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On the Beach Group (OTB)

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Tuesday 30 June, 2020

On the Beach Group

Interim Results for the 6 months ended 31 March 20

RNS Number : 4376R
On the Beach Group PLC
30 June 2020
 

30 June 2020

 

On the Beach Group plc

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

 

INTERIM RESULTS FOR SIX MONTHS ENDED 31 MARCH 2020

WELL-PLACED TO CAPITALISE ON STRUCTURAL CHANGES IN THE MARKET POST COVID-19

 

Financial Overview

 

Financial Highlights & Operational Highlights

 

 

6 months to
31 March 2020

6 months to
31 March 2019

Change

 

Adjusted (1)

GAAP

Adjusted (1)

GAAP

Adjusted (1)

GAAP

Group revenue

£52.8m

£21.4m

£63.5m

£63.5m

(17%)

(66%)

Revenue as Agent*

£37.3m

£5.9m

£45.0m

£45.0m

(17%)

(87%)

Revenue as Principal**

£15.5m

£15.5m

£18.5m

£18.5m

(16%)

(16%)

Group gross profit

£37.5m

£7.6m

£47.5m

£47.5m

(21%)

(84%)

Gross profit as Agent

£35.3m

£5.4m

£45.0m

£45.0m

(22%)

(88%)

Gross profit as Principal

£2.2m

£2.2m

£2.5m

£2.5m

(12%)

(12%)

Group (loss)/profit before tax

£2.3m

(£34.1m)

£15.7m

£11.9m

(85%)

-

Basic  (loss)/earnings per share (2)

1.4p

(21.1)p

9.5p

7.3p

-

-

Interim dividend payable

Nil

Nil

1.3p

1.3p

-

-

 

(1)  Group adjusted profit before tax is profit before tax, amortisation of acquired intangibles of £2.7m (2019: £2.8m), share based payments credit of £1.0m (2019: cost of £0.5m) and exceptional items of £34.7m (2019: £0.5m)

(2)  Adjusted earnings per share is Group adjusted profit after tax divided by the average number of shares in issue during the period

 *As an agent, revenue is accounted on a "booked" rather than "travelled" basis (unlike tour operators and airlines) and the Group is reporting H1 bookings taken between 1 October 2019 and 31 March 2020. Many of the bookings taken in H1 were cancelled towards the end of the period or have subsequently been cancelled due to the closure of airspace. As a result, cancellations/refunds are recognised more quickly in an agent's financial results than in a principal's.

 ** As a principal, revenue is accounted on a "travelled" basis and reported on a gross basis.

· Prior to the escalation of the COVID-19 pandemic in Europe, the Group was trading well. As outlined in the AGM Trading Update released on 6 February 2020, in the first four months of FY20 and following the collapse of the Thomas Cook Group ("TCG"), the Group priced competitively and total holiday sales grew by 29% (excluding  Classic Collection Holidays) for Summer 2020 departures.

· H1 revenue of £21.4m was down 66% on prior year due to COVID-19 related cancellations and a significant reduction in demand from mid-February when COVID-19 began to spread to Europe. Adjusting for the exceptional cancellations H1 adjusted revenue of £52. 8m is down 17%.

· H1 adjusted profit before tax of £2.3m is down £13.4m on prior year, impacted by the reduction in consumer demand and increased offline marketing spend which, as announced on 8 April 2020, will now not pay back in H2.

· Total exceptional costs in the period of £34.7m represents the estimated cost of COVID-19 to trading in H1. This is primarily the cost of COVID-19 related cancellations or expected cancellations and associated administrative expenses.

· Net debt at 31 March 2020 was £13.0m excluding customer monies held in a ring-fenced trust account ("Trust") of £68.8m. At 31 May 2020 the Group's cash position, following a successful share placing on 22 May 2020, was £50.5m excluding £54.8m of customer monies held in Trust and after repayment of the £30m RCF.

· As announced on 8 April 2020 and 21 May 2020 respectively, the Group also has access to a £75m RCF facility which, at 31 May 2020, remained undrawn.

· The Directors believe that the Group's asset light business model, alongside Trust account protection for customers, places the Company in a strong position for the future.

 

Explanation of adjustments

· Certain costs, including the exceptional impact of the COVID-19 pandemic, have been excluded from performance measures in this statement as the Board consider this necessary to provide a fair, balanced and understandable view of the performance of the Group. A full reconciliation of all non-GAAP measures to the closest equivalent GAAP measure is included in the glossary.

· Whilst the underlying result has still been significantly impacted by the COVID-19 pandemic, the Board believe that adjusting for the items shown in the table below provides a clearer reflection of the Group's performance in the period. The Group organised package holidays for customers which have since been cancelled, or are likely to be cancelled, due to airspace closures and government advice on travel. See note 2.5 for details of the adjustments.

· The Group has not estimated the financial impact of, or made an adjustment for, the significant reduction in booking volumes in February and March 2020 as a result of the COVID-19 pandemic.

· A summary of the adjustments between Adjusted and GAAP measures, split between the COVID-19 impact and other costs, is shown below:

 

 

 H1 2020

H1 2019

 

COVID-19

Other

Total

Total

Group revenue

(£31.4m)

-

(£31.4m)

-

Revenue as Agent

(£31.4m)

-

(£31.4m)

-

Cost of sales (3)

1.5m

-

1.5m

-

Group overheads

(£4.8m)

(£1.7m)

(£6.5m)

(£3.8m)

Share Based Payments

-

£1.0m

£1.0m

(£0.5m)

Acquired Intangibles Amortisation

-

(£2.7m)

(£2.7m)

(£2.8m)

Other exceptional operating costs (4)

(£4.8m)

-

(£4.8m)

(£0.5m)

Group profit before tax

(£34.7m)

(£1.7m)

(£36.4m)

(£3.8m)

 

(3)  Agents' commission no longer due on cancelled holiday bookings

(4)  Provision for amounts due from suppliers £3.3m, exceptional development spend £1.2m, legal and professional fees £0.3m (2019: Double property costs £0.3m, Acquisition costs £0.1m and Recruitment costs of £0.1m)

 A full explanation of all adjusted performance measures is included in the Glossary

COVID-19 Impact and Response

· COVID-19 has significantly impacted On the Beach and the entire global travel industry.

· OTB's trading performance has been impacted by both a material reduction in underlying bookings from February 2020 and the reversal of revenue generated for bookings received in H1 for travel in H2 that have either been cancelled or are likely to be cancelled.

· The Group took early action in the period to manage risk and conserve cash:

In an environment of limited demand and as a result limited revenue, the Group's marketing costs reduced to almost nil.

Further actions to limit other non-essential costs in a zero revenue environment resulting in monthly cash costs of less than 2m across the Group.

The Group utilised the Coronavirus Job Retention Scheme to reduce staff costs across non-essential roles in the current environment.

The Group has maintained all costs associated with the delivery of its future strategy, the call centre has operated a full service and s uppliers (including hotels) have all been paid within agreed terms.

The Group's CEO is forgoing his salary and the remainder of the Board have voluntarily agreed to a 20% reduction in salary and fees. This is alongside no bonuses being awarded across the Group in the current financial year.

· On 8 April 2020 the Group reach ed agreement with its bank, Lloyds Banking Group plc ("Lloyds") to extend the 50m RCF to all months of each year, extend the term to December 2023  and reset covenant tests for all periods up to and including June 2021.

· On 21 May 2020 the Group agreed an increase to these facilities, in the form of an incremental £25m RCF under the Coronavirus Large Business Interruption Loan Scheme ("CLBILS") with Lloyds, expiring in May 2022. The recently renegotiated £50m RCF remains in place, expiring in December 2023. As a result, the Group now has available to it maximum working capital facilities of £75m.

· In addition, on 22 May 2020, the Group issued the equivalent of 19.9% of issued share capital with no discount raising £65m cash, net of fees.

· The Board believes that the above measures allow the Group to simultaneously increase investment in its digital platforms; continue to drive brand through investment in online and offline marketing activity; improve conversion with attractive low deposit schemes; and react to commercial opportunities in the UK and internationally as demand begins to normalise.

 

· The Group remains the only listed UK travel business that operates a fully ring-fenced customer trust account in which customer funds are held until the point of travel. Therefore, the Group does not rely on cash received for forward bookings to trade. Monies that have been received for holidays that are cancelled by a closure of airspace can be repaid to customers in cash with limited impact on the Group's working capital.

 

Current Trading & Outlook

· During April OTB Group bookings were at c.10% of normal volumes as consumer appetite for booking holidays remained subdued.

· From mid-June there has been a significant increase in demand for Summer 2020 departures, albeit from a very low base.

· Booking volumes for Summer 2021 remain low, but are significantly ahead of the prior year, partially due to the early release of flights for next year by most major airlines.

· Most airlines are seeking to resume flying, albeit at a significantly reduced level, in July 2020, in line with the partial reopening of resorts for overseas visitors. Whilst a significant number of bookings have been or will be cancelled, we do expect that some holidays booked to travel from 1 July to 31 October will go ahead as planned.

· The Board believes the business is well-positioned to grow market share as demand for holidays recovers. Whilst this recovery is likely to take some time and the consumer environment will continue to be challenging, the Group remains confident in the resilience and flexibility of our business model and believe there is an exciting opportunity to increase our market share over the short to medium term.

· The Board will continue to evaluate internal and external opportunities that will both increase scale and deliver value for shareholders.

· In light of the continued market uncertainties, the Group is maintaining its suspension of full year guidance until such time that the overall impact of COVID-19 on the Group becomes clearer.

 

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

 

"In the aftermath of the Thomas Cook collapse, the Group made excellent progress in the first four months of the financial year, driving record levels of brand awareness and achieving sales growth of almost 30% for holidays departing in Summer 2020.  We also made significant progress against our strategic objectives in the year with Classic Package Holidays going live in over 2,600 agencies alongside the continued expansion of our long haul offering. 

The onset of the COVID-19 pandemic led to a rapid slowdown in demand for foreign travel followed by the total closure of airspace across Europe by mid-March. Our staff responded brilliantly to ensure that the Group delivered the highest possible customer service standards in the most difficult of circumstances.

On the Beach continues to successfully build a leading position as more consumers discover the ease of use and wide choice of beach holidays across our platforms. The flexibility and asset light nature of our business model together with our recently strengthened balance sheet and the actions we have taken since the middle of March means we are well placed to capitalise on the inevitable structural changes in the market post COVID-19. As a result, the Board continues to look to the future with confidence."

