5 December 2023
On the Beach Group plc
("On the Beach", "OTB", the "Company" or the "Group")
PRELIMINARY RESULTS FOR YEAR ENDED 30 SEPTEMBER 2023 ('FY23')
Financial Overview
| | | | ||
| | 2023 | 2022 | ||
| | Adjusted¹ | GAAP | Adjusted¹ | GAAP7 |
| Group TTV2 | 1,070.4 | - | 849.4 | - |
| Group revenue | | 170.2 | | 143.4 |
| Revenue as Agent3 | | 112.1 | | 92.9 |
| Revenue as Principal4 | | 58.1 | | 50.5 |
| Group gross profit | | 114.0 | | 94.9 |
| Gross profit as Agent | | 106.4 | | 89.1 |
| Gross profit as Principal | | 7.6 | | 5.8 |
| Group profit before tax5 | 23.6 | 12.9 | 14.2 | 2.2 |
| Basic earnings per share6 | 11.6p | 6.4p | 6.4p | 1.0p |
| | | | | |
1 Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary. The prior period is restated for the effects of the discontinued operations.
2 Group Total Transaction Value ('TTV') is a non-GAAP measure representing the cumulative total transaction value of sales booked each month before cancellations and amendments.
3 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 2022 and 30 September 2023. Adjusted revenue is revenue before exceptional items of £nil (2022: £1.0m) and fair value losses on forward currency contracts of £0.8m (2022: gains of £0.8m).
4 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 2022 and 30 September 2023.
5 Group adjusted profit before tax excludes amortisation of acquired intangibles of £5.2m (2022: £5.5m), share-based payments cost of £1.2m (2022: £4.7m) fair value losses on forward currency contracts of £0.8m (2022: gains of £0.8m) and exceptional items of £3.5m (2022: £2.6m). A full explanation of the adjustments is included in the glossary.
6 Adjusted earnings per share is Group adjusted profit after tax for continuing operations divided by the average number of shares in issue during the period. Earnings per share is Group profit after tax for continuing operations divided by the average number of shares in issue during the period.
7 The prior period is restated for the effects of the discontinued operations
Overview of the year
? Revenue of £170.2m was £26.8m (18.7%) higher than FY22:
- The Group delivered record TTV and Revenue in the year, as the market returned to a more normal pattern after a number of years of disruption.
- There was strong demand for holidays across its core addressable market and strategic expansion areas, with growth across both passenger numbers and ABVs.
- Summer 23 performance was especially pleasing, with passenger numbers for those holidays departing between May and October up 13% on the prior year.
- The Group continues to focus on improving the operational efficiency of its cost base, with marketing costs reducing as a % of revenue vs the prior year, and admin expenses as a % of revenue in line with the prior year.
? Exceptional cancellations in the prior year relating to the impact of COVID-19 and supplier disruption have not repeated in the current year, FY23: £nil, (FY22: £1.3m). Costs incurred in respect of wildfires and other similar events in the year have been included in the underlying result.
? Adjusted profit before tax was £23.6m (FY22: £14.2m) reflecting strong revenue growth in the OTB segment along with a reduction in marketing spend as a % of revenue. Statutory profit before tax of £12.9m (FY22: £2.2m).
Cash and liquidity
? The Group remains in a very strong financial position with combined cash balances of £184.4m (2022: £133.9m):
- Group cash, excluding amounts held in trust, of £75.8m (30 September 2022: £64.5m).
- Customer prepayments held in a ring-fenced trust account of £108.6m (30 September 2022: £69.4m).
? Net finance income in the year has increased to £2.6m (2022: finance cost of £0.5m) due to a £3.8m increase in bank interest receivable.
? The Group recently won a legal claim which it brought in October 2021 against Ryanair in respect of refunds owed by Ryanair to the Group for flights that had been cancelled or had been subject to a major change where customers had chosen a refund (the "Refunds Claim"), and the court awarded £2m to the Group, plus interest and costs. The Group intends to pursue Ryanair for further sums due in similar circumstances which accrued after issue of the Refunds Claim. Given the date of summary judgment was after the balance sheet date the proceeds of this action, along with costs recovered, will be included within exceptional items in FY24.
? The Group is currently awaiting the announcement of ATOL reforms. We understand that there has been further delay to the announcement of proposed reforms which is now not expected until 2024, however the Group remains well placed regardless of the outcome.
Current Trading and Outlook
? Our FY23 growth has continued into the new financial year with YTD TTV as at 2 Dec +26%.
? Our forward book is at record levels and Group Winter '23 YTD TTV is +34%.
? We approach our key booking period in Q2 with significant momentum.
? Our platform and proposition are stronger than ever and we are taking share in adjacent markets.
? Current trends and strategy give us confidence that Summer '24 will be significantly ahead of Summer '23.
? Reinstatement of dividend from FY24 reflecting the Group's continuing cash generative position and in line with its capital allocation framework
Shaun Morton, Chief Executive Officer of On the Beach Group plc, commented:
"I am pleased with the Group's incredibly strong performance this year, delivering record TTV and exceeding the £1bn revenue milestone for the first time - a huge achievement testament to the hard work across all our teams in the business. In line with our broader strategy, our firm focus and investments towards our marketing campaign has delivered our highest ever top three brand consideration score.
"Last year we differentiated ourselves from other mainstream holiday companies as the first to offer free lounge and fast track on bookings and this continues to grow customer satisfaction. The investment we have put into our proprietary technology has enhanced our flight, hotel and front-end platform capability and thanks to this upgraded front-end, we have improved the user experience leveraging technology, automation and AI via our new website and customer app. This has all helped drive growth in both the core business and expansion segments.
"This year we have seen the majority of consumers protect - not sacrifice - their holiday, a trend that our research shows will continue. We are already seeing this with strong momentum into the new financial year with TTV up 26% for the first nine weeks of FY24 and Winter FY23 bookings up 34%.
"We approach our key booking period in Q2 with significant momentum and this gives us confidence that Summer '24 will be significantly ahead of Summer '23."
Analyst Webinar
A briefing for sell-side equity analysts will be held today at 10.30am at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. For those unable to attend in person, there will be a conference call facility (no video), details of which can be obtained from FTI Consulting.
| For further information: |
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| On the Beach Group plc | via FTI Consulting |
| Shaun Morton, Chief Executive Officer |
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| Jon Wormald, Chief Financial Officer |
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| FTI Consulting | Tel: +44 (0)20 3727 1000 |
| Alex Beagley | onthebeach@fticonsulting.com |
| Fiona Walker |
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| Harriet Jackson |
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| Rafaella de Freitas |
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| Hannah Butler |
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About On the Beach
On the Beach Group plc is one of the UK's largest online beach holidays retailers, with significant opportunities for growth. Its innovative technology, low-cost base and strong customer-value proposition provides a structural challenge to legacy tour operators and online travel agents, as it continues disrupting the online retail of beach holidays. Its 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 financial statements and investor presentation is available on www.onthebeachgroupplc.com
Chief Executive's review
On the Beach Group plc is one of the UK's largest online beach holidays retailers, with significant opportunities for growth. We operate in a sector where consumers are seeking convenience, choice, value, and a personalised experience with financial protection. Our proprietary technology, coupled with a low-cost, asset light and cash generative operating model provides a structural challenge to tour operators.
This has been a record year for On the Beach, achieving Group TTV for the year of £1.1bn, exceeding the £1bn milestone for the first time. I am incredibly proud of my team and our performance in FY23 is testament to their efforts.
In line with our strategy to capture share as demand for beach holidays recovers, the Group successfully increased booking volumes and Average Booking Values ("ABV") in its core addressable market, whilst delivering a 74% increase in B2C TTV for long-haul bookings and a 32% increase in premium 5* TTV.
Performance has been underpinned by leveraging the benefits of continued investments in our proprietary technology platform, brand and customer proposition. Alongside access to greater seat and bed capacity, I am confident that the activities we have undertaken over the last 12 months have laid further strong foundations for the Group for the year ahead.
Following our strong second half and full year performance, we exited FY23 with the momentum of a record forward order book and demonstrable progress in strategic expansion areas, which we are excited to build upon in FY24.
People
Our people continue to be the driving force behind the business and deserve credit for our record performance this year. We've successfully embedded hybrid and flexible working as 'the way we work', and it's enabling us to recruit from a wider talent pool. This is important in helping us to attract and retain talent in a tight labour market, where people are seeking a greater degree of flexibility.
Our business continues to support employees in all aspects of their lives, promoting a healthy work-life balance, enabling flexible working, creating a collaborative working environment and a high-performance culture, where they're fully supported and encouraged to realise their full potential.
We continually review policies and benefits to ensure that they're competitive and relevant for our people, and in FY24 we'll be introducing a number of new and updated policies that are focused on Wellbeing and Family Friendly, including; the option to buy additional days leave, increased employer pension contributions and enhanced family friendly leave. These policies, individually and in aggregate, will help ensure we remain competitive in the marketplace for both hiring and retaining key talent, and will offer the support our valued employees need.
We were delighted to achieve an Engagement Index score of 7.6 in our Annual Engagement Survey. This shows that our people are enjoying life at On the Beach, but we won't rest on our laurels. We'll use the data and insight from this survey to develop action plans that make sure we keep a sharp focus on supporting and driving high performance and ensure On the Beach is always a place where people are supported and encouraged to reach their potential.
Trading
The Group significantly increased investment in the first half of the year across brand, technology and its customer proposition, to support strong sales growth for summer 2023 departures, to continue to build momentum for the second half of the year and to grow our market share. Investment in these areas was weighted to H1 to enable us to capitalise on peak bookings and build momentum into H2.
Trading momentum continued into the second half, which resulted in record TTV, +26% year on year, driven by growth in volumes and ABV. Despite remaining early into FY24, bookings for Summer 24 are also significantly ahead of where they were at the equivalent time in the prior year.
Addressable market
Over the last few years, we have outlined our strategy to continue to grow the Group's share of short haul beach holidays sold online (Value), whilst penetrating new markets, including premium and long-haul beach holidays sold online, and beach holidays sold through our B2B channel.
Value
We have experienced a significant year on year improvement in volumes and ABV in our core addressable market, with B2C TTV growth on 3* holidays of 32% Year on Year ('YOY').
Having been subject to a protracted cost of living crisis, the UK consumer is now experiencing deflation in energy bills and lower inflation in food costs. Since May, real wage growth has turned positive and discretionary income data indicates four consecutive months of growth YOY.
However, against this backdrop, we are aware that the cost-of-living crisis is certainly not over. Many consumers are experiencing financial difficulties, for example those with exposure to higher mortgage rates or rising rental costs. Despite this backdrop, research shows that summer family beach holidays are increasingly viewed as sacrosanct. Our YOY volume data for Summer 23, Winter 23/24 and early stage data for Summer 24 indicates a positive trajectory, with 3* volumes for S24 ahead of Summer 23. We expect volumes in the 3* value market to exceed pre-pandemic levels in FY24.
Premium
The premium market continues to perform strongly with B2C TTV growth in 5* holidays of +32% YOY. The premium market has shown greater resilience to cost-of-living pressures, recovering earlier. Attracting these customers that typically book earlier is giving greater visibility of the season ahead and delivering higher revenue per booking. FY23 Group premium TTV is now 126% greater than its level in FY19.
The strategic actions the Group has taken to enhance its proposition and access more premium hotels, positions it well to continue to outperform in this market. The Group estimates premium to be of a similar size to the value market in terms of passengers, but approximately two and a half times larger in absolute value, and the revenue margin opportunity on each individual booking is also significantly greater.
On the Beach continues to invest in the proposition, which supports higher searches for 5* hotels. The Group is focused on growing TTV in this market in FY24 and we believe there is a significant incremental revenue opportunity to be gained in the medium term by attracting premium customers to the brand.
Long-Haul
The Group is successfully scaling its long-haul offering and OTB is now a brand firmly associated with long-haul as well as short haul beach holidays. Scheduled air connectivity has been enhanced again this year with the addition of new key carriers, improving the breadth and depth of customer choice for both Westbound and Eastbound long haul flying, and increasing the number of destinations we can offer to our customers.
B2C long-haul TTV was up 74% in FY23 versus the prior year and we experienced 12 months of consistent growth in Sales on prior periods. Group long-haul TTV mix was up to 8% of TTV in FY23, which represents significant growth compared to 2% Group TTV in FY19. The largest destinations (Dubai, Mexico and Dominican Republic) are performing well, whilst destinations newer to the Group (US, Phuket, Mauritius, Maldives) continue to gather momentum.
There remains a significant organic growth opportunity in long haul. OTB has a low single digit share of a large B2C long haul market. The majority of OTB's continued growth is from its existing LH destinations, and there is significant headroom for further penetration in these destinations. In addition, there is opportunity for further growth from new destinations, both from existing and recently added long-haul carriers.
B2B
The Group appointed a new CEO, Andy Freeth, at Classic in November 2022 to drive continued growth across Classic Collection Holidays and Classic Package Holidays. Both B2B businesses are recognised brands operating in a market with opportunities to grow. The Group has partnerships with the majority of the UK's travel agent and homeworking groups and is a trusted operator in the B2B space, having won a number of recent industry awards, voted for by travel agents.
This has been a challenging year for high street retail, which has experienced a sluggish recovery from the pandemic. The competitive landscape for our B2B businesses has also become more crowded, as tour operators and low?cost airlines compete for share of high street agent and homeworker business. As a result of this market backdrop, B2B growth has been slower than expected. In both businesses, however we have been able to define and drive certain destinations and product lines where growth has been strong.
The Group took action towards the end of FY23 to integrate B2B back-office functions into the Group, thereby reducing overheads to improve overall profitability. Notwithstanding recent market headwinds, the B2B channel and share opportunity remains significant, with online penetration lagging other consumer verticals. The strategy for Classic continues to be to build on its foundations, deepening partnerships with independent high street agents. Agents are increasingly risk averse post-Covid, with a trend away from tour operating and back to retailing.
We expect a return to B2B profitability in FY24, underpinned by the synergies already realised across the Group, a focus on product and destinations where we can win with a digital first approach.
Strategy
As I set out in more detail below, in FY23, we introduced four strategic pillars which straddle functional teams across the Group to accelerate progress in penetrating all relevant market segments.
Investment in our brand
In line with previous years and with strategy, we invested significantly in OTB's brand and proposition in FY23 to continue to gain share in all segments.
FY23 performance was supported by our largest ever offline marketing campaign, 'The most wonderful time of the year'. This marketing effort also delivered the Group's highest ever top 3 brand consideration score, despite a more aggressive competitive environment.
The group is the first mainstream holiday company to offer free lounge and fast track on bookings. Following a successful launch last year, in which we delivered encouraging TTV growth, we have increased our investment into lounge and fast track, alongside continued innovation in developing a wider suite of further perks.
Being known for perks significantly benefits OTB. It offers a key point of differentiation from other holiday companies, makes our offline marketing campaigns more effective, strengthens the brand, attracts new customers, and improves our customer's overall holiday experience, which increases the likelihood of repeat purchase.
Finally, from a customer perspective we have continued to ensure the contact centre has been well resourced and supported. We are investing in automation and live chat which will improve customer experience and reduce costs to serve in future periods. FY23 was a record year and a higher proportion of customers are seeking reassurance between booking and travelling on holiday as we emerge from the pandemic. There were also periods of disruption to navigate, including Rhodes wildfires, NATS air traffic control issues and the Morrocco earthquake.
Our teams worked hard to assist customers experiencing issues during each of these incidents, and to ensure we provided the best experience possible. I'd like to thank the service teams for their tireless efforts in helping our customers.
Investment in technology
In April 2023, our Chief Product Officer, Kasia Michalska was appointed Chief Product & Technology Officer for Group, with the Engineering and Product teams directly reporting into her. The appointment was a significant opportunity to bring product, technology and data teams in closer alignment.
The technology teams have made strong progress over the last two years in developing our scheduled flight supply with airlines that serve a core group of east and west bound long haul destinations. There is significant runway for growth in many of the existing long haul destinations and we continue to add more destinations as new airlines are onboarded. We believe the long haul market offers a significant opportunity for the group where our technology creates a competitive advantage to disrupt a largely offline market.
