INTERIM RESULTS

Released : 11 May 2017 07:00

RNS Number : 7945E
On the Beach Group PLC
11 May 2017
 

11 May 2017

 

On the Beach Group plc

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

INTERIM RESULTS FOR SIX MONTHS ENDED 31 MARCH 2017

33.8% Growth in GROUP PROFIT BEFORE TAX

Financial & Operational Highlights

Group

•     Group revenue increased 7.3% to £38.1m (H1 2016: £35.5m) with a later booking pattern for peak departures

•     Group profit before tax up 33.8% to £9.9m (H1 2016: £7.4m)

•     Adjusted group profit before tax(1) up 28.4% to £12.2m (H1 2016: £9.5m)

•     Basic and diluted earnings per share increased 22.0% to 6.1p (H1 2016: 5.0p)

•     Adjusted earnings per share up 27.1% to 7.5p (H1 2016: 5.9p)

•     Net debt at half year reduced to £2.3m (H1 2016: £6.6m debt)

•     Interim dividend declared of 0.9p per share (H1 2016: Nil)

•     On 9 May, post half year end, we completed the acquisition of Sunshine.co.uk Limited, an online travel agent based in the UK, for a net consideration of £12.0m

 

 (1) Adjusted Group profit before tax is profit before tax before amortisation of acquired intangibles of £2.1m (H1 2016: £2.1m) and share based payments £0.2m (H1 2016: nil)

UK

•     UK revenue up 7.1% to £37.5m (H1 2016: £35.0m)

•     UK revenue after marketing costs up 16.9% to £19.4m (H1 2016: £16.6m) and up 21.1% to £20.1m (H1 2016: £16.6m) excluding incremental offline expenditure(2) incurred at end of H1 of £0.7m

•     UK EBITDA up 23.3% to £14.3m (H1 2016: £11.6m) 

•     Daily unique visitors(3) increased by 9.5% to 27.5m (H1 2016: 25.1m)

•     Branded and free traffic increased to 56.7% of overall traffic (H1 2016: 54.6%)

•     % revenue spent on online marketing decreased to 40.4% (H1 2016: 46.3%) 

 

(2) Incremental offline marketing expenditure incurred at the end of H1, for which management consider that no benefit would have accrued in H1

(3) Daily UVs: Number of individuals, as defined by an IP address, visiting pages from the onthebeach.co.uk website during a 24 hours period

 

 

International

•     International revenue increased 20% in Sweden to £0.6m (H1 2016: £0.5m) with strengthening growth throughout H1 

•     International EBITDA loss of £(1.0)m, in line with H1 2016

•     Launch of second international market in Norway during H1

 

 

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

"On the Beach has delivered a solid performance in H1, with booking growth strengthening towards the end of the period and continuing into H2. In the Group's AGM Trading Update, management outlined the view that H2 performance would be stronger than H1, with more favourable YOY comparators in H2 and because H1 was impacted by the later timing of the low cost carriers' seat release as well as key hotel partners in the Western Mediterranean holding back capacity to sell in the late market. All of these assumptions played out in the first half and have continued in H2. Given these market dynamics, we took a proactive decision to balance volume and revenue growth. This position remains under constant review to ensure that business performance is optimised.

Strategically, the changing market dynamics are presenting a number of exciting opportunities for On the Beach to leverage its scale and technological capability and we are delighted to have recently completed the acquisition of Sunshine.co.uk to further strengthen our market leading position. Given the resilient and flexible nature of our business model the Board remains confident in delivering a full year result in line with management's expectations."

 

Analyst Meeting 

A meeting for analysts will be held today at the offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD commencing at 09:30am. 

For further information: 

 

On the Beach Group plc

Simon Cooper, Chief Executive Officer

Paul Meehan, Chief Financial Officer

 

via FTI Consulting 

FTI Consulting 

Jonathon Brill

Alex Beagley

Fiona Walker

 

Tel: +44 (0)20 3727 1000

About On the Beach

On the Beach is one of the UK's largest online retailers of beach holidays with a c.20% share of the online short haul beach holiday market.  The Group has multiple opportunities to generate further growth and has a vision to become Europe's leading online retailer of beach holidays.  On the Beach provides a significant structural challenge to legacy tour operators and travel agents as the Group continues its journey to disrupt the online retail of beach holidays with its scalable, flexible, innovative technology, combined with a strong customer value proposition and a low cost base.  The business model is customer-centric, asset light, profitable and cash generative.

www.onthebeachgroupplc.com  

 

Chief Executive's Review

Summary of Operating Performance

On the Beach continues to be a dynamic, entrepreneurial and ambitious business delivering value for money beach holidays that are personalised to the customers' individual needs. The Group maintains a daily focus to improve the quality of its customer proposition and the value that it provides to its growing customer base.

 

In a market with changing dynamics and booking profile, we have continued to grow market share in H1, with daily unique visitors to site in the UK increasing 9.5% to 27.5m (H1 2016: 25.1m). We have focused on driving this growth efficiently with improvements to our bespoke bid management capability driving online marketing expenditure as a percentage of revenue down to 40.4% (H1 2016: 46.3%) and our revenue after marketing costs increased 16.9% to £19.4m (H1 2016: £16.6m). Our continued growth has been delivered by executing a focused strategy to optimise our customer proposition to increase conversion and improve margin while driving an efficient increase in our market traffic share, providing further evidence of our ability to gain market share from traditional tour operators.

