Holidays group sees clearer skies in second half of trading

Ongoing lockdown restrictions have hampered Manchester online holiday firm On the Beach, but it sees clearer skies heading into the second half of its financial year.

In an update ahead of its annual general meeting today, the group commented on trading for the four months to January 31, 2021.

It said due to the four week lockdown in November and the subsequent UK-wide lockdown that started in early January 2021, combined with further reductions in Winter flying programmes, consumer demand for forward holidays has remained very weak with UK traffic, bookings and spend on online marketing activity across the first four months of the financial year down 73%, 83% and 85%, respectively.

The group has responded by taking holidays off-sale that depart prior to May 1, 2021.

It expects booking demand to remain weak until these restrictions are lifted and vaccine deployment is more widespread, both in the UK and its major travel destinations, which will impact the first half and full year performance.

However, as stated in its December trading update, On the Beach said it continues to believe the forthcoming period offers an unprecedented opportunity to drive market share gains and, as a result, has continued to invest in the areas that will drive the largest benefits in the medium term, including talent and technology, delivering best-in-class customer service by refunding customers whose holidays are cancelled in advance of receipt of refunds from airlines and continuing to support a strong low deposit offering, building direct hotelier relationships by continuing to pay its valued partners promptly, and increasing share of voice through online and offline marketing activity.

By January 31, the group had £39m in cash.

This reflected £4m investment in offline marketing activity to increase awareness of the brand. The majority of this spend was booked prior to the January lockdown. Subsequent investment has been scaled back, however, the board feels it is important to maintain a level of brand awareness in the current environment.

There is also £5m owed by customers in additional deposit payments, and £3m due from airlines where the business has refunded customer flight costs in advance of receipt from airlines to protect the brand and generate customer goodwill.

The group has a £75m undrawn revolving credit facility and the monthly cash burn remains approximately £2m in the event that no revenue is received.

Chief executive, Simon Cooper, said: “The first four months of our financial year have seen differing tiering levels across the UK, followed by the current nationwide lockdown and ban on international leisure travel.

“Clearly, this has and continues to impact booking volumes and the board believes that booking volumes will remain weak through H1 and into H2.”

But he added: “Following the prudent activities undertaken in the last financial year, the group remains in a strong and debt-free financial position.

“The board is confident about the group’s long term strategy and we will continue to evaluate the growing range of exciting opportunities to build our market share both in the UK and internationally.”