 

Analyst Conference Call

 

A conference call for sell-side equity analysts will be held today at 10.30am, the details of which can be obtained through FTI Consulting. 

For further information: 

 

On the Beach Group plc

Simon Cooper, Chief Executive Officer

Paul Meehan, Chief Financial Officer

 

via FTI Consulting 

FTI Consulting 

Alex Beagley

Fiona Walker

Sam Macpherson

 

Tel: +44 (0)20 3727 1000

 

About On the Beach

With over 20% share of online sales in the short haul beach holiday market, we are one of the UK's largest online beach holiday retailers. We have significant opportunities for growth and a long-term mission to become Europe's leading online retailer of beach holidays. By using our innovative technology, low-cost base and strong customer-value proposition to provide a structural challenge to legacy tour operators and online travel agents, we continue our journey to disrupt the online retail of beach holidays. Our model is customer-centric, asset light, profitable and cash generative.

 

Cautionary statement

 

This announcement may contain certain forward-looking statements with respect to the financial condition, results, operations and businesses of the Company. Forward looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'due', 'will', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal' or 'estimates'. These forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements, including factors outside the Company's control. The forward-looking statements reflect the knowledge and information available at the date of preparation of this announcement and will not be updated during the year. Nothing in this announcement should be construed as a profit forecast.

 

This statement together with the interim financial statements and investor presentation is available on www.onthebeachgroupplc.com .

 

Chief Executive's Review

Summary of Operating Performance and COVID-19

 

First and foremost, the health and wellbeing of our team members and our customers is and always will be the Group's top priority. I am pleased that everyone across the team has responded with speed and professionalism to the current challenges around COVID-19.

 

On the Beach continues to be a dynamic, entrepreneurial and ambitious business delivering value for money beach holidays that are personalised to our 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 the first four months of the financial year and the aftermath of the collapse of Thomas Cook Group we believe we were able to drive a significantly increased share of market. We continued to invest in both online and offline marketing activity and these investments led to record levels of brand awareness and branded traffic. Our expansion into longer haul destinations and our B2B presence via the Classic Collection and Classic Package Holidays brands was running well ahead of plan prior to the COVID-19 shutdown and we look forward to continuing this progress as the market normalises.

 

Strategy and growth

The Group's vision is to build Europe's leading beach holiday retailer via a single platform multi-brand strategy.

On the Beach continues to deliver significant growth in its core and adjacent markets by evolving a strategy based on the following strategic pillars:

1.  Investing in talent and technology to extend core capabilities

-  Continuing to invest in our people and our platform to allow us to innovate at an increasing pace

-  Investing in our People function to ensure that we drive optimum performance from a growing talent base

-  Evolving platform capabilities to simplify the integration of further brands

2.  Driving an efficient increase in traffic through branded and direct channels

-  Investing in an efficient multi-channel approach supported by our sophisticated bid management capability

-  Increasing investment offline in conjunction with econometric modelling capability to strengthen brand awareness and to ensure marketing investment is efficient

3.  Personalising our customer experience

-  Driving an increasingly simplified customer experience

-  Showing the most relevant product to all site visitors on all devices at the earliest possible opportunity

-  Optimising our multifunctional app to increase customer engagement

4.  Leveraging increased revenue through direct and differentiated supply

-  Building a programme of direct and differentiated supply

-  Building our in-house capability to increase visibility of differentiated product

-  Leveraging our multi-brand capability to offer a range of distribution options

5.  Inspiring holidaymakers with destination agnostic search technologies

-  Optimising destination agnostic search technologies

-  Leveraging capabilities to retail a wider range of product from a wider range of suppliers

6.  Reaching an ever-wider audience of beach holidaymakers through product, channel and geographic extension

-  Expanding our long haul offering to monetise existing search volumes

-  Growing share of B2B sales through the CPH online agent-facing portal

-  Evolving the product portfolio of the Classic luxury B2B brand

-  Leveraging our core capabilities to grow market share in Scandinavia

-  Seeking value-enhancing M&A opportunities

Refunds for COVID-19 impacted bookings

 

When an OTB customer books a holiday, all funds paid to the Group, excluding any flight costs which are paid immediately to the flight operator, are held in a ring-fenced trust account until the customer returns from their holiday, at which point the funds are released to OTB. As such all affected customers are receiving refunds for Hotels and Transfers within 14 days of cancellation, as stipulated by the Package Travel Regulations.

 

Refunds due to customers for the flight element of their holiday are paid as soon as this refund has been received from the airline. To comply with EU261 an airline must offer a cash refund for cancelled flights and this must be reimbursed within 7 days. During this period, there has been widespread non-compliance with this regulation which has impacted the Group's ability to provide timely refunds for customers' flights. The Group remains committed to ensuring that customers receive any refunds due for cancelled flights, in cash.

 

Current trading and outlook

During April, OTB Group bookings were at c.10% of normal volumes as consumer appetite for booking holidays remained subdued. From mid-June there has been a significant increase in demand for Summer 2020 departures, albeit from a very low base. Booking volumes for Summer 2021 remain low, but are significantly ahead of the prior year, partially due to the early release of flights for next year by most major airlines.

Most airlines are seeking to resume flying, albeit at a significantly reduced level, in July 2020, in line with the partial reopening of resorts for overseas visitors. Whilst a significant number of bookings have been or will be cancelled, we do expect that some of the holidays booked to travel from 1 July to 31 October will go ahead as planned.

The Board believes the business is well-positioned to grow market share as demand for holidays recovers. Whilst this recovery is likely to take some time and the consumer environment will continue to be challenging, the Group remains confident in the resilience and flexibility of our business model and believe there is an exciting opportunity to increase our market share over the short to medium term. The Board will continue to evaluate internal and external opportunities that will both increase scale and deliver value for shareholders.

In light of the continued market uncertainties, the Group is maintaining its suspension of full year guidance until such time that the overall impact of COVID-19 on the Group becomes clearer.

 

Segmental performance

The Group organises its operations into four principal financial reporting segments, being OTB (onthebeach.co.uk and sunshine.co.uk), International (ebeach.se, ebeach.no and ebeach.dk), CCH (Classic Collection Holidays) and CPH (Classic Package Holidays).

 

OTB Segment performance

 

H1 2020

H1 2020

H1 2019

H1 2019

 

Adjusted £m

GAAP £m

Adjusted £m

GAAP £m

Revenue

34.4

5.2

 

44.6

44.6

Online Marketing costs

(11.7)

(11.7)

(14.9)

(14.9)

Offline Marketing costs

(8.4)

(8.4)

(4.1)

(4.1)

Revenue after marketing costs

14.3

(14.9)

25.6

25.6

Variable costs

(3.2)

(3.2)

(2.7)

(2.7)

Fixed costs

(4.9)

(4.9)

(4.2)

(4.2)

Depreciation and amortisation

(2.8)

(2.8)

(2.0)

(2.0)

Exceptional operating costs

-

(4.6)

-

(0.5)

Share based payments

-

1.0

-

(0.5)

Amortisation of acquired intangibles

-

(2.2)

-

(2.3)

Operating profit

3.4

(31.6)

16.7

13.4

EBITDA *

6.2

(26.6)

18.7

17.7

EBITDA %

18%

-

42%

40%

*see glossary for reconciliation to nearest GAAP measure

In response to the collapse of Thomas Cook Group, the Group more than doubled spend on offline marketing campaigns to £8.4m (H1 2019: £4.1m) to increase brand awareness and gain market share. This contributed to strong trading for Summer 2020 departures prior to the COVID-19 outbreak spreading to Europe in February 2020. The YOY growth in sales transaction value for the four months to January 2020 was 24%.

The Group also continued to make significant progress with expanding its long haul proposition. Long haul package holiday bookings to 31 January increased by 145% and we expect to see further expansion in this area when the COVID-19 pandemic has eased.

As announced on 28 February 2020, the Group experienced a reduction in demand for Summer 2020 travel following the reports of COVID-19 cases in early February. The reduction in demand accelerated significantly as cases increased in Europe, particularly when COVID-19 cases were reported in Tenerife.

As a result of this reduction in demand, adjusted revenue decreased by (23%) to £34.4m (H1 2019: £44.6m). Revenue, accounting for COVID-19 cancellations, was down to £5.2m (H1 19: £44.6m).

Online marketing costs, which flex with demand, were £11.7m (H1 2019: £14.9m) and 34% (H1 2019: 33%) of revenue. However, adjusted revenue after all marketing costs reduced by (45%) to £14.3m due to the increased offline marketing spend in the period.

EBITDA

Overhead as % of revenue

 

H1 2020

H1 2020

H1 2019

H1 2019

 

Adjusted

GAAP

Adjusted

GAAP

Variable costs % revenue

9%

62%

6%

6%

Fixed costs % revenue

14%

94%

10%

10%

Overheads % revenue

23%

154%

16%

16%

 

In anticipation of bookings and market share growth following the failure of TCG, the Group continued to invest in areas that will support the long term prospects of the Company. When demand began to fall in February, and ultimately when lockdown was imposed, a series of cost cutting measures were implemented. However, the severe marketing conditions and resulting cancellations mean overheads as a percentage of adjusted revenue have increased to 23% (H1 2019 16%). The Group is well positioned to return to a pre-COVID operating leverage position once market conditions return to normal. 

Adjusted EBITDA of £6.2m (H1 2019 £18.7m) decreased by 67% and adjusted EBITDA as a percentage of revenue decreased to 18% (H1 2019 41%). The closest GAAP equivalent measure to Adjusted EBITDA is operating profit which decreased to a loss of £31.6m (H1 2019 profit £13.4m). This decrease is attributable to the reduction in demand due to COVID-19 and the resulting impact on operating leverage.

 

International Segment performance

 

 

H1 2020

H1 2020

H1 2019

H1 2019

 

Adjusted £m

GAAP £m

Adjusted £m

GAAP £m

Revenue

0.3

0.1

0.4

0.4

Revenue after marketing costs

-

(0.2)

-

-

Variable costs

(0.1)

(0.1)

(0.1)

(0.1)

Fixed costs

(0.1)

(0.1)

(0.1)

(0.1)

Depreciation and amortisation

-

-

(0.1)

(0.1)

Operating profit

(0.2)

(0.4)

(0.3)

(0.3)

EBITDA*

(0.2)

(0.4)

(0.2)

(0.2)

*see glossary for reconciliation to nearest GAAP measure

Performance summary

 

In the first four months to January 2020, bookings were down 4% YOY. This reduction follows the collapse of TCG, resulting uncertainty around the Ving airline and a general softening of demand for overseas travel in Sweden in particular.

