9 December 2021

 

On the Beach Group plc

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

 

PRELIMINARY RESULTS FOR YEAR ENDED 30 SEPTEMBER 2021 ("FY21")

READY FOR 2022

 

 

Financial Overview

 

	2021		2020
	Adjusted	GAAP	Adjusted	GAAP
Group revenue	£30.5m	£21.2m	£71.2m	£33.7m
Revenue as Agent(1)	£24.0m	£14.7m	£54.3m	£16.8m
Revenue as Principal(2)	£6.5m	£6.5m	£16.9m	£16.9m
Group gross profit	£23.3m	£14.4m	£53.4m	£16.0m
Gross profit as Agent	£22.7m	£13.8m	£50.8m	£13.5m
Gross profit as Principal	£0.6m	£0.6m	£2.6m	£2.6m
Group (loss)/profit before tax(3)	(£18.4m)	(£36.7m)	£0.6m	(£46.3m)
Basic (loss)/earnings per share(4)	(9.7p)	(19.0p)	(0.5p)	(27.6p)

 

⁽¹⁾    As an agent, revenue is accounted on a "booked" rather than "travelled" basis (unlike tour operators and airlines) and the Group is reporting bookings taken between 1 October 2020 and 30 September 2021. Adjusted revenue is revenue before exceptional items of £9.3m (2020: £37.5m).

⁽²⁾    As a principal, revenue is accounted on a "travelled" basis and reported on a gross basis and the Group is reporting bookings which departed between 1 October 2020 and 30 September 2021.

⁽³⁾    Group adjusted profit / loss before tax is profit / loss before tax, amortisation of acquired intangibles of £5.5m (2020: £5.5m), share based payments cost of £2.8m (2020: credit of £0.6m) and exceptional items of £10.0m (2020: £42.0m). A full explanation of the adjustments is included in the glossary.

⁽⁴⁾     Adjusted earnings per share is Group adjusted profit after tax divided by the average number of shares in issue during the period. Earnings per share is Group profit after tax divided by the average number of shares in issue during the period.

 

 

Strategic progress

Simon Cooper, Chief Executive of On the Beach Group plc, commented:

 

 

 

Analyst Conference Call

A conference call for sell-side equity analysts will be held today at 9.45am, the details of which can be obtained through 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 Rafaella de Freitas	Tel: +44 (0)20 3727 1000 onthebeach@fticonsulting.com

 

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 beach holiday retailer via a single platform multi-brand strategy. By using our innovative technology, low-cost base and strong customer-value proposition to provide a structural challenge to legacy tour operators and online travel agents, we continue our journey to disrupt the online retail of beach holidays. Our model is customer-centric, asset light, profitable and cash generative.

 

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.

 

This statement together with the interim financial statements and investor presentation is available on www.onthebeachgroupplc.com.

 

 

Chief Executive's review

 

The Group continues to be a dynamic, entrepreneurial and ambitious business. We deliver value-for-money personalised beach holidays to our customers and maintain a daily focus to improve the quality of our customer proposition and the value that we provide to our growing customer base.

 

Our low-cost operating model, in a primarily digital sector, where consumers are seeking increased convenience, choice, and a personalised experience with financial protection, positions us to emerge from the pandemic favourably.

 

This has been another unique and difficult year for the global travel industry where the impact of the pandemic has been deeper and longer lasting than most would have expected. Our performance has suffered from a materially lower than normal level of bookings and the reversal of revenue generated for bookings received in the year that have subsequently been cancelled.

 

Against this challenging market backdrop, we have continued to strengthen our balance sheet by successfully raising a further £24.9m from shareholders who see the long term opportunity of the business, giving us an even greater platform to emerge from the pandemic in a position of strength. Over the period, we have continued to invest in our people and technology, optimise our supply and reinvigorate our brand.

 

I am confident that the activities we have undertaken over the last 12 months have laid strong foundations for the Group in the year ahead as holidaying begins to return to pre-pandemic levels, and I am incredibly proud of my colleagues who have delivered so much in often challenging situations.

 

People

Our people have continued to rise to the widespread challenges that the crisis has presented. Staff across all business departments have worked productively and professionally at home.

 

We have continued to support colleagues with a diverse range of initiatives to promote mental health and wellbeing, helping retain a connection to our staff in other departments and across the Group as a whole, while our offices have remained closed.

 

We have not relied extensively on the Government furlough scheme and instead have looked to recruit more staff across all core functions, including technology, brand, finance and customer service.

 

We are excited that a move to hybrid working means all of our colleagues can once again be in the same dedicated office, Aeroworks, which will help us collaborate better across departments. Hybrid working will enable us to recruit from a wider talent pool and allow our staff to continue to benefit from greater flexibility.

 

We have significantly improved our colleague benefits and development opportunities, and have added strength to our senior management team across Data, Product and Marketing, with the appointment of a Director of Data, a Director of Product and a Chief  Marketing Officer.

 

Finally, as a big thanks to our staff who continue to respond with speed, professionalism and resilience to the crisis, we have raised the entry salary across the business to £20,000, thereby elevating the skill set of the new talent we attract and improving the overall quality of service to our customers.

 

Market conditions

Whilst FY21 was not expected to return to a normal year for travel, the industry and the UK population did not foresee an extended lockdown and travel ban for the first six months of calendar year 2021. In a normal year, holiday bookings would peak in January for travel from March through to September. However, it became increasingly clear before entering a third lockdown on 4 January 2021, that market conditions for the remainder of the first half would be more challenging than anticipated at the start of the financial year.

 

Although the vaccine rollout in the UK has been successful, the Government remained cautious about reopening borders for leisure travel. The traffic light system, determining the different requirements and restrictions to be imposed by destination, led to a significant amount of uncertainty for consumers over the summer season, including:

 

Following the Government's announcement in May 2021 on the traffic light system for leisure travel, where most destinations were classified 'amber', On the Beach made the strategic decision to extend its off- sale period for holidays from 30 June to 31 August 2021.

 

In addition to the Group's focus on growing its market share in the long term, the Board's decision was based on consumer feedback from both research and search / sales data, showing a market wide lack of appetite  for booking amber destinations, as well as the likely loss of customer goodwill for holidays that might be booked only to be cancelled or re-arranged.

 

On the Beach restarted selling holidays to travel from early September 2021, when it became clearer that overall confidence to book a holiday had increased, with On the Beach research finding 53% of Brits felt confident about booking a holiday for the remainder of calendar year 2021 (up from 34% in July 2021).

 

For many customers seeking to go abroad, the financial and administrative implications of PCR tests remain a key booking barrier, with one in three people citing that as their main concern, second only to concerns that the holiday would not go ahead as planned.

 

On the Beach therefore announced on 8 September 2021 the decision to provide customers with free Covid tests for bookings made between 8 and 30 September for holidays in 2021 to Spain, Greece, the Spanish and Greek Islands. Following the success of the promotion, free Covid tests were more recently made available for bookings made in October and November.

 

Our 'New Normal Booking Pledge' offers  additional reassurance and transparency  to help our customers with their holiday planning. Both initiatives, combined with a further softening of government restrictions stimulated bookings in the final weeks of the year. The increased awareness of brand and strengthening in trading over this period sets the business up well for 2022 as the market  starts to normalise.

 

Strategy for growth

On the Beach continues to target significant medium and long term growth in its core and adjacent markets by evolving a strategy based on the following strategic pillars:

 

-      Optimise the conditions that enable us to attract, develop and retain a diverse group of talent

-      Enhance our platform capabilities to attract the widest possible audience of beach holidaymakers

-      Leverage our data capabilities to improve user level personalisation

 

-      Deliver a truly differentiated customer proposition

-      Deliver a superior customer experience from the moment of booking to increase repeat purchase and brand advocacy

 

-      Develop key partnerships through our ability to manage relationships, retail opaquely and pay promptly

-      Build our in house capability to increase flight connectivity

-      Grow our multi-channel capability to offer partners the widest range of distribution

 

-      Drive mainstream growth through Classic Package Holidays

-      Evolve Classic Collection to include long haul, itineraries and boutique hotels

 

-      Grow share of long haul beach holidaymakers

-      Seek value enhancing opportunities in new and existing international markets

 

-      Help to shape industry regulation that is fit for purpose

-      Ensure the market works in the best interests of the consumer

 

Investment in our Brand

The pandemic has caused reputational damage to all in our sector. Our decisive action has enabled us to take steps that better protected our reputation versus our rivals, but we were not immune from the issues presented by a unique set of circumstances at various points over the last 18 months. This included, but was not limited to, an unprecedented volume of customer enquiries, difficulties in collecting refunds from low cost carriers and a high degree of uncertainty regarding future travel.

 

Throughout the year, our marketing focus has been on reputational repair and reinvigorating the brand. Never before has our unique business model better enabled us to do the right thing by our customers, consumers and the industry as a whole. Our strategy has been to act innovatively putting consumers at the heart of our decision making, setting us apart from our rivals and enabling us to maintain our brand metrics with a fraction of the spend.

 

In December 2020, we launched a 'Ready when you are' TV campaign which aligned with consumer sentiment in a period of low / no travel during our usual peak booking period.

 

Technology developments delivered in record time enabled us to better serve customers needing to amend bookings, and our finance ops team worked tirelessly in order that we could refund customers at scale within 14 days.

 

We made the decision not to offer customers refund credit notes but to refund in cash, and our white paper on the topic helped hold the industry to account as we looked to highlight consumers' right to refund as the pandemic continued.

 

As disruption, cancellations and unexpected costs continued to blight holidays booked, we took the radical decision to stop selling holidays that we were not confident would be delivered.

 

Lastly, as we look to help restore consumer confidence and get people back on holiday again, we created our free Covid test offer - On the Beach's largest ever promotion at a cost of over £1million - which meant  we could reduce the holiday hassle administration as well as saving our customers money.

 

Investment in Technology

 

We have continued to add to add to our technology talent, in particular to software engineering, design, product, infrastructure and security.  

