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The collapse of Monarch Airlines knocked earnings at Saga, the travel and insurance company for the over-50s, and the company warned that its efforts to attract new customers will also cause profits to fall next year.
The company said it now expects full-year underlying pre-tax profits to grow between one and two per cent, a marked slowdown from the first half of the year when the measure increased by more than 5 per cent.
Saga has been looking to expand its travel business, aiming to boost profits fivefold over the next five years. However, Monarch’s collapse in October – which left more than 100,000 travelers stranded overseas – hit its tour operations business, and caused a one-off cost of around £2m.
Its insurance arm, which currently generates the bulk of Saga’s profits, also struggled from a “challenging trading environment” in home and travel insurance, with earned profit for retail broking expected to fall compared to last year.
The company added that underlying profits are expected to decline in 2018, despite rising profitability in both its broking and travel businesses. Saga said higher investment in “customer acquisition”, along with changes to when revenues are recognised and a decline in releases from historical claims, will weigh on next year’s performance.
Lance Batchelor, Saga 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.