 

The International segment operated until this point at a breakeven level at revenue after marketing. Thereafter, the onset of the COVID-19 pandemic resulted in a significant reduction in demand.

 

Adjusted revenue was down 25% to £0.3m (H1 2019 £0.4m) due to a slowdown in demand in February and March. Revenue, accounting for COVID-19 cancellations, was down to £0.1m.

 

Adjusted EBITDA was maintained at a loss of (£0.2m) (H1 2019 loss (£0.2m)) due to a reduction in marketing spend. The closest GAAP equivalent measure to International EBITDA is operating loss which increased to (£0.4m) (H1 19 (£0.3m)).

 

The International segment comprises websites in Sweden, Norway, and Denmark operating under the 'www.ebeach.se', 'www.ebeach.no', and 'www.ebeach.dk' domains.

 

Classic segment performance

 

H1 2020

H1 2020

H1 2019

H1 2019

 

Adjusted £m

GAAP £m

Adjusted £m

GAAP £m

Revenue

15.5

15.5

18.5

18.5

Gross profit

2.2

2.2

2.5

2.5

Gross Profit after marketing costs

1.7

1.7

2.0

2.0

Variable costs

(0.6)

(0.6)

(0.6)

(0.6)

Fixed costs

(1.4)

(1.4)

(1.5)

(1.5)

Depreciation and amortisation

(0.1)

(0.1)

(0.1)

(0.1)

Amortisation of acquired intangibles

-

(0.5)

-

(0.5)

Operating profit / (loss)

(0.4)

(0.9)

(0.2)

(0.7)

EBITDA*

(0.3)

(0.3)

(0.1)

(0.1)

*see glossary for reconciliation to nearest GAAP measure

As a principal (rather than an agent) Classic accounts for revenue on a "travelled" basis and reports revenue on a gross basis.

Revenue decreased by 16% to 15.5m and operating losses increased from £0.7m to £0.9m. This reduction in revenue is due to:

· The failure of TCG on 23 September 2019 and the resulting closure of TCG-controlled travel agencies which represented c25% of Classic's high street distribution. Most of these shops had reopened under Hays Travel by mid-January 2020.

· A significant reduction in demand from February 2020.

c40% of customers whose Summer 2020 travel plans have been impacted by COVID-19 have opted to amend their booking to a later date.

The management team continues to develop the luxury and tailor-made travel proposition, and long-haul product was launched in the period with brochures being made available in shops from January 2020.

CPH segment performance

 

H1 2020

H1 2020

H1 2019

H1 2019

 

Adjusted £m

GAAP £m

Adjusted £m

GAAP £m

Revenue

2.6

0.6

-

-

Gross profit

0.6

0.1

-

-

Gross Profit after marketing costs

0.4

(0.1)

-

-

Variable costs

(0.2)

(0.2)

-

-

Fixed costs

(0.7)

(0.9)

(0.5)

(0.5)

Depreciation and amortisation

(0.1)

(0.1)

-

-

Operating profit / (loss)

(0.6)

(1.3)

(0.5)

(0.5)

EBITDA*

(0.5)

(1.2)

(0.5)

(0.5)

*see glossary for reconciliation to nearest GAAP measure

CPH provides an online B2B platform that enables high street travel agents to sell dynamically packaged holidays to their customers.

Adjusted Revenue for the period was £2.6m, and adjusted EBITDA was (£0.5m). After accounting for COVID-19 related cancellations, revenue was £0.6m and operating losses were (£1.3m).

The CPH trading result has been significantly impacted by COVID-19, both due to a drop in demand, and the cancellation of a significant proportion of bookings made for travel this year.

Prior to the onset of the pandemic, significant progress had been made with the strategy to increase distribution of CPH product, which is now available in 2,600 high street travel agents.

Agent activity had also significantly increased and in January 2020 alone total holiday sales of over £7m were booked with over 1,000 agents.

Finance costs

During the period the Group had in place a revolving credit facility of up to £50m with Lloyds which was extended to £75m on 21 May 2020. The drawdown at 31 March 2020 was £30.0m (H1 2018: £9.5m) and the peak drawdown for the period was £30.0m.

 

As mentioned earlier in these statements, the Group has renewed and extended its banking facilities. Details of the current facility limits and maturity dates are as follows:

 

Facilities

£m

Issued

Expiry

Drawn at 30 June 2020

Original RCF

£50m

Apr 2020

Dec 2023

£nil

New CLBILS facility

£25m

May 2020

May 2022

£nil

Total facility

£75m

 

 

£nil

 

Share based payments

The Group has an LTIP scheme in place which vests based on performance criteria.  In accordance with IFRS 2, the group has recognised a non-cash credit of £1.0m (H1 2019: charge £0.5m). The credit this year relates to the reversal of benefits accrued for the 2018 incentive scheme which, as a result of COVID-19, is now unlikely to vest in full.

Taxation

The Group tax credit of £6.4m represents an effective rate of 18.7% (H1 2019: 19%) which is lower than the average standard UK rate of 19% (H1 2019: 19%). This is due to changes in future deferred tax rates.

The Group has reclaimed all tax payments on account relating to the year ending 30 September 2020 (£1.5m received in May 2020), and we expect to make no further payments on account this financial year due to the loss making position of the Group.

Cash flow

£m

H1 2020

H1 2019

FY19

Profit before tax

(34.1)

11.9

19.3

Depreciation and amortisation

5.7

4.9

10.3

Net finance (income) / costs

(0.1)

-

-

Share based payments

(1.0)

0.5

0.7

Movement in working capital

  (31.7)

  (57.2)

(3.2)

Cash generated from operating activities

(61.2)

(39.9)

27.1

 

 

 

 

Other Cash Flows

 

 

 

Corporation Tax

(1.2)

(0.2)

(3.8)

Capitalised development expenditure

 (2.0)

 (2.3)

(5.1)

Capital expenditure

 (1.1)

 (3.4)

(3.3)

Sale of assets

0.2

0.3

0.3

Net finance income/(costs)

0.2

0.1

0.2

Payment of lease liabilities

(0.1)

(0.3)

(0.6)

Dividends paid

(2.6)

(2.9)

(4.6)

Deferred consideration

-

-

(2.7)

Net cash flows

  (67.8)

  (48.6)

7.5

 

 

 

 

Opening cash balance

54.8

47.3

47.3

Net (debt) / cash

(13.0)

(1.3)

54.8

 

 

 

 

Proceeds from borrowings

30.0

9.5

-

Closing cash at bank

17.0

8.2

54.8

Closing trust balance

68.8

56.9

44.0

 

The cash flow profile of the Group is seasonal with approximately 50% of customers travelling in the period June to August and therefore in a normal year the cash flows (excluding any cash held in the Trust) experience a trough prior to June and a peak following this.

 

Net cash outflows of £67.8m are £19.2m higher than last year due to impact of the failure of TCG and no travel post lockdown.

 

Refunds for holidays that have or are expected to be cancelled due to the COVID-19 pandemic will either be refunded from the Trust account or from the airline.

 

Dividend

The Board has not declared an interim dividend (H1 2019: 1.3p), as announced on 8 April 2020.

 

  Simon Cooper Paul Meehan

  CEO  CFO

  30 June 2020  30 June 2020

 

On the Beach Group Plc 

INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 MARCH 2020 

 

CONDENSED CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

For the 6 months ended 31 March 2020

 

 

 

 

 

 

 

 

 

 

Restated

(note 2.6)

 

Restated
(note 2.6)

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

 

 

 

Note

£'m

 

£'m

 

£'m

 

 

unaudited

 

unaudited

 

audited

 

 

 

 

 

 

 

Revenue

3,4

21.4

 

63.5

 

140.4

Cost of sales

 

(13.8)

 

(16.0)

 

(48.4)

Gross profit

 

7.6

 

47.5

 

92.0

 

 

 

 

 

 

 

Administrative expenses

5

(41.8)

 

(35.6)

 

(72.7)

Group operating profit

 

(34.2)

 

11.9

 

19.3

 

 

 

 

 

 

 

Finance costs

 

(0.2)

 

(0.2)

 

(0.5)

Finance income

 

0.3

 

0.2

 

0.5

Net finance income/(costs)

 

0.1

 

-

 

-

 

 

 

 

 

 

 

Profit before taxation

 

(34.1)

 

11.9

 

19.3

Taxation

6

6.4

 

(2.3)

 

(3.7)

 

 

 

 

 

 

 

Profit for the period

 

(27.7)

 

9.6

 

15.6

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

Net loss on cash flow hedges

 

-

 

(0.3)

 

(0.1)

Total comprehensive income for the period

 

(27.7)

 

9.3

 

15.5

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Equity holders of the parent

 

(27.7)

 

9.3

 

15.5

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Basic (Loss)/earnings per share

7

(21.1p)

 

7.3p

 

11.9p

Diluted (Loss)/earnings per share

7

(21.0p)

 

7.3p

 

11.9p

Adjusted earnings per share *

7

1.4p

 

9.5p

 

21.3p

 

 

 

 

 

 

 

Adjusted profit measure *

 

 

 

 

 

 

Adjusted PBT (before amortisation of acquired intangibles, exceptional & non underlying costs and share based payments) *

5

2.3

 

15.7

 

34.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* This is a non GAAP measure, refer to notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

As at 31 March 2020

 

 

 

 

 

 

 

 

 

 

Restated
(note 2.6)

 

Restated
(note 2.6)

 

 

At 31 March 2020

 

At 31 March 2019

 

At 30 September 2019

 

 

£'m

 

£'m

 

£'m

Assets

Note

unaudited

 

unaudited

 

audited

Non-current assets

 

 

 

 

 

 

Intangible assets

8

82.4

 

86.3

 

85.1

Property, plant and equipment

9

10.7

 

12.0

 

10.6

Investment property

 

0.6

 

0.8

 

0.6

Total non-current assets

 

93.7

 

99.1

 

96.3

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Trade and other receivables

10

172.1

 

189.4

 

94.6

Assets held for sale

 

-

 

0.2

 

0.2

Derivative financial instruments

13

4.0

 

-

 

-

Corporation tax receivable

 

7.8

 

-

 

-

Trust account

12

68.8

 

56.9

 

44.0

Cash at bank

 

17.0

 

8.2

 

54.8

Total current assets

 

269.7

 

254.7

 

193.6

Total assets

 

363.4

 

353.8

 

289.9

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Share capital

 

1.3

 

1.3

 

1.3

Retained earnings

 

225.6

 

252.3

 

256.9

Capital contribution reserve

 

0.5

 

0.5

 

0.5

Merger reserve

 

(129.5)

 

(129.5)

 

(129.5)

Total equity

 

97.9

 

124.6

 

129.2

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Deferred tax

 

6.2

 

6.6

 

6.1

Total non-current liabilities

 

6.2

 

6.6

 

6.1

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Corporation tax payable

 

-

 

1.9

 

0.2

Trade and other payables

11

200.7

 

207.2

 

141.1

Loans and overdrafts

13

30.0

 

9.5

 

-

Provisions

11

28.6

 

-

 

12.3

Derivative financial instruments

13

-

 

4.0

 

1.0

Total current liabilities

 

259.3

 

222.6

 

154.6

 

 

 

 

 

 

 

Total liabilities

 

265.5

 

229.2

 

160.7

Total equity and liabilities

 

363.4

 

353.8

 

289.9

 

 

Paul Meehan

Chief Financial Officer

30 June 2020

On the Beach Group plc. Reg no 09736592

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

 

 

 

For the 6 months ended 31 March 2020

 

 

 

 

 

 

 

 

 

 

Restated
(note 2.6)

 

Restated
(note 2.6)

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

unaudited

 

unaudited

 

audited

 

Note

£'m

 

£'m

 

£'m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before taxation

 

(34.1)

 

11.9

 

19.3

Adjustments for:

 

 

 

 

 

 

Depreciation

 

1.0

 

0.7

 

1.6

Amortisation of intangible assets

 

4.7

 

4.2

 

8.7

Finance costs

 

0.2

 

0.2

 

0.5

Finance income

 

(0.3)

 

(0.2)

 

(0.5)

Share based payments

 

(1.0)

 

0.5

 

0.7

 

 

(29.5)

 

17.3

 

30.3

Changes in working capital:

 

 

 

 

 

 

(Increase) in trade and other receivables

 

(81.5)

 

(115.2)

 

(22.2)

Increase in trade and other payables

 

74.6

 

76.5

 

24.6

(Increase) in trust account

 

(24.8)

 

(18.5)

 

(5.6)

 

 

(31.7)

 

(57.2)

 

(3.2)

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Cash generated from operating activities

 

(61.2)

 

(39.9)

 

27.1

Tax paid

 

(1.2)

 

(0.2)

 

(3.8)

Net cash flow from operating activities

 

(62.4)

 

(40.1)

 

23.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of property, plant and equipment

9

(1.1)

 

(3.4)

 

(3.3)

Proceeds from disposal of assets held for sale

 

0.2

 

0.3

 

0.3

Purchase of intangible assets

8

(2.0)

 

(2.3)

 

(5.1)

Interest received

 

0.3

 

0.2

 

0.5

Contingent consideration

 

-

 

-

 

(2.7)

 

 

 

 

 

 

 

Net cash outflow from investing activities

 

(2.6)

 

(5.2)

 

(10.3)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from borrowings

 

30.0

 

9.5

 

-

Equity dividends paid

 

(2.6)

 

(2.9)

 

(4.6)

Interest paid

 

(0.1)

 

(0.1)

 

(0.3)

Payment of lease liabilities

 

(0.1)

 

(0.3)

 

(0.6)

Net cash in/(outflow) from financing activities

 

27.2

 

6.2

 

(5.5)

 

 

 

 

 

 

 

Net (decrease)/increase in cash at bank and in hand

 

(37.8)

 

(39.1)

 

7.5

Cash at bank and in hand at beginning of period

 

54.8

 

47.3

 

47.3

Cash at bank and in hand at end of period

 

17.0

 

8.2

 

54.8

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 

 

For the 6 months ended 31 March 2019

 

 

 

 

 

 

Share capital

Merger reserve

Capital contribution reserve

Retained earnings

Total

For the year ended 30 September 2019

£'m

£'m

£'m

£'m

£'m

Balance at 30 September 2018 restated (note 2.6)

1.3

(129.5)

0.5

245.2

117.5

 

 

 

 

 

 

Share based payments including tax

-

-

-

0.8

0.8

Dividends paid during the year

-

-

-

(4.6)

(4.6)

Total comprehensive income for the year restated (note 2.6)

-

-

-

15.5

15.5

Balance at 30 September 2019

1.3

(129.5)

0.5

256.9

129.2

 

 

 

 

 

 

 

Share capital

Merger reserve

Capital contribution reserve

Retained earnings

Total

For the 6 months ended 31 March 2019

£'m

£'m

£'m

£'m

£'m

Balance at 30 September 2018 restated (note 2.6)

1.3

(129.5)

0.5

245.2

117.5

 

 

 

 

 

 

Share based payment charges

-

-

-

0.5

0.5

Dividends paid during the period

-

-

-

(2.9)

(2.9)

Tax on share options

-

-

-

0.2

0.2

Total comprehensive income for the period

-

-

-

9.3

9.3

Balance at 31 March 2019 (unaudited)

1.3

(129.5)

0.5

252.3

124.6

 

 

 

 

 

 

 

 

Share capital

Merger reserve

Capital contribution reserve

Retained earnings

Total

For the 6 months ended 31 March 2020

£'m

£'m

£'m

£'m

£'m

Balance at 30 September 2019 restated (note 2.6)

1.3

(129.5)

0.5

256.9

129.2

 

 

 

 

 

 

Share based payment charges including tax

-

-

-

(1.0)

(1.0)

Dividends paid during the period

-

-

-

(2.6)

(2.6)

Total comprehensive income for the period

-

-

-

(27.7)

(27.7)

Balance at 31 March 2020 (unaudited)

1.3

(129.5)

0.5

225.6

97.9

             

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the 6 months ended 31 March 2020

 

 

 

1

General Information

 

 

The interim condensed consolidated financial statements of On the Beach Group plc and its subsidiaries (collectively, the Group) for the six months ended 31 March 2020 were authorised for issue on 30 June 2020 in accordance with a resolution of the directors.


On the Beach Group plc (the Company) is a public limited company, incorporated and domiciled in the United Kingdom, whose shares are listed on the London Stock Exchange. The registered office is located at Aeroworks, 5 Adair Street, Manchester, M1 2NQ.

 

 

 

2

Basis of preparation and changes to the Group's accounting policies

 

2.1

Basis of preparation

 

 

The interim condensed consolidated financial statements for the six months ended 31 March 2020 have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not constitute statutory financial statements as defined in section 435 of the Companies Act 2006 and therefore do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 30 September 2019. No audit or review opinion has been provided by a statutory auditor on these interim statements.

 
The financial information for the preceding year is based on the statutory financial statements for the year ended 30 September 2019. These financial statements, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. These financial statements did not require a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

 

 

2.2

Accounting policies

 

 

Except where noted below, the accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 30 September 2019.

 

 

 

 

2.3

Principal risks and uncertainties

 

 

 

 

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. Whilst the principal risks and uncertainties faced by the Group remain those as set out on in our 2019 Annual report (please refer to pages 24 to 30 of that report, available on our website www.onthebeachgroupplc.com ), the effect of the on-going Covid-19 pandemic has been significant, increasing the levels of many of those risks:

 

Risk

Impact of Covid-19

Consumer demand

 

Covid-19 has caused consumer behaviour to shift with many people choosing not to book a holiday or delaying booking. It has had a huge impact on the economy and led to reduced job security. Health concerns and anxiety in relation to the virus could lead to a continued reduction in consumer demand for holidays which could be exacerbated if there is a second wave and / or further travel restrictions.

Flight supply

 

Given the closure of airspace, there has been no flight supply. When airlines are not operating their normal flight programmes, this impacts the Group financially in terms of cancelled bookings and affects its ability to sell holidays. Many flight programmes are due to recommence in July but flight supply could be impacted if travel restrictions are reinstated.

Supplier failure

 

Covid-19 has hugely impacted the travel sector and in turn increased the risk of supplier failure. The impact of a major airline failure is discussed on page 26 of the 2019 Annual Report. Failure of a major bedbank or key hotel partner would cause operational disruption and potentially affect the holidays the Group is able to sell.

Competition risk

Covid-19 has seen the rise of refund credit notes in lieu of cash refunds. This could increase the competition risk for the Group as it creates captive consumers for those organisers issuing the credit notes, thereby potentially reducing the demand for the Group's offering.

Package Organiser liability

The Group is responsible for the proper performance of package holidays - please see page 27 of the 2019 Annual Report and Accounts for further information. As package organiser, the Group is liable to refund the customer in full if their flight is cancelled or there is any other major change. There is also the potential for the Group to see Covid-19 related claims brought under the Package Travel Regulations.

Damage to brand / reputation

There is a risk that the Group's brand and reputation could be damaged if it is not able to deal with refunds and bookings affected by the virus promptly.

IT systems and data security

The significant increase in employees working at home could increase the Group's IT and information security risks.

Business interruption

Covid-19 has obviously caused a significant business interruption which has impacted the Group's ability to trade and manage its business.

People risk

Increased risk of employee absence due to factors such as sickness, childcare problems, quarantine periods etc.

 

The Directors have been closely monitoring these risks throughout the period of lockdown and where required, have implemented risk management plans and additional controls.

 

 

 

 

2.4

Going concern

 

 

 

 

 

 

On the Beach Group covers its daily working capital requirements by means of cash and a Revolving Credit Facility ("RCF").
 
As at 31 March 2020 net debt (Cash, excluding cash held in Trust, less RCF drawdown) was £13m (30 September 2019 cash of £54.8m).

 
The increase in net debt since 30 September 2019 follows the normal working capital cycle of the business. The annual cash cycle results in investment into working capital as bookings are placed in the first half of the year, and cash is generated (withdrawn from the Trust) as customers travel during the Summer. Cash received from customers for bookings that have not yet travelled is held in a ring fenced Trust account and is not withdrawn until the customer returns from their holiday. Cash held in the trust account at 31 March 2020 was £68.8m.

 

 

 

As travel restrictions were imposed, a number of actions were taken immediately to reduce cash costs and protect the financial position of the Group:

· Marketing costs were reduced to almost £nil

· The low deposit offer was reduced on 25 February for new bookings travelling within 90 days to ensure flight costs were covered in full

· The CEO sacrificed his salary and the remainder of the Board voluntarily agreed to a 20% reduction in salary and fees

· No bonuses are being awarded across the Group in the current financial year 

· The Group participated in the Coronavirus Job Retention Scheme, obtained a refund of Corporation Tax paid and deferred both VAT & PAYE payments

· The Group has not declared an interim dividend

 

 

The Group has also taken a number of actions to improve overall liquidity to ensure that it is well placed to operate through the pandemic and to trade once travel restrictions are eased. These actions include:

· Extending the £50m RCF drawdown limit to all months of each year

· Extending the term to December 2023

· Reset of covenant tests for all periods up to and including June 2021

· Agreeing an incremental £25m RCF under the Coronavirus Large Business Interruption Loan Scheme ("CLBILS"), expiring in May 2022

· On 22 May the Group also issued new shares generating £65m incremental liquidity (net of fees)

 

The net proceeds from the share placing, together with the revised banking facilities, provides the Group with greater resilience through the current downturn and will enable the Group to exit this extended disruptive period in a strong position.

 

Where holidays are cancelled as a result of the COVID-19 pandemic, the Group is committed to refunding customers in cash rather than vouchers. These cash refunds are fully funded from the Trust account (where refunds are for hotel and transfer payments) or are a pass-though from airlines. Therefore, there is no net cash outflow for refunds processed.

 

The Directors have modelled a number of scenarios, including what the directors consider to be a severe downside scenario of no travel or bookings until 1 October 2021. Even in this scenario, the Group would have headroom against its current facilities.

 

On the basis of the assumptions outlined above, the Group has and we expect will continue to have sufficient funds to meet its obligations as they fall due. Therefore the Board confirms that it considers it appropriate to continue to adopt the going concern basis in preparing the consolidated financial statements.

 

 

2.5

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.

 

 

COVID-19

 

 

 

In preparing these interim financial statements, in addition to those estimates and judgements disclosed in the 2019 Annual Report, management has made additional judgements and assumptions to estimate the impact of the COVID-19 pandemic on bookings made before 31 March 2020 that had not departed by this date.

 

On 11 March 2020 the World Health Organised declared COVID-19 a global pandemic. On 17 March 2020, the Foreign and Commonwealth Office advised against all non-essential travel overseas, initially for a period of 30 days. In making their judgements as to the impact on cancellations of bookings made in the period, the directors considered the expected time period that travel would be restricted, the extent to which airlines will honour their original schedules thereafter and the expected impact on customer behaviour. On 5 April 2020, the Foreign and Commonwealth Office advice was extended indefinitely, which supported the assumptions taken by the directors.

 

In determining the cost, the Directors have assumed that travel recommences in July 2020, but at a much reduced level.

On this basis, the Directors have assumed that a significant proportion of bookings for travel in Summer 2020 will not go ahead. Forward bookings for the Winter 20/21 and Summer 21 seasons at 31 March 2020 were not significant.

 

A summary of the adjustments between Adjusted and GAAP measures, split between the COVID-19 impact and other costs, is shown below:

 

 H1 2020

H1 2019

 

COVID-19

Other

Total

Total

Group revenue

(£31.4m)

-

(£31.4m)

-

Revenue as Agent

(£31.4m)

-

(£31.4m)

-

Cost of sales (1)

1.5m

-

1.5m

-

Group overheads

(£4.8m)

(£1.7m)

(£6.7m)

(£3.8m)

Share Based Payments

-

£1.0m

£1.0m

(£0.5m)

Acquired Intangibles Amortisation

-

(£2.7m)

(£2.7m)

(£2.8m)

Other exceptional operating costs (2)

(£4.8m)

-

(£4.8m)

(£0.5m)

Group profit before tax

(£34.7m)

(£1.7m)

(£36.4m)

(£3.8m)

(1)  Agents' commission no longer due on cancelled holiday bookings

(2)  Provision for amounts due from suppliers £3.3m, exceptional development spend £1.2m, legal and professional fees £0.3m (2019: Double property costs £0.3m, Acquisition costs £0.1m and Recruitment costs of £0.1m)

The total exceptional costs in the period of £34.8m represents the estimated cost of COVID-19 to trading in the period. This is primarily the cost of COVID-19 related cancellations or expected cancellations of £29.9m. The adjustment also includes a provisions against amounts due from suppliers of £3.3m, exceptional development spend of £1.2m and legal and professional fees of £0.3m.

 

 

2.6

New standards, amendments and interpretations

 

 

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 30 September 2019, except for the adoption of new standards effective as of 1 October 2019. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The Group applies, for the first time, IFRS 16 Leases under the full retrospective method which requires restatement of previous financial statements. As required by IAS 34, the nature and effect of these changes are disclosed below for IFRS 16.

 

 

 

 

 

 

 

 

 

 

 

IFRS 16 Leases

 

 

IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model.

 

 

 

 

 

 

 

 

 

 

 

The Group adopted IFRS 16 using the full retrospective method of adoption with the date of initial application of 1 October 2019. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option ('short-term leases'), and lease contracts for which the underlying asset is of low value ('low-value assets').

 

The Group has identified two leases relating to the Digital and Operational HQ's that were previously accounted for under operating leases. These leases have been brought onto the balance sheet together with a corresponding lease liability. The effect of adoption of IFRS 16 is as follows:

 

 

 

 

 

 

 

 

 

 

 

Impact on the statement of financial position (increase/(decrease)):

 

 

 

 

 

At 31 March 2020

 

At 31 March 2019

 

At 30 September 2019

 

 

 

 

Note

£'m

 

£'m

 

£'m

 

 

Assets

 

 

 

 

 

 

 

 

 

Right-of-use assets

 

(a)

3.9

 

4.4

 

4.2

 

 

Prepayments

 

 

0.3

 

-

 

0.1

 

 

Total assets

 

 

4.2

 

4.4

 

4.3

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

(0.2)

 

(0.2)

 

(0.2)

 

 

Total equity

 

 

(0.2)

 

(0.2)

 

(0.2)

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Lease Liabilities

 

(a)

4.4

 

4.6

 

4.5

 

 

Total liabilities

 

 

4.4

 

4.6

 

4.5

 

 

 

 

 

 

 

 

 

 

 

                         

 

 

 

Impact on the statement of profit or loss (increase/(decrease)):

 

 

 

 

At 31 March 2020

 

At 31 March 2019

 

At 30 September 2019

 

 

 

 

£'m

 

£'m

 

£'m

 

Depreciation expense

 

(0.2)

 

(0.2)

 

(0.5)

 

Rent expense

 

 

0.3

 

0.3

 

0.6

 

Finance costs

 

 

(0.1)

 

(0.1)

 

(0.2)

 

Profit for the period

 

-

 

-

 

(0.1)

 

 

 

 

(a) Nature of the effect of adoption of IFRS 16

 

 

The Group has lease contracts for its Manchester and Cheadle offices. Before the adoption of IFRS 16, the Group classified each of its leases, in respect of which it is the lessee, as operating leases.  A lease was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Group; otherwise it was classified as an operating lease.

 

Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases, in respect of which it is the lessee, except for short-term leases and leases of low-value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. In accordance with the full retrospective method of adoption, the Group applied IFRS 16 at the date of initial application as if it had already been effective at the commencement date of existing lease contracts. Accordingly, the comparative information in these interim condensed consolidated financial statements has been restated.

 

(b) Summary of new accounting policies

 

 

 

Right-of-use assets

 

 

 

 

The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The recognised right-of-use assets are depreciated on a straight-line basis over the lease term. Right-of-use assets are subject to impairment.

 

 

 

 

 

 

 

Lease liabilities

 

 

 

 

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.

3

Revenue

 

 

 

 

 

 

 

 

Set out below is the disaggregation of the Group's revenue from contracts with customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 6 months ended 31 March 2020

 

 

 

 

OTB

Int'l

Classic

CPH

Total

 

 

 

 

£'m

£'m

£'m

£'m

£'m

 

 

Revenue before exceptional cancellations

 

 

 

 

 

 

 

Sales as agent

 

34.4

0.3

-

2.6

37.3

 

 

Sales as principal

 

-

-

15.5

-

15.5

 

 

Total Revenue before exceptional cancellations

34.4

0.3

15.5

2.6

52.8

 

 

Exceptional cancellations*

 

(29.2)

(0.2)

-

(2.0)

(31.4)

 

 

Total Revenue

 

5.2

0.1

15.5

0.6

21.4

 

 

 

 

 

 

 

 

 

 

 

*Exceptional cancellations in the 6 months ended 31 March 2020 relate to the impact of COVID-19.

 

 

 

 

 

 

 

For the 6 months ended 31 March 2019

 

 

 

 

OTB

Int'l

Classic

CPH

Total

 

 

 

 

£'m

£'m

£'m

£'m

£'m

 

 

 

 

 

 

 

 

 

 

 

Sales as agent

 

44.6

0.4

-

-

45.0

 

 

Sales as principal

 

-

-

18.5

-

18.5

 

 

Total Revenue

 

44.6

0.4

18.5

-

63.5

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended 30 September 2019

 

 

 

 

OTB

Int'l

Classic

CPH

Total

 

 

 

 

£'m

£'m

£'m

£'m

£'m

 

 

Revenue before exceptional cancellations

 

 

 

 

 

 

 

Sales as agent

 

90.3

1.4

-

0.8

92.5

 

 

Sales as principal

 

-

-

55.0

-

55.0

 

 

Total Revenue before exceptional cancellations

90.3

1.4

55.0

0.8

147.5

 

 

Exceptional cancellations**

 

(7.0)

-

-

(0.1)

(7.1)

 

 

Total Revenue

 

83.3

1.4

55.0

0.7

140.4

 

 

 

**Exceptional cancellations in the year ended 30 September 2019 relate to the impact of TCG.

 

 

                                           

 

4

Segmental report

 

 

 

 

 

 

 

The management team considers the reportable segments to be ''OTB'', "International", ''Classic'' and "CPH". All segment revenue, operating profit assets and liabilities are attributable to the Group from its principal activities.

 

 

OTB, International and CPH recognise revenue as agent on a net basis. Classic recognises revenue as a principal on a gross basis.