The teams have also worked collaboratively with our airport partners through the complex task of delivering the broadest perks platform in the industry. This is a key point of differentiation given other peers either do not have the scale and volumes to appeal to the airports, or have too much volume (tour operators / airlines with a number of outbound flights) at busy times of the day.
As in previous years, we have significantly invested in our proprietary technology to support continued growth and a much larger volume of holiday bookings. This includes re-architecture of our core platform which allows us to significantly improve site speed and reliability. The upgraded hotel platform processes billions of searches with a high booking success rate. The upgraded data acquisition platform improves availability and accuracy.
Migration to the cloud this year has facilitated greater speed of development and increased security. Utilising cloud native technology has allowed teams to improve performance and reduce the complexity of running our services. The new, fast and reliable packaging service has reduced package search time and improved the customer experience.
The re architecture of our platform and migration to the cloud not only improves performance of our systems and their reliability but also gives us access to a richer pool of tech talent.
Finally, we've also been investing in improving our customer experience via the new site and our customer app. The introduction and development of our new customer facing app has enabled faster iterations and ongoing experimentation, which have gradually increased our conversion rate. These investments have enabled the Group to drive continued growth in both the core business and expansion markets. Crucially, the investments support a much larger, scalable business, and we expect further operating leverage in future periods.
Investment in supply
Alongside investments in brand, proposition, and technology, the Group has invested in supply to support growth. This includes improved flight connectivity and deeper relationships with our supply partners, with direct bookings in FY23 at 91%.
The Group offers seats from a diversified group of low-cost carriers that fly to short haul East and West Mediterranean locations and has developed relationships with destination specific carriers that serve Turkey, which experienced a significant uplift in demand in FY23.
We believe that by having our own relationships with our hotel partners, we can guarantee our customers the best prices and an enhanced hotel experience. Our operating model and reputation in the market has allowed us to strengthen existing hotel relationships as well as developing new ones, which has significantly contributed to further growth in premium, long haul and B2B markets.
We also maintain significant relationships and volumes with our key bedbank partners, which allows access to competitive prices in the tail of product outside of our top selling hotels.
In FY23 we have gathered more data on our hotel supplier's sustainability position. The Global Sustainable Tourism Council (GSTC) has harmonised various sustainability certifications into one set of criteria, setting the industry standard.
We partnered with Bioscore, a GSTC member and identified 1,870 hotels (37% of our top selling 5,000 hotels) that operate sustainable practices that meet GSTC standards and could therefore validly be labelled as "Sustainable". Of our Top 500 hotels 44% meet GSTC standards. Where we are finding gaps, we are engaging with hotels to encourage them to qualify for accreditation via Bioscore.
Strategic pillars
Our new four strategic pillars which straddle functional teams across the Group to accelerate progress in penetrating all relevant market segments are:
1. Storytellers: We will build rich, visually led and socially integrated experiences that really bring our holidays to life and build excitement from the outset
2. Matchmakers: We will use technology to evolve search, making it easier and more enjoyable for consumers to find what, not just where, they are looking for
3. Fixers: We will give our customers hiccup free holidays, using industry leading self-service, automation and AI-enabled contact centres, all delivered via our mobile app
4. Perkers: We will deliver holidays that start sooner with our anticipation building exclusive perks.
The pillars speak to a continuation of our broader Group strategy to penetrate our addressable market, but also help summarise the strategic direction of how we intend to grow in each market, for each of our teams and wider stakeholders.
Our investment into talent, technology, brand, proposition, customer experience and supply enables this strategy, which has contributed to our record performance in FY23 and sets us up for success in FY24.
Looking ahead, given continued momentum in our expansion areas as well as the recent positive signs of recovery in our core value customer base, we will be building upon our strategic pillars in the coming months and are excited by what we can achieve across the Group in FY24.
Regulatory reform and litigation
We believe that holistic and comprehensive regulatory reform of the travel industry is critical and urgent in order to create a competitive and thriving travel market, which works well for consumers and creates a level playing field for those operating within it.
For most customers in the UK who are booking their annual beach package holiday, this will likely be the biggest investment they will make throughout the year, unless they are moving house or changing their car. A recent study found that households spend a quarter of their disposable income on holidays. It is therefore critical that competition in the market is healthy to ensure value, choice, flexibility and consumer protection.
However, 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, poses a serious threat to fair competition and choice for consumers. Low cost airlines ('LCA') are using anti-competitive behaviours to stop consumers booking through online travel agents, harming consumers in the process.
These increasingly sophisticated anti-competitive behaviours include blocking OTA bookings, reducing or removing seats to certain destinations, making them completely unbookable by OTAs or consumers unless booked directly with the airline; harming the consumer experience with onerous verifications only applied to bookings made with an OTA; and false and misleading smear campaigns that cast doubt in the minds of consumers about the validity and benefits of booking package holidays with OTAs.
OTB published a White Paper on these where consumers surveyed for the paper agreed. Nearly half believe that LCAs treat their customers badly because they know that they can get away with it and 84% say that they are worried that a lack of regulation means airlines will be able to charge more and provide worse service in the future.
We continue to challenge Ryanair on its anti-competitive behaviour and withholding of refunds through ongoing litigation. We recently successfully sued Ryanair for £2m of outstanding flight refunds. This common-sense outcome should not have taken a protracted and expensive legal process to resolve.
Both OTAs and LCAs have called for regulatory intervention and the CMA has the power to exercise a review of the market to preserve competition and protect customers. We continue to encourage the Government and Regulators and other online travel business to ensure the CMA steps in to take action to protect holidays for everyone.
The CAA is consulting on reform of the ATOL scheme including the assessment of funding arrangements and the protection of customer money. The consultation process is still ongoing, but will be delayed, We expect to hear further feedback from the CAA in FY24.
Current trading and outlook
Our FY23 growth has continued into the new financial year with YTD TTV as at 2 Dec +26%
Our forward book is at record levels and Group winter '23 YTD TTV is +34%.
We approach our key booking period in Q2 with significant momentum.
Our platform and proposition are stronger than ever and we are taking share in adjacent markets.
Current trends and strategy give us confidence that summer '24 will be significantly ahead of summer '23.
Reinstatement of dividend from FY24 reflecting the Group's continuing cash generative position and in line with its capital allocation framework
Shaun Morton
Chief Executive Officer
4 December 2023
Chief Financial Officer Report
The Group's financial performance for the year ended 30 September 2023 ("FY23") is reported in accordance with UK-adopted international accounting standards and applicable law.
The Group organised its operations during the year 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). As of 30 September 2023 the International segment was discontinued as explained later in this report. Prior periods have been restated accordingly.
The Group acts as agent across the OTB, International and CPH segments as it is not the primary party responsible for providing the components that make up the customers' booking. As a result, revenue is accounted for on a booked rather than travelled basis.
For the CCH segment, revenue is accounted for on a travelled basis, as principal, and is therefore reported on a gross basis.
Group overview
| | | | ||
| | 2023 | 2022 | ||
| | Adjusted¹ | GAAP | Adjusted¹ | GAAP7 |
| Group TTV2 | 1,070.4 | - | 849.4 | - |
| Group revenue | | 170.2 | | 143.4 |
| Revenue as Agent3 | | 112.1 | | 92.9 |
| Revenue as Principal4 | | 58.1 | | 50.5 |
| Group gross profit | | 114.0 | | 94.9 |
| Gross profit as Agent | | 106.4 | | 89.1 |
| Gross profit as Principal | | 7.6 | | 5.8 |
| Group profit before tax5 | 23.6 | 12.9 | 14.2 | 2.2 |
| Basic earnings per share6 | 11.6p | 6.4p | 6.4p | 1.0p |
| | | | | |
1 Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary. The prior period is restated for the effects of the discontinued operations.
2 Group Total Transaction Value ('TTV') is a non-GAAP measure representing the cumulative total transaction value of sales booked each month before cancellations and amendments.
3 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 2022 and 30 September 2023. Adjusted revenue is revenue before exceptional items of £nil (2022: £1.0m) and fair value losses on forward currency contracts of £0.8m (2022: gains of £0.8m).
4 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 2022 and 30 September 2023.
5 Group adjusted profit before tax excludes amortisation of acquired intangibles of £5.2m (2022: £5.5m), share-based payments cost of £1.2m (2022: £4.7m) fair value losses on forward currency contracts of £0.8m (2022: gains of £0.8m) and exceptional items of £3.5m (2022: £2.6m). A full explanation of the adjustments is included in the glossary.
6 Adjusted earnings per share is Group adjusted profit after tax for continuing operations divided by the average number of shares in issue during the period. Earnings per share is Group profit after tax for continuing operations divided by the average number of shares in issue during the period.
7 The prior period is restated for the effects of the discontinued operations
Overview of the year
? Revenue of £170.2m was £26.8m (18.7%) higher than FY22:
? The Group delivered record TTV and Revenue in the year, as the market returned to a more normal pattern after a number of years of disruption.
? There was strong demand for holidays across its core addressable market and strategic expansion areas, with growth across both passenger numbers and ABVs.
? Summer 23 performance was especially pleasing, with passenger numbers for those holidays departing between May and October up 13% on the prior year.
? The Group continues to focus on improving the operational efficiency of its cost base, with marketing costs reducing as a % of revenue vs the prior year, and admin expenses as a % of revenue in line with the prior year.
? Exceptional cancellations in the prior year relating to the impact of COVID-19 and supplier disruption have not repeated in the current year, FY23: £nil, (FY22: £1.3m). Costs incurred in respect of wildfires and other similar events in the year have been included in the underlying result.
? Adjusted profit before tax was £23.6m (FY22: £14.2m) reflecting strong revenue growth in the OTB segment along with a reduction in marketing spend as a % of revenue. Statutory profit before tax of £12.9m (FY22: £2.2m).
Cash and liquidity
? The Group remains in a very strong financial position with combined cash balances of £184.4m (2022: £133.9m):
? Group cash, excluding amounts held in trust, of £75.8m (30 September 2022: £64.5m).
? Customer prepayments held in a ring-fenced trust account of £108.6m (30 September 2022: £69.4m).
? Net finance income in the year has increased to £2.6m (2022: finance cost of £0.5m) due to a £3.8m increase in bank interest receivable.
? The Group recently won a legal claim which it brought in October 2021 against Ryanair in respect of refunds owed by Ryanair to the Group for flights that had been cancelled or had been subject to a major change where customers had chosen a refund (the "Refunds Claim"), and the court awarded £2m to the Group, plus interest and costs. The Group intends to pursue Ryanair for further sums due in similar circumstances which accrued after issue of the Refunds Claim. Given the date of summary judgment was after the balance sheet date the proceeds of this action, along with costs recovered, will be included within exceptional items in FY24.
? The Group is currently awaiting the announcement of ATOL reforms. We understand that there has been further delay to the announcement of proposed reforms which is now not expected until 2024, however the Group remains well placed regardless of the outcome.
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OTB performance
| | | | ||
| | 2023 Adjusted¹ £m | 2023 GAAP £m | 2022 Adjusted¹ £m | 2022 GAAP¹ £m |
| TTV | 983.8 | - | 762.7 | - |
| Revenue | | 106.1 | | 87.1 |
| Gross profit | | 104.2 | | 87.1 |
| Online marketing costs | | (26.0) | | (27.0) |
| Offline marketing costs | | (14.6) | | (11.9) |
| Gross profit after marketing costs | | 63.6 | | 48.2 |
| Overheads | | (32.3) | | (25.9) |
| Depreciation and amortisation | | (9.9) | | (6.7) |
| Exceptional operating costs | | (3.3) | | (1.3) |
| Share-based payments | | (1.1) | | (4.7) |
| Amortisation of acquired intangibles | | (4.2) | | (4.4) |
| Operating profit | 22.2 | 12.8 | 15.4 | 5.2 |
| EBITDA | 32.1 | 26.9 | 22.1 | 16.3 |
| |
| | | |
1 Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary. The prior period is restated for the effects of the discontinued operations.
Revenue has increased to £106.1m (FY22: £87.1m). This is as a result of a full year without any material impact from COVID-19, along with continued success in our core market and our strategic focus areas. We have seen significant growth across both premium and long-haul markets, and the increased ABV in these areas has contributed to an increased margin per booking of £209 (2022: £192).
Average booking values have increased by 14% vs FY22 reflecting the continued growth in both long-haul and premium holidays. This has resulted in an increase in TTV to £984m (FY22: £763m).
Revenue of £106.1m is stated net of a £5.1m investment in holiday perks for customers travelling with On The Beach. This has been expanded in the year as part of our strategic pillar "Perkers" which has helped to drive revenue growth and repeat booking rates. This has been achieved through the expansion of our free airport lounge and fast track offers across a wider range of departure dates.
FY23 was supported by our largest ever offline marketing campaign. This saw a transfer of spend from our online marketing activities into offline investment, with total marketing costs as a % of revenue having fallen versus the prior year. Total marketing costs are now below our historic run rate of 40% of revenue.
| | | | ||
| | 2023 Adjusted¹ £m | 2023 GAAP £m | 2022 Adjusted¹ £m | 2022 GAAP¹ £m |
| Overheads % TTV | 3.3% | - | 3.4% | - |
| Overheads % revenue | | 30% | | 30% |
| Total marketing % revenue | | 38% | | 45% |
| | | | | |
1 Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary. The prior period is restated for the effects of the discontinued operations.
Overheads as a % of revenue are consistent at 30% (FY22: 30%) with inflationary pressures in respect of wages and salaries being offset by savings made elsewhere.
Adjusted EBITDA has increased to £32.1m (FY22 restated: 22.1m). A full explanation of adjusted measures are included in the glossary.
Classic Collection Holidays segment performance
| | | | ||
| | 2023 Adjusted¹ £m | 2023 GAAP £m | 2022 Adjusted¹ £m | 2022 GAAP £m |
| TTV | 58.7 | - | 55.6 | - |
| Revenue | | 58.1 | | 50.5 |
| Gross profit | | 7.6 | | 5.8 |
| Gross profit after marketing costs | | 5.8 | | 4.8 |
| Overheads | | (6.8) | | (5.2) |
| Depreciation and amortisation | | (0.3) | | (0.3) |
| Exceptional operating costs | | (0.2) | | - |
| Share-based payments | | (0.1) | | - |
| Amortisation of acquired intangibles | | (1.0) | | (1.1) |
| Operating loss | (1.3) | (2.6) | (0.4) | (1.8) |
| EBITDA | (1.0) | (1.3) | (0.1) | (0.4) |
| | | | | |
1 Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary. The prior period is restated for the effects of the discontinued operations.
As a principal (rather than an agent) Classic Collection accounts for revenue on a 'travelled' basis and reports revenue on a gross basis. Both TTV and Revenue increased this year as consumer confidence in travel increased.
Revenue increased to £58.1m (FY22: £50.5m) and operating losses were £2.6m (FY22 £1.8m). Overheads increased by £1.6m in part due to investment in headcount across sales and marketing teams to deliver on the strategic growth plan.
Sales on a booked, rather than travelled, basis were £58.7m (FY22: £55.6m). Long haul continued to perform well representing 22% of total sales in the year and is expected to be a high growth area for the business in FY24.
Classic Package Holidays segment performance
| | | | ||
| | 2023 Adjusted¹ £m | 2023 GAAP £m | 2022 Adjusted¹ £m | 2022 GAAP £m |
| TTV | 28.0 | - | 31.1 | - |
| Revenue | | 6.0 | | 5.8 |
| Gross profit | | 2.1 | | 2.0 |
| Gross profit after marketing costs | | 1.5 | | 1.0 |
| Overheads | | (1.4) | | (1.5) |
| Depreciation and amortisation | | - | | (0.2) |
| Operating profit / (loss) | 0.1 | 0.1 | (0.3) | (0.7) |
| EBITDA | 0.1 | 0.1 | (0.1) | (0.5) |
| | | | | |
1 Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary. The prior period is restated for the effects of the discontinued operations.
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 £6.0m (FY22: £5.8m), and the operating profit was £0.1m (FY22: operating loss of (£0.7m)). The platform being increasingly used by online agents and home workers allowed for marketing cost control and a reduction in spend from £1.0m to £0.6m. The focus continues to be on developing the proposition to ensure that we are serving the trade and holidaymakers with market leading product at competitive prices.