 

We have continued to invest in remote working and greater use of cloud, to empower colleagues to self-serve, work securely from anywhere at any time and drive speed to market.

 

Our technology teams have taken the opportunity to capitalise on periods of lower trading to continue to focus on enhancing the core capabilities of our platform (flights, beds, packaging, front end, payments and back-office).

 

We have re-architected our core booking paths, enabling quicker future development and the addition of diverse sites from all geographies.

 

We have built new capabilities to support long haul and scheduled airlines, allowing new suppliers to be  added at pace.

 

As part of our overall strategy, there has been a focus on optimising our data platform with a view to driving increasingly sophisticated user-level  personalisation and maximising customer lifetime value.

 

Investment in Supply

We continue to believe that only by having our own relationships with our hotel partners can we guarantee our customers both a good hotel experience and the best prices. COVID-19 has presented the opportunity to secure direct relationships with quality inventory in key destinations that were previously on exclusive contracts with competitors.

 

Throughout the pandemic and the widespread disruption this caused, it was clear without direct contracting capability we could not possibly have delivered the same level of service, either when airspace closed or when it reopened. Our direct contact with all key partners allowed us to better manage through the chaos.

 

We supported hoteliers during the pandemic, maintained a full-strength team and paid our partners and suppliers on time. This has not only welcomed us to new opportunities but it has also given us maximum flexibility with suppliers.

 

Perhaps most importantly as we turn our focus to the future, our ring-fencing of customer prepayments allows On the Beach to maintain its favourable payment terms to all partners.

 

Many others in the market, including tour operators and bedbank peers, have not been able to honour their commitments under the financial pressure of COVID-19. We have cancelled and amended tens of thousands of bookings, working in collaboration with our suppliers to avoid cancellation charges and to ensure smooth operational processes. This is only possible with strong directly contracted relationships. The net result is that our directly contracted share has continued to grow and we exit HY21 with a c.90% share.

 

We continue to believe that our ability to pay promptly, access preferential package rates with hotel suppliers and access B2C and B2B channels are fundamental to growing levels of direct and differentiated supply.

 

Expansion Areas

Business-to-business (B2B)

In 2018, we expanded into a new B2B channel via the acquisition of Classic Collection Holidays (CCH). This increased the size of the Group's addressable market by a further c.8m holidaymakers, who book beach packages each year through an intermediary.

 

Since the acquisition, the Group has continued to invest behind the strategic development of both the existing CCH brand and our new Classic Package Holidays brand.

 

Both Classic brands have maintained high service standards throughout the pandemic, receiving recognition from the trade for excellence, which has enhanced their reputation and positions both favourably as demand continues to recover.

 

Classic Package Holidays (CPH)

Significant progress was made in activating travel agents to sell CPH holidays and increasing usage up to February 2020. The brand, launched in 2019, already has the capability to sell packages via its portal to over 2,500 agents.

 

Partly as a result of the pandemic, there are some challenges for new entrants and smaller independent operators but with Thomas Cook exiting the market in 2019 and other tour operators focusing on direct sales, there is an opportunity to drive both number and usage of high street and independent travel agents that sell CPH holidays.

 

Classic Collection Holidays (CCH)

Pre-pandemic, the Group invested in the product portfolio of CCH to include longer haul beach and tailor-made itineraries via travel agents for its end customers. Over the last 18 months, CCH has continued to extend and tailor the offering.

 

In line with our strategy, the Classic brands have now launched a long haul offering and are building a dedicated Group long haul function which will cover B2B and B2C, value vs luxury and standard vs bespoke.

 

The proportion of CCH booked holidays that are long haul has increased from 1.4% in September 2019 to 16.4% in September 2021.

 

Long Haul

There are 4 million holidaymakers in the UK who book long haul packages each year. Pre-pandemic, the On the Beach site handled 10m searches per annum for long haul destinations.

 

There is a significant opportunity post pandemic to drive a growing share of bookings to longer haul destinations in Classic and the core On the Beach brand, by building out our scheduled air connectivity and portfolio of directly contracted beach hotels.

 

We continue to develop new technological capabilities to allow airlines to be added at pace and we are developing relationships with hotels in destination, both East and Westbound. Our new group long haul function in Classic will handle more complex long haul enquiries on behalf of the Group when demand returns.

 

International expansion

The Board will continue to evaluate international opportunities that increase the Group's scale and deliver further value for shareholders.

 

Championing Change in Travel Industry Regulation

 

What On the Beach is calling for

We believe that holistic and comprehensive reform is required in the  regulation of the travel industry, in order to create a competitive and thriving travel market which works well for consumers, creates a level playing field for those operating within it, and which reduces or eliminates exposure for taxpayers against the risk of business failure.

 

Why this change is necessary

The failures of Monarch and Thomas Cook in 2017 and 2019 respectively highlighted the exposure of consumers and taxpayers to the considerable cost of airline failures and highlighted the need for reform in financial protection for airlines. The Airline Insolvency Review that followed Monarch's failure identified a number of reforms required and while this was included in the 2019 Queen's Speech, progress was derailed by the pandemic and Brexit, and it is not clear when this is likely to be addressed.

 

During the pandemic, as travel operators scrambled to preserve cash, consumers were mistreated by having refunds refused or significantly delayed, and many were forced to accept vouchers or refund credit notes, when they were entitled to a cash refund in a timely manner, thus creating consumer detriment and reduced competition.

 

Although consumer sentiment has recently improved, consumer confidence for international leisure travel remains fragile and there continues to be some uncertainty regarding the shape and timing of the recovery. This recovery is dependent on the industry regaining the trust of consumers that they will be treated fairly.

 

For most consumers in the UK who are booking their annual beach package holiday, this will likely be the biggest investment they will make in a year, unless they are moving house or changing their car. It is therefore critical that competition in the market is healthy to ensure they get the best value, choice, flexibility and consumer protection.

 

However, a number of market dynamics, most notably the market power of the few airlines operating popular leisure routes from the UK, and how that power manifests itself to the detriment of consumers, pose a serious threat to fair competition and choice for consumers.

 

ATOL reform

The CAA is consulting on reform of the ATOL scheme including the assessment of funding arrangements and the protection of consumer money. The consultation process is still ongoing and we expect to hear initial feedback from the CAA in December 2021, with a further consultation process in 2022. Proposals include mandatory ring-fencing of consumer funds, which would mean a fundamental change for the travel industry for those not already operating trust accounts. On the Beach is supportive of trust accounts, to protect the interests of customers and taxpayers, and if this is the direction the CAA decides to pursue, On the Beach is well-placed for the relevant reforms.

 

What next?

On the Beach will continue to engage with Government, Parliament and regulators on the changes it believes are required to secure a healthy and competitive market that protects the interests of consumers.

 

Regulatory focus thus far has been focused on package organisers and not on airlines. Given the failures and significant delays by airlines to refund cancelled flights, and given the misuse of market power, On the Beach will be championing the need for this to be reviewed and addressed.

 

Current trading and outlook

 

Booking volumes have been and will continue to be significantly influenced by the evolution of the COVID-19 pandemic and responses from UK and European Government policy. As I write this review, it is too early to say what impact the Omicron variant will have on restrictions and demand but we have well-rehearsed plans in place to deal with any ensuing disruption. The Group exits 2021 with strong liquidity, high brand awareness and is ready for 2022.

 

The Board remains confident in the resilience and flexibility of the business model and believes the business is well-positioned to grow market share over the medium term as demand for holidays recovers.

 

In light of the continued market uncertainties, the Group is maintaining its suspension of full year guidance until such time that the overall impact of COVID-19 on the Group becomes clearer.

 

The Board will provide a further update on trading on the date of the AGM on 25 February 2022.

 

Simon Cooper

Chief Executive Officer

9 December 2021

 

Financial Review

 

Group overview

	2021		2020
	Adjusted	GAAP	Adjusted	GAAP
Group revenue	£30.5m	£21.2m	£71.2m	£33.7m
Revenue as Agent(1)	£24.0m	£14.7m	£54.3m	£16.8m
Revenue as Principal(2)	£6.5m	£6.5m	£16.9m	£16.9m
Group gross profit	£23.3m	£14.4m	£53.4m	£16.0m
Gross profit as Agent	£22.7m	£13.8m	£50.8m	£13.5m
Gross profit as Principal	£0.6m	£0.6m	£2.6m	£2.6m
Group (loss)/profit before tax(3)	(£18.4m)	(£36.7m)	£0.6m	(£46.3m)
Basic (loss)/earnings per share(4)	(9.7p)	(19.0p)	(0.5p)	(27.6p)

 

⁽⁵⁾     As an agent, revenue is accounted on a "booked" rather than "travelled" basis (unlike tour operators and airlines) and the Group is reporting bookings taken between 1 October 2020 and 30 September 2021. Adjusted revenue is revenue before exceptional items of £9.3m (2020: £37.5m).

⁽⁶⁾     As a principal, revenue is accounted on a "travelled" basis and reported on a gross basis and the Group is reporting bookings which departed between 1 October 2020 and 30 September 2021.

⁽⁷⁾     Group adjusted profit / loss before tax is profit / loss before tax, amortisation of acquired intangibles of £5.5m (2020: £5.5m), share based payments cost of £2.8m (2020: credit of £0.6m) and exceptional items of £10.0m (2020: £42.0m). A full explanation of the adjustments is included in the glossary.

⁽⁸⁾     Adjusted earnings per share is Group adjusted profit after tax divided by the average number of shares in issue during the period. Earnings per share is Group profit after tax divided by the average number of shares in issue during the period.

 

COVID-19 pandemic impact

Certain items, including the ongoing exceptional impact of the COVID-19 pandemic, have been excluded from performance measures in this statement as the Board considers this necessary to provide a fair, balanced and understandable view of the performance of the Group. A full reconciliation of all non-GAAP measures to the closest equivalent GAAP measure is included in the glossary. Whilst the underlying result has still been significantly impacted by the COVID-19 pandemic, 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 likely to be cancelled, due to continued airspace closures and government restrictions on leisure travel.

