Interim Results for six months ended 31 July 2016

21 September 2016

Saga plc

Interim Results for the six months ended 31 July 2016

23% increase in interim dividend supported by strong financial performance

Saga plc ("Saga" or "the Group"), the UK's specialist in products and services for life after 50, announces its interim results for the six months ended 31 July 2016.

Financial highlights

·     Trading Profit¹ of £117.6m (H1 2015: £117.5m)

o  Trading Profit in the core businesses grew by 2.0%, including £4.7m negative profit impact in H1 2016 of scheduled maintenance for Saga Sapphire cruise ship

·     Profit before tax, excluding the effect of derivative gains, increased by 3.9% to £104.5m (H1 2015: £100.6m)

·     Sustained cash generation, leading to further deleveraging:

o  Net debt to EBITDA reduced to 2.2x from 2.4x at 31 July 2015

o  Progressing towards target range for debt ratio of between 1.5 and 2.0 times in the medium term

·     23% increase in interim dividend to 2.7p supported by financial performance and ongoing deleveraging

Operational highlights

·     Insurance - strong performance in competitive environment:

o  Total core insurance policies increased to 3,051k (H1 2015: 2,731k), 3.0% growth excluding Bennetts

o  Motor panel performing effectively, taking around one quarter of net premium² on renewals

o  Continued strong performance in motor underwriting with combined operating ratio³ of 58.6% (H1 2015: 65.5%)

o  Solvency II position of 196% (31 January 2016: 170%)1

o  Quota share reducing capital at risk, enabling cash to be gradually released from AICL

·     Travel - robust trading performance and visibility:

o  Substantial majority of 2016/2017 sales targets already met and ahead of prior year for departures in 2017/2018

o  No discernable impact on customer behavior following the UK's decision to leave the EU

·     Good progress made on design for new cruise ship with delivery on track for July 2019

¹Please refer to the glossary provided in the Saga plc annual report and accounts for a full definition of this measure.  The income statement and supporting analysis given later in the Chief Financial Officer's Review shows how this measure reconciles to statutory measures.

²Net premium here is defined as the share of premium paid by customer that is passed on to the underwriter.

³Combined operating ratio is the ratio of claims costs and expenses incurred in selling and administering insurance underwritten (the numerator) to the net earned premium and other income (the denominator) recognised for the period.

Commenting on the results, Lance Batchelor, Group Chief Executive Officer, said:

"I am pleased that the business has made significant progress with our key strategic initiatives whilst delivering another robust financial performance. The strength of our core businesses and our operating model has again led to strong cash generation, enabling us to further reduce our debt ratio and giving us the confidence to increase our interim dividend by 23% to 2.7p.

Saga already has significant brand awareness and customer loyalty but we have been working hard to enhance our understanding of the relationship with our customers. This has produced some fascinating insights and opportunities and we are underway with the work that will enable us to capitalise on our findings.

We have seen no discernible impact to date from Britain's decision to leave the European Union; this has been especially notable in our Travel business, where we polled customers recently and 99% said that Brexit would not make them reconsider their future holiday plans. 

The robust operational performance in the first half means that we are on track to meet our targets for the full year."

END

A presentation to analysts will be held at 09.30 at the offices of Goldman Sachs, Peterborough Court, 133 Fleet Street, London, EC4A 2BB. There will be a live webcast of the analyst presentation for registered participants. Registration can be completed at http://corporate.saga.co.uk/. The webcast will be also accessible via the Saga website following the presentation. 

For further information please contact:

Notes to editors

Saga is a specialist in the provision of products and services for life after 50. The Saga brand is one of the most recognised and trusted brands in the UK and is known for its high level of customer service and its high quality, award winning products and services including cruises and holidays, insurance, personal finance and publishing. saga.co.uk

Group Chief Executive's Review 

Overview

The business has produced another solid financial performance in the first half of the year with sustained profit growth in our core businesses delivered alongside investment in future growth. Profit before tax, excluding the effect of derivative gains, grew by 3.9% to £104.5m, generating £97.3m of available operating cash flow. This allowed us to further decrease our debt ratio to 2.2x net debt to EBITDA, making further progress towards our target range of 1.5x to 2.0x. This positive performance, combined with our confidence in our robust, sustainable operating model, has enabled us to increase our interim dividend by 23% to 2.7p, in line with our progressive dividend policy.

Our strategy remains focused on becoming an even more customer driven business, growing our core insurance and travel businesses, investing in future growth and maintaining our operating model to generate strong cash flows and robust earnings.

