Why Operating cash flow is understated in travel agent On the Beach?

Thursday, Nov 30 2017 by

Brief Introduction

On the Beach is an online holidaymaker website established in 2004 by Simon Cooper. It controls 20% of online short-haul beach holiday market.


On the Beach IPO

In 2015, the company listed in the stock market, it did a placing of 52.1m shares at £1.84 per share. The Offer is expected to raise £90.2 million of net proceeds, of which £6.4 million is for the Company and £83.8 million is for selling shareholders.


Update on annual results

You can find the Preliminary Results HERE.

So, On the Beach reported group revenue rising to £83.6m from £71.3m, an increase of 17.2%. Profit before tax rose to £21.1m from £16.9m. Net profit grew by 26% to £18m.

It also announced an increase in dividend to 2.8 pence per share up from 2.2 pence per share, an increase of 27%. The dividend is covered over 4 times net earnings.

On the Beach has a valuation of £550m in the market, giving it a PE Ratio of 31 times earnings, slightly ahead of earnings and dividend growth.   

More details and interpretation of today’s annual results are found in the following section below.


On the Beach Group in Numbers

I think investors like their information quick and informative. Below are some numbers you may find interesting:

-Cash in hand amounts to £33m, not £71.6m (as claimed on the balance sheet) because £38.5m is restricted cash under “Trust.” It becomes unrestricted when holidaymakers begin their travel.

-Cash in hand accounts for 6.3% of MKT. CAP.

-The company has a brand value of £23.5m, along with goodwill of £31.62m. Brand value depends on operational performance, same with goodwill.

-Their propriety website technology has a valuation of £13m.   

-Marketing costs as % of revenue peaked in 2014 at 52.8%. 

Today’s marketing costs of £40.27m accounts for 48% of sales.    

- On the Beach’s daily unique visitors increased by 13% to 66m from 58.1m. Five years ago, it was half that size. 


Concern about On the Beach receivables and payable numbers

This could be my imagination, but On the Beach receivables and payables data doesn’t conform with the change in working capital movement in the cash flow statement.

Here is…

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On the Beach Group plc is a United Kingdom-based online travel agent. The Company operates in two segments: Core and International. The Company's core segment conducts its activity through the United Kingdom Website (UK). The Company's international segment conducts its activity through Swedish Website (eBeach.se). The Company is an online retailer of beach short-haul beach holidays, primarily targeting customers in the United Kingdom under the On the Beach brand. The Company's technology platform enables customers to package the constituent components of their holiday (including flights, hotels and transfers) to build custom-made holidays from a range of flight and hotel combinations. The Company offers customers a range of flight and hotel products bookable through online channels (including by desktop, mobiles, tablets and applications) and over the phone. The Company's subsidiaries include On the Beach Beds Limited and On the Beach Travel Limited. more »

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8 Posts on this Thread show/hide all

Mike888 30th Nov '17 1 of 8

Hi Orangetree,

Nice article, thanks. BTW it would seem that your subscription widgit isn't working properly on your WordPress blog site.


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clarea 1st Dec '17 2 of 8

Hi Orangetree

You seem a sharp investor is there any chance at some point you would mind cobbling something on how you use Stocko stats to filter out initial red flags when your looking at new stocks to help us new to mid stage investors.

Many thanks

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Andrew L 2nd Dec '17 3 of 8

Orangetree - thanks for that. Maybe the acquisition of Sunshine.co.uk accounts for the difference?

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Orangetree 2nd Dec '17 4 of 8

In reply to post #247908

Yeah, I'm having trouble with Mailchimp lately Sorry about that.

Blog: Walbrock Research
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dustyie 19th Dec '17 5 of 8

can anyone hazad a guess , how much of affect on earnings if ryanair wins it case against "on the beach" below is a link on the case in courts


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Orangetree 20th Dec '17 6 of 8

In reply to post #256203

No one knows for sure.
On the Beach did say it will have an adverse effect because first Ryanair is the biggest European airline. Also, Ryanair operates around Europe, which On the Beach does as well. We should remember that Ryanair is one of the cheapest airlines and On the Beach is all about finding the cheapest deals for travellers.

It will be a lose-lose situation for On the Beach, and there is a strong probability their profits could turn into a loss. I can see the shares plunging if they lose.

But if they win, then the shares will rise by 10%. So, the market is pricing in a 95% winning outcome.

That's why On the Beach management has cited the Ryanair case as having the most financial impact on their operations.

Hope this answers your question without providing "real" financial data.

Blog: Walbrock Research
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dustyie 6th Jan '18 7 of 8

In reply to post #256878

I have recently sold my holding in "on the beach" My reason is the market hasn't factor in this court case in today price , Plus if ryanair air lose this case , they will keep appealing it , until they get there way . current PE of 30 and 22 next year , Perhaps management will recognise this risk and perhaps strike a deal with ryanair

P.S.I enjoy reading you article

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IGotPoesJacket 6th Jan '18 8 of 8

In reply to post #293698

This is all going to take years, meanwhile the company is growing fast right now, paying dividends right now.
Ryanair has several of these actions if I read the articles properly, the first one that gets decided on will pretty much set the precedent for the rest.
And even if Ryanair win I'm sure they would be keen to strike some kind of deal given the amount of sales they must make through these intermediaries. And a deal might be struck in the meantime - I feel this is about Ryanair trying to leverage extra revenue by charging a commercial booking fee that they're currently not getting and the court action is a way of getting a negotiation started. I'm no legal or financial expert though, this is my personal opinion on the events as I see them.

I'm long OTB.

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