 

Strategy and growth

The Group has a mission to make it simple for customers to plan, find and book their perfect beach holiday and a vision to be Europe's leading online retailer of beach holidays.

 

On the Beach has delivered significant growth within a growing market over the last three years by evolving a strategy based around the following drivers:

 

1. Out-innovating through agility and investment in talent and technology

·  Improvements to agile working methodologies continue to increase throughput of benefits-delivering features and functionality

·  Continued evolution of core platform to support future innovations

 

2. Driving an efficient increase in market traffic share

·      Daily unique visitor growth of 9.5% in H1 and significant market share growth

·      Branded and free traffic increased to 56.7% of overall traffic to site (H1 2016: 54.6%)

·      Reduction in percentage of revenue spent on online marketing (H1 2017: 40.5% vs H1 2016: 46.3%)

·      Second year of full national TV advertising campaign

3. Optimising and personalising our multi device customer proposition

·      5.0m logged sessions in H1 2017, a 40% YOY increase (H1 2016: 3.6m)

·      Responsive site now serves 52.7% of UK traffic on smartphone (H1 2016: 42.4%)

·      Repeat purchase rate has increased to 40.3% (H1 2016: 37.4%)

 

4. Leveraging increased revenue through direct and differentiated supply

·      Direct contracting has averaged 66% of all hotel buying (H1 2016: 57%)

·      Further progress made to increase percentage of exclusive flight and hotel supply throughout FY17 and beyond whilst maintaining risk-free model

5. Expanding our model into new source markets and products and driving operational leverage

·      Fixed and variable cost as a percentage of revenue reduced to 13.6% (H1 2016: 14.3%)

·      Branded share of traffic on ebeach.se increased to 30.4% (H1 2016: 19.4%) and repeat purchase rate continues to improve

·      Launched Norway website (ebeach.no) at the end of 2016

 

We have continued to invest in our people and our platform which allows us to innovate at an increasing pace and, in doing so, stay ahead of the competition. 

Recent market trends

 

The Group has witnessed continued reduction in capacity to the Eastern Mediterranean and a corresponding increase in seat capacity to the Western Mediterranean. This shift in market dynamics has led to a number of noteworthy trends, including:

 

·      Oversupply of seats to key Western Mediterranean destinations has continued to drive down flight prices YOY

·      Weakness of Sterling versus Euro combined with hotel inflation in the Western Mediterranean has increased hotel prices YOY

·      The above offsetting impacts have led to holiday prices being flat YOY with the exception of peak season pricing;

historically, widely available early booking discounts have encouraged an early booking pattern for peak season with many hotels selling out well in advance of peak;

this year most early discounts have been removed, leading to a different booking profile for peak season. This means that there is significantly more availability YOY and this is supporting a stronger booking pattern for H2 2017

·      Tour operators' share of sales in the early market were supported by FX hedging and hotel rates for early sales contracted prior to summer 2016, to coincide with the release of summer 17 brochures in spring 2016. These advantages are unwinding as c.40% of currency was hedged pre EU referendum and hoteliers are restricting access to lower rates for peak season.

 

As a result, some of the Group's larger competitors held a significant transient advantage and many of our key hotelier partners have changed their pricing policies. The Group has continued to drive share of market traffic in a cost effective manner, while extending its offline investment to help to build momentum into the second half of the financial year.

Current Trading & Outlook

 

The hotel pricing policies that supported strong growth in H1 2016 but suppressed growth in H2 2016, combined with the disruptive activity of Low Cost Travel Group prior to their failure, look set to have an equal and opposite effect on H1 / H2 2017, with significantly softer comparators in H2 2017, and recent trading gives us confidence that the trends seen in H1 are reversing. The business has enjoyed a strong start to H2 supported by greater availability of competitively priced peak season hotel product and strong branded traffic share.

Although the start of 2017 was slow in Sweden, the level of bookings growth towards the end of H1 has continued into H2 giving us confidence that we can achieve strong full year revenue growth in the region.  We also launched ebeach.no in Norway at the end of 2016 and progress in this market is in line with management's expectations.

We are efficiently executing our strategy of investing in our brand, supply and technology and we continue to realise the benefits of operational leverage from our low fixed cost base. The current market dynamics are presenting the Group with multiple opportunities to leverage its scale and technological capability to strengthen its market leading position, such as the recently completed acquisition of Sunshine.co.uk, and the Board continues to evaluate opportunities to enhance the Group's market share position. 

 

Financial Review

The Group organises its operations into two principal financial reporting segments, being UK (the "UK Segment"), the Group's established market and International (the "International Segment"), the Group's developing market. In each of the UK Segment and the International Segment, the Group realises 93% of revenue from dynamically packaged holidays with the remainder single element products such as flights or hotels.