Become an even more customer driven business

A significant amount of work has been undertaken to further enhance our understanding of our customers. A large part of that work has been to segment our customer base and identify a cohort of high value customers that already have the strongest relationship with Saga. By identifying this group we are able to understand their common characteristics and to evolve our proposition to help ensure we build on our relationship with them.

To maximise the benefit of this insight, we are currently implementing a new suite of marketing software tools, which will enable us to understand how each customer interacts with us across multiple channels, and to produce targeted and personalised communications for them. This in turn allows us to optimise our marketing resources, and to reduce the use of mass direct marketing materials.

We are excited about the potential benefits of work in this area and we already have multiple initiatives underway internally that will allow us to capitalise on our findings. These initiatives will be launched externally in the coming months and we will update the market on the details in due course.

Growing our core businesses

Insurance

The strength of Saga's insurance model lies in its flexibility to operate efficiently in all market conditions, balancing volume and price to deliver sustainable, robust earnings.  Through Saga Services, our retail broker, we have the ability to access high quality, accurately priced underwriting from the most cost efficient source.  This is either from our panel of third party providers, our own in-house underwriter, AICL, or from a third party solus arrangement. So far this year, this has allowed us to perform strongly across our portfolio of insurance products in a continuingly competitive environment, with Trading Profit up 3.7%. 

The UK motor insurance market has remained highly competitive. While motor premiums demonstrated strong growth year on year, we saw the pace of premium growth slow markedly during the second quarter of the year.

The motor panel is proving effective with around a quarter of the net premiums on renewal going to third party underwriters. Our experience in home insurance shows that motor panel will take some time to reach its optimum pricing potential. It will become increasingly efficient as underwriters understand the Saga customer base, gain comfort with the data we provide them through the 'Saga Factor' and as more underwriters join the panel. We have started rolling out insurer hosted pricing, which enables us to receive enhanced real-time pricing from our third party providers, leading to better pricing and improved competitive tension. We currently have five insurers on the panel and expect to add more insurers to compete for volume during the remainder of the financial year.

As part of our drive to improve the customer experience and efficiency of our operations, we are undertaking the modernisation of our insurance sales and administration platform over the next three years. This update will enhance our ability to rapidly react to customers' changing needs, regardless of the channel through which they interact with Saga.  The cost of this new generation of supported insurance operating platform will be covered within our usual run rate of capital expenditure.

We have delivered a 6.9% improvement in our reported combined operating ratio to 58.6% with a consistent level of reserve releases. This improvement is the result of the earn through of motor rate increases combined with ongoing efficient management of claims and continued positive claims experience, as well as an earned to written benefit from the introduction of the arrangement fee at the end of last year.

The UK home insurance market continues to be highly competitive and we have seen the same deflationary rate environment that the wider market has experienced. Despite these conditions, the efficiency of our panel has helped us to maintain our competitiveness and deliver growth in core policies.

In recent years, the competitive tension on the home insurance panel continued to rise as new panel members joined.  This meant that, in a falling market, we were afforded a pricing advantage, with the cost of risk being charged to our retail broker, Saga Services, falling faster than the average market price of policies. The panel is now running very efficiently and as a result, future margin improvements are expected to be more in line with wider market rate rises.

We have continued to deliver a strong performance in other insurance, through growing customer numbers in this segment's core products of private medical insurance ('PMI') and travel insurance.  Continued strong performance in PMI has been driven by our ability to manage our supply chain to achieve lower net rates. We have also been working closely with our supplier to improve the customer proposition to ensure its relevance to our target customer base.  We now have a system in place that means patients can fast track appointments, providing the certainty and urgency that is important to our demographic.  Our travel insurance has continued to perform well in light of our focus on developing new routes to market.  This has helped us to continue to grow volumes, despite seeing market reductions in quote levels compared to the same period last year. 

Travel

We have delivered growth in both revenue and profit within our tour operating business. We have continued to see a shift in the mix of sales to longer-haul, higher-value products as customers look beyond some of the more traditional holiday destinations. In this area, our customers value the security and the highly differentiated products that we offer. The shift is testament to our expertise in catering for the specific needs of our customer demographic and the flexibility of our model, which allows us to shift our offer to match changes in demand. We are continuing to broaden and target our offering based upon customer insight and this has been very well received to date.

Cruising has had a strong first half year with improvements in yields year on year. However Saga Sapphire underwent scheduled maintenance during the period which had a £4.7m adverse profit impact.