 

 

 

 

 

6 months ended 31 March 2020

 

 

 

OTB

Int'l

Classic

CPH

Total

 

 

 

 

 

£'m

£'m

£'m

£'m

£'m

 

 

Income

 

 

 

 

 

 

 

Revenue before exceptional cancellations

34.4

0.3

15.5

2.6

52.8

 

 

Exceptional cancellations*

(29.2)

(0.2)

-

(2.0)

(31.4)

 

 

Total Revenue

5.2

0.1

15.5

0.6

21.4

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

6.2

(0.2)

(0.3)

(0.5)

5.2

 

 

Share based payments

1.0

-

-

-

1.0

 

 

Exceptional costs

(33.8)

(0.2)

-

(0.7)

(34.7)

 

 

EBITDA

(26.6)

(0.4)

(0.3)

(1.2)

(28.5)

 

 

Depreciation and amortisation

(5.0)

-

(0.6)

(0.1)

(5.7)

 

 

Group operating profit

(31.6)

(0.4)

(0.9)

(1.3)

(34.2)

 

 

 

 

 

 

 

 

 

 

Finance costs

 

 

 

 

(0.2)

 

 

Finance income

 

 

 

 

0.3

 

 

Profit before taxation

 

 

 

 

(34.1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Goodwill

31.6

-

4.6

4.0

40.2

 

 

Other intangible assets

32.3

0.1

9.4

0.4

42.2

 

 

Property, plant and equipment

8.5

-

2.2

-

10.7

 

 

Investment property

-

-

0.6

-

0.6

 

 

 

 

 

 

 

 

 

 

*Exceptional cancellations in the 6 months ended 31 March 2020 relate to the impact of COVID-19.

 

 

 

 

 

 

 

 

 

 

 

 

 Restated (note 2.6)

 

 

 

6 months ended 31 March 2019

 

 

 

OTB

Int'l

Classic

CPH**

Total

 

 

 

 

 

£'m

£'m

£'m

£'m

£'m

 

 

Income

 

 

 

 

 

 

 

Revenue

44.6

0.4

18.5

-

63.5

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

18.7

(0.2)

(0.1)

(0.5)

17.9

 

 

Share based payments

(0.5)

-

-

-

(0.5)

 

 

Exceptional costs

(0.5)

-

-

-

(0.5)

 

 

EBITDA

17.7

(0.2)

(0.1)

(0.5)

16.9

 

 

Depreciation and amortisation

(4.3)

(0.1)

(0.6)

-

(5.0)

 

 

Group operating profit

13.4

(0.3)

(0.7)

(0.5)

11.9

 

 

 

 

 

 

 

 

 

 

Finance costs

 

 

 

 

(0.2)

 

 

Finance income

 

 

 

 

0.2

 

 

Profit before taxation

 

 

 

 

11.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Goodwill

31.6

-

4.1

4.0

39.7

 

 

Other intangible assets

35.9

0.1

10.5

0.1

46.6

 

 

Property, plant and equipment

10.0

-

2.0

-

12.0

 

 

Investment property

-

-

0.8

-

0.8

 

 

 

 

 

 

 

 

 

 

 

 Restated (note 2.6)

 

 

 

Year ended 30 September 2019

 

 

 

OTB

Int'l

Classic

CPH**

Total

 

 

 

 

 

£'m

£'m

£'m

£'m

£'m

 

 

Income

 

 

 

 

 

 

 

Revenue before exceptional cancellations

90.3

1.4

55.0

0.8

147.5

 

 

Exceptional cancellations***

(7.0)

-

-

(0.1)

(7.1)

 

 

Total Revenue

83.3

1.4

55.0

0.7

140.4

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

38.8

(0.6)

2.2

(1.1)

39.3

 

 

Share based payments

(0.7)

-

-

-

(0.7)

 

 

Impact of Thomas Cook

(7.2)

-

(0.4)

(0.1)

(7.7)

 

 

Exceptional costs

(1.0)

-

(0.3)

-

(1.3)

 

 

EBITDA

29.9

(0.6)

1.5

(1.2)

29.6

 

 

Depreciation and amortisation

(8.9)

(0.1)

(1.3)

-

(10.3)

 

 

Group operating profit

21.0

(0.7)

0.2

(1.2)

19.3

 

 

 

 

 

 

 

 

 

 

Finance costs

 

 

 

 

(0.5)

 

 

Finance income

 

 

 

 

0.5

 

 

Profit before taxation

 

 

 

 

19.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Goodwill

31.6

-

4.6

4.0

40.2

 

 

Other intangible assets

34.5

0.1

10.0

0.3

44.9

 

 

Property, plant and equipment

8.9

-

1.7

-

10.6

 

 

Investment property

-

-

0.6

0.6

 

 

 

 

 

 

 

 

 

 

** Trading commenced in March 2019

 

 

 

 

*** Exceptional cancellations in the year ended 30 September 2019 relate to the impact of TCG.

 

 

 

5

Operating profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a)

Operating expenses

 

 

 

 

 

 

 

Expenses by nature including exceptional items and impairment charges:

 

 

 

 

 

 

Restated
(note 2.6)

 

Restated
(note 2.6)

 

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

 

unaudited

 

unaudited

 

Audited

 

 

 

£'m

 

£'m

 

£'m

 

 

 

 

 

 

 

 

 

 

Marketing

21.1

 

20.0

 

36.3

 

 

Depreciation

1.0

 

0.7

 

1.6

 

 

Staff costs (including share based payments)

4.8

 

5.4

 

14.7

 

 

IT hosting, licences & support

1.3

 

1.0

 

2.1

 

 

Office expenses

0.5

 

0.4

 

0.9

 

 

Credit / debit card charges

1.0

 

0.7

 

2.8

 

 

Insurance

0.4

 

0.2

 

0.6

 

 

Other

2.2

 

2.5

 

3.1

 

 

Administrative expenses before exceptional cost & amortisation of intangible assets

32.3

 

30.9

 

62.1

 

 

 

 

 

 

 

 

 

 

Impact of COVID-19*

4.8

 

-

 

-

 

 

Impact of Thomas Cook

-

 

-

 

0.6

 

 

Other exceptional costs

-

 

0.5

 

1.3

 

 

Amortisation of intangible assets

4.7

 

4.2

 

8.7

 

 

Exceptional costs and amortisation of intangible assets

9.5

 

4.7

 

10.6

 

 

Administrative expenses

41.8

 

35.6

 

72.7

 

 

 

 

 

 

 

 

 

 

* In addition to the exceptional cost of COVID-19, cost of sales include a credit of £1.5m for commission that is no longer due to agents for CPH bookings that will not travel as planned as a result of COVID-19.

 

 

 

 

 

 

 

 

 

b)

Exceptional items

 

 

 

 

 

 

 

Exceptional items totalling £4.8m in the 6 months ended 31 March 2020 are related to the impact of COVID-19 which include provisions against amounts due from suppliers £3.3m, Exceptional development spend £1.2m, legal & professional fees £0.3m.

 

Exceptional operating items in the 6 months ended 31 March 2019 include £0.3m non-underlying property costs in relating to the move to the new Digital HQ, £0.1m acquisition costs and £0.1m of recruitment fees.

 

 

 

The other exceptional costs for the year ended 30 September 2019 of £1.3m relate to £0.3m non-underlying property costs, £0.8m relating to organisational restructuring costs and £0.2m relating to other exceptional costs.

 

 

 

 

 

 

 

 

 

c)

Adjusted PBT

 

 

 

 

 

 

 

 

 

 

 

 

Restated
(note 2.6)

 

Restated
(note 2.6)

 

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

 

unaudited

 

unaudited

 

Audited

 

 

 

£'m

 

£'m

 

£'m

 

 

Profit before taxation

(34.1)

 

11.9

 

19.3

 

 

Total COVID-19 exceptional

34.7

 

-

 

-

 

 

Impact of Thomas Cook failure

-

 

-

 

7.7

 

 

Other exceptional costs

-

 

0.5

 

1.3

 

 

Amortisation of acquired intangibles

2.7

 

2.8

 

5.5

 

 

Share based payments charge

(1.0)

 

0.5

 

0.7

 

 

Adjusted PBT

2.3

 

15.7

 

34.5

 

 

 

 

 

 

 

 

 

                       

 

6

Taxation

 

 

 

 

 

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

unaudited

 

unaudited

 

Audited

 

 

£m

 

£m

 

£m

 

 

 

 

 

 

 

 

Current tax on (loss)/profit for the year

(6.5)

 

2.9

 

4.8

 

Adjustments in respect of prior years

 

-

 

(0.1)

 

Total current tax

(6.5)

 

2.9

 

4.7

 

 

 

 

 

 

 

 

Deferred tax on profits for the period

 

 

 

 

 

 

Origination and reversal of temporary differences

0.1

 

(0.6)

 

(1.0)

 

Total deferred tax

0.1

 

(0.6)

 

(1.0)

 

Total tax (credit)/charge

(6.4)

 

2.3

 

3.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 operating are as follows:

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

unaudited

 

unaudited

 

Audited

 

 

£m

 

£m

 

£m

 

 

 

 

 

 

 

 

(Loss)/Profit on ordinary activities before tax

(34.1)

 

11.9

 

19.3

 

 

 

 

 

 

 

 

(Loss)/Profit on ordinary activities multiplied by the effective rate of corporation tax in the UK of 19% (2019: 19%)

(6.5)

 

2.3

 

3.7

 

 

 

 

 

 

 

 

Effects of:

 

 

 

 

 

 

Adjustments in respect of prior years

0.1

 

-

 

(0.1)

 

Expenses not deductible

-

 

-

 

0.1

 

Total taxation (credit)/charge

(6.4)

 

2.3

 

3.7

 

 

 

 

 

 

 

 

The tax charge for the year is based on the effective rate of UK corporation tax for the period of 19% (2018: 19%).

 

The deferred tax liability has been calculated based on these rates.

 

7

Earnings per share

 

 

 

 

 

 

Basic earnings per share are calculated by dividing the profit attributable to equity holders of On the Beach Group plc by the weighted average number of ordinary shares issued during the year.

 

Adjusted earnings per share figures are calculated by dividing adjusted earnings after tax for the year by the weighted average number of shares.

 

 

 

 

Restated
(note 2.6)

 

Restated
(note 2.6)

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

Unaudited

 

unaudited

 

Audited

 

 

£'m

 

£'m

 

£'m

 

Basic EPS

 

 

 

 

 

 

Profit after tax for the period

(27.7)

 

9.6

 

15.6

 

Basic weighted average number of Ordinary Shares (m)

131.2

 

131.1

 

131.1

 

Earnings per share (in pence per share)

(21.1p)

 

7.3p

 

11.9p

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

Profit after tax for the period

(27.7)

 

9.6

 

15.6

 

Weighted average number of Ordinary Shares (m)

131.8

 

131.7

 

131.4

 

Earnings per share (in pence per share)

(21.0p)

 

7.3p

 

11.9p

 

 

 

 

 

 

 

 

Adjusted basic earnings per share

 

 

 

 

 

 

Adjusted earnings after tax

1.8

 

12.5

 

27.9

 

Weighted average number of Ordinary Shares (m)

131.2

 

131.1

 

131.1

 

Earnings per share (in pence per share)

1.4p

 

9.5p

 

21.3p

 

 

 

 

 

 

 

 

Adjusted earnings after tax is calculated as follows:

 

 

 

 

 

 

Restated
(note 2.6)

 

Restated
(note 2.6)

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

Unaudited

 

unaudited

 

Audited

 

 

£'m

 

£'m

 

£'m

 

 

 

 

 

 

 

 

Profit for the period after taxation

(27.7)

 

9.6

 

15.6

 

Adjustments (Net of Tax at 19%)

 

 

 

 

 

 

Impact of exceptional Thomas Cook cancellations

-

 

-

 

6.2

 

Impact of exceptional COVID-19 cancellations

28.1

 

-

 

-

 

Other exceptional costs

-

 

0.4

 

1.0

 

Amortisation of acquired intangibles

2.2

 

2.1

 

4.5

 

Share based payment charges*

(0.8)

 

0.4

 

0.6

 

Adjusted earnings after tax

1.8

 

12.5

 

27.9

 

 

* The share based payment charges are in relation to options which are not yet exercisable.

 

 

8

Intangible assets

 

 

 

 

 

Brand

Goodwill

Website & development Costs

Website technology

Customer relationships

Total

 

 

£'m

£'m

£'m

£'m

£'m

£'m

 

Cost

 

 

 

 

 

 

 

At 1 October 2019

35.9

40.2

11.6

22.8

6.5

117.0

 

Additions

-

-

2.0

-

-

2.0

 

At 31 March 2020

35.9

40.2

13.6

22.8

6.5

119.0

 

 

 

 

 

 

 

 

 

Accumulated amortisation

 

 

 

 

 

 

 

At 1 October 2019

12.7

-

4.7

13.6

0.9

31.9

 

Charge for the year

1.2

-

2.0

1.1

0.4

4.7

 

Disposals

-

-

-

-

-

-

 

At 31 March 2020

13.9

-

6.7

14.7

1.3

36.6

 

 

 

 

 

 

 

 

 

Net book amount

 

 

 

 

 

 

 

At 31 March 2020

22.0

40.2

6.9

8.1

5.2

82.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brand

Goodwill

Website & development Costs

Website technology

Customer relationships

Total

 

 

£'m

£'m

£'m

£'m

£'m

£'m

 

Cost

 

 

 

 

 

 

 

At 1 October 2018

35.9

39.7

6.5

22.8

6.5

111.4

 

Additions

-

-

2.3

-

-

2.3

 

At 31 March 2019

35.9

39.7

8.8

22.8

6.5

113.7

 

 

 

 

 

 

 

 

 

Accumulated amortisation

 

 

 

 

 

 

 

At 1 October 2018

10.3

-

1.5

11.2

0.2

23.2

 

Charge for the year

1.2

-

1.4

1.2

0.4

4.2

 

At 31 March 2019

11.5

-

2.9

12.4

0.6

27.4

 

 

 

 

 

 

 

 

 

Net book amount

 

 

 

 

 

 

 

At 31 March 2019

24.4

39.7

5.9

10.4

5.9

86.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brand

Goodwill

Website & development Costs

Website technology

Customer relationships

Total

 

 

£'m

£'m

£'m

£'m

£'m

£'m

 

Cost

 

 

 

 

 

 

 

At 1 October 2018

35.9

39.7

6.5

22.8

6.5

111.4

 

Additions

-

-

5.1

-

-

5.1

 

Revaluation

-

0.5

-

-

-

0.5

 

At 30 September 2019

35.9

40.2

11.6

22.8

6.5

117.0

 

 

 

 

 

 

 

 

 

Accumulated amortisation

 

 

 

 

 

 

 

At 1 October 2018

10.3

-

1.5

11.2

0.2

23.2

 

Charge for the year

2.4

-

3.2

2.4

0.7

8.7

 

At 30 September 2019

12.7

-

4.7

13.6

0.9

31.9

 

 

 

 

 

 

 

 

 

Net book amount

 

 

 

 

 

 

 

At 30 September 2019

23.2

40.2

6.9

9.2

5.6

85.1

 

 

 

 

 

 

 

 

 

The Group capitalises development projects where they satisfy the requirements for capitalisation in accordance with the IAS 38 and expense projects that relate to ongoing maintenance and support.

                         

 

9

Tangible assets

 

 

 

 

 

 

 

Fixed asset additions for the period amounted to £1.1m (6 months the 30 March 2019: £3.4m, Year ended 30 September 2019: £3.3m)

 

Disposals in the period amounted to £nil (6 months to March 2019: £nil, 30 September 2019: £nil)

 

Depreciation charge of the period amounted to £1.0m (6 months to 30 March 2019: £0.7m, Year ended 30 September 2019: £1.6m)

 

 

 

 

 

 

 

 

 

10

Trade and other receivables

 

 

 

 

 

 

 

 

 

Restated

(note 2.6)

 

Restated

(note 2.6)

 

 

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

 

 

unaudited

 

unaudited

 

Audited

 

Amounts falling due within one year

 

 

£'m

 

£'m

 

£'m

 

 

 

 

 

 

 

 

 

 

Trade receivables - net

 

 

147.9

 

164.5

 

64.7

 

Other receivables

 

 

21.3

 

22.3

 

28.5

 

Prepayments 

 

 

2.9

 

2.6

 

1.4

 

 

 

 

172.1

 

189.4

 

94.6

 

 

 

 

 

 

 

 

 

 

For the year end 30 September 2019, other receivables includes £18.5m receivable in respect of chargeback claims following the failure of the Thomas Cook Group on 23 September 2019.

 

 

 

 

 

 

 

 

 

11

Trade, other payables and provisions

 

 

 

 

 

 

 

Restated

(note 2.6)

 

Restated

(note 2.6)

 

 

 

 

6 months ended 31 March 2020

 

6 months ended 31 March 2019

 

Year ended 30 September 2019

 

 

 

 

Unaudited

 

unaudited

 

Audited

 

Current

 

 

£'m

 

£'m

 

£'m

 

Trade payables

 

 

181.6

 

182.5

 

121.6

 

Accruals

 

 

14.7

 

17.4

 

15.0

 

Lease liabilities

 

 

4.4

 

4.6

 

4.5

 

Contingent consideration

 

 

-

 

2.7

 

-

 

 

 

 

200.7

207.2

141.1

 

Provision

 

 

28.6

 

-

 

12.3

 

 

 

 

229.3

 

207.2

 

153.4

 

 

 

 

 

 

Provisions

For the 6 months ended 31 March 2020, the £28.6m provision is management's estimate of the lost revenue from the anticipated cancellations caused by the COVID-19 pandemic. In determining the provision required, the Directors have assumed that travel recommences in July 2020, but at a much reduced level. On this basis, the Directors have assumed that a significant proportion of bookings for travel in Summer 2020 will not go ahead.

 

 

For the year ended 30 September 2019, the £12.3m provision is in respect of the Thomas Cook Group failure. The amount recognised was an estimate of the cost the Group would incur to fulfil its obligations to customers under the ATOL regulations to arrange refunds or alternative flights. The Group also recognised an £18.5m debtor recovered through chargeback claims (see note 10).

 

12

Trust Account

 

Trust accounts are restricted cash held separately and transferred into cash and accessible by the Group at the point the customer has returned from their holiday.

 

13

Financial instruments

 

 

 

 

 

 

At the balance sheet date, the Group held the following:

 

 

 

 

 

 

 

6 months ended 31 March 2020

6 months ended 31 March 2019

Year ended 30 September 2019

 

 

Financial assets

 

 

Fair Value Level

£'m

£'m

£'m

 

 

Derivative financial assets designated as hedging instruments

 

 

 

 

 

 

Forward exchange contracts

 

 

2

4.0

-

-

 

 

Financial assets at amortised cost

 

 

 

 

 

 

 

 

Trade and other receivables

 

 

 

169.2

186.8

93.2

 

 

Trust account

 

 

 

68.8

56.9

44.0

 

 

Cash at bank

 

 

 

17.0

8.2

54.8

 

 

 Total financial assets

 

 

 

259.0

251.9

192.0

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments

 

 

 

 

 

 

 

Forward exchange contracts

 

 

2

-

(4.0)

(1.0)

 

 

Financial liabilities at fair value through profit or loss

 

 

 

 

 

 

Contingent consideration

 

 

3

-

(2.7)

-

 

 

Financial liabilities at amortised cost

 

 

 

 

 

 

 

 

Trade and other payables

 

 

 

(200.7)

(204.5)

(141.1)

 

 

Revolving credit facility

 

 

 

(30.0)

(9.5)

-

 

 

 Total financial liabilities

 

 

 

(230.7)

(220.7)

(142.1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a) Measurement of fair values

 

 

 

 

 

 

 

 

 

 

 

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6 months ended 31 March 2020

6 months ended 31 March 2019

Year ended 30 September 2019

 

 

 

 

 

 

£'m

£'m

£'m

 

 

Forward Contracts

 

 

 

4.0

(4.0)

(1.0)

 

 

Contingent consideration

 

 

 

-

(2.7)

-

 

 

 

 

 

 

 

 

 

 

 

 

 

The forward contracts have been fair valued at 31 March 2020 with reference to forward exchange rates that are quoted in an active market, with the resulting value discounted back to present value.

 

 

 

 

 

 

 

 

 

 

 

 

 

b) Financial risk management

 

 

 

 

 

 

 

The Group's principal financial liabilities, other than derivatives, comprise revolving credit facility, and trade and other payables. The main purpose of these financial liabilities is to finance the Group's operations. The Group's principal financial assets include trade receivables, and cash at bank that derive directly from its operations.

 

 

 

 

 

 

 

 

 

 

 

 

 

In the course of its business the Group is exposed to market risk (including foreign exchange risk and interest rate risk), credit risk, liquidity risk and technology risk. The Group's overall risk management strategy is to minimise potential adverse effects on the financial performance and net assets of the Group. These policies are set and reviewed by senior finance management and all significant financing transactions are authorised by the Board of Directors.

