TIDMOTB
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 MONTHSED 31 MARCH 2017
33.8% Growth in GROUP PROFIT BEFORE TAX
Financial & Operational Highlights
Group
-- Group revenue increased 7.3% to GBP38.1m (H1 2016: GBP35.5m)
with a later booking pattern for peak departures
-- Group profit before tax up 33.8% to GBP9.9m (H1 2016: GBP7.4m)
-- Adjusted group profit before tax(1) up 28.4% to GBP12.2m (H1 2016: GBP9.5m)
-- 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 GBP2.3m (H1 2016: GBP6.6m 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 GBP12.0m
(1) Adjusted Group profit before tax is profit before tax before
amortisation of acquired intangibles of GBP2.1m (H1 2016: GBP2.1m)
and share based payments GBP0.2m (H1 2016: nil)
UK
-- UK revenue up 7.1% to GBP37.5m (H1 2016: GBP35.0m)
-- UK revenue after marketing costs up 16.9% to GBP19.4m (H1
2016: GBP16.6m) and up 21.1% to GBP20.1m (H1 2016: GBP16.6m)
excluding incremental offline expenditure(2) incurred at end of H1
of GBP0.7m
-- UK EBITDA up 23.3% to GBP14.3m (H1 2016: GBP11.6m)
-- 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 GBP0.6m (H1
2016: GBP0.5m) with strengthening growth throughout H1
-- International EBITDA loss of GBP(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 via FTI Consulting
Simon Cooper, Chief Executive Officer
Paul Meehan, Chief Financial Officer
FTI Consulting Tel: +44 (0)20 3727
Jonathon Brill 1000
Alex Beagley
Fiona Walker
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
GBP19.4m (H1 2016: GBP16.6m). 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;
o 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;
o 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
GBPm 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 GBP37.5m (H1 2016: GBP35.0m) 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 GBP15.2m (H1 2016: GBP16.2m) 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 GBP2.9m
(H1 2016: GBP2.2m) 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 GBP14.3m (H1 2016: GBP11.6m). EBITDA
as a percentage of revenue increased from 33.1% to 38.1%.
International Segment performance
GBPm 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 GBP1.0m (H1 2016: GBP1.0m) 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.
GBPm 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 GBP1m but
excludes amortisation of acquired brand and website technology
intangible assets of GBP2.1m (H1 2016: GBP2.1m) and share based
payments of GBP0.2m
Finance costs
The Group has in place a revolving credit facility of up to
GBP35.0m with Lloyds. The drawdown on 31 March 2017 was GBP9.0m (H1
2016: GBP11.5m) and the peak drawdown for the period was GBP11.0m.
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 GBP2.0m 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 GBP0.4m (2016 H1: GBP1.0m) which is
released in line with the amortisation of GBP2.1m 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
GBPm 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 GBP23.0m (H1 2016:
GBP15.0m).
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 MONTHSED 31 MARCH 2017
CONDENSED CONSOLIDATED INCOME STATEMENT AND STATEMENT OF
COMPREHENSIVE INCOME
For the 6 months ended 31 March 2017
6 months 6 months Year ended
ended 31 ended 30 September
March 2017 31 March 2016
2016
Note GBP'000 GBP'000 GBP'000
unaudited unaudited audited
Revenue 2 38,066 35,504 71,321
Administrative expenses before
amortisation 3 (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 At 31 At 30
March March September
2017 2016 2016
Note unaudited unaudited audited
Assets GBP'000 GBP'000 GBP'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
Share Share Merger Capital Retained Total
For the year ended capital premium reserve contribution Earnings
30 September 2016 reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
------------- ---------------- ---------- -------------------- ---------- ----------------
Share Share Merger Capital Retained Total
For the 6 months capital premium reserve contribution Earnings
ended 31 March 2016 reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
------------- ---------------- ---------- -------------------- ---------- ----------------
Share Share Merger Capital Retained Total
For the 6 months capital premium reserve contribution Earnings
ended 31 March 2017 reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 6 months
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
unaudited unaudited audited
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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 6 months Year ended
ended 31 ended 31 30 September
March 2017 March 2016 2016
unaudited unaudited audited
GBP'000 GBP'000 GBP'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 6 months Year ended
ended 31 ended 31 30 September
March 2017 March 2016 2016
unaudited unaudited audited
GBP'000 GBP'000 GBP'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 6 months Year ended
ended ended 30 September
31 March 31 March 2016
2017 2016
unaudited unaudited audited
GBP'000 GBP'000 GBP'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 6 months Year ended
ended ended 31 30 September
31 March March 2016 2016
2017
unaudited unaudited audited
GBP'000 GBP'000 GBP'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 6 months
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
unaudited unaudited audited
GBP'000 GBP'000 GBP'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 6 months
to 31 to 31 Year ended
March March 30 September
2017 2016 2016
unaudited unaudited audited
GBP'000 GBP'000 GBP'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 6 months
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
unaudited unaudited audited
GBP'000 GBP'000 GBP'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 Website Total
& development technology
costs
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Website Total
& development technology
costs
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Website Total
& development Technology
Costs
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP2.1m amortisation charge for
the 6 month period ended 31 March 2017
8. Cash and cash equivalents
6 months 6 months Year ended
ended ended 31 30 September
31 March March 2016 2016
2017
unaudited unaudited audited
GBP'000 GBP'000 GBP'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 6 months Year
ended 31 ended 31 ended
March 2017 March 2016 30 September
2016
FV Level unaudited unaudited audited
GBP'000 GBP'000 GBP'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
GBP30,000,000. As a result of the acquisition of Sunshine.co.uk
Limited, on 9 May, the facility was increased to GBP35,000,000 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
GBP2,000,000 in one month to the full GBP35,000,000 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
GBP0.01 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 GBP12.0m.
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 GBP18.6m and EBITDA of GBP1.6m
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
INDEPENT 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
This information is provided by RNS
The company news service from the London Stock Exchange
END
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