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On The Beach burned by Covid-19

The budget holiday operator has seen bookings (and earnings) slump in the wake of the global pandemic

On The Beach burned by Covid-19

It will come as little surprise that budget holiday retailer On The Beach (OTB) saw its sales collapse by two-thirds in the six months to 31 March. As the spread of Covid-19 picked up pace from mid-February, prospective holidaymakers cancelled their bookings and demand dried up.

IC TIP: Hold at 295p

The first half of the year didn’t start off badly. Looking to capitalise on the collapse of Thomas Cook, the group more than doubled its investment in offline advertising to attract bookings and increase its market share. As a result, from October through January, total holiday sales for the summer of 2020 (excluding its luxury classic collection) rose by 29 per cent year-on-year.

But scrapped bookings translated to £35m of exceptional costs. This meant On The Beach swung to a £32m operating loss, from a £13m profit a year earlier.

Having entered the first half with £55m of net cash, it ended the period with £13m of net debt (excluding lease liabilities). This is not abnormal given the group’s working capital profile. While most bookings are typically made in the first half of the year for summer travel, customer payments (excluding flight costs which are immediately handed to airlines) are kept in a ring-fenced trust. This cash is only withdrawn when the customer returns from their holiday.

But thanks to a share placing in May and the repayment of £30m drawn down from its revolving credit facility (RCF), the group has returned to a £51m net cash position. It believes it has sufficient liquidity even if there are no travel or bookings until October.  

Bookings were down around 90 per cent in April, although demand for holidays for this summer started to pick up in June. Volumes for next summer are also subdued, but they are higher than usual after airlines released their flight schedules early.

House broker Numis anticipates an adjusted pre-tax loss of £9.7m and loss per share of 5p for the full year to September, recovering to a £35m profit and earnings per share of 18p in FY2021.

ON THE BEACH (OTB)   
ORD PRICE:295pMARKET VALUE:£ 387m
TOUCH:294-295p12-MONTH HIGH:500pLOW: 113p
DIVIDEND YIELD:0.7%PE RATIO:NA
NET ASSET VALUE:75p*NET DEBT:18%**
Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2019 (Restated)63.511.97.31.3
202021.4-34.1-21.1nil
% change-66---
Ex-div:na   
Payment:na   
*Includes £82.4m in intangible assets or 63p a share, **Includes £4.4m in lease liabilities