to initiate an active programme to locate a buyer for its Travel segment
business, Destinology. On 20 October 2020 the Group announced that it had sold Destinology Limited to Brooklyn Travel
Limited for a nominal sum of £1. Net transaction costs of £0.2m were incurred in relation to the disposal.
Details of the sale of Destinology are as follows:
Cash consideration received (net of transaction costs)
Cash and short-term deposits disposed of as part of the transaction
Expense of non-cash items relating to disposal
Carrying value of net liabilities disposed
Loss on disposal before tax
Tax expense on gain
Loss on disposal after tax
The carrying amounts of assets and liabilities as at the date of disposal were:
Intangible assets
Property, plant and equipment
Trade receivables and other receivable
Total assets
Financial liabilities
Contract liabilities
Trade and other payables
Total liabilities
Net liabilities disposed
2021
£’m
(0.2)
(1.6)
(1.0)
0.2
(2.6)
–
(2.6)
At date of
disposal
£’m
1.0
0.9
0.3
2.2
0.5
1.6
0.3
2.4
(0.2)
(iv) Other
During the year, transaction costs of £1.0m (2020: £nil) were incurred in relation to other business disposals that did
not complete.
167
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
14 GOODWILL
Cost
At 1 February 2019
Reclassification to assets held for sale
At 31 January 2020 and 31 January 2021
Impairment
At 1 February 2019
Charge for the year
At 31 January 2020
Charge for the year (note 16a)
At 31 January 2021
Net book value
At 31 January 2021
At 31 January 2020
Goodwill deductible for tax purposes amounts to £nil (2020: £nil).
15 INTANGIBLE ASSETS
Cost
At 1 February 2019
Additions and internally developed software
Disposals
Transfer of asset class
Reclassification to assets held for sale
At 31 January 2020
Additions and internally developed software
Disposals
Disposed of with subsidiary undertakings
At 31 January 2021
Amortisation and impairment
At 1 February 2019
Amortisation
Impairment of assets
Disposals
Transfer of asset class
Reclassification to assets held for sale
At 31 January 2020
Amortisation
Impairment of assets
Disposals
Disposed of with subsidiary undertakings
At 31 January 2021
Net book value
At 31 January 2021
At 31 January 2020
168
Goodwill
£’m
1,485.0
(13.6)
1,471.4
310.0
383.0
693.0
59.8
752.8
718.6
778.4
Contracts
Brands
£’m
£’m
Customer
relationships
£’m
Software
£’m
Total
£’m
5.8
–
–
–
(5.8)
–
–
–
–
–
4.4
1.0
–
–
–
(5.4)
–
–
–
–
–
–
–
–
17.9
–
–
–
(5.2)
12.7
–
–
(12.7)
–
8.3
1.8
5.7
–
–
(3.1)
12.7
–
–
–
(12.7)
–
–
–
11.3
–
–
–
(3.9)
7.4
–
–
(7.4)
–
11.1
0.2
–
–
–
(3.9)
7.4
–
–
–
(7.4)
–
–
–
124.4
21.5
(1.2)
5.7
(6.0)
144.4
13.2
(1.2)
(4.8)
151.6
72.8
14.3
2.1
(1.2)
4.2
(4.9)
87.3
12.4
0.1
(1.0)
(3.8)
95.0
159.4
21.5
(1.2)
5.7
(20.9)
164.5
13.2
(1.2)
(24.9)
151.6
96.6
17.3
7.8
(1.2)
4.2
(17.3)
107.4
12.4
0.1
(1.0)
(23.9)
95.0
56.6
56.6
57.1
57.1
Saga plc Annual Report and Accounts 2021Financial Statements 15 INTANGIBLE ASSETS (CONTINUED)
The net book value of software at 31 January 2021 includes internally generated software of £28.7m (2020: £27.1m) relating
to the Group’s Guidewire platform. Guidewire is the Group’s insurance broking, policy administration and billing platform.
The Guidewire platform has an expected useful economic life of 10 years, with 7 years of phase one expenditure remaining
at 31 January 2021. Implementation and the commencement of amortisation of the Guidewire platform is on a phased basis,
based on product re-platforming, and began in the year ended 31 January 2019.
The net book value of software at 31 January 2021 also includes internally generated software of £10.3m (2020: £7.9m)
relating to the Group’s Tigerbay platform. Tigerbay is the Group’s travel booking reservation platform. The Tigerbay platform
has an expected useful economic life of 10 years, with 8 years of phase one expenditure remaining at 31 January 2021.
Implementation and the commencement of amortisation of the Tigerbay platform is on a phased basis, based on product
re-platforming, and began in the year ended 31 January 2020.
The amortisation charge for the year is analysed as follows:
Cost of sales
Administrative and selling expenses (note 4)
2021
£’m
0.6
11.8
12.4
2020
£’m
0.6
16.7
17.3
During the year, the Group disposed of assets with a net book value of £0.2m (2020: £nil). Loss arising on disposal was £0.2m
(2020: £nil).
During the year, borrowing costs of £1.1m (2020: £0.8m) have been capitalised in software in intangible assets.
The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest
rate applicable to the Group’s general borrowings during the year, being 4.0% (2020: 3.6%).
16 IMPAIRMENT OF INTANGIBLE ASSETS
a. Goodwill
Goodwill acquired through business combinations has been allocated to CGUs for the purpose of impairment testing.
The carrying value of goodwill by CGU is as follows:
Insurance
Cruise
Tour Operations
2021
£’m
718.6
–
–
718.6
2020
(restated)
£’m
718.6
44.8
15.0
778.4
During the year ended 31 January 2020, the Group made structural changes to its Travel business such that the cash flows of
the Cruise business are now managed independently of the Tour Operations businesses. This required a re-evaluation of the
determination of the Group’s CGUs, and the Travel excluding Destinology CGU was subdivided into separate Cruise and Tour
Operations excluding Destinology CGUs. The goodwill asset previously allocated to the Travel excluding Destinology CGU was
allocated to the Cruise and Tour Operations excluding Destinology CGUs based on their relative value-in-use measurements.
The carrying value of the goodwill asset allocated to each of the Cruise and Tour Operations excluding Destinology CGUs as at
31 January 2020 have been restated to £44.8m (previous reported value: £35.8m) and £15.0m (previous reported value: £24.0m)
reflecting a correction to the allocation calculation.
The Group tests all goodwill balances for impairment at least annually, and twice yearly if there exist indicators of impairment at
the interim reporting date of 31 July. Due to the impact of the COVID-19 pandemic on the Group’s earnings, the Group tested
goodwill for impairment as at 31 July 2020 and 31 January 2021.The impairment test compares the recoverable amount of
each CGU to the carrying value of its net assets including the value of the allocated goodwill.
The recoverable amount of each CGU has been determined based on a value-in-use calculation using cash flow projections
from the Group’s latest five-year financial forecasts to 2025/26, which are derived using past experience of the Group’s
trading combined with the anticipated impact of changes in macroeconomic and regulatory factors. A terminal value has
been calculated using the Gordon Growth Model based on the fifth year of those projections and an annual growth rate of
2.0% (January 2020: 2.0%) as the expected long-term average growth rate of the UK economy. The cash flows have then
been discounted to present value using a suitably risk-adjusted discount rate based on a market-participant view of the
cost of capital and debt relevant to each industry. The pre-tax discount rates used for each CGU were as follows:
169
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
16 IMPAIRMENT OF INTANGIBLE ASSETS (CONTINUED)
a. Goodwill (continued)
The pre-tax discount rates used for each CGU were as follows:
Insurance
Cruise*
Tour Operations
31 January
2021
31 July
2020
31 January
2020
9.8%
n/a
n/a
9.9%
11.7%
11.3%
12.6%
10.9%
12.2%
* The Cruise pre-tax discount rate as at 31 January 2020 has been restated to accurately reflect the impact of the tonnage tax regime on future cash flows.
The Group also considered a series of stress tests, both in terms of adverse impacts to either the cash flow projections or
to the discount rate. For the cash flow stress tests, the impact of further prolonged COVID-19 lockdowns during 2021 was
considered, both in terms of the impact on the resumption of Travel operations and the positive impact this could have
on motor insurance claims experience, in combination with a more cautious terminal growth rate of 1.5% reflecting a more
conservative outlook for growth in the UK economy. For the discount rate stress test, the Group applied risk premia of
c.+1.0ppt for the Insurance CGU as at 31 January 2021, and +2.0ppt and 3.7ppt for the Cruise and Tour Operations CGUs
respectively as at 31 July 2020.
For the Insurance CGU, the Group has also incorporated the expected impact of the publication of the FCA’s findings from
its market study into general insurance pricing and the impact this will likely have on new business pricing and retention rates,
with a further stress test involving a more cautious outlook for the impact of this. The Group has also excluded the projected
cash flow benefit of strategic initiatives that are not reflective of the business in its current condition. After considering the
impact of cash flow and discount rate stresses to the recoverable amount, the Group remains comfortable that there remains
headroom over and above the carrying value of the net assets including goodwill allocated to the Insurance CGU. This was
the case at both the 31 July 2020 and 31 January 2021 testing points.
As at 31 July 2020, for both the Cruise and Tour Operations businesses, the underlying forecast cash flows were updated
for the impact of the COVID-19 pandemic as assessed at that point in time, with the expectation then that ocean cruises
would recommence in November 2020 and Tour Operations trading would remain suspended until April 2021. In addition to
this, a further stress test scenario was considered that reflected the need for a further suspension of ocean cruises between
January 2021 and May 2021, with a long-term impact on demand levels for both cruises and package holidays. As a result
of the continued uncertainty and adverse impact of the COVID-19 pandemic on the travel industry, increases in perceived
travel industry risk resulted in higher betas and cost of debt levels, particularly in Cruise in the first half of 2020. This led
to a marked increase in the market-participant view of discount rates used in the calculation of recoverable amount,
and particularly in increases in the top end of the range of discount rates considered for the discount rate stress test.
Consequently, the Group determined that the recoverable amounts of the goodwill allocated to the Tour Operations and
Cruise CGUs were below their respective carrying values and took the decision to impair in full the £59.8m goodwill allocated
to Tour Operations and Cruise in the Group’s interim results. Whilst the outlook for the travel industry has improved since
then, characterised by an improvement in industry betas and cost of debt levels, goodwill impairments are irreversible,
so the impairment charge remains in the full-year results. The headroom/(deficit) for each of the CGUs against the brought
forward carrying value was as follows:
Insurance
Cruise
Tour Operations
Headroom/(deficit) £’m
Central scenario
Cash flow
stress test scenario
Discount rate
stress test scenario
31 January
2021
216.4
n/a
n/a
31 July
2020
205.4
18.0
86.0
31 January
2021
72.4
n/a
n/a
31 July
2020
102.4
(10.0)
20.0
31 January
2021
108.0
n/a
n/a
31 July
2020
192.0
(44.8)
(15.0)
The headroom/(deficit) calculated is most sensitive to the discount rate and terminal growth rate assumed, or to changes in
the projected cash flow of the CGU. A quantitative sensitivity analysis for each of these as at 31 January 2021 and its
impact on the headroom/(deficit) against brought forward goodwill carrying values is as follows:
Insurance
Pre-tax discount rate
Terminal growth rate
Cash flow (annual)
+1.0ppt
£’m
(113.0)
–1.0ppt
£’m
146.4
+1.0ppt
£’m
113.2
–1.0ppt
£’m
(87.3)
+10%
£’m
102.9
–10%
£’m
(102.9)
Given these headroom numbers the Directors consider that there is no reasonable possible change in the key
assumptions made in their impairment assessment that would give rise to an impairment.
170
Saga plc Annual Report and Accounts 2021Financial Statements 16 IMPAIRMENT OF INTANGIBLE ASSETS (CONTINUED)
b. Other intangible assets
Separately identifiable intangible assets are valued and their appropriate useful lives established at the time of acquisition.
The carrying values of these assets and their remaining useful lives are reviewed annually for indicators of impairment.
The Group has assessed the recoverable amount of intangible assets as at 31 January 2021 and concluded that an
impairment of £0.1m to software assets is required in the Group’s Central Costs division.
17 PROPERTY, PLANT AND EQUIPMENT
Freehold
land &
buildings
£’m
Long
leasehold
land &
buildings
£’m
Cruise
ships
£’m
Assets in the
course of
construction
£’m
Plant &
equipment
£’m
Cost
At 1 February 2019
Additions
Disposals
Transfer of asset class
Reclassification to assets held for sale
At 31 January 2020
Additions
Disposals
Disposed of with subsidiary undertakings
Transfer of asset class
Reclassification to assets held for sale
At 31 January 2021
Depreciation and impairment
At 1 February 2019
Provided during the year
Impairment of assets
Disposals
Transfer of asset class
Reclassification to assets held for sale
At 31 January 2020
Provided during the year
Impairment of assets
Disposals
Disposed of with subsidiary undertakings
Transfer of asset class
Reclassification to assets held for sale
At 31 January 2021
Net book value
At 31 January 2021
At 31 January 2020
45.0
–
(0.4)
(3.7)
(1.1)
39.8
–
–
–
–
(24.4)
15.4
9.2
0.8
–
(0.1)
(4.3)
(1.0)
4.6
0.7
4.5
(0.1)
–
–
(7.5)
2.2
13.2
35.2
The depreciation charge for the year is analysed as follows:
Cost of sales
Administrative and selling expenses (note 4)
Total
£’m
313.0
282.0
(24.0)
8.2
(3.5)
575.7
274.0
(92.8)
(1.2)
3.2
(24.4)
734.5
131.6
21.5
9.5
(19.0)
10.0
(2.9)
150.7
13.5
5.0
(88.0)
(0.9)
1.5
(7.5)
74.3
8.5
0.1
–
0.9
–
9.5
–
(0.1)
(0.2)
–
–
9.2
2.5
0.2
–
–
2.9
–
5.6
0.2
0.1
(0.1)
(0.3)
–
–
5.5
104.0
236.2
(22.6)
67.0
–
384.6
–
(80.7)
–
344.4
–
648.3
76.0
16.1
6.3
(17.7)
–
–
80.7
8.3
–
(75.7)
–
–
–
13.3
3.7
635.0
101.0
40.3
–
(68.5)
–
72.8
271.6
54.5
5.4
(1.0)
12.5
(2.4)
69.0
2.4
–
(12.0)
(1.0)
3.2
–
61.6
43.9
4.4
3.2
(1.2)
11.4
(1.9)
59.8
4.3
0.4
(12.1)
(0.6)
1.5
–
53.3
–
(344.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8.3
660.2
3.9
303.9
72.8
9.2
425.0
2021
£’m
9.7
3.8
13.5
2020
£’m
17.4
4.1
21.5
During the year, the Group disposed of assets with a net book value of £4.8m (2020: £5.0m). Profit arising on disposal was
£7.2m (2020: £0.5m).
171
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
17 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
During the year, borrowing costs of £2.1m (2020: £3.5m) have been capitalised in property, plant and equipment.
The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest
rate applicable to the Group’s general borrowings during the year, being 4.0% (2020: 3.6%).
a. Impairment review of property, plant and equipment
As the Group is planning to vacate most of its properties (note 38), management has concluded that this constitutes an
indicator of impairment and has duly conducted an impairment review of the Group’s freehold land and buildings as at
31 January 2021, with the exception of the main Head Office building which will not be vacated. In relation to these freehold
properties, value-in-use is negligible and so the Group has obtained market valuations to determine the fair value of each
building. The outcome of these impairment reviews concluded that an impairment charge totalling £5.0m should be recognised
against the Group’s assets as at 31 January 2021. At the year end, the Group reclassified freehold land and buildings with
a net book value of £16.9m to assets held for sale (note 38).
Due to the continued impact of the COVID-19 pandemic on the Group’s operations, and particularly in Travel, with the suspension
of the Cruise and Tour Operations businesses since March 2020, management concluded that indicators of impairment exist
and conducted impairment reviews at 31 January 2021 for the Group’s two ocean cruise ships, Spirit of Discovery and Spirit of
Adventure. The impairment test compares the recoverable amount of each cruise ship to its carrying value.
The recoverable amount of each cruise ship has been determined based on a value-in-use calculation using cash flow
projections from the Group’s latest five-year financial forecasts to 2025/26, and applying a constant annual growth rate
thereafter for subsequent periods until the end of the ship’s useful economic life of 30 years, at which point a residual value
of 15% has been assumed. This has then been discounted back to present value using a suitably risk-adjusted discount rate.
The underlying forecast cash flows have been updated for the latest impact of the COVID-19 pandemic, with the expectation
that ocean cruises recommence in June 2021 for Spirit of Discovery and in July 2021 for the inaugural cruise of Spirit of
Adventure. In addition, a stress test of a further four-month delay to the resumption of ocean cruises and the potential adverse
medium-term impact that the pandemic may have on demand for cruises have also been considered. The annual growth rate
beyond the fifth year of management forecasts was also reduced to 1.5% in the stress test scenario, reflecting a more cautious
outlook for long-term growth in the UK economy.
The cash flows have then been discounted to present value using a suitably risk-adjusted discount rate based on a market-
participant view of the cost of equity and debt. The pre-tax discount rates used for the cruise ships were 11.8% (2020: 10.9%)
for both vessels. As at 31 January 2021, the headroom/(deficit) for each of the ships against the carrying value was as follows:
Spirit of Discovery
Spirit of Adventure
Headroom/(deficit) £’m
Central scenario Stress test scenario
57.0
(17.0)
10.0
(49.0)
Based on these impairment tests, and looking at the probability of a range of outcomes, the Group remains comfortable that
there is headroom over and above the carrying value of Spirit of Discovery. Given the headroom in these tests, the Directors
consider that there is no reasonable possible change in the key assumptions made in their impairment assessment that
would give rise to an impairment of this vessel. For Spirit of Adventure however, the carrying value of the asset would exceed
its recoverable amount in both the central and stress test scenarios at the discount rate selected, and therefore
management considered a range of other factors to test the reasonableness of the assumptions used. Those factors included
additional data sources in the form of alternative views of the discount rate, useful economic life and enterprise valuations
derived from EBITDA multiples of other publicly-traded cruise companies.
