Online holiday group in £26m share placing to bolster finances

On the Beach headquarters
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On the Beach Group has raised £26m through a new share placing.

The Manchester-based online holidays giant placed a total of 7,870,000 placing shares through Numis Securities and Peel Hunt at a price of 330p per placing share, a discount of approximately five per cent to the closing share price of 347.5p last night (July 6).

The placing was conducted through an accelerated bookbuild process. All of the directors and certain members of the executive management team participated in the placing.

On the Beach explained that fiscal year 2021 was not expected to be a normal year for travel, the industry and the UK population did not foresee an extended lockdown and travel ban for the first six months of calendar year 2021.

As outlined in the group’s interim results last month, this has had a material impact on OTB’s trading performance due to exceptionally low levels of consumer demand and a significant number of cancellations.

And while the vaccine roll-out in the UK has been successful, the Government remains cautious about reopening borders for leisure travel.

The implementation of a traffic light system in early May has presented continued and significant uncertainty for consumers. As a result, and based on feedback from both consumer research and OTB’s own search/sales data, OTB made the decision to extend its off-sale period from 30 June to 31 August 2021, focusing on supporting customers with bookings due to travel this summer and taking bookings for winter 2021 and summer 2022.

Since this decision, concerns relating to the short term recovery of international leisure travel have been compounded as a result of the continued spread of the Delta variant and the recent tightening of restrictions on UK travel into some European destinations.

The group said it reiterates that it remains focused on growing its market share in the long term and believes that any potential upside from incremental summer 2021 bookings would be marginal and would be offset by disruption and loss of goodwill for holidays that would need to be cancelled or re-arranged.

Given the extended disruption to international travel from the UK throughout 2021 and the ongoing trading environment across the sector, the board said it believes it is in the group’s best interest to seek supplementary financing.

Chief executive, Simon Cooper, said: “The duration of the pandemic and its disruption to the travel sector has been more than anyone could have imagined and whilst On the Beach has undertaken numerous actions to best navigate the crisis, manage risk and conserve cash, this placing will provide the group with greater resilience, flexibility and firepower as demand for holidays recover.

“The group is well funded with £30m of cash as at 31 March 2021, and has access to a £75m undrawn Revolving Credit Facility.

“This fundraise will restore our cash position back to a similar level to where we were following our placing in May 2020. The placing will position the group strongly for growth while ensuring On the Beach is able to protect its strong market position and appropriately gain market share when there is an eventual recovery in demand.”

He added: “On the Beach’s asset light, flexible model and ring-fenced trust account for customer monies sets us apart from our competitors as our lack of reliance on customer deposits to fund working capital allows us to focus on what is right for the customer.

“As a result of this, the previously announced extension of our off-sale period from 30 June to 31 August 2021 was a decision taken to focus on supporting customers with bookings due to travel this summer and, given the continued uncertainty across the sector as evidenced in Portugal, it appears this was the right call.

“During this period of little to no travel, we continue to maintain, repair and re-invigorate the On the Beach brand, recently launching our ‘we’re ready when you are’ campaign, designed to increase brand awareness, welcoming our customers back when there is more certainty across the short haul beach holiday market.

“I would like to take this opportunity to thank our existing shareholders for their continued support and I would also like to thank the wider team across the group for their resilience and professionalism in helping our customers through these challenging times.”

The Manchester office of Addleshaw Goddard advised On The Beach Group on the equity fundraising. Its team comprised Roger Hart, Christina McNally, Josh Nock and Ben Farnworth.

This is the third significant equity fundraising on the public markets by North West listed companies which Addleshaw Goddard’s Manchester team has advised on recently.

It advised on this fundraising by On The Beach, the £208m IPO of Stockport-based musicMagpie and a £464m placing by Bury’s JD Sports Fashion. AG also advised On The Beach on its £67m placing in May last year.