Our focus in cruising remains the safety of our ships, our passengers and our crew and we continue to invest to ensure we are continuously "raising the bar" within this remit. Outside of this we continually challenge ourselves to understand and adapt to our customer feedback which is ultimately measured by our exceptionally high guest satisfaction scores.

In both tour operating and cruising, we have already secured the substantial majority of our 2016/2017 sales targets and are ahead of prior year for departures in 2017/2018.

Current trading

Trading to week ending 10 September 2016

Investing in future growth

The strength of our core businesses allows us to continue to explore areas in which we can provide enhanced and differentiated products and services that cater for our customers' needs.

We have made good progress during the period in the design stage of the new cruise ship, conducted in consultation with our customers. We are working with one of the world's best cruise shipyards and are on track for delivery of the ship in July 2019.  Given its enduring popularity with our customers, it is not surprising that we have received a high level of interest from customers regarding our new ship, with nearly 5,000 pre-registrations for the initial cruises. The first cruises will begin to go on sale next year and both we and our customers are extremely excited about the future of our cruising business.

As we have stated previously, the economics of the new ship will be transformational for our cruise business, delivering significant improvements in profits while enhancing our already fantastic customer experience.  

We are continuing to develop our broad Saga Money proposition to serve our customers' wide range of financial needs. Within that, Saga Investment Services is making progress as the product range is broadened and customers continue to seek financial advice approaching retirement. The majority of our initial customers' have chosen to invest in our readymade portfolios, tailored by growth and risk objectives. During the recent challenging period immediately after Brexit, customers of these portfolios benefited from the funds' diversification.

We also continue to operate our other small scale, low cost pilots and we will continue to monitor progress and keep the market updated.

Maintaining our simple and efficient operating model

Strong cash generation and robustness of earnings are central to our model.  Our new motor panel allows us to offer competitive products to a broader range of customers, and increase our ratio of broked to underwritten policies, growing our potential footprint and enhancing the quality of earnings. 

The funds-withheld quota share arrangement we now have in place will reduce the need to hold as much capital in the future within our underwriter, gradually allowing cash to be released as a greater number of policies are covered by the arrangement. This will enhance cash generation, supporting our progressive dividend policy, while also maintaining our debt reduction targets.

We are also stepping up measures to enhance customers' experience of dealing with Saga, as well as improving operational efficiency across the business.  We are in the process of introducing a new claims system, which will improve the process for our customers, as well as reducing costs associated with claims handling.  As mentioned above, we will also be modernising our retail broking platform with an upgraded sales and administration system. The back office of our travel business is also being reorganised to improve efficiency and reduce costs.  Lastly, we have put in place an enhanced procurement team to drive purchasing efficiency across the Group.

Britain's decision to leave the European Union (Brexit)

Before the 23^rd June EU Referendum we had stated our belief that whatever the outcome of the vote, we were confident that Saga could continue to thrive. We were confident because our business model is flexible, and our target market has shown itself to be robust in the face of previous economic challenges.

The largest part of the Saga business that was potentially exposed to changing customer behaviour post the vote is our travel business. However, we polled our customers in the immediate aftermath of the vote and less than 1% of them said that they were reconsidering their future holiday plans as a result of the referendum result.

Since then, we have seen no discernible impact on our customers' travel behaviour across the business, evidenced by our current trading in the travel business. Our travel business model is also different to the industry standard as we do not have to make volume commitments to hotels and suppliers. We also hedge fuel and other costs up to two years in advance so that short term currency and oil price fluctuations have no material impact on pricing to customers.

With regard to our underwriting operations in Gibraltar (AICL), at present we can see no reason why the decision to leave the EU will lead to a change in how we currently operate.

The longer-term impact of the Brexit negotiations will emerge over time, but we will monitor them closely and remain confident in our ability to adapt to and thrive amidst the new challenges and opportunities. 

Conclusion

The first half of the year has been an exciting one with a significant amount of activity throughout all areas of the company. Whilst growing our core businesses and exploring opportunities for future growth, we are working hard to increase our understanding of our customers through an enhanced dialogue, further analysis of our database and developing our proposition.  

Our aim is to deliver on these objectives, while continuing to generate resilient earnings, progressive returns to shareholders and reaching our cash generation and debt reduction targets. I believe that we have the right team in place to achieve our goals and I am confident that we will deliver on our plans for the full year.