Firstly, the calculated discount rate of 11.8% was found to sit at the mid-point of a range of possible values that the Group’s
auditors would consider reasonable, that range being 10.3% to 13.2% as at 31 January 2021. Selection of a discount rate at
the bottom of that range of 10.3% would leave a headroom of £30.0m in the central scenario, and a deficit of £5.0m in the
stress-test scenario. Secondly, the useful economic life of 30 years was found to sit at the bottom end of a range of 30-40
years being adopted by the industry. Increasing the useful economic life by five years would increase the recoverable amount
further by £7.0m. Lastly, using an enterprise valuation basis derived from EBITDA multiples of other publicly traded cruise
companies implied a headroom of £15.0m. On this basis, considering the range of data available, the Group therefore
concluded that no impairment of Spirit of Adventure was necessary.
172
Saga plc Annual Report and Accounts 2021Financial Statements 17 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
a. Impairment review of property, plant and equipment (continued)
The headroom/(deficit) calculated is most sensitive to the discount rate and cash flows assumed. A quantitative sensitivity
analysis for each of these as at 31 January 2021 and its impact on the headroom/(deficit) against carrying values is as follows:
Pre-tax discount
rate
Annual growth rate
(beyond fifth year) Cash flow (annual)
Useful economic
life
Spirit of Discovery
Spirit of Adventure
18 RIGHT-OF-USE ASSETS
Cost
At 1 February 2019
Additions
Disposals
Transfer of asset class
Effect of modification of lease terms
At 31 January 2020
Additions
Disposals
Disposed of with subsidiary undertakings
Transfer of asset class
Effect of modification of lease terms
Other movements
At 31 January 2021
Depreciation and impairment
At 1 February 2019
Provided during the year
Impairment of assets
Disposals
Transfer of asset class
At 31 January 2020
Provided during the year
Impairment of assets
Disposals
Disposed of with subsidiary undertakings
Transfer of asset class
Effect of modification of lease terms
Other movements
At 31 January 2021
Net book value
At 31 January 2021
At 31 January 2020
+1.0ppt
£’m
(27.3)
(26.2)
–1.0ppt
£’m
31.6
30.4
+1.0ppt
£’m
17.3
168
–1.0ppt
£’m
(15.4)
(14.9)
+10%
£’m
34.4
32.4
–10%
£’m +5 years -5 years
(13.1)
(10.8)
(34.3)
(32.4)
8.4
7.0
Long
leasehold
land &
buildings
£’m
River
cruise
ships
£’m
Plant &
equipment
£’m
13.5
0.2
(0.2)
–
–
13.5
–
(1.9)
(1.1)
–
(8.4)
–
2.1
2.8
1.0
–
(0.2)
–
3.6
0.7
0.1
(1.5)
(0.6)
–
(0.7)
–
1.6
0.5
9.9
16.1
15.9
–
–
(2.6)
29.4
–
–
–
–
(29.4)
–
–
8.0
10.4
–
–
–
18.4
0.9
–
–
–
–
(19.3)
–
–
–
11.0
9.4
3.4
(5.4)
0.9
–
8.3
0.8
(0.5)
–
(3.2)
–
0.5
5.9
5.6
2.0
0.2
(4.9)
0.6
3.5
1.5
–
(0.4)
–
(1.5)
–
0.5
3.6
2.3
4.8
Total
£’m
39.0
19.5
(5.6)
0.9
(2.6)
51.2
0.8
(2.4)
(1.1)
(3.2)
(37.8)
0.5
8.0
16.4
13.4
0.2
(5.1)
0.6
25.5
3.1
0.1
(1.9)
(0.6)
(1.5)
(20.0)
0.5
5.2
2.8
25.7
173
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
18 RIGHT-OF-USE ASSETS (CONTINUED)
The depreciation charge for the year is analysed as follows:
Cost of sales
Administrative and selling expenses (note 4)
2021
£’m
1.6
1.5
3.1
2020
£’m
11.4
2.0
13.4
During the year, the Group disposed of assets with a net book value of £0.5m (2020: £0.5m). Loss arising on disposal was
£0.4m (2020: £0.4m profit).
The total cash outflow for leases amounted to £5.0m (2020: £16.2m).
In the current year, modification of lease terms relating to river cruise ships resulted from the impact of the COVID-19
pandemic on the Travel business. Modification of lease terms relating to long leasehold land and buildings resulted from the
Group’s decision to initiate an active program to locate buyers for a number of its freehold properties (note 38) due to a
relationship existing between the use of one of these freehold properties and the use of one of the long leasehold land
buildings. In addition, the modification of lease terms relating to long leasehold land and buildings resulted in a gain of £3.2m
being reported in the income statement.
19 FINANCIAL ASSETS AND FINANCIAL LIABILITIES
a. Financial assets
Fair value through profit or loss
Foreign exchange forward contracts
Loan funds
Money market funds
Fair value through profit or loss designated in a hedging relationship
Foreign exchange forward contracts
Fuel oil swaps
Fair value through other comprehensive income
Debt securities
Amortised cost
Deposits with financial institutions
Total financial assets
Current
Non-current
2021
£’m
2020
£’m
0.6
6.2
66.8
73.6
0.1
–
0.1
0.1
7.8
45.9
53.8
1.0
0.1
1.1
261.9
261.9
274.2
274.2
24.2
24.2
49.0
49.0
359.8
378.1
105.2
254.6
359.8
126.4
251.7
378.1
Debt securities, loan funds, money market funds and deposits with financial institutions relate to monies held by the Group’s
insurance business and are subject to contractual restrictions and are not readily available to be used for other purposes
within the Group.
Debt securities, where the contractual cash flows are solely principal and interest and the objective of the Group’s business
model is achieved both by collecting contractual cash flows and selling financial assets, are classified as fair value through
OCI. On disposal of these debt securities, any related balance within the fair value reserve is reclassified to other gains/
(losses) within profit or loss.
174
Saga plc Annual Report and Accounts 2021Financial Statements 19 FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
a Financial assets (continued)
Deposits with financial institutions, where the contractual cash flows are solely principal and interest and the objective
of the Group’s business model is achieved by holding the asset in order to collect contractual cash flows, are classified as
measured at amortised cost. The fair values of financial assets held at amortised cost are not materially different from their
carrying amounts.
b. Financial liabilities
Fair value through profit or loss
Foreign exchange forward contracts
Fair value through profit or loss designated in a hedging relationship
Foreign exchange forward contracts
Fuel oil swaps
Amortised cost
Bond and bank loans (note 30)
Lease liabilities
Bank overdrafts
Total financial liabilities
Current
Non-current
2021
£’m
2020
£’m
1.3
1.3
2.1
0.2
2.3
2.0
2.0
23.4
2.5
25.9
817.1
4.4
1.5
823.0
624.3
28.6
9.5
662.4
826.6
690.3
10.4
816.2
826.6
95.6
594.7
690.3
The fair values of financial liabilities held at amortised costs are not materially different from their carrying amounts, since
the interest payable on those liabilities is either close to current market rates or the borrowings are of a short-term nature.
All financial assets that are measured at FVTPL are mandatorily measured at FVTPL and all financial liabilities that are
measured at FVTPL meet the definition of held for trading.
c. Fair values
Financial instruments held at fair value are valued using quoted market prices or other valuation techniques.
Valuation techniques include net present value and discounted cash flow models, and comparison to similar instruments for
which market observable prices exist. Assumptions and market observable inputs used in valuation techniques include
foreign currency exchange rates and future oil prices.
The objective of using valuation techniques is to arrive at a fair value determination that reflects the price of the financial
instrument at the reporting date which would have been determined by market participants acting at arm’s length.
Observable prices are those that have been seen either from counterparties or from market pricing sources, including
Bloomberg. The use of these depends upon the liquidity of the relevant market.
Financial instruments held at fair value have been categorised into a fair value measurement hierarchy as follows:
i) Level 1
These are valuation techniques that are based entirely on quoted market prices in an actively traded market and are the
most reliable. All money market funds, loan funds and debt securities are categorised as Level 1 as the fair value is obtained
directly from the quoted active market price.
175
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
19 FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
c. Fair values (continued)
ii) Level 2
These are valuation techniques for which all significant inputs are taken from observable market data. These include
valuation models used to calculate the present value of expected future cash flows and may be employed either when
no active market exists or when there are quoted prices available for similar instruments in active markets.
The models incorporate various inputs including the credit quality of counterparties, interest rate curves and forward rate
curves of the underlying instrument.
All the derivative financial instruments are categorised as Level 2 as the fair values are obtained from the counterparty,
brokers or valued using observable inputs. Where material, credit valuation adjustment (CVA)/debit valuation adjustment
(DVA) risk adjustment is factored into the fair values of these instruments. As at 31 January 2021, the marked-to-market
values of derivative assets are net of a credit valuation adjustment attributable to derivative counterparty default risk.
The fair values are periodically reviewed by the Group’s Treasury Committees.
iii) Level 3
These are valuation techniques for which any one or more significant inputs are not based on observable market data.
The following tables provide the quantitative fair value hierarchy of the Group’s financial assets and financial liabilities that
are held at fair value:
Financial assets measured
at fair value
Foreign exchange forwards
Fuel oil swaps
Loan funds
Debt securities
Money market funds
Financial liabilities measured
at fair value
Foreign exchange forwards
Fuel oil swaps
Financial assets for which
fair values are disclosed
Deposits with institutions
Financial liabilities for which
fair values are disclosed
Bond and bank loans
Lease liabilities
Bank overdrafts
As at 31 January 2021
As at 31 January 2020
Level 1
£’m
Level 2
£’m
Level 3
£’m
Total
£’m
Level 1
£’m
Level 2
£’m
Level 3
£’m
Total
£’m
–
–
6.2
261.9
66.8
–
–
–
–
–
–
0.7
–
–
–
–
3.4
0.2
24.2
817.1
4.4
1.5
–
–
–
–
–
–
–
–
–
–
–
0.7
–
6.2
261.9
66.8
–
–
7.8
274.2
45.9
1.1
0.1
–
–
–
3.4
0.2
–
–
25.4
2.5
–
–
–
–
–
–
–
1.1
0.1
7.8
274.2
45.9
25.4
2.5
24.2
–
49.0
–
49.0
817.1
4.4
1.5
–
–
–
624.3
28.6
9.5
–
–
–
624.3
28.6
9.5
There have been no transfers between Level 1 and Level 2 and no non-recurring fair value measurements of assets and
liabilities during the year (2020: none). The Group’s policy is to recognise transfers into and out of fair value hierarchy levels
as at the end of the reporting period.
The values of the debt securities, money market funds and loan funds are based upon publicly available market prices.
Foreign exchange forwards are valued using current spot and forward rates discounted to present value. They are also
adjusted for counterparty credit risk using credit default swap (CDS) curves. Fuel oil swaps are valued with reference to the
valuations provided by third parties, which use current Platts index rates, discounted to present value.
176
Saga plc Annual Report and Accounts 2021Financial Statements
19 FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)
d. Cash flow hedges
i) Forward currency risk
During the year ended 31 January 2021, the Group designated 285 foreign exchange forward currency contracts as hedges
of highly probable foreign currency cash expenses in future periods. These contracts are entered into to minimise the Group’s
exposure to foreign exchange risk.
Foreign currency cash flow hedging instruments
Euro (EUR)
US dollar (USD)
Other currencies
Total
Designated in the year
At 31 Jan 2021
At 31 Jan 2020
Volume
101
61
123
285
£’m
(0.7)
(1.1)
–
(1.8)
Volume
92
82
113
287
£’m
(0.7)
(1.2)
(0.1)
(2.0)
Volume
245
200
363
808
£’m
(23.5)
0.3
(0.9)
(24.1)
Hedging instruments for other currencies are in respect of Australian dollars, Canadian dollars, Swiss francs, Japanese yen,
New Zealand dollars, Norwegian krone, Thai baht, Chinese yuan, Danish krona and South African rand.
ii) Commodity price risk
The Group uses derivative financial instruments to mitigate the risk of adverse changes in the price of fuel. The Group enters
into fixed price contracts (swaps) in the management of its fuel price exposures. These contracts are expected to reduce the
volatility attributable to price fluctuations of fuel and are designated as cash flow hedges. Hedging the price volatility
of forecast fuel purchases is in accordance with the risk management strategy outlined by the Board of Directors.
Commodity cash flow hedging instruments
Hedging instruments
Designated in the year
At 31 Jan 2021
At 31 Jan 2020
Volume
–
£’m
–
Volume
22
£’m
(0.2)
Volume
50
£’m
(2.4)
iii) Hedge maturity profile
The table below summarises the present value of the highly probable forecast cash flows that have been designated in a
hedging relationship as at 31 January 2021. These cash flows are expected to become determined in profit or loss in the
same period in which the cash flows occur.
Determination period
1 February 2021 to 31 July 2021
1 August 2021 to 31 January 2022
1 February 2022 to 31 July 2022
1 August 2022 to 31 January 2023
1 February 2023 to 31 July 2023
Total
EUR
£’m
–
18.2
16.6
12.0
0.1
46.9
USD
£’m
2.5
15.5
15.3
11.8
0.3
45.4
Other
currencies
Currency
hedges
Fuel
hedges
£’m
–
3.0
1.7
0.5
–
5.2
£’m
2.5
36.7
33.6
24.3
0.4
97.5
£’m
(0.1)
(0.1)
–
–
–
(0.2)
Total
£’m
2.4
36.6
33.6
24.3
0.4
97.3
During the year, the Group recognised net gains of £6.0m (2020: £4.0m losses) on cash flow hedging instruments through
OCI into the hedging reserve. Additionally, the Group recognised net gains of £16.3m (2020: £7.2m losses) through other
comprehensive income into the hedging reserve, in relation to the specific hedging instrument for the acquisition of two new
ships. The overall net gains were £22.3m (2020: £11.2m losses). The Group has recognised £nil gains (2020: £0.1m) through the
income statement in respect of the ineffective portion of hedges measured during the year.
During the year the Group has de-designated 174 foreign currency forward contracts, with a transaction value of £46.6m,
where the cash flows forecast are no longer expected to occur. Similarly, during the year the Group has de-designated 27 fuel
oil swaps to 25% and 50%, with a transaction value of £4.9m, where the cash flows forecast are no longer expected to occur.
During the year, the Group recognised a £2.5m gain (2020: £2.6m gain) through the income statement in respect of matured
hedges which have been recycled from OCI. The Group also recognised a £2.7m loss (2020: £31.9m gain) in property, plant and
equipment, in respect of matured hedges which have been recognised directly from the hedging reserve.
177
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
20 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial liabilities comprise loans and borrowings, and trade and other payables. The main purpose
of the loans and borrowings financial liabilities is to finance the Group’s operations and to provide guarantees to support its
operations. The Group’s principal financial assets include debt securities, deposits with financial institutions, money market
funds, loan funds, and trade and other receivables, and cash and short-term deposits. The Group also enters into derivative
transactions such as foreign exchange forward contracts, fuel and gas oil swaps and interest rate swaps to manage its
exposures to various risks.
The Group is exposed to market risk, credit risk, liquidity risk, insurance risk and operational risk. The Group’s senior management
oversees these risks, supported by the Group Treasury function and Treasury Committees within the key areas of the Group
that advise on financial risks and the appropriate financial risk governance framework for the Group. These functions and
Committees ensure that the Group’s financial risks are governed by appropriate policies and procedures and that financial risks
are identified, measured and managed in accordance with the Group’s policies and risk objectives. All derivative activities are
for risk management purposes and are carried out by the Group’s Treasury function. It is the Group’s policy that no trading in
derivatives for speculative purposes may be undertaken.
The Group manages concentration risk on its financial assets through a policy of diversification that is outlined in the Group
Treasury Policy and approved by the Board. The policy defines the exposure limit by asset class and to third-party institutions
based on the credit ratings of the individual counterparties, combined with the views of the Board. On a monthly basis,
exposure to each asset class and counterparty is calculated and reported, and compliance with the policy is monitored.
The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
a. Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market
prices. The Group is exposed to the following market risk factors:
– Foreign currency risk.
– Commodity price risk.
– Equity prices.
– Interest rate risk.
The Group has policies and limits approved by the Board for managing the market risk exposure. These set out the principles
that the business should adhere to for managing market risk and establishing the maximum limits that the Group is willing
to accept considering strategy, risk appetite and capital resources. The Group has the ability to monitor market risk exposure
on a daily basis and has established limits for each component of market risk.
The Group uses derivatives for hedging its exposure to foreign currency, fuel oil prices and interest rate risks. The market risk
policy explicitly prohibits the use of derivatives for speculative purposes. For risk exposures that the Group hedges and for which
the Group applies hedge accounting, ineffectiveness may arise if the timing of the forecast transaction changes from what was
originally estimated, or if there are changes in the credit risk of the derivative counterparty. Hedge effectiveness is determined
at the inception of the hedge relationship, and through periodic prospective effectiveness assessments, to ensure that an
economic relationship exists between the hedged item and hedging instrument. The hedge ratio of the hedging relationship
is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the
hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Equity exposures are managed within allocation parameters agreed by the Board and with reference to agreed benchmarks.
i) Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of a financial asset or liability will fluctuate because
of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily
to the Group’s operating activities (when revenue or expense is denominated in a different currency from the Group’s
functional currency).
The Group uses foreign exchange forward contracts to manage the majority of its transaction exposures. The foreign
exchange forward contracts, some of which are formally designated as hedging instruments, are entered into for periods
consistent with the foreign currency exposure of the underlying transactions, generally from 1 to 24 months. The foreign
exchange forward contracts vary with the level of expected foreign currency sales and purchases.
The following table demonstrates the sensitivity of the fair value of forward exchange contracts to a 5% change in US dollar
and Euro exchange rates, with all other variables held constant. The Group’s exposure to foreign currency changes for all other
currencies is not material. The impact is shown net of tax at the current rate.