UK Segment performance

 

£m

H1 2017

H1 2016

Change %

Revenue

37.5

35.0

7.1%

Revenue after marketing costs

19.4

16.6

16.9%

Variable costs

(2.0)

(1.9)

 

Overhead costs

(3.1)

(3.1)

 

EBITDA

14.3

11.6

23.3%

EBITDA % revenue

38.1%

33.1%

 

 

Revenue and marketing costs

 

Revenue increased by 7.1% to £37.5m (H1 2016: £35.0m) with On the Beach's agile business model allowing the Group to react to rapid changes in consumer demand. The acts of terrorism in recent years, have continued to impact Egypt and the Eastern Mediterranean resulting in continuing stronger demand for holidays in the Western Mediterranean and a shortening of lead times. 

 

Marketing expenses (excluding offline) for the first half as a percentage of revenue decreased to 40.5% (H1 2016: 46.3%) with total expenditure of £15.2m (H1 2016: £16.2m) driving an efficient increase in our share through the sophistication of our in house bid modelling and attribution tools. We have increased expenditure in H1 on the Group's offline TV advertising to £2.9m (H1 2016: £2.2m) with a fully national campaign and a TV sponsorship.

 

UK segment EBITDA

 

Operational leverage continues to improve and as a result there has been a fall in costs as a percentage of revenue overall:

 

 

H1 2017

H1 2016

Variable costs % revenue 

5.3% 

5.4%

Overhead costs % revenue

8.3%

8.9%

Total

13.6%

14.3%

 

Variable costs, which comprise mainly contact centre wages and credit card fees, are closely linked to booking volumes and we continue to gain from the benefits of scale. Continued operational leverage and the revenue benefit of direct relationships reduced overhead costs as a percentage of revenue to 8.3% (H1 2016: 8.9%).

 

EBITDA increased 23.3% to £14.3m (H1 2016: £11.6m). EBITDA as a percentage of revenue increased from 33.1% to 38.1%.

 

International Segment performance

 

£m

H1 2017

H1 2016

Change %

Revenue

0.6

0.5

20.0%

Revenue after marketing costs

 (0.9)

 (0.8)

 

Variable costs

 (0.1)

  (0.1)

 

Overhead costs

-

 (0.1)

 

EBITDA

(1.0)

(1.0)

0.0%

 

The Group has focused on growing share both online and offline supported by a TV campaign in December. We also launched a site in Norway mid-way through H1.

 

Losses in the first half were £1.0m (H1 2016: £1.0m) and are derived almost entirely from the marketing investment required to drive branded awareness and share of traffic which will in turn improve efficiency.

 

Group adjusted profit before tax and retained earnings

The Group reports adjusted profit before tax, amortisation of acquired intangibles and deal costs to allow better interpretation of the underlying trend in profit before tax.

£m

H1 2017

H1 2016

Change %

Adjusted Group operating profit before amortisation(1)

12.3

9.6

28.1%

Finance costs

(0.1)

(0.2)

 

Finance income

-

0.1

 

Adjusted Group Profit before tax

12.2

9.5

28.4%

 

 

 

 

Share based payments

(0.2)

-

 

Amortisation of acquired intangibles

(2.1)

(2.1)

 

Profit before taxation

9.9

7.4

33.8%

Taxation

(2.0)

(0.9)

 

Profit for the half year

7.9

6.5

21.5%

 

(1) Includes amortisation of development costs of £1m but excludes amortisation of acquired brand and website technology intangible assets of £2.1m (H1 2016: £2.1m) and share based payments of £0.2m

 

Finance costs

The Group has in place a revolving credit facility of up to £35.0m with Lloyds. The drawdown on 31 March 2017 was £9.0m (H1 2016: £11.5m) and the peak drawdown for the period was £11.0m.  Borrowing limits vary under the RCF to reflect the seasonal requirements of the Group and as a result of the flexible payment options given to customers.

 

Taxation

The Group tax charge of £2.0m represents an effective rate(1) of 19.6% (H1 2016: 19.7%) which was lower than the average standard UK rate of 20% (H1 2016: 20%).  The current tax charge is affected by a deferred tax credit of £0.4m (2016 H1: £1.0m) which is released in line with the amortisation of £2.1m on the valuation of acquired intangibles on the investment by Inflexion in October 2013.

(1)  Effective tax rate is calculated as taxation charge excluding deferred tax credits, divided by adjusted group profit before tax

 

Cash flow and net debt

£m

H1 2017

H1 2016

FY16

EBITDA

13.3

10.6

           23.3

Share based payment charges

0.2

-

 0.1

Capitalised development expenditure

 (1.3)

 (1.2)

            (2.4)

Movement in working capital

  (34.8)

  (22.5)

                0.6

Capital expenditure

 (0.4)

 (0.6)

         (0.6) 

Adjusted operating cash flow (1)

  (23.0)

  (13.7)

21.0

 

(1)     Adjusted operating cash flow is stated as net cash (outflow)/inflow from operating activities before tax paid, before deal costs paid and after deducting capital expenditure on PPE and intangible assets,

 

On an annual basis the Group operates a highly cash generative business model and makes no stock commitment. The cash flow profile of the Group is seasonal with approximately 50% of customers travelling in the period June to August and hence the cash flows (excluding any cash held in the trust) experience a trough prior to June through to August and a peak following this. The movement in the trust account balance for the half year is £23.0m (H1 2016: £15.0m).

