On the Beach issues profits warning amid coronavirus

On the Beach issues profits warning amid coronavirus

Leading OTA reports drop in demand

Leading OTA On the Beach issued a profits warning on the back of a drop in demand due to coronavirus.

The company, which claims a 20% share of online overseas beach holiday sales, issued a trading update on the impact of the virus to the London stock exchange on Friday afternoon.

The group said it “experienced a small but noticeable reduction in demand for summer 2020 travel following the early reports of COVID-19 cases in early February.

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“The reduction in demand has accelerated significantly following the increase in COVID-19 cases in Europe, particularly the spread of the virus to Tenerife.

“Whilst this reduction in demand has led to a natural reduction in marketing spend, the board does not now expect the group to achieve payback in the current financial year on its previously outlined strategic marketing investment.

“With the expectation that the spread of the COVID-19 is going to cause significant disruption for a period of time, the board believes that the group’s full year results for the year to 30 September 2020 will be below current market expectations.”

However, the company added that its asset light business model, low inventory risk and tight cost and cash controls “ensure that the group is resilient in a volatile market environment, enabling it to return to profitable growth when the demand for short haul beach holidays normalises”.

On the Beach had issued an upbeat trading update in early February, saying it had an “unprecedented opportunity” to take market share following the collapse of Thomas Cook.