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- Group said it was suffering 'challenging' conditions in insurance broking arm
- Collapse of Monarch Airlines cost the insurance and travel group £2million
Saga's share price slumped nearly 25 per cent on Wednesday morning, after the group revealed it expects its profits to increase by around one or two per cent this year, and fall by five per cent next year.
In an unscheduled trading update, the group said it had been hit hard by 'challenging' trading conditions in its insurance broking business and the collapse of Monarch Airlines.
The over-50s insurance group said Monarch Airlines's collapse had had a negative impact on its tour operations arm and cost it £2million.
What a saga: Saga said Monarch Airlines's collapse had had a negative impact on its tour operations arm
Once Monarch ceased trading, Saga had to help passengers arrange flights with alternative airlines.
Earlier this week, the Kent-based group announced that it had made the 'difficult decision' to make 100 of its staff redundant, following an operational review.
At present, Saga's share price is down 23.72 per cent to 138.3p.
Charting the group's performance since August, Saga said its motor insurance arm was doing well, but that its home and travel insurance operations were suffering amid a 'challenging trading environment.'
Lance Batchelor, Saga's 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.
'We are confident that the actions taken will ultimately see a better quality of earnings and profit growth across the business, supporting our progressive dividend policy for the benefit of our shareholders.'
Next year, Saga's underlying pre-tax profits is expected to be around five per cent lower than this year because of tough trading conditions and a decision to plough an extra £10million into 'customer acquisition' from next year.
The insurance and holiday firm expects its investment to return the number of retail broking policies and holiday passengers to growth, and said it remains on track to hit its target of increasing profits in its travel arm by up to five times by 2022.
The group expects its dividend for the year to be in line with expectations.
Saga's full year results will be published on 12 April 2018.