 

Dividend

The Board has declared an interim dividend of 0.9 pence per share. The interim dividend will be paid on 30 June 2017 to members on the register at the close of business on 2 June 2017.

 

 

   Simon Cooper

   CEO

   11 May 2017

 

Paul Meehan

CFO

11 May 2017

 

On the Beach Group Plc

INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 MARCH 2017

CONDENSED CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

For the 6 months ended 31 March 2017

 

 

 

6 months ended 31 March 2017

 

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

Note

£'000

 

£'000

 

£'000

 

 

unaudited

 

unaudited

 

audited

 

 

 

 

 

 

 

Revenue

2

38,066

 

35,504

 

71,321

Administrative expenses before amortisation

(25,026)

 

(25,181)

 

(48,528)

Group operating profit before amortisation

 

13,040

 

10,323

 

22,793

 

 

 

 

 

 

 

Amortisation of intangible assets

 

(3,124)

 

(2,924)

 

(5,971)

Group operating profit

 

9,916

 

7,399

16,822

 

 

 

 

 

 

Finance costs

 

(78)

 

(125)

 

(100)

Finance income

 

31

 

65

 

230

Net finance (costs)/income

 

(47)

 

(60)

 

130

 

 

 

 

 

 

 

Profit before taxation

 

9,869

 

7,339

 

16,952

Taxation

4

(1,986)

 

(840)

 

(2,645)

 

 

 

 

 

 

 

Profit for the period/year

 

7,883

 

6,499

 

14,307

Other comprehensive income

 

-

 

-

 

-

Total comprehensive income for the period/year

7,883

 

6,499

14,307

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Equity holders of the parent

 

7,883

 

6,499

14,307

 

 

 

 

 

 

  

 

 

 

 

 

 

Basic and diluted earnings per share attributable to the equity Shareholders of the Company:

 

From profit for the year

5

6.1p

 

5.0p

 

11.0p

 

 

 

 

 

 

 

Adjusted earnings per share

5

7.5p

 

5.9p

 

13.0p

 

 

 

 

 

 

 

Adjusted profit measure

 

 

 

 

 

 

Adjusted PBT (before amortisation of acquired intangibles)

3

12,150

 

9,462

 

21,315

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2017

 

 

 

At 31 March 2017

 

At 31 March 2016

 

At 30 September 2016

 

Note 

unaudited

 

unaudited

 

audited

Assets

 

£'000

 

£'000

 

£'000

Non-current assets

 

 

 

 

 

 

Intangible assets

7

62,828

 

66,493

 

64,662

Property, plant and equipment

 

884

 

895

 

747

Total non-current assets

 

63,712

 

67,388

 

65,409

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Trade and other receivables

 

111,752

 

92,581

 

29,933

Cash and cash equivalents

8

55,260

 

43,700

 

51,632

Derivative financial instruments

 

-

 

3,128

 

1,683

Total current assets

 

167,012

 

139,409

 

83,248

Total assets

 

230,724

 

206,797

 

148,657

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Share capital

10

1,304

 

1,304

 

1,304

Retained earnings

 

217,598

 

204,514

 

212,427

Capital contribution reserve

 

              500

 

                500

 

500

Merger reserve

 

(132,093)

 

(132,093)

 

(132,093)

Total equity

 

87,309

 

74,225

 

82,138

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Deferred tax

 

6,607

 

7,657

 

7,007

Total non-current liabilities

 

6,607

 

7,657

 

7,007

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Corporation tax payable

 

3,609

 

3,290

 

3,647

Loans and overdrafts

9

           9,000

 

          11,493

 

                   -  

Trade and other payables

 

123,201

 

110,132

 

55,865

Derivative financial instruments

 

998

 

                   -  

 

                   -  

Total current liabilities

 

136,808

 

124,915

 

59,512

 

 

 

 

 

 

 

Total liabilities

 

143,415

 

132,572

 

66,519

Total equity and liabilities

 

230,724

 

206,797

 

148,657

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

For the year ended 30 September 2016

Share capital

Share premium

Merger reserve

Capital contribution reserve

Retained Earnings

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 30 September 2015

195,652

13,856

(132,093)

550

(10,239)

67,726

Capital reduction

(194,348)

(13,856)

(50)

208,254

Share based payment charges

105

105

Total comprehensive profit for the year

14,307

14,307

Balance at 30 September 2016

1,304

(132,093)

500

212,427

82,138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 6 months ended 31 March 2016

Share capital

Share premium

Merger reserve

Capital contribution reserve

Retained Earnings

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Balance at 30 September 2015

195,652

13,856

(132,093)

550

(10,239)

67,726

Capital reduction (see note 10)

(194,348)

(13,856)

(50)

208,254

               -  

Total comprehensive income for the period

6,499

6,499

Balance at 31 March 2016 (unaudited)

1,304

(132,093)

500

204,514

74,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 6 months ended 31 March 2017

Share capital

Share premium

Merger reserve

Capital contribution reserve

Retained Earnings

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Balance at 30 September 2016

1,304

(132,093)

