(Reuters) Britain’s Saga said it expected its underlying pretax profit to grow by just 1-2% in the current year and fall 5% next year, sending its shares 20% lower.
In an unscheduled trading update, the provider of travel and insurance services for people aged 50 and over said more challenging trading in insurance broking and the collapse of Monarch Airlines would limit profit growth in the year to the end of January 2018.
An investment of £10m ($13.4m) to take on more customers, a fall in earned profit and lower reserve releases would push underlying pretax profit 5% lower in the the year to January 2019.
Saga shares tumbled 23% to 138.3 pence by 0929 GMT, taking them to the bottom of the FTSE Midcap Index. They were priced at 185 pence when the company listed in 2014.
Monarch collapse hurts Saga tour business
Saga said its tour business would see one-off cost of about £2m ($2.7m) hurt by Monarch going into administration.
Saga also said it had completed a review of its operating structure and would see about £10m of annualised savings next year.
The company said written profit for its retail broking business in the year ending 1 January was expected to be ahead of a year earlier, but added that strong performance in motor insurance was partially offset by a challenging trading in home and travel insurance.
Older Britons still travelling but opt for shorter and less luxury
The average price of motor insurance in Britain has been rising, partly in response to new rules for personal injury claims.
The drop in the pound since the Brexit vote has hit many British consumers’ spending power, but Saga said its travel segment is expected to perform strongly ahead of a year earlier.
Saga said in September that older Britons are still going on holiday despite a squeeze in incomes but some are opting for shorter or lower-star vacations.