Exceptional Items
Exceptional items in the year amounted to £3.5m, being £2.0m of legal and professional fees and £1.5m of restructuring costs. In the prior year exceptional operating costs totalled £1.3m, with £2.5m of legal and professional fess being partially offset by the release of £1.2m of provisions. A further £1.3m of exceptional cancellation costs were incurred in the prior year.
Legal and professional fees principally related to ongoing litigation with Ryanair. Costs awarded following the successful judgement in November 2023 relating to refunds have not yet been finally determined and therefore no recovery has been included.
Restructuring costs relate to the consolidation of certain group functions between CCH and OTB in order to harmonise processes and deliver operational synergies.
Financing
In December 2022, the Group refinanced its credit facilities with Lloyds Bank and NatWest and entered into a new facility for £60m expiring in December 2025.
Details of the current facility limits and maturity dates are as follows:
| Existing facilities | £ | Issued | Expiry | Drawn at 30 September 2023 |
| RCF - Lloyds Bank | £30m | Dec 2022 | Dec 2025 | Nil |
| RCF - NatWest | £30m | Dec 2022 | Dec 2025 | Nil |
| Total facilities | £60m | | | |
Share-based payments
The Group has a number of LTIP schemes in place which vest subject to continued employment and performance criteria. In accordance with IFRS 2, the Group has recognised a non-cash charge of £1.2m (FY22: £4.7m).
The share-based payment charge represents a non-cash charge for the expected cost of shares vesting under the Group's Long-Term Incentive Plan. The change in the year is a result of a reduction in the number of awards in the year as well as the change in expectations for non-market based performance conditions. Given the volatility and size of these charges they are added back to provide comparability to prior periods.
Taxation
The Group tax charge of £2.3m represents an effective rate of 19% (FY22: 25%) which is lower than the standard UK rate of 25% (FY22: higher than the standard rate of 19%). An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021.
Cash flow
| | FY23 £m | FY22 £m |
| Profit before tax from continuing operations | 12.9 | 2.2 |
| Loss before tax from discontinued operations | (0.5) | (0.1) |
| Depreciation and amortisation | 15.3 | 12.8 |
| Net finance (income) / costs | (2.6) | 0.5 |
| Share based payments | 1.2 | 4.7 |
| Movement in working capital | (4.1) | 1.3 |
| Corporation tax | (0.2) | 0.5 |
| Cash generated from operating activities | 22.0 | 21.9 |
| Other cash flows | | |
| Capitalised development expenditure | (12.0) | (10.6) |
| Capitalised intangible assets | - | (0.5) |
| Capital expenditure net of proceeds | - | (1.3) |
| Net finance income / (costs) | 2.8 | (0.3) |
| Payment of lease liabilities | (1.5) | (0.7) |
| Total net cash flows | 11.3 | 8.5 |
| Opening cash balance | 64.5 | 56.0 |
| Closing cash at bank | 75.8 | 64.5 |
| Closing trust balance | 108.6 | 69.4 |
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. As a result the available credit facilities are only utilized for a short period, in FY23 being between January and June.
Net cash inflows were £11.3m (2022: £8.5m). This is due to increased profitability in the period, partially offset by working capital investment to support the continuing growth of the business.
Not included in the Group's cash position is £108.6m (FY22: £69.4m) of customer prepayments held in a trust account to be released once the customer has travelled. The Civil Aviation Authority ("CAA") is currently consulting on reform of the ATOL scheme including the assessment of funding arrangements. The consultation process is still ongoing and we expect to hear more in 2024.
The Group remains in a strong financial position with sufficient cash reserves to continue to invest in its continuing success.
Discontinued Operations
During the year, following a strategic review, the Board took the decision to close the International business which comprised the standalone e-beach sites in Norway and Sweden. Since launch in 2015, the intended growth of this segment has been restricted by a number of factors including COVID-19, the failure of a number of local airlines such as Norwegian, Primera and Ving and the infrequent scheduling of other low-cost carriers. The Board remain confident that the core proposition is scaleable across additional geographic markets.
During the year the International segment contributed revenue of £0.9m and an operating loss of £0.5m.
Capital Allocation
The Board has considered and approved a revised capital allocation policy for the Group. The primary objective is to invest in organic growth whilst maintaining capital discipline. The Board has signalled its intention to re-introduce a dividend for FY24 given the return to normal market conditions and a sustainable cash generative business model.
Dividend
The Board is not recommending a final dividend in respect of FY23.
Jon Wormald
Chief Financial Officer
4 December 2023
Financial Statements
Consolidated income statement and statement of comprehensive income
Year ended 30 September 2023
| | | | |
| | Note | 2023 £'m | Restated* 2022 £'m |
| Revenue | 4,5 | 170.2 | 143.4 |
| Cost of sales | | (54.2) | (48.5) |
| Expected credit losses | 15 | (2.0) | - |
| Gross profit | | 114.0 | 94.9 |
| | | | |
| Administrative expenses | 6 | (103.7) | (92.2) |
| Group operating profit | | 10.3 | 2.7 |
| | | | |
| Finance costs | 8 | (1.5) | (0.8) |
| Finance income | 8 | 4.1 | 0.3 |
| Net finance income/(costs) | | 2.6 | (0.5) |
| | | | |
| Profit before taxation | | 12.9 | 2.2 |
| Taxation | 9 | (2.3) | (0.5) |
| | | | |
| Profit from continuing operations | | 10.6 | 1.7 |
| Loss from discontinued operations | 10 | (0.5) | (0.1) |
| Profit for the year | | 10.1 | 1.6 |
| | | | |
| Other comprehensive income: | | | |
| Net (loss)/gain on cash flow hedges | | (0.6) | 0.6 |
| Net gain on fair value hedges | | 0.7 | - |
| Total comprehensive income for the year | | 10.2 | 2.2 |
| | | | |
| Attributable to equity holders of the parent | | | |
| Profit from continuing operations | | 10.6 | 1.7 |
| Loss from discontinued operations | | (0.5) | (0.1) |
| Other comprehensive income | | 0.1 | 0.6 |
| Total comprehensive income for the year | | 10.2 | 2.2 |
| | | | |
| Basic and diluted earnings per share from continuing operations attributable to the equity shareholders of the Company: | | | |
| Basic earnings per share | 11 | 6.4p | 1.0p |
| Diluted earnings per share | 11 | 6.3p | 1.0p |
| Adjusted basic earnings per share** | 11 | 11.6p | 6.4p |
| Adjusted diluted earnings per share ** | 11 | 11.5p | 6.4p |
| | | | |
| Basic and diluted earnings per share from total operations attributable to the equity Shareholders of the Company: | | | |
| Basic earnings per share | 11 | 6.1p | 0.9p |
| Diluted earnings per share** | 11 | 6.0p | 0.9p |
| | | | |
| Adjusted profit measure** | | | |
| Adjusted PBT (before amortisation of acquired intangibles, exceptional items and share-based payments)** | 6 | 23.6 | 14.2 |
| | | | |
* The prior period is restated for the effects of the discontinued operations (see note 10).
** This is a non-GAAP measure, refer to notes listed above.
Consolidated balance sheet
At 30 September 2023
| | | | |
| Assets | Note | 2023 £'m | 2022 £'m |
| Non-current assets | | | |
| Intangible assets | 12 | 73.7 | 74.3 |
| Property, plant and equipment | 13 | 8.3 | 9.1 |
| Deferred tax | 20 | 2.6 | 3.4 |
| Other assets | 15 | - | 0.6 |
| Total non-current assets | | 84.6 | 87.4 |
| | | | |
| Current assets | | | |
| Trade and other receivables | 15 | 165.3 | 122.4 |
| Derivative financial instruments | 23 | 0.9 | 3.2 |
| Trust account | 16 | 108.6 | 69.4 |
| Cash at bank | | 75.8 | 64.5 |
| Total current assets | | 350.6 | 259.5 |
| Total assets | | 435.2 | 346.9 |
| | | | |
| Equity | | | |
| Share capital | 21 | 1.7 | 1.7 |
| Share premium | 22 | 89.6 | 89.6 |
| Retained earnings | 22 | 205.9 | 194.5 |
| Capital contribution reserve | 22 | 0.5 | 0.5 |
| Merger reserve | 22 | (129.5) | (129.5) |
| Total equity | | 168.2 | 156.8 |
| | | | |
| Non-current liabilities | | | |
| Trade and other payables | 17 | 2.6 | 3.0 |
| Total non-current liabilities | | 2.6 | 3.0 |
| | | | |
| Current liabilities | | | |
| Corporation tax payable | | 1.7 | 0.2 |
| Trade and other payables | 17 | 261.2 | 186.6 |
| Provisions | 17 | 0.4 | 0.3 |
| Derivative financial instruments | 23 | 1.1 | - |
| Total current liabilities | | 264.4 | 187.1 |
| | | | |
| Total liabilities | | 267.0 | 190.1 |
| Total equity and liabilities | | 435.2 | 346.9 |
| | | | |
The financial statements were approved by the Board of Directors and authorised for issue.
Jon Wormald Chief Financial Officer
4 December 2023 On the Beach Group plc. Reg no 09736592
Consolidated statement of cash flows
Year ended 30 September 2023
| | | | |
| | Note | 2023 £'m | Restated* 2022 £'m |
| Profit before taxation | | | |
| From continuing operations | | 12.9 | 2.2 |
| From discontinued operations | 10 | (0.5) | (0.1) |
| | | | |
| Adjustments for: | | | |
| Depreciation | 6 | 2.7 | 2.0 |
| Amortisation of intangible assets | 6 | 12.6 | 10.8 |
| Finance costs | 8 | 1.5 | 0.8 |
| Finance income | 8 | (4.1) | (0.3) |
| Share-based payments | 24 | 1.2 | 4.7 |
| Loss on disposal of property, plant and equipment | 13 | - | - |
| | | 26.3 | 20.1 |
| Changes in working capital: | | | |
| Increase in trade and other receivables | | (39.9) | (29.6) |
| Increase in trade and other payables | | 75.0 | 61.3 |
| Increase in trust account | | (39.2) | (30.4) |
| | | (4.1) | 1.3 |
| Cash flows from operating activities | | | |
| Cash used in operating activities | | 22.2 | 21.4 |
| Tax (paid)/received | | (0.2) | 0.5 |
| Net cash inflow from operating activities | | 22.0 | 21.9 |
| | | | |
| Cash flows from investing activities | | | |
| Purchase of property, plant and equipment | 13 | (0.1) | (1.3) |
| Proceeds from disposal of assets | | 0.1 | - |
| Purchase of intangible assets | 12 | - | (0.5) |
| Development expenditure | 12 | (12.0) | (10.6) |
| Interest received | 8 | 4.1 | 0.3 |
| Net cash outflow from investing activities | | (7.9) | (12.1) |
| | | | |
| Cash flows from financing activities | | | |
| Interest paid on borrowings | 8 | (1.3) | (0.6) |
| Payment of lease liabilities | 18 | (1.5) | (0.7) |
| Net cash outflow from financing activities | | (2.8) | (1.3) |
| | | | |
| Net increase in cash at bank and in hand | | 11.3 | 8.5 |
| Cash at bank and in hand at the beginning of the year | | 64.5 | 56.0 |
| Cash at bank and in hand at the end of the year | | 75.8 | 64.5 |
| | | | |
* The prior period is restated for the effects of the discontinued operations (see note 10).
Consolidated statement of changes in equity
Year ended 30 September 2023
| | | | | | | |
| | Share capital £'m | Share premium £'m | Merger reserve £'m | Capital contribution reserve £'m | Retained earnings £'m | Total £'m |
| Balance at 30 September 2021 | 1.7 | 89.6 | (129.5) | 0.5 | 187.6 | 149.9 |
| | | | | | | |
| Share-based charge including tax | - | - | - | - | 4.7 | 4.7 |
| Total comprehensive income for the year | - | - | - | - | 2.2 | 2.2 |
| Balance at 30 September 2022 | 1.7 | 89.6 | (129.5) | 0.5 | 194.5 | 156.8 |
| | | | | | | |
| Share-based charge including tax | - | - | - | - | 1.2 | 1.2 |
| Total comprehensive income for the year | - | - | - | - | 10.2 | 10.2 |
| Balance at 30 September 2023 | 1.7 | 89.6 | (129.5) | 0.5 | 205.9 | 168.2 |
Notes to the consolidated financial statements
Year ended 30 September 2023
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 given on page £.
2. Accounting policies
a) Basis of preparation
The consolidated financial statements presented in this document have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006.
The financial information set out herein does not constitute the Company's statutory accounts for the years ended 30 September 2023 or 2022 but is derived from those accounts. The financial information has been prepared using accounting policies consistent with those set out in the annual report and accounts for the year ended 30 September 2023. Statutory accounts for 2022 have been delivered to the Registrar of Companies, and those for 2023 will be delivered in due course. The auditors have reported on those accounts; their report was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain any statements under Section 498(2) or (3) of the Companies Act 2006.
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 Revolving Credit Facility ('RCF'). On 7 December 2022, the Group increased its facility from £50m to £60m, expiring in December 2025. At the same time the Group cancelled its CLBILS facility of £25m, which was due to expire in May 2023. The RCF has financial covenants in place, which are tested quarterly.
As at 30 September 2023, cash (excluding cash held in trust which is ringfenced and not factored into the going concern assessment) was £75.8m (30 September 2022: cash of £64.5m).
Cash received from customers for bookings that have not yet travelled is held in a ringfenced trust account and is not withdrawn until the customer returns from their holiday except where a flight is purchased. Cash held in trust at 30 September 2023 was £108.6m.
The Directors have assessed a going concern period through to March 2025 and have modelled a number of scenarios considering factors such as airline resilience, cost of living, inflation, interest rates and customer behaviour/demand. The Group has performed an assessment of the impact of climate risk, as part of the Director's assessment of the Group's ability to continue as a going concern. 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 have modelled a reasonably possible downside scenario to sensitise the base case. In this scenario the Directors have assessed the impact to cash and revenue in an environment where bookings are 40% lower than historic levels, although profitability would be affected, the Group would be able to continue operating. The impact of climate change has not yet been reflected in these estimates and assumptions due to the level of uncertainty about the impact of climate change on these estimates and assumptions.
Given the assumptions above, the mitigating actions available and within the Group's control, the Directors remain confident that the Group continue to operate in an agile way adapting to any continued travel disruption. 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 2022; the following amended standards have been implemented, however, they have not had a significant impact on the Group's consolidated financial statements:
? Amendments to IFRS 3 - Reference to Conceptual Framework
? Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use
? Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a Contract
? AIP IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter
? AIP IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities
? AIP IAS 41 Agriculture - Taxation in fair value measurements
International Tax Reform - Pillar Two Model Rules - Amendments to IAS 12 introduced a mandatory temporary exception to the requirements of IAS 12 under which a company does not recognise or disclose information about deferred tax assets and liabilities related to the proposed OECD/G20 BEPS Pillar Two model rules. The Group has applied the temporary exception in the Group's consolidated financial statements.
Standards issued but not yet effective
Certain new financial reporting standards, amendments and interpretations have been published that are not mandatory for the 30 September 2023 reporting period, and have not been early adopted by the Group. The Group is currently assessing the impact of the following standards, amendments and interpretations:
? IFRS 17 Insurance Contracts
? Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
? Definition of Accounting Estimates - Amendments to IAS 8
? Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12
International Tax Reform - Pillar Two Model Rules - Amendments to IAS 12 introduced a mandatory temporary exception to the requirements of IAS 12 under which a company does not recognise or disclose information about deferred tax assets and liabilities related to the proposed OECD/G20 BEPS Pillar Two model rules. The Group has applied the temporary exception in the Group's consolidated financial statements.
d) Climate-related matters
The Group considers climate-related matters in estimates and assumptions where appropriate, this includes areas such as:
? Impairment of non-financial assets: The value-in-use may be impacted by the changes in climate-related regulations or a change in the demand of certain holiday destinations as a result of extreme weather or natural disasters.
? Deferred tax asset recoverability: The forecasts used in assessing whether the Group has sufficient future taxable income could be impacted by climate-related regulation or change in consumer demand for travelling abroad.
The Group's business model allows for flexibility, through being asset-light, this means the Group can respond quickly to changes in customer demand for certain locations. The Group is closely monitoring changes and developments in both climate-related legislation and extreme weather events.
e) Discontinued operations
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount of profit or loss after tax from discontinued operations in the consolidated income statement and statement of comprehensive income.