500

212,427

82,138

Share based payment charges

 

 

 

 

158

158

Dividends paid during the period

 

 

 

 

(2,870)

(2,870)

Total comprehensive income for the period

7,883

7,883

Balance at 31 March 2017 (unaudited)

        1,304

               -  

(132,093)

                 500

   217,598

     87,309

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the 6 months ended 31 March 2017

 

 

 

6 months ended 31 March 2017

 

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

 

unaudited

 

unaudited

 

audited

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Profit before taxation

 

9,869

 

7,339

 

16,952

Adjustments for:

 

 

 

 

 

 

Depreciation

 

220

 

205

 

397

Amortisation of intangible assets

 

3,124

 

2,924

 

5,971

Finance costs

 

78

 

125

 

100

Finance income

 

(31)

 

(65)

 

(230)

Share based payments

 

158

 

                   -  

 

105

 

 

13,418

 

10,528

 

23,295

Changes in working capital:

 

 

 

 

 

 

Increase/decrease in trade and other receivables

 

(81,819)

 

(62,850)

 

247

Increase in trade and other payables

 

69,988

 

55,271

 

1,999

Increase in trust account

 

(22,996)

 

(14,939)

 

(1,661)

 

 

(34,827)

 

(22,518)

 

585

 

 

 

 

 

 

 

Cash outflow before deal costs from operating activities

 

(21,409)

 

(11,990)

 

23,880

Deal costs paid

 

-

 

       (3,010)

 

       (3,010)

Cash outflow from operating activities before tax

 

(21,409)

 

(15,000)

 

20,870

Tax paid

 

(2,424)

 

(685)

 

(2,780)

Net cash (outflow)/inflow from operating activities

 

(23,833)

 

(15,685)

 

18,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of property, plant and equipment

 

(357)

 

(552)

 

(617)

Purchase of intangible assets

 

(1,290)

 

(1,210)

 

(2,407)

Interest received

 

31

 

65

 

230

Net cash outflow from investing activities

 

(1,616)

 

(1,697)

 

(2,794)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from borrowings

 

9,000

 

11,500

 

-

Interest paid

 

(49)

 

(133)

 

(100)

Dividends paid to shareholders

 

(2,870)

 

                   -  

 

                  -  

Net cash inflow/(outflow) from financing activities

 

6,081

 

11,367

 

(100)

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

(19,368)

 

(6,015)

 

15,196

Cash at beginning of year

 

26,052

 

10,856

 

10,856

Cash at end of year

 

6,684

 

4,841

 

26,052

 

 

Notes to the condensed consolidated interim financial statements

 

1.   Basis of preparation

 

This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The annual financial statements of the Group are prepared in accordance with International Reporting Standards (IFRSs) as adopted by the EU. As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 30 September 2016.

The Group's last annual consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union.

The comparative figures for the year ended 30 September 2016 are an abridged version of the Group's last annual financial statements and, together with other financial information contained in these interim results, do not constitute statutory financial statements of the Group as defined in section 434 of the Companies Act 2006.  A copy of the statutory accounts for the year ended 30 September 2016 has been delivered to the Registrar of Companies. The auditor has reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or (3) of the Companies Act 2006.

These interim financial statements were authorised for issue by the Group's Board of Directors on 10 May 2017

The financial information for the six months ended 31 March 2017 has been reviewed by KPMG, the Company's external auditor.  Their report is included within this announcement.

Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.

Accounting estimates and judgements

In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 September 2016.

 

2.   Segmental analysis

 

The management team consider the reportable segments to be "UK" and "International". All segment revenue, operating profit, assets and liabilities are attributable to the group from its principal activities as on online travel agent.

 

6 months ended March 2017 (unaudited)

 

 

UK

International

Total

 
 

 

£'000

£'000

£'000

 

 

 

 

 

 

Income

 

 

 

 

Revenue

37,450

616

38,066

 

Marketing expenditure excluding offline

(15,113)

(1,140)

(16,253)

 

Incremental offline expenditure

(678)

-

(678)

 

Other offline expenditure

(2,242)

(365)

(2,607)

 

Revenue after marketing costs

19,417

(889)

18,528

 

EBITDA

14,306

(1,046)

13,260

 

Depreciation and amortisation

(3,268)

(76)

(3,344)

 

Segment operating profit/(loss)

11,038

(1,122)

 

 

Group operating profit

 

 

 9,916

 

 

 

 

 

 

Finance costs

 

 

(78)

 

Finance income

 

 

31

 

Profit before taxation

 

 

9,869

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

Goodwill

21,544

-

21,544

 

Other intangible assets

41,015

269

41,284

 

Property, plant and equipment

884

-

884

 

Total

63,443

269

63,712

 

 

 

6 months ended March 2016 (unaudited)

 

 

 

UK

International

Total

 

 

 

 

 

£'000

£'000

£'000

 

 

Income

 

 

 

 

 

Revenue

34,991

513

35,504

 

 

Marketing expenditure excluding offline

(16,201)

(1,081)

(17,282)

 

 

Incremental offline expenditure

-

-

-

 

 

Other offline expenditure

(2,242)

(265)

(2,507)

 

 

