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On the Beach reports 24% growth in profits
On the Beach largely avoided the summer heatwave impact which triggered a second profits warning by Thomas Cook yesterday.
The growing online travel agency group, a big winner at the Travolution Awards, saw annual pre-tax profits rise by almost 24% to £26.1 million as revenue increased by a quarter year-on-year to top £100 million.
Classic Collection Holidays, which was acquired in August for £20 million, delivered earnings [Ebitda] of £1.1 million in the period to the end of September.
On the Beach revealed that other acquisitions are being evaluated.
However, One the Beach admitted that its international business was heavily affected by the unprecedented hot summer in Scandinavia, leading to lower demand for holidays and “widespread discounting of distressed product” by Sweden’s leading tour operators.
As a result, international revenue fell by 5.9% to £1.6 million in the year to September 30.
“We therefore reduced marketing activity to a background level, with a significant impact on revenue but a saving versus forecasted losses with a view to reinvesting at the start of the new financial year,” the company said.
Core revenue at On the Beach and Sunshine.co.uk rose by 9% to £89.3 million.
Chief executive Simon Cooper said the company’s 2017-18 performance was delivered “despite the previously highlighted exceptionally hot weather that was prevalent over the summer in the UK and in the Nordics, which combined with the football World Cup, suppressed holiday demand.
“Whilst this impacted our headline revenue growth during the period, the weaker demand also drove a significant reduction in the group’s marketing spend, ensuring growth in revenue after marketing costs remained strong. This is further testament to On the Beach’s resilient and flexible business model.”
He added: “The first quarter of our financial year (calendar Q4) is historically the quietest trading period for the group. We are pleased to report a strong early trading performance, supported by a slightly earlier release of summer capacity by major low cost carriers, lower year-on-year seat prices for winter departures and a continued efficiency in marketing spend.
“This current performance is in line with our expectations and the board believes the business is well positioned for the key trading period that commences in late December and continues into Q1 2019.
“Whilst the consumer environment continues to be challenging, we remain confident in the resilience and flexibility of our business model.
“The board will also continue to evaluate acquisition opportunities that will both increase scale and deliver value for shareholders.”
Cooper said the deal for Classic Collection Holidays gave the firm a business to business channel to access five million short haul beach holidays booked offline each year.
This will be through both the existing business and via the launch of online agent-only booking portal Classic Package Holidays due to be introduced early in 2019.
“We remain confident in the resilience and flexibility of our business model to capitalise on any structural changes in the market,” Cooper added.
“On the Beach continues to successfully build a leading position as more consumers discover the ease of use and wide choice of beach holidays that our platforms offer.”