Additional disclosures are provided in note 10. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise.
f) Basis of consolidation
The Group's consolidated financial statements consolidate the financial statements of On the Beach Group plc and all of its subsidiary undertakings.
i. Subsidiaries are entities controlled by the Company - Control exists when the Company has power over the investee, the Company is exposed, or has rights to variable returns from its involvement with the subsidiary and the Company has the ability to use its power of the investee to affect the amount of investor's returns.
ii. Transactions eliminated on consolidation - Intragroup balances, and any gains and losses, or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial information. Gains arising from transactions with jointly controlled entities are eliminated to the extent of the Group's interest in the entity. Losses are eliminated in the same way as gains, but only to the extent that there is no evidence of impairment.
g) Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and trade and assets represents the excess of the cost of acquisition over the fair value of the identifiable assets and liabilities at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently remeasured at cost less any accumulated impairment losses. Goodwill, which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the combination. If the recoverable amount is less than the carrying amount of the unit, the impairment loss is allocated to first reduce the amount of goodwill allocated to the unit and then the other assets in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
An impairment loss recognised for goodwill is not reversed. Impairment losses recognised for other assets are reversed only if the reasons for the impairment have ceased to apply.
h) Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in the income statement.
i) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
i. Financial assets
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through other comprehensive income ('OCI'), and fair value through profit or loss. In order for a financial asset to be classified and measured at amortised cost, the financial asset is under a 'hold to collect' business model and it needs to give rise
to cash flows that are 'solely payments of principal and interest' ('SPPI') on the principal amount outstanding. The Group considers financial assets in default when contractual payments are 90 days past due.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method, less any impairment losses. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. An expected credit loss is calculated using a provision matrix, which is initially based on the Group's historical observed default rates that is calibrated for changes in the forward-looking estimates.
Cash at bank
Cash at bank comprises cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash at bank for the purpose only of the cash flow statement.
Trust account
All ATOL protected customer monies are held in a trust account until after the provision of the holiday service. The trust account is governed by a deed between the Group, the Civil Aviation Authority Air Travel Trustees and independent trustees (Travel Trust Services Limited), which determines the inflows and outflows from the account.
All ATOL protected customer receipts are paid into the trust account in full before the holiday departure date. These payments are held in the trust account until the service is provided - for flights on payment to the supplier, and for hotels and ancillaries on the customer's return from holiday. The Group, therefore, does not use customer prepayments to fund its business operations. Due to the restrictions on accessing the funds in the trust account, customer monies held in the trust account are presented separately to cash at bank.
Cash flows in respect of the trust account are presented as operating cash flows on the basis that they are linked to the Group's revenue-producing activities as an online travel agent.
ii. Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
Trade and other payables
Trade and other payables are recognised initially at fair value and net of directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the Effective Interest Rate ('EIR') amortisation process.
Revolving credit facility ('RCF')
Borrowings from the RCF are recognised initially at fair value and net of directly attributable transaction costs. After initial recognition, the RCF is subsequently measured at amortised cost using the EIR method.
iii. Derivative financial instruments, including hedge accounting
The Group enters into forward foreign exchange contracts to manage exposure to foreign exchange rate risk. Further details of these derivative financial instruments are disclosed in note 23 of these financial statements. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value.
Fair value hedges
All derivative financial instruments are assessed against the hedge accounting criteria set out in IFRS 9. On initial designation of the derivative as a hedging instrument, the Group formally documents the relationship between the hedging instrument and hedged item, the Group elects to identify the spot-element of forward contracts as the hedging instrument. The documentation also identifies the hedged item, the risk management objectives and strategy in understanding the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship.
The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value of the respective hedged items attributable to the hedged risk.
Derivatives are initially recognised at the fair value on the date a derivative contract is entered into and are subsequently remeasured at each reporting date at their fair value. The change in the fair value of the hedging instrument is recognised in the statement of profit or loss as other expense. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit or loss as other expense. The change in the fair value of the forward element of the forward contracts is recognised in other comprehensive income.
Cash flow hedges
For derivatives that are designated as cash flow hedges, and where the hedge accounting criteria are met, the effective portion of changes in the fair value is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of finance costs. Amounts accumulated in equity are recognised in profit or loss when the income or expense on the hedged item is recognised in profit or loss.
j) 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 three reportable segments:
i. 'OTB' - activity via UK websites (www.onthebeach.co.uk, www.sunshine.co.uk and www.onthebeachtransfers.co.uk).
ii. 'CCH' - activity via the Tour Operator, Classic Collection Holidays Limited and subsidiaries.
iii. 'CPH' - activity via the Classic Package Holidays online business to business portal.
k) 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 describe 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 of these financial statements.
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 through purchases from customers 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 (note 17).
Revenue earned from sales through the OTB segment is stated net. 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 for the CCH segment. 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.
l) Override income
The Group has agreements with suppliers, which give rise to rebate income. This income relates to segments where revenue is accounted for on an agent basis, therefore, the income received from suppliers relates to a reduction in cost of sales (corresponding increase in commission received), and as such is considered part of the Group's net revenue, for the year ended 30 September 2023 override income was £3.4m. The Group has some agreements whereby receipt of the income is conditional on the Group achieving agreed volume targets.
For agreements not linked to volume targets, override income is recognised when earned by the Group, which occurs when all obligations conditional for earning income have been discharged, and the income can be measured reliably based on the terms of the contract, which is usually once the booking has been confirmed with the supplier.
For agreements where volume targets are in place, income is recognised once the target has been achieved. For volume targets that span the year-end, the Group is required to make estimates in determining the amount and timing of recognition of override. In determining the amount of volume-related allowances recognised in any period, management estimate the probability that the Group will meet contractual target volumes, based on current and forecast performance.
Amounts due, but not yet recovered, relating to override income are recognised within trade and other receivables.
m) Business combinations
All business combinations are accounted for by applying the acquisition method. Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.
For acquisitions, the Group measures goodwill at the acquisition date as:
? the fair value of the consideration transferred; plus
? the recognised amount of any non-controlling interests in the acquiree; plus
? the fair value of the existing equity interest in the acquiree; less
? the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in the income statement.
n) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:
| Fixtures, fittings and equipment | 3-10 years |
| Buildings freehold | 50 years |
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income.
o) Intangible assets
i. Research and development
Expenditure on research activities is recognised in the income statement as an expense as incurred. Expenditure on development activities directly attributable to the design and testing of identifiable and unique software products are capitalised if the product or process meets the following criteria:
? The completion of the development is technically and commercially feasible to complete;
? Adequate technical resources are sufficiently available to complete development;
? It can be demonstrated that future economic benefits are probable; and
? The expenditure attributable to the development can be measured reliably.
Development activities involve a plan or design for the production of new or substantially improved products or processes. Directly attributable costs that are capitalised as part of the software product, website or system include employee costs. Other development expenditures that do not meet these criteria, as well as ongoing maintenance, are recognised as an expense as incurred.
Development costs for software, websites and systems are carried at cost less accumulated amortisation and are amortised over their useful lives (not exceeding five years) at the point in which they come into use.
ii. Software licenses and domain names
Acquired intangible assets are capitalised at the cost necessary to bring the asset to its working condition. The Group have applied the guidance published by the IFRS Interpretations Committee ('IFRIC') in respect of cloud computing arrangements. The guidance requires that cloud computing arrangements are reviewed to determine if they are within the scope of IAS 38 Intangible Assets, IFRS 16 Leases, or a service contract. This is to determine if the Group has control of the software intangible asset. Control is assumed if the Group has the right to take possession of the software and run it on its own or a third party's computer infrastructure, or if the Group has exclusive rights to use the software whereby the supplier cannot make the software available to other customers.
Costs for software licenses and domain names are carried at cost less accumulated amortisation and are amortised over their useful lives at the point in which they come into use.
iii. Brand
Upon acquisition of the Group by OTB Topco, the On the Beach brand was identified as a separately identifiable asset. Acquisitions of Sunshine.co.uk and Classic Collection Holidays Limited resulted in the brand of each being identified and recognised separately from goodwill at fair value.
iv. Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
| Website technology: | 10 years |
| Website and development costs: | 3 years |
| Brand: | 10-15 years |
| Agent relationships: | 15 years |
| Customer relationships: | 5 years |
v. Customer and agent relationships
Upon the acquisition of Classic Collection Holidays Limited, customer relationships were identified as a separately identifiable asset. Classic Collection's revenue is driven by a very high volume of repeat customers due to its bespoke holiday packages and the target market. Repeat customers are from two broad segments - independent travel agents and direct customers, and individuals booking directly. There is a defined margin and attrition profile differential between the two customer groups and as such two separate assets were identified.
p) Impairment of non-financial assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.
Goodwill is required to be tested for impairment annually, or more frequently where there is an indication that the goodwill may be impaired. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units, or 'CGU'. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the 'cash-generating unit').
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
q) Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
i. Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
| Buildings | 10 years- |
| IT equipment | 3-5 years |
The right-of-use assets are also subject to impairment. The Group's right-of-use assets are included as a separate category in property, plant and equipment.
ii. Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date where the interest rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments), or a change in the assessment of an option to purchase the underlying asset.
The Group's lease liabilities are included in trade and other payables.
r) Employee benefits
i. Pension scheme
The Group operates a defined contribution pension scheme. A defined contribution scheme is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement in the years during which services are rendered by employees.
ii. Share-based payment transactions
Employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details of which are given in note 24.
That cost is recognised in employee benefits expense (note 7a), together with a corresponding increase in equity (other capital reserves), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (further details are given in note 11).
s) Financing income and expenses
Financing expenses comprises interest payable and interest on lease liabilities recognised in profit or loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the income statement (see foreign currency accounting policy). Financing income comprises interest receivable on funds invested.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Foreign currency gains and losses are reported on a net basis.
t) Exceptional items
Exceptional items are material items of income and expense which, because of the nature and expected infrequency of events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior years and to assess better trends in financial performance.
u) Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.
v) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.
w) Share premium and other reserves
The amount subscribed for the ordinary shares in excess of the nominal value of these new shares is recorded in 'share premium'.
Costs that directly relate to the issue of ordinary shares are deducted from share premium net of corporation tax.
The merger reserve represents the amount subscribed for the ordinary shares in excess of the nominal value of the shares issued in exchange for the acquisition of subsidiaries.
x) Earnings per share
The Group presents basic and diluted earnings per share ('EPS') data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. For diluted EPS, the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares.
y) Capital management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
z) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation.
The Group recognises a refund liability (presented as a cancellation provision) for the commission that is considered to represent variable consideration due to the risk that a booking may be cancelled (see note 2k).
aa) Non-statutory measures
One of the Groups KPI's is adjusted profit before tax. When reviewing profitability, the Directors use an adjusted profit before taxation ('PBT') in order to give a meaningful year-on-year comparison. Whilst we recognise that the measure is an alternative (non-Generally Accepted Accounting Principles ('non-GAAP')) performance measure, which is also not defined within IFRS, this measure is important and should be considered alongside the IFRS measures.
Adjusted PBT is calculated by adjusting for material items of income and expenditure where, because of the nature and/or expected infrequency of events giving rise to them, merit separate presentation to allow shareholders a better understanding of the financial performance in the period. These adjustments include amortisation of acquired intangibles and exceptional items. In addition, share-based payments charge is excluded in order to provide comparability to prior periods due to fluctuations in the charge.
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 that 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.
i. Performance obligations
Revenue in the OTB, International and CPH segments is recognised based on there being a single performance obligation 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 that a customer is on holiday.
ii. 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 accordance with IFRS 15, revenue for the OTB, International and CPH segments is recognised 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 is recognised 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 2023, the proportion of development costs that have been capitalised is higher than prior year as the development team are focusing on key strategic development objectives. Management have assessed each project to determine whether the project is technically feasible, intended to be completed and used, whether there is available resources to complete it, and whether there is probable economic benefits from each project.
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 of future taxable profits, together with future tax planning strategies. Using approved budgets and forecasts covering a four-year period, management concluded that there would be a sufficient level of future taxable profits to support the deferred tax asset of £6.3m (2022: £8.2m) recognised (note 20).
Whilst the forecasts include inherent estimation uncertainty, the Group determined that there would be sufficient taxable income generated to realise the benefit of the deferred tax assets and no reasonably possible change to key assumptions would result in a material reduction in forecast headroom of tax profits.
The key management judgement required was determining the expected timing of recovery to profit and, therefore, the period over which the deferred tax asset would be realised. In determining the timing of recovery, all available evidence was considered, including approved budgets, forecasts and analysis of historical operating results. These forecasts are consistent with those prepared and used internally for business planning and impairment purposes. The Group performed sensitivity analyses on these forecasts that were consistent with those detailed for impairment testing in note 20.
The Group has £0.2m of tax losses carried forward from subsidiaries that have a history of losses, these losses may not be used to offset taxable income elsewhere in the Group (2022: £0.2m). On this basis, the Group has determined that it cannot recognise deferred tax assets on these tax losses carried forward.
Critical accounting estimates
Recoverability of airline debtor
In relation to flights cancelled during the financial year, the Group has considered the recoverability of amounts paid to airlines in lieu of flights that have been cancelled, which as at 30 September 2023 is a receivable balance of £1.2m - see note 15.
The Group has a legal right to a refund; the airline has an obligation to refund in the event that the flight is cancelled. Where an airline is not forthcoming with a refund owed, the Group exercises its chargeback rights as governed by the card scheme rules. Alternatively, the Group may take legal action to recover the sums owed (e.g. under the right of redress provided by Regulation 29 of the Package Travel and Linked Travel Arrangements Regulations 2018, or via an unjust enrichment claim). 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. If the Group was to increase the provision by five percentage points ('ppts') this would have resulted in a decrease of £0.2m in the airline receivable of £1.2m.
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 2k of these financial statements.
For the year ended 30 September 2023
| | | |||
| | OTB £'m | CCH £'m | CPH £'m | Total £'m |
| Revenue before fair value FX losses | | | | |
| Revenue as agent | 106.9 | - | 6.0 | 112.9 |
| Revenue as principal | - | 58.1 | - | 58.1 |
| | | | | |
| Total revenue before fair value FX losses | 106.9 | 58.1 | 6.0 | 171.0 |
| Fair value FX losses | (0.8) | - | - | (0.8) |
| Total revenue | 106.1 | 58.1 | 6.0 | 170.2 |
| | | |||
For the year ended 30 September 2022*
| | | |||
| | OTB £'m | CCH £'m | CPH £'m | Total £'m |
| Revenue before exceptional items | | | | |
| Revenue as agent | 86.9 | - | 6.2 | 93.1 |
| Revenue as principal | - | 50.5 | - | 50.5 |
| Total revenue before exceptional items | 86.9 | 50.5 | 6.2 | 143.6 |
| Exceptional cancellations** | (0.6) | - | (0.4) | (1.0) |
| Fair value FX gains | 0.8 | - | - | 0.8 |
| Total revenue | 87.1 | 50.5 | 5.8 | 143.4 |
| | | |||
* The results for the year ended 30 September 2022 have been restated to exclude the results of the discontinued operation included in that period (note 10).
** Exceptional cancellations in the year ended 30 September 2022 relates to the impact of Covid-19 in the year and travel disruption arising following the removal of travel restrictions.
Details of receivables arising from contracts with customers are set out in note 15.
5. Segmental report
As explained in note 2j, the management team considers the reportable segments to be 'OTB', 'CCH' and 'CPH'. All segment revenue, operating profit and assets and liabilities are attributable to the Group from its principal activities. All revenues are derived in the United Kingdom.
