Transforming Saga – Experience is Everything
In 2021 Saga will celebrate its 70th anniversary. The strategic turnaround plan outlined by the new management team in September 2020 will build on Saga's heritage while responding fully to the challenges faced by the business today.
At our core, we will remain the same - a unique British business focused on providing exceptional, differentiated products and services to our distinct customer group. At the same time, we will refresh our brand, invest in data and digital to improve the customer experience; we will optimise the Insurance business and build greater capability and resilience in the Cruise business and re-set our Tours offer.
Our new strategy will focus on the following five pillars.
1. People and Culture Reset
The transformation required in people, leadership and culture will underpin the success of the strategic reset, so this is our first priority. The new management team have already acted decisively, resizing and reshaping the business in 2020, and creating a culture of accountability by reducing management layers from 17 to 5.
We are launching a new purpose, values and engagement programme this month, as we connect the customer brand revitalisation with the colleague brand to secure a strong foundation for growth in revenue and profit across the business.
2. Data, Digital and Brand Transformation
The new management team are implementing a single group-wide customer digital data platform. This builds on and optimises the investments made in the last five years and will give us a single view of the customer across our businesses. We are efficiently re-purposing existing technology and developing big data solutions over the next two years. From this we are creating an automated personalisation model that provides prompts to make the best offer to each customer at each opportunity, allowing customer interaction in real time and synchronisation across channels and businesses to drive customer multi-product holdings, loyalty and value.
3. Optimising our Businesses
The new management team are focused on making the core Saga businesses the best they can be for customers and colleagues – separately and together. We are clearly focused on this core and will not create distraction by investing in other businesses until we have delivered real improvements. This discipline will be important to drive maximum value creation and efficiency across the Group in the interests of shareholders.
4. Lower Cost Base
During 2020 and before COVID-19 the new management team was focused on delivering the optimum cost base for Saga. Having inherited a high cost, complex business, we have worked hard to reduce cost and complexity and have focused Saga to great effect already. This focus on cost efficiency will remain as a central element for the business in the years ahead.
5. Debt Reduction
The new management team acted quickly with decisive measures to strengthen the balance sheet and reduce debt. Focused in particular on the covenanted short-term debt, we have reduced operating costs, disposed of non-core assets, suspended the dividend and now we are proposing the Placing and Open offer. These measures will significantly strengthen the Saga balance sheet and provide a strong foundation for future success and growth.
A key financial objective for the Group is to reduce total debt leverage to under 3.5x EBITDA. While the pace of recovery from COVID-19 will significantly influence the speed of debt reduction, the Group’s modelling suggests that this should be achieved by the end of 2023 even in stress test scenarios. Given this priority the Group is not expecting to pay dividends in the next few years, but the Board will reassess its dividend policy once the leverage goal has been achieved.