 

The Group has not estimated the financial impact of, or made an adjustment for, the significant reduction in booking volumes as a result of the COVID-19 pandemic. A summary of the adjustments between Adjusted and GAAP measures, split between the COVID-19 impact and other costs, is shown below.

 

	2021				2020
	Adjusted £m	COVID-19 £m	Other £m	GAAP £m	Adjusted £m	COVID-19 £m	Other £m	GAAP £m
Group revenue(1)	30.5	(9.3)	-	21.2	71.2	(37.5)	-	33.7
Revenue as Agent	24.0	(9.3)	-	14.7	54.3	(37.5)	-	16.8
Revenue as Principal	6.5	-		6.5	16.9	-	-	16.9
Cost of sales(2)	(7.2)	0.4	-	(6.8)	(17.8)	0.1	-	(17.7)
Group overheads	(41.7)	(1.1)	(8.3)	(51.1)	(52.8)	(4.3)	(5.2)	(62.3)
Share Based Payments	-	-	(2.8)	(2.8)	-	-	0.6	0.6
Acquired Intangibles Amortisation	-	-	(5.5)	(5.5)	-	-	(5.5)	(5.5)
Other exceptional operating costs(3)	-	(1.1)	-	(1.1)	-	(4.3)	(0.3)	(4.6)
Group profit/(loss) before tax	(18.4)	(10.0)	(8.3)	(36.7)	0.6	(41.7)	(5.2)	(46.3)

 

A full explanation of all adjusted performance measures is included in the Glossary.

 

Overview of the year

 

Continued and evolving response to the pandemic

As the country started to emerge from the pandemic, the Group took a customer-led approach. This has included:

 

Cash and liquidity

 

Details of the current facility limits and maturity dates are as follows:

 

Facilities	£m	Issued	Expiry	Drawn at 30 September 2021
Original RCF	£50m	Apr 2020	Dec 2023	£nil
New CLBILS facility	£25m	May 2020	May 2023	£nil
Total facility	£75m			£nil

 

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).

 

OTB Performance

 

	2021 Adjusted £m	2021 GAAP £m	2020 Adjusted £m	2020 GAAP £m
Revenue	22.1	13.0	50.4	15.9
Online Marketing costs	(5.5)	(5.5)	(14.2)	(14.2)
Offline Marketing costs	(6.1)	(6.1)	(8.7)	(8.7)
Revenue after marketing costs	10.5	1.4	27.5	(7.0)
Overheads	(16.6)	(16.6)	(16.9)	(16.9)
Depreciation and amortization	(5.9)	(5.9)	(5.5)	(5.5)
Exceptional operating costs	-	(0.7)	-	(4.5)
Share based payments	-	(2.8)	-	0.6
Amortisation of acquired intangibles	-	(4.4)	-	(4.4)
Operating (loss)/profit	(12.0)	(29.0)	5.1	(37.7)
EBITDA	(6.1)	(18.7)	10.6	(27.8)

 

 

See glossary for reconciliation to nearest GAAP measure

 

Revenue decreased by 18% to £13.0m (FY20: £15.9m). The reduction in revenue is due to a lack of opportunity and demand for travel during the year.

 

The summer holiday booking peak, which traditionally occurs in January, did not take place this year due to tightening restrictions over the Christmas period followed by a complete and indefinite lockdown announced on 4 January 2021. In addition, the Group's decision in May 2021 to withdraw from sale holidays departing prior to 1 September 2021 impacted booking volumes, but also reduced the opportunity for significant business disruption, holiday cancellations and customer dissatisfaction through summer.

 

As a result, adjusted revenue, which is grossed up for revenue on bookings taken during the period but subsequently cancelled, decreased by (56%) to £22.1m (FY20: £50.4m).

 

Offline marketing spend of £6.1m, relates to three distinct campaigns through the year:

·    The 'Everything's Better on the Beach', and 'We're Ready When You Are' brand campaign, which went live on Christmas Day;

·    'Summer off Sale', where we put consumers before cash. This was possible due to the Group's unique business model, which is not reliant on generating customer cash as working capital;

·    'Free COVID tests' in an industry first to start to build back consumer confidence in an industry that had been dented by a significant period of complexity, costly testing and disruption.

 

As a result of these campaigns, even during a period of exceptionally low demand, brand awareness in September 2021 was ahead of September 2019.

 

Online marketing spend, which flexes with holiday search demand, was 42% (FY20: 89%) of revenue. This reduction is due to a lower proportion of bookings made being subsequently cancelled. Adjusting for these cancellations online marketing cost efficiency was similar to the previous year at 25% (FY20: 28%).

 

	2021 Adjusted	2021 GAAP	2020 Adjusted	2020 GAAP
Overheads as a % of revenue	75%	127%	34%	106%

 

The severe market conditions and resulting cancellations have resulted in increased operating leverage in the year. Overheads as a percentage of adjusted revenue have increased to 75% (FY20: 34%).

 

Fixed costs have also increased due to ongoing investments in people and technology as well as continued regulatory cost pressures such as insurance and other costs related to being a UK Plc.

 

As a result of the market dynamics explained above operating losses have decreased to £29.0m (FY20: £37.7m).

 

Classic Collection Holidays segment performance

 

	2021 Adjusted £m	2021 GAAP £m	2020 Adjusted £m	2020 GAAP £m
Revenue	6.5	6.5	16.9	16.9
Gross profit	0.6	0.6	2.6	2.6
Gross Profit after marketing costs	0.2	0.2	1.6	1.6
Overheads	(3.3)	(3.3)	(3.5)	(3.5)
Depreciation and amortisation	(0.2)	(0.2)	(0.1)	(0.1)
Amortisation of acquired intangibles	-	(1.1)	-	(1.1)
Exceptional operating costs	-	(0.4)	-	(0.1)
Operating loss	(3.3)	(4.8)	(2.0)	(3.2)
EBITDA	(3.1)	(3.5)	(1.9)	(2.0)

 

See glossary for reconciliation to nearest GAAP measure.

 

As a principal (rather than an agent) Classic accounts for revenue on a "travelled" basis and reports revenue on a gross basis. As very few customers were able to travel during the year, results have been impacted significantly.

 

Revenue decreased by 62% to £6.5m (FY20: £16.9m) and operating losses increased to £4.8m (FY20: £3.2m). However the forward order book is healthy.

 

The management team continues to develop the overall proposition and has launched new boutique, tailor-made and long haul programmes during the year.

 

Throughout the pandemic, Classic has been recognised for delivering excellent customer service and has this year launched the 'acclaimed' programme which is designed to foster even stronger relationships with travel agents.

 

Classic Package Holidays segment performance

 

	2021 Adjusted £m	2021 GAAP £m	2020 Adjusted £m	2020 GAAP £m
Revenue	1.8	1.7	3.6	0.8
Cost of sales	(1.3)	(0.9)	(3.5)	(3.3)
Gross profit	0.5	0.8	0.1	(2.5)
Gross Profit after marketing costs	0.1	0.4	(0.1)	(2.8)
Overheads	(1.8)	(1.8)	(1.4)	(1.4)
Depreciation and amortisation	(0.2)	(0.2)	(0.2)	(0.2)
Operating (loss)	(1.9)	(1.6)	(1.7)	(4.4)
EBITDA	(1.7)	(1.4)	(1.5)	(4.2)

 

See glossary for reconciliation to nearest GAAP measure

 

CPH provides an online B2B platform that enables high street travel agents to sell dynamically packaged holidays to their customers. Revenue for the period was £1.7m (FY20: £0.8m), and the operating loss was £1.6m (FY20: £4.4m). The CPH trading result has been significantly impacted by COVID-19 due to a drop in demand and temporary closure of high street shops for much of the year.

 

The brand was created in 2019, and despite the pandemic, has continued to make significant strategic progress. CPH product is now available in 2,500 high street travel agents and c.3,500 hotels are now available across both short and long haul destinations. At the year end, forward orders were more than double what they were as at 30 September 2019 and represented holidays with a total sales value of £9.5m.

 

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 charge of £2.8m (FY20: credit £0.6m). The FY20 credit related to the reversal of benefits accrued for the 2018 incentive scheme which, as a result of COVID-19, did not vest in full.

 

On 22 December 2020 the Remuneration Committee approved the introduction of an underpin/minimum award for the nil cost awards originally granted on 9 July 2019. This removal of a non-market based condition has resulted in a catch up charge to the FY21 income statement of £2.0m that reflects the scheme progress to date. These awards vested on 30 September 2021.

 

Taxation

The Group tax credit of £6.5m represents an effective rate of 18% (FY20: 19%) which is lower than the standard UK rate of 19% (FY20: 19%).

 

During the period, a Corporation Tax rebate of £4.2m was received and no payments on account have been made due to the loss making position of the Group.

 

Cash Flow

 

£m	FY21	FY20
Loss before tax	(36.7)	(46.3)
Depreciation and amortisation	11.9	11.4
Net finance costs / (income)	0.9	0.4
Share based payments	2.8	(0.6)
Net loss / (gain) on disposal of property, plant and equipment	0.1	-
Movement in working capital	18.0	(39.7)
Corporation tax	4.2	(0.2)
Cash generated from operating activities	1.2	(75.0)
Other Cash Flows
Capitalised development expenditure	(4.6)	(4.0)
Capital expenditure net of proceeds	(0.5)	(1.0)
Net finance (costs) / income	(0.9)	(0.4)
Payment of lease liabilities	(0.6)	(0.4)
Cash flows excl share proceeds and dividends paid	(5.4)	(80.8)
Proceeds from issue of share capital	24.9	65.1
Dividends paid	-	(2.6)
Total net cash flows	19.5	(18.3)
Opening cash balance	36.5	54.8
Closing cash at bank	56.0	36.5
Closing trust balance	39.0	25.8

 

The cash flow profile of the Group is seasonal with approximately 50% of customers travelling in the period June to August and therefore in a normal year the cash flows (excluding any cash held in the trust account) experience a trough prior to June and a peak following this.