OTB and CPH recognise revenue as agent on a net basis. CCH recognises revenue as a principal on a gross basis.
| | | | ||||||
| | 2023 | 2022* | ||||||
| | OTB £'m | CCH £'m | CPH £'m | Total £'m | OTB £'m | CCH £'m | CPH £'m | Total £'m |
| Revenue | | | | | | | | |
| Revenue before exceptional cancellations | 106.9 | 58.1 | 6.0 | 171.0 | 86.9 | 50.5 | 6.2 | 143.6 |
| Exceptional cancellations** | - | - | - | - | (0.6) | - | (0.4) | (1.0) |
| Fair value FX (losses)/gains | (0.8) | - | - | (0.8) | 0.8 | - | - | 0.8 |
| Total revenue | 106.1 | 58.1 | 6.0 | 170.2 | 87.1 | 50.5 | 5.8 | 143.4 |
| | | | | | | | | |
| Adjusted EBITDA | 32.1 | (1.0) | 0.1 | 31.2 | 22.1 | (0.1) | (0.1) | 21.9 |
| Share-based charge | (1.1) | (0.1) | - | (1.2) | (4.7) | - | - | (4.7) |
| Exceptional items | (3.3) | (0.2) | - | (3.5) | (1.9) | (0.3) | (0.4) | (2.6) |
| Fair value FX (losses)/gains | (0.8) | - | - | (0.8) | 0.8 | - | - | 0.8 |
| EBITDA | 26.9 | (1.3) | 0.1 | 25.7 | 16.3 | (0.4) | (0.5) | 15.4 |
| Depreciation and amortisation | (14.1) | (1.3) | - | (15.4) | (11.1) | (1.4) | (0.2) | (12.7) |
| Group operating profit/(loss) | 12.8 | (2.6) | 0.1 | 10.3 | 5.2 | (1.8) | (0.7) | 2.7 |
| | | | | | | | | |
| Finance costs | | | | (1.5) | | | | (0.8) |
| Finance income | | | | 4.1 | | | | 0.3 |
| Profit before taxation | | | | 12.9 | | | | 2.2 |
| | | | | | | | | |
| Non-current assets | | | | | | | | |
| Goodwill | 31.6 | 4.6 | 4.0 | 40.2 | 31.6 | 4.6 | 4.0 | 40.2 |
| Other intangible assets | 27.9 | 5.6 | 0.2 | 33.7 | 27.4 | 6.6 | 0.1 | 34.1 |
| Property, plant and equipment | 5.5 | 2.5 | - | 8.0 | 6.3 | 2.8 | - | 9.1 |
| | | | | | | |||
* The results for the year ended 30 September 2022 have been restated to exclude the results of the discontinued operation included in that period (note 10).
** Exceptional cancellations in the year ended 30 September 2022 relates to the impact of Covid-19 in the year and travel disruption arising following the removal of travel restrictions.
6. Operating profit
a) Operating expenses
Expenses by nature including exceptional items and impairment charges:
| | | | |
| | | | Restated* |
| | | 2023 £'m | 2022 £'m |
| Marketing | | 40.6 | 38.3 |
| Depreciation | | 2.7 | 2.0 |
| Staff costs (including share-based payments) | | 28.4 | 27.9 |
| IT hosting, licences and support | | 6.2 | 4.5 |
| Office expenses | | 0.9 | 0.7 |
| Credit/debit card charges | | 3.9 | 3.2 |
| Insurance | | 2.2 | 1.6 |
| Professional services | | 1.2 | 0.9 |
| Other | | 1.5 | 1.0 |
| Administrative expenses before exceptional items and amortisation of intangible assets | 87.6 | 80.1 | |
| | | | |
| Exceptional items | | 3.5 | 1.3 |
| Amortisation of intangible assets | | 12.6 | 10.8 |
| Exceptional items and amortisation of intangible assets | | 16.1 | 12.1 |
| Administrative expenses | | 103.7 | 92.2 |
| | | | |
* The prior period is restated for the effects of the discontinued operations (see note 10).
b) Exceptional items
Exceptional items in the year ended 30 September 2023 of £3.5m represents £2.0m of non-trade legal and professional fees relating to ongoing litigation and £1.5m of redundancy costs as a result of the consolidation of certain Group functions between OTB and CCH.
Total exceptional items for the year ended 30 September 2022 includes £2.6m due to the impact of travel disruption, £1.3m relates to exceptional cancellations, other exceptional operating costs of £1.3m includes £2.5m of legal and professional fees incurred in the year offset by the release of £1.2m of provisions.
c) Services provided by the Company auditor
During the year, the Group obtained the following services from the operating Company's auditor.
| | | | |
| | | 2023 £'m | 2022 £'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 | | 0.4 | 0.3 |
| - Review of interim financial statements | | - | - |
| - Other assurance services | | - | - |
| | | 0.5 | 0.4 |
| | | | |
d) Adjusted profit before tax
Management measures the overall performance of the Group by reference to adjusted profit before tax, a non-GAAP measure, as it provides comparability of the Group's performance year on year:
| | | | |
| | | | Restated* |
| | | 2023 £'m | 2022 £'m |
| Profit before taxation | | 12.9 | 2.2 |
| Exceptional items | | 3.5 | 2.6 |
| Fair value FX losses/(gains) | | 0.8 | (0.8) |
| Amortisation of acquired intangibles** | | 5.2 | 5.5 |
| Share-based payments charge*** | | 1.2 | 4.7 |
| Adjusted profit before tax | | 23.6 | 14.2 |
| | | | |
* The prior period is restated for the effects of the discontinued operations (see note 10).
** These charges relate to amortisation of brand, website technology and customer relationships recognised on the acquisition of subsidiaries and are added back as they are inherently linked to historical acquisitions of businesses.
*** The share-based payment charge represents the expected cost of shares vesting under the Group's Long-Term Incentive Plan. The share-based payment charge has decreased to £1.2m (2022: £4.7m) as a result of a reduction in the number of awards in the year and the change in the expectations for non-market-based performance conditions. The year ending 30 September 2022 also included a catch-up charge following the introduction of an underpin/minimum award. These charges are added back to provide comparability to prior periods due to fluctuations in the charges.
7. Employees and Directors
a) Payroll costs
The aggregate payroll costs of these persons were as follows:
| | | | |
| | | 2023 £'m | 2022 £'m |
| Wages and salaries | | 31.7 | 27.2 |
| Defined contribution pension cost | | 1.0 | 0.7 |
| Social security costs | | 3.3 | 2.9 |
| Share-based payment charge | | 1.2 | 4.7 |
| | | 37.2 | 35.5 |
| | | | |
Staff costs above include £8.8m (2022: £7.5m) employee costs capitalised as part of software development.
The share-based payment charge has decreased to £1.2m (2022: £4.7m) as a result of a reduction in the number of awards in the year and the change in the expectations for non-market based performance conditions. The year ending 30 September 2022 also included a catch-up charge following the introduction of an underpin/minimum award.
b) Employee numbers
Average monthly number of people (including Executive Directors) employed:
| | | | |
| By reportable segment: | | 2023 No. | 2022 No. |
| OTB | | 522 | 463 |
| CCH | | 148 | 134 |
| CPH | | 11 | 22 |
| | | 681 | 619 |
| | | | |
The average monthly number of employees for the discontinued operations was four (2022: four).
c) Directors' emoluments
The remuneration of Directors was as follows:
| | | | |
| | | 2023 £'m | 2022 £'m |
| Aggregate emoluments | | 1.8 | 1.0 |
| Defined contribution pension | | 0.1 | - |
| Share-based payment charges | | 0.4 | 0.8 |
| | | 2.3 | 1.8 |
| | | | |
Remuneration was paid by On the Beach Limited, a subsidiary company of the Group.
The remuneration of the highest paid Director was as follows:
| | | | |
| | | 2023 £'m | 2022 £'m |
| Aggregate emoluments | | 0.6 | 0.6 |
| Share-based payment charges | | 0.3 | 0.8 |
| | | 0.9 | 1.4 |
| | | | |
d) Key management compensation
Key management comprised the ten members of the Executive Team (2022: eight).
Remuneration of all key management (including Directors) was as follows:
| | | | |
| | | 2023 £'m | 2022 £'m |
| Wages and salaries | | 4.2 | 5.1 |
| Short-term non-monetary benefits | | 0.2 | - |
| Share-based payment charges | | 1.2 | 3.4 |
| | | 5.6 | 8.5 |
| | | | |
e) Retirement benefits
Included in pension contributions payable by the Group of £1.0m (2022: £0.7m) is £25,800 (2022: £10,700) of contributions that the Group made to a personal pension scheme in relation to one Executive Director.
8. Finance income and finance costs
a) Finance costs
| | | | |
| | | 2023 £'m | 2022 £'m |
| Rolling credit facility interest/fees | | 1.3 | 0.6 |
| Interest on lease liabilities | | 0.2 | 0.2 |
| Finance costs | | 1.5 | 0.8 |
| | | | |
b) Finance income
| | | | |
| | | 2023 £'m | 2022 £'m |
| Bank interest receivable | | 4.1 | 0.3 |
| Finance income | | 4.1 | 0.3 |
| | | | |
9. Taxation
| | | | |
| | | 2023 £'m | 2022 £'m |
| Current tax on profit for the year | | 1.6 | 0.4 |
| Adjustments in respect of prior years | | (0.1) | - |
| Total current tax | | 1.5 | 0.4 |
| | | | |
| Deferred tax on profits for the year | | | |
| Origination and reversal of temporary differences | | 1.0 | 0.3 |
| Adjustments in respect of prior years | | (0.2) | (0.2) |
| Total deferred tax | | 0.8 | 0.1 |
| Total tax charge | | 2.3 | 0.5 |
| | | | |
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 operations are as follows.
| | | | |
| | | 2023 £'m | 2022 £'m |
| Profit on ordinary activities before tax | | 12.9 | 2.2 |
| | | | |
| Profit on ordinary activities multiplied by a blended rate of corporation tax of 22% (2022: 19%) | | 2.8 | 0.4 |
| | | | |
| Effects of: | | | |
| Impact of difference in current and deferred tax rates | | (0.6) | (0.5) |
| Adjustments in respect of prior years | | (0.3) | (0.2) |
| Expenses not deductible | | 0.4 | 0.8 |
| | | | |
| Total taxation charge | | 2.3 | 0.5 |
| | | | |
The tax charge for the year is based on the effective rate of corporation tax for the period of 19% (2022: 25%). 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 2023 have been calculated based on this rate.
10. Loss from discontinued operations
On 30 September 2023, the Group made the decision to cease its current operations outside of the UK. The results of the discontinued operations are analysed below. The comparative figures have been restated to show separately the results of the discontinued operation included in that period. The 'International' segment is no longer presented in the segment note.
| | | | |
| | | 2023 £'m | 2022 £'m |
| Loss for the year from discontinued operations | | | |
| Revenue | | 0.9 | 0.7 |
| Administrative expenses | | (1.4) | (0.8) |
| Loss before tax | | (0.5) | (0.1) |
| | | | |
| Loss from discontinued operations | | (0.5) | (0.1) |
| | | | |
| Earnings per share | | | |
| Basic EPS | | (0.3p) | (0.1p) |
| Adjusted EPS | | (0.3p) | (0.1p) |
| | | | |
| Cash flows from discontinued operations | | | |
| Net cash flows from operating activities | | (0.5) | (0.1) |
| Net cash flows from discontinued operations | | (0.5) | (0.1) |
| | | | |
No impact on cash flows from investing or financing activities.
There are no assets relating to discontinued operations held for sale at 30 September 2023.
11. 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 basic earnings per share figures are calculated by dividing adjusted earnings after tax for the year by the weighted average number of shares. Adjusted diluted earnings per share figures are calculated by dividing adjusted earnings after tax for the year by the weighted average number of shares plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into ordinary shares.
| | | ||
| Earnings per share for continuing operations | Basic weighted average number of ordinary shares (m) | Total earnings £'m | Pence per share |
| Year ended 30 September 2023 | | | |
| Basic EPS | 166.5 | 10.6 | 6.4p |
| Diluted EPS | 167.8 | 10.6 | 6.3p |
| Adjusted basic EPS | 166.5 | 19.3 | 11.6p |
| Adjusted diluted EPS | 167.8 | 19.3 | 11.5p |
| | | ||
| | Basic weighted average number of ordinary shares (m) | Total earnings* £'m | Pence per share |
| Year ended 30 September 2022 | | | |
| Basic EPS | 165.9 | 1.7 | 1.0p |
| Diluted EPS | 166.7 | 1.7 | 1.0p |
| Adjusted basic EPS | 165.9 | 10.6 | 6.4p |
| Adjusted diluted EPS | 166.7 | 10.6 | 6.4p |
* The prior period has been restated to exclude the results of discontinued operations
| Earnings per share for total operations | Basic weighted average number of Ordinary Shares (m) | Total earnings £'m | Pence per share |
| Year ended 30 September 2023 | | | |
| Basic EPS | 166.5 | 10.1 | 6.1p |
| Diluted EPS | 167.8 | 10.1 | 6.0p |
| | Basic weighted average number of Ordinary Shares (m) | Total earnings £'m | Pence per share |
| Year ended 30 September 2022 | | | |
| Basic EPS | 165.9 | 1.6 | 0.9p |
| Diluted EPS | 166.7 | 1.6 | 0.9p |
Adjusted earnings after tax is calculated using the Group's effective tax rate as follows:
| | | | |
| | | 2023 £'m | 2022 £'m |
| Profit for the year after taxation | | 10.6 | 1.7 |
| Adjustments (net of tax at the effective rate)* | | | |
| Exceptional items | | 2.8 | 1.9 |
| Fair value FX losses/(gains) | | 0.7 | (0.6) |
| Amortisation of acquired intangibles | | 4.2 | 4.1 |
| Share based payment charges** | | 1.0 | 3.5 |
| Adjusted earnings after tax | | 19.3 | 10.6 |
| | | | |
* The effective tax rate for the year ending 30 September 2023 was 19% (2022: 25%), see note 9 for details.
** The share based payment charges are in relation to options which are not yet exercisable
| | | | |
| | | 2023 £'m | 2022 £'m |
| Weighted average number of shares for basic earnings per share | | 166.5 | 165.9 |
| Dilution from share options | | 1.3 | 0.8 |
| Weighted average number of shares for diluted earnings per share | | 167.8 | 166.7 |
| | | | |
12. Intangible assets
| | | ||||||
| | Brand £'m | Goodwill £'m | Website and development costs £'m | Website technology £'m | Customer relationships £'m | Agent relationships £'m | Total £'m |
| Cost | | | | | | | |
| At 1 October 2021 | 35.9 | 40.2 | 20.2 | 22.8 | 2.1 | 4.4 | 125.6 |
| Additions | - | - | 11.0 | - | - | - | 11.0 |
| At 30 September 2022 | 35.9 | 40.2 | 31.2 | 22.8 | 2.1 | 4.4 | 136.6 |
| Additions | - | - | 12.0 | - | - | - | 12.0 |
| Disposals | - | - | (0.5) | - | - | - | (0.5) |
| At 30 September 2023 | 35.9 | 40.2 | 42.7 | 22.8 | 2.1 | 4.4 | 148.1 |
| | | | | | | | |
| Accumulated amortisation | | | | | | | |
| At 1 October 2021 | 17.5 | - | 13.3 | 18.4 | 1.3 | 1.0 | 51.5 |
| Charge for the year | 2.4 | - | 5.3 | 2.4 | 0.4 | 0.3 | 10.8 |
| At 30 September 2022 | 19.9 | - | 18.6 | 20.8 | 1.7 | 1.3 | 62.3 |
| Charge for the year | 2.5 | - | 7.4 | 2.0 | 0.4 | 0.3 | 12.6 |
| Disposals | - | - | (0.5) | - | - | - | (0.5) |
| At 30 September 2023 | 22.4 | - | 25.5 | 22.8 | 2.1 | 1.6 | 74.4 |
| | | | | | | | |
| Net book amount | | | | | | | |
| At 30 September 2023 | 13.5 | 40.2 | 17.2 | - | - | 2.8 | 73.7 |
| | | | | | | | |
| At 30 September 2022 | 16.0 | 40.2 | 12.6 | 2.0 | 0.4 | 3.1 | 74.3 |
| | | ||||||
Brand
The brand intangibles assets consist of three brands, which were separately identified as intangibles on the acquisition of the respective businesses. The carrying amount of the brand intangible assets:
| | | | | |
| Brand | Remaining useful economic life | Acquisition | At 30 September 2023 £'m | At 30 September 2022 £'m |
| On the Beach | 5 | On the Beach Travel Limited | 10.0 | 12.1 |
| Sunshine.co.uk | 5 | Sunshine.co.uk Limited | 0.6 | 0.7 |
| Classic Collection | 10 | Classic Collection Limited | 2.9 | 3.2 |
| | | | 13.5 | 16.0 |
| | | | | |
Goodwill
Goodwill acquired in a business combination is allocated on acquisition to the cash-generating unit ('CGU') that is expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:
| | | | | |
| Reportable segment | CGU | Acquisition | At 30 September 2023 £'m | At 30 September 2022 £'m |
| OTB | OTB | On the Beach Travel Limited | 21.5 | 21.5 |
| OTB | OTB | 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 and a single CGU, as they are internally reported and managed as one entity. Goodwill acquired through Sunshine.co.uk has been allocated to the 'OTB' CGU. Goodwill acquired through the Classic collection acquisition has been allocated to the 'CCH' and 'CPH' CGUs.
