Shares in Saga, which specialises in travel and insurance for the over 50s, slumped after the company slashed its dividend and warned profits would be hit by Brexit and lower insurance margins.
Lance Batchelor, the chief executive, said travel bookings to Europe this year were down 8% from a year earlier. “Brexit is putting a clear dampener on customers’ willingness to commit to holidays in 2019,” he said.
Saga shares fell 35% to 67.3p after hitting a record low of 64.1p in early trading. It cut its final dividend to 1p a share from 6p a share last year.
The company, which has 2.1 million customers, fell into the red with a loss before tax of £134.6m for the year to 31 January, after writing down goodwill by £310m. Its underlying profit before tax was £180.3m; this year it expects it to fall to between £105m and £120m.
The company plans to shake up its insurance division where profit margins have fallen as a result of fierce competition in the motor and home insurance market, but this will not involve any job cuts. Car insurance premiums have also been pushed down by changes in the Ogden rate, used to calculate compensation for personal injuries.
Saga said it would change its approach to selling insurance, from one that lures new customers through lower prices and recoups initial losses through higher renewal rates. It will focus on selling cover directly to consumers rather than through price comparison sites, and offering new products and services that “customers can’t get elsewhere”. In November it started a trial of a three-year fixed-price motor and home insurance product. On the back of selling 5,000 policies it was officially launched on Thursday.
Saga has said its travel division will specialise in cruises – a new ship will carry its first passengers in July, with another new vessel coming next summer – and offer more experience-led holidays.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “While the speed of deterioration has taken the market, and us, by surprise, there have been worries for some time that the Saga brand was losing its appeal at the lower end of its ‘over 50s’ customer base. Without brand loyalty, Saga is just another insurer.”
