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On The Beach sales surpass pre-pandemic levels

While there is uncertainty around the cost of living crisis, market share is being gained and a return to profit is expected in the second half
On The Beach sales surpass pre-pandemic levels
  • Omicron hit sales for part of the period
  • Summer sales are significantly up 

The travel sector has been especially at the mercy of governmental restrictions over the course of the pandemic. Specialist travel retailer On the Beach (OTB), which stopped selling holidays for the summer of 2021 to limit its financial exposure when the travel traffic light system was implemented, provides a case in point. This time around the travel restriction thorn in the company’s side was due to the Omicron variant, which hit sales from November to early January (more than a third of the whole period).

Frustratingly for the company, this came after booked sales in September and October outperformed the pre-pandemic financial year 2019 comparative. After restrictions were removed, sales bounced back. And summer sales have now soared. As at 22 May, sales were up by more than a fifth against pre-Covid numbers and by a third over the previous two months. The Spanish government’s recent relaxation of restrictions on inward travel will help further.

Monthly booked sales (showing “the total transaction value of holidays booked every month before cancellations and adjustments”) for the six months in these results came in at £386mn, 6 per cent up on the 2019 comparative. Progress is being made and market share is being gained, with the company focusing on the premium, long-haul, and business-to-business segments.   

While chief executive Simon Cooper said that “visibility of the near-term outlook for the UK outbound travel industry remains limited” and that “customers are typically booking holidays with shorter lead times and we believe we are yet to see the full impact of the escalating costs of living on bookings”, management are confident that the company will return to profit in the second half.

This will be aided by £5.2mn of “brand investment” made over the past six months relating to Covid testing, and lounges and security fast track at airports. An unleveraged balance sheet will also help the company through uncertainty over the cost of living crisis, with an unutilised £75mn revolving credit facility and strong net cash position supporting future progress.

Numis has the shares trading at 12 times forward 2023 earnings, around half of the pre-pandemic valuation which indicates the impact of Covid-19 on the travel sector, falling to nine times in 2024. The broker’s analysts said that summer sales “demonstrates management’s ability to proactively target luxury hotels, more long-haul and generally more affluent customers”. Despite challenges, the company is moving in the right direction. Hold.

Last IC View: Hold, 226p, 09 Dec 2021

ON THE BEACH (OTB)   
ORD PRICE:235pMARKET VALUE:£ 390mn
TOUCH:235p-236p12-MONTH HIGH:434pLOW: 198p
DIVIDEND YIELD:nilPE RATIO:NA
NET ASSET VALUE:89p*NET CASH:£12.6mn
Half-year to 31 MarTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
20214.40-21.6-11.2nil
202252.9-7.00-3.30nil
% change+1102---
Ex-div:-   
Payment:-   
*Includes intangible assets of £73.3mn, or 44p a share