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On the Beach Group (OTB)

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Thursday 10 December, 2020

On the Beach Group

PRELIMINARY RESULTS

RNS Number : 1962I
On the Beach Group PLC
10 December 2020
 

10 December 2020

On the Beach Group plc

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

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2020 ("FY20")

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

 

Group overview


2020

2019

Change

Adjusted (1)

GAAP

Adjusted (1)

GAAP

Adjusted (1)

GAAP

Group revenue

£71.2m

£33.7m

£147.5m

£140.4m

(52%)

(76%)

Revenue as Agent

£54.3m

£16.8m

£92.5m

£85.4m

(41%)

(80%)

Revenue as Principal

£16.9m

£16.9m

£55.0m

£55.0m

(69%)

(69%)

Group gross profit

£53.4m

£16.0m

£99.1m

£92.0m

(46%)

(83%)

Gross profit as Agent

£50.8m

£13.5m

£92.0m

£84.9m

(45%)

(84%)

Gross profit as Principal

£2.6m

£2.6m

£7.1m

£7.1m

(63%)

(63%)

Group profit/ (loss) before tax

£0.6m

(£46.3m)

£34.5m

£19.3m

(98%)

-

Basic (loss)/earnings per share

(0.5p)

(27.6p)

21.3p

11.9p

-

-

Total dividend payable

-

-

3.3 p

3.3 p

-

-

(1)  Denotes a non-GAAP measure. An explanation of this measure and reconciliation to the closest GAAP measure is included in the APM Glossary at the back of this statement.

 

COVID-19 pandemic impact

(1)  Certain costs, including the exceptional impact of COVID-19, 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. Whilst the underlying result has still been significantly impacted by COVID-19, 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 to be cancelled, due to airspace closures, cancelled flights and government advice and/or regulations on travel. See below 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 this year as a result of COVID-19. A summary of the adjustments between Adjusted and GAAP measures, split between the COVID-19 impact, the failure of the Thomas Cook Group (TCG) and other costs, is shown below:

 


2020

Adjusted

COVID-19 adjustment

Other adjustment

Total adjustment

GAAP

Group revenue (1)

£71.2m

(£37.5m)

-

(£37.5m)

£33.7m

Group Cost of Sales (2)

(£17.8m)

£0.1m

-

£0.1m

(£17.7m)

Group Gross Profit

£53.4m

(£37.4m)

-

(£37.4m)

£16.0m

Group overheads

(£52.8m)

(£4.3m)

(£5.2)

(£9.5m)

(£62.3m)

Share Based Payments (3)

-

-

£0.6m

£0.6m

£0.6m

Acquired Intangibles Amortisation

-

-

(£5.5m)

(£5.5m)

(£5.5m)

Other exceptional operating costs (4)

-

(£4.3m)

(£0.3m)

(£4.6m)

(£4.6m)

Group profit/(loss) before tax

£0.6m

(£41.7m)

(£5.2m)

(£46.9m)

(£46.3m)

(2)  The impact of lost revenue due to cancelled bookings resulting from the COVID-19 pandemic

(3)  Commission no longer payable to Travel Agents for holidays cancelled as a result of the COVID-19 pandemic, less additional direct costs incurred as a result of cancelled bookings

(4)  Costs relating to the expected cost of shares granted to employees as part of LTIP or other share schemes

(5)  Supplier prepayment provision £2.2m, Exceptional development spend £0.7m, legal fees & claims £0.9m, facility arrangement fees £0.5m, redundancy costs £0.7m offset by contributions from the Government furlough scheme £0.7m

 

Thomas Cook Group plc Impact to 2019

On 23 September 2019, Thomas Cook Group plc ("TCG") announced that it had ceased trading and had entered compulsory liquidation. There was a one-off exceptional cost associated with helping customers to organise alternative travel arrangements and lost margin on cancelled bookings. A summary of the adjustments between Adjusted and GAAP measures, split between the TCG impact and other costs, is shown below:

 


2019

Adjusted

TCG impact adjustment

Other adjustment

Total adjustment

GAAP

Group revenue (1)

£147.5m

(£7.1m)

-

(£7.1m)

£140.4m

Group Cost of Sales

(£48.4m)

-

-

-

(£48.4m)

Group Gross Profit

£99.1m

(£7.1m)

-

(£7.1m)

£92.0m

Group overheads

(£64.6m)

(£0.6m)

(£7.5m)

(£8.1m)

(£72.7m)

Share Based Payments (2)

-

-

(£0.7m)

(£0.7m)

(£0.7m)

Acquired Intangibles Amortisation

-

-

(£5.5m)

(£5.5m)

(£5.5m)

Other exceptional operating costs (3)

-

(£0.6m)

(£1.3m)

(£1.9m)

(£1.9m)

Group profit before tax

£34.5m

(£7.7m)

(£7.5m)

(£15.2m)

£19.3m

(1)  The impact of lost revenue due to cancelled bookings resulting the failure of TCG

(2)  Costs relating to the expected cost of shares granted to employees as part of LTIP or other share schemes

(3)  Incremental operating costs relating to the management of the failure of TCG.

 

Summary of financial performance:

· Of the total exceptional adjustment in the period of £42.0m, £41.7m represents the cost of COVID-19, primarily due to cancellations or expected cancellations and associated administrative expenses.

· The loss before tax of £46.3m is due to both a significant reduction in new bookings and the cancellations referred to above.

· Despite the disruption, the Group's liquidity position remains strong. Total cash at 30 September 2020 was £36.5m (excluding customer monies held in Trust of £25.8m) and has strengthened further to £51m at 30 November 2020.

· The Group's £75m RCF facility has been undrawn since the equity placing in May.

· The Directors believe that the Group's asset light business model, strong liquidity position and Trust account protection for customers positions us well to see through the COVID-19 disruption and prosper when normal market conditions return.

· The Group continues to work hard to refund all customers in cash and in full where their holidays are cancelled. OTB promptly refunds the hotel and transfer elements of cancelled holidays from its fully ring-fenced customer Trust account. There have and continue to be substantial delays in receiving refunds from airlines for monies paid in advance. The Group continues to pursue these rightful refund claims on behalf of its customers and refunds flight monies as soon as they are received from the airlines. In many cases we have refunded customers in advance of receiving the flight monies from airlines.

 

Customer refund status at 30 November 2020

· Total cash refunds since 15 March 2020 of £165m, of which:

Hotels and transfers £72m.

Flights £93m.

· Monies received from airlines for cancelled flights £89m.

· We are awaiting refunds for cancelled flights of £4m, where we have refunded flight costs in advance of receipt from airlines, in order to protect the brand and generate customer goodwill.

 

Liquidity

· On 22 May 2020 the Group received £65.1m net of fees for a share placing of 19.9% of the Group's share capital.

· On this date, following receipt of share proceeds, Group cash was £50.5m.

· On 30 November the Group had net cash and equivalents of £51m, excluding customer prepayments (of £21.1m) which are held in a ring-fenced Trust account.

· The Group has a £75m credit facility which is undrawn.

· The Group's monthly cash burn is c.£2m in the event that no revenue is received.

 

Current Trading & Outlook

· Booking volumes in October and November 2020 were significantly below normal levels as consumer appetite for booking holidays remained subdued.

· Legislation passed by the Government on 4 November made leisure travel from England illegal during the period from 5 November to 1 December 2020 (inclusive).

· A number of factors continue to supress demand such as regularly changing FCDO advice, onerous destination entry requirements and quarantine restrictions.

· Reduced consumer confidence over the summer and in recent months has resulted in the reduction and consolidation of airline flying schedules this winter.

