Shares in online beach holidays retailer On The Beach (OTB) jumped 11% to 456.5p after the company unveiled the £20m acquisition of Classic Collection Holidays.
Classic Collection packages luxury beach breaks and sells them via third party travel agencies. Part of On The Beach's plans for the acquired business is to launch an online booking portal solely for travel agents, streamlining the bookings process.
HOLIDAY DEMAND UNDER PRESSURE
This is an apparently timely bit of news for On The Beach with sun and sea holiday demand weak. This is largely because of the blistering heatwave that has seen temperatures in the UK and across parts of Europe soar since May.
The World Cup in June and July also upset bookings patterns and dragging on sales growth in the 19 weeks to 15 August.
Sensibly the company responded by slashing marketing spending which is why management remain confident of meeting full year to 30 September 2018 pre-tax profit expectations. Analysts currently anticipate pre-tax profit to increase by around 20% this year to approximately £34m.
EXPOSURE TO LUXURY MARKET
Numis analyst Richard Stuber says Classic Collection offers exposure to the substantial retail luxury market thanks to its business to business distribution network with no risk capacity as it owns no shops.
Stuber has trimmed his pre-tax forecast by 2% to £33.9m in the year to 30 September. The analyst speculates that Classic Collection will be initially loss-making due to portal launch costs of around £1.5m in 2019.