The Group has not recognised an impairment to the goodwill for the year ending 30 September 2023 (2022: £nil).
'OTB' CGU
The Group performed its annual impairment test as at 30 September 2023 on the 'OTB' 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 five-year period. The forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2% (2022: 2%), 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 14.6% (2022: 13.5%).
'CCH' CGU
The Group performed its annual impairment test as at 30 September 2023 on the 'CCH' 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 five-year period. The forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2% (2022: 2%). 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 14.6% (2022: 13.%).
'CPH' CGU
The Group performed its annual impairment test as at 30 September 2023 on the 'CPH' 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 five-year period. The forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2% (2022: 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 14.6% (2022: 13.5%)
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.
Key assumptions used in value-in-use calculations and sensitivity to changes in assumptions
The main assumptions on which the forecast cash flows used for the CGUs were based include:
? Consumer demand - management considered historic performance as well as the size of the market, current market share, competitive pressure, consumer confidence and appetite under the cost-of-living crisis. The Directors have used their past experience of the business and its industry, together with their expectations of the market.
? Impact of new marketing and planned improvements on booking conversion - whilst the spend on incentives and improvements is within the Group's control, the impact on increasing bookings requires assessment of consumer demand and competitive pressures using industry and market knowledge.
The calculation of value in use for all CGUs is most sensitive to the following assumptions:
? Revenue: the level of sales is based on expected customer demand, average booking values and booking conversion, however, a material deterioration in consumer can lead to reduced demand for holidays as well as disruption to its operations from unpredictable domestic and international events, which can significantly impact the level of sales. A decrease in bookings of 20% for each CGU would not result in an impairment.
? Discount rates: Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments, and is derived from its weighted average cost of capital ('WACC'). A rise in the discount rate to 16% for all CGUs would not result in an impairment.
? Growth rates used to extrapolate cash flows beyond the forecast period: the Group operates in a fast-moving marketplace so management recognises that the speed of technological change and the possibility of new entrants can have a significant impact on growth rate assumptions. A reduction in long-term growth rates by 10ppts for each CGU would not result in an impairment.
Sensitivity analysis has been completed in isolation and in combination. Management considers that no reasonably possible changes in assumptions would reduce a CGU's headroom to nil.
Impact of changes in customer behaviour
The Group does not consider that any CGU has been automatically impaired as a result of either the rising cost of living or changes in customer behaviour in respect of climate related matters with booking volumes increasing for the year ending 30 September in comparison to the prior year. All CGUs remain viable long term trading assets, which the Group expects to continue to generate positive cashflows. Inherent in the impairment test and sensitivity analysis is the impact of customer demand being affected by either of these factors. The Group is satisfied that sufficient headroom exists to support the asset value.
Website and 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 and the purchase of domain names. The amortisation period for website and development costs is three years straight line. Domain names are amortised over ten 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 2023 this was £0.9m (2022: £1.3m).
13. Tangible assets
| | | |||
| | Freehold property £'m | Right-of-use asset (note 17) £'m | Fixtures, fittings and equipment £'m | Total £'m |
| Cost | | | | |
| At 1 October 2021 | 2.3 | 3.6 | 7.1 | 13.0 |
| Additions | - | 1.5 | 1.3 | 2.8 |
| Disposals | - | - | (1.0) | (1.0) |
| At 1 October 2022 | 2.3 | 5.1 | 7.4 | 14.8 |
| Additions | - | 1.0 | 0.1 | 1.1 |
| Modification of lease | - | 0.9 | - | 0.9 |
| Disposals | - | - | (1.4) | (1.4) |
| At 30 September 2023 | 2.3 | 7.0 | 6.1 | 15.4 |
| | | | | |
| Accumulated deprecation | | | | |
| At 1 October 2021 | 0.1 | 1.1 | 3.5 | 4.7 |
| Charge for the year | 0.1 | 0.6 | 1.3 | 2.0 |
| Disposals | - | - | (1.0) | (1.0) |
| At 1 October 2022 | 0.2 | 1.7 | 3.8 | 5.7 |
| Charge for the year | 0.1 | 1.4 | 1.2 | 2.7 |
| Disposals | - | - | (1.3) | (1.3) |
| At 30 September 2023 | 0.3 | 3.1 | 3.7 | 7.1 |
| | | | | |
| Net book amount | | | | |
| At 30 September 2023 | 2.0 | 3.9 | 2.2 | 8.3 |
| | | | | |
| At 30 September 2022 | 2.1 | 3.4 | 3.6 | 9.1 |
| | | |||
The depreciation expense of £2.7m for the year ended 30 September 2023 and the depreciation expense of £2.0m for the year ended 30 September 2022 have been recognised within administrative expenses.
14. Investments
The parent company, On the Beach Group plc, is incorporated in the UK and directly holds a number of subsidiaries. The registered address for each subsidiary is Aeroworks, 5 Adair Street, Manchester M1 2NQ.
The table below shows details of the wholly-owned subsidiaries of the Group.
| Subsidiary | Nature of business | Proportion of ordinary shares held by the Group |
| On the Beach Topco Limited* | Holding company | 100% |
| On The Beach Limited | Internet travel agent | 100% |
| On The Beach Beds Limited | In-house bedbank | 100% |
| On The Beach Bid Co Limited* | Holding company | 100% |
| On the Beach Travel Limited | Holding company | 100% |
| On the Beach Trustees Limited | Employee trust | 100% |
| On the Beach Holidays Limited | Dormant | 100% |
| Sunshine.co.uk Limited | Internet travel agent | 100% |
| Sunshine Abroad Limited | Dormant | 100% |
| Classic Collection Holidays Limited | Tour Operator | 100% |
| Classic Collection Aviation Limited | Transport Broker | 100% |
| Classic Collection Holiday, Travel & Leisure Limited | Dormant | 100% |
| Saxon House Properties Limited | Property Management | 100% |
| Classic Package Holidays Limited | Travel agent | 100% |
* In the prior year, the Group undertook a project to simplify the Group structure, on 30 September 2022 On the Beach Topco Limited and On the Beach Bidco were placed into Members Voluntary Liquidation. The Group chose to simplify the Group structure to reduce duplication of processes, reduce complexity of the structure without affecting the control of the Group's assets, and reduce additional costs associated with the subsidiaries.
There are no restrictions on the Company's ability to access or use the assets and settle the liabilities of the Company's subsidiaries.
15. Trade and other receivables
| | | | |
| Amounts falling due within one year: | | 2023 £'m | 2022 £'m |
| Trade receivables - net | | 147.4 | 100.8 |
| Other receivables and prepayments | | 17.9 | 21.6 |
| | | 165.3 | 122.4 |
| | | | |
For trade receivables, impairment analysis is performed at each reporting date to calculate the expected credit losses. The provision rates are based on historical default rates, see note 23 for details of credit risk.
Prepayments greater than one year are nil (2022: £0.6m).
For the year ended 30 September 2023, other receivables includes £1.2m receivable in respect of amounts due from airlines as a result of supplier cancellations (2022: £2.8m). Other receivables and prepayments includes £7.4m of advanced payments to suppliers, and £6.0m of rebates due from suppliers. The expected credit losses in respect to these balances is not material. Other receivables and prepayments for the year ending 30 September 2022 includes £5.3m of advanced payments to suppliers, £3.9m of rebates due from suppliers and £2.2m receivable in relation to value-added tax.
Expected credit losses for trade receivables
Set out below is the movement in the allowance for expected credit losses of trade receivables:
| | | |
| | | £'m |
| At 1 October 2022 | | 0.5 |
| Provision for expected credit losses | | 2.0 |
| Utilised in year | | (1.5) |
| At 30 September 2023 | | 1.0 |
| | | |
16. 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.
17. Trade, other payables and provisions
| | | | |
| | | 2023 £'m | 2022 £'m |
| Non-current | | | |
| Lease liabilities (note 18) | | 2.6 | 3.0 |
| Current | | | |
| Trade payables | | 236.4 | 158.3 |
| Accruals and other payables | | 17.0 | 19.9 |
| Contract liabilities | | 5.9 | 7.5 |
| Lease liabilities (note 18) | | 1.9 | 0.9 |
| | | | |
| Provision | | 0.4 | 0.3 |
| | | 264.2 | 189.9 |
| | | | |
Accruals and other payables includes £8.6m (2022: £14.9m) for products or services received but not yet invoiced at the year-end date, £6.5m relates to amounts due to non-trade suppliers.
Contract balances
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 for the CCH segment. 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.
A contract liability is recognised if a payment is received from a customer before the Group delivers its performance obligations. Contract liabilities are recognised as revenue when the Group delivers its performance obligations.
Set below is the amount of revenue recognised from:
| | | | |
| | | 2023 £'m | 2022 £'m |
| Amounts included in contract liabilities at the beginning of the year | | 6.6 | 5.3 |
| Performance obligations satisfied in previous years | | 0.8 | 0.2 |
| | | | |
Provisions
| | | | |
| | | Cancellations £'m | Total £'m |
| At 1 October 2022 | | 0.3 | 0.3 |
| Arising during the year | | 0.4 | 0.5 |
| Utilised | | (0.3) | - |
| Unused amounts reversed | | - | - |
| Unwinding of discount and changes in the discount rate | | - | - |
| At 30 September 2023 | | 0.4 | 0.7 |
| Current | | 0.4 | 0.7 |
| Non-current | | - | - |
| | | | |
Cancellations
A provision has been recognised in respect of expected future cancellations for supplier and customer cancellations on the forward order book for future departures. The Group expect this provision to be utilised over the next year. The provision is based on historical trends and best estimate of future expectation, there is inherent uncertainty in terms of the level and timing of future cancellations, which will depend on various factors including potential supplier disruption and customer requested cancellations.
18. Leases
The Group as a lessee
The Group has leases for its head office and IT equipment, the lease term for the building is ten years and lease terms for the IT equipment are between three and five years. For the year ending 30 September 2023, the Group was subject to a rent review for the lease of the building, this resulted in the revaluation of the lease liability and a corresponding increase in the right-of-use asset. 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. 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 (see note 13).
Amounts recognised in profit or loss
The following lease-related expenses were recognised under IFRS 16 in the profit or loss:
| | | | |
| | | 2023 £'m | 2022 £'m |
| Depreciation expense of right-of-use assets | | 1.4 | 0.6 |
| Interest expense on lease liabilities | | 0.2 | 0.2 |
| Total amount recognised in profit or loss | | 1.6 | 0.8 |
| | | | |
Set out below are the carrying amounts of lease liabilities (included trade and other payables) and the movements during the period:
| | | | |
| | | 2023 £'m | 2022 £'m |
| As at 1 October | | 3.9 | 2.9 |
| Additions | | 1.0 | 1.5 |
| Modification of lease | | 0.9 | - |
| Accretion of interest | | 0.2 | 0.2 |
| Payments | | (1.5) | (0.7) |
| As at 30 September | | 4.5 | 3.9 |
| Current (note 17) | | 1.9 | 0.9 |
| Non-current (note 17) | | 2.6 | 3.0 |
| | | | |
The Group had total cash outflows for leases of £1.5m in 2023 (2022: £0.7m). The above table satisfies the requirements of IAS 7.44A to present a net debt reconciliation.
19. Borrowings
Bank facility
On 7 December 2022, the Group refinanced its credit facilities with Lloyds and NatWest. This included cancelling its previous facilities of £75m with Lloyds Bank and entering into a new facility for £60m, expiring in December 2025. The purpose of the facility is to meet the day-to-day working capital requirements of the Group. At the point of refinancing there was nothing drawn down.
The total facility is £60m and has two elements as follows:
? £30m facility with Lloyds; and
? £30m facility with NatWest.
The interest rate payable is equal to SONIA plus a margin. The margin contained within the facility is dependent on net leverage ratio and the rate per annum ranges from 2.00% to 2.75% for the facility or any unpaid sum.
The terms of the facility prior to 7 December 2022 included the following key financial 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; and
ii. that the ratio of total net debt to adjusted EBITDA shall not exceed 2:1
The terms of the new facility following 7 December 2022 include the following covenants:
(i) the ratio of adjusted EBITDA to net finance charges in respect of any relevant period shall not be less than 5:1; and
(ii) the ratio of total net debt to adjusted EBITDA shall not exceed 2.5:1.
The Group did not breach the covenants during the period.
The RCF is available for other credit uses including currency hedging liabilities and corporate credit cards. At 30 September 2023, the liabilities recognised in trade and other payables for the other credit uses was £4.9m, leaving £55.1m of the Lloyds/NatWest facility available for use. Card facilities with other providers remain available for use.
The amount drawn down in cash at 30 September 2023 was £nil and there has been nothing drawn down post balance sheet date.
20. Deferred tax
| | Intangible assets £'m | Property, plant and equipment £'m | Share-based payments £'m | Losses and unused tax relief £'m | Tax assets/ (liabilities) £'m |
| 2023 | | | | | |
| Assets | - | - | 0.4 | 6.3 | 6.7 |
| Liabilities | (4.0) | (0.1) | - | - | (4.1) |
| Total | (4.0) | (0.1) | 0.4 | 6.3 | 2.6 |
| | | | | | |
| 2022 | | | | | |
| Assets | - | - | 0.7 | 8.2 | 8.9 |
| Liabilities | (5.2) | (0.3) | - | - | (5.5) |
| Total | (5.2) | (0.3) | 0.7 | 8.2 | 3.4 |
| | | | |||
| | | | | |||
| | Intangible assets £'m | Capital allowances £'m | Acquired property £'m | Share-based payments £'m | Losses and unused tax relief £'m | Total £'m |
| 30 September 2021 | (6.3) | (0.1) | (0.2) | 0.7 | 9.5 | 3.6 |
| Recognised in income | 1.1 | - | - | 0.1 | (1.3) | (0.1) |
| Recognised in equity | - | - | - | (0.1) | - | (0.1) |
| 30 September 2022 | (5.2) | (0.1) | (0.2) | 0.7 | 8.2 | 3.4 |
| Recognised in income | 1.2 | 0.2 | - | (0.3) | (1.9) | (0.8) |
| Recognised in equity | - | - | - | - | - | - |
| 30 September 2023 | (4.0) | 0.1 | (0.2) | 0.4 | 6.3 | 2.6 |
| | | | | |||
The deferred tax asset includes an amount of £6.3m (2022: £8.2m), which relates to carried forward tax losses. Deferred tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is probable, deferred tax assets are reviewed at each reporting date to assess the availability of sufficient taxable temporary differences and the probability that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. The Group determined that there would be sufficient taxable income generated to realise the benefit of the deferred tax assets and no reasonably possible change to key assumptions would result in a material reduction in forecast headroom of tax profits (see note 3 for details).
In determining the recognition of deferred tax assets arising from the carry forward of unused tax losses, the Group considered the following:
? The Group considered the location of the taxable entities, the loss making companies are all located in the United Kingdom, for a full list of subsidiaries see note 14.
? The Group has considered the approved budgeted information covering a five-year period that is consistent with the forecasts used for the Group's review of impairment, going concern and viability assessments. For details of the assumptions used and sensitivity analysis performed for the forecasts, see note 12. Whilst the forecasts include inherent estimation uncertainty, the Group determined that there would be sufficient taxable income generated to realise the benefit of the deferred tax assets and no reasonably possible change to key assumptions would result in a material reduction in forecast headroom of tax profits. On this basis, the Group concluded that there is not a significant risk of a material adjustment to the carrying amount of the deferred tax asset.
? Based on the budgeted information, the Group made a significant judgement on the timing of utilising the unused tax losses, as detailed in note 3.
? The Group has £0.2m that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group, they have arisen in subsidiaries that have been loss-making for some time, and there are no other tax planning opportunities or other evidence of recoverability in the near future.
