On The Beach reports half year profits up by a third

On The Beach reports half year profits up by a third

Daily unique visitors to the On the Beach UK website grew by 9.5% to 27.5 million over the winter.

The group today saw half-year pre-tax profits rise by 33.8% to £9.9 million for the six months to March 31.

This came as revenues rose by 7.3% to £38.1 million “with a later booking pattern for peak departures,” the company said.

The company, which yesterday revealed the takeover of smaller OTA rival Sunshine.co.uk, outlined a number of market trends, including an oversupply of seats to key western Mediterranean destinations which has continued to drive down prices.

However, hotel prices have risen in the region due to the weakness of sterling against the euro combined with hotel inflation.

The combined impact is that holiday prices have remained flat year-on-year with the exception of the peak season.

This means that most early discounts have been removed, resulting in “significantly more availability” supporting a strong booking pattern for the summer.

“Tour operators’ share of sales in the early market were supported by foreign exchange hedging and hotel rates for early sales contracted prior to summer 2016, to coincide with the release of summer ‘17 brochures in spring 2016, the company said.

“These advantages are unwinding as 40% of currency was hedged pre-EU referendum and hoteliers are restricting access to lower rates for peak season.

“As a result, some of the group’s larger competitors held a significant transient advantage and many of our key hotelier partners have changed their pricing policies. The Group has continued to drive share of market traffic in a cost effective manner, while extending its offline investment to help to build momentum into the second half of the financial year.”

Looking forward, On the Beach said it had enjoyed a strong start to the second half of its financial year, “supported by greater availability of competitively priced peak season hotel product and strong branded traffic share”.

Chief executive Simon Cooper said: “On the Beach has delivered a solid performance in H1, with booking growth strengthening towards the end of the period and continuing into H2.

“In the Group’s AGM Trading Update, management outlined the view that H2 performance would be stronger than H1, with more favourable year-on-year comparators in H2 and because H1 was impacted by the later timing of the low cost carriers’ seat release as well as key hotel partners in the western Mediterranean holding back capacity to sell in the late market.

“All of these assumptions played out in the first half and have continued in H2. Given these market dynamics, we took a proactive decision to balance volume and revenue growth. This position remains under constant review to ensure that business performance is optimised.

“Strategically, the changing market dynamics are presenting a number of exciting opportunities for On the Beach to leverage its scale and technological capability and we are delighted to have recently completed the acquisition of Sunshine.co.uk to further strengthen our market leading position.

“Given the resilient and flexible nature of our business model the Board remains confident in delivering a full year result in line with management’s expectations.”

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