178
Saga plc Annual Report and Accounts 2021Financial Statements 20 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
a. Market risk (continued)
i) Foreign currency risk (continued)
2021
2020
Sensitivity of +/– 5%
forex rate change in
EUR – Trading
Effect on the fair value
of forward exchange
contracts
+/ – £3.5m
Effect on profit after
tax and equity
+/ – £1.4m
USD
+/ – £2.5m
+/ – £0.5m
EUR – Trading
EUR – New ships
USD
+/ – £4.8m
+/ – £11.0m
+/ – £2.9m
+/ – £0.5m
+/ – £0.0m
+/ – £0.3m
To the extent that forward exchange contracts are held as part of effective hedging relationships, any change to the fair
value of the instrument will be offset by an equal and opposite change to the cost of the hedged item resulting in no effect
on profit after tax and equity.
ii) Commodity price risk
The Group is affected by the price volatility of certain commodities. Its operating activities require the ongoing purchase
of fuel and gas oil to sail its cruise ships and therefore require a continuous supply of fuel and gas oil. The volatility in the
price of fuel and gas oil has led to the decision to enter into commodity fuel and gas oil swap contracts. These contracts are
expected to reduce the volatility attributable to price fluctuations of fuel and gas oil. Managing the price volatility of forecast
oil purchases is in accordance with the risk management strategy outlined by the Board of Directors.
The Group manages the purchase price using forward commodity purchase contracts based on future forecast fuel oil
requirements.
The following table shows the sensitivity of the fair value of fuel oil swaps to changes in the US dollar exchange rate with
all other variables held constant. The impact is shown net of tax at the current rate.
2021
2020
Sensitivity of +/– 5%
rate change in
USD – Fuel oil price
Effect on profit after
tax and equity
+/ – £0.0m
USD – Fuel oil price
+/ – £0.0m
iii) Interest rate risk
Interest rate risk arises primarily from medium and long-term investments in fixed interest securities. The market value
of these investments is affected by the movement in interest rates. This is managed by a policy of holding the majority
of investments to maturity by closely matching asset and liability duration.
It is also ensured that the investment portfolio has a diversified range of investments such that there is a combination
of fixed and floating rate securities, as well as other types of investments such as Retail Price Index (RPI) linked securities.
Interest rate risk also arises in respect of the Group’s borrowings where the interest rate attaching to those borrowings is not
fixed. Where the Group perceives there to be a significant interest rate risk, it manages its exposure to such risks
by purchasing interest rate caps to limit the risk.
The following table shows the sensitivity of financial assets and liabilities to changes in the London inter-bank offered rate
(LIBOR). The impact is shown net of tax at the current rate.
2021
2020
Sensitivity
of +/– 0.25%
rate change in
LIBOR
Effect on profit after
tax and equity
+/ – £0.4m
LIBOR
+/ – £0.2m
179
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
20 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
b. Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk in relation to its financial and reinsurance assets, outstanding
derivatives, and trade and other receivables. The Group assesses its counterparty exposure in relation to the investment of
surplus cash, fuel oil and foreign currency contracts, and undrawn credit facilities. The Group primarily uses published credit
ratings to assess counterparty strength and therefore to define the credit limit for each counterparty in accordance with
approved treasury policies.
The credit risk in respect of trade and other receivables is generally limited as payment from customers is generally required
before services are provided. An exception to this in light of the Thomas Cook insolvency is agency debtors, where if a
third-party tour operator takes a booking on behalf of the Travel business but is forced into liquidation, the Group would still
be required to provide the service but would not receive the full amount owed from the third-party tour operator.
At 31 January 2021, the maximum exposure to credit risk for trade receivables by operating segment was as follows:
Insurance
Travel
Other Businesses and Central Costs
Reclassification to assets held for sale
2021
£’m
39.9
2.2
5.2
47.3
–
47.3
2020
£’m
50.9
5.5
6.8
63.2
(8.2)
55.0
The variance between the quantum of the maximum exposure to credit risk for trade receivables (above) and total of trade
receivables presented in ‘Trade and other receivables’ (note 23) primarily relates to insurance instalment gross premium
debtors due from customers, for which a corresponding related creditor exists with third-party insurers for the net premium.
In the event of payment obligation default by a customer no longer on risk, the impairment of the debtor balance by the
Group would lead to a corresponding reduction in the related creditor with, or refund of net premium from, the third-party
insurer. In the event of payment obligation default by a customer remaining on risk, the impairment of the debtor balance
by the Group would not lead to a corresponding reduction in the related creditor with, or refund of net premium from, the
third-party insurer, and the Group would bear the credit risk relating to the debtor balance.
The Group uses an allowance matrix to measure the expected credit losses of trade receivables from individual customers,
which comprise a very large number of small balances. The loss allowance required for these receivables is calculated in line
with the simplified method for trade receivables per IFRS 9, whereby lifetime expected credit losses are recognised irrelevant
of the credit risk. The loss allowance is based on a combination of:
(i) aged debtor analysis;
(ii) historical experience of write offs for each receivable;
(iii) any specific indicators of credit deterioration observed; and
(iv) management judgement.
Loss rates are based on the probability of a receivable progressing through successive stages of delinquency to write off.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in
a repayment plan with the Group.
On that basis, the loss allowance as at 31 January 2021 and 31 January 2020 was determined as follows for
trade receivables:
31 January 2021
Expected loss rate
Gross carrying amount – trade receivables
(note 23)
Loss allowance (note 23)
31 January 2020
Expected loss rate
Gross carrying amount – trade receivables
(note 23)
Loss allowance (note 23)
Current
0%
< 30 days
25%
30-60
days
38%
61-90
days
29%
91-120
days > 120 days
63%
22%
Total
£107.5m
£0.1m
£1.6m
£0.4m
£0.8m
£0.3m
£0.7m
£0.2m
£0.9m
£0.2m
£20.1m £131.6m
£13.9m
£12.7m
Current < 30 days
24%
1%
30-60
days
38%
61-90
days
44%
91-120
days > 120 days
64%
43%
Total
£108.7m
£1.0m
£3.8m
£0.9m
£2.6m
£1.0m
£2.7m
£1.2m
£4.4m
£1.9m
£23.8m £146.0m
£21.2m
£15.2m
180
Saga plc Annual Report and Accounts 2021Financial Statements 20 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
b. Credit risk (continued)
The loss allowance for trade receivables as at 31 January 2021 reconciles to the opening allowances as follows:
Opening loss allowance at 1 February
(Decrease)/increase in loan loss allowance recognised in profit or loss during the year
Receivables written off during the year as uncollectible
Unused amount reversed
Closing loss allowance at 31 January
2021
£’m
21.2
(5.5)
(1.7)
(0.1)
13.9
2020
£’m
15.9
7.31
(1.9)1
(0.1)
21.2
1 For the year ended 31 January 2020, the increase in the loss allowance recognised in profit or loss during the year, and the amount of receivables written off during
the year as uncollectible, have both been restated due to an incorrect allocation between these classifications. The increase in loan loss allowance recognised in
profit or loss during the year has decreased by £7.0m and the amount of receivables written off during the year as uncollectible has also decreased by £7.0m
Credit risk in relation to deposits, debt securities and derivative counterparties is managed by the Group’s Treasury function in
accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit
limits assigned to each counterparty. Counterparty credit limits are reviewed on a regular basis, and updated throughout the
year subject to approval by the Board. The limits are set to minimise the concentration of risks and therefore mitigate financial
loss through any potential counterparty failure.
The Group is exposed to the risk of default on the reinsurance arrangements in its insurance business when amounts recoverable
under those arrangements become due. Credit risk in respect of reinsurance arrangements is assessed at the time of entering
into a reinsurance contract. The Group’s reinsurance programme is only placed with reinsurers which meet the Group’s financial
strength criteria.
The Group’s maximum exposure to credit risk for the components of the statement of financial position at 31 January 2021
and 31 January 2020 is the gross carrying amount except for derivative financial instruments. The Group’s maximum
exposure for financial guarantees and financial derivative instruments is noted under liquidity risk. None of the financial
assets were impaired at the reporting date.
The Group’s financial assets and reinsurance assets are analysed by Moody’s rating as follows:
Ratings analysis
31 January 2021
£’m
Debt securities
Money market funds
Deposits with financial institutions
Derivative assets
Loan funds
Reinsurance assets
Total
31 January 2020
£’m
Debt securities
Money market funds
Deposits with financial institutions
Derivative assets
Loan funds
Reinsurance assets
Total
AAA
23.1
66.8
–
–
–
89.9
–
89.9
AAA
15.3
45.9
–
–
–
61.2
–
61.2
AA
73.9
–
24.2
–
–
98.1
39.7
137.8
AA
117.5
–
30.4
–
–
147.9
36.4
184.3
A
71.5
–
–
0.2
–
71.7
31.9
103.6
A
54.1
–
–
0.7
–
54.8
26.5
81.3
BBB
93.4
–
–
0.5
–
93.9
–
93.9
BBB
87.3
–
18.6
0.5
1.6
108.0
–
108.0
Unrated
–
–
–
–
6.2
6.2
–
6.2
Unrated
–
–
–
–
6.2
6.2
0.6
6.8
Total
261.9
66.8
24.2
0.7
6.2
359.8
71.6
431.4
Total
274.2
45.9
49.0
1.2
7.8
378.1
63.5
441.6
181
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
20 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
c. Liquidity risk
Liquidity risk is the risk that the Group, although solvent, either does not have available sufficient financial resources
to enable it to meet its obligations as they fall due or can secure them only at excessive cost. The Group’s approach
to managing liquidity risk is to evaluate current and expected liquidity requirements to ensure that it maintains sufficient
reserves of cash or availability on its RCF. The Group manages its obligations to pay claims to policyholders as they fall
due by matching the maturity of investments to the expected maturity of claims payments.
The table below analyses the maturity of the Group’s financial liabilities and insurance contract liabilities on contractual
payments. The analysis of non-derivative financial liabilities is based on the remaining period at the reporting date to
the contractual maturity date. The analysis of claims outstanding is based on the expected dates on which the claims will be
settled and is before discounting, gross of reinsurance.
31 January 2021
£’m
Bond and bank loans
Interest on bond and bank loans
Insurance contract liabilities
Derivative liabilities
31 January 2020
£’m
Bond and bank loans
Interest on bond and bank loans
Insurance contract liabilities
Derivative liabilities
On
demand
–
–
–
–
–
On
demand
–
–
–
–
–
Less than
1 year
–
27.4
88.9
2.1
118.4
Less than
1 year
50.4
21.4
69.3
25.9
167.0
1 to 2
years
46.4
26.5
64.3
1.5
138.7
1 to 2
years
20.4
18.6
53.2
2.0
94.2
2 to 5
years
500.1
46.9
92.7
–
639.7
2 to 5
years
431.3
38.8
107.6
–
577.7
Over
5 years
289.1
27.9
144.8
–
Total
835.6
128.7
390.7
3.6
461.8
1,358.6
Over
5 years
132.7
16.2
179.9
–
328.8
Total
634.8
95.0
410.0
27.9
1,167.7
In March 2021 the Group reached agreement of a one-year extension to the debt deferral on its cruise ship facilities (note
41). This has resulted in the debt repayments on the cruise ship facilities within the bond and bank loans profile disclosed
above being amended for this one-year deferral.
d. Insurance risk
Insurance risk arises from the inherent uncertainties as to the occurrence, cost and timing of insured events that could lead
to significant individual or aggregated claims in terms of quantity or value. This could be for a number of reasons, including
weather-related events, large individual claims, changes in claimant behaviour patterns such as increased levels of fraudulent
activities, the use of PPOs, prospective or retrospective legislative changes, unresponsive and inaccurate pricing or reserving
methodologies and the deterioration in the Group’s ability to effectively and efficiently handle claims while delivering
excellent customer service.
The Group manages insurance risk within its risk management framework as set out by the Board. The key policies
and processes of mitigating these risks have been implemented, which include underwriting partnership arrangements,
reinsurance excess of loss contracts, pricing policies and claims management, and administration policies.
i) Underwriting and pricing risk
The Group primarily underwrites motor insurance for private cars in the UK. The book consists of a large number of individual
risks which are widely spread geographically, which helps to minimise concentration risk. The Group has controls in place to
restrict access to its products to only those risks that it wishes to underwrite.
The Group has management information to allow it to monitor underwriting performance on a continuous basis and the
ability to make pricing and underwriting changes quickly. The Group undertakes detailed statistical analysis of underwriting
experience for each rating factor and combinations of rating factors, to enable it to adjust pricing for emerging trends.
ii) Reserving risk
Reserving risk is the risk that insufficient funds have been set aside to settle claims as they fall due. The Group undertakes
regular internal actuarial reviews and commissions external actuarial reviews at least once a year. These reviews estimate the
future liabilities in order to consider the adequacy of the provisions.
182
Saga plc Annual Report and Accounts 2021Financial Statements 20 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
d. Insurance risk (continued)
ii) Reserving risk (continued)
Claims which are subject to PPOs are a significant source of uncertainty in the claim’s reserves. Cash flow projections are
undertaken for PPO claims to estimate the gross and net of reinsurance provisions required. PPO provisions are discounted
to reflect expectations of future investment returns and cost inflation.
In the year to 31 January 2021, the Group has considered the additional latency risk to claims cost development caused
by the impact of COVID-19 and has recognised an additional claims reserve above actuarial best estimate to cover this
specific risk.
iii) Reinsurance
The Group purchases reinsurance to reduce the impact of individual large losses or accumulations from a single catastrophic
event. During 2018, the Group entered into a funds-withheld quota share reinsurance contract that reinsures 80% of the
Group’s motor claims risks limited by a loss ratio cap of 130%, effective from 1 February 2019. Prior to this, the Group had
a funds-withheld quota share reinsurance contract in place that reinsured 75% of the Group’s motor claims risks limited
by a loss ratio cap of 120%. The Group also purchases individual excess of loss protections for the motor portfolio to limit
the impact of a single large claim. Similar protections are in place for all years for which the Group has underwritten
motor business.
Reinsurance recoveries on individual excess of loss protections can take many years to collect, particularly if a claim is
subject to a PPO. This means that the Group has exposure to reinsurance credit risk for many years. Reinsurers are therefore
required to have strong credit ratings and their financial health is regularly monitored.
iv) Sensitivities
The following table demonstrates the impact on profit and loss and equity of a 5 percentage point variation in the recorded
loss ratio at 31 January 2021 and 31 January 2020. The impact of a 5% change in claims outstanding is also shown at the
same dates. The impact is shown net of reinsurance and tax at the current rate.
Impact of 5 percentage point change in loss ratio
Impact of 5% change in claims outstanding
2021
2020
+/ – £3.2m +/ – £3.6m
+/ – £4.6m +/ – £5.9m
Impact of a 0.25 percentage point change in discount rate for PPOs
+/ – £3.2m +/ – £3.3m
e. Operational risk
Effective operational risk management requires the Group to identify, assess, manage, monitor, report and mitigate all areas
of exposure. The Group operates across a range of segments and operational risk is inherent in all of the Group’s products
and services, arising from the operation of assets, from external events and dependencies, and from internal processes
and systems.
The Group manages its operational risk through the risk management framework agreed by the Board, and through the use
of risk management tools which together ensure that operational risks are identified, managed and mitigated to the level
accepted, and that contingency processes and disaster recovery plans are in place. Regular reporting is undertaken to
segment boards and includes details of new and emerging risks, as well as monitoring of existing risks. Testing of contingency
processes and disaster recovery plans is undertaken to ensure the effectiveness of these processes. The resilience of the
Group’s disaster recovery plans was demonstrated during the COVID-19 lockdown. The Group was able to quickly move
office-based colleagues to working from home arrangements, ensuring that it was able to continue to support existing
and new customers through the call centre and support functions.
All of the Group’s operations are dependent on the proper functioning of its IT and communication systems; on its properties
and other infrastructure assets; on the need to adequately maintain and protect customer and employee data and other
information; and on the ability of the Group to attract and retain staff. Specific areas of operational risk by segment include:
i) Insurance
The Insurance segment is required to comply with various operational regulatory requirements primarily in the UK but also
within Gibraltar for its underwriting business. To the extent that significant external events could increase the incidence of
claims, these would place additional strain on the claims handling function but any financial impact of such an event is
considered to be an insurance risk.
183
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
20 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
e. Operational (continued)
ii) Travel
The Travel segment operates two cruise ships which are the Group’s largest trading assets. Risk to the operation of these
cruise ships arises from the impact of mechanical or other malfunction, non-compliance with regulatory requirements,
and from global weather and socio-economic events. The tour holidays operated by the segment are also affected by global
weather and socio-economic events which impact either the Group directly or its suppliers. The Travel segment is in operation
with multiple suppliers which minimises the impact of any socio-economic events affecting its suppliers. The COVID-19
pandemic has created an unprecedented challenge for the Group and a high level of uncertainty for all companies. Further detail
relating to this is provided within the basis of preparation and going concern sections in note 2.1 on pages 136 to 138.
iii) Other Businesses and Central Costs
The financial services product business is required to comply with various operational regulatory requirements in the UK.
21 INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES
A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor
in deciding who controls the entity, such as when any voting rights relate to the administrative tasks only and the relevant
activities are directed by means of contractual agreements. The Group has interests in unconsolidated structured entities
in the form of investment funds comprising:
– bank loan funds; and
– money market funds.
The nature and purpose of the bank loan funds are to diversify the investment portfolio and enhance the overall yield, whilst
maintaining an acceptable level of risk for the portfolio as a whole.
Bank loan funds invest in secured loans to companies rated below investment grade.
The nature and purpose of the money market funds is to provide maximum security and liquidity for the funds invested whilst
also providing an adequate return. The money market funds used by the Group are all members of the Institutional Money
Market Funds Association. They are thus required to maintain specified liquidity and diversification characteristics of their
underlying portfolios, which comprise investment grade investments in financial institutions.
The Group invests in unconsolidated structured entities as part of its investment activities. The Group does not sponsor any
of the unconsolidated structured entities.
At 31 January 2021, the Group’s total interest in unconsolidated structured entities was £73.0m analysed as follows:
Loan funds
Money market funds
Carrying
value
£’m
6.2
66.8
Interest
income
£’m
0.2
0.1
Fair value
losses
£’m
(0.1)
–
These investments are typically managed under credit risk management as described in note 20. The Group’s maximum
exposure to loss on the interests presented above is the carrying amount of the Group’s investments. No further loss can
be made by the Group in relation to these investments. For this reason, the total assets of the entities are not considered
meaningful for the purposes of understanding the related risks and so have not been presented.