 

Net cash outflows excluding share proceeds and dividends were £5.4m which is £75.4m lower than last year (outflow of £80.8m). This is due to reduced losses and a partial unwind of the working capital position at 30 September 2020 and in particular amounts due from airlines which have been substantially recovered in the period.

 

Not included in the Group's cash position is £39m (FY20:£25.8m) of customer prepayments held in a trust account to be released once the customer has travelled.

 

As a result of the share placings in FY20 and FY21, and the extension of banking facilities to December 2023, the Group has sufficient cash reserves to continue to invest ahead of an expected recovery of the international travel market in calendar year 2022.

 

Dividend

As announced on 15 June 2021, no interim dividend was declared during FY21. In view of the performance in light of the pandemic and the planned investment in technology, people, brand and customer proposition in FY22, the Board is not recommending a final dividend in respect of FY21.

 

Shaun Morton

Chief Financial Officer

9 December 2021

 

Consolidated Income Statement and Statement of Comprehensive Income
Year ended 30 September 2021					2021		2020
	Note				£'m		£'m
Revenue	4,5				21.2		33.7
Cost of sales					(6.8)		(17.7)
Gross profit					14.4		16.0
Administrative expenses	6				(50.2)		(61.9)
Group operating loss					(35.8)		(45.9)
Finance costs					(1.0)		(0.8)
Finance income					0.1		0.4
Net finance costs					(0.9)		(0.4)
Loss before taxation					(36.7)		(46.3)
Taxation	8				6.5		7.5
Loss for the year					(30.2)		(38.8)
Other comprehensive income:
Net (loss)/gain on cash flow hedges					(0.1)		0.1
Total comprehensive loss for the year					(30.3)		(38.7)
Attributable to:
Equity holders of the parent					(30.3)		(38.7)
Basic and diluted earnings per share attributable to the equity Shareholders of the Company:
Basic loss per share	9				(19.0p)		(27.6p)
Diluted loss per share	9				(19.0p)		(27.6p)
Adjusted loss per share *	9				(9.7p)		(0.5p)
Adjusted profit measure *
Adjusted (LBT)/PBT (before amortisation of acquired intangibles, exceptional items and share based payments) *	6				(18.4)		0.6
* This is a non GAAP measure, refer to notes. The adjusted loss per share presented is both basic and diluted.

 

Consolidated Balance Sheet
At 30 September 2021
		2021		2020
Assets	Note	£'m		£'m
Non-current assets
Intangible assets	10	74.1		79.6
Property, plant and equipment		8.3		9.9
Investment property		-		0.6
Total non-current assets		82.4		90.1
Current assets
Trade and other receivables	11	94.9		104.7
Deferred tax		3.6		-
Derivative financial instruments		-		0.5
Corporation tax receivable		0.8		4.5
Trust account	12	39.0		25.8
Cash at bank		56.0		36.5
Total current assets		194.3		172.0
Total assets		276.7		262.1
Equity
Share capital		1.7		1.6
Share premium		89.6		64.8
Retained earnings		187.6		215.0
Capital contribution reserve		0.5		0.5
Merger reserve		(129.5)		(129.5)
Total equity		149.9		152.4
Non-current liabilities
Deferred tax		-		2.6
Trade and other payables	13	2.5		3.8
Total non-current liabilities		2.5		6.4
Current liabilities
Trade and other payables	13	119.4		92.4
Provisions	13	4.6		10.9
Derivative financial instruments		0.3		-
Total current liabilities		124.3		103.3
Total liabilities		126.9		109.7
Total equity and liabilities		276.7		262.1

 

Consolidated Statement of Cash Flows
Year ended 30 September 2021
		2021		2020
	Note	£'m		£'m
Loss before taxation		(36.7)		(46.3)
Adjustments for:
Depreciation	6	1.8		1.9
Amortisation of intangible assets	6	10.1		9.5
Finance costs		1.0		0.8
Finance income		(0.1)		(0.4)
Share based payments		2.8		(0.6)
Gain on termination of lease	14	(0.1)		-
Loss on disposal of property, plant and equipment	14	0.2		-
		(21.0)		(35.1)
Changes in working capital:
Decrease/(Increase) in trade and other receivables	11	9.9		(7.4)
Increase/(decrease) in trade and other payables	13	21.3		(50.6)
(Increase)/decrease in trust account		(13.2)		18.3
		18.0		(39.7)
Cash flows from operating activities
Cash used in operating activities		(3.0)		(74.8)
Tax received/(paid)		4.2		(0.2)
Net cash outflow from operating activities		1.2		(75.0)
Cash flows from investing activities
Purchase of property, plant and equipment		(0.5)		(1.2)
Proceeds from disposal of assets held for sale		-		0.2
Purchase of intangible assets	10	(4.6)		(4.0)
Interest received		0.1		0.4
Net cash outflow from investing activities		(5.0)		(4.6)
Cash flows from financing activities
Proceeds from issue of share capital		26.0		65.1
Costs related to shares issued paid		(1.1)		-
Equity dividends paid		-		(2.6)
Interest paid on borrowings		(0.9)		(0.6)
Interest paid on lease liabilities		(0.1)		(0.2)
Payment of lease liabilities	14	(0.6)		(0.4)
Net cash inflow from financing activities		23.3		61.3
Net increase in cash at bank and in hand		19.5		(18.3)
Cash at bank and in hand at beginning of year		36.5		54.8
Cash at bank and in hand at end of year		56.0		36.5

 

Consolidated Statement of Changes in Equity
Year ended 30 September 2021
	Share capital	Share premium	Merger reserve	Capital contribution reserve	Retained earnings	Total
	£'m	£'m	£'m	£'m	£'m	£'m
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 income for the year	-	-	-	-	(38.7)	(38.7)
Balance at 30 September 2020	1.6	64.8	(129.5)	0.5	215.0	152.4
Share based charge including tax	-	-	-	-	2.9	2.9
Shares issued during the year	0.1	25.9	-	-	-	26.0
Costs related to shares issued	-	(1.1)	-	-	-	(1.1)
Total comprehensive loss for the year	-	-	-	-	(30.3)	(30.3)
Balance at 30 September 2021	1.7	89.6	(129.5)	0.5	187.6	149.9

 

Notes to the Consolidated Financial Statements

Year ended 30 September 2021

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 address of 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 Accounting Standards in conformity with the requirements of the Companies Act 2006; and - International Financial Reporting Standards ('IFRSs') adopted pursuant to Regulation (EC) No 1606/2002 as it applies in 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

The Group covers its daily working capital requirements by means of cash and a £50m Revolving Credit Facility ("RCF") expiring December 2023. In addition, the Group has a CLBILS facility of £25m. As at 30 September 2021 cash (cash, excluding cash held in trust which is ringfenced and not factored into the going concern assessment) was £56.0m (30 September 2020: cash of £36.5m). Given the extended disruption to international travel from the UK throughout 2021 and the ongoing trading environment across the sector, the Group took a number of actions to improve overall liquidity, including on 7 July 2021 raising £24.9m net of fees through issuing new shares, to ensure that it is well placed to operate and to trade once travel restrictions are eased. On 25 May 2021, the Group took further action to ensure that the facility was fit for purpose. This included exercising a one year extension of the £25m CLBILs element of the facility, now expiring in May 2023, and resetting covenants until September 2022 to ensure the facility can be accessed through this period. This incremental liquidity has provided the Group with greater resilience and flexibility through the extended downturn in the market, and will enable the Group to exit the pandemic period in a strong position. Where holidays are cancelled as a result of the COVID-19 pandemic 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-through from airlines.   Cash received from customers for bookings that have not yet travelled is held in a ring fenced trust account and is not withdrawn until the customer returns from their holiday. Cash held in trust at 30 September 2021 was £39.0m. The trust account is described in note 12.   The Directors have assessed a going concern period through to March 2023 and have modelled a number of scenarios considering factors such as airline and hotelier resilience, employee absence and customer behaviour / demand. The Directors have also considered the impact of climate risk in these scenarios concluding that it is not expected to have a significant impact over the going concern period.  Further detail of the Group's assessment of the impact of climate risk is provided within the 'Principal risks and Uncertainties' section of this report. The Directors modelled what they consider to be a remote downside scenario of no travel or bookings until March 2023. In this scenario the Directors have assumed that variable marketing spend, which is within their control, is significantly reduced. Even in this scenario, the Group would have positive cash and no requirement to draw down on its current facilities both during the going concern review period, and in the subsequent period prior to expiry of facilities. Given the assumptions above, the mitigating actions available and within the Group's control and that in no scenario is there any requirement to access the RCF or CLBILs facility, 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

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2020; the following amended standards have been implemented however they have not had 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.

d)

Segment reporting

IFRS 8 requires operating segments to be reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the management team, including the Chief Executive Officer and Chief Financial Officer. For management purposes, the Group is organised into segments based on location, and information is provided to the management team on these segments for the purposes of resource allocation and segment performance management and monitoring.

The management team considers there to be four reportable segments:

(i) "OTB" - activity via UK websites (www.onthebeach.co.uk, www.sunshine.co.uk and www.onthebeachtransfers.co.uk)

(ii) "International" - activity via Swedish, Norwegian and Danish websites (www.eBeach.se, www.eBeach.no and www.eBeach.dk)

(iii) "CCH" - activity via the Tour Operator, Classic Collection Holidays Limited and subsidiaries

(iv) "CPH" - activity via the Classic Package Holidays online business to business portal

e)

Revenue recognition

IFRS 15 Revenue from Contracts with Customers is a principle-based model of recognising revenue from customer contracts. It has a five-step model that requires revenue to be recognised when control over goods and services are transferred to the customer. The standard requires the Group to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The following paragraphs describes the types of contracts, when performance obligations are satisfied, and the timing of revenue recognition. Further details of the disaggregation of revenue are disclosed in note 4.