Chief Financial Officer's Review

The Group had a solid first six months of the year, with Trading Profit in line with H1 2015. Profit before tax increased by 8.5% and, excluding the benefit of derivative gains, grew by 3.9%. These results were impacted by the scheduled Saga Sapphire maintenance, which reduced profit in the first half of the year by £4.7m. After generating a strong positive cash flow, the Group further reduced its debt ratio to 2.2x from 2.3x at 31 January 2016.  The interim dividend has been increased by 23% to 2.7p per share (H1 2015: 2.2p).

Income Statement

Group revenue decreased by 8.6% to £437.2m (H1 2015: £478.3m), reflecting the accounting impact from the introduction of the funds-withheld quota share arrangement in motor insurance. Trading Profit was flat against the first half of 2015, with the current period incurring a £4.7m profit impact from the scheduled Saga Sapphire maintenance.

Net finance costs in the first half of the year were £9.0m (H1 2015: £14.1m), benefitting from lower interest costs on debt, lower amortisation of debt issue costs and a credit related to the unwind of discounting.

Profit before tax increased by 8.5% to £109.9m (H1 2015: £101.3m), reflecting a £4.7m increase in derivative fair value gains taken to profit and loss due to favourable movements on foreign exchange and oil price derivatives that are not covered by hedge accounting, and the reduction in finance costs. This was partially offset by an increase in amortisation of acquired intangibles of £1.1m as a result of the full six-month impact of Bennetts, acquired on 1 July 2015, and a £0.2m increase in non-trading costs.

During the first half of the year we completed the sale of the Bel Jou hotel, in St Lucia. Having written-down its carrying value during the previous financial year, there is no impact on the Group's income statement or balance sheet in the period.

Tax expense

The tax charge reported in the income statement of £22.0m (H1 2015: £20.2m) equates to 20.0% of profit before tax (H1 2015: 19.9%).

Earnings per share

The Group's basic earnings per share from continuing operations for the six months ending 31 July 2016 were 7.9p (H1 2015: 7.3p).

Dividends

The Directors declared an interim dividend of 2.7p per share (H1 2015: 2.2p per share). The dividend will be paid on 18 November 2016 to holders of ordinary shares on the register at the close of business on 7 October 2016.

Saga offers a share alternative in the form of a dividend re-investment plan ("DRIP") for those shareholders who wish to elect to use their dividend payments to purchase additional shares in the Group, rather than receive a cash payment. The last date for shareholders to elect to participate in the DRIP will be 24 October 2016.

Cash flow and liquidity

The Group continued to generate high levels of cash flow in the six months to 31 July 2016, with an available operating cash flow of 72.9% of Trading EBITDA (H1 2015: 106.5%). Cash flow in the first half of 2016 was more consistent with the expected full-year cash flow outturn.

This cash flow decreased by £41.8m on the previous period, which was driven by a lower payout from the restricted businesses, as Travel retained more cash to fund deposits on the new ship, and normalisation of working capital in line with the full year.  The working capital movement in the current year includes a one-off payment of £7.6m to Acromas in respect of the tax losses purchased, the benefit of which was recognised in the previous year's tax expense.

Available operating cash flow reconciles to net cash flows from operating activities as follows:

Financing

The Group has reduced its net debt to EBITDA ratio to 2.2x in the six months to 31 July 2016 from 2.3x as at 31 January 2016. As at 31 July 2016, net debt was £534.0m, comprising £470.0m of gross debt and £75.0m of drawn revolving credit facility, offset by £11.0m of available cash. This compared with net debt as at 31 January 2016 of £547.7m, comprising £480.0m of gross debt and £75.0m of drawn revolving credit facility, offset by £7.3m of available cash.

Pensions

Over the six month period, the valuation of the Group's pension scheme liability has increased on an IAS19 basis by £28.8m to a deficit of £47.6m (31 January 2016: deficit £18.8m):

The increase in deficit was driven by a £78.0m increase in the present value of obligations to £315.4m (January 2016: £237.4m), due to lower discount rates as a result of falling bond yields. This was partially offset by a £49.2m increase in the fair value of the scheme assets to £267.8m (January 2016: £218.6m), reflecting a change in investment strategy and gains on overseas assets.

Net assets

Since 31 January 2016, total assets and liabilities increased by £43.3m and £4.9m respectively, increasing overall net assets by £38.4m.

The growth in total assets was due to an increase in cash and short-term deposits of £22.5m, and an increase in trade and other receivables of £16.0m.