Revenue after marketing costs

16,548

(833)

15,715

 

 

EBITDA

11,573

(1,046)

10,527

 

 

Depreciation and amortisation

(3,054)

(74)

(3,128)

 

 

Segment operating profit/(loss)

8,519

(1,120)

 

 

 

Group operating profit

 

 

7,399

 

 

Finance costs

 

 

(125)

 

 

Finance income

 

 

65

 

 

Profit before taxation

 

 

7,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

Goodwill

21,547

-

21,547

 

 

Other intangible assets

44,724

222

44,946

 

 

Property, plant and equipment

895

-

895

 

 

Total

67,166

222

67,388

 

 

 

 

 

 

 

 

 

Year ended 30 September 2016

 

 

 

UK

International

Total

 

 

 

 

£'000

£'000

£'000

 

Income

 

 

 

 

Revenue

70,177

1,144

71,321

 

Marketing expenditure excluding offline

(31,304)

(2,238)

(33,542)

 

Incremental offline expenditure

-

-

-

 

Other offline expenditure

(2,842)

(268)

(3,110)

 

Revenue after marketing costs

36,031

(1,362)

34,669

 

EBITDA

24,992

(1,802)

23,190

 

Depreciation and amortisation

(6,257)

(111)

(6,368)

 

Segment operating profit/(loss)

18,735

(1,913)

 

 

Group operating profit

 

 

16,822

 

Finance costs

 

 

(100)

 

Finance income

 

 

230

 

Profit before taxation

 

 

16,952

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

Goodwill

21,544

-

21,544

 

Other intangible assets

42,853

265

43,118

 

Property, plant and equipment

747

-

747

 

Total

65,144

265

65,409

 
               

 

 

3.          Profit for the period

 

a.          Operating expenses

 

Expenses by nature including impairment charges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6 months ended 31 March 2017

 

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

unaudited

 

unaudited

 

audited

 

£'000

 

£'000

 

£'000

Marketing

19,538

 

19,789

 

36,652

Depreciation

220

 

205

 

397

Staff costs

3,066

 

2,859

 

6,708

IT hosting, licences & support

476

 

420

 

878

Credit / Debit Card Charges

864

 

775

 

1,519

Other

862

 

1,133

 

2,374

Total Administrative expenses

25,026

 

25,181

 

48,528

 

 

 

 

 

 

Amortisation of intangible assets

3,124

 

2,924

 

5,971

Total expenses

28,150

 

28,105

 

54,499

                     

 

 

b.      Adjusted PBT

 

Management measures the overall performance of the Group by reference to Adjusted PBT, a non-GAAP measure:

 

 

 

 

 

 

 

 

 

 

 

 

 

6 months ended 31 March 2017

 

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

unaudited

 

unaudited

 

audited

 

£'000

 

£'000

 

£'000

Profit before taxation

9,869

 

7,339

 

16,952

Amortisation of acquired intangibles

2,123

 

2,123

 

4,258

Share based payments charge

158

 

-

 

105

Adjusted PBT*

12,150

 

9,462

 

21,315

 

*this is a non GAAP measure

This adjusted profit measure is applied by management to understand the earnings trend of the group and is the measure by which management assess the operating performance of the group.

 

4.   Taxation

 

6 months ended 31 March 2017

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

unaudited

 

unaudited

 

audited

 

£'000

 

£'000

 

£'000

Analysis of charge in year

 

 

 

 

 

 

 

 

 

 

 

Current tax on profit for the year/period

2,387

 

1,870

 

4,318

Adjustments in respect of prior years

-

 

-

 

-

Total current tax

2,387

 

1,870

 

4,318

 

 

 

 

 

 

Deferred tax on profits for the year

 

 

 

 

 

Origination and reversal of temporary differences

(401)

 

(404)

 

(776)

Impact of change in tax rate

-

 

(626)

 

(897)

Total deferred tax

(401)

 

(1,030)

 

(1,673)

Total tax charge

1,986

 

840

 

2,645

 

The differences between the total taxation shown above and the amount calculated by applying the standard UK corporation taxation rate to the profit before taxation on continuing operations are as follows. The Group earns its profits primarily in the UK therefore the rate used for taxation is the standard rate for UK corporation tax.

 

6 months ended 31 March 2017

 

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

unaudited

 

unaudited

 

audited

 

£'000

 

£'000

 

£'000

Profit/(loss) on ordinary activities before tax

9,869

 

7,339

 

16,952

 

 

 

 

 

 

Profit/(loss) on ordinary activities multiplied by the rate of corporation tax in the UK of 20% (31 March 2016: 20%, 30 September 2016: 20%)

1,974

 

1,468

 

3,390

Effects of:

 

 

 

 

 

Other expenses not deductible

-

 

(2)

 

152

Impact of change in tax rate

12

 

(626)

 

(897)

Adjustments in respect of prior years/periods

-

 

-

 

-

Total taxation charge

1,986

 

840

 

2,645

 

 

5.   Earnings per share

 

6 months ended 31 March 2017

 

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

unaudited

 

unaudited

 

audited

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Profit after tax for the year/period

7,883

 

6,499

 

14,307

 

 

 

 

 

 

