Shares in online holiday provider On The Beach (OTB:AIM) gained 0.7% to 357.5p despite warning its financial performance will be impacted as holiday bookings remain ‘very weak’ amid travel bans and quarantines.
In a trading update ahead of its annual general meeting today, On The Beach said UK traffic, bookings and spend on online marketing activity across the four months to 31 January were down 73%, 83% and 85% respectively.
The firm has responded to the latest travel restrictions by taking holidays off-sale that depart prior to 1 May 2021, and expects booking demand to ‘remain weak until these restrictions are lifted and vaccine deployment is more widespread, both in the UK and our major travel destinations,’ which it added will impact its first half and full year financial performance.
‘UNPRECEDENTED OPPORTUNITY’
But on a more positive note, it also said it sees the forthcoming period as an ‘unprecedented opportunity’ to drive market share gains and as a result has continued to invest in the areas that will ‘drive the largest benefits in the medium term’.
This includes investing in technology and its core platform capabilities, as well as ‘delivering best-in-class customer service’ by refunding customers whose holidays are cancelled in advance of getting refunds from airlines, building relationships by paying hotel partners promptly and ‘increasing share of voice’ through online and offline marketing activity, driving brand awareness with its Everything’s Better campaign which began on 25 December 2020.
On The Beach’s cash position at 31 January stood at £39 million. It has a £75 million undrawn credit facility, £25 million of which is provided under the Coronavirus Large Business Interruption Loan Scheme and expires in May 2022, with £50 million expiring in December 2023. Monthly cash burn remains at around £2 million.
ANALYST VIEW
Numis analyst Richard Stuber thinks On The Beach will be able to capitalise on the opportunity it mentions and said unlike the firm, many competitors such as tour operators and online travel agencies will financially struggle, ‘meaning that there will be few operators able to benefit from the inevitable recovery in addition to market share gains from the exit of Thomas Cook.’
He added that the firm’s second quarter performance will likely be ‘softer than expected’ and is more cautious on its third quarter too, with international travel restrictions likely to be relaxed after the domestic economy reopens.
Numis is cutting On The Beach’s core revenue forecast for its 2021 financial year by 52%, now 47% below 2019 levels, and forecasts a loss before tax of £15.4 million.
‘However, owing to OTB’s continued investments, weakening competitor landscape and pent-up consumer demand, we make no changes to FY22 forecasts,’ Stuber added.
