Over-50s insurance specialist Saga has warned that underlying profits will grow at a slower than expected rate this year and will be around five per cent lower next year following the collapse of Monarch Airlines.
Saga's underlying profit before tax growth is expected to be between one and two per cent for the year to the end of January.
"This has been impacted by more challenging trading in insurance broking during the period and the Monarch Airlines administration, which has affected our tour operations business," the firm said.
Shares in the company dropped on the news, sinking more than 19 per cent to 145.7p in morning trading.
Saga said it would take a one-off hit of £2m in its tour operations arm because of Monarch's collapse in October, due to the weakness of the pound and a drop in demand for some areas over terrorism concerns.
Next year, Saga's underlying profit before tax is expected to be around five per cent lower than the current year because of industry challenges and a decision to invest an additional £10m into customer acquisition, starting next year.
"We expect the current year dividend to be in line with our expectations, and we remain fully committed to our stated dividend policy," Saga said.
The company also said it had completed a review of its operating structure in the period that will realise around £10m of annualised savings next year. It expects to incur a one-off cost of about £4m relating to the changes, excluded from underlying profit before tax.
Lance Batchelor, chief executive of Saga, said the firm has continued to develop for the long term against a backdrop of tough trading conditions.
"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," Batchelor said.
"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."
The company expects its investment to return the number of retail broking policies and holiday passengers to growth, and it remains on track to hit its target of increasing the profit before tax of its travel segment by four to five times by the 2022 financial year.
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