Given its clearly defined focus on providing services to the over 50s, you’d think Saga (SAGA) would have its brand awareness sewn up. However, management has decided to increase its annual "customer acquisition spend" by £10m, starting from next year. The additional marketing should be seen in light of tough trading conditions in its travel and home insurance businesses. That means profits for the year to January 2019 will be 5 per cent below the previous year. Shares in the specialist insurer dropped by a quarter on the morning of the news.
Management now expects growth in underlying pre-tax profits for FY2018 to be between 1 per cent and 2 per cent, below the mid single digits expected by analysts. The collapse of Monarch Airlines has hit its tour operating business with an estimated £2m in one-off costs. While motor insurance broking is partially offsetting poor trading in home and travel, earned profits will be slightly behind the prior period due to reduced benefits from third-party add-ons and lower levels of reserve releases.