22 INVENTORIES
Raw materials
Technical stocks
Finished goods
Technical stocks are spare parts for the Group’s cruise ships.
184
2021
£’m
0.2
1.5
1.8
3.5
2020
£’m
0.3
2.4
2.7
5.4
Saga plc Annual Report and Accounts 2021Financial Statements 23 TRADE AND OTHER RECEIVABLES
Trade receivables (note 20)
Loss allowance (note 20)
Other receivables
Prepayments
Contract cost assets
Deferred acquisition costs
Other taxes and social security costs
2021
£’m
131.6
(13.9)
117.7
33.0
11.4
2.9
15.1
3.0
183.1
2020
(re-presented)
£’m
146.0
(21.2)
124.8
25.2
36.8
2.6
14.6
5.0
209.0
An explanation of how the Group manages and measures the credit risk of trade receivables can be found at note 20(b).
The Group expects trade and other receivables to be normally settled within 12 months. Due to the short-term nature of the
current receivables, their carrying amount is considered to be the same as their fair value.
For the prior year, trade receivables and other receivables have been re-presented to reflect reclassification and additional
analysis of assets to ensure comparability with the current year presentation.
24 TRUST ACCOUNTS
The Civil Aviation Authority (CAA) and Association of British Travel Agents (ABTA) regulated the Travel business conducted
by the Group in the UK during the year. To comply with its regulatory obligations, the Group is required to arrange financial
security to protect customer monies, in addition to making ATOL Protection Contributions, which the Group pays into the Air
Travel Trust Fund.
From 25 September 2020, the Group changed its method of customer protection for ATOL licensable bookings from financial
security bonds to paying customer monies into trust (‘Trust Accounting’). Under Trust Accounting, all monies the Group
receives from customers in respect of ATOL licensable holiday packages sold are held in trust until such time as the Group
has fulfilled all its obligations to the customer. The trust is administered and controlled by an independent Trustee, PT Trustees
Limited. Interest arising from the funds held on trust belongs to the Group.
With the introduction of Trust Accounting during the year, the Group is no longer required to hold financial security bonds in
relation to ATOL bookings.
25 CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
Cash and short-term deposits
Money market funds
Bank overdraft
Cash held by disposal groups
Cash and cash equivalents in the cash flow statement
2021
£’m
94.4
7.2
101.6
66.8
(1.5)
–
166.9
2020
£’m
73.1
24.8
97.9
45.9
(9.5)
4.8
139.1
Included within cash and cash equivalents are amounts held by the Group’s travel and insurance businesses which are
subject to contractual or regulatory restrictions (note 41). These amounts held are not readily available to be used for other
purposes within the Group and total £91.5m (2020: £98.2m). Available cash excludes these amounts and any amounts held
by disposal groups.
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn
interest at the respective short-term deposit rates.
The bank overdraft is subject to a guarantee in favour of the Group’s bankers and is limited to the amount drawn. The bank
overdraft is repayable on demand.
185
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
26 TRADE AND OTHER PAYABLES
Trade payables
Other payables
Other taxes and social security costs
Assets in the course of construction
Accruals
2021
£’m
115.5
5.1
8.4
4.4
41.7
175.1
2020
(re-presented)
£’m
115.7
5.3
12.4
5.2
47.3
185.9
All trade and other payables are current in nature. The carrying amounts of trade and other payables are considered to be
the same as their fair values, due to their short-term nature.
For the prior year, trade payables, other payables and accruals have been re-presented to reflect reclassification and
additional analysis of liabilities to ensure comparability with the current year presentation.
27 RETIREMENT BENEFIT SCHEMES
The Group operates retirement benefit schemes for the employees of the Group consisting of defined contribution plans
and a defined benefit plan.
a. Defined contribution plans
There are a number of defined contribution schemes in the Group. The total charge for the year in respect of the defined
contribution schemes was £3.2m (2020: £3.6m).
The assets of these schemes are held separately from those of the Group in funds under the control of Trustees.
b. Defined benefit plan
The Group operates a funded defined benefit scheme, the Saga Pension Scheme, which is open to new members who accrue
benefits on a career average salary basis. The assets of the scheme are held separately from those of the Group
in independently administered funds.
The scheme is governed by the employment laws of the UK. The level of benefits provided depends on the member’s length
of service and average salary whilst a member of the scheme. The scheme requires contributions to be made to a separately
administered fund which is governed by a Board of Trustees and consists of an equal number of employer and employee
representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the
investment strategy.
The long-term investment objectives of the Trustees and the Group are to limit the risk of the assets failing to meet the
liabilities of the scheme over the long-term, and to maximise returns consistent with an acceptable level of risk so as to
control the long-term costs of the scheme. To meet those objectives, the scheme’s assets are invested in different categories
of assets, with different maturities designed to match liabilities as they fall due. The investment strategy will continue to
evolve over time and is expected to match the liability profile increasingly closely. The pension liability is exposed to inflation
rate risks and changes in the life expectancy of members. As the plan assets include investments in quoted equities, the
Group is exposed to equity market risk. The Group has provided a super security to the Trustees of the scheme, which ranks
before any liabilities under the senior facilities agreement (as detailed in note 30). The value of the security is capped
at £32.5m.
The fair value of the assets and present value of the obligations of the Saga defined benefit scheme are as follows:
Fair value of scheme assets
Present value of defined benefit obligation
Defined benefit scheme liability
2021
£’m
411.2
(415.5)
(4.3)
2020
£’m
372.3
(377.8)
(5.5)
The present values of the defined benefit obligation, the related current service cost and any past service costs have been
measured using the projected unit credit valuation method.
186
Saga plc Annual Report and Accounts 2021Financial Statements 27 RETIREMENT BENEFIT SCHEMES (CONTINUED)
b. Defined benefit plan (continued)
The following table summarises the components of the net benefit expense recognised in the income statement, other
comprehensive income and amounts recognised in the statement of financial position for the schemes for the year ended
31 January 2021:
1 February 2020
Pension cost charge to income statement
Current service cost paid in cash during the period
Non-cash current service cost uplift
Total current service cost
Net interest
Included in income statement
Benefits paid
Return on plan assets (excluding amounts included in net interest expense)
Actuarial changes arising from changes in demographic assumptions
Actuarial changes arising from changes in financial assumptions
Experience adjustments
Sub-total included in other comprehensive income
Total contributions by employer
31 January 2021
Fair value
of scheme
assets
£’m
372.3
Defined
benefit
obligation
£’m
(377.8)
Defined
benefit
scheme
liability
£’m
(5.5)
–
–
–
6.3
6.3
(9.6)
31.5
–
–
–
21.9
10.7
411.2
(5.4)
(2.6)
(8.0)
(6.3)
(14.3)
9.6
–
6.2
(24.7)
(14.2)
(23.1)
(0.3)
(415.5)
(5.4)
(2.6)
(8.0)
–
(8.0)
–
31.5
6.2
(24.7)
(14.2)
(1.2)
10.4
(4.3)
The following table summarises the components of the net benefit expense recognised in the income statement, other
comprehensive income and amounts recognised in the statement of financial position for the schemes for the year ended
31 January 2020:
1 February 2019
Pension cost charge to income statement
Current service cost paid in cash during the period
Non-cash current service cost uplift
Total current service cost
Net interest
Included in income statement
Benefits paid
Return on plan assets (excluding amounts included in net interest expense)
Actuarial changes arising from changes in demographic assumptions
Actuarial changes arising from changes in financial assumptions
Experience adjustments
Sub-total included in other comprehensive income
Total contributions by employer
31 January 2020
Fair value
of scheme
assets
£’m
312.4
Defined
benefit
obligation
£’m
(315.2)
Defined
benefit
scheme
liability
£’m
(2.8)
–
–
–
8.4
8.4
(9.7)
51.3
–
–
–
41.6
9.9
372.3
(6.8)
(0.2)
(7.0)
(8.3)
(15.3)
9.7
–
4.5
(61.4)
0.2
(47.0)
(0.3)
(377.8)
(6.8)
(0.2)
(7.0)
0.1
(6.9)
–
51.3
4.5
(61.4)
0.2
(5.4)
9.6
(5.5)
187
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
27 RETIREMENT BENEFIT SCHEMES (CONTINUED)
b. Defined benefit plan (continued)
The major categories of assets in the Saga scheme are as follows:
Equities
Bonds
Property and alternatives
Hedge funds
Insured annuities
Cash and other
Total
2021
£’m
51.7
203.0
39.6
99.8
6.1
11.0
411.2
2020
£’m
45.0
222.7
24.5
73.2
3.9
3.0
372.3
Equities and bonds are all quoted in active markets whilst property and hedge funds are not. Global financial markets have
been monitoring and reacting to the COVID-19 pandemic and have incurred increased volatility and uncertainty since the
onset of the pandemic. The COVID-19 pandemic is an unprecedented event and the eventual impact on the global economy
and markets will largely depend on the scale and duration of the outbreak. The ultimate extent of the effect of this on the
asset portfolio is not possible to estimate at this time.
The principal assumptions used in determining pension benefit obligations for the Saga scheme are shown below:
Real rate of increase in salaries
Real rate of increase of pensions in payment
Real rate of increase of pensions in deferment
Discount rate – pensioner
Discount rate – non-pensioner
Inflation – pensioner
Inflation – non-pensioner
Life expectancy of a member retiring in 20 years’ time – Male
Life expectancy of a member retiring in 20 years’ time – Female
2021
2.60%
2.70%
2.55%
1.35%
1.45%
2.80%
2.60%
27.2 yrs
29.0 yrs
2020
2.70%
2.70%
2.65%
1.60%
1.70%
2.80%
2.70%
27.3 yrs
29.4 yrs
Following the RPI reform consultation which completed in November 2020, the Group has updated the inflation risk
premium (IRP) applied when setting the RPI assumption (at 31 January 2021, an IRP of 0.3% p.a. before 2030 and 0.5%
p.a. thereafter has been adopted, compared to an IRP of 0.3% p.a. at all terms in the prior year). The actuary has confirmed
that the impact of the change in approach is a £6m decrease in the DBO.
The Group has also updated the assumed long-term gap between RPI and CPI (at 31 January 2021, an RPI-CPI gap of
0.8% p.a. before 2030 and nil therefore has been adopted, compared to a gap of 0.8% p.a. at all terms in the prior year).
The actuary has confirmed that the impact of the change in approach is an £8m increase in the DBO.
Mortality assumptions are set using standard tables based on specific experience where available and allow for future
mortality improvements. The Saga scheme assumption is that a member currently aged 60 will live on average for a further
26.0 years if they are male and on average for a further 27.7 years if they are female.
A quantitative sensitivity analysis for significant assumptions as at 31 January 2021 and their impact on the scheme
liabilities is as follows:
Assumptions
Sensitivity
Impact £’m
Discount rate
Future inflation
Life expectancy
Future salary
+/– 0.25%
+/– 0.25%
+/– 1 year
+/– 0.5%
Increase Decrease
23.2
(24.6)
Increase Decrease
(16.7)
18.3
Increase Decrease
(14.1)
14.8
0.0
Note: a positive impact represents an increase in the net defined benefit liability.
188
Saga plc Annual Report and Accounts 2021Financial Statements 27 RETIREMENT BENEFIT SCHEMES (CONTINUED)
b. Defined benefit plan (continued)
The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. When calculating
the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method has been applied as when
calculating the pension liability recognised within the statement of financial position. The methods and types of assumptions used
in preparing the sensitivity analysis did not change compared to the prior period.
The expected contribution to the Saga scheme for the next year is £5.2m and average duration of the defined benefit plan
obligation at the end of the reporting period is 23 years. Formal actuarial valuations take place every three years for the
scheme. The assumptions adopted for actuarial valuations are determined by the Trustees and are agreed with the Group
and are normally more prudent than the assumptions adopted for IAS 19 purposes, which are best estimate. Where a funding
deficit is identified, the Group and the Trustees may agree a deficit recovery plan to pay additional contributions above those
needed to fund new pensions accruing in the scheme.
The latest valuation of the Saga scheme was at 31 January 2017. The pension trustees have largely completed the triennial
valuation of the scheme as at 31 January 2020. Following discussions with the Company, the trustees are proposing a new
deficit recovery plan totalling £39.0m over the next seven years, with the first payment of £4.2m paid in February 2021 and
subsequent payments of £5.8m due each February thereafter until February 2027. Discussions with the trustees are ongoing
but are expected to be concluded in the next two months. Under the previously agreed recovery plan, the Group made an
additional payment of £3.0m during the year ended 31 January 2021. The total expected contributions in the year ending
31 January 2022 are £9.4m, inclusive of a £4.2m additional payment.
The Group has also agreed to pay additional amounts into an Escrow account should asset returns fall below an agreed
level over set periods of time. Dependent upon the level of return on the scheme’s assets between 31 January 2020 and
31 January 2027, any amount in the Escrow account will be released to either the Group or the scheme by 30 June 2027.
28 INSURANCE CONTRACT LIABILITIES AND REINSURANCE ASSETS
The analysis of gross and net insurance liabilities is as follows:
Gross
Claims outstanding
Provision for unearned premiums
Total gross liabilities
Recoverable from reinsurers
Claims outstanding
Provision for unearned premiums
Total reinsurers’ share of insurance liabilities (as presented on the face of the statement
of financial position)
Amounts recoverable under funds – withheld quota share agreements recognised within
trade payables:
– Claims outstanding
– Provision for unearned premiums
Total reinsurers’ share of insurance liabilities after funds – withheld quota share
Analysed as:
Claims outstanding
Provision for unearned premiums
Total reinsurers’ share of insurance liabilities after funds – withheld quota share
2021
£’m
2020
£’m
329.5
96.8
426.3
338.3
105.3
443.6
2021
£’m
2020
£’m
65.2
6.4
71.6
147.1
55.9
274.6
212.3
62.3
274.6
55.2
6.9
62.1
134.0
63.9
260.0
189.2
70.8
260.0
189
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
28 INSURANCE CONTRACT LIABILITIES AND REINSURANCE ASSETS (CONTINUED)
Net
Claims outstanding
Provision for unearned premiums
Total net insurance liabilities
Amounts recoverable under funds – withheld quota share agreements recognised within
trade payables:
– Claims outstanding
– Provision for unearned premiums
Total net insurance liabilities after funds – withheld quota share
Analysed as:
Claims outstanding
Provision for unearned premiums
Total net insurance liabilities after funds – withheld quota share
Reconciliation of movements in claims outstanding
Gross claims outstanding at 1 February
Less: reinsurance claims outstanding
Net claims outstanding at 1 February
Gross claims incurred
Less: reinsurance recoveries
Net claims incurred
Gross claims paid
Less: received from reinsurance
Net claims paid
Gross claims outstanding at 31 January
Less: reinsurance claims outstanding
Net claims outstanding at 31 January
2021
£’m
2020
£’m
264.3
90.4
354.7
283.1
98.4
381.5
(147.1)
(55.9)
151.7
(134.0)
(63.9)
183.6
117.2
34.5
151.7
149.1
34.5
183.6
2021
£’m
338.3
(189.2)
149.1
131.4
(113.2)
18.2
(140.2)
90.1
(50.1)
329.5
(212.3)
117.2
2020
(restated)
£’m
392.6
(209.8)
182.8
140.61
(109.8)1
30.8
(194.9)1
130.41
(64.5)
338.3
(189.2)
149.1
1 Gross claims incurred and reinsurers’ share of claims incurred for the year ended 31 January 2020 have been restated due to an incorrect allocation between these
classifications. Gross claims incurred have decreased by £19.3m and reinsurers’ share of claims incurred has decreased by £19.3m. As a result of these changes, gross
claims paid and reinsurers’ share of claims paid for the year ended 31 January 2020 have also been restated – gross claims paid have decreased by £19.3m and
reinsurers’ share of claims paid has decreased by £19.3m
190
Saga plc Annual Report and Accounts 2021Financial Statements 28 INSURANCE CONTRACT LIABILITIES AND REINSURANCE ASSETS (CONTINUED)
Reconciliation of movements in the provision for net unearned premiums
Gross unearned premiums at 1 February
Less: unearned reinsurance premiums
Net unearned premiums at 1 February
Gross premiums written
Less: outward reinsurance premium
Net premiums written
Gross premiums earned
Less reinsurance premium earned
Net premiums earned (note 3a)
Gross unearned premiums at 31 January
Less: unearned reinsurance premiums
Net unearned premiums at 31 January
2021
£’m
105.3
(70.8)
34.5
213.2
(134.3)
78.9
(221.7)
142.8
(78.9)
96.8
(62.3)
34.5
2020
£’m
98.0
(63.5)
34.5
241.2
(153.0)
88.2
(233.9)
145.7
(88.2)
105.3
(70.8)
34.5
The net cost of purchasing reinsurance in 2021 was £7.8m (2020: £6.4m).
On 15 July 2019, the UK Government announced a change to the Ogden discount rate from –0.75% to –0.25%. The insurance
liabilities presented here and on the face of the Group’s balance sheet incorporate the effect of this change.
a. Discounting
Claims outstanding provisions are calculated on an undiscounted basis, with the exception of PPOs made by the courts as
part of a bodily injury claim settlement. Claims outstanding provisions for PPOs are discounted at a rate of –1.5% (2020:
–1.5%) representing the Group’s view on long-term carer wage inflation less the expected return on holding the invested
financial assets associated with these claims.
The value of claims outstanding before discounting was £390.7m (2020: £410.0m) gross of reinsurance and £133.4m
(2020: £174.6m) net of reinsurance.
The period between the balance sheet date and the estimated final payment date was calculated using Ogden life
expectancy tables, with appropriate adjustments where necessary for impaired life. The average life expectancy from PPO
settlement date to the final PPO payment was 37 years (2020: 36 years) and the rate of investment return used to determine
the discounted value of claims provisions was 2.0% (2020: 2.0%).
191
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
28 INSURANCE CONTRACT LIABILITIES AND REINSURANCE ASSETS (CONTINUED)
b. Analysis of claims incurred: claims development tables
The following tables detail the Group’s initial estimate of ultimate gross and net claims incurred over the past 10 years and
the re-estimation at subsequent financial period ends.