Basic weighted average number of Ordinary Shares (m)

130

 

130

 

130

Basic earnings per share (in pence per share)

6.1p

 

5.0p

 

11.0p

 

Adjusted basic earnings per share

Adjusted basic earnings per share are calculated by dividing adjusted earnings after tax of On the Beach Group plc by the weighted average number of shares:

 

6 months to 31 March 2017

 

6 months to 31 March 2016

 

Year ended 30 September 2016

 

unaudited

 

unaudited

 

audited

 

£'000

 

£'000

 

£'000

Adjusted earnings (before deferred tax movements relating to the amortisation of acquired intangibles and share based payments)

9,749

 

7,621

 

16,922

 

 

 

 

 

 

Number of ordinary shares

130

 

130

 

                130

Adjusted earnings per share (in pence per share)

7.5p

 

5.9p

 

13.0p

 

Adjusted earnings is calculated as follows:

 

6 months ended 31 March 2017

 

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

unaudited

 

unaudited

 

audited

 

£'000

 

£'000

 

£'000

Profit after tax

7,883

 

6,499

 

14,307

Deferred tax movements relating to amortisation of acquired intangibles

(415)

 

(1,001)

 

(1,748)

Amortisation of acquired intangibles

2,123

 

2,123

 

4,258

Share based payment charges

158

 

-

 

105

 

 

 

 

 

 

Adjusted earnings

9,749

 

7,621

 

16,922

 

6.   Dividends

 

An interim dividend has been declared for the 6 months ended 31 March 2017 of 0.9p per share (H1 2016: Nil per share).

7.   Intangible assets

 

 

 

Brand

Goodwill

Website & development costs

Website technology

Total

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

At 1 October 2016

30,079

21,544

3,802

22,513

77,938

Additions

-

-

1,290

-

1,290

At 31 March 2017

30,079

21,544

5,092

22,513

79,228

 

 

 

 

 

 

Accumulated amortisation

 

 

 

 

 

At 1 October 2016

6,015

-

504

6,757

13,276

Charge for the year

1,003

-

994

1,127

3,124

At 31 March 2017

7,018

-

1,498

7,884

16,400

 

 

 

 

 

 

Net book amount

 

 

 

 

 

At 31 March 2017

23,061

21,544

3,594

14,629

62,828

 

 

 

 

Brand

Goodwill

Website & development costs

Website technology

Total

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

At 1 October 2015

30,079

21,544

5,023

22,513

79,159

Additions

-

-

1,191

-

1,191

At 31 March 2016

30,079

21,544

6,214

22,513

80,350

 

 

 

 

 

 

Accumulated amortisation

 

 

 

 

 

At 1 October 2015

4,010

-

2,419

4,504

10,933

Charge for the year

1,003

-

794

1,127

2,924

At 31 March 2016

5,013

-

3,213

5,631

13,857

 

 

 

 

 

 

Net book amount

 

 

 

 

 

At 31 March 2016

25,066

21,544

3,001

16,882

66,493

 

 

 

Brand

Goodwill

Website & development Costs

Website Technology

Total

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

At 1 October 2015

30,079

21,544

5,023

22,513

79,159

Additions

-

-

2,407

-

2,407

Disposals

-

-

(3,628)

-

(3,628)

At 30 September 2016

30,079

21,544

3,802

22,513

77,938

 

 

 

 

 

 

Accumulated amortisation

 

 

 

 

 

At 1 October 2015

4,010

-

2,419

4,504

10,933

Charge for the year

2,005

-

1,713

2,253

5,971

Disposals

-

-

(3,628)

-

(3,628)

At 30 September 2016

6,015

-

504

6,757

13,276

 

 

 

 

 

 

Net book amount

 

 

 

 

 

At 30 September 2016

24,064

21,544

3,298

15,756

64,662

 

 

 

 

 

 

 

 

 

 

 

 

 

Upon acquisition of the Group by OTB Topco, the On the Beach brand was identified as a separately identifiable asset and the website technology, resulting in a £2.1m amortisation charge for the 6 month period ended 31 March 2017

 

8.   Cash and cash equivalents

 

 

 

 

6 months ended 31 March 2017

 

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

 

 

unaudited

 

unaudited

 

audited

 

 

 

£'000

 

£'000

 

£'000

Cash & Cash Equivalents

 

 

 

 

 

Cash

 

 

6,684

 

4,841

 

26,052

Trust account

 

48,576

 

38,859

 

25,580

 

 

 

55,260

 

43,700

 

51,632

                                          

 

Trust accounts are restricted cash held separately and only accessible at the point the customer has travelled.

9.   Financial instruments

 

The following table provides the fair values of the Group's financial assets and liabilities:

 

 

 

 

6 months ended 31 March 2017

 

6 months ended 31 March 2016

 

Year ended 30 September 2016

 

 

FV Level

unaudited

 

unaudited

 

audited

 

 

 

£'000

 

£'000

 

£'000

Financial Assets

 

 

 

 

 

 

Derivative financial instruments

2

-

 

3,128

 

1,683

 

 

 

-

 

3,128

 

1,683

Financial Liabilities

 

 

 

 

 

 

Rolling credit facility

2

(9,000)

 

(11,493)

 

-

Derivative financial instruments

2

(998)

 

-

 

 

 

 

 

(9,998)

 

(11,493)

 

-

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

The Group operates internationally and is therefore exposed to foreign currency transaction risk, primarily on purchases denominated in Euros and US Dollars. The Group's policy is to mitigate foreign currency transaction exposures where possible and the Group uses financial instruments in the form of forward foreign exchange contracts to hedge future highly probable foreign currency cash flows.