As agent:

The Group acts as agent when it is not the primary party responsible for providing the components that make up the customers booking and it does not control the components before they are transferred to customers. Revenue comprises the fair value of the consideration received or receivable in the form of commission. Service fees/commissions are earned from the consumer through purchases of travel products such as flight tickets or hotel accommodation from third party suppliers. Revenue in the form of commission or service fees recognised when the performance obligation of arranging and facilitating the customer to enter into individual contracts with suppliers is satisfied, usually on delivery of the booking confirmation. Given the level of cancellations the Group has experienced, the commission is considered to represent variable consideration and the transaction price of commission income determined using the expected value method, such that revenue is recognised only to the extent that it is highly probable that there will not be a significant reversal of revenue recognised in future periods. The sum of the range of probabilities of cancellations in different scenarios based on historical trends and best estimate of future expectations is used to calculate the extent to which the variable consideration is reduced and a corresponding refund liability (presented as a cancellation provision) recognised in provisions. Revenue earned from sales through CPH are stated net, with the commission payable to agents recognised in the cost of sales.

As principal:

The Group acts as principal when it is the primary party responsible for providing the components that make up the customer's booking and it controls the components before transferring to the customer. Revenue represents amounts received or receivable for the sale of package holidays and other services supplied to the customers. Revenue is recognised when the performance obligation of delivering an integrated package holiday is satisfied, usually over the duration of the holiday. Revenue is stated net of discounts, rebates, refunds and value added tax.

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 CCH 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 CCH segment will continue to be treated as a principal on the basis that CCH have the primary responsibility for fulfilling the package holiday for the customer.

Capitalised website development costs

Determining the amounts to be capitalised involves judgement and is dependent upon the nature of the related development; namely whether it is capital (as relating to the enhancement of the website) or expenditure (as relating to the ongoing maintenance of the website) in nature. In order to capitalise a project, the key judgement management have made is in determining the project's ability to produce future economic benefits. In the year ending 30 September 2021, the proportion of development costs that have been capitalised is lower than pre-pandemic reporting periods due to the development team undertaking more operational tasks that have been specific to the Group's response to COVID-19.

Deferred tax asset

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. The Group has concluded that the deferred assets will be recoverable using the estimated future taxable income based on the approved projections and plans for the Group.

Critical accounting estimates

COVID-19

The recognition of costs and provisions relating to disruption caused by the COVID-19 pandemic is an area of significant estimation. These adjustments relate primarily to lost revenue resulting from the cancellation of bookings in the financial year and beyond. The estimation includes the loss of revenues caused by the cancellation and refund of bookings, off-set by extent to which related holiday costs can be recovered. Key areas of estimation include:

COVID cancellation provision

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 up to 20% of forward bookings as at the balance sheet date will be cancelled within FY22, giving rise to an estimated liability of £4.1m,  shown in note 13. In estimating this cancellation rate management have considered: (i) season; as historically summer cancellations are lower than the preceding winter; (ii) flight supplier load factors; and (iii) experience of summer FY21 during the pandemic but taking into consideration the current levels of vaccination rate. The level of forward bookings beyond summer 2022 is not significant and any changes to this assumption would not have a material impact. If the group was to increase the percentage of cancellations by 5ppts then the provision required would increase by 23%.

Prepayments with suppliers

In the normal course of business the Group will advance payments to certain hotel suppliers for holidays booked. A risk assessment is made based on a review of each significant suppliers financial stability with varying % provisions applied to different risk levels. If the Group was to increase its % provision applied by 5ppts across all specific risk categories not already fully provided, this would have resulted in a decrease of £0.1m in the prepayments of £5.3m shown in Note 11.

Recoverability of airline debtor

In relation to flights cancelled during the financial year, the Group has considered the impact of the pandemic on the recoverability of amounts paid to airlines in lieu of flights which have been cancelled which as at 30 September 2021 is a receivable balance of £3.3m - see note 11.

The Group has a legal right to a refund; the airline has an obligation to refund in the event that the flight is cancelled. European Regulations provide 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. Where a flight has been cancelled, the Group has recognised a net receivable for the expected recoverable amount in accordance with the considerations above. Management have calculated the provision for airline refunds owed based on factors such as age, flight supplier and payment method.

Impact of COVID-19

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

2021

Adjusted

Impact of COVID-19

GAAP

£'m

£'m

£'m

Group revenue

Revenue as Agent

24.0

(9.3)

14.7

Revenue as Principal

6.5

-

6.5

Group Cost of Sales

(7.2)

0.4

(6.8)

Group overheads

(50.0)

(1.1)

(51.1)

Group loss before tax

(26.7)

(10.0)

(36.7)

The total exceptional items in the year ended 30 September 2021 of £10.0m 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 £8.9m. Exceptional operating costs of £1.1m includes legal and professional fees and supplier provisions.

The total exceptional items in the year ended 30 September 2020 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. £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 10).

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 2e of these financial statements.

For the year ended 30 September 2021

OTB

Int'l

CCH

CPH

Total

£'m

£'m

£'m

£'m

£'m

Revenue before exceptional cancellations

Sales as agent

22.1

0.1

-

1.8

24.0

Sales as principal

-

-

6.5

-

6.5

Total Revenue before exceptional cancellations

22.1

0.1

6.5

1.8

30.5

Exceptional cancellations*

(9.1)

(0.1)

-

(0.1)

(9.3)

Total Revenue

13.0

-

6.5

1.7

21.2

For the year ended 30 September 2020

OTB

Int'l

CCH

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

*Exceptional cancellations in the year ended 30 September 2021 and 30 September 2020 relate to the impact of COVID-19 (see note 3)

 

5	Segmental report
	As explained in note 2d, the management team considers the reportable segments to be ''OTB'', "International", ''CCH'' 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. CCH recognises revenue as a principal on a gross basis.
		2021						2020
		OTB	Int'l	CCH	CPH	Total		OTB	Int'l	CCH	CPH	Total
		£'m	£'m	£'m	£'m	£'m		£'m	£'m	£'m	£'m	£'m
	Income
	Revenue before exceptional cancellations	22.1	0.1	6.5	1.8	30.5		50.4	0.3	16.9	3.6	71.2
	Exceptional cancellations*	(9.1)	(0.1)	-	(0.1)	(9.3)		(34.5)	(0.2)	-	(2.8)	(37.5)
	Total Revenue	13.0	-	6.5	1.7	21.2		15.9	0.1	16.9	0.8	33.7
	Adjusted EBITDA	(6.1)	(0.2)	(3.1)	(1.7)	(11.1)		10.6	(0.3)	(1.9)	(1.5)	6.9
	Share based (charge)/credit	(2.8)	-	-	-	(2.8)		0.6	-	-	-	0.6
	Impact of COVID-19	(9.8)	(0.1)	(0.4)	0.3	(10.0)		(38.7)	(0.2)	(0.1)	(2.7)	(41.7)
	Other exceptional costs	-	-	-	-	-		(0.3)	-	-	-	(0.3)
	EBITDA	(18.7)	(0.3)	(3.5)	(1.4)	(23.9)		(27.8)	(0.5)	(2.0)	(4.2)	(34.5)
	Depreciation and amortisation	(10.3)	(0.1)	(1.3)	(0.2)	(11.9)		(9.9)	(0.1)	(1.2)	(0.2)	(11.4)
	Group operating loss	(29.0)	(0.4)	(4.8)	(1.6)	(35.8)		(37.7)	(0.6)	(3.2)	(4.4)	(45.9)
	Finance costs					(1.0)						(0.8)
	Finance income					0.1						0.4
	Loss before taxation					(36.7)						(46.3)
	Non-current assets
	Goodwill	31.6	-	4.6	4.0	40.2		31.6	-	4.6	4.0	40.2
	Other intangible assets	26.0	0.1	7.7	0.1	33.9		30.1	0.1	8.9	0.3	39.4
	Property, plant and equipment	5.8	-	2.5	-	8.3		8.1	-	1.8	-	9.9
	Investment property	-	-	-	-	-		-	-	0.6	-	0.6
	*Exceptional cancellations in the year ended 30 September 2021 and 30 September 2020 relate to the impact of COVID-19.

 

