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Saga share price falls 37% after revealing £310 million hit in full-year results

The over 50s travel and insurance group saw its share price lose a third of its value on Thursday, after halving its dividend to shareholders and recording a £134.6 million loss.

Saga saw its share price plunged more than 37% on Thursday morning, after the company announced a £310 million write-down of good will, resulting in a £134.6 million loss.

The company’s share price has seen recovered slightly, down 32% and sitting at around 71p a share as of 10:43am GMT.

‘Over recent years Saga has faced increasing challenges from the commoditisation of the markets in which we operate, especially in Insurance,’ Saga Group CEO Lance Batchelor said. ‘This has had an impact on both customer numbers and profitability.’

‘Although Underlying Profit Before Tax for the 2018/19 financial year is in line with our expectations, the long-term challenges we face and the results demonstrate that Saga cannot grow without a clearly differentiated offering to its customers,’ he added.

Saga to slash dividend after major write-down

In response to its multi-million-pound write-down and subsequence loss, the company was forced to cut its final dividend to just 1p a share, giving a full-year dividend of 4p, down from 9p a share last year.

The travel and insurance group also cut its profit guidance for 2019-20 to between £105 million to £120 million, down from £180.3 million in its latest results.

The company said that the decline in its profit forecast is the result of lower margins in insurance, a shift in approach to renewal pricing, as well as lower reserve releases and investment in new products, with Saga launching a new strategy to get the business back on track.

Saga launches turnaround strategy

The new strategy will fundamentally change Saga by returning the entire business to its ‘heritage as an organisation that offers differentiated products and services’, with its management hoping to gives its over 50s customers a ‘compelling reason’ to stay with the company.

‘As a first step, we are announcing the launch of a new approach to Insurance,’ Batchelor said. ‘This focuses on direct channels and products that offer attractive innovative features, moving the conversation from price to value.’

‘The fundamental changes we are making are essential to address the long-term challenges facing our business. They will support future growth in customers and profits, and generate attractive cash flows for Saga,’ he added.

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