With regard to liabilities, pension scheme obligations increased by £28.8m, coupled with £29.9m more deferred revenue driven by the seasonality of the Travel business (recognised under other liabilities) and an increase in tax liabilities of £11.9m. These were partially offset by a reduction of £32.7m in gross insurance contract liabilities, due to lower total claims outstanding, £19.2m less financial liabilities as a result of more derivative contracts moving into the money and continued deleveraging, and a £13.7m decrease in trade in other payables.

Segmental performance

The prior period has been restated to reclassify certain overhead costs within the insurance segment to provide a more accurate allocation of costs. Insurance Trading Profit of £114.3m is unchanged.

Total revenue for the insurance business decreased by 15.5% to £214.9m (H1 2015: £254.3m), driven primarily by the impact of the new funds-withheld quota share arrangement in motor insurance. Travel revenue reduced by 0.8% to £208.0m (H1 2015: £209.7m), resulting from the Saga Sapphire maintenance offset by increased revenues from the tour operating businesses. Emerging businesses and central costs revenue was in line with the previous year.

The insurance business saw an increase in Trading Profit of £4.2m, driven by the introduction of the motor panel, the full six-month impact of Bennetts and supply chain improvements in private medical insurance. Within this, Trading Profit from home insurance was down £4.0m due to lower average premiums and less profit share. This was offset by a £1.7m decrease in travel Trading Profit due to the Saga Sapphire maintenance and a £2.4m increase in the Trading Loss in the emerging businesses and central costs segment, driven by investment in both the Saga Investment Services and healthcare businesses.

Motor insurance

The prior period has been restated to reclassify certain overhead costs within the insurance segment to provide a more accurate allocation of costs. Insurance Trading Profit of £114.3m is unchanged.

Overall motor revenue decreased by 23.4% to £120.4m (H1 2015: £157.2m), with the impact of the new quota share arrangement being partially offset by trading in the Bennetts business that was acquired on 1 July 2015.

High motor market premium inflation during the first quarter of the year lowered persistency, but also led to higher levels of churn in the market, resulting in higher new business sales. Combined with the inclusion of Bennetts for the full six-month period, growth in core motor policies was 23.1%. When excluding Bennetts, core motor insurance policies increased by 1.7% to 1,102k (H1 2015: 1,084k). Motor core policies placed with third-party panel members form part of the policy count included under broking / other.

Positive claims experience within the core underwriting business, the introduction of the motor panel and the full-period impact of Bennetts has enabled an increase in Trading Profit of 9.9%, despite continuing challenging market conditions.

Motor underwriting

The profitability of the core underwritten motor business has improved, as lower net earned premiums are more than offset by improved claims experience and increases in other income.

The prior period has been restated to reclassify certain overhead costs within the insurance segment to provide a more accurate allocation of costs. Insurance Trading Profit of £114.3m is unchanged.

As intended, the introduction of the new motor panel has resulted in more higher-premium business being placed with third-party underwriters, reported under broking / other, which has driven a reduction in the number of policies and average premiums that remain underwritten by the Group. This effect, combined with the newly introduced arrangement fee now recognised in other income, has resulted in underlying net earned premium reducing by 7.4% to £105.4m.

Underlying profit from the core underwritten motor business has increased by 15.1% to £57.3m (H1 2015: £49.8m), with a 7.3% improvement in the pure combined operating ratio when excluding the effect of the new funds-withheld quota share arrangement. This improvement has been driven by the earn through of motor rate increases combined with our strong claims performance, coupled with an earned to written benefit enjoyed from the introduction of the arrangement fee at the end of last year.

The accounting for the new quota share arrangement, effective from 1 February 2016, has resulted in a reduction in revenue and some cost lines, with a limited impact on Trading Profit. The impact of this has been presented in the table above. The premiums ceded to the reinsurer are based on the net premiums recognised by AICL, and so they do not incorporate a share of broker revenue.

The Group has not seen the increase in claims frequency that has been reported elsewhere in the market recently, with current levels of frequency being broadly flat across accidental damage, third party damage and personal injury claims. As previously reported, this is largely a result of the characteristics of the Group's current customer base, with the majority of customers being retired, therefore lessening the impact of recent falls in fuel costs and economic growth.

Claims severity during 2016 has increased in line with expectations, being broadly stable across accidental damage, third party damage and small personal injury claims when removing the effect of cost inflation. The Group is not currently experiencing the inflation in personal injury claims costs reported elsewhere and has continued to maintain strong levels of retention within the Ministry of Justice Portal, in addition to its significant and ongoing focus on effective management of these types of claims.