6	Operating profit
a)	Operating expenses
	Expenses by nature including exceptional items and impairment charges:
							2021	2020
							£'m	£'m
	Marketing						10.9	22.8
	Depreciation						1.8	1.9
	Staff costs (including share based payments)						18.5	14.6
	IT hosting, licences & support						2.5	2.4
	Office expenses						0.8	0.8
	Credit / debit card charges						0.5	1.7
	Insurance						1.6	1.6
	Other						2.4	2.0
	Administrative expenses before exceptional items & amortisation of intangible assets						39.0	47.8
								-
	Impact of COVID-19						1.1	4.3
	Other exceptional items						-	0.3
	Amortisation of intangible assets						10.1	9.5
	Exceptional items and amortisation of intangible assets						11.2	14.1
	Administrative expenses						50.2	61.9
b)	Exceptional items
		2021			2020
		Adjusted	Impact of COVID-19	GAAP	Adjusted	Impact of COVID-19	Other exceptional items	GAAP
		£'m	£'m	£'m	£'m	£'m	£'m	£'m
	Group revenue
	Revenue as Agent	24.0	(9.3)	14.7	54.3	(37.5)	-	16.8
	Revenue as Principal	6.5	-	6.5	16.9	-	-	16.9
	Group Cost of Sales	(7.2)	0.4	(6.8)	(17.8)	0.1	-	(17.7)
	Group overheads
	Administrative expenses	(49.1)	(1.1)	(50.2)	(57.3)	(4.3)	(0.3)	(61.9)
	Net finance costs	(0.9)	-	(0.9)	(0.4)	-	-	(0.4)
	Group loss before tax	(26.7)	(10.0)	(36.7)	(4.2)	(41.7)	(0.3)	(46.3)
	The total exceptional items in the year ended 30 September 2021 of £10.0m 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 £8.9m. Exceptional operating costs of £1.1m includes legal and professional fees and supplier provisions.
	The exceptional items in the year ended 30 September 2020 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. Other exceptional items of £0.3m relate to legal and professional fees.
c)	Services provided by the company auditor
	During the year, the Group obtained the following services from the operating company's auditor.
							2021	2020
							£'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						0.3	0.2
	- Review of interim financial statements						-	-
	- Other assurance services						-	-
							0.4	0.3
d)	Adjusted (LBT)/PBT
	Management measures the overall performance of the Group by reference to Adjusted (LBT)/PBT, a non-GAAP measure as it gives a meaningful year on year comparison of the Group's performance:
							2021	2020
							£'m	£'m
	Profit before taxation						(36.7)	(46.3)
	Impact of COVID-19						10.0	41.7
	Other exceptional costs						-	0.3
	Total exceptional items						10.0	42.1
	Amortisation of acquired intangibles*						5.5	5.5
	Share based payments charge**						2.8	(0.6)
	Adjusted (LBT)/PBT						(18.4)	0.6
	* These charges relate to amortisation of brand, website technology and customer relationships recognised on the acquisition of subsidiaries and are added back as they fall outside of the normal activities of the Group.
	**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. On 10 December 2020 the remuneration committee approved the introduction of an underpin/minimum award for the nil cost awards originally granted 9 July 2019 to key management. This removal of a non-marked based condition has resulted in a catch up charge to the income statement of £2.0m that reflects the scheme progress to date.

 

7	Employees and Directors
a)	Payroll costs
	The aggregate payroll costs of these persons were as follows:
		2021		2020
		£'m		£'m
	Wages and salaries	18.0		17.9
	Defined contribution pension cost	0.4		0.3
	Social security costs	1.9		1.8
	Share-based payment charge/(credit)	2.8		(0.6)
		23.1		19.4
	Staff costs above include £4.6m (2020: £4.0m) employee costs capitalised as part of software development. During the year £0.2m was claimed in relation to the Coronavirus Job Retention Scheme (2020: £0.7m). This has been netted off against other exceptional costs in relation to COVID 19.
b)	Employee numbers
	Average monthly number of people (including Executive Directors) employed:
		2021		2020
	By reportable segment:	No.		No.
	UK	365		419
	Int'l	6		10
	CCH	115		116
	CPH	8		5
		494		550
c)	Directors' emoluments
	The remuneration of Directors was as follows:	2021		2020
		£'m		£'m
	Aggregate emoluments	0.5		0.9
	Defined contribution pension	-		-
	Share-based payment charges	0.1		0.1
		0.6		1.0
	Remuneration was paid by On the Beach Limited, a subsidiary company of the Group.
	The remuneration of the highest paid director was as follows:
		2021		2020
		£'m		£'m
	Aggregate emoluments	0.3		0.3
	Share-based payment charges	0.1		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:
		2021		2020
		£'m		£'m
	Wages and salaries	1.7		1.6
	Short-term non-monetary benefits	-		-
	Share-based payment charges	2.1		0.1
		3.8		1.7
e)	Retirement benefits
	Included in pension contributions payable by the Group of £0.4m (2020: £0.3m) is £1,300 (2020: £42,000) of contributions that the Group made to a personal pension scheme in relation to one Executive Director.

 

8	Taxation
		2021		2020
		£'m		£'m
	Current tax on loss for the year	(0.4)		(4.0)
	Adjustments in respect of prior years	(0.1)		-
	Total current tax	(0.5)		(4.0)
	Deferred tax on profits for the year
	Origination and reversal of temporary differences	(6.1)		(3.5)
	Adjustments in respect of prior years	0.1		-
	Total deferred tax	(6.0)		(3.5)
	Total tax credit	(6.5)		(7.5)
	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.
		2021		2020
		£'m		£'m
	Profit on ordinary activities before tax	(36.7)		(46.3)
	Profit on ordinary activities multiplied by the effective rate of corporation tax in the UK of 19% (2020: 19%)	(7.0)		(8.8)
	Effects of:
	Impact of difference in current and deferred tax rates	0.1		1.3
	Adjustments in respect of prior years	(0.0)		-
	Expenses not deductible	0.3		-
	Total taxation credit	(6.5)		(7.5)
	The tax charge for the year is based on the effective rate of UK corporation tax for the period of 19% (2020: 19%). An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. The deferred tax assets and liabilities at 30 September 2021 have been calculated based on these rates.

 

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 2021
	Basic EPS	159.3	(30.2)	(19.0p)
	Diluted EPS*	159.3	(30.2)	(19.0p)
	Adjusted EPS	159.3	(15.4)	(9.7p)
	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.
	Adjusted earnings after tax is calculated as follows:
			2021	2020
			£'m	£'m
	Profit for the year after taxation		(30.2)	(38.8)
	Adjustments (net of tax at 19%)
	Impact of exceptional COVID-19 cancellations		8.1	33.8
	Other exceptional costs		-	0.3
	Amortisation of acquired intangibles		4.5	4.5
	Share based payment charges*		2.2	(0.5)
	Adjusted earnings after tax		(15.4)	(0.7)
	* 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 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
	Additions	-	-	4.6	-	-	4.6
	At 30 September 2021	35.9	40.2	20.2	22.8	6.5	125.6
	Accumulated amortisation
	At 1 October 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
	Charge for the year	2.4	-	4.6	2.4	0.7	10.1
	At 30 September 2021	17.5	-	13.3	18.4	2.3	51.5
	Net book amount
	At 30 September 2021	18.4	40.2	6.9	4.4	4.2	74.1
	At 30 September 2020	20.8	40.2	6.9	6.8	4.9	79.6
	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 2021		As at 30 September 2020
	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	CCH	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 "CCH" and "CPH" cash generating units.
	"OTB" CGU
	The Group performed its annual impairment test as at 30 September 2021 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 (2020: 2 percent); the forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2 percent (2020: 2 percent), this being the Directors' 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 10 percent (2020: 11 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 2021 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 (2020: 2 percent); the forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2 percent (2020: 2 percent), this being the Directors' 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 10 percent (2020: 11 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.
	"CCH" CGU
	The Group performed its annual impairment test as at 30 September 2021 on the "CCH" 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 (2020: 2 percent),  the forecasts are then extrapolated in perpetuity based on at a 2 percent growth rate (2020: 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 10 percent (2020: 11 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 2021 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 5 percent (2020: 2 percent),  the forecasts are then extrapolated in perpetuity based on a 2 percent growth rate (2020: 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 10 percent (2020: 11 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.
	Climate-related risks
	The Group is in the process of conducting a materiality assessment of climate-related risks and will adjust the key assumptions used in value-in-use calculations and sensitivity to changes in assumptions should a change be required.
	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 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 recognised in administrative expenses in the period incurred, in 2021 this was £1.4m (2020: £1.3m). £0.3m of the expensed costs in the current year were due to projects no longer viable due to the impact of COVID-19 (2020: £0.7m).
	Sensitivity to changes in assumptions
	Sensitivity analysis has been completed on key assumptions in isolation and in combination, and the headroom taken is significant. 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. Management considers that no reasonably possible changes in assumptions would reduce a CGU's headroom to nil.

 

11	Trade and other receivables
			2021		2020
	Amounts falling due within one year:		£'m		£'m
	Trade receivables - net		79.5		58.9
	Other receivables and prepayments		15.4		45.9
			94.9		104.7
	For the year ended 30 September 2021, other receivables includes £3.3m receivable in respect of amounts due from airlines as a result of exceptional COVID-19 cancellations. Other receivables and prepayments includes £5.3m of advanced payments to suppliers.
	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. Substantially all of the amount has been fully recovered in the current year with the balance having been provided for. Other receivables and prepayments includes £2.2m of advanced payments to suppliers.

 

12	Trust Account
	Trust accounts are restricted cash held separately and only accessible once the Trust rules are met as approved by our Trustees and the Civil Aviation Authority, this is at the point the customer has travelled or the booking is cancelled and refunded.

 

13	Trade, other payables and provisions
			2021		2020
			£'m		£'m
	Non-current
	Lease liabilities (note 14)		2.5		3.8
	Current
	Trade payables		104.3		80.2
	Accruals and other payables		14.8		11.8
	Lease liabilities (note 14)		0.4		0.4
	Provision		4.6		10.9
			126.6		107.1
	Trade payables includes £0.9m (2020: £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.
		Covid-19 cancellations	Other Covid-19 related provisions		Total
		£'m	£'m		£'m
	At 1 October 2020	(10.0)	(0.8)		(10.8)
	Arising during the year	(1.8)	(0.3)		(2.1)
	Utilised	7.6	0.5		8.1
	Unused amounts reversed	0.1	0.1		0.2
	Unwinding of discount and changes in the discount rate	-	-		-
	At 30 September	(4.1)	(0.5)		(4.6)
	Current	(4.1)	(0.5)		(4.6)
	Non-current	-	-		-
	Covid-19 cancellations
	A provision is recognised in respect of expected future cancellations in relation to bookings taken before 30 September 2021. We expect this provision to be utilised over the next year. Assumptions used to calculate the provision for cancellations were to the extent to which holidays will be impacted by the pandemic and he level of revenue that will be reversed as a result of the cancellations, see note 3.
	Other Covid-19 related provisions
	A provision has been recognised for specific suppliers, we expect this provision to be utilised over the next year. Assumptions used to calculate the other Covid-19 related provisions were the extent to which holidays will be impacted by the pandemic, see note 3.
14	Leases
	The Group as a lessee
	For the year ending 30 September 2020, the Group had lease contracts for two properties, both with a lease term of 10 years. On 29 April 2021, the Group exercised the termination clause on the lease of one of the properties, on this date the Group performed a reassessment of the lease liability resulting in a £0.1m gain on termination. 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 lease-related expenses were recognised under IFRS 16 in the profit or loss:
			2021		2020
			£'m		£'m
	Depreciation expense of right-of-use assets		0.5		0.5
	Interest expense on lease liabilities		0.1		0.2
	Gain on termination of lease		(0.1)		-
	Total amount recognised in profit or loss		0.5		0.7
	Set out below are the carrying amounts of lease liabilities (included trade and other payables) and the movements during the period:
			2021		2020
			£'m		£'m
	As at 1 October		4.2		4.5
	Accretion of interest		0.1		0.2
	Payments		(0.6)		(0.4)
	Reassessment of lease term		(0.8)		-
	As at 30 September		2.9		4.2
	Current (note 13)		0.4		0.4
	Non-current (note 13)		2.5		3.8
	The Group had total cash outflows for leases of £0.6m in 2021 (£0.4m in 2020). The above table satisfies the requirements of IAS 7.44A to present a net debt reconciliation.