The following table analyses the gross incurred claims (before deducting reinsurance recoveries) on an accident year basis:
Analysis of
claims
incurred
Accident
year
2012 and
earlier
2013
2014
2015
2016
2017
2018
2019
2020
2021
Claims
handling
costs
Financial year ended 31 January
2012
£’m
2013
£’m
2014
£’m
2015
£’m
2016
£’m
2017
£’m
2018
£’m
2019
£’m
2020
£’m
2021
£’m
Total
£’m
Claims
paid
£’m
Gross
claims
outstanding
£’m
315.1
(47.2)
321.2
(42.3)
(14.2)
281.9
(36.2)
(45.2)
(18.9)
271.3
(40.0)
(22.1)
(25.7)
(6.0)
280.4
(21.4)
(13.4)
(7.6)
(6.2)
4.1
197.2
(17.4)
(5.6)
(11.1)
(8.2)
(19.3)
4.7
194.9
(11.4)
(5.9)
(10.6)
(15.3)
(21.7)
(13.1)
–
189.8
(7.5)
(2.9)
(2.6)
(5.0)
(9.1)
(6.8)
(5.8)
1.0
163.2
315.1
274.0
225.4
171.0
186.6
152.7
138.0
111.8
124.5
(3.6)
n/a
(3.5) 208.4
201.5
(3.9)
222.7
(7.9)
228.7
(5.7)
168.4
(13.6)
178.0
(11.1)
191.5
0.7
172.5
9.3
154.7
154.7
115.4
n/a
(197.9)
(192.8)
(205.7)
(209.6)
(154.8)
(139.6)
(143.0)
(117.4)
(78.4)
15.6
330.7
17.4
291.4
17.2
242.6
18.0
189.0
21.5
208.1
11.5
164.2
10.5
148.5
27.3
139.1
16.1
140.61
16.0
131.4
34.0
10.5
8.7
17.0
19.1
13.6
38.4
48.5
55.1
76.3
321.2
8.3
329.5
1 For the year ended 31 January 2020, gross claims incurred have been restated due to an incorrect allocation between gross claims incurred and reinsurers’ share of
claims incurred for that year. Gross claims incurred have decreased by £19.3m and reinsurers’ share of claims incurred have decreased by £19.3m. In addition, gross
claims incurred have been restated by £0.3m to agree to the income statement. Gross claims incurred have decreased by a further £0.3m for this correction.
The development of the associated loss ratios on the same basis is as follows:
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Financial year ended 31 January
77%
71%
76%
63%
72%
75%
62%
62%
70%
81%
57%
56%
63%
80%
87%
55%
53%
61%
78%
88%
67%
52%
52%
58%
75%
82%
69%
75%
52%
51%
55%
71%
75%
65%
75%
80%
52%
50%
55%
69%
73%
62%
73%
80%
70%
51%
49%
54%
67%
71%
58%
69%
80%
74%
70%
Accident year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
192
Saga plc Annual Report and Accounts 2021Financial Statements 28 INSURANCE CONTRACT LIABILITIES AND REINSURANCE ASSETS (CONTINUED)
b. Analysis of claims incurred: claims development tables (continued)
The following table analyses the net incurred claims (after deducting reinsurance recoveries) on an accident year basis:
Analysis of
claims
incurred
Accident
year
2012 and
earlier
2013
2014
2015
2016
2017
2018
2019
2020
2021
Claims
handling
costs
Financial year ended 31 January
2012
£’m
2013
£’m
2014
£’m
2015
£’m
2016
£’m
2017
£’m
2018
£’m
2019
£’m
2020
£’m
2021
£’m
Total
£’m
Claims
paid
£’m
Net claims
outstanding
£’m
286.0
(45.8)
315.4
(42.4)
(14.6)
276.8
(20.2)
(22.9)
(14.7)
219.1
(29.6)
(19.8)
(23.4)
5.3
220.9
(28.3)
(14.6)
(11.0)
(9.2)
3.2
94.0
(15.3)
(10.2)
(9.8)
(11.1)
(15.1)
1.5
78.8
(11.4)
(5.9)
(10.6)
(15.3)
(21.7)
(6.2)
–
71.8
(7.5)
(2.9)
(2.6)
(5.0)
(9.1)
(1.9)
(1.6)
1.0
55.3
286.0
269.6
219.8
161.3
153.4
34.1
18.8
0.7
25.7
n/a
(3.6)
(3.5)
221.0
(3.9) 200.8
175.9
(7.9)
172.5
(5.7)
83.9
(3.5)
74.0
(3.2)
72.9
0.1
56.0
0.7
42.2
42.2
11.7
n/a
(217.4)
(192.1)
(169.4)
(158.6)
(74.2)
(64.4)
(58.1)
(45.3)
(25.4)
15.6
301.6
17.4
287.0
17.2
237.0
18.0
179.3
21.5
174.9
11.5
45.6
10.5
29.3
8.9
9.6
5.1
30.81
6.5
18.2
14.6
3.6
8.7
6.5
13.9
9.7
9.6
14.8
10.7
16.8
108.9
8.3
117.2
1 Net claims incurred have been restated by £0.3m to agree to the income statement.
The development of the associated loss ratios on the same basis is as follows:
Accident year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Financial year ended 31 January
76%
70%
75%
62%
72%
75%
62%
66%
71%
67%
57%
62%
65%
69%
70%
54%
58%
62%
66%
71%
56%
53%
56%
59%
63%
66%
56%
66%
52%
54%
56%
58%
59%
53%
66%
70%
52%
54%
55%
56%
56%
52%
64%
71%
63%
51%
53%
54%
54%
55%
50%
62%
71%
64%
53%
Favourable claims development over the year has resulted in a £30.6m (2020: £29.6m) reduction in the net claims incurred in
respect of prior years.
29 CONTRACT LIABILITIES
Deferred revenue (note 3b)
Current
Non-current
2021
£’m
82.2
82.2
66.9
15.3
82.2
2020
£’m
153.2
153.2
150.2
3.0
153.2
Deferred revenue comprise amounts received within the Travel segment for holidays and cruises with departure dates after the
reporting date, and insurance premiums and sales revenues received in the Insurance segment in respect of insurance policies
which commence after the reporting date, and represents the performance obligations not yet satisfied as at 31 January 2021.
Contract liabilities have decreased on the prior year due to the impact of the COVID-19 pandemic on the Travel business.
193
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
30 LOANS AND BORROWINGS
Bond
Bank loans
Ship loans
Revolving credit facility
Accrued interest payable
Less: deferred issue costs
2021
£’m
250.0
70.0
515.6
–
8.3
843.9
(26.8)
817.1
2020
£’m
250.0
140.0
234.8
10.0
3.7
638.5
(14.2)
624.3
Term loan and RCF
The Group’s bank facilities consist of a £250.0m seven-year senior unsecured bond (repayable May 2024), a £200.0m
five-year term loan facility (repayable May 2023) and a £100.0m five-year RCF with an option to extend. In March 2019, the
Group’s banks agreed to extend the term on the RCF by one year with expiry in May 2023. The bond is listed on the Irish Stock
Exchange.
At 31 January 2021, the Group had drawn £nil of its £100.0m RCF and since the May 2017 refinancing £130.0m of the term
loan has been repaid.
In light of the significant impact of the COVID-19 pandemic on the business, especially Travel operations, the Group
entered into discussions with its lending banks in early March 2020 to amend the terms of its bank debt. These discussions
were concluded on 1 April 2020, with favourable amendments to banking covenants.
On 30 August 2020 the Group announced that it was at the advanced stage of a prospective £150.0m equity capital raise
in order to strengthen its statement of financial position, improve liquidity and support the execution of its strategy plan.
The prospective £150.0m equity raise was launched on 10 September 2020, structured as a Firm Placing and Open Offer.
The £150.3m equity subsequently raised (£138.7m net of issue costs) improved the Group’s financial position by funding the
reduction of the term loan to £70.0m and repayment of the drawn RCF, with the balance of the proceeds raised increasing
available cash. The Group also agreed with its lending banks to extend the maturity of the remaining £70.0m term loan to
May 2023 and amended certain bank covenants to provide additional headroom in stress test scenarios as follows:
– Increase in the leverage ratio (excluding Cruise) covenant at 31 July 2021 from 4.25x to 4.75x and at 31 October 2021 from
4.0x to 4.5x;
– Reduction in the Group interest cover covenant at 30 April 2021 from 2.0x to 1.25x, at 31 July 2021 from 3.0x to 1.5x, at
31 October 2021 from 3.0x to 1.75x and at 31 January 2022 from 3.5x to 2.5x.
In March 2021 the Group reached agreement to amend covenants on the term loan and RCF (note 41). The covenants within
the Group’s term loan and RCF have been amended as follows:
– Increase in the leverage ratio (excluding Cruise) covenant at 31 January 2022 from 4.00x to 4.25x;
– Reduction in the Group interest cover covenant at 31 July 2021 from 1.5x to 1.25x, at 31 October 2021 from 1.75 x to 1.25x
and at 31 January 2022 from 2.5x to 1.5x.
In addition, the following amendments have also been made:
– The Group is subject to a minimum liquidity requirement of £40 million, which can be met either through cash or undrawn
and committed facilities;
– The permitted indebtedness to the Cruise Group is £55m until September 2022, and then reduces to £30m (being £50m
and £25m respectively permitted indebtedness in addition to the level of borrowing that was in place when the facility was
originally agreed of £5m);
– Dividends remain restricted while leverage (excluding Cruise) is above 3.0x.
Interest on the bond is incurred at an annual interest rate of 3.375%. Interest on the term loan and RCF is incurred at a
variable rate of LIBOR plus a bank margin which is linked to the Group’s leverage ratio.
Cruise ship debt deferral
In June 2019, the Group drew down the financing for its cruise ship, Spirit of Discovery, of £245.0m. The financing for Spirit of
Discovery represents a 12-year fixed rate sterling loan, backed by an export credit guarantee. The initial loan was repayable in
24 broadly equal instalments, with the first payment of £10.2m paid in December 2019. This financing is secured against Spirit
of Discovery cruise ship asset.
194
Saga plc Annual Report and Accounts 2021Financial Statements 30 LOANS AND BORROWINGS (CONTINUED)
Cruise ship debt deferral (continued)
The Board announced on 22 June 2020 that it had secured a debt holiday and covenant waiver for the Group’s ship facilities.
The Group’s lenders agreed to a deferral of £32.1m in principal payments under the ship facilities that were due up to
31 March 2021. These deferred amounts will be paid between June 2021 and December 2024 for Spirit of Discovery and
between September 2021 and March 2025 for Spirit of Adventure, and interest remains payable.
On 29 September 2020, the Group drew down the financing for its new cruise ship, Spirit of Adventure, of £280.8m. The financing for
Spirit of Adventure represents a 12-year fixed rate sterling loan, backed by an export credit guarantee. The loan is repayable in
24 broadly equal instalments, with the first payment originally due six months after delivery in March 2021, but deferred to September
2021 as a result of the debt holiday described above. This financing is secured against Spirit of Adventure cruise ship asset.
In March 2021 the Group reached agreement of a one-year extension to the debt deferral on its cruise ship facilities (note
41). As part of an industry-wide package of measures to support the cruise industry, an extension of the existing debt
deferral has been agreed to 31 March 2022. The key terms of this deferral are:
– All principal payments to 31 March 2022 (£51.8 million) are deferred and repaid over 5 years;
– All financial covenants until 31 March 2022 are waived;
– Dividends remain restricted while the deferred principal is outstanding;
– The Group is now subject to a minimum liquidity requirement of £40 million, which can be met through either cash or
undrawn and committed facilities.
Interest on the Spirit of Discovery ship loan is incurred at an effective annual interest rate of 4.31% (including arrangement
and commitment fees). Interest on the Spirit of Adventure ship loan is incurred at an effective annual interest rate of 3.30%
(including arrangement and commitment fees).
At 31 January 2021, debt issue costs were £26.7m (2020: £14.2m) which have increased in the year following the draw down
of the financing for the new cruise ship, Spirit of Adventure.
During the year, the Group charged £29.4m (2020: £19.5m) to the income statement in respect of fees and interest associated with
the bond, term loan, ship loans and RCF. In addition, finance costs recognised in the income statement include £0.8m (2020: £1.2m)
relating to interest and finance charges on lease liabilities and net fair value losses on derivatives are £nil (2020: £1.1m). The Group
has complied with the financial covenants of its borrowing facilities during the current year and prior year.
31 PROVISIONS
At 1 February 2019
Utilised during the year
Released unutilised during the year
Charge for the year
Reclassification to assets held for sale
At 31 January 2020
Utilised during the year
Released unutilised during the year
Charge for the year
At 31 January 2021
Current
Non-current
At 31 January 2021
Current
Non-current
At 31 January 2020
PMI
£’m
5.2
(1.5)
–
–
3.7
–
3.7
(2.8)
–
4.0
4.9
PMI
£’m
4.9
–
4.9
PMI
£’m
3.7
–
3.7
Other
£’m
4.8
(2.6)
(0.5)
2.4
4.1
(0.1)
4.0
(1.2)
(1.1)
5.1
6.8
Other
£’m
6.2
0.6
6.8
Other
£’m
2.4
1.6
4.0
Total
£’m
10.0
(4.1)
(0.5)
2.4
7.8
(0.1)
7.7
(4.0)
(1.1)
9.1
11.7
Total
£’m
11.1
0.6
11.7
Total
£’m
6.1
1.6
7.7
195
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
31 PROVISIONS (CONTINUED)
COVID-19 has led to a high number of private inpatient appointments and operations being delayed. This has had a favourable
impact on the underwriting performance of the private medical insurance (PMI) product, resulting in a profit share due. Due to
Group’s public commitment to not profit from the impacts of COVID-19, a provision to offset this profit share has been made
during the year. The provision represents that some of this upside may be returned to customers, however the quantum remains
unknown since it is expected that as lockdowns begin to be lifted and hospitals ‘catch up’ on missed appointments, the profit
share position will reduce during the next financial year.
Other provisions primarily comprise provisions for the return of insurance commission in respect of policies cancelled mid-
term after the reporting date or as a result of being cancelled during the statutory cooling off period after the reporting date;
credit hire and repair claims handling and litigation costs on income booked as at the reporting date; fleet insurance at the
estimated cost of settling all outstanding incidents at the reporting date; and an employer liability provision relating to
various Group-related, self-funded insurance arrangements. In addition, over the last year management have been working
to identify areas where there is likely to be a requirement to remedy various errors that have had an adverse impact on
customer outcomes. Management have also reviewed whether those issues identified necessitate a provision and have
quantified a best estimate for this provision in such cases. Based on this quantification and analysis, management have
recognised customer remediation provisions for these issues as at 31 January 2021.
All provisions are expected to be fully utilised over the next 12 months with the exception of the fleet insurance, credit
hire and repair claims handling and litigation costs, and employer liability provisions. The timing of fleet insurance costs
is uncertain and will depend upon the nature of each incident. The costs of debt recovery on credit hire and repair claims
handling and litigation costs is uncertain and will depend upon the nature and timing of each claim. The settlement cash
outflows from the employer liability provision depend on the timing of the settlement of claims.
These items are reviewed and updated annually.
32 RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The following tables analyse the cash and non-cash movements for liabilities arising from financing activities:
Lease liabilities (note 37)
Bank loans (note 30)
Ship loans (note 30)
Revolving credit facility (note 30)
Bond (note 30)
Deferred issue costs (note 30)
Lease liabilities (note 37)
Bank loans (note 30)
Ship loans (note 30)
Revolving credit facility (note 30)
Bond (note 30)
Deferred issue costs (note 30)
Non-cash changes
New leases
and lease
modifications
(note 18)
£’m
(20.2)
–
–
–
–
–
2020
£’m
28.6
140.0
234.8
10.0
250.0
(14.2)
Cash flows
£’m
(4.0)
(70.0)
280.8
(10.0)
–
(17.4)
Other
£’m
–
–
–
–
–
4.8
Non-cash changes
New leases
and lease
modifications
(note 18)
£’m
15.9
–
–
–
–
–
2019
£’m
27.7
160.0
–
30.0
250.0
(3.0)
Cash flows
£’m
(15.0)
(20.0)
234.8
(20.0)
–
(7.9)
Other
£’m
–
–
–
–
–
(3.3)
2021
£’m
4.4
70.0
515.6
–
250.0
(26.8)
2020
£’m
28.6
140.0
234.8
10.0
250.0
(14.2)
Included within ‘Other’ is the amortisation of deferred issue costs of £4.8m (2020: £3.4m) and the transfer of debt issue costs
paid in the prior year from prepayments to deferred issue costs in the current year of £nil (2020: £6.7m).
Cash flows relating to bank loans comprise repayment of borrowings of £70.0m (2020: £20.0m).
Cash flows relating to ship loans comprise proceeds from borrowings of £280.8m (2020: £245.0m) less repayment of
borrowings of £nil (2020: £10.2m).
Cash flows relating to the RCF comprise proceeds from borrowings of £50.0m (2020: £34.0m) less repayment of borrowings
of £60.0m (2020: £54.0m).
196
Saga plc Annual Report and Accounts 2021Financial Statements 33 CALLED UP SHARE CAPITAL
Allotted, called up and fully paid
As at 31 January 2019 and 31 January 2020
Issue of shares – 5 October 2020
– First Firm Placing
– Second Firm Placing
– Placing and Open Offer
Sub-total before share consolidation
Share consolidation – 13 October 2020
Issue of shares – 18 November 2020
As at 31 January 2021
Ordinary shares
Nominal
value
£
Value
£’m
Number
1,122,003,328
0.01
11.2
224,400,000
124,183,026
623,335,182
971,918,208
0.01
0.01
0.01
0.01
2.2
1.2
6.3
9.7
2,093,921,536
(1,954,326,767)
507,458
140,102,227
0.01
20.9
0.15
0.15
0.1
21.0
On 30 August 2020 the Group announced that it was at the advanced stage of a prospective £150m equity capital raise in
order to strengthen its statement of financial position, improve liquidity and support the execution of its strategic plan.
The prospective £150m equity raise was launched on 10 September 2020, structured as a Firm Placing and Open Offer.