 

Rolling credit facility

 

The Group entered into a Lloyds Facility on 18 September 2015 with Lloyds and was renewed in November 2016 to expire in September 2018. A revolving credit facility is available under the terms of the Second Lloyds Facility in an aggregate amount of up to £30,000,000. As a result of the acquisition of Sunshine.co.uk Limited, on 9 May, the facility was increased to £35,000,000 and extended to December 2018.

 

The borrowing limits under the facility will vary monthly throughout the period of the Second Lloyds Facility to reflect the seasonal borrowing requirements of the Group, ranging from £2,000,000 in one month to the full £35,000,000 in another month.

 

It is to be repaid in monthly instalments which vary in accordance with the Group's seasonal requirements. No early repayment fees are payable.

 

The margin contained in the Facility is dependent on gross leverage ratio and the rate per annum ranges from 1.10%. to 1.90% for the utilised facility and 0.39% to 0.67% for the non-utilised facility.

The terms of the facility include the following financial covenants:

(i) that the ratio of total debt to EBITDA in respect of any relevant period shall not exceed 2:1 (with a one-off increase to a ratio of 2.5:1); and

(ii) that the ratio of EBITDA to finance charges in respect of any relevant period shall not be less than 5:1.

There have been no changes to the fair value methodology and categorisation for financial assets and liabilities since the year-end.

 

 

Fair value estimation

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

(i)         Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

(ii)        Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,  either directly (i.e., as prices) or indirectly (i.e., derived from prices)

(iii)       Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The fair values noted above are approximates of the carrying amounts of the instruments

There is no difference between the carrying value and fair value of cash and cash equivalents, trade and other receivables and trade and other payables.

 

10. Share capital

 

Capital reduction

 

In the prior year, as contemplated in the prospectus dated 23 September 2015 for Company's IPO and pursuant to a resolution of the shareholders of the Company passed on 21 September 2015, the Company has completed a reduction of capital, cancellation of share premium account and cancellation of capital redemption reserve (the "Reduction & Cancellation").

 

The Reduction & Cancellation was formally approved by the High Court of Justice, Chancery Division, on 18 November 2015. Following registration of the order of the High Court with Companies House, the Reduction & Cancellation became effective on 18 November 2015.

 

Following the Reduction & Cancellation, the issued share capital of the Company consists of 130,434,763 ordinary shares of £0.01 each, as at 18 November 2015.

 

The effect of the Reduction & Cancellation is to create distributable reserves to support the Board's future dividend policy.

 

 

11. Principal risks and uncertainties

 

There are a number of potential risks and uncertainties which could have a material impact on the Company's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results.  The directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report for the year ended 30 September 2016. These risks and how the Company seeks to mitigate these risks are set out on pages 14 to 20 of the 2016 Annual Report and Accounts  which can be found at www.onthebeachgroupplc.com.

 

The Group is one of several online travel agents involved in litigation with Ryanair in connection with Ryanair's efforts to prevent OTAs from booking and selling its flights. The legal process is ongoing but remains at an early stage. The position remains as disclosed in our Prospectus, save that (with regard to paragraph 13.6 on page 185), OTB has issued a motion to compel delivery of full and proper particulars. This has resulted in a further delay to the anticipated timescales set out in the Prospectus. Litigation is unpredictable and if Ryanair were to prevail, this could have a material impact on the Group's business.

 

12. Subsequent Events

 

On 9 May 2017, On the Beach Group's subsidiary On the Beach Travel Ltd acquired the entire issued share capital of Sunshine.co.uk Limited, an online travel agent based in the UK ("Sunshine"), for a net consideration of £12.0m.

The consideration will be funded from the Group's existing cash resources and bank facilities in the form of an extension to the Group's existing working capital revolving credit facility with Lloyds Bank plc.  The consideration will be split with 75% paid on completion and the remaining 25% in December.

Sunshine reported gross assets of £18.6m and EBITDA of £1.6m in its latest statutory audited accounts for the thirteen month period to 30 September 2016.

Management have not yet determined the fair value of the assets acquired.

 

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

·      The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU; and

·      The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first 6 months of the current financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

·      The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

This responsibility statement was approved by the Board on 10 May 2017 and is signed on its behalf by:

 

Paul Meehan

CFO

11 May 2017

INDEPENDENT REVIEW REPORT TO ON THE BEACH GROUP PLC 

Introduction 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 which comprises the condensed consolidated income statement and statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and the related explanatory notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the Company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure guidance and transparency rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 
Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 

Our responsibility 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2016 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA. 

_________________

Will Baker

for and on behalf of KPMG LLP 

Chartered Accountants 

8 Princes Parade
Liverpool
L3 1QH
11 May 2017

 


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