21. Share capital
| | | | |
| Allotted, called up and fully paid | | 2023 £'m | 2022 £'m |
| 166,640,480 ordinary shares @ £0.01 each (2022: 166,258,172 ordinary shares @ £0.01 each) | 1.7 | 1.7 | |
| | | | |
The Group issued 382,308 ordinary shares with a nominal value of £0.01. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Group.
22. Reserves
The analysis of movements in reserves is shown in the statement of changes in equity.
Details of the amounts included in other reserves are set out below.
The merger reserve arose on the purchase of On the Beach TopCo Limited in the year ended 30 September 2015.
During the year ended 30 September 2018, the Group issued 607,747 shares with a nominal value of £0.01 each to form part of the acquisition of Classic. The consideration value of the shares issued was £2.6m. The excess above the nominal value of the shares was credited to the merger reserve.
The capital contribution reserve arose as a result of the redemption of preference shares in the year ended 30 September 2015.
23. Financial instruments
Details of significant accounting policies and methods adopted, including criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in the statement of accounting policies.
At the balance sheet date the Group held the following:
| | | | |
| Financial assets | FV Level | 2023 £'m | 2022 £'m |
| Derivative financial assets designated as hedging instruments | | | |
| Forward exchange contracts | 2 | 0.9 | 3.2 |
| Financial assets at amortised cost | | | |
| Trust account | | 108.6 | 69.4 |
| Cash at bank | | 75.8 | 64.5 |
| Trade and other receivables (note 15) | | 157.9 | 116.9 |
| Total financial assets | | 343.2 | 254.0 |
| | | | |
| Financial liabilities | | | |
| Derivatives designated as hedging instruments | | | |
| Forward exchange contracts | 2 | (1.1) | - |
| Financial liabilities at amortised cost | | | |
| Trade and other payables (note 17) | | (263.8) | (189.6) |
| Provisions | | (0.4) | (0.3) |
| Total financial liabilities | | (26532) | (189.9) |
| | | | |
Derivative financial instruments
The Group enters into derivative financial instruments with various financial institutions, which are valued using present value calculations. The valuation methods incorporate various inputs including the foreign exchange spot and forward rates, yield curves of the respective currencies and currency basis spreads between the respective currencies.
Revolving credit facility
In order to fund seasonal working capital requirements, the Group has a revolving credit facility with Lloyds and NatWest Banks. The borrowing limits under the facility is £60m per month, subject to covenant compliance; at year-end nothing was drawn down on this facility (2022: £nil). For details of the revolving credit facility, see note 19.
The following table provides the fair values of the Group's financial assets and liabilities:
| | | | |
| Financial assets | FV Level | 2023 £'m | 2022 £'m |
| Forward exchange contracts | 2 | (0.2) | 3.2 |
| | | | |
There is no difference between the carrying value and fair value of cash and cash equivalents, trade and other receivables, and trade and other payables.
a) Measurement of fair values
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
i. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
ii. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
iii. Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
| | | ||
| | Level 1 £'m | Level 2 £'m | Level 3 £'m |
| Forward Contracts | | | |
| As at 30 September 2023 | - | (0.2) | - |
| As at 30 September 2022 | - | 3.2 | - |
The forward contracts have been fair valued at 30 September 2023 with reference to forward exchange rates that are quoted in an active market, with the resulting value discounted back to present value.
b) Financial risk management
The Group's principal financial liabilities, other than derivatives, comprise revolving credit facility, and trade and other payables. The main purpose of these financial liabilities is to finance the Group's operations. The Group's principal financial assets include trade receivables, and cash at bank that derive directly from its operations.
In the course of its business, the Group is exposed to market risk (including foreign exchange risk and interest rate risk), credit risk, liquidity risk and technology risk. The Group's overall risk management strategy is to minimise potential adverse effects on the financial performance and net assets of the Group. These policies are set and reviewed by senior finance management and all significant financing transactions are authorised by the Board of Directors.
c) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
The Group's key financial market risks are in relation to foreign currency rates. Foreign currency risk results from the substantial cross-border element of the Group's trading and arises on sales and purchases that are denominated in a currency other than the functional currency of the business. Group cash resources are matched with the net funding requirements sourced from three sources, namely internally generated funds, loan facilities and bank funding arrangements.
The foreign currency risk is managed at Group level by the purchase of foreign currency contracts for use as a commercial hedge. During the course of the period, there has been no changes to the market risk or manner in which the Group manages its exposure. The Group is exposed to interest rate risk that arises principally through the Group's revolving credit facility.
Liquidity risk, credit risk and capital risk is considered below. The Executive Team is responsible for implementing the risk management strategy to ensure that the appropriate risk management framework is operating effectively, embedding a risk mitigation culture throughout the Group. The Board are provided with a consolidated view of the risk profile of the Group. All major exposures are identified and mitigating controls identified and implemented. Regular management reporting and assessment of the effectiveness of controls provide a balanced assessment of the key risks and the effectiveness of controls.
The Group does not speculate with derivatives or other financial instruments.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of changes in market interest rates is only through the revolving credit facility and interest income, which is subject to fluctuations in SONIA.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The majority of the Group's purchases are sourced from outside the United Kingdom and as such the Group is exposed to the fluctuation in exchange rates (currencies are principally Sterling, US Dollar, Euro and Swedish Krona). The Group places forward cover on the net foreign currency exposure of its purchases. The Group foreign currency requirement is reviewed twice weekly and forward cover is purchased to cover expected usage.
The carrying amount of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:
| | | | |
| Euro | | 2023 ?'m | 2022 ?'m |
| Cash | | 28.5 | 12.0 |
| Trade payables | | (195.6) | (137.0) |
| Trade receivables | | 2.8 | 3.0 |
| Forward exchange contracts | | 163.4 | 129.5 |
| Balance sheet exposure | | (0.9) | 7.5 |
| | | | |
| | | | |
| US Dollar | | 2023 $'m | 2022 $'m |
| Cash | | 2.0 | 4.0 |
| Trade payables | | (23.0) | (8.1) |
| Trade receivables | | - | 0.3 |
| Forward exchange contracts | | 21.4 | 12.7 |
| Balance sheet exposure | | 0.4 | 8.9 |
| | | | |
| | | | |
| Swedish Krona | | 2023 Kr'm | 2022 Kr'm |
| Cash | | 28.8 | 25.0 |
| Trade receivables | | 1.0 | 1.5 |
| Forward exchange contracts | | - | - |
| Balance sheet exposure | | 29.8 | 26.5 |
| | | | |
| | | | |
| Norwegian Krona | | 2023 Kr'm | 2022 Kr'm |
| Cash | | 2.1 | 2.4 |
| Trade receivables | | - | - |
| Forward exchange contracts | | - | - |
| Balance sheet exposure | | 2.1 | 2.4 |
| | | | |
| | | | |
| Danish Krona | | 2023 Kr'm | 2022 Kr'm |
| Cash | | - | 0.1 |
| Balance sheet exposure | | - | 0.1 |
| | | | |
| | | | |
| Moroccan Dirham | | 2023 MAD'm | 2022 MAD'm |
| Cash | | 1.8 | 0.2 |
| Forward exchange contracts | | (3.5) | (0.9) |
| Balance sheet exposure | | (1.7) | (0.7) |
| | | | |
| | | | |
| United Arab Emirates Dirham | | 2023 AED'm | 2022 AED'm |
| Trade payables | | (0.1) | - |
| Balance sheet exposure | | (0.1) | - |
| | | | |
| | | | |
| Swiss Franc | | 2023 CHF'm | 2022 CHF'm |
| Cash | | 0.1 | - |
| Trade payables | | - | - |
| Balance sheet exposure | | 0.1 | - |
| | | | |
Foreign currency sensitivity
The following table details the Group sensitivity to a percentage change in Pounds Sterling against these currencies with regards to equity. The sensitivity analysis of the Group's exposure to foreign currency risk at the reporting date has been determined based on a 10% change taking place at the beginning of the financial period and held constant throughout the reporting period:
| | | | |
| | | 2023 £'m | 2022 £'m |
| Euro | | | |
| Weakening - 10% | | 0.9 | (1.7) |
| Strengthening - 10% | | (0.9) | 1.7 |
| US Dollar | | | |
| Weakening - 10% | | - | (0.2) |
| Strengthening - 10% | | - | 0.2 |
| Swedish Krona | | | |
| Weakening - 10% | | 0.2 | 0.2 |
| Strengthening - 10% | | (0.2) | (0.2) |
| | | | |
The Group uses forward exchange contracts to hedge its foreign currency risk against sterling. The forward contracts have maturities of less than 18 months after the balance sheet date. Hedge ineffectiveness can arise from differences in timing of cash flows of the hedged item and hedging instrument, the counterparties' credit risk differently impacting the fair value movements of the hedging instrument and hedged item.
As a matter of policy, the Group does not enter into derivative contracts for speculative purposes. The details of such contracts at the year-end, by currency were:
| | | | ||||
| | 2023 | 2022 | ||||
| Euro | Foreign currency ?'m | Notional value £'m | Carrying amount £'m | Foreign currency ?'m | Notional value £'m | Carrying amount £'m |
| 30 September | | | | | | |
| Less than 3 months | 79.2 | 69.3 | (0.5) | 56.2 | 48.1 | 1.3 |
| 3 to 6 months | 16.8 | 14.7 | (0.1) | 11.6 | 10.0 | 0.3 |
| 6 to 12 months | 68.4 | 59.9 | 0.1 | 53.1 | 46.3 | 1.2 |
| 12+ months | 3.9 | 3.4 | - | 2.3 | 2.1 | - |
| Total | 168.3 | 147.3 | (0.5) | 123.2 | 106.5 | 2.8 |
| | | | | | ||
| | | | ||||
| | 2023 | 2022 | ||||
| USD | Foreign currency $'m | Notional value £'m | Carrying amount £'m | Foreign currency $'m | Notional value £'m | Carrying amount £'m |
| 30 September | | | | | | |
| Less than 3 months | 8.9 | 7.1 | 0.1 | 3.9 | 3.1 | 0.4 |
| 3 to 6 months | 6.6 | 5.3 | 0.1 | 1.8 | 1.5 | 0.1 |
| 6 to 12 months | 5.9 | 4.7 | 0.2 | 1.8 | 1.6 | - |
| 12+ months | 0.1 | 0.1 | - | - | - | - |
| Total | 21.5 | 17.2 | 0.4 | 7.5 | 6.2 | 0.5 |
| | | | | | ||
| | | | ||||
| | 2023 | 2022 | ||||
| MAD | Foreign currency MAD 'm | Notional value £'m | Carrying amount £'m | Foreign currency MAD 'm | Notional value £'m | Carrying amount £'m |
| 30 September | | | | | | |
| Less than 3 months | 0.9 | 0.1 | (0.1) | 0.2 | - | - |
| 3 to 6 months | 0.2 | - | - | - | - | - |
| 6 to 12 months | 0.1 | - | - | - | - | - |
| Total | 1.2 | 0.1 | (0.1) | 0.2 | - | - |
| | | | | | ||
The impact of the hedging instruments on the statement of financial position is as follows:
| | | | ||
| | Notional amount £'m | Carrying amount £'m | Line in the statement of financial position | Change in fair value £'m |
| As at 30 September 2023 | | | | |
| Foreign exchange forward contracts | 164.5 | (0.2) | Derivative financial instruments | (2.0) |
| | | | | |
| As at 30 September 2022 | | | | |
| Foreign exchange forward contracts | 112.6 | 3.2 | Derivative financial instruments | 1.3 |
Credit risk
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises from cash balances and derivative financial instruments, as well as credit exposures to customers, including outstanding receivables, financial guarantees and committed transactions. Credit risk is managed separately for treasury and operating-related credit exposures. Customer credit risk is managed by the Group's business units, which each have policies, procedures and controls relating to customer credit risk management. Outstanding trade receivables balances are regularly reviewed to monitor any changes in credit risk with concentrations of credit risk considered to be limited given that the Group's customer base is large and unrelated.
Trade receivables and other receivables
The ageing of trade receivables at the balance sheet date was:
| | | | ||
| | Not past due £'m | Past due 0-90 days £'m | Past due >90 days £'m | Total £'m |
| At 30 September 2023 | 146.7 | 0.4 | 0.3 | 147.4 |
| At 30 September 2022 | 100.1 | 0.7 | - | 100.8 |
The ageing of other receivables at the balance sheet date was:
| | | | ||
| | Not past due £'m | Past due 0-90 days £'m | Past due >90 days £'m | Total £'m |
| At 30 September 2023 | 10.5 | - | - | 10.5 |
| At 30 September 2022 | 16.1 | - | - | 16.1 |
In line with IFRS 9, the Group applies the simplified approach for the impairment of trade and other receivables and, therefore, does not track changes in credit risk, instead a loss allowance is recognised based on lifetime expected credit losses at each reporting date. The Group uses a provision matrix to measure expected credit losses based on historical cancellation and recovery rates and considers forward-looking factors, including the impact of rising cost of living and inflation rates.
Other receivables includes a receivable in respect of amounts due from airlines as a result of exceptional cancellations, a provision of £4.8m has been recognised for airline receivables past due greater than 12 months. The Group has recognised a net receivable for the expected recoverable amount in note 15.
Financial instruments and cash deposits
As part of credit risk, the Group is subject to counterparty risk in respect of the cash and cash equivalents held on deposit with banks and foreign currency financial instruments. The Group generally deposits cash and undertakes currency transactions with highly rated banks, the Group considers that its cash and cash equivalents have low credit risk based on the external credit ratings of the counterparties. No collateral or credit enhancements are held in respect of any financial derivatives. The maximum exposure to credit risk at each reporting date is the fair value of financial assets and trade receivables.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. It is Group policy to maintain a balance of funds, borrowing, committed bank loans and other facilities sufficient to meet anticipated short-term and long-term financial requirements. In applying the policy, the Group continuously monitors forecast and actual cash flows against the maturity profiles of financial assets and liabilities. It is Group policy to ensure that a specific level of committed facilities is always available based on forecast working capital requirements. Cash forecasts identifying the Group's liquidity requirements are produced and are sensitised for different scenarios including, but not limited to, decreases in profit margins and weakening of sterling against other functional currencies.
The following are the contractual maturities of financial liabilities:
| | | | | | |
| Financial liabilities at amortised cost At 30 September 2023 | Carrying amount £'m | Contractual cash flows £'m | Within 1 year £'m | 1 to 5 years £'m | > 5 years £'m |
| Trade payables | 236.4 | 236.4 | 236.4 | - | - |
| Lease liabilities | 4.5 | 4.7 | 1.8 | 2.9 | - |
| Contract liabilities | 5.9 | 5.9 | 5.9 | - | - |
| Other payables | 17.0 | 17.0 | 17.0 | - | - |
| | 263.8 | 264.0 | 261.1 | 2.9 | - |
| | | | | | |
| At 30 September 2022 | | | | | |
| Trade payables | 158.3 | 158.3 | 158.3 | - | - |
| Lease liabilities | 3.9 | 4.2 | 1.1 | 2.9 | 0.2 |
| Other payables | 27.4 | 27.4 | 27.4 | - | - |
| | 189.6 | 189.9 | 186.8 | 2.9 | 0.2 |
Capital management
It is the Group's policy to maintain an appropriate equity capital base so as to maintain investor, creditor and market confidence, and to sustain the future development of the business.
The capital structure of the Group consists of the net cash (borrowings disclosed in note 19) and equity of the Group as disclosed in note 21.
The Group is not subject to any externally imposed capital requirements.
24. Share-based payments
The following table illustrates the number of, and movements in, share options granted by the Group.
| | | | |
| | LTIP No. of share options (thousands) | CSOP & RSA No. of share options (thousands) | Total No. of share options (thousands) |
| Outstanding at the beginning of the year | 2,964 | 1,617 | 4,581 |
| Granted during the year | 2,295 | - | 2,295 |
| Lapsed during the year | (547) | - | (547) |
| Exercised during the year | (129) | (226) | (355) |
| Forfeited during the year | (684) | (346) | (1,030) |
| Outstanding at the year-end | 3,899 | 1,045 | 4,944 |
| Exercisable | 186 | 351 | 537 |
LTIP
For the 2020 and 2021 LTIP schemes the EPS target is measured across a three-year performance period, to the end of year ending September 2022/2023 respectively. For the 2020 schemes, the Group awarded nil-cost options to certain key management within the business. The vesting of these awards will be dependent on EBITDA over a three-year performance period.