The Group’s Firm Placing was made up of two firm placings, both of which involved issuing shares to the Chairman, Roger De
Haan. The First Firm Placing resulted in Roger De Haan subscribing for 224,400,000 new ordinary shares at a price of 27p per
ordinary share. The Second Firm Placing resulted in Roger De Haan subscribing for 124,183,026 new ordinary shares at 12p per
ordinary share (the Offer Price as if he were participating in the Open Offer as a qualifying shareholder). The Firm Placing was
inter-conditional with the Placing and Open Offer.
Under the Placing and Open Offer the Company invited its shareholders to subscribe to the issue of 623,335,182 ordinary
shares at an issue price of 12p per ordinary share on the basis of five new shares for every nine ordinary shares held.
In addition to the Firm Placing described above, Roger De Haan subscribed for 204,250,307 new shares in the Placing and
Open Offer, and, as a result, from admission held 26.4% of the enlarged share capital of the Company.
Under the Firm Placing and Open Offer, on 5 October 2020 the Company issued 971,918,208 new ordinary shares, raising
£150.3m of funds which were utilised to repay part of the Group’s term loan and repay in full the drawn RCF (note 30), with
the balance of the proceeds raised increasing available cash. The issue was fully subscribed.
The share premium arising on the issue of the new ordinary shares was £140.6m. Transaction costs associated with the issue
of the share capital of £11.6m were deducted from share premium.
On 13 October 2020 the Company undertook a consolidation of its shares, whereby for every 15 ordinary shares held of 1p
nominal value, shareholders received 1 new consolidated share of 15p nominal value.
On 18 November 2020, Saga plc issued 507,458 new ordinary shares of 15p each, with a value of £0.1m, for transfer into an
Employee Benefit Trust (EBT) to satisfy employee incentive arrangements.
Employee Benefit Trust
The EBT purchased 13,408,108 shares at their nominal value of £134,000 during the year ended 31 January 2015. There were
no associated transaction costs.
During the year, employees exercised options over 67,567 of these shares which were transferred from the EBT into the direct
ownership of the employee. Employees exercised 13,213,975 of these shares in prior periods. As a result of the share
consolidation exercise described above, the remaining 126,566 shares (1p nominal value) became 8,437 shares (15p nominal
value) on 13 October 2020. The remaining 8,437 shares have been treated as treasury shares at 31 January 2021.
197
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
34 RESERVES
Share-based payment reserve
Prior to vesting, the share-based payment reserve is used to recognise the value of equity-settled share-based payments
provided to employees, including key management personnel, as part of their remuneration. More detail is provided in note 36.
Fair value reserve
The fair value reserve comprises the unrealised gains or losses of FVOCI assets pending subsequent recognition in profit or
loss once the investment is derecognised.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments
used in cash flow hedges pending subsequent recognition in: (a) profit or loss as the hedged cash flows or items affect profit
or loss; or (b) the statement of financial position as the hedged cash flows or items affect property, plant and equipment.
35 CAPITAL MANAGEMENT
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
For the purposes of the Group’s capital management, capital comprises total equity of £680.7m (2020: £588.2m) as shown
on the consolidated statement of financial position. The Group operates in a number of regulated markets and includes
subsidiaries which are required to comply with specific requirements in respect of capital or other resources.
The Group’s financial services businesses are regulated primarily by the FSC in Gibraltar and by the FCA in the UK; and the
capital requirements of its Travel businesses are regulated by the CAA in the UK. It is the Group’s policy to comply with the
requirements of these regulators in respect of capital adequacy or other similar tests at all times.
The Group’s regulated underwriting business is based in Gibraltar and regulated by the FSC. The underwriting business is
required to ensure that it has a sufficient level of capitalisation in accordance with Solvency II.
The Group (and its subsidiaries) has complied with externally imposed capital requirements during the year.
(The amounts set out in the following three paragraphs are provisional and unaudited.)
The Group monitored its ability to comply with the requirements of Solvency II throughout the year to 31 January 2021,
having previously received approval from the FSC for the Undertaking of Specific Parameters when applying the standard
formula to measure capital requirements for this business under Solvency II rules. Under Solvency II, AICL remained well
capitalised, and at 31 January 2021 available capital was £123.9m against a Solvency Capital Requirement of £77.0m, giving
161% coverage which has been adjusted to reflect the economic view by removing the benefit of the out of the money quota
share arrangement. As at 31 January 2020, available capital was £86.2m against a Solvency Capital Requirement of £53.8m,
giving 160% coverage, which did reflect the benefit of the quota share arrangement at that time.
The Group’s regulated insurance distribution business is based in the UK and regulated by the FCA. Due to the nature of the
business, the capital requirements are significantly less than the underwriting business but the Group is required to comply
with the Adequate Resources requirements of Threshold Condition 2.4 of the FCA Handbook. The Group undertakes a
rigorous assessment against the requirements of this Condition on an annual basis and, as a consequence of this, calculates
and holds an appropriate amount of capital in respect of the insurance distribution business. The Minimum Regulatory Capital
requirement of these businesses at 31 January 2021 was £5.3m (2020: £5.3m). Please refer to note 41 for events occurring
after the reporting period which will impact this balance.
The regulated Travel businesses are required to comply with a main test based on liquidity. As of 31 January 2020 the CAA
changed the liquidity test requirement to a fixed 70% coverage rate on the last day of each month, whereas previously it
was a variable coverage rate from month to month, and has removed the leverage test requirement. The Group monitors
its compliance with this test on a monthly basis including forward-looking compliance using budgets and forecasts.
At 31 January 2021 and 31 January 2020, the Travel businesses had sufficient coverage against this covenant.
198
Saga plc Annual Report and Accounts 2021Financial Statements 36 SHARE-BASED PAYMENTS
The Group has granted a number of different equity-based awards to employees and customers which it has determined
to be share-based payments:
a. Share options and free shares offer granted at the time of the IPO
– On 29 May 2014, share options over 13,132,410 shares were granted to certain Directors and employees with
no exercise price and no service or performance vesting conditions. There are no cash settlement alternatives.
– Eligible customers and employees who acquired their shares under the Customer or Employee Offers in the Prospectus
received one bonus share for every 20 shares they acquired and held continuously for one year to 29 May 2015.
As these were bonus shares, there was no exercise price and no cash settlement alternative.
b. Restricted Share Plan (RSP)
– The RSP is a discretionary executive share plan under which the Board may grant options over shares in Saga plc.
– On 24 June 2020, options over 12,134,706 shares were issued under the RSP to certain Directors and other senior employees
which vest and become exercisable on the third anniversary of the grant date, subject to continuing employment.
– On 15 December 2020, options over 26,225 shares were issued under the RSP to certain Directors and other senior employees
which vest and become exercisable on the third anniversary of the grant date, subject to continuing employment.
c. Long-Term Incentive Plan (LTIP)
– The LTIP is a discretionary executive share plan under which the Board may, within certain limits and subject
to applicable performance conditions, grant options over shares in Saga plc.
– Up to 31 January 2017, these options are 50% linked to a non-market vesting condition, EPS, and 50% linked
to a market vesting condition, Total Shareholder Return (TSR).
– From 1 February 2017 to 31 January 2018, these options were 60% linked to non-market vesting conditions
(30% linked to basic EPS and 30% linked to organic EPS) and 40% linked to a market vesting condition, TSR.
– From 1 February 2018, these options were 60% linked to non-market vesting conditions (30% linked to organic
EPS and 30% linked to return on capital employed (ROCE)) and 40% linked to a market vesting condition, TSR.
– From 1 February 2019, these options are 75% linked to non-market vesting conditions (50% linked to operational
and strategic measures and 25% linked to ROCE) and 25% linked to a market vesting condition, TSR.
d. Deferred Bonus Plan (DBP)
– On 28 May 2020, share options over 1,337,581 shares were issued under the DBP to the Executive Directors reflecting
their deferred bonus in respect of 2019/20, which vest and become exercisable on the third anniversary of the grant
date. Under the DBP scheme, executives receive two-thirds of the bonus award in cash and one-third in the form of
rights to shares of the Company.
e. Other share options
– On 2 December 2015, share options over 99,552 shares were issued to the Chief Marketing Officer at the time which
were to vest on the second anniversary of his appointment, subject to continuing employment. Following the cessation
of his employment, the vesting period was extended to 1 May 2020.
f. Employee Free Shares
– On 23 November 2020, 253,458 shares were awarded to eligible staff on the sixth anniversary of the IPO and
allocated at nil cost; these shares become beneficially owned over a three-year period from allocation, subject
to continuing service.
Each employee share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable
by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be
exercised at any time from the date of vesting to the date of their expiry. With the exception of share options granted at
the time of the IPO, if an employee ceases to be employed by the Group, the option rights will be forfeited, except in limited
circumstances that are approved by the Board on a case-by-case basis
199
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
36 SHARE-BASED PAYMENTS (CONTINUED)
The table below summarises the movements in the number of share options outstanding for the Group and their weighted
average exercise price:
At 1 February 2020
Granted
Forfeited
Exercised
Sub-total before share consolidation
Share consolidation – 13 October
2020 (note 33)
Granted
Forfeited
Exercised
IPO options
194,133
RSP
LTIP
– 18,835,712
–
– 12,134,706
(5,552,624)
(333,567)
–
(67,567)
(649,039)
–
126,566 11,801,139 12,634,049
DBP
1,003,882
1,337,581
–
(380,330)
1,961,133
Other
options
99,552
–
–
–
99,552
Employee
Free Shares
Total
3,371,966 23,505,245
– 13,472,287
(6,073,704)
(1,824,407)
29,079,421
(187,513)
(727,471)
2,456,982
(118,129) (11,014,397) (11,791,781)
–
26,225
–
–
(1,033)
–
–
–
–
(1,830,393)
–
–
–
(92,916)
–
–
–
(2,293,185) (27,140,801)
279,683
(2,322)
(6,037)
253,458
(2,322)
(5,004)
At 31 January 2021
8,437
812,967
841,235
130,740
6,636
409,929
2,209,944
Exercise price
£nil
£nil
£nil
£nil
£nil
£nil
£nil
Exercisable at 31 January 2021
8,437
–
11,585
5,168
–
61,174
86,364
Average remaining contractual life
0.0 years
2.4 years
1.2 years
2.0 years
0.0 years
2.0 years
1.8 years
Average fair value at grant
£27.75
£2.71
£10.27
£5.23
£30.33
£7.87
£6.87
The average fair values at grant date have been restated to reflect the impact of the share consolidation.
The weighted average share price at the date of exercise for share options exercised during the year ended 31 January 2021
was £2.42 (2020: £11.38).
The following information is relevant in the determination of the fair value of options granted during the year under the
equity-settled and cash-settled share-based remuneration schemes operated by the Group.
Model used
Expected life of share option
Weighted average share price (£)
RSP
Black-
Scholes
3 years
£2.71
DBP
Black-
Scholes
3 years
£3.34
Employee
Free Shares
Black-
Scholes
3 years
£2.77
As only limited historical data for the Group’s share price is available, the Group has estimated the Company’s share price
volatility as an average of the volatilities of its TSR comparator group over a historical period commensurate with the
expected life of the award immediately prior to the date of the grant.
For future valuations, at a date when sufficient Saga share price data becomes available, the Group intends to estimate the
Company volatility directly from this data.
The total amount charged to the income statement in the year ended 31 January 2021 is £2.4m (2020: £2.1m). This has been
charged to administrative and selling expenses £2.4m (2020: £2.1m).
The Group did not enter into any share-based payment transactions with parties other than employees during the
current period.
200
Saga plc Annual Report and Accounts 2021Financial Statements 37 COMMITMENTS AND CONTINGENCIES
a. Lease commitments
The Group leases various river cruise ships, offices, warehouses, equipment and vehicles. The contract length of the lease
varies considerably and may include extension or termination options. Where it is reasonably certain that an extension option
will be triggered in a contract, lease payments to be made in respect of the option are included in the measurement of the
lease liability. Future minimum lease payments under lease contracts together with the present values of the net minimum
lease payments are as follows:
Within one year
Between one and five years
After five years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
2021
£’m
2.3
2.2
0.1
4.6
(0.2)
4.4
2020
£’m
9.8
10.8
45.5
66.1
(37.5)
28.6
Please refer to note 18 for further details on modification of lease terms during the year.
As at 31 January 2021, the value of lease liabilities contracted for but not provided for in the financial statements in respect
of right-of-use assets amounted to £92.7m (2020: £88.1m). These lease commitments relate to the river cruise vessels, Spirit
of the Rhine and Spirit of Danube.
b. Commitments
As at 31 January 2021, the capital amount contracted for but not provided for in the financial statements, amounted to £nil
(2020: £271.9m). For the year ended 31 January 2020 the capital amount contracted but not provided for, related to the
purchase of the cruise ship, Spirit of Adventure, which the Group took delivery of on 29 September 2020.
c. Contingent liabilities
The CAA and ABTA regulate the Group’s UK Tour Operations business. IATA and ABTA require the Group to put in place bonds
to provide customer protection. At 31 January 2021, the Group had £21.0m (2020: £48.0m) of tour operating-related bonds in
place.
38 ASSETS HELD FOR SALE
At the end of the year, the Group made the decision to initiate an active programme to locate buyers for a number of its freehold
properties. Immediately before the classification of the properties to held for sale, their recoverable amounts were ascertained and
this resulted in an impairment charge of £4.5m being recognised against the Group’s freehold land and buildings assets (note 17a).
At the point of reclassification to held for sale, the carrying values were considered to be equal to, or below, fair value less
costs to sell and hence no revaluation at the point of reclassification was required. These properties are presented within
the Insurance segment of the Group, are being actively marketed and the disposals are expected to be completed within
12 months of the end of the financial year. No gains or losses have been recognised with respect to the properties.
During the prior year, the Group made the decision to initiate an active programme to locate a buyer for its insurance biking
brand, Bennetts, and its Healthcare segment. As at 31 January 2020, the requirements of IFRS 5 were met and accordingly
Bennetts and the Healthcare segment were classified as separate disposal groups held for sale in the statement of financial
position. Neither of the disposal groups met the requirements of IFRS 5 to be classified as discontinued operations.
During the current year the Group completed the sale of these two operations. Further information on the completed
disposals can be found in note 13.
39 SUBSIDIARIES
The entities listed below are subsidiaries of the Company or Group. All of the undertakings are wholly owned and included
within the consolidated financial statements. The registered office address for all entities registered in England is Enbrook
Park, Sandgate, Folkestone, Kent CT20 3SE. The registered office address of Acromas Insurance Company Limited is 57/63
Line Wall Road, Gibraltar. The registered office address of Saga Cruises GmbH is Industriegebiet Süd, 26871, Papenburg,
Niedersachsen, Germany. The registered office address of Saffron Maritime Limited is Aspire Corporate Services Limited,
PO Box 191, Elizabeth House, Ruettes Brayes, St Peter Port, Guernsey, GY1 4HW.
Name
Saga Personal Finance Limited
Saga Services Limited
Acromas Insurance Company Limited
CHMC Limited
Country of
registration
England
England
Gibraltar
England
Nature of business
Delivery of regulated investment products
Regulated Insurance distribution
Insurance underwriting
Motor accident management
201
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the consolidated financial statements continued
39 SUBSIDIARIES (CONTINUED)
Name
PEC Services Limited
ST&H Limited
Titan Transport (UK) Limited
Titan Travel (UK) Limited
Saga Transport Limited
Saga Cruises Limited
Saga Cruises IV Limited
Saga Cruises V Limited
Saga Cruises VI Limited
Saga Cruises GmbH
Saga Crewing Services Limited
Saffron Maritime Limited
MetroMail Limited
Saga Mid Co Limited
Saga Publishing Limited
Saga Membership Limited
Driveline Group Limited
CHMC Holdings Limited
Saga 200 Limited
Saga 300 Limited
Saga 400 Limited
Saga Group Limited
Saga Holdings Limited
Saga Leisure Limited
Saga Properties Limited
ST&H Group Limited
Confident Services Limited
Driveline Europe Limited
Driveline Travel Limited
Enbrook Cruises Limited
Saga 500 Limited
Saga Coach Holidays Limited
Saga Communications Limited
Saga Cruises BDF Limited
Saga Cruises I Limited
Saga Cruises II Limited
Saga Cruises III Limited
Saga Flights.com Limited
Saga Funding Limited
Saga Healthcare Limited
Saga Holidays Limited
Saga Independent Living Limited
Saga Radio (North West) Limited
Saga Retirement Villages Limited
Saga Shipping Company Limited
Spirit of Adventure Limited
ST&H Transport Limited
Titan Aviation Limited
Titan Travel Holdings Limited
Titan Travel Limited
202
Country of
registration
England
England
England
England
England
England
England
England
England
Germany
England
Guernsey
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
Enbrook
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
Nature of business
Repairer of automotive vehicles
Tour operating
Tour operating
Tour operating
Tour operating
Cruising
Cruising
Cruising
Cruising
Cruising
Cruising
Cruising
Mailing house
Debt service provider
Publishing
Customer loyalty scheme
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Saga plc Annual Report and Accounts 2021Financial Statements 40 RELATED PARTY TRANSACTIONS
Roger De Haan was appointed as non-executive chairman of Saga plc on 5 October 2020, following his purchase of
36,855,555 shares in the Company (constituting 26.4% of issued share capital immediately after the capital raise and 26.31%
of total issued capital as at 31 January 2021). The Company entered into a relationship agreement with Roger De Haan on
10 September 2020, which regulates the relationship between the Company and Roger De Haan and contains undertakings
that transactions and arrangements with the shareholder will be conducted on an arm’s length basis and on normal
commercial terms.
On 6 April 2021, the Company entered into a working capital facility agreement with Roger De Haan, which allows the Company
to draw down up to £10m with 20 days’ notice to fund the short-term liquidity needs of its Cruise business. The agreement
allows the Company to select a loan period of one, two, three or six months, or any other period agreed with Roger De Haan.
Interest on the working capital facility agreement is incurred at a variable rate of LIBOR plus a bank margin which is linked to
the Group’s leverage ratio. Interest accrues on the facility and is payable on the last day of the period of the loan. The facility
matures on 9 May 2023, at which point any outstanding amounts, including interest, must be repaid.