 

15	Borrowings
	Bank Facility
	The Group has a revolving credit facility with Lloyds Bank plc. The purpose of the facility is to meet the day to day working capital requirements of the Group.
	The total facility is £75m and has two elements as follows:
	·        Core facility of £50m expiring December 2023; and
	·        CLBILS facility of £25m expiring May 2023 (extended to May 2023 on 25 May 2021).
	The interest rate payable on the core facility 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 interest rate payable on the CLBILS facility is equal to the base rate plus a margin. The margin contained within the facility is 2.30% per annum for the facility or any unpaid sum.
	On 25 May 2021 covenant tests were amended up to and including 30 September 2022 to account for the impact of COVID-19 on the Group's results, tests return to normal from 1 October 2022.
	The terms of the facility following 1 October 2022 include the following 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 shall not exceed 2:1
	The terms of the facility prior to 1 October 2022 include the following key financial covenants:
	i)              LTM minimum EBITDA: June 21 £11.6m loss: September 21 £18.4m loss; December 21 £20.4m loss; March 22 £1.2m loss
	ii)             EBITDA/Net debt ratio; June 22 2.5:1 ; September 22 2.25:1
	The RCF is available for other credit uses including currency hedging liabilities and corporate credit cards. At 30 September 2021, the liabilities for these other credit uses was £2.1m, leaving £73m of the Lloyds facility available for use. Card facilities with other providers remain available for use.
	The amount drawn down in cash at 30 September 2021 was £nil and there has been nothing drawn down post balance sheet date.

 

16	Related party transactions
	No related party transactions have been entered into during the year.
	Transactions with key management personnel have been disclosed in note 7(d).

 

Principal risks and uncertainties

 

The Board has carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency or liquidity. A summary of the nature of the risks currently faced by the Group is set out below. A more detailed explanation of the risks currently faced by the Group and how the Company seeks to mitigate those risks can be found in the risk management section of the Group's Annual Report and Accounts for the year ended 30 September 2021.

·    Consumer demand: A recession or reduced economic growth can lead to reduced job security and a reduction in consumer leisure spending.  A weak pound makes holidays more expensive. High-profile corporate failures reduce consumer confidence to make 'big ticket' purchases. Terrorist attacks, war/acts of force and civil unrest undermine consumer confidence. COVID-19 has shifted consumer behaviour with many people choosing not to book a holiday or delaying booking. Ryanair has sought to degrade the customer experience for customers of OTAs which could reduce customer demand for the Group's holidays. Climate change could impact demand e.g. if customers choose to travel less frequently.

 

·   Flight supply: A lack of flight supply/capacity impacts the Group's ability to fulfil consumer demand for holidays. Where the Group does not have an agreement in place with an airline, such airline may not wish to accept bookings from the Group's customers and might seek to impede the Group's access to flight data and bookability. Certain airlines use technological and other means to prevent the Group's bookings or to apply a price difference to make the Group's bookings more expensive, which could make the Group's offering less extensive or more expensive which could have a  material adverse effect on the Group. The Group is one of several OTAs against which Ryanair has brought litigation in Ireland in connection with Ryanair's efforts to prevent OTAs from booking and selling its flights. The legal process, which began in 2010, is ongoing but remains at an early stage. The case lay dormant for over 3 years with no material developments in that period, and as a result the Group is seeking to strike out the claim on the basis of inordinate and inexcusable delay. Other airlines could seek to emulate Ryanair's claim against OTAs. Litigation is unpredictable and if Ryanair were to prevail, this could have a material impact on the Group's business. Ryanair's aggression towards OTAs like OTB has escalated since the start of the pandemic, e.g. Ryanair has sought to block bookings and degrade the customer experience for customers of OTAs. In order to mitigate flight supply risk, the Group may take allocations of seats on certain key routes, which may involve some limited risk. If the Group cannot sell the seats profitably or the programme is cancelled, this could lead to material costs for the Group.

 

·    Supplier failure: In the event of a major airline failure, the Group must replace the customer's flight arrangements, or refund the customer in full for the holiday, with no ability to claim back the costs from the failed airline or any bond or effective insurance or the ATOL scheme/CAA (which protects consumers, not package organisers). Whilst the Group can usually recover flight costs it is owed via chargeback claims, this creates a cash flow impact.

 

·  Competition risk: The Group operates in a very competitive market. If competitors offer a more compelling proposition, this could have a material adverse effect on the Group's financial position and prospects. COVID-19 has seen the rise of refund credit notes in lieu of cash refunds which could increase competition risk as they create captive consumers for those organisers issuing the credit notes, thereby potentially reducing the demand for the Group's offering. In order to provide the most competitive range of holiday options, and in view of the dominance by certain airlines on certain flight routes, the Group must have the ability to book the widest range of airlines available. If flight supply risk increases, so would competition risk. Our customers care about climate and ESG issues and if our competitors are perceived to be doing more to meet consumer needs in this area, we could be less attractive to consumers.

 

·    Package organiser liability: The Group is responsible for the proper performance of the package holidays it sells, therefore it can be held liable for death/personal injury or illness suffered by customers that are the fault of any of the suppliers. In the event of a catastrophic injury/fatality, or multiple injuries, the cost could run into millions of pounds. The Group must also provide replacement travel services or a refund where a supplier cancels a holiday element, and provide accommodation where customers are stranded. In the current climate, less people are going on holiday which reduces personal injury claims. We do however anticipate claims in respect of refunds for cancelled holidays as a result of the disruption. Conditions in the insurance markets continue to be extremely difficult due to COVID-19 pressures, and travel is one of the most affected industries, meaning an increase in insurance costs.

 

·    Recoverability of airline refunds: The pandemic brought about a new risk in relation to the recoverability of refunds with some airlines not refunding flight costs in a timely manner or not refunding the flight costs at all because the flight still went ahead, despite restrictions on customers' ability to travel. During the pandemic, many airlines were not complying with legal obligations to refund flight costs within 7 days of the flight being cancelled. As such the Group had to refund many customers in advance of getting the monies from the airlines. Since last year, most airlines have got quicker at refunding, albeit we are still awaiting refunds for some cancelled flights.

 

·    Regulatory breach: The Group's business is highly regulated and is subject to a complex regime of laws, rules and regulations concerning travel and aviation, online commerce, financial services, consumer rights and data protection. A breach of these laws could have serious financial and reputational implications for the Group. Unfavourable changes to or interpretation of existing laws could adversely affect the Group's business and financial performance. Regulation on climate related reporting is developing at pace and the Group will need to ensure it takes appropriate action to ensure compliance with legal and regulatory obligations in this area.

 

·    Damage to brand/reputation: The Group relies on the strength of its brand to attract customers to its website and to secure bookings. Failure to maintain and protect our brand, or any events or circumstances which give rise to adverse publicity (including the conduct of airlines), could cause brand/reputation damage, lead to a loss of goodwill and reduced customer demand to book with the Group. COVID-19 had impacted our reputation and during FY21, we have been focused on taking steps to repair that damage and reinvigorate the brand. Our customers are becoming increasingly concerned about ESG matters and if consumers feel that the Group is not taking enough action in this area, it could negatively affect the perception of our brand.

 

·    IT systems and data security: The Group is exposed to security threats and the associated risk of breach whereby a third party could illegally gain access to our customers' or employees' personal data, resulting in damage to brand, material fines and litigation. The Group's growth strategy is to build Europe's leading beach holiday retailer via a single platform, multi-brand strategy. Our IT platforms must be scalable, robust and reliable. If our systems can't keep up with growing demand, this could affect our ability to deliver growth.

 

·   Business interruption:  The risk that a pandemic, terrorism-related event or other business interruption causes significant business interruption to the Group and/or its suppliers' ability to trade and/or manage the business, e.g. an event preventing head office access, website or systems downtime or restrictions on taking or making payments. Physical impacts of climate change such as flooding and forest fires could increase the risk of a significant business interruption.

 

·   People risk: The Group's ability to achieve its strategic objectives is dependent on certain key personnel, plus its ability to attract and retain skilled staff. The North West, where the Group's HQ is located, is an area where there is a high degree of competition for talent. If the Group cannot attract and retain staff, or if a member of key personnel were unable to perform their role, this could have a material impact on the Group's growth. Competition for talent has increased during the year. Unemployment levels are at historic lows and there are more job vacancies than pre-pandemic. Extended periods of disruption and restrictions due to COVID-19 could result in an erosion of resilience/ morale, incentive schemes failing to pay out, and/or talent seeking to exit the travel industry.

 

Responsibility statement

 

The responsibility statement below has been prepared in connection with the Group's Annual Report & Accounts for the year ended 30 September 2021. Certain parts thereof are not included within this announcement. We confirm that to the best of our knowledge and belief:

·    The consolidated financial statements, prepared in accordance with International Financial Reporting Standards as adopted in the European Union, give a true and fair view of the assets, liabilities, financial position, cash flows and loss of the Company and Group; and

·    The management report, which is incorporated into the strategic report, includes a fair review of the development and performance of the business and the position of the Company and Group, together with a description of the principal risks and uncertainties it faces.