During the prior year, the Group awarded nil-cost options to certain key employees within the business. The vesting of these awards will be dependent on absolute TSR, relative TSR and Total Transaction Value ('TTV') targets at the end of a three-year period. On 21 December 2021, the Remuneration Committee approved the introduction of an underpin/minimum award for the nil cost awards originally granted at 9 July 2019. This removal of a non-market based condition has resulted in a catch-up charge to the income statement of £1.9m that reflects the scheme progress to date, all of these shares vested in FY22.
During the current year, the Group awarded nil-cost options to certain key employees within the business. The vesting of these awards will be subject to continued employment, however the Remuneration Committee have the ability to adjust the level of vesting as deemed appropriate.
The fair value of equity-settled share-based payments has been estimated as at date of grant using the Black-Scholes model.
| | | | | | | | | | |
| Award date | No. of options awarded | Share price at grant date (£) | Exercise price (£) | Expected volatility (%) | Option Life (years) | Risk free rate (%) | Dividend yield (%) | Non- vesting conditions (%) | Fair value at grant date (£) |
| 22 December 2021 (no conditions) | 435,500 | 4.630 | Nil | 0% | 3.0 | 0.73% | 0.74% | - | 4.520 |
| 22 December 2021 (no conditions) | 44,000 | 2.450 | Nil | 0% | - | 0.73% | 0.74% | - | 2.395 |
| 22 December 2021 (EBITDA dependent) | 22,000 | 2.450 | Nil | 43% | - | 0.73% | 0.74% | - | 2.395 |
| 25 February 2022 (Relative TSR dependent) | 275,591 | 2.750 | Nil | 46% | 3.0 | 1.20% | - | - | 1.710 |
| 25 February 2022 (Absolute TSR dependent) | 275,591 | 2.750 | Nil | 46% | 3.0 | 1.20% | - | - | 1.470 |
| 25 February 2022 (TTV condition dependent) | 551,183 | 2.750 | Nil | 0% | 3.0 | 1.20% | - | - | 2.749 |
| 27 July 2022 (Relative TSR dependent) | 4,883 | 2.750 | Nil | 46% | 3.0 | 1.20% | - | - | 0.717 |
| 27 July 2022 (Absolute TSR dependent) | 4,883 | 2.750 | Nil | 46% | 3.0 | 1.20% | - | - | 0.613 |
| 27 July 2022 (TTV condition dependent) | 9,766 | 2.750 | Nil | 0% | 3.0 | 1.20% | - | - | 1.156 |
| 24 February 2023 (no conditions) | 2,221,629 | 1.610 | Nil | 0% | 3.0 | 3.93% | - | - | 1.610 |
| 30 June 2023 (no conditions) | 73,274 | 0.960 | Nil | 0% | 0.5 | 4.93% | - | - | 0.960 |
Expected volatility is estimated by considering historic average share price volatility at the grant date.
Restricted Share Award (nil-cost option) and CSOP
There have been no new RSA or CSOP awarded in the current year. Of the 2022 RSA awards, 290,398 vested on 31 December 2022. The remaining 2022 RSA awards will vest on 31 December 2023 subject to continued employment, employee personal performance and Company performance.
| | | | | | | | | | |
| Award date | No. of shares | Share price at grant date (£) | Exercise price (£) | Expected volatility (%) | Option Life (years) | Risk free rate (%) | Dividend yield (%) | Non- vesting conditions (%) | Fair value at grant date (£) |
| 2022 RSA | 793,135 | 2.450 | Nil | N/A | 2.0 | 1.20% | - | Nil | 2.450 |
| 2022 RSA | 290,398 | 2.450 | Nil | N/A | 1.0 | 1.20% | - | Nil | 2.450 |
| 2022 RSA | 33,164 | 2.750 | Nil | N/A | 2.0 | 1.20% | - | Nil | 2.750 |
| 2022 RSA | 87,887 | 1.156 | Nil | N/A | 1.5 | 1.20% | - | Nil | 1.156 |
The following has been recognised in the income statement during the year:
| | | | |
| | | 2023 £'m | 2022 £'m |
| LTIP | | 0.5 | 3.2 |
| RSA | | 0.7 | 1.5 |
| Total share scheme charge | | 1.2 | 4.7 |
| | | | |
25. Commitments and contingencies
a) Capital commitments
No new capital commitments.
b) Contingencies
In September 2010, proceedings were initiated in Ireland against On the Beach Limited by Ryanair alleging infringement of, inter alia, its intellectual property rights. The case lay dormant for over 3 years with no material developments in that period, and as such the Group sought to strike out the claim on the basis of inordinate and inexcusable delay. The Court decided that Ryanair was guilty of inordinate and inexcusable delay but decided that the balance of justice lay in favour of allow the case to proceed. The legal process is ongoing but no trial date has yet been set. The amount of the claim by Ryanair is unquantified as at the date of this document. The Group expects that final resolution of the dispute might take some time.
26. 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).
27. Events after the reporting period
On 31 October 2023, the High Court ruled in favour of the Group in respect of the legal claim brought against Ryanair for refunds owed by Ryanair to the Group for flights that had been cancelled or had been subject to a major change where customers had chosen a refund, the Group was awarded £2m plus costs which was received on 4 December 2023. This is a non-adjusting post balance sheet event and therefore no accounting entries have been recognised in the current year.
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 2023.
£££Major airline failure:?The collapse of a major airline could have a material adverse effect on the Group's business. 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. Although the Group can usually recover flight costs it is owed via chargeback claims or by taking legal action, this has an impact on cash flow.
? ? £Flight supply:?A lack of flight supply/capacity impact's the Group's ability to fulfil consumer demand for holidays. For a number of low-cost airlines the Group does not have agreements in place and instead acts as the customer's agent. Certain airlines seek to block bookings or charge customers more for choosing to book through a travel agent. The Group is one of several online travel agents involved in litigation with Ryanair in connection with Ryanair's efforts to prevent OTAs from booking and selling its flights. The legal process is ongoing. 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. In order to ensure a healthy and competitive market that protects consumers' interests, the Group is engaging with Government and regulators on the market power of airlines. The Group may take seats on certain key routes to mitigate flight supply risk, although this may involve some limited risk. If the programme is cancelled or the seats cannot be sold profitably, the Group may incur material costs.
? ? ?Recoverability of airline refunds:?Where a customer's holiday is cancelled, the Group provides a full cash refund within 14 days as required under the Package Travel Regulations (PTRs). Where a flight is cancelled, airlines have an obligation to refund the cost of cancelled flights. Some airlines takes months to refund, put obstacles in the way of claiming these monies, or refuse outright to do so.
? ? £Data & security:?A major security breach, whether stemming from human error, deliberate action or a technology failure, could lead to unauthorised access or to misuse of our technology, customer data, employee data, commercially sensitive information and disruption to core business operations. This could result in significant financial loss, significant fines and reputational damage.
? ? £Innovation, transformation and scalability:?The Group operates in a fast-moving environment. In order to meet our strategic objectives, our technology platforms must be agile and scalable. If we cannot keep up with growing demand and/or do not innovate then this will impact growth and the service we can offer to our customers.
?£•Disruption to operations:?The Group faces the risk of disruption to its operations from a wide range of unpredictable domestic and international events, ranging from smaller localised disruptions impacting systems and operations at office locations, incidents at holiday destinations, or major incidents affecting the whole Group such as a pandemic or natural disaster, which could impact our ability to trade and/or manage our business. As a package organiser under the Package Travel Regulations, we have a number of responsibilities including finding replacements/providing refunds where flights are cancelled or there is a major change to a customer's holiday and providing accommodation when customers are stranded.
?£•People:?Our employees are a key asset and it is critical that we are attracting and retaining the right talent. The North West, where the Group's HQ is located, is an area where there is a particularly high degree of competition for talent. If the Group cannot attract and retain staff, or if a member of key personnel were unable to carry out their role, this could have a material effect on the Group's growth.
?£•Customer demand:?A material deterioration in consumer confidence can lead to reduced demand for beach holidays. A weak pound makes holidays and consumer spending abroad more expensive. Environmental and sustainability concerns are increasingly becoming a factor in consumer choices and demand could be impacted by consumers choosing to travel less frequently.
?£•Brand and consumer proposition:?The Group relies on the strength of its brand and reputation to set it apart from competitors and attract customers to its website and secure bookings. Failure to maintain and protect our brand, or events or circumstances which give rise to adverse publicity, could damage our brand/reputation, leading to a loss of goodwill and reduced customer demand.
? ? £Non-compliance with laws and regulations:?The Group's business is highly regulated and is subject to a complex regime of laws, rules and regulations concerning travel and aviation, online commercial 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.
? ? £Customer health & safety:?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 suppliers. In the event of a catastrophic injury/fatality, or multiple injuries, the cost could run into millions of pounds.
? ? £Financial risk and liquidity:?The risk that the Group has insufficient liquidity, does not have appropriate access to funds, there are negative movements in the market, or we cannot meet our obligations as they fall due. Even in a recessionary environment the business is cash-generative, and mitigating actions can be taken if needed.
? ? Acquisition and organic growth risk:?Failing to achieve our strategic organic growth target due to market competition, insufficient working capital or poor execution could prevent the Group from achieving its strategic goals. Failure to achieve our strategic growth target for acquisitions due to insufficient opportunities being identified, poor due diligence or poor integration, or insufficient cash resources, could result in erosion of shareholder value. Our focus has been on organic growth opportunities and we expect this to continue into FY24.
Statement of Directors' Responsibilities
The responsibility statement below has been prepared in connection with the Group's Annual Report & Accounts for the year ended 30 September 2023. Certain parts thereof are not included within this announcement. The Directors confirm, to the best of their knowledge and belief:
? That the consolidated financial statements, prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit of the Parent Company and undertakings included in the consolidation taken as a whole;
? That the Annual Report, including the strategic report, includes a fair review of the development and performance of the business and the position of the Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
? That they consider the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's position, performance, business model and strategy.
Jon Wormald
Chief Financial Officer
4 December 2023
Glossary of Alternative Performance Measures ('APMs')
| APM | Definition | | Reconciliation to closest GAAP measure | ||
| | | | | | |
| Adjusted earnings per share ('EPS') for continuing operations | Adjusted basic EPS is calculated on the weighted average number of ordinary shares in issue, using the adjusted profit after tax. Adjusted earnings after tax is based on profit after tax adjusted for amortisation of acquired intangibles, share-based payments and exceptional items. Amortisation of acquired intangibles are linked to the historical acquisitions of businesses. Share-based payments represents the non-cash costs, which fluctuates year on year. Exceptional items consists of restructuring and legal and professional costs. Exceptional items for 2022 consists of exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 and legal and professional services. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Group and allow comparability to prior years. | | Adjusted profit after tax (£'m) | 2023 | Restated |
| | Profit for the year | 10.6 | 1.7 | ||
| | Share-based payments (net of tax) | 1.0 | 3.5 | ||
| | Exceptional items (net of tax) | 2.8 | 1.9 | ||
| | Fair value FX losses/(gains) (net of tax) | 0.7 | (0.6) | ||
| | Amortisation of acquired intangibles (net of tax) | 4.2 | 4.1 | ||
| | Adjusted profit after tax | 19.3 | 10.6 | ||
| | Basic weighted average number of ordinary shares (m) | 166.5 | 165.9 | ||
| | Adjusted EPS (p) | 11.6 | 6.4 | ||
| | | | | ||
| | | | | ||
| | | | | | |
| Adjusted profit before tax | Adjusted profit before tax is based on profit before tax adjusted for amortisation of acquired intangibles, share-based payments and exceptional items. Amortisation of acquired intangibles are linked to the historical acquisitions of businesses. Share-based payments represents the non-cash costs, which fluctuates year on year. Exceptional items consists of restructuring and legal and professional costs. Exceptional items for 2022 consists of exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 and legal and professional services. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Group and allow comparability to prior years. | | Adjusted profit before tax (£'m) | 2023 | Restated |
| | Profit before tax | 12.9 | 2.2 | ||
| | Amortisation of acquired intangibles | 5.2 | 5.5 | ||
| | Share-based payments | 1.2 | 4.7 | ||
| | Exceptional items | 3.5 | 2.6 | ||
| | Fair value FX losses/(gains) | 0.8 | (0.8) | ||
| | Adjusted profit before tax | 23.6 | 14.2 | ||
| | | | | ||
| | | | | ||
| APM | Definition | | Reconciliation to closest GAAP measure | ||
| | | | | | |
| B2B TTV | B2B Total Transaction Value ('TTV') is a non-GAAP measure representing the cumulative total transaction value of sales booked each month before cancellations and adjustments. * Costs relate to the gross costs for bookings made on an agent basis. ** Bookings where revenue has been recognised on a travelled basis as a principal.
| | B2B (£'m) | 2023 | 2022 |
| | CCH revenue | 58.1 | 50.5 | ||
| | CPH revenue | 6.0 | 5.8 | ||
| | B2B revenue | 64.1 | 56.3 | ||
| | Costs* and amendments | 23.5 | 35.5 | ||
| | Booked in previous year and travelled in year** | (20.9) | (13.7) | ||
| | Booked but not yet travelled** | 20.0 | 8.6 | ||
| | B2B TTV | 86.7 | 86.7 | ||
| | | | | ||
| | | | | | |
| CCH adjusted EBITDA | CCH adjusted EBITDA is based on CCH operating profit/(loss) before depreciation, amortisation and the impact of exceptional items. Amortisation of acquired intangibles are linked to the historical acquisitions of businesses. Exceptional items consists of restructuring costs. Exceptional items for 2022 consists of exceptional cancellations as a result of Covid-19 and supplier disruption in 2022. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment and allow comparability to prior years. | | CCH adjusted EBITDA (£'m) | 2023 | 2022 |
| | CCH operating loss | (2.6) | (1.8) | ||
| | Exceptional items | 0.2 | 0.3 | ||
| | Share-based payment | 0.1 | - | ||
| | Depreciation and amortisation | 0.3 | 0.3 | ||
| | Amortisation of acquired intangibles | 1.0 | 1.1 | ||
| | Adjusted CCH EBITDA | (1.0) | (0.1) | ||
| | | | | ||
| | | | | ||
| | | | | | |
| CCH adjusted operating loss | CCH adjusted operating lodd is based on CCH operating loss before amortisation of acquired intangibles, share-based payments and exceptional items Exceptional items consists of restructuring costs. Exceptional items for 2022 consists of exceptional cancellations as a result of Covid-19 and supplier disruption in 2022. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment and allow comparability to prior years. | | CCH adjusted operating loss (£'m) | 2023 | 2022 |
| | CCH operating loss | (2.6) | (1.8) | ||
| | Exceptional items | 0.2 | 0.3 | ||
| | Share-based payments | 0.1 | - | ||
| | Amortisation of acquired intangibles | 1.0 | 1.1 | ||
| | CCH adjusted operating loss | (1.3) | (0.4) | ||
| | | | | ||
| | | | | | |
| CCH EBITDA | CCH EBITDA is based on CCH operating profit before depreciation | | CCH EBITDA (£'m) | 2023 | 2022 |
| | CCH operating loss | (2.6) | (1.8) | ||
| | Depreciation and amortisation | 1.3 | 1.4 | ||
| | CCH EBITDA | (1.3) | (0.4) | ||
| | | | | ||
| APM | Definition | | Reconciliation to closest GAAP measure | ||
| | | | | | |
| CCH TTV | CCH TTV is a non-GAAP measure representing the cumulative total transaction value of sales booked each month before cancellations and adjustments. * As a principal revenue is recognised on a travelled basis. | | CCH TTV EBITDA (£'m) | 2023 | 2022 |
| | Revenue | 58.1 | 50.5 | ||
| | Amendments | 1.5 | 10.2 | ||
| | Booked in previous year and travelled in year* | (20.9) | (13.7) | ||
| | Bookings made but not yet travelled* | 20.0 | 8.6 | ||
| | CCH TTV | 58.7 | 55.6 | ||
| | | | | ||
| | | | | | |
| CPH adjusted EBITDA | CPH adjusted EBITDA is based on CPH operating loss before depreciation, amