In a battered market which has shrunk 10% this year, online beach holiday retailer On the Beach (OTB) has stormed ahead of its competition by reporting a substantial increase in first half revenues and profits.

The rise was in line with market estimates but with the company playing down full year expectations - as uncertainty over the timing of Brexit puts some holidaymakers off booking their getaway - the shares have slipped 3% to 436p.

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OUTPERFORMING ITS RIVALS

In a market which has been dreadful for many other travel firms, On The Beach has held up well reporting a 41% jump in revenues to £63.5m and a 12% rise in pre-tax profits to £11.9m for the six months to the end of March.

It’s something chief executive Simon Cooper says should provide comfort to investors.

‘Whatever upset we face in the market, it affects our competitors too and it will affect them more than us. Unlike tour operators we don’t have any fixed inventories we need to sell at a discount to protect sales,’ he says.

While the outlook remains cloudy until Brexit is resolved, Cooper adds that the company will start to feel the benefit later this year from the acquisitions it has made in the past two years, as well as from integrating Emirates and British Airways onto its platform as it moves into the long-haul market.

OFFLINE MARKET WORTH £7BN

In March the firm launched its online booking portal Classic Package Holidays for exclusive use by travel agents, capitalising on the acquisition of Classic Collection Holidays last year.

It’s part of the company’s efforts to expand into the offline market, where an estimated 5m holidays - worth around £7bn - are booked each year via travel agents.

Analysts at Liberum believe that the company could start to take a 10% market share in offline package holidays from 2021 onwards.

FULL BENEFIT FROM 2020

While its acquisition of Sunshine in 2017 will also give the business diversification, as Cooper says the website can sell non-beach holidays such as city breaks, and also work with travel agents to become a white-label provider.

Cooper believes On The Beach will start reaping the rewards from all of its activity from next year as it diversifies and starts pushing into the offline and long-haul markets.

He says, ‘We’ve been in net investment mode up until now. We hope to get [Sunshine and Classic Collection] up to speed in the second half of this year, and in year 2020 we should feel the full benefit [from the acquisitions] in markets which are ripe for disruption.’


Issue Date: 14 May 2019