Holiday firm in a ‘strong and debt-free financial position’

Online holiday firm On the Beach Group said it is well positioned to emerge from the coronavirus pandemic, despite months of volatile trading conditions and anticipated annual exceptional costs of £45m.

In a full year trading update for the year to September 30, today, the Manchester-based business revealed it had a strong financial position and anticipates growing its market share as demand for holidays recovers.

It said following the reopening of airspace in early July, the group was pleased that its customers were once again able to enjoy international beach holidays – albeit this freedom was short-lived and the subsequent impact on consumer confidence has led to significant reductions in seat capacity over the Winter.

This position has now been further exacerbated by a four week ban on international leisure travel which began on November 5.

As a result of the travel restrictions in place and low levels of consumer confidence, the group experienced a varied trading performance through quarters three and four with booking volumes down 75% and 53%, respectively, year-on-year.

Due to strong cost control, adjusted profit before tax for the year – which excludes exceptional costs and brand amortisation – is at breakeven levels.

Cancellation rates have been in excess of 90% across Summer 2020, well above the assumption at the half year.

The group expects it to continue at these levels over the Winter.

This has led to further exceptional costs of £10m in the second half, which the group now expects to be £45m for the full year.

On the Beach said it continues to work hard to refund all customers in cash and in full where their holidays are cancelled.

It has continued to promptly refund the hotel and transfer elements of cancelled holidays from its fully ring-fenced customer trust account, although there have been, and continue to be, substantial delays in receiving refunds from airlines.

The group said it continues to pursue these rightful refund claims on behalf of its customers.

As at November 6, total customer refunds made in cash since March 15 stood at £160m – £70m hotels and transfers and £90m for flights. Monies received from airlines for cancelled flights was £79m.

However, On the Beach is awaiting refunds for cancelled flights of £11m, where it has refunded flight costs in advance of receipt, to protect the brand and generate customer goodwill.

The group’s cash status, at November 6, revealed that, on May 22, it received £65m net of fees for a share placing of 19.9% of the group’s share capital. On this date, following receipt of share proceeds, group cash was £50.5m.

On November 6, the group had cash of £44m, excluding customer prepayments which are held in a ring-fenced trust account.

This cash figure will further increase as the group continues to receive monies from airlines for cancelled flights where On the Beach has already provided customer refunds

The group has access to a £75m credit facility which is undrawn. And it said, as a reminder, it has a zero revenue cash burn of £2m per month reduced by trading volumes.

The board said it continues to believe that the strength of the group’s balance sheet and flexible business model means the business is well-positioned to sustain further significant disruption and to grow market share as demand for holidays recovers.

Chief executive, Simon Cooper, said: “I would like to take this opportunity to thank all of my colleagues for their continued hard work and resilience in the most challenging times to have ever faced the travel industry.

“It is clear now that the full impact of COVID-19 will be every bit as extreme as any of us could have mapped out at the beginning of the year.

“Following the overwhelming support we received from our shareholders in May, combined with our ring-fencing of customer prepayments, we are in a strong and debt-free financial position.

“The board is confident about the group’s long-term strategy and we will continue to look at the increasing number of exciting opportunities to grow our market share both in the UK and internationally.”