Holidays group ready for anticipated recovery despite torrid year

Annual figures for On The Beach (OTB), the Manchester-based holiday provider, revealed the torrid time the travel industry has faced throughout the pandemic.

Revenues for the year to September 30, were £21.2m, down from £33.7m the previous year, while the pre-tax loss of £36.7m was less than the previous year’s £46.3m pre-tax loss.

The group said booking volumes remained low throughout the complete UK lockdown of January 4 to May 17, 2021. Dampened consumer confidence through the calendar year, it said, was due to complex and inconsistent rules coupled with prohibitively expensive testing costs.

Total exceptional items in the period of £10m, compared with £42m in 2020, represents the estimated impact of COVID-19. This is primarily the result of COVID-19 related cancellations, expected cancellations and associated administrative expenses.

The group raised £24.9m through a placing in July to provide greater resilience, flexibility and firepower through the downturn by restoring the group’s cash position to a similar position to where it was following the placing in May 2020.

It would also ensure that, ahead of an expected recovery of the international travel market in calendar year 2022, the group will have sufficient funding available to increase marketing spend and to support the necessary short term investment in working capital to capitalise upon that demand.

OTB extended its £25m CLBILS facility to May 2023 and reset covenants for the period up to September 2022.

It has access to a £75m revolving credit facility which has not been drawn since 22 May 2020.

Cash at September 30, 2021, was £56m excluding customer monies held in a ring-fenced trust account of £39m. The group continues to refund customers in advance of receiving refunds from airlines for cancelled flights and it does not issue refund credit notes.

In current trading, an investment in brand, combined with a softening of government restrictions, stimulated bookings in the final weeks of the year.

However, booking volumes have been, and will continue to be, significantly influenced by the evolution of the COVID-19 pandemic and responses from UK and European Government policy.

OTB said it is too early to say what impact the Omicron variant will have on restrictions and demand but the group has well-rehearsed plans in place to deal with any ensuing disruption.

In light of the continued market uncertainties, the group is maintaining its suspension of full year guidance until such time that the overall impact of COVID-19 on the group becomes clearer.

OTB said the group exits 2021 with strong liquidity, high brand awareness and is ready for 2022

Chief executive, Simon Cooper, said: “The disruption caused by COVID-19 has lasted longer than anyone would have anticipated and the travel industry has been, and continues to be, one of the hardest hit.

“Whilst our trading performance has clearly suffered, our successful placing this year is testament to the support from our shareholders who see the long term value of On the Beach and it ensures we are well positioned as the market starts to normalise.

“Looking after our customers remains central to our thinking where we have invested across our digital platforms, brand and supply. We are also proud of our industry leading initiatives of free COVID tests and our New Normal Booking Pledge which has enabled us to sustain high levels of brand awareness and customer trust through times of weak consumer demand.”

He added: “The shape of recovery for the sector remains uncertain due to the continued COVID-19 evolution and subsequent governmental responses. The flexible, asset light nature of our business model and use of our ring-fenced trust account, alongside the work the team has done over the last year, means we are ready for 2022. I would once again like to thank everyone at On the Beach who has risen to the challenge, acting with speed, professionalism and resilience.”

Russ Mould, investment director at Manchester investment platform AJ Bell, said: “We have got used to certain patterns during the pandemic and where working from home guidance and increased mask wearing lead, yet tighter travel restrictions often follow.

“This is the unhelpful backdrop to an iffy set of full year results from online beach holiday specialist On The Beach.

“The company made what seemed like a prudent decision at the time to suspend new bookings for holidays departing before September 1, back in May.

“On The Beach continues to do the right things to protect its standing with holidaymakers, offering all refunds in cash, unlike some of its rivals, investing in TV ads, offering free COVID tests and working on all the background stuff around its technology routes, back office and payments when bookings were depressed.

“The company also benefits from its asset-light nature, meaning during fallow periods it does not face onerous ownership costs on high street outlets, planes or hotels.

“In theory this should put On The Beach in a strong position in a more normalised environment, the problem for the business is it has no control over when that truly normalised environment returns.”