Holiday firm raises £67m through share placing for life after lockdown

On The Beach headquarters

Manchester-based online holiday firm On The Beach has raised £67.3m via a share placing.

It placed 26,143,500 new shares, equivalent to approximately 19.9% of its existing issued shares.

Numis Securities and Peel Hunt acted as joint bookrunners for the placing.

The company has also revealed revised banking facilities.

With international borders closed and airline fleets grounded, the holiday sector has been one of the most impacted sectors since the outbreak of the coronavirus pandemic.

The company revealed that it expects to include an exceptional charge of around £35m in its interim results, scheduled for release on June 30, related to bookings of customers who have not been able to take their holidays booked with the firm.

Among measures taken to reduce its cash burn once the holidays market ground to a halt is a decision to amend and extend its existing £50m revolving credit facility (RCF).

As a result of these mitigating actions, net debt at the end of April 2020 was £9.7m, down from £25.3m as at the end of February 2020.

Net debt will not be affected by the exceptional charge and does not include customer monies – excluding flight monies paid to airlines – which are ring-fenced in a trust account.

The actions aim to ensure the group is better placed to survive than its peers, while it prepares to capitalise on the multiple opportunities that these market conditions are likely to present.

On The Beach believes that its theoretical stress test of airspace being closed until the end of September 2020 has become increasingly plausible, which is why it has amended its banking facilities and proposed the share placing.

It says supplementary funding will provide the business with even greater resilience, flexibility and firepower through the current downturn, ensure that, in the event of a recovery scenario involving accelerated demand, it will have sufficient funding available to increase marketing spend and to support the necessary short-term investment in working capital to meet that demand, enable it to capitalise on commercial opportunities that may present themselves, and ensure that, even in more pessimistic scenarios, the company is able to protect its strong market position and position itself for the eventual recovery in demand.

The additional headroom will allow the group to simultaneously increase investment in its digital platforms, continue to drive brand through investment in online and offline marketing activity, improve conversion with attractive low deposit schemes, and react to commercial opportunities in the UK and internationally.

As well as the placing, the company has also agreed an increase to its existing banking facilities, in the form of an incremental £25m RCF under the Coronavirus Large Business Interruption Loan Scheme with Lloyds Banking Group.

The recently renegotiated £50m RCF remains in place. As a result, the group now has available to it maximum working capital facilities of £75m.

All the company’s directors, and certain members of the executive management team, said they intended to participate in the placing and will contribute approximately £1.08m in aggregate.

Chief executive, Simon Cooper, said: “The fundraising and banking facilities announced today will provide On the Beach with greater flexibility and firepower to ensure the group is ready to take advantage of the multiple opportunities that are likely to arise across the travel industry, as and when the world emerges from the ongoing crisis.

“Importantly, the additional funding will enable the group to consider commercial opportunities simultaneously with a strong balance sheet to support its growth ambitions.

“The funding will also enable the group to increase its online and offline marketing spend to meet pent up consumer demand when it returns, so as to make substantial market share gains and deliver long term growth for shareholders.”

He added: “There is no doubt that the group’s asset light and flexible model, combined with its ring-fenced trust account for customer funds, helps to differentiate On the Beach from its competitors and has stood us apart when providing customers the refunds they are entitled to in these difficult times.

“I would like to take this opportunity to thank our existing shareholders and look forward to welcoming new shareholders to our register.

“I would also like to thank the wider team across the group for the resilience and professionalism they have shown in helping our customers through these challenging times.”

The Addleshaw Goddard corporate team in Manchester advised On the Beach.

The team comprised Roger Hart, Lucie Alker, Jade Saunders and Katie Barker.

This is the third equity fundraising by North West-listed companies which Addleshaw Goddard’s Manchester team has advised on in the past week.

Roger Hart advised on this fundraising by On The Beach and last week’s £197.7m fundraising by Boohoo, while Richard Lee advised on the £32.6m fundraising last week by Scapa.

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