 

 

 

 

 

 

 

 

 

 

 

 

 

The Group's key financial market risks are in relation to foreign currency rates. The majority of the Group's purchases are sourced from outside the United Kingdom and as such the Group is exposed to the fluctuation in exchange rates (currencies are principally Sterling, US Dollar, Euro and Swedish Krona). The Group places forward cover on the net foreign currency exposure of its purchases.

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives are valued using present value calculations. The valuation methods incorporate various inputs including the foreign exchange spot and forward rates, yield curves of the respective currencies and currency basis spreads between the respective currencies.

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving credit facility - during the period

 

 

 

 

 

 

 

During the period the Group extended its revolving credit facility with Lloyds Bank plc to 31 December 2022.

 

 

The borrowing limits under the facility will vary monthly to reflect the seasonal borrowing requirements of the Group, ranging from £2.0m in one month to £50.0m in another month.  No early prepayment fees are payable.

 

 

The interest rate payable is equal to LIBOR plus a margin. The margin contained within the Facility is dependent on net leverage ratio and the rate per annum ranges from 1.40% to 2.20% for the facility or any unpaid sum.

 

 

 

 

 

 

 

 

 

 

 

 

 

The terms of the facility include the following financial covenants:

 

 

(i) that the ratio of adjusted EBITDA to net finance charges in respect of any relevant period shall not be less than 5:1; and

 

 

(ii) that the ratio of total net debt to adjusted EBITDA in respect of any relevant period shall not exceed 2:1.

 

 

The Group operated within these covenants during the period.

 

                               

 

14

Related party transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No related party transactions have been entered into during the period.

 

 

 

 

                     

 

 

 

 

 

 

 

 

 

 

 

15

Events after the reporting period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issue

 

 

 

 

 

 

 

 

 

On 22 May the Group raised £67.3m via a share placing. The Group issued 26,143,500 ordinary shares which is the equivalent of 19.9% of issued share capital, no discount was offered on the value of the shares.

 

 

 

 

 

 

 

 

 

 

 

Refinancing

 

 

 

 

 

 

 

 

 

As announced on 8 April 2020, the Group extended its revolving credit facility with Lloyds Bank plc to 31 December 2023.

 

 

 

 

 

 

 

 

 

 

 

The borrowing limits under the facility increased to £50.0m with the option to request an increase of up to an additional £10.0m.  No early prepayment fees are payable.

 

The interest rate payable is equal to LIBOR plus a margin. The margin contained within the Facility is dependent on net leverage ratio and the rate per annum is 3.75% for the facility or any unpaid sum.

 

 

 

 

 

 

 

 

 

 

 

In addition, on 21 May 2020, the Group secured a revolving credit facility with Lloyds Bank plc pursuant to the Coronavirus Large Business Interruption Loan Scheme (CLBILS) to 21 May 2022.

 

 

The borrowing limits under the CLBILS facility is £25.0m and include the same financial covenants as the extended revolving credit facility.

 

 

The interest rate payable is equal to the Base Rate plus a margin. The margin contained within the Facility is 2.30% per annum for the facility or any unpaid sum.

 

Covenant tests have been amended up to and including 30 June 2021 to account for the impact of COVID-19 on the Group's results, tests return to normal from 30 September 2021.

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the interim report in accordance with applicable law and regulations. The Directors confirm that the condensed consolidated interim financial information has been prepared in accordance with International Accounting Standard 34 ('Interim Financial Reporting') as adopted by the European Union.

The interim management report includes a fair review of the information required by the Disclosure and Transparency Rules paragraphs 4.2.7 R and 4.2.8 R, namely:

· an indication of important events that have occurred during the six months ended 31 March 2020 and their impact on the condensed set of financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· material related-party transactions during the six months ended 31 March 2020 and any material changes in the related-party transactions described in the Annual report and Accounts 2019.

The Directors of the Company are listed in the Annual Report and Accounts 2019. A list of current Directors is also maintained on the Company's website:  http://onthebeachgroupplc.com .

The interim report was approved by the Board of Directors and authorised for issue on 30 June 2020 and signed on its behalf by:

Paul Meehan - CFO

30 June 2020

 

Glossary

 

APM

Definition

Reconciliation to closest GAAP measure

 

 

 

 

 

 

 

 

 

Adjusted OTB EBIT

Adjusted OTB EBIT is based on OTB operating profit before the impact of certain costs / income that derive from events or transactions that fall outside of the normal activities of the Group. This also includes the non-cash cost of the share based payment schemes. These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment.

Adjusted OTB operating profit (£m)

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

OTB Operating (Loss)/Profit

(31.6)

13.4

21.0

Exceptional costs

33.8

0.5

8.2

Share Based Payments

(1.0)

0.5

0.7

Amortisation of acquired intangibles

2.2

2.3

4.5

Adjusted OTB EBIT

3.4

16.7

34.4

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted OTB EBITDA

Adjusted OTB EBITDA is based on OTB operating profit before depreciation, amortisation and the impact of certain costs / income that derive from events or transactions that fall outside of the normal activities of the Group. This also includes the non-cash cost of the share based payment schemes. These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment.

Adjusted OTB EBITDA (£m)

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

OTB Operating Profit

(31.6)

13.4

21.0

Exceptional costs

33.8

0.5

8.2

Share Based Payments

(1.0)

0.5

0.7

Depreciation and amortisation

2.8

2.0

4.4

Amortisation of acquired intangibles

2.2

2.3

4.5

Adjusted OTB EBITDA

6.2

18.7

38.8

 

 

 

 

 

 

 

 

 

 

 

 

International EBITDA

International EBITDA is based on International operating profit before depreciation and amortisation.

International EBITDA (£m)

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

International Operating Profit

(0.4)

(0.3)

(0.7)

Depreciation and amortisation

-

0.1

0.1

International EBITDA

(0.4)

(0.2)

(0.6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classic EBITDA

Classic EBITDA is based on Classic operating profit before depreciation and amortisation.

Classic EBITDA (£m)

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

Classic Operating Profit

(0.9)

(0.7)

0.2

Depreciation and amortisation

0.6

0.6

1.3

Classic EBITDA

(0.3)

(0.1)

1.5

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Profit before Tax

Adjusted Profit before Tax is based on Profit before Tax adjusted for amortisation of acquired intangibles, and the impact of certain costs / income that derive from events or transactions that fall outside of the normal activities of the Group. This also includes the non-cash cost of the share based payment schemes. These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Group.

Adjusted Profit before Tax (£m)

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

Profit before Tax

(34.1)

11.9

19.3

Amortisation of acquired intangibles

2.7

2.8

5.5

Share Based Payments

(1.0)

0.5

0.7

Impact of TCG

-

-

7.7

Impact of COVID-19

34.7

-

-

Exceptional costs

-

0.5

1.3

Adjusted Profit before Tax

2.3

15.7

34.5

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Profit after Tax

Adjusted Profit after Tax is based on Profit after Tax adjusted for amortisation of acquired intangibles, and the impact of certain costs / income that derive from events or transactions that fall outside of the normal activities of the Group. This also includes the non-cash cost of the share based payment schemes. These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Group.

Adjusted Profit after Tax

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

Profit for the period

(27.7)

9.6

15.6

Share based payments (net of tax)

(0.8)

0.4

0.6

Impact of TCG (net of tax)

-

-

6.2

Impact of COVID-19 (net of tax)

28.1

-

 

Exceptional costs (net of tax)

-

0.4

1.0

Amortisation of acquired intangibles (net of tax)

2.2

2.1

4.5

Adjusted Profit after Tax

1.8

12.5

27.9

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS

Adjusted EPS is calculated on the weighted average number of Ordinary share in issue, using the adjusted profit after tax.

Adjusted EPS

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

 

Adjusted Profit after Tax

1.8

12.5

27.9

 

Basic weighted average number of Ordinary Shares (m)

131.2

131.1

131.1

 

Adjusted EPS (p)

  1.4

  9.5

  21.3

 

 

 

 

 

 

 

 

 

 

 

 

Exceptional costs

Exceptional costs are certain costs / income that derive from events or transactions that fall outside of the normal activities of the Group. These costs / income are excluded from various performance measures by virtue of their size and in order to better reflect management's view of the performance of the Group.

Exceptional costs (£m)

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

Impact of TCG failure

  - 

  - 

7.7

Impact of COVID-19

34.7

  - 

-

Other exceptional costs

  - 

0.5

1.3

Exceptional costs

34.7

0.5

9.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTB revenue after marketing cost

OTB revenue after marketing cost is revenue after "OTB" online and offline marketing costs.

OTB revenue after marketing cost (£m)

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

OTB revenue

5.2

44.6

83.3

 

 

Exceptional cancellations

29.2

-

7.0

 

 

OTB adjusted revenue

34.4

44.6

90.3

 

 

OTB online marketing costs

(11.7)

(14.9)

(29.8)

 

 

OTB off-line marketing costs

(8.4)

(4.1)

(5.4)

 

 

Total OTB marketing

(20.1)

(19.0)

(35.2)

 

 

OTB revenue after marketing costs

(14.3)

25.6

55.1

 

 

 

 

 

 

 

 

 

 

 

 

OTB EBITDA as a percentage of revenue

OTB EBITDA as a percentage of revenue is based on the adjusted OTB EBITDA divided by the revenue generated in the OTB business.

OTB EBITDA as a percentage of revenue

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

Revenue

5.2

44.6

83.3

 

Exceptional cancellations

29.2

  - 

7.0

 

 

Adjusted Revenue

34.4

44.6

90.3

 

 

Adjusted OTB EBITDA

6.2

18.7

38.8

 

 

OTB EBITDA as a percentage of revenue

18.0%

41.9%

43.0%

 

 

 

 

 

 

 

 

 

 

 

 

International revenue after marketing costs

International revenue after marketing costs is based on International revenue after all marketing costs

International revenue after marketing costs

6 months ended 31 March 2020

6 months ended 31 March 2019

2019

Revenue

0.1

0.4

1.4

Exceptional cancellations

0.2

-

-

 

Adjusted Revenue

0.3

0.4

1.4

 

Marketing costs

(0.3)

(0.4)

(1.4)

 

International revenue after marketing costs

-

-

-

 

 

 

 

 

 

 

 

 


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