This responsibility statement was approved by the Board on 10 December 2020 and is signed on its behalf by:

Shaun Morton

Chief Financial Officer

9 December 2021

 

 

Glossary of Alternative Performance Measures (APMs)

APM	Definition	Reconciliation to closest GAAP measure
Adjusted CCH EBITDA	Adjusted CCH EBITDA is based on CCH operating profit before depreciation, amortisation and the impact of exceptional items. Exceptional items consists of exceptional cancellations as result of COVID-19 in 2021 and 2020, and other exceptional items that derive from events or transactions that fall outside of the normal activities of the Group.  These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment.	Adjusted CCH EBITDA (£'m)	2021	2020
		CCH operating loss	(4.8)	(3.2)
		Impact of exceptional cancellations	0.4	0.1
		Other exceptional items	-	-
		Depreciation and amortisation	0.2	0.1
		Amortisation of acquired intangibles	1.1	1.1
		Adjusted CCH EBITDA	(3.1)	(1.9)
Adjusted CPH EBITDA	Adjusted CPH EBITDA is based on CPH operating profit before depreciation, amortisation and the impact of exceptional items. Exceptional items consists of exceptional cancellations as result of COVID-19 in 2021 and 2020, and other exceptional items that derive from events or transactions that fall outside of the normal activities of the Group.  These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment.	Adjusted CPH EBITDA (£'m)	2021	2020
		CPH operating loss	(1.6)	(4.4)
		Depreciation and amortisation	0.2	0.2
		Exceptional items	(0.3)	2.7
		Adjusted CPH EBITDA	(1.7)	(1.5)
Adjusted EPS	Adjusted EPS is calculated on the weighted average number of Ordinary share in issue, using the adjusted profit after tax.	Adjusted EPS	2021	2020
		Adjusted profit after tax	(15.4)	(0.7)
		Basic weighted average number of Ordinary Shares (m)	159.3	140.2
		Adjusted EPS (p)	(9.7)	(0.5)
Adjusted International EBITDA	Adjusted International EBITDA is based on International operating loss before depreciation, amortisation and the impact of exceptional items. Exceptional items consists of exceptional cancellations as result of COVID-19 in 2021 and 2020, and other exceptional items that derive from events or transactions that fall outside of the normal activities of the Group. These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment.	Adjusted International EBITDA (£'m)	2021	2020
		International operating loss	(0.4)	(0.6)
		Depreciation and amortisation	0.1	0.1
		Exceptional items	0.1	0.2
		Adjusted International EBITDA	(0.2)	(0.3)
Adjusted OTB EBIT	Adjusted OTB EBIT is based on OTB operating loss before the impact of exceptional items, amortisation of acquired intangibles and the non-cash cost of the share based payment schemes. Exceptional items consists of exceptional cancellations as result of COVID-19 in 2021 and 2020, and other exceptional items that derive from events or transactions that fall outside of the normal activities of the Group. These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment.	Adjusted OTB operating profit (£'m)	2021	2020
		OTB operating loss	(29.0)	(37.7)
		Exceptional items	9.8	39.0
		Share based payments	2.8	(0.6)
		Amortisation of acquired intangibles	4.4	4.4
		Adjusted OTB EBIT	(12.0)	5.1
Adjusted OTB EBITDA	Adjusted OTB EBITDA is based on OTB operating loss before depreciation, amortisation, impact of exceptional items and the non-cash cost of the share based payment schemes. Exceptional items consists of exceptional cancellations as result of COVID-19 in 2021 and 2020, and other exceptional items that derive from events or transactions that fall outside of the normal activities of the Group. These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment.	Adjusted OTB EBITDA (£'m)	2021	2020
		OTB operating loss	(29.0)	(37.7)
		Exceptional items	9.8	39.0
		Share based payments	2.8	(0.6)
		Depreciation and amortisation	5.9	5.5
		Amortisation of acquired intangibles	4.4	4.4
		Adjusted OTB EBITDA	(6.1)	10.6
Adjusted profit after tax	Adjusted Profit after Tax is based on Profit after Tax adjusted for the impact of exceptional items, amortisation of acquired intangibles and the non-cash cost of the share based payment schemes. Exceptional cancellations consist of cancellations as result of COVID-19 in 2021 and 2020. These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Group.	Adjusted profit after tax (£'m)	2021	2020
		Profit for the year	(30.2)	(38.8)
		Share based payments (net of tax)	2.2	(0.5)
		Impact of exceptional cancellations (net of tax)	8.1	33.8
		Other exceptional items (net of tax)	-	0.3
		Amortisation of acquired intangibles (net of tax)	4.5	4.5
		Adjusted profit after tax	(15.4)	(0.7)
Adjusted profit before tax	Adjusted Profit before Tax is based on Profit before Tax adjusted for the impact of exceptional items, amortisation of acquired intangibles and the non-cash cost of the share based payment schemes. Exceptional cancellations consist of cancellations as result of COVID-19 in 2021 and 2020. These costs / income are excluded by virtue of their size and in order to reflect management's view of the performance of the Group.	Adjusted profit before Tax (£'m)	2021	2020
		Profit before tax	(36.7)	(46.3)
		Amortisation of acquired intangibles	5.5	5.5
		Share Based Payments	2.8	(0.6)
		Impact of exceptional cancellations	10.0	41.7
		Other exceptional items	-	0.3
		Adjusted profit before tax	(18.4)	0.6
CCH EBITDA	CCH EBITDA is based on CCH operating profit before depreciation and amortisation.	CCH EBITDA (£'m)	2021	2020
		CCH operating loss	(4.8)	(3.2)
		Depreciation and amortisation	1.3	1.2
		CCH EBITDA	(3.5)	(2.0)
CPH EBITDA	CPH EBITDA is based on CPH operating profit before depreciation and amortisation.	CPH EBITDA (£'m)	2021	2020
		CPH operating loss	(1.6)	(4.4)
		Depreciation and amortisation	0.2	0.2
		CPH EBITDA	(1.4)	(4.2)
Exceptional items	Exceptional items are certain costs / income that derive from events or transactions that fall outside of the normal activities of the Group. These costs / income are excluded from various performance measures by virtue of their size and in order to better reflect management's view of the performance of the Group.	Exceptional items (£'m)	2021	2020
		Impact of COVID-19	10.0	41.7
		Other exceptional items	-	0.3
		Exceptional items	10.0	42.0
International EBITDA	International EBITDA is based on International operating loss before depreciation and amortisation.	International EBITDA (£'m)	2021	2020
		International operating loss	(0.4)	(0.6)
		Depreciation and amortisation	0.1	0.1
		International EBITDA	(0.3)	(0.5)
International revenue after marketing costs	International revenue after marketing costs is based on International revenue after all marketing costs	International revenue after marketing costs (£'m)	2021	2020
		Revenue	-	0.1
		Marketing costs	(0.1)	(0.2)
		International revenue after marketing costs (£'m)	(0.1)	(0.1)
Operating cash conversion	Operating cash converstion is EBITDA divided by cash generated from operating activities. These cash flows are excluded from various performance measures by virtue of their size and in order to better reflect management's view of the performance of the Group.	Operating cash conversion (£'m)	2021	2020
		Loss before taxation	(36.7)	(46.3)
		Depreciation	1.8	1.9
		Amortisation	10.1	9.5
		Net finance (income)/costs	0.9	0.4
		Share based payments	2.8	(0.6)
		Net loss/(gain) on disposal of PPE	0.1	-
		EBITDA	(21.0)	(35.1)
		Movement in working capital	31.2	(58.0)
		Movement in trust account	(13.2)	18.3
		Cash generated from operating activities	(3.0)	(74.8)
Operating profit before amortisation and exceptional items	Operating profit before amortisation and exceptional items is based on Group operating profit, adjusting for amortisation of acquired intangibles and the impact of exceptional items. Exceptional items consists of exceptional cancellations as result of COVID-19 in 2021 and 2020, and other exceptional items that derive from events or transactions that fall outside of the normal activities of the Group.	Operating profit before amortisation and exceptional items (£'m)	2021	2020
		Loss before taxation	(36.7)	(46.3)
		Exceptional items	10.0	42.0
		Amortisation of intangibles	10.1	9.5
		Operating profit before amortisation and exceptional items	(16.5)	5.2
OTB adjusted revenue after marketing cost	OTB adjusted revenue after marketing cost is revenue after "OTB" online and offline marketing costs.	OTB revenue after marketing cost (£'m)	2021	2020
		OTB adjusted revenue	22.1	50.4
		OTB online marketing costs	(5.5)	(14.2)
		OTB offline marketing costs	(6.1)	(8.7)
		Total OTB marketing	(11.6)	(22.9)
		OTB adjusted revenue after marketing costs	10.5	27.5
OTB EBITDA	OTB EBITDA is based on OTB operating profit before depreciation and amortisation.	OTB EBITDA (£'m)	2021	2020
		OTB operating loss	(29.0)	(37.7)
		Depreciation and amortisation	10.3	9.9
		OTB EBITDA	(18.7)	(27.8)
OTB EBITDA as a percentage of adjusted revenue	OTB EBITDA as a percentage of adjusted revenue is based on the adjusted OTB EBITDA divided by the revenue generated in the OTB business before the impact of exceptional cancellations. Exceptional cancellations relate to COVID-19 in 2021 and 2020.	OTB EBITDA as a percentage of adjusted revenue	2021	2020
		Revenue	13.0	15.9
		Exceptional cancellations	9.1	34.5
		Adjusted revenue	22.1	50.4
		Adjusted OTB EBITDA	(6.1)	10.6
		OTB EBITDA as a percentage of adjusted revenue	(28%)	21%