Saga shares dive by 25% on profits warning

Mae Love
December 7, 2017

Over 50s travel and insurance firm Saga saw shares plummet by as much as 25% after it warned the collapse of airline Monarch had hit earnings and said efforts to attract new customers will see next year's profits fall.

The company said profits in the current financial year would grow more slowly than expected, and that 2018's profits would be 5% lower than this year's.

The results have been impacted by more challenging trading in insurance broking during the period and the Monarch Airlines administration, which has affected the tour operations business, according to a December 6 trading update.

Saga now expects full year growth in underlying profit before tax to be in the region of 1-2%, compared to 5.5% delivered at the half year.

Saga's travel segment "continues to trade well" and is expected to be strongly ahead of the prior year. Its demise slapped Saga's tour operations with a one-off cost of around £2 million, pulling the brakes on the company's planned expansion to its travel business.

As well as the Monarch blow, Saga also said its insurance arm suffered hard trading in the home and travel divisions, with earned profit for retail broking expected to fall "marginally" over the current financial year.

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Lance Batchelor, the chief executive, said: "Against a backdrop of some challenging trading conditions in our final quarter, we continue to develop the business for the long term".

"With greater customer insight and a stronger business platform, now is the right time for Saga to invest in growing the customer base and the business", Mr Batchelor said. "But lower reserve releases and a rapid decline in benefits from the introduction of the motor broker panel shouldn't be coming as a surprise to management".

"The fact that the group feels the need to throw more cash at customer acquisition is also less than reassuring".

In September, Saga unveiled plans for a concierge-style scheme offering customers "VIP access" to events and "money can't buy" experiences as part of an effort to rebrand itself.

At the other end of the "mid-cap" index, shares in Intu Properties (INTUP) soared 19.8% to 238.3p after the shopping centre investment company agreed to a £3.4 billion takeover by larger rival Hammerson (HMSO).

The company floated in 2014 at an offer price of 185p-per-share.

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