41 EVENTS AFTER THE REPORTING PERIOD
a. Regulated insurance distribution business – TC2.4 balance
The Group is in discussion with the FCA regarding the magnitude of the Threshold Condition 2.4 balance that the Retail
Broking business holds as restricted cash and the potential need to hold an additional amount on a temporary basis as
a result of COVID-19. Any additional temporary liquidity provision is not expected to be significant in a Group context and
allowance has been made for this in going concern and viability assessments on a prudent basis.
b. Corporate and cruise ship facilities
In March 2021 the Group reached agreement to amend covenants on the term loan and RCF, and the agreement of a
one-year extension to the debt deferral on its cruise ship facilities.
Term loan and RCF
The covenants within the Group’s term loan and RCF have been amended as follows:
– Increase in the leverage ratio (excluding Cruise) covenant at 31 January 2022 from 4.00x to 4.25x;
– Reduction in the Group interest cover covenant at 31 July 2021 from 1.5x to 1.25x, at 31 October 2021 from 1.75 x to 1.25x
and at 31 January 2022 from 2.5x to 1.5x.
In addition, the following amendments have also been made:
– The Group is subject to a minimum liquidity requirement of £40 million, which can be met either through cash or undrawn
and committed facilities;
– The permitted indebtedness to the Cruise Group is £55m until September 2022, and then reduces to £30m (being £50m
and £25m respectively permitted indebtedness in addition to the level of borrowing that was in place when the facility was
originally agreed of £5m);
– Dividends remain restricted while leverage (excluding Cruise) is above 3.0x.
Cruise ship debt deferral
As part of an industry-wide package of measures to support the cruise industry, an extension of the existing debt deferral
has been agreed to 31 March 2022. The key terms of this deferral are:
– All principal payments to 31 March 2022 (£51.8 million) are deferred and repaid over 5 years;
– All financial covenants until 31 March 2022 are waived;
– Dividends remain restricted while the deferred principal is outstanding;
– The Group is now subject to a minimum liquidity requirement of £40 million, which can be met through either cash or
undrawn and committed facilities.
203
Saga plc Annual Report and Accounts 2021Financial Statements Company financial statements of Saga plc
Balance sheet
Non-current assets
Investment in subsidiaries
Current assets
Debtors – amounts falling due after more than one year
Debtors – amounts falling due within one year
Cash and short-term deposits
Creditors – amounts falling due within one year
Net current assets
Creditors – amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss reserve
Share-based payment reserve
Total shareholders’ funds
Note
2021
£’m
2020
£’m
2
4
4
5
6
7
552.3
552.3
412.5
2.2
0.1
414.8
(4.8)
410.0
284.6
3.0
–
287.6
(4.0)
283.6
(248.9)
(248.6)
713.4
587.3
21.0
648.3
38.2
5.9
713.4
11.2
519.3
48.8
8.0
587.3
The Company has not presented its own profit and loss account as permitted by section 408(3) of the Companies Act 2006
(the ‘Act’). The loss included in the financial statements of the Company, determined in accordance with the Act, was £14.2m
(2020: £532.7m).
Company number: 08804263
The notes on pages 206 to 211 form an integral part of these financial statements.
Signed for and on behalf of the Board on 6 April 2021 by
E A SUTHERLAND
Group Chief Executive Officer
J B QUIN
Group Chief Financial Officer
204
Saga plc Annual Report and Accounts 2021Financial Statements Company financial statements of Saga plc
Statement of changes in equity
At 31 January 2019
Loss for the financial year
Dividends paid
Share-based payment charge
Exercise of share options
At 31 January 2020
Loss for the financial year
Dividends paid
Issue of share capital (note 7)
Transaction costs associated with issue of share capital
Share-based payment charge
Exercise of share options
At 31 January 2021
Called up
share
capital
£’m
11.2
–
–
–
–
11.2
–
–
9.8
–
–
–
21.0
Share
premium
account
£’m
519.3
–
–
–
–
519.3
–
–
140.6
(11.6)
–
–
648.3
Retained
earnings
£’m
600.2
(532.7)
(25.8)
–
7.1
48.8
(14.2)
(0.1)
–
–
–
3.7
38.2
Share-
based
payment
reserve
£’m
13.6
–
–
2.1
(7.7)
8.0
–
–
–
–
2.3
(4.4)
5.9
Total
equity
£’m
1,144.3
(532.7)
(25.8)
2.1
(0.6)
587.3
(14.2)
(0.1)
150.4
(11.6)
2.3
(0.7)
713.4
205
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the Company financial statements
1.1 ACCOUNTING POLICIES
a. Accounting convention
These financial statements were prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure
Framework’ (FRS 101).
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements
of international accounting standards (IAS) in conformity with the requirements of the Companies Act 2006, but makes
amendments where necessary in order to comply with the Companies Act 2006 and has set out below where advantage
of the FRS 101 disclosure exemptions has been taken.
The financial statements are prepared under the historical cost convention, as modified by derivative financial assets and
financial liabilities measured at fair value through profit or loss, and in accordance with the Companies Act 2006, and are
prepared on a going concern basis (please refer to note 2.1 of the Saga plc consolidated accounts on pages 136 to 138
for assessment of the going concern basis for the Group and the Company).
The Company’s financial statements are presented in sterling and all values are rounded to the nearest hundred thousand
(£’m) except when otherwise indicated.
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year
ended 31 January 2021.
The Company has taken advantage of the following disclosure exemptions under FRS 101:
– The requirements of IFRS 7 ‘Financial Instruments: Disclosures’.
– The requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in
respect of paragraph 79(a)(iv) of IAS 1.
– The requirements of paragraphs 10(d), 10(f), 16, 38A, 38B-D, 40A-D, 111 and 134-136 of IAS 1 ‘Presentation of Financial
Statements’.
– The requirements of IAS 7 ‘Statement of Cash Flows’.
– The requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’.
– The requirements of paragraphs 17 and 18A of IAS 24 ‘Related Party Disclosures’.
– The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into between two
or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such
a member.
– The requirements of paragraphs 45(b) and 46-52 of IFRS 2 ‘Share-based Payment’.
b. Investment in subsidiaries
Investment in subsidiaries are accounted for at the lower of cost less impairment and net realisable value and reviewed
for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
c. Debtors
Trade and other debtors are initially recognised at fair value and, where the time value of money is material, subsequently
measured at amortised cost using the effective interest rate method. Provision for impairment is made through profit or loss
when there is objective evidence that the Company will not be able to recover balances in full. Balances are written off when
the probability of recovery is assessed as being remote.
Amounts due from Group undertakings are classified as debtors. They have no fixed date of payment and are payable on
demand. The amounts due from Group undertakings are disclosed at fair value.
206
Saga plc Annual Report and Accounts 2021Financial Statements 1.1 ACCOUNTING POLICIES (CONTINUED)
d. Deferred tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the
carry forward of unused tax credits and unused tax losses, can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset
is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the reporting date. Deferred tax is charged or credited in the income statement, except when it relates to items charged
or credited in other comprehensive income, in which case the deferred tax is dealt with in OCI.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
e. Share-based payments
The Company provides benefits to employees (including Directors) of Saga plc and its subsidiary undertakings, in the
form of share-based payment transactions, whereby employees render services as consideration for equity instruments
(‘equity-settled transactions’). The cost of equity-settled transactions is measured by reference to the fair value on the grant
date and is recognised as an expense over the relevant vesting period, ending on the date on which the employee becomes
fully entitled to the award.
Fair values of share-based payment transactions are calculated using Black-Scholes modelling techniques.
In valuing equity-settled transactions, assessment is made of any vesting conditions to categorise these into market
performance conditions, non-market performance conditions and service conditions.
Where the equity-settled transactions have market performance conditions (that is, performance which is directly or
indirectly linked to the share price), the fair value of the award is assessed at the time of grant and is not changed, regardless
of the actual level of vesting achieved, except where the employee ceases to be employed prior to the vesting date.
For service conditions and non-market performance conditions, the fair value of the award is assessed at the time of grant
and is reassessed at each reporting date to reflect updated expectations for the level of vesting. No expense is recognised
for awards that ultimately do not vest.
At each reporting date prior to vesting, the cumulative expense is calculated, representing the extent to which the vesting
period has expired and, in the case of non-market conditions, the best estimate of the number of equity instruments that
will ultimately vest or, in the case of instruments subject to market conditions, the fair value on grant adjusted only for
leavers. The movement in the cumulative expense since the previous reporting date is recognised in the income statement,
with the corresponding increase in share-based payments reserve.
Upon vesting of an equity instrument, the cumulative cost in the share-based payments reserve is reclassified to reserves.
f. Financial instruments
i) Financial assets
On initial recognition, a financial asset is classified as either amortised cost, FVOCI or FVTPL. The classification of financial
assets is based on the business model in which a financial asset is managed and its contractual cash flow characteristics.
The Company measures all financial assets at fair value at each reporting date, other than those instruments measured
at amortised cost.
The Company’s financial assets at amortised cost include amounts due from Group undertakings. The Company does not
hold any financial assets classified as FVOCI or FVTPL.
207
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the Company financial statements continued
1.1 ACCOUNTING POLICIES (CONTINUED)
f. Financial instruments (continued)
Financial assets at amortised cost
Initial recognition and measurement
A financial asset is classified at amortised cost if it meets both of the following conditions and is not elected to be
designated as a FVTPL:
– It is held within a business model whose objective is to hold assets to collect contractual cash flows.
– Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
Subsequent measurement
These assets are subsequently measured at amortised cost using the EIR method. The amortised cost is reduced by
impairment losses (see (ii) below). Impairment losses are recognised in profit or loss as they are incurred. Any gain or loss
on derecognition is recognised in profit or loss immediately.
Derecognition
A financial asset is derecognised when the rights to receive cash flows from the asset have expired or when the Company
has transferred substantially all the risks and rewards relating to the asset to a third party.
Impairment of financial assets
ii)
The ECL impairment model applies to financial assets measured at amortised cost and debt investments at FVOCI.
The Company measures loss allowances at an amount equal to 12 month ECLs, except for trade receivables and contract
assets that result from transactions within the scope of IFRS 15.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without
undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s
historical experience and informed credit assessment and including forward-looking information.
Measurement of ECLs
ECLs are measured as a probability-weighted estimate of credit losses. Credit losses are measured as the probability of
default in conjunction with the present value of the Group’s exposure. Loss allowances for ECLs on financial assets measured
at amortised cost are deducted from the gross carrying amount of the assets, with a corresponding charge to the income
statement.
iii) Financial liabilities
Initial recognition and measurement
All financial liabilities are classified as financial liabilities at amortised cost on initial recognition.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable
transaction costs.
The Company’s financial liabilities comprise loans and borrowings.
Subsequent measurement
After initial recognition, interest bearing loans and borrowings and other payables are subsequently measured at amortised
cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the
income statement.
g. Audit remuneration
Amounts receivable by the Company’s auditor and its associates in respect of services to the Company and its associates,
other than the audit of the Company’s financial statements, have not been disclosed as the information is required instead to
be disclosed on a consolidated basis in the consolidated financial statements.
208
Saga plc Annual Report and Accounts 2021Financial Statements 1.2 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements requires the Company to select accounting policies and make estimates and assumptions
that affect items reported in the primary Company financial statements and notes to the Company financial statements.
Significant estimates
All estimates are based on management’s knowledge of current facts and circumstances, assumptions based on that
knowledge and predictions of future events and actions. Actual results may therefore differ from those estimates.
The table below sets out those items the Company considers susceptible to changes in critical estimates and assumptions
together with the relevant accounting policy.
Acc. policy Items involving estimation
Investment in
2.3h
subsidiaries impairment
testing
Sources of estimation uncertainty
The Company determines whether investment in subsidiaries needs to be impaired
when indicators of impairment exist. This requires an estimation of the value-in-use
of the subsidiaries owned by the Company. The value-in-use calculation requires the
Company to estimate the future cash flows expected to arise from the subsidiaries,
discounted at a suitably risk-adjusted rate in order to calculate present value.
Sensitivity analysis has been undertaken to determine the effect of changing the
discount rate, the terminal value and future cash flows on the present value calculation,
which is shown in note 2 on pages 209 and 210.
2 INVESTMENT IN SUBSIDIARIES
Cost
At 31 January 2019
Capital contributions arising from share-based payments
At 31 January 2020
Capital contributions arising from share-based payments
At 31 January 2021
Amounts provided for
At 31 January 2019
Amounts provided in the year
At 31 January 2020
Amounts provided in the year
At 31 January 2021
Net book value
At 31 January 2021
At 31 January 2020
£’m
4,132.2
0.5
4,132.7
–
4,132.7
3,062.4
518.0
3,580.4
–
3,580.4
552.3
552.3
See note 39 to the consolidated financial statements for a list of the Company’s investments.
The Company has tested the investment in subsidiaries balance for impairment at 31 January 2021 due to the carrying value
being in excess of the Company’s market capitalisation and this constituting an indicator of impairment. The impairment test
compares the recoverable amount of investment to its carrying value.
The recoverable amount of the investment has been determined based on a value-in-use calculation using cash flow
projections from the Group’s Board approved five-year plan to 2025/26. Terminal values have been included using 2.0% as the
expected long-term average growth rate of the UK economy, and calculated using the Gordon Growth Model. The cash flows
have then been discounted to present value using a suitably risk-adjusted discount rate derived from the Group’s weighted
average cost of capital, and risk adjusted for each of the Group’s businesses based on relative industry betas and cost of
debt levels. The recoverable amount is the value-in-use, being the sum of the value-in-use of the Group’s CGUs and the
present value of central costs less the market value of external debt and the net assets of the Company (excluding the
carrying value of the investment in subsidiaries).
209
Saga plc Annual Report and Accounts 2021Financial Statements Notes to the Company financial statements continued
2 INVESTMENT IN SUBSIDIARIES (CONTINUED)
In the current year, the recoverable amount when compared against the carrying value of the investment in subsidiaries
resulted in headroom of £342.0m in a central scenario. When considering an array of stress tests to the Group’s projected
cash flows in line with the reasonable worse-case assumptions outlined in note 2.1 of the Saga plc consolidated accounts
on pages 136 to 138, combined with a lower terminal growth rate of 1.5%, the level of headroom reduced to £12.0m.
Management therefore concluded that is was not necessary to impair the investment in subsidiaries, nor would it be
appropriate to reverse any impairment already recognised in previous years at this point in time.
In the prior year, the recoverable amount when compared against the carrying value of the investment in subsidiaries resulted
in a deficit of £518.0m, therefore management considered it necessary to impair the investment in subsidiaries balance to its
value-in-use of £552.3m. An impairment charge of £518.0m was recognised in the year to 31 January 2020.
The surplus calculated is most sensitive to the discount rate and terminal growth rate assumed. A quantitative sensitivity
analysis for each of these as at 31 January 2021 and its impact on the headroom/(deficit) against the carrying value of
investment in subsidiaries is as follows:
Pre-tax
discount
rate
–1.0ppt
£’m
253.7
+1.0ppt
£’m
(199.5)
Terminal
growth
rate
–1.0ppt
£’m
(151.3)
+1.0ppt
£’m
192.5
Impact
3 DIVIDENDS
The Company did not receive any dividends during the current year (2020: £nil).
4 DEBTORS
Amounts falling due after more than one year
Amounts due from Group undertakings
Amounts falling due within one year
Deferred tax asset
Other debtors
5 CREDITORS – AMOUNTS FALLING DUE IN LESS THAN ONE YEAR
Other creditors
Accrued interest payable
6 CREDITORS – AMOUNTS FALLING DUE IN MORE THAN ONE YEAR
Bond
Unamortised issue costs
2021
£’m
2020
£’m
412.5
412.5
284.6
284.6
2021
£’m
2020
£’m
1.0
1.2
2.2
2021
£’m
3.0
1.8
4.8
2021
£’m
250.0
(1.1)
248.9
1.2
1.8
3.0
2020
£’m
2.2
1.8
4.0
2020
£’m
250.0
(1.4)
248.6
Please refer to note 30 of the Saga plc consolidated accounts on pages 194 and 195 for further details relating to the bond.
210
Saga plc Annual Report and Accounts 2021Financial Statements 7 CALLED UP SHARE CAPITAL
Allotted, called up and fully paid
As at 31 January 2019 and 31 January 2020
Issue of shares – 5 October 2020
– First Firm Placing
– Second Firm Placing
– Placing and Open Offer
Sub-total before share consolidation
Share consolidation – 13 October 2020
Issue of shares – 18 November 2020
As at 31 January 2021
Ordinary shares
Nominal
value
£
Value
£’m
Number
1,122,003,328
0.01
11.2
224,400,000
124,183,026
623,335,182
971,918,208
0.01
0.01
0.01
0.01
2.2
1.2
6.3
9.7
2,093,921,536
(1,954,326,767)
507,458
140,102,227
0.01
20.9
0.15
0.15
0.1
21.0
On 30 August 2020 the Company announced that it was at the advanced stage of a prospective £150m equity capital raise
in order to strengthen the Group’s statement of financial position, improve liquidity and support the execution of its strategy
plan. The prospective £150m equity raise was launched on 10 September 2020, structured as a Firm Placing and Open Offer.
Under the Firm Placing and Open Offer, on 5 October 2020 the Company issued 971,918,208 new ordinary shares, raising
£150.3m of funds which were utilised to repay part of the Group’s term loan and repay in full the drawn RCF, with the balance
of the proceeds raised increasing available cash. The issue was fully subscribed.
The share premium arising on the issue of the new ordinary shares was £140.6m. Transaction costs associated with the issue
the share capital of £11.6m were deducted from share premium.
On 13 October 2020 the Company undertook a consolidation of its shares, whereby for every 15 ordinary shares held of 1p
nominal value, shareholders received 1 new consolidated share of 15p nominal value.
On 18 November 2020, Saga plc issued 507,458 new ordinary shares of 15p each, with a value of £0.1m, for transfer into an
EBT to satisfy employee incentive arrangements.
Please refer to note 33 of the Saga plc consolidated accounts on page 197 for further details on the movements in share
capital during the year.
8 COMMITMENTS
The Company has provided guarantees for the Group’s bond, term loan, ship debt, RCF and bank overdraft (please refer to
notes 25 and 30 of the Saga plc consolidated accounts on pages 185, and 194 to 195, respectively for further details).