Home insurance

The prior period has been restated to reclassify certain overhead costs within the insurance segment to provide a more accurate allocation of costs. Insurance Trading Profit of £114.3m is unchanged.

The home insurance market has remained highly competitive over the last six months, with no inflation in premiums.

Revenue decreased by 6.1% to £47.5m (H1 2015: £50.6m) due to a reduction in profit share and a small fall in average premiums compared to the first half of last year. This, coupled with inflationary increases in operating expenses, resulted in a decrease in Trading Profit of 11.6% to £30.4m (H1 2015: £34.4m).

Other insurance

The prior period has been restated to reclassify certain overhead costs within the insurance segment to provide a more accurate allocation of costs. Insurance Trading Profit of £114.3m is unchanged.

Revenue in other insurance lines grew by 1.1% to £47.0m (H1 2015: £46.5m), driven by an increase in travel insurance volumes, and lower net rates on private medical insurance due to supply chain improvements.

Trading Profit was up £1.7m to £16.0m (H1 2015: £14.3m) due to an increase in profit on private medical insurance, and after marketing spend in the previous year on Saga Legal Services.  This was partially offset by increased costs in line with increased travel insurance volumes.

Insurance underwriting

Reserving

Continued favourable claims development experience during the six months to 31 July 2016, driven by large and small personal injury claims, enabled the Group to maintain a consistent level of reserve releases in the first half of the year of £41.2m (H1 2015: £41.5m). There has been no deterioration in the reserve margin year-on-year. Releases in the second half of this year are expected to be lower than the comparable period in the prior year.

Analysis of insurance contract liabilities at 31 July 2016 and 31 January 2016 is as follows:

The Group's total insurance contract liabilities net of reinsurance assets have reduced by £35.2m as at 31 July 2016 from 31 January 2016 due to a £29.5m decrease in the total claims outstanding and a £5.7m decrease in unearned premiums.

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 increased by £3.1m compared with the previous year end, from £644.7m as at 31 January 2016, to £647.8m as at 31 July 2016. As at 31 July 2016, 94% of the financial assets held by the Group were invested with counterparties with a risk rating of A or above, which is up 2 percentage points on the previous year and reflects the move towards the Group's more prudent investment strategy.

Solvency capital

As expected, the Group's Solvency II coverage ratio has risen during the period as the new quota share arrangement is taken into account. At 31 July 2016, the Group had an SCR of £109.7m and available capital of £214.6m, giving a coverage ratio of 196%.

Travel

The Travel business has had another strong six months of trading, offset by the scheduled maintenance of one of the Group's cruise ships, the Saga Sapphire.

The tour operating businesses generated a 2.2% increase in revenue to £170.5m (H1 2015: £166.9m), despite a small decrease in passenger numbers of 1.0% on the previous year, as average revenue per passenger increased due to a change in product mix to more long haul and third-party cruise products. This resulted in an increase in Trading Profit to £8.5m (H1 2015: £8.3m).

The Saga Sapphire was out of operation for scheduled maintenance for 63 days between April and June, which impacted revenue and Trading Profit by £8.6m and £4.7m respectively. As a result, cruising delivered revenue of £37.5m, 12.4% below the previous year (H1 2015: £42.8m), and Trading Profit of £0.5m (H1 2015: £2.4m). Excluding the impact of the Saga Sapphire maintenance, revenue and Trading Profit would have both increased, reflecting improved yields.

Emerging businesses and central costs

Revenue from emerging businesses was consistent with the previous year, at £14.3m (H1 2015: £14.3m).

The overall Trading Loss from this segment was £9.9m (H1 2015: £7.5m), the increase being driven by investment in both the Saga Investment Services and healthcare businesses.

Financial outlook and guidance

Given trading in the year to date, the Group expects to deliver an ongoing increase in the profitability of the core businesses. After incremental investment year on year in emerging businesses, and with the benefit of lower finance costs, we are confident of delivering growth in PBT of between 5% and 7% for the full year.

With our strong cash generative attributes and our robust solvency positon, we are confident that we can deliver on our progressive dividend policy, while continuing to reduce our debt ratio toward our medium term target range of between 1.5 and 2.0 times.

Condensed consolidated income statement

for the period ended 31 July 2016

Condensed consolidated statement of comprehensive income

for the period ended 31 July 2016

Condensed consolidated statement of financial position

as at 31 July 2016

Condensed consolidated statement of changes in equity

for the period ended 31 July 2016