TIDMOTB
RNS Number : 9543X
On the Beach Group PLC
16 August 2018
16 August 2018
On the Beach Group plc
("On the Beach", "OTB" or the "Group")
Acquisition of Classic Collection Holidays Limited
and Trading Update
On the Beach Group plc (LSE: OTB.L), the UK's leading online
retailer of beach holidays, announces that its subsidiary On the
Beach Travel Limited has acquired the entire issued share capital
of Classic Collection Holidays Limited ("Classic Collection" or
"Classic") for a total consideration of GBP20.0m. Classic
Collection reported EBITDA of GBP2.6m and gross assets of GBP18m
(including a property valued at GBP2.5m) in its latest statutory
audited accounts for the 12 months to 31 October 2017. The Board
believes the acquisition will be earnings enhancing in the first
full year of ownership, including some initial investment from On
the Beach.
Rationale for the acquisition
Classic Collection dynamically packages luxury beach holidays
and sells its packages through a network of third party offline
travel agencies (including independent high street agents and
homeworkers). Classic Collection employs 124 staff in its Worthing
headquarters, who will continue to manage the relationships with
travel agents, ensuring an excellent level of service to those
travel agents and the agents' customers.
The acquisition represents a continuation of On the Beach's
strategy, whilst leveraging the Group's capabilities to access the
circa five million short haul beach holidays that each year are
booked offline. The Group will invest to grow Classic Collection's
portfolio of luxury holidays. Separately, the Group will support
Classic to invest in, build and launch an online booking portal to
provide travel agents with access to a portfolio of mainstream
beach holiday product under a new brand 'Classic Online', using
OTB's technology capability, product sourcing and scale in the
short haul beach market. Classic Online will be available
exclusively through travel agents and will not be a consumer
site.
The Package Travel Directive that came into effect on 1 July
2018 has meant that travel agents that dynamically package holidays
take on onerous responsibilities that make it increasingly
difficult for independent agents to do so cost-effectively. For
agents, Classic Online will provide many of the benefits of
dynamically packaging themselves, but without the risks, as Classic
Online will be the package organiser. Both Classic and OTB are
package organisers so the Group already has the infrastructure in
place to fulfil these responsibilities.
Consideration
The total consideration will be GBP20.0m made up of GBP14.6m
cash consideration on completion, GBP2.7m cash which will be
deferred for 12 months post completion, and GBP2.7m in shares.
Classic Collection is currently owned by its Managing Director,
Nick Munday, its Directors and a number of small private
shareholders. The cash consideration will be funded from the
Group's existing cash resources and bank facilities. The Board
confirms that this transaction will not impact the Group's ability
to pay dividends in line with its stated policy.
The consideration shares (being 607,747 ordinary shares in On
the Beach Group plc, calculated using the average mid-market price
over a period of 20 days prior to this announcement) will be issued
upon completion to Nick Munday who will be subject to a lock in
period (six months for 50% of the shares and a further six months
for the remaining 50%) and orderly market provisions.
Classic Collection's existing management team, headed by Nick
Munday will continue to run the business and help deliver the joint
vision for Classic Collection's future.
Trading Update
The Group provides an update on trading for the 19 weeks from 1
April 2018 to 15 August 2018. As has been widely publicised, the
exceptionally hot UK weather that has been prevalent over recent
months, combined with the football World Cup, has supressed holiday
demand. This has impacted our headline revenue growth during the
period, but the weaker demand has driven a significant reduction in
the Group's marketing spend, ensuring growth in revenue after
marketing costs has remained strong. This is further testament to
On the Beach's resilient and flexible business model as we have
previously demonstrated in similar circumstances. Whilst August and
September are important trading months for the Group, the Board
continues to expect that adjusted PBT for the financial year will
be broadly in line with management expectations.
Nick Munday, Managing Director of Classic Collection;
commented:
"I am thrilled to be joining forces with Simon and the team at
On the Beach. Partnering with such an innovative market leader will
give our loyal network of agents access to an even wider portfolio
of mainstream beach holiday product through the launch of Classic
Online together with further investment to broaden the luxury
offering of Classic Collection."
Simon Cooper, Chief Executive of On the Beach Group plc,
commented:
"We are pleased to welcome Nick and the Classic Collection team
into the On the Beach family. We are excited about the opportunity
to access the circa five million short haul beach customers that
book holidays offline each year. Classic Collection has an
excellent reputation in the industry and we look forward to working
with Nick and the team to expand both of our product offerings.
"With regards recent trading, the resilient, flexible and
asset-light nature of On the Beach's business model, combined with
our advanced technology, has allowed the business to swiftly adapt
to the unprecedented three month heatwave and deliver an impressive
performance."
There will be a conference call for sell-side analysts at 8:00am
BST today, the details of which can be obtained from FTI
Consulting.
This announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation.
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
Charlotte Cobb
About On the Beach
With over 20% share of online sales in the short haul beach
holiday market, On the Beach is one of the UK's largest online
beach holiday retailers. The Company has significant opportunities
for growth and a long-term mission to become Europe's leading
online retailer of beach holidays. By using its innovative
technology, low-cost base and strong customer-value proposition to
provide a structural challenge to legacy tour operators and travel
agents, it continues its journey to disrupt the online retail of
beach holidays. The model is customer-centric, asset light,
profitable and cash generative.
www.onthebeachgroupplc.com
About Classic Collection
Founded in 1988, Classic Collection dynamically packages luxury
beach holidays and sells this package product through an
independent network of more than 1800 third party travel agencies
and homeworkers.
About the Package Travel Regulations
The Package Travel Regulations 2018 were implemented into UK law
in June 2018 and apply to bookings made after 1 July 2018. The
change to the definition of "package" means that dynamically
packaged holidays (e.g. flight plus hotel) sold by travel agents
will now be "packages" even where the customer contracts remain
with the end suppliers, not the travel agent. The regulations
impose onerous obligations on package organisers, including the
obligation to perform the package, which means that the customer
has rights to pursue the organiser if something goes wrong (e.g.
hotel quality/service/description and personal injury/illness
claims). Package organisers therefore require the infrastructure,
legal/claims management, insurance, health & safety management,
and financial protection/ATOL licensing arrangements in place to
support their obligations under the regulations.
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END
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