REG - On the Beach Group - AGM Trading Update

On Beach groupAnnouncement

25/02/2022 07:16

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RNS Number : 7883C  On the Beach Group PLC  25 February 2022

This announcement contains inside information as stipulated under the market
abuse regulation (EU no. 596/2014) as it forms part of UK law by virtue of the
market abuse (amendment) (EU exit) regulations 2019 (SI 2019/310).

25 February 2022

 

On the Beach Group plc

("On the Beach" or the "Group")

 

AGM Trading Update

 

On the Beach Group plc (LSE: OTB.L), a leading UK online retailer for beach
holidays, issues the following trading update for its financial year to date,
in advance of its Annual General Meeting to be held today.

 

Summary

-      Prior to the emergence of the Omicron variant in November, Group
sales* in September and October exceeded FY19 levels (the last full financial
year not impacted by COVID)

-      The Omicron variant heavily impacted Group sales in November,
December and early January. However, Group sales returned to FY19 levels on 13
January 2022

-      In the 4 weeks to 23 February 2022, Group sales were up 50% on
FY19, as travel restrictions were eased

-      In line with its stated strategy, the Group is continuing to
invest in its customer proposition, brand, technology and customer service
capabilities to ensure that it is well positioned to continue to take market
share as the travel market recovers

 

Update on trading and liquidity

After 18 months of COVID affected trading, On the Beach experienced green
shoots of recovery at the start of the current financial year. Group sales for
October 2021 exceeded the comparative month in FY19, carrying forward the
positive momentum from September 2021, driven by the easing of international
travel restrictions and the success of the Group's free COVID test promotion.

The emergence of the Omicron variant triggered the reintroduction of
widespread travel restrictions at the end of November 2021, leading to a
substantial reduction in consumer confidence, search traffic and booking
volumes, throughout December and into early January 2022. Pleasingly, the
Group has experienced a significant strengthening of traffic and booking
volumes since the reduction and subsequent removal of travel restrictions by
the UK government in early and late January respectively.

Daily booked Group sales exceeded FY19 levels on 13 January 2022 and the delta
between the current period and FY19 has been increasing steadily since this
date.

Group sales since the start of the financial year, including the period
affected by Omicron, are down 2% vs FY19 (up 389% vs FY21), however over the
last four weeks Group sales are up 50% vs FY19.

In line with its strategy, the Group has materially invested in the
proposition to capture share as it emerges from the pandemic. This includes
offering a differentiated customer experience with lounges and fast track,
increasing headcount in technology and customer service areas, and investing
in above the line media to drive awareness of the brand.

The Group's cash position as at 23 February 2022 was £19m, which reflects
significant investment in funding low deposit schemes and offline marketing.
This figure excludes £61m of customer prepayments held in Trust. The Group
also has an undrawn £75m credit facility.

 

Short Haul progress

Given the experience of the past 24 months and short term concerns about cost
of living increases, customers looking for holidays to 2, 3 and value 4 star
hotels in the Spanish mainland, Canaries, Balearics and the Algarve have been
booking with shorter lead times vs FY19. Group sales into this product have
been strengthening over the last 4 weeks as consumer confidence in overseas
travel grows and restrictions continue to ease.

Planned short haul airline capacity to On the Beach destinations for summer
2022 has recently surpassed capacity for summer 2019. As a result, the Group
also expects to see a substantial lates market, with competitive prices for
both flight and hotel inventory supporting the ongoing recovery.

Early bookings for summer 2022 have been stronger into higher value, more
premium hotels, particularly for destinations in the Eastern Mediterranean and
the actions taken during the pandemic, as set out below, have positioned On
the Beach well to take share of these early bookings.

By continuing to pay hotelier partners promptly throughout the pandemic, the
Group has successfully increased both its direct contracting share (now 90%)
and access to new premium hotels that were previously exclusive to other
operators.

On 26 December 2021, On the Beach launched its enhanced customer proposition,
including investing in airport fast track for all customers and a free lounge
for customers booking premium holidays in summer 2022.

Whilst the Group is also focused on capturing share of 2, 3 and value 4 star
holidays as that segment of the market strengthens, investments in the
customer proposition have enabled the Group to:

-      target the premium segment of its addressable market (since the
start of the financial year 30% of hotel sales are in hotels that are new to
the Group or on improved terms);

-      increase the overall mix of sales into premium hotels (71% vs 59%
in FY19); and

-      capitalise on a shift in booking mix into higher value
destinations.

 

Long Haul and B2B developments

Despite ongoing restrictions for some destinations, the Group's Long Haul
offering, which has also benefitted from the improvements to the proposition,
continues to make good progress. Long haul sales in the year to date are up
349% vs FY19 and now account for 9% of Group sales (FY19: 2%).

The Group's B2B businesses, Classic Collection and Classic Package Holidays,
traded well prior to Omicron and, despite the lack of B2B footfall throughout
December 2021 and January 2022, total B2B sales in the YTD are up 35% on FY19.

*Group sales: the total transaction value of holidays sold during the period,
before cancellations.

 

Simon Cooper, Chief Executive of On the Beach Group plc, commented:

"After what has been a very difficult time for the travel industry, it has
been incredibly pleasing to see consumer confidence and demand return in line
with the loosening of travel restrictions in the UK and our destinations. The
Group's proactive actions taken throughout the pandemic have led to increased
Group sales in the higher value 4 and 5 star hotels, particularly for holidays
to the Eastern Mediterranean. Our sales patterns continue to evolve to our
core destinations and while we are seeing shorter lead times for these
holidays, we are hopeful that the increasing consumer confidence will result
in a strong lates market in those regions.

"Our customer first attitude and proposition has also been reflected in our
record Trust Pilot score of 4.5, further supporting our decision to refund our
customers throughout the pandemic promptly and in advance of receiving funds
from airlines. This would not have been possible without the continued hard
work of all colleagues across the business. While we are mindful of the
ongoing inflationary pressures impacting our core consumer base, we look to
the future with renewed confidence and believe On the Beach is favourably
positioned to continue to gain market share as demand for beach holidays
further normalises."

 

For further information:

 

 On the Beach Group plc                  via FTI Consulting

 Simon Cooper, Chief Executive Officer

 Shaun Morton, Chief Financial Officer

 FTI Consulting                          Tel: +44 (0)20 3727 1000

 Alex Beagley                            Onthebeach@fticonsulting.com (mailto:Onthebeach@fticonsulting.com)

 Fiona Walker

 Sam Macpherson

 Rafaella de Freitas

 

About On the Beach

On the Beach is a consumer-centric disruptor on a mission to continually
democratise easy access, hassle free, great value holidays. Having invested in
proposition, technology, brand and service, our asset light model is well
positioned to continue to attract and retain the widest possible audience of
beach holidaymakers. We are a leading online retailer in the UK short haul
beach holiday market. By expanding into B2B and Long Haul channels, we have
doubled our UK addressable market, and have a long‐term vision to become
Europe's leading online retailer of beach holidays.

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