211
Saga plc Annual Report and Accounts 2021Financial Statements Alternative Performance Measures (APM) Glossary
The Group uses a number of Alternative Performance
Measures (‘APMs’), which are not required or commonly
reported under International Financial Reporting Standards,
the Generally Accepted Accounting Principles (GAAP) under
which the Group prepares its financial statements, but which
are used by the Group to help the user of the accounts
better understand the financial performance and position
of the business.
Definitions for the primary APMs used in this report are set
out below. APMs are usually derived from financial statement
line items and are calculated using consistent accounting
policies to those applied in the financial statements, unless
otherwise stated.
APMs may not necessarily be defined in a consistent manner
to similar APMs used by the Group’s competitors. They should
be considered as a supplement rather than a substitute for
GAAP measures.
UNDERLYING PROFIT BEFORE TAX
Underlying Profit Before Tax represents loss before tax
excluding unrealised fair value gains and losses on derivatives,
the net profit on disposal of businesses and ships, the
impairment of the carrying value of fixed assets including
goodwill, the impact of the insolvency of Thomas Cook, and
restructuring costs. It is reconciled to statutory loss before
tax within the Operating and Financial Review on page 31.
This measure is the Group’s key performance indicator
and is useful for presenting the Group’s underlying trading
performance, as it excludes non-cash technical accounting
adjustments and one-off financial impacts that are not
expected to recur.
TRADING EBITDA / ADJUSTED TRADING EBITDA
Trading EBITDA is defined as earnings before interest
payable, tax, depreciation and amortisation, and excludes
the amortisation of acquired intangibles, non-trading costs
and impairments. Adjusted Trading EBITDA also excludes the
impact of IFRS 16, Trading EBITDA in relation to businesses
disposed of in the period and Trading EBITDA relating to the
two new cruise ships, Spirit of Discovery and Spirit
of Adventure in line with the Group’s debt covenants. It is
reconciled to Underlying Profit Before Tax within the Operating
and Financial Review on page 40. Underlying Profit Before Tax
is reconciled to statutory loss before tax within the Operating
and Financial Review on 31.
This measure is linked to the Group’s debt covenants, being
the denominator in the Group’s leverage ratio calculation.
UNDERLYING BASIC EARNINGS PER SHARE
Underlying basic Earnings Per Share represents basic
Earnings Per Share excluding the post-tax effect of
unrealised fair value gains and losses on derivatives,
the net profit on disposal of businesses and ships, the
impairment of the carrying value of fixed assets including
goodwill, the impact of the insolvency of Thomas Cook
and restructuring costs. Prior year figures have been restated
to reflect the effect of the share consolidation that was
completed in October 2020. This measure is reconciled to the
statutory basic earnings per share in note 12 to the accounts
on pages 164-165.
This measure is linked to the Group’s key performance
indicator Underlying Profit Before Tax and represents what
management consider to be the underlying shareholder value
generated in the period.
AVAILABLE CASH
Available cash represents cash held by subsidiaries within
the Group that is not subject to regulatory restrictions, net
of any overdrafts held by those subsidiaries. This measure is
reconciled to the statutory measure of cash in note 25 to the
accounts on page 185.
AVAILABLE OPERATING CASH FLOW
Available operating cash flow is net cash flow from operating
activities after capital expenditure but before tax, interest paid,
restructuring costs, proceeds from disposal of businesses
and other non-trading items, which is available to be used
by the Group as it chooses and is not subject to regulatory
restriction. It is reconciled to statutory net cash flow from
operating activities within the Operating and Financial
Review on page 40.
ADJUSTED NET DEBT
Adjusted net debt is the sum of the carrying values of the
Group’s debt facilities less the amount of available cash
it holds, but excludes the ship debt and the Cruise business
available cash. It is linked to the Group’s debt covenants,
being the numerator in the Group’s leverage ratio calculation,
and is analysed further within the Operating and Financial
Review on page 43.
212
Saga plc Annual Report and Accounts 2021Additional Information Glossary
Asset beta measures the market risk of the company
excluding the impact of debt
form of principles and provisions to address the principal
aspects of corporate governance
Association of British Insurers General Terms of Agreement
(ABI GTA)
Accident year the financial year in which an insurance
loss occurs
Combined operating ratio (COR) the ratio of the claims
costs and expenses incurred to underwrite insurance
(numerator), to the revenue earned by AICL (denominator)
in a given period. Can otherwise be calculated as the sum
of the loss ratio and expense ratio
Acromas Insurance Company Limited (AICL) the Group’s
underwriting business
Companies Act the UK Companies Act 2006, as amended
from time to time
Add-on an insurance policy that is actively marketed
and sold as an addition to a core policy
Company Saga plc
Air Travel Organiser’s Licence (ATOL) government-run
financial protection scheme operated by the Civil
Aviation Authority
Annual General Meeting (AGM)
Association of British Travel Agents (ABTA) the trade
association for tour operators and travel agents in the UK
Available cash cash held by subsidiaries within the Group
that is not subject to regulatory restrictions, net of any
overdrafts held by those subsidiaries
Board Saga plc Board of Directors
Bordereau a report prepared periodically and submitted to
our reinsurers detailing premium or loss data with respect to
identified specific risks
Carbon Disclosure Project (CDP) charity that manages
companies’ disclosure of their environmental impacts
Care Quality Commission (CQC) the independent regulator
of all health and social care services in England
Cash Generating Unit (CGU) group of assets that generate
cash inflows
Chartered Institute of Internal Auditors (CIIA) body
representing internal auditors in the UK
Chief Executive Officer (CEO)
Chief Financial Officer (CFO)
Chief People Officer (CPO)
Core policy an insurance policy that is actively marketed
and sold on its own, irrespective of any add-ons purchased
Corporate social responsibility (CSR)
Cruise passenger days the total number of days passengers
have travelled on a ship, or ships, in a given period
Cruise passengers the number of passengers that have
travelled on a Saga cruise in a given period
Deferred Bonus Plan (DBP) reward scheme used to
incentivise colleagues over the longer-term, ensuring
alignment with company goals
Diems the total amount of cruise revenue earned per cruise
passenger per day
Discontinued operations operations divested or those that
have been classified as held for sale whose trading activities
relate to a separate line of business or geographical area
Diversity, Inclusion and Belonging (DI&B)
Debt ratio (leverage) the ratio of adjusted net debt to
Adjusted Trading EBITDA
Disclosure and Transparency Rules (DTRs) rules published by
the UK Financial Conduct Authority relating to the disclosure
of information by a company listed in the UK
Earned premium insurance premiums that are recognised in
the income statement over the period of cover to which the
premiums relate, deferred on a 365ths basis
Earnings Per Share (EPS) represents underlying shareholder
value generated in a given period
Civil Aviation Authority (CAA) one of the bodies that
regulates the Group’s Travel business, responsible for the
management of the Air-Travel Organisers Licence scheme
EBITDA earnings before interest, tax, depreciation and
amortisation of acquired intangibles, non-trading costs
and impairments
Claims frequency the number of claims incurred divided
by the number of policies earned in a given period
Effective Interest Rate (EIR) annual interest rate after taking
into account the compounding over time
Claims reserves accounting provisions that have been set to
meet outstanding insurance claims, incurred but not reported
and associated claims handling costs
Employee Benefit Trust (EBT) trust established to hold
assets to provide benefits for employees
Code the UK Corporate Governance Code published by the
UK Financial Reporting Council setting out guidance in the
Environmental, Social and Governance (ESG) central
factors in measuring the sustainability and societal impact
of the business
213
Saga plc Annual Report and Accounts 2021Additional Information Glossary continued
European Union (EU)
Executive Director of Saga plc (unless otherwise stated)
Executive Leadership Team (ELT) the first layer of
management below Board level
Expected Credit Loss (ECL) impairment model applied
to financial assets
Expense ratio the ratio of expenses incurred to underwrite
insurance (numerator) to the revenue earned by AICL
(denominator) in a given period
Fair Value Through Other Comprehensive Income (FVOCI)
one of three classification categories for financial assets
under IFRS 9
Fair Value Through Profit and Loss (FVTPL) one of three
classification categories for financial assets under IFRS 9
International Accounting Standards Board (IASB)
independent body that sets accounting standards
International Air Transport Associations (IATA) trade
association of the world’s airlines
International Financial Reporting Standards (IFRS)
accounting standards issued by the International Accounting
Standards Board
Investor code (IVC) a unique reference code issued to
investors of Saga plc
Investor Relations (IR) team responsible for facilitating
communication between Saga plc and its shareholders
Key Performance Indicator (KPI) quantifiable measure used
to evaluate performance
Leverage ratio the ratio of adjusted net debt to Adjusted
Trading EBITDA
Federation of Tour Operators (FTO) body that regulates
the Group’s Tour Operations business
Limited Liability Partnership (LLP)
Financial Conduct Authority (FCA) the independent UK body
that regulates the financial services industry, which includes
general insurance
Listing Rules (LRs) a set of mandatory regulations
of the UK Financial Conduct Authority and applicable
to a company listed on the London Stock Exchange
Financial Reporting Council (FRC) the independent body
that regulates auditors, accountants and actuaries in the UK
Load factor the total number of cruise passengers booked
in proportion to the total cruise ship capacity
Gibraltar Authorisation Regime (GAR)
London inter-bank offered rate (LIBOR) benchmark interest rate
estimated from leading London banks
Generally Accepted Accounting Principles (GAAP) a common
set of accounting principles, standards and procedures issued
by the Financial Accounting Standards Board
London Stock Exchange (LSE) the stock exchange upon
which Saga plc are listed
Gibraltar Financial Services Commission (GFSC)
independent Gibraltar body that regulates the Group’s
underwriting business
Long-term incentive plan (LTIP) reward scheme used
to incentivise colleagues over the longer-term, ensuring
alignment with company goals
Greenhouse gas (GHG)
Gross Written Premiums (GWP) the total premium charged
to customers for a core insurance product, excluding
Insurance Premium Tax but before the deduction of any
outward reinsurance premiums, measured with reference
to the cover start date of the policy
Group the Saga plc group
Her Majesty’s Revenue and Customs (HMRC)
Holidays passengers the number of passengers that have
travelled on a Saga or Titan holiday in a given period
Incurred but not reported (IBNR) a claims reserve provided
to meet the estimated cost of claims that have occurred,
but have not yet been reported to the insurer
Loss ratio a ratio of the claims costs (numerator) to
the net earned premium (denominator) in a given period
Malus an arrangement that permits the forfeiture
of unvested remuneration awards in circumstances
the Company considers appropriate
Mental Health First Aider (MHFA) a specialist group of first
aiders within Saga plc
Net claims the cost of claims incurred in the period
less any claims costs recovered under reinsurance contracts
and after the release of any claims reserves
Net earned premium earned premium net of any outward
earned reinsurance premium paid
Net interest expense finance costs less finance income
Initial Public Offering (IPO) the first sale of shares by a previously
unlisted company to investors on a securities exchange
Net promoter score (NPS) percentage of customers rating
their likelihood to recommend Saga plc
International Accounting Standards (IAS) accounting standards
issued by the International Accounting Standards Committee
Ogden discount rate the discount rate set by the relevant
government bodies, the Lord Chancellor and Scottish
214
Saga plc Annual Report and Accounts 2021Additional Information Ministers, and used to calculate lump sum awards in bodily
injury cases
challenges we face, including those related to poverty,
inequality, climate change, environmental degradation, peace
and justice
Open Offer the offer that took place in October 2020 as part
of the capital raise, allowing qualifying shareholders to
subscribe for new shares at a ratio of five new shares for
every nine existing shares held
tCO2e tonnes of carbon dioxide equivalent, which is a measure
that allows comparison of the emissions of other greenhouse
gases relative to one unit of CO2
Periodic payment order (PPO) a court order prescribing
settlement of an insurance claim through regular payments
Tell Euan About (TEA) a communications forum allowing
colleagues to interact with the Group Chief Executive Officer
Policies sold the number of core and add-on insurance
policies sold to customers in a given period, measured by
reference to the cover start date of the policy
Principal risks and uncertainties (PRUs) the most significant
risks threatening Saga plc
Total Shareholder Return (TSR) the theoretical growth
in value of a shareholding over a period, by reference to
the beginning and ending share price, and assuming that
dividends, including special dividends, are reinvested to
purchase additional units of the equity
Tour Operating Membership Scheme (TOMS)
Private Medical Insurance (PMI) one of the products offered
within the Groups Retail Broking business
UK United Kingdom
Profit Before Tax (PBT) one of the Group’s primary key
performance indicators
Unearned premium an amount of insurance premium that
has been written but not yet earned
Public Limited Company (plc)
Weighted Average Cost of Capital (WACC)
Reinsurance contractual arrangements where an insurer
transfers part or all of the insurance risk written to another
insurer, in exchange for a share of the customer premium
Working@Saga a collaborative initiative to design, refit and
repurpose our office space to support new ways of working
Restricted Share Plan (RSP) share scheme, and
corresponding share awards used to incentivise colleagues
over the longer-term, ensuring alignment with company goals
Return on capital employed (ROCE)
Revolving credit facility (RCF)
Saga Management Team (SMT) the third layer of
management below Board level
Saga Services Limited (SSL) the Group’s Retail Broking
Business Saga Services Limited.
Senior Leadership Team (SLT) the second layer of
management below Board level
Share Incentive Plan (SIP)
Simpler Saga Group-wide project launched in January 2020
with the goal of increasing the pace of execution and
efficiency across the business. The project involves the
review of all areas on the business with a focus on flattening
our structures to become closer to our customers and
ensuring we are being as efficient as possible.
Solvency capital/Solvency II insurance regulations designed
to harmonise European Union insurance regulation.
Primarily this concerns the amount of capital that European
insurance companies must hold under a measure of capital
and risk
Sustainable Development Goals set in 2015 by the United
Nations General Assembly, the blueprint to achieve a better
and more sustainable future for all. They address the global
215
Saga plc Annual Report and Accounts 2021Additional Information Shareholder information
FINANCIAL CALENDAR
2021 Annual General Meeting – 14 June 2021
SHAREHOLDER INFORMATION ONLINE
The Company will publish annual reports, notices of shareholder
meetings and other documents which we are required to send
to shareholders (shareholder information) on our website.
Consenting shareholders will be notified either by post or email,
if preferred, each time the Company publishes shareholder
information. This allows us to increase speed of communication,
reduce our impact on the environment and keep costs to
a minimum.
You can change your communication preference via the Saga
Shareholder Services Portal www.sagashareholder.co.uk or
by contacting Saga Shareholder Services. In order to register
on the portal, you require your 11-digit investor code (IVC).
You can find your IVC on communications such as your share
certificate. The Saga Shareholder Services Portal allows you
to manage your shareholding easily and securely online.
You can also change your personal details; view your holding
and get an indicative valuation; view dividend information;
register proxy voting instructions; reinvest your dividends
to buy additional Saga plc shares; buy and sell shares; and
register bank details so that dividends can be paid directly
to your account.
SHAREHOLDER FRAUD
Shareholders are advised to be wary of any unsolicited
advice or offers, whether over the telephone, through the
post or by email. If any such unsolicited communication is
received; please check the company or person contacting
you is properly authorised by the FCA before getting
involved. Fraudsters use persuasive and high-pressure
tactics to lure investors into scams. They may offer to
sell shares that turn out to be worthless or non-existent,
or to buy shares at an inflated price in return for an upfront
payment. While high profits are promised, if you buy or
sell shares in this way; you may lose your money. For more
information, or if you are approached by fraudsters, please
visit the FCA website www.fca.org.uk/consumers/scams,
where you can report and find out more about investment
scams. You can also call the FCA Consumer Helpline
on 0800 111 6768. If you have already paid money
to share fraudsters; you should contact Action Fraud
on 0300 123 2040.
Independent auditors
KPMG LLP
15 Canada Square
London E14 5GL
Legal advisers
Herbert Smith Freehills LLP
Exchange House, Primrose Street
London EC2A 2EG
Information for investors
Information for investors is provided on the internet as part
of the Group’s corporate website which can be found at
www.corporate.saga.co.uk/investors
Registrars
Link Asset Services
For shareholder enquiries contact:
Saga Shareholder Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Shareholder Helpline: 0800 015 5429 – calls to Freephone
numbers will vary by provider. If you are outside the UK, call
+44 (0)333 300 1581 – calls outside the UK will be charged
at the applicable international rate. Lines are open 9am to
5.30pm, Monday to Friday, excluding public holidays
in England and Wales.
enquiries@sagashareholder.co.uk
REGISTERED OFFICE
Saga plc
Enbrook Park
Sandgate
Folkestone
Kent CT20 3SE
Registered in England. Company Number: 08804263
CORPORATE WEBSITES
Information made available on the Group’s websites does
not, and is not intended to, form part of this annual report
and accounts.
ADVISERS
Joint corporate broker
Investec Bank plc
30 Gresham Street
London EC2V 7QP
Joint corporate broker
Numis Securities Ltd
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Media relations advisers
Headland Consultancy
Cannon Green
1 Suffolk Lane
London EC4R 0AX
216
Saga plc Annual Report and Accounts 2021Additional Information FORWARD-LOOKING STATEMENTS
This annual report contains certain forward-looking
statements with respect to Saga’s expectations, including
strategy, management objectives, future developments and
financial position and performance. These statements are
subject to assumptions, risks and uncertainties, many of
which relate to factors that are beyond Saga’s ability to
control and which could cause actual results and
performance to differ materially from those expressed or
implied by these forward-looking statements. Any forward-
looking statements made are based upon the knowledge and
information available to Directors on the date of this annual
report and are subject to change without notice.
Shareholders are cautioned not to place undue reliance on
the forward-looking statements. Nothing in this annual
report should be construed as a profit estimate or forecast.
Consultancy, design and production
www.luminous.co.uk
Bridgewell Corporate Communication
Consultancy
Design and production
www.luminous.co.uk
S
A
G
A
P
L
C
A
N
N
U
A
L
R
E
P
O
R
T
A
N
D
A
C
C
O
U
N
T
S
Y
E
A
R
E
N
D
E
D
3
1
J
A
N
U
A
R
Y
2
0
2
1
SAGA PLC
Enbrook Park
Sandgate
Folkestone
Kent
CT20 3SE