On the Beach reduces exposure to summer uncertainty

On the Beach (OTB) stopped selling holidays for the normally lucrative summer season once the traffic light system was introduced in early May. The decision to stop taking bookings for departure before 1 September 2021 was taken to mitigate (to an extent) short-term financial exposure, as management maintains that “any potential upside from incremental bookings over this period would be marginal”.

The 79 per cent fall in half-year revenue through to 31 March was predictable under the circumstances, though the decision to curtail booking through to the end of August seems prescient given the government’s recent erratic treatment of Portugal. The group incurred one-off charges of £7.6m relating to cancellations through the period.

Finances were stable at the period-end with net cash of £30m, and On the Beach is continuing to reimburse customers in advance of receiving refunds from airlines for cancelled flights – the outstanding monies owed by airlines stood at £11.8m at the end of March.

The travel group has stretched its horizons in view of government travel curbs, and bookings for summer 2022 are “significantly ahead of normal trading patterns”. But the trading backdrop for the industry 12 months from now is impossible to gauge. Back to hold.

Last IC View: Sell, 355p, 11 Dec 2020