· In a normal year, holiday bookings would peak in January for travel from March - September. Booking volumes and the timing of the peak in FY21 will be significantly influenced by the evolution of the COVID-19 pandemic and UK and European Government policy in response to it. Whilst the wider environment therefore remains uncertain, the Board remains confident in the resilience and flexibility of the Group's business model and believes there is an unprecedented opportunity to significantly increase market share over the medium to long term as demand returns.

· 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 for FY21 until such time that there is more certainty over the timing of, and extent to which travel can return to normal.

· The Board will provide a further update on trading on the date of our AGM on 5 February 2021.

 

Simon Cooper, Chief Executive Officer of OTB commented:

 

"There is no doubt that 2020 has significantly impacted the entire global travel industry and that the effects of the pandemic will have lasting impacts on the way the industry conducts business for many years to come. I am pleased to have witnessed and experienced the professionalism and resilience of our team members in coping and dealing with the many challenges that COVID-19 has presented and I would like to thank them, on behalf of the Board, for all of their hard work for our customers.

 

"On the Beach continues to successfully build a leading position as more consumers discover the ease of use and vast 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 Meeting

There will be a virtual meeting for sell-side analysts and investors at 9:30am GMT today, the details of which can be obtained from FTI Consulting.

 

For further information:

 

On the Beach Group plc

Simon Cooper, Chief Executive Officer

Shaun Morton, Chief Financial Officer

 

via FTI Consulting

FTI Consulting

Alex Beagley

Fiona Walker

Sam Macpherson

Holly Ayres

 

Tel: +44 (0)20 3727 1000

[email protected]

 

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, we continue our journey to disrupt the online retail of beach holidays. Our model is customer-centric, asset light, profitable and cash generative.

 

www.onthebeachgroupplc.com

 

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.

 

Chief Executive's Review

 

The Group 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.

 

This has been a challenging year for us, as it has for the rest of the travel industry and it is likely that we will see several years of change in the industry over the next six to twelve months which will include a level of consolidation and changes to how the sector is regulated.

 

The Group is already well positioned to benefit from the changes we are likely to see post-pandemic. Our business model is established as a low cost operating model, for an increasingly digitised industry where consumers are seeking increased convenience, choice, and a personalised experience with financial protection.

 

Up until February 2020, 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 Classic Collection and Classic Package Holidays were both running well ahead of plan prior to the COVID-19 shutdown and we look forward to continuing this progress as the market normalises.

 

COVID-19 impact and response

 

The health and wellbeing of our team members and our customers is and always will be the Group's top priority. Throughout the past 9 months, I am delighted that my colleagues have responded with speed and professionalism to the many challenges that COVID-19 has presented.

 

COVID-19 has significantly impacted the entire global travel industry. Our 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 the year 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, the Group's variable marketing costs reduced to almost nil.

· Further actions to limit other non-essential costs in a zero revenue environment resulted in monthly cash costs of c.£2m across the Group.

· We utilised CJRS to reduce staff costs where it was appropriate to do so.

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

· The Board, the Executive Team and senior management all agreed to reductions in their salaries and fees during the year. This is alongside no bonuses being awarded across the Group in the current financial year.

· On 8 April 2020 the Group reached agreement with its bank, 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 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.

We believe 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.

 

Refunds for COVID-19 impacted bookings

When a 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 the Group to pay the hotel and transfer providers. As such the majority of affected customers have received 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 have been paid as soon as the refund was 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 by airlines which has impacted the Group's ability to provide timely refunds for customers' flights. Notwithstanding our repeated requests to the Government and regulators to enforce this legislation, in many cases this non-compliance continues.

 

During this period it has been necessary, in some instances, to refund customers for cancelled flights in advance of receiving refunds from airlines. This action has been taken where the Directors believe the brand and / or customers have been significantly impacted by delays to flight refunds caused by airlines. As at 30 September there was £25m of refunds paid to customers in advance of receiving refunds from airlines which by 30 November had reduced to £4m.

 

As at 30 September, On the Beach had processed £151m in refunds to customers for cancelled holidays which represented the vast majority of all refunds due for cancelled holidays travelling in the financial year. The Group remains committed to ensuring that customers receive any refunds due for cancelled flights, in cash, and unlike many peers in the industry has not issued any vouchers or refund credit notes in lieu of cash refunds.

 

Industry developments

The Group is the only listed UK travel business that operates a fully ring-fenced customer Trust account in which customer funds, excluding those paid to airlines, are held until the customer returns from their holiday. 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.

 

Companies operating in the travel industry have historically traded using advance holiday receipts as working capital. We expect and would welcome regulatory changes to the system of financial protection and protection of customer prepayments in the travel industry to protect both customers and the taxpayer.

 

In the event that regulators require travel operators to implement ring-fencing of customer prepayments (or impose financial penalties for not operating with this type of structure) the Group is well placed given it already operates a Trust account structure.

 

Current Trading & Outlook

· Booking volumes in October and November 2020 were significantly below normal levels as consumer appetite for booking holidays remained subdued.

· Legislation passed by the Government on 4 November made leisure travel from England illegal during the period from 5 November to 1 December 2020 (inclusive).

· A number of factors continue to supress demand such as regularly changing FCDO advice, onerous destination entry requirements and quarantine restrictions.

· Reduced consumer confidence over the summer and in recent months has resulted in the reduction and consolidation of airline flying schedules this winter.

· In a normal year holiday bookings would peak in January for travel from March - September. Booking volumes and the timing of the peak in FY21 will be significantly influenced by the evolution of the COVID-19 pandemic and UK and European Government policy in response to it. Whilst the wider environment therefore remains uncertain, the Board remains confident in the resilience and flexibility of the Group's business model and believes there is an unprecedented opportunity to significantly increase market share over the medium to long term as demand returns.

· 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 for FY21 until such time that there is more certainty over the timing of, and extent to which travel can return to normal.

 

On the Beach continues to successfully build a leading position as more consumers discover the ease of use and vast 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 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.

 

The Board will provide a further update on trading on the date of our AGM on 5 February 2021.

 

Simon Cooper

Chief Executive Officer

10 December 2020

 

Financial Review

 

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).

 

As a principal, CCH accounts for revenue on a "travelled" basis and therefore reports revenue on a gross basis. In each of the OTB, International and CPH Segments, the Group offers dynamically packaged holidays acting as an agent rather than a principal and accounts for revenue on a "booked" basis.

 

OTB performance

 

 


2020

2020

2019

2019


Adjusted £m

GAAP £m

Adjusted £m

GAAP £m

Revenue

50.4

15.9

90.3

83.3

Online Marketing costs

(14.2)

(14.2)

(29.8)

(29.8)

Offline Marketing costs

(8.7)

(8.7)

(5.4)

(5.4)

Revenue after marketing costs

27.5

(7.0)

55.1

48.1

Variable costs

(5.8)

(5.8)

(7.2)

(7.2)

Fixed costs

(11.1)

(11.1)

(9.0)

(9.0)

Depreciation and amortisation

(5.5)

(5.5)

(4.6)

(4.6)

Exceptional operating costs

-

(4.5)

-

(1.2)

Share based payments

-

0.6

-

(0.7)

Amortisation of acquired intangibles

-

(4.4)

-

(4.4)

Operating profit / (loss)

5.1

(37.7)

34.3

21.0

EBITDA

10.6

(27.8)

38.9

30.0

EBITDA %

21%

-

43%

36%

 

Performance Summary

As is widely reported, the travel industry has been severely impacted by the COVID-19 pandemic. As a result, adjusted revenue of £50.4m is down (44%) YOY, £16.0m of which was earned in H2 and is predominantly for departures in winter 20/21 and summer 2021.

 

In response to the restrictions imposed on travel due to COVID-19, the Group took swift and decisive action to reduce costs. This included the suspension all offline marketing campaigns which were launched in H1 following the collapse of TCG.

 

Online marketing costs for the year were £14.2m, down (52%) YOY and only £2.5m in H2. Online marketing costs naturally fluctuate with demand and have therefore reduced to low levels in H2 as the cost per visitor and the number of visitors to the website have reduced to background levels.

 

Exceptional operating costs of £4.5m relate to legal and professional fees, operating costs in response to COVID-19, and supplier provisions.

 

EBITDA

 

Overhead as % of revenue


2020

2020

2019

2019


Adjusted

GAAP

Adjusted

GAAP

Variable costs % revenue

12%

36%

8%

9%

Fixed costs % revenue

22%

70%

10%

11%

Overheads % revenue

34%

106%

18%

20%

 

Overheads as a percentage of revenue have increased to 106% (FY19: 20%). This increase is the result of a reduction in revenue earned due to European travel restrictions and a significant reduction in consumer demand. The Group is well-positioned to return to a pre-COVID operating leverage position once market conditions return to normal.

 

Included within fixed costs are costs related to covering public liability insurance excesses on incidents in resort for holidays booked since the Package Travel Regulations were implemented in July 2018.

 

Adjusted EBITDA of £10.6m (FY19 £38.8m) decreased by 73% and adjusted EBITDA as a percentage of revenue decreased to 21% (FY19 43%). The closest GAAP equivalent measure to Adjusted EBITDA is operating loss which was £37.7m (FY19 profit £21.0m). This decrease is attributable to the reduction in demand due to COVID-19 and the resulting impact on operating leverage.

 

International Segment performance

 


2020

2020

2019

2019


Adjusted £m

GAAP £m

Adjusted £m

GAAP £m

Revenue

0.3

0.1

1.4

1.4

Revenue after marketing costs

0.1

(0.1)

-

-

Variable costs

(0.2)

(0.2)

(0.2)

(0.2)

Fixed costs

(0.2)

(0.2)

(0.4)

(0.4)

Depreciation and amortisation

(0.1)

(0.1)

(0.1)

(0.1)

Operating profit / (loss)

(0.4)

(0.6)

(0.7)

(0.7)

EBITDA

(0.3)

(0.5)

(0.6)

(0.6)

 

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.

 

Scandinavia has experienced a similar slowdown in consumer demand as the UK. As a result, adjusted revenue was down (79%) to £0.3m (FY19 £1.4m). Including the impact of cancellations, revenue was £0.1m and down (64%) YOY (FY19: £1.4m).

 

Adjusted EBITDA was a loss of (£0.3m) (FY19 (£0.6m)) due to a reduction in marketing spend. The closest GAAP equivalent measure to International EBITDA is operating loss which decreased to (£0.6m) (FY19 (£0.7m)).

 

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 performance

 

 


2020

2020

2019

2019


Adjusted £m

GAAP £m

Adjusted £m

GAAP £m

Revenue

16.9 

16.9 

55.0 

55.0

Gross profit

2.6 

2.6 

7.2

7.2

Gross Profit after marketing costs

1.6 

1.6 

6.3

6.3

Variable costs

(1.3) 

(1.3) 

(1.2) 

(1.2) 

Fixed costs

(2.2) 

(2.2) 

(2.9) 

(2.9) 

Depreciation and amortisation

(0.1) 

(0.1) 

(0.2) 

(0.2) 

Amortisation of acquired intangibles

-

(1.1)

-

(1.1)

Exceptional operating costs

 -

(0.1) 

-

(0.7) 

Operating profit / (loss)

(2.0)

(3.2)

2.0

0.2

EBITDA

(1.9)

(2.0)

2.2

1.5

 

 

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 69% to £16.9m and the business made an operating loss of £3.2m (FY19: profit £0.2m). As Classic accounts for revenue on a travelled basis, H2 revenue was £1.4m as very few customers travelled over this period.

 

Revenue is stated net of £10.7m of COVID-19 related cancellations. However, whilst a number of customer holidays were cancelled, for a full refund, c.40% of bookings have been amended to a future travel date. Revenue associated with these bookings is £8m, which should be earned in FY21.

 

Throughout the pandemic the team at Classic have been focused on continuing to deliver the high levels of customer service that our partners have become accustomed to and have received an industry award this year for service levels provided over the summer.

 

The management team continues to develop the luxury, tailor-made and long haul propositions, brochures for which have been produced for distribution this winter.

 

CPH performance

 


2020

2020

2019

2019


Adjusted £m

GAAP £m

Adjusted £m

GAAP £m

Revenue

3.6

0.8 

0.8

0.7

Gross profit / (loss)

0.1

(2.5)

0.3

0.2

Gross Profit after marketing costs

(0.1)

(2.8)

0.1

-

Variable costs

(0.3) 

(0.3) 

(0.2) 

(0.2) 

Fixed costs

(1.1) 

(1.1) 

(1.0) 

(1.0) 

Depreciation and amortisation

(0.2) 

(0.2) 

-

-

Operating profit / (loss)

(1.7)

(4.4)

(1.1)

(1.2)

EBITDA

(1.5)

(4.2)

(1.1)

(1.2)

 

CPH provides an online B2B platform that enables high street travel agents to sell dynamically packaged holidays to their customers and was recently launched in Q3 of FY19.

 

Adjusted Revenue for the period was £3.6m, and adjusted EBITDA was (£1.5m). After accounting for COVID-19 related cancellations revenue was £0.8m and operating losses were (£4.4m).

 

The Gross loss of (£2.5m) is stated after all costs incurred on cancelled bookings.

 

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 c.2,400 high street travel agents. Agent activity had also significantly increased prior to the onset of the COVID-19, and over 1,400 agents have now booked a CPH holiday.

 

Financing and Liquidity

The Group has in place a RCF of up to £75m with Lloyds. The drawdown at 30 September 2020 was £nil (FY19: £nil) and the peak drawdown for the year was £30.0m.

 

As mentioned earlier, 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

September 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 £0.6m (FY19: charge £0.7m). The credit this year relates to the reversal of benefits accrued for the 2018 incentive.

 

Taxation

The Group tax credit of £7.5m represents an effective rate of 19% (FY19: 19%) which was consistent with the average standard UK rate of 19% (FY19: 19%).

 

Cash flow

 

£m

2020

2019

Profit/(loss) before tax

(46.3)

19.3

Depreciation and amortisation

11.4

10.3

Net finance (income) / costs

0.4

-

Share based payments

(0.6)

0.7

Movement in working capital

(58.0)

2.4

Movement in Trust account

18.3

(5.6)

Corporation Tax

(0.2)

(3.8)

Cash generated from operating activities

(75.0)

23.3

Other Cash Flows



Capitalised development expenditure

(4.0)

(5.1)

Capital expenditure net of proceeds

(1.0)

(3.0)

Net finance income/(costs)

(0.4)

-

Payment of lease liabilities

(0.4)

(0.4)

Dividends paid

(2.6)

(4.6)

Deferred consideration

-

(2.7)

Net cash flows

(8.4)

(15.8)




Opening cash balance

54.8

47.3




Proceeds from share issue

65.1

-

Closing cash at bank

36.5

54.8

Closing trust balance

25.8

44.0

 

Total cash at 30 September 2020 was £36.5m (FY19: £54.8m). The main movements relate to:

· Group loss before tax £46.3m

· Movements in working capital:

The unwind of a normal working capital position resulting from very low levels of trading and travel for summer 2020. This impacts Classic working capital in particular which operates on a negative working capital cycle

The Group refunded a number of customers in advance of receiving refunds from airlines. At the year end this gap was £25m, and as at 30 November 2020 has narrowed to £4m.

Other working capital timing, including the timing of receipts of monies held in Trust which can only be withdrawn once customers have been refunded

· Other cash flows as shown in the above table of £8.4m relating to tax, capital expenditure and dividends.

· Net proceeds of £65.1m from shares issued 22 May 2020.

 

Dividend

As announced on 8 April 2020, no interim dividend was declared during FY20. In view of the exceptional circumstances and the likelihood that disruption will continue into 2021, the Board is not recommending a final dividend in respect of FY20.

 

Shaun Morton

Chief Financial Officer

10 December 2020

 

CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME










Year ended 30 September 2020







Restated
(note 2)







2020


2019



Note




£'m


£'m











Revenue

4,5




33.7


140.4


Cost of sales





(17.7)


(48.4)


Gross profit





16.0


92.0











Administrative expenses

6




(61.9)


(72.7)


Group operating (loss)/profit





(45.9)


19.3











Finance costs





(0.8)


(0.5)


Finance income





0.4


0.5


Net finance (costs)/income





(0.4)


-











(Loss)/profit before taxation





(46.3)


19.3


Taxation

8




7.5


(3.7)











(Loss)/profit for the year





(38.8)


15.6











Other comprehensive income:









Net gain/(loss) on cashflow hedges





0.1


(0.1)


Total comprehensive (loss)/income for the year




(38.7)


15.5











Attributable to:









Equity holders of the parent





(38.7)


15.5


 









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









Basic (loss)/earnings per share

9




(27.6p)


11.9p


Diluted (loss)/earnings per share

9




(27.6p)


11.9p


Adjusted (loss)/earnings per share *

9




(0.5p)


21.3p











Adjusted profit measure *









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

6




0.6


34.5




















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









 

CONSOLIDATED BALANCE SHEET







At 30 September 2020











Restated


Restated





(note 2)


(note 2)



2020


2019


2018

Assets

Note

£'m


£'m


£'m

Non-current assets







Intangible assets

10

79.6


85.1


88.2

Property, plant and equipment


9.9


10.6


9.2

Investment property


0.6


0.6


0.8

Total non-current assets


90.1


96.3


98.2








Current assets







Trade and other receivables

11

104.7


94.6


71.4

Assets held for sale


-


0.2


0.5

Derivative financial instruments


0.5


-


0.1

Corporation tax receivable


4.5


-


0.7

Trust account

12

25.8


44.0


38.4

Cash at bank


36.5


54.8


47.3

Total current assets


172.0


193.6


158.4

Total assets


262.1


289.9


256.6








Equity







Share capital


1.6


1.3


1.3

Share premium


64.8


-


-

Retained earnings


215.0


256.9


245.2

Capital contribution reserve


0.5


0.5


0.5

Merger reserve


(129.5)


(129.5)


(129.5)

Total equity


152.4


129.2


117.5








Non-current liabilities







Deferred tax


2.6


6.1


7.2

Trade and other payables

13

3.8


4.2


4.5

Total non-current liabilities


6.4


10.3


11.7








Current liabilities







Corporation tax payable


-


0.2


-

Trade and other payables

13

92.4


136.9


127.4

Provisions

13

10.9


12.3


-

Derivative financial instruments


-


1.0


-

Total current liabilities


103.3


150.4


127.4








Total liabilities


109.7


160.7


139.1

Total equity and liabilities


262.1


289.9


256.6

 

CONSOLIDATED STATEMENT OF CASH FLOWS





Year ended 30 September 2020




Restated





(note 2)



2020


2019


Note

£'m


£'m











(Loss)/profit before taxation


(46.3)


19.3

Adjustments for:





Depreciation


1.9


1.6

Amortisation of intangible assets


9.5


8.7

Finance costs


0.8


0.5

Finance income


(0.4)


(0.5)

Share based payments


(0.6)


0.7



(35.1)


30.3

Changes in working capital:





(Increase)/decrease in trade and other receivables


(7.4)


(22.2)

(Decrease)/increase in trade and other payables


(50.6)


24.6

Decrease/(increase) in trust account


18.3


(5.6)



(39.7)


(3.2)






Cash flows from operating activities





Cash used in operating activities


(74.8)


27.1

Tax paid


(0.2)


(3.8)

Net cash outflow from operating activities


(75.0)


23.3











Cash flows from investing activities





Purchase of property, plant and equipment


(1.2)


(3.3)

Proceeds from disposal of assets held for sale


0.2


0.3

Purchase of intangible assets

10

(4.0)


(5.1)

Interest received


0.4


0.5

Contingent consideration


-


(2.7)

Net cash outflow from investing activities


(4.6)


(10.3)






Cash flows from financing activities





Proceeds from issue of share capital


65.1


-

Equity dividends paid


(2.6)


(4.6)

Interest paid on borrowings


(0.6)


(0.3)

Interest paid on lease liabilities

14

(0.2)


(0.2)

Payment of lease liabilities

 14

(0.4)


(0.4)

Net cash inflow from financing activities


61.3


(5.5)






Net increase in cash at bank and in hand


(18.3)


7.5

Cash at bank and in hand at beginning of year


54.8


47.3

Cash at bank and in hand at end of year


36.5


54.8

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY








Year ended 30 September 2020










Share capital

Share premium

Merger reserve

Capital contribution reserve

Retained earnings

Total



£'m

£'m

£'m

£'m

£'m

£'m

Balance at 30 September 2018 restated (note 2)


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)

-

-

-

-

15.5

15.5

Balance at 30 September 2019


1.3

-

(129.5)

0.5

256.9

129.2









Share based credit including tax


-

-

-

-

(0.6)

(0.6)

Shares issued during the year


0.3

67.0

-

-

-

67.3

Costs related to shares issued


-

(2.2)

-

-

-

(2.2)

Dividends paid during the year


-

-

-

-

(2.6)

(2.6)

Total comprehensive loss for the year


-

-

-

-

(38.7)

(38.7)

Balance at 30 September 2020


1.6

64.8

(129.5)

0.5

215.0

152.4









 


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 


Year ended 30 September 2020

 



 

1)

General Information

 


On the Beach Group plc is a public limited company which is listed on the London Stock Exchange and is domiciled and incorporated in the United Kingdom under the Companies Act 2006. The registered office is located at Aeroworks, 5 Adair Street, Manchester, M1 2NQ .

 



2

 Accounting Policies

a)

Basis of preparation


The consolidated financial statements presented in this document have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Company's financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland" ("FRS 102") and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes.

These financial statements are presented in pounds sterling (£'m) because that is the currency of the primary economic environment in which the Group operates.



b)

Going concern




On the Beach Group covers its daily working capital requirements by means of cash and a Revolving Credit Facility ("RCF").
As at 30 September 2020 cash, excluding cash held in trust, was £36.5m (30 September 2019 cash of £54.8m).
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 and limited other non-essential costs
- 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 have been awarded across the Group in the current financial year
- The Group participated in the Coronavirus Job Retention Scheme and obtained a refund of corporation tax paid
- The Group did not declare an interim dividend and is not proposing a final dividend for the year to 30 September 2020




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 included reaching an agreement with Lloyds Bank to increase maximum available debt facilities:
- extended the £50m RCF drawdown limit to all months of each year
- extended the term to December 2023
- reset covenant tests for all periods up to and including June 2021
- accessed an incremental £25m RCF under CLBILS, expiring in May 2022

In addition, on 22 May the Group issued new shares generating £65.1m 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 the Group has been unable to deliver the package holiday 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 considering factors such as airline and hotelier resilience, employee absence and customer behaviour / demand. As part of this exercise, the Directors modelled what they consider to be a severe downside scenario of no travel or bookings until January 2022. Even in this scenario, the Group would have no requirement to draw down on its current facilities.

Given the assumptions above, the Directors remain confident in their response to the pandemic and will continue to operate in an agile way adapting to any applicable government guidance. Therefore it is considered appropriate to continue to adopt the going concern basis in preparing these financial statements.











c)

New standards, amendments and interpretations


The Group applied IFRS 16 Leases for the first time. The nature and effect of the changes as a result of adoption of this new accounting standard is described below.












IFRS 16 Leases












IFRS 16 "Leases" replaces the current IAS 17 "Leases" and its associated interpretative guidance. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet. The Group adopted IFRS 16 using the full retrospective method of adoption, with the initial application of 1 October 2019.

The Group elected to use the transition practical expedient to not reassess whether a contract is, or contains, a lease at 1 October 2019. Instead, the Group applied the standard 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 effect of adopting IFRS 16 is, as follows:





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







At 30 September 2020


At 30 September 2019


At 30 September 2018






£'m


£'m


£'m


Assets










Property, plant and equipment


3.7


4.2


4.7


Prepayments



0.3


0.1


(0.1)


Total assets



4.0


4.3


4.6












Equity










Retained earnings



(0.2)


(0.2)


(0.1)


Total equity



(0.2)


(0.2)


(0.1)












Liabilities










Lease Liabilities



4.2


4.5


4.7


Total liabilities



4.2


4.5


4.7












As at 30 September 2020, as a result of transition total assets increased to £262.0m from £258.0m, total liabilities increased to £109.6m from £105.4m, and total equity decreased to £152.4m from £152.6m.

As at 30 September 2019, as a result of transition total assets increased to £289.9m from £285.6m, total liabilities increased to £160.7m from £156.2m, and total equity decreased to £129.2m from £129.4m.

As at 30 September 2018, as a result of transition total assets increased to £256.6m from £252.0m, total liabilities increased to £139.1m from £134.4m, and total equity decreased to £117.5m from £117.6m.












Impact on the statement of profit or loss (increase/(decrease)) for the year ended 30 September 2020:










2020


2019








£'m


£'m


Depreciation expense





(0.5)


(0.5)


Rent expense





0.6


0.6












Finance costs





(0.2)


(0.2)












Profit for the period





(0.1)


(0.1)






















Impact on consolidated statement of cash flows (increase/(decrease)):












2020


2019








£'m


£'m


Profit before taxation





(0.1)


(0.1)


Depreciation





0.5


0.5


Finance costs





0.2


0.2


Net cash flows from operating activities



0.6


0.6












Interest paid on lease liabilities




(0.2)


(0.2)


Payment of lease liabilities




(0.4)


(0.4)


Net cash flows from financing activities



(0.6)


(0.6)












There is no material impact on other comprehensive income or the basic and diluted earnings per share.












Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases for 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.












As at 30 September 2018, 30 September 2019 and 30 September 2020:


• Right-of-use assets were recognised and presented as 'Property, plant and equipment' in the statement of financial position.
• Additional lease liabilities were recognised and included under 'Trade and other payables'.
• 'Prepayments' related to previous operating leases were derecognised.
• 'Retained earnings' decreased due to the net impact of these adjustments.


For the year ended 30 September 2020:


• Depreciation expense increased because of the depreciation of additional assets recognised (i.e., increase in right-of-use assets, net of the decrease in 'Property, plant and equipment'). This resulted in increases in 'Administrative expenses' of £0.5m (2019: £0.5m).
• Rent expense included in 'Administrative expenses', relating to previous operating leases, decreased by £0.6m (2019: £0.6m).
• 'Finance costs' increased by £0.2m (2019: 0.2m) relating to the interest expense on additional lease liabilities recognised.
• Cash outflows from operating activities increased by £0.6m (2019: £0.6m) and cash outflows from financing activities decreased by the same amount, relating to decrease in operating lease payments and increases in principal and interest payments of lease liabilities.






















Standards not yet effective








A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2020 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements as they do not have a material effect on the Group's financial statements.
The following amended standards are not expected to have a significant impact on the Group's consolidated financial statements:
• Amendments to References to Conceptual Framework in IFRS Standards;
• Definition of a Business (Amendments to IFRS 3); and
• Definition of material - amendments to IAS 1 and IAS 8

 

3)

Critical accounting estimates and judgements


The Group's accounting policies have been set by management. The application of these accounting policies to specific scenarios requires reasonable estimates and assumptions to be made concerning the future. These are continually evaluated based on historical experience and expectations of future events. The resulting accounting estimates will, by definition, seldom equal the related actual results. Under IFRS estimates or judgements are considered critical where they involve a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities from period to period. This may be because the estimate or judgement involves matters which are highly uncertain or because different estimation methods or assumptions could reasonably have been used.




Critical accounting judgements










Revenue from contracts with customers


The Group applied the following key judgements on the agent vs principal status of each segment as well as the number of performance objections in each.


Performance obligations



Revenue in the OTB, International and CPH segments is recognised based on there being a single performance obligation to at the point of booking. This is to arrange and facilitate the customer entering into individual contracts with principal suppliers providing holiday related services including flights, hotels and transfers. For the OTB, International and CPH segments, there is not a significant integration service and responsibility for providing the services remains with the principal suppliers.












The Group has concluded that under IFRS 15 for revenue in the Classic segment, a package holiday constitutes the delivery of one distinct performance obligation which includes flights, accommodation, transfers and other holiday-related services. In formulating this conclusion, management has assessed that it provides a significant integration service to collate all of the elements within a customer's specification to produce one integrated package holiday. Management has further analysed the recognition profile and concluded that under IFRS 15, revenue and corresponding cost of sales should be recognised over the period a customer is on holiday.












Agent vs Principal



Determining whether an entity is acting as a principal or as an agent requires judgement and has a significant effect on the timing and amount (gross or net basis) of revenue by the Group. As an agent, revenue is recognised at the point of booking on a net basis. As a principal, revenue is recognised on a gross basis over the duration of the holiday.

In line with IFRS 15, management have concluded that revenue in the OTB, International and CPH segments will continue to be treated as an agent on the basis that the performance obligation is to arrange for another entity to provide the goods or services. This assessment has given consideration that there is no inventory risk and limited discretion in establishing prices. Revenue in the Classic segment will continue to be treated as a principal on the basis that Classic have the primary responsibility for fulfilling the package holiday for the customer.












Critical accounting estimates










COVID-19


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. This initial lockdown remained in place for several months and airlines ceased the majority of flying schedules until 1 July 2020. Following the reopening of airspace, whilst some flying resumed, a significant number of holidays have been cancelled due to reductions in flying schedules and changeable government restrictions. Post year-end, disruption to leisure travel has continued, including more recently a four week ban on international leisure travel which started on 5 November 2020.












In relation to flights cancelled during the financial year, the Group has considered the impact of the pandemic on the recoverability of supplier prepayments including amounts paid to airlines in lieu of flights which have been cancelled. The Group has a legal right to a refund under EU261/2004; the airline has an obligation to refund in the event that the flight is cancelled. EU 261 provides strict guidelines for the compensation of travellers whose flights are delayed, cancelled, or overbooked while travelling in or to EU countries. The rules apply to any flights that originate in an EU country. Where an airline is not forthcoming with a refund owed the Group exercises its chargeback rights are as governed by the card scheme rules. The Group has a right to make a chargeback when (i) the merchant (airline) was unable or unwilling to provide the purchased services; or (ii) the cardholder is entitled to a refund under the merchant's cancellation policy. A chargeback asset was recognised in the prior year relating to TCG and recovered in full, further supporting the Group's recognition of the airline receivables amount.
Where a flight has been cancelled, the Group has recognised a net receivable for the expected recoverable amount in accordance with the considerations above.












In relation to bookings which are due to travel after the year-end, the primary judgements are as follows:


- The extent to which holidays will be impacted by the pandemic, either directly due travel restrictions or indirectly due to reductions in flying schedules. Management have estimated that the level of disruption will gradually reduce through FY21 and will return to normal levels for the next winter season. The level of forward bookings beyond summer 2021 is not significant and any changes to this assumption would not have a material impact.

- The level of revenue that will be reversed as a result of the cancellations and the extent to which the Group can mitigate costs related to the cancellation, such as flight, hotel and other supplier costs. The Group has assumed the majority of the these costs can be recovered where holidays are cancelled by the Group.


Determining the amounts to be provided for the bookings affected by the pandemic involves judgement and is dependent upon a number of assumptions by management including the number of bookings that will be cancelled due to travel restrictions. The Group expects travel to be disrupted and cancellations to continue above normal levels throughout 2021. Sensitivity analysis was performed based on various scenarios, including the duration and severity of travel disruption resulting from the pandemic and the extent to which supplier costs can be recovered or avoided for cancelled holidays. Specifically regarding the proportion of holidays that will be cancelled, Management have considered a range of scenarios and believe that the amounts recognised are Management's best estimate of the costs the Group will incur.


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
















2020










COVID-19










£'m







Group revenue










Revenue as Agent



(37.5)







Revenue as Principal



-







Group Cost of Sales



0.1







Group overheads










Other exceptional operating costs



(4.3)







Group profit before tax



(41.7)



























The total exceptional costs in the period of £41.7m 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 £37.4m. The adjustment also includes a provisions against amounts due from suppliers of £2.2m, exceptional development spend of £0.7m and legal and professional fees of £1.4m. During the year £0.7m of redundancy costs were offset by £0.7m of contributions in relation to the Coronavirus Job Retention Scheme.












Impairment of intangible assets and goodwill



Intangible assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is reviewed for impairment on an annual basis. When a review for impairment is conducted, the recoverable amount is determined based on the higher of value in use and fair value less costs to sell. The value in use method requires the Group to determine appropriate assumptions (which are sources of estimation uncertainty) in relation to the cash flow projections based on the latest budget, the long-term growth rate to be applied to these cash flow projections and the risk-adjusted pre-tax discount rate used to discount the assumed cash flows to present value.












The Group has concluded that the carrying value of the intangibles and goodwill is appropriate (after considering certain sensitivities which are set out in Note 11).

4) Revenue
















In line with IFRS 15, the Group is required to disaggregate its revenue to show the main drivers of its revenue streams. Revenue is accounted for at the point the Group has satisfied its performance obligations, details of the revenue performance obligations are set out in note 2i of these financial statements.











For the year ended 30 September 2020




OTB

Int'l

Classic

CPH

Total




£'m

£'m

£'m

£'m

£'m


Revenue before exceptional cancellations







Sales as agent


50.4

0.3

-

3.6

54.3


Sales as principal


-

-

16.9

-

16.9










Total Revenue before exceptional cancellations

50.4

0.3

16.9

3.6

71.2


Exceptional cancellations*


(34.5)

(0.2)

-

(2.8)

(37.5)


Total Revenue


15.9

0.1

16.9

0.8

33.7




















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 2020 relate to the impact of COVID-19 (see note 3)

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





 

5)

Segmental report


























As explained in note 2h, 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.
























Restated (note 2)



2020


2019



OTB

Int'l

Classic

CPH

Total


OTB

Int'l

Classic

CPH

Total





£'m

£'m

£'m

£'m

£'m


£'m

£'m

£'m

£'m

£'m


Income













Revenue before exceptional cancellations

50.4

0.3

16.9

3.6

71.2


90.3

1.4

55.0

0.8

147.5


Exceptional cancellations*

(34.5)

(0.2)

-

(2.8)

(37.5)


(7.0)

-

-

(0.1)

(7.1)


Total Revenue

15.9

0.1

16.9

0.8

33.7


83.3

1.4

55.0

0.7

140.4















Adjusted EBITDA

10.6

(0.3)

(1.9)

(1.5)

6.9


38.9

(0.6)

2.2

(1.1)

39.4


Share based credit/(charge)

0.6

  - 

  - 

  - 

0.6


(0.7)

-

-

-

(0.7)


Impact of COVID-19

(38.7)

(0.2)

(0.1)

(2.7)

(41.7)


-

-

-

-

-


Impact of Thomas Cook

-

  - 

-

-

-


(7.2)

  - 

(0.4)

(0.1)

(7.7)


Other exceptional costs

(0.3)

-

-

-

(0.3)


(1.0)

-

(0.3)

-

(1.3)


EBITDA

(27.8)

(0.5)

(2.0)

(4.2)

(34.5)


30.0

(0.6)

1.5

(1.2)

29.7


Depreciation and amortisation

(9.9)

(0.1)

(1.2)

(0.2)

(11.4)


(9.0)

(0.1)

(1.3)

-

(10.4)


Group operating loss

(37.7)

(0.6)

(3.2)

(4.4)

(45.9)


21.0

(0.7)

0.2

(1.2)

19.3















Finance costs





(0.8)






(0.5)


Finance income





0.4






0.5


Loss before taxation





(46.3)






19.3




























Non-current assets













Goodwill

31.6

-

4.6

4.0

40.2


31.6

-

4.6

4.0

40.2


Other intangible assets

30.1

0.1

8.9

0.3

39.4


34.5

0.1

10.0

0.3

44.9


Property, plant and equipment

8.1

-

1.8

-

9.9


8.9

-

1.7

-

10.6


Investment property

  - 

  - 

0.6

  - 

0.6


  - 

  - 

0.6

  - 

0.6















*Exceptional cancellations in the year ended 30 September 2020 relate to the impact of COVID-19. Exceptional cancellations in the year ended 30 September 2019 relate to the impact of TCG.

 

6)

Operating profit









a)

Operating expenses





Expenses by nature including exceptional items and impairment charges:










2020


2019



£'m


£'m







Marketing

22.8


36.3


Depreciation

1.9


1.6


Staff costs (including share based payments)

14.6


14.7







IT hosting, licences & support

2.4


2.1


Office expenses

0.8


0.8


Credit / debit card charges

1.7


2.8


Insurance

1.6


0.6


Other

2.0


3.2


Administrative expenses before exceptional cost & amortisation of intangible assets

47.8


62.1





  - 


Impact of COVID-19

4.3


-


Impact of Thomas Cook

-


0.6


Other exceptional costs

0.3


1.3


Amortisation of intangible assets

9.5


8.7


Exceptional costs and amortisation of intangible assets

14.1


10.6


Administrative expenses

61.9


72.7











b)

Other operating exceptional items





The exceptional costs for the year ended 30 September 2020 of £0.3m relate to legal and professional fees.


The 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)

Services provided by the company auditor










During the year, the Group obtained the following services from the operating company's auditor.








2020


2019



£'m


£'m


Audit of the parent company financial statements

0.1


0.1


Amounts receivable by the Company's auditor and its associated in respect of:





- Audit of financial statements of subsidiaries pursuant to legislation

0.2


0.1


- Review of interim financial statements

-


-


- Other assurance services

-


-



0.3


0.2






d)

Adjusted PBT










Management measures the overall performance of the Group by reference to Adjusted PBT, a non-GAAP measure as it gives a meaningful year on year comparison of the Groups performance:





Restated
(note 2)



2020


2019



£'m


£'m


Profit before taxation

(46.3)


19.3


Impact of exceptional COVID-19 cancellations

41.7


-


Impact of exceptional Thomas Cook cancellations

-


7.7


Other exceptional costs

0.3


1.3


Total exceptional costs

42.0


9.0


Amortisation of acquired intangibles

5.5


5.5


Share based payments charge*

(0.6)


0.7


Adjusted PBT

0.6


34.5







*The share based payment charge represents the expected cost of shares vesting under the Group's Long Term Incentive Plan. These charges are added back to the adjusted profit measure as they do not necessarily relate to the performance of the Group in the current financial year.






 

7)

Employees and Directors



a)

Payroll costs


 The aggregate payroll costs of these persons were as follows:


 

2020


2019



£'m


£'m







Wages and salaries

17.9


17.2


Defined contribution pension cost

0.3


0.3


Social security costs

1.8


1.7


Share-based payment (credit)/charges

(0.6)


0.7



19.4


19.9




Staff costs above include £4.0m (2019: £5.2m) employee costs capitalised as part of software development. During the year £0.7m was claimed in relation to the Coronavirus Job Retention Scheme. As a non-recurring item, this has been netted off against other exceptional costs in relation to COVID 19 cancellations described in note 3.



b)

Employee numbers


Average monthly number of people (including Executive Directors) employed:





2020


2019


  By reportable segment:

No.


No.


UK


404


Int'l

10


13


Classic

116


99


CPH

5


5



550


521



c)

Directors' emoluments




 The remuneration of Directors was as follows:

2020


2019



 'm


£'m


Aggregate emoluments

0.9


1.0


Defined contribution pension

-


-


Share-based payment charges

0.1


(0.1)



1.0


0.9




Remuneration was paid by On the Beach Limited, a subsidiary companies of the Group.


 The remuneration of the highest paid director was as follows:



2020


2019



£'m


£'m


Aggregate emoluments

0.3


0.4


Share-based payment charges

0.1


-



0.4


0.4



d)

Key management compensation


Key management comprised the seven members of the executive team.


Remuneration of all key management (including directors) was as follows:





2020


2019



£'m


£'m


Wages and salaries

1.6


1.9


Short-term non-monetary benefits

-


-


Share-based payment charges

0.1


0.1



1.7


2.0



e)

Retirement benefits


Included in pension contributions payable by the Group of £0.4m (2019: £0.2m) is £42,000 (2019: £26,000) of contributions that the Group made to a personal pension scheme in relation to one Executive Director.

8)

Taxation




 






 



2020


2019

 



£'m


£'m

 






 


Current tax on profit for the year

(4.0)


4.8

 


Adjustments in respect of prior years

-


(0.1)

 


Total current tax

(4.0)


4.7

 






 


Deferred tax on profits for the year




 


Origination and reversal of temporary differences

(3.5)


(1.0)

 


Total deferred tax

(3.5)


(1.0)

 


Total tax charge

(7.5)


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.

 



 






 



2020


2019

 



£'m


£'m

 






 


Profit on ordinary activities before tax

(46.3)


19.3

 






 


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

(8.8)


3.7

 






 


Effects of:




 


Adjustments in respect of prior years

-


(0.1)

 


Impact of difference in current and deferred tax rates

1.3


0.1

 


Total taxation charge

(7.5)


3.7

 






 


The tax charge for the year is based on the effective rate of UK corporation tax for the period of 19% (2019: 19%).
The deferred tax liability at 30 September 2020 has been calculated at the UK corporation tax rate of 19%.

 

 

9)

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.


Diluted earnings per share is 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 period plus the weighted average number of Ordinary Shares that would be issued on the conversion of all dilutive potential ordinary shares into Ordinary Shares.


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










Basic weighted average number of Ordinary Shares

Total earnings

Pence per share



(m)

£'m



Year ended 30 September 2020





Basic EPS

140.2

(38.8)

(27.6p)


Diluted EPS

140.2

(38.8)

(27.6p)


Adjusted EPS

140.2

(0.7)

(0.5p)







There was no difference in the weighted average number of shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.







Year ended 30 September 2019





Basic EPS

131.1

15.6

11.9p


Diluted EPS

131.4

15.6

11.9p


Adjusted  EPS

131.1

27.9

21.3p







Adjusted earnings after tax is calculated as follows:






Restated (note 2)




2020

2019




£'m

£'m







Profit for the year after taxation


(38.8)

15.6


Adjustments (net of tax at 19%)





Impact of exceptional COVID-19 cancellations


33.8

-


Impact of exceptional Thomas Cook cancellations


-

6.2


Other exceptional costs


0.3

1.0


Amortisation of acquired intangibles


4.5

4.5


Share based payment charges*


(0.5)

0.6


Adjusted earnings after tax


(0.7)

27.9







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






 

10)

Intangible assets






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


Additions

-

-

4.0

-

-

4.0










At 30 September 2020

35.9

40.2

15.6

22.8

6.5

121.0










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


Charge for the year

2.4

-

4.0

2.4

0.7

9.5










At 30 September 2020

15.1

-

8.7

16.0

1.6

41.4










Net book amount








At 30 September 2020

20.8

40.2

6.9

6.8

4.9

79.6










At 30 September 2019

23.2

40.2

6.9

9.2

5.6

85.1










Goodwill








Goodwill acquired in a business combination is allocated on acquisition to the CGUs that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:














As at 30 September 2020


As at 30 September 2019


Reportable segment

CGU

Acquisitions

£'m


£'m










OTB

OTB

On the Beach Travel Limited


21.5


21.5


OTB

Sunshine

Sunshine.co.uk Limited


10.1


10.1


CCH

Classic

Classic Collection Limited


4.6


4.6


CPH

CPH

Classic Collection Limited

4.0


4.0






40.2


40.2










Impairment of goodwill


On the Beach and Sunshine are considered to be one reportable segment, as they are internally reported and managed as one entity, but for impairment review purposes they are treated as separate CGU's as they have independent cash inflows. Goodwill acquired through Sunshine.co.uk has been allocated to the "Sunshine" cash generating unit. Goodwill acquired through the Classic collection acquisition has been allocated to the "Classic" and "CPH" cash generating units.










"OTB" CGU








The Group performed its annual impairment test as at 30 September 2020 on the "OTB" cash generating unit ("CGU"). The recoverable amount of the CGU has been determined based on the value in use calculations using cash flow projections derived from financial budgets and projections covering a three-year period. The initial two years are based on the latest budget, year three is extrapolated at a growth rate of 2 percent (2019: 5 percent); the forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2 percent (2019: 2 percent), this being the Directors' estimated view best estimate of the future prospects of the business. This is deemed appropriate because the CGU is considered to be a long-term business. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to this CGU. The discount rate applied is 11 percent (2019: 9.5 percent).

The main assumptions on which the forecast cash flows were based include the level of sales and administrative expenses within the business and have been set by the Directors based on their past experience of the business and its industry, together with their expectations of the market. The level of sales depends upon the size of the markets in which the Group operates together with the Directors' estimations of its market share and competitive pressures, including the level of supplier overrides.


"Sunshine" CGU








The Group performed its annual impairment test as at 30 September 2020 on the "Sunshine" cash generating unit ("CGU"). The recoverable amount of the CGU has been determined based on the value in use calculations using cash flow projections derived from financial budgets and projections covering a three-year period. The initial two years are based on the latest budget, year three is extrapolated at a growth rate of 2 percent (2019: 5 percent); the forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2 percent (2019: 2 percent), this being the Directors' estimated view best estimate of the future prospects of the business. This is deemed appropriate because the CGU is considered to be a long-term business. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to this CGU. The discount rate applied is 11 percent (2019: 9.5 percent).

The main assumptions on which the forecast cash flows were based include the level of sales and administrative expenses within the business and have been set by the Directors based on their past experience of the business and its industry, together with their expectations of the market. The level of sales depends upon the size of the markets in which the Group operates together with the Directors' estimations of its market share and competitive pressures, including the level of supplier overrides.


"Classic" CGU


The Group performed its annual impairment test as at 30 September 2020 on the "Classic" cash generating unit ("CGU"). The recoverable amount of the CGU has been determined based on the value in use calculations using cash flow projections derived from financial budgets and projections covering a three year period. The initial two years are based on the latest budget, year three is extrapolated at a 2 percent growth rate (2019: flat growth rate),  the forecasts are then extrapolated in perpetuity based on at a 2 percent growth rate (2019: flat growth rate). This is deemed appropriate based on the Directors' best estimate of the future prospects of the business. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU. The discount rate applied is 11 percent (2019: 9.5 percent).

The main assumptions on which the forecast cash flows were based include the level of sales and administrative expenses within the business and have been set by the Directors based on their past experience of the business and its industry, together with their expectations of the market. The level of sales depends upon the size of the markets in which the Group operates together with the Directors' estimations of its market share and competitive pressures, including the level of supplier overrides.


"CPH" CGU








The Group performed its annual impairment test as at 30 September 2020 on the "CPH" cash generating unit ("CGU"). The recoverable amount of the CGU has been determined based on the value in use calculations using cash flow projections derived from financial budgets and projections covering a three-year period. The initial two years are based on the latest budget, year three is extrapolated at a growth rate of 2 percent (2019: 2 percent),  the forecasts are then extrapolated in perpetuity based on a 2 percent growth rate (2019: 2 percent). This is deemed appropriate based on the Directors' best estimate of the future prospects of the business. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU. The discount rate applied is 11 percent (2019: 9.5 percent).The main assumptions on which the forecast cash flows were based include the level of sales and administrative expenses within the business and have been set by the Directors based on their past experience of the business and its industry, together with their expectations of the market. The level of sales depends upon the size of the markets in which the Group operates together with the Directors' estimations of its market share and competitive pressures, including the level of supplier overrides.










The "international" CGU has been internally developed and as such, has no goodwill.


Administrative expenses are dependent upon the net costs to the business of purchasing services. Expenses are based on the current cost base of the Group adjusted for variable costs.










Impact of COVID-19 on impairment considerations


The Group does not consider that any CGU has been automatically impaired as a result of the pandemic. All CGUs remain viable trading long term assets which the Group expects to continue to generate positive cashflows. Inherent in the impairment test is a period of disruption followed by a gradual recovery. Sensitivities have been applied to both the extent / period of disruption and the Group is satisfied that sufficient headroom exists to support the asset value.




Development costs


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.


Capitalised development costs are not treated as a realised loss for the purpose of determining the Company's distributable profits as the costs meet the conditions requiring them to be treated as an asset in accordance with IAS 38.


Additions in the year relate to domain name acquisition costs and the development of software. The amortisation period for website development costs is 3 years straight line. Domain names are amortised over 10 years. Amortisation has been recognised within operating expenses.


Research and development costs that are not eligible for capitalisation have been expensed in the period incurred, in 2020 this was £1.3m (2019: £0.3m), and they are recognised in administrative expenses. £0.7m of the expensed costs in the current year were due to projects no longer viable due to the impact of COVID-19.




Sensitivity to changes in assumptions


Sensitivity analysis has been completed on key assumptions in isolation, and the headroom taken is significant. Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to exceed its recoverable amount. The key assumptions are discount factor, long term growth rates and short term trading volumes/cashflows. Sensitivities have been applied on all of these assumptions.

11)

Trade and other receivables

 






Restated
(note 2)

 




2020


2019

 


Amounts falling due within one year:


£'m


£'m

 







 


Trade receivables - net


58.9


64.7

 


Other receivables


43.6


28.5

 


Prepayments 


2.2


1.4

 




104.7


94.6

 







 


For the year ended 30 September 2020, other receivables includes £34.3m receivable in respect of amounts due from airlines as a result of exceptional COVID-19 cancellations. By 30 September £89.5m had fallen due from airlines in respect of flights cancelled in the year. In determining the recoverability of these amounts the Group has considered, the amount of cash received by 30 November, chargeback and other legal rights. By 30 November, of the balance that was due at the year end, £6.5m remains outstanding which the Group is confident it will recover.

 


For the year ended 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. The amount has been fully recovered in the current year.

 

12)

Trust Account










Trust accounts are restricted cash held separately and only accessible at the point the customer has travelled or booking is cancelled and refunded.

 

13)

Trade, other payables and provisions







 




Restated
(note 2)





2020


2019





£'m


£'m



Non-current







Lease liabilities


3.8


4.2



Current







Trade payables


80.2


121.6



Accruals and other payables


11.8


15.0



Lease liabilities


0.4


0.3





96.2


141.1



Provision


10.9


12.3





107.1


153.4






For the year ended 30 September 2020, the £10.9m provision is in respect of expected future cancellations in relation to bookings taken before 30 September 2020. We expect to this provision to be utilised over the next year. Trade payables includes £9.0m in respect of refunds owed to customers, with the related receivable from the airlines recognised in trade receivables. Where the refunds are not received from the airline the Group has a legally enforceable right to offset the recognised amounts. The Group has opted to show the figures gross due to no option to settle on a net basis or realise the asset and settle the liability simultaneously. For details of assumptions, see note 3.


In the prior year, the £12.3m provision is in respect of the TCG failure. The amount recognised is an estimate of the cost the Group will incur to fulfil its obligations to customers under the ATOL regulations to arrange refunds or alternative flights.
















14)

Leases







The Group has lease contracts for two properties, both with a  lease terms of 10 years.  With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment.



Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group.










Amounts recognised in profit or loss







The following leases-related expenses were recognised under IFRS 16 in the profit or loss:














Restated
(note 2)





2020


2019





£'m


£'m



Depreciation expense of right-of-use assets

0.5


0.5



Interest expense on lease liabilities


0.2


0.2










Total amount recognised in profit or loss


0.7


0.7










Set out below are the carrying amounts of lease liabilities (included trade and other payables) and the movements during the period:





2020


2019





£'m


£'m



As at 1 October


4.5


4.7



Accretion of interest


0.2


0.2



Payments


(0.4)


(0.4)



As at 30 September


4.2


4.5



Current


0.4


0.3



Non-current


3.8


4.2










The Group had total cash outflows for leases of £0.4m in 2020 (£0.4m in 2019). The above table satisfies the requirements of IAS 7.44A to present a net debt reconciliation.


15)

Borrowings












Bank Facility




















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.  No early repayment 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.












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;


(ii) that the ratio of total net debt to adjusted EBITDA in respect of the relevant period ending 30 June 2020 shall not exceed 2.25:1 and any relelvant period ending on or after 30 September 2021 shall not exceed 2:1;


(iii) that the total net debt on the last day of the relevant period ending 30 September 2020 shall not exceed £10.0m; and


(iv) that the EBITDA in the relevant period ending 30 September 2020 shall not be less than a loss of £(11.6M).


There have been no covenant breaches in the year and there are none expected in the next 12 months.