On the Beach Group 17.9% Growth in adjusted PBT

On the Beach Group (LON:OTB), today announced preliminary results for the year ended 30th September.

Financial & Operational Highlights

Group

Overview

• Group gross profit (2) increased 10.8% to £92.6m (FY17: £83.6m)

• Group adjusted profit before tax(3) up 17.9% to £33.6m (FY17 : £28.5m)

• Strong cash conversion (5) of 79% (FY17: 79%) – adjusted (5) operating cash conversion 90% (FY17: 88%)

• Net external cash(6) at year end of £47.3m (FY17: £33.0m)

• Proposed final dividend of 2.2p per share, totalling 3.3p per share for the year (FY17: 2.8p per share), an increase of 17.9%

Core (Onthebeach.co.uk and Sunshine.co.uk)

• Core revenue up 9.0% to £89.3m (FY17: £81.9m)

• Core revenue after marketing costs up 15.8% to £52.0m (FY17: £44.9m)

• Adjusted Core EBITDA(7) up 14.2% to £37.9m (FY17: £33.2m)

• Core EBITDA as a percentage of revenue increased to 42.4% (FY17: 40.5%)

• Branded and free traffic increased to 63.9% of overall traffic (FY17: 59.3%)

• Percentage of revenue spent on marketing decreased to 41.8% (FY17: 45.2%)

International

• After significant growth of 51.0% in H1, International revenue decreased by (5.9)% to £1.6m (2017: £1.7m) for the full year (FY17: 48.0%). Revenue was heavily impacted by the unprecedented hot summer in Scandinavia leading to lower demand for holidays and widespread discounting of distressed product by Sweden’s leading tour operators. We therefore reduced marketing activity to a background level, with a significant impact on revenue but a saving versus forecasted losses with a view to reinvesting at the start of the new financial year

• Launch of third international market in Denmark

• International EBITDA loss of £(2.2)m (FY17 £(2.0)m)

Classic Collection Holidays (“Classic”)

• Acquired Classic on 15 August 2018 for a net consideration of £20.0m (total consideration of £23.3m, less a working capital adjustment of £3.3m).

• As it is a principal rather than an agent, Classic reports on a “travelled” basis

• EBITDA £1.1m in period since acquisition

(1) Group revenue includes revenue from Classic Collection Holidays Limited (“Classic”) for the period since acquisition (15th August 2018) of £13.2m. Classic accounts for revenue on a “travelled” basis as a principal and therefore reports revenue on a gross basis

(2) Group gross profit includes revenue from Classic less cost of sales and agents commission of £1.7m

(3) Group adjusted profit before tax is profit before tax, amortisation of acquired intangibles of £4.6m (FY17: £4.3m), share based payments £1.4m (FY17: £0.5m), exceptional costs of £0.6m (FY17: £2.7m) and one-off property and litigation costs of £0.9m (FY17: nil)

(4) Adjusted earnings per share is Group adjusted profit after tax divided by the average number of shares in issue during the period

(5) Cash conversion is operating cash flow divided by EBITDA. Underlying cash conversion is operating cash flow divided by EBITDA excluding the impact of the acquisition of Classic and capital expenditure for the new HQ

(6) Net external cash is defined as cash and cash equivalents excluding the trust accounts

(7) Adjusted Core EBITDA excludes exceptional costs, share based payments and one-off property and litigation costs. See note 2 for the reconciliation to the nearest GAAP measure.

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

“I am pleased with the Group’s performance, having delivered a 17.9% increase in Group adjusted profit before tax, in line with market expectations and a further improvement in the market-leading performance for Core EBITDA as a percentage of revenue at 42.4% (FY17: 40.5%). This performance was delivered despite the previously highlighted exceptionally hot weather that was prevalent over the summer in the UK and in the Nordics, which combined with the football World Cup, supressed holiday demand. Whilst this impacted our headline revenue growth during the period, the weaker demand also drove a significant reduction in the Group’s marketing spend, ensuring growth in revenue after marketing costs remained strong. This is further testament to On the Beach’s resilient and flexible business model.

“In August, we completed the acquisition of Classic Collection Holidays Limited, which gives On the Beach a “business to business” channel through which we can access the five million short haul beach holidays that are booked offline each year. This will be through both the existing business (Classic Collection Holidays) and via the launch of an online agent-only booking portal (Classic Package Holidays) through which agents can book mainstream beach holidays, which is due to be launched early in 2019.

“We remain confident in the resilience and flexibility of our business model to capitalise on any structural changes in the market. On the Beach continues to successfully build a leading position as more consumers discover the ease of use and wide choice of beach holidays that our platforms offer.

“The first quarter of our financial year (calendar Q4) is historically the quietest trading period for the Group. We are pleased to report a strong early trading performance, supported by a slightly earlier release of summer capacity by major low cost carriers, lower YOY seat prices for winter departures and a continued efficiency in marketing spend. This current performance is in line with our expectations and the Board believes the business is well positioned for the key trading period that commences in late December and continues into Q1 2019.”

“Whilst the consumer environment continues to be challenging, we remain confident in the resilience and flexibility of our business model. The Board will also continue to evaluate acquisition opportunities that will both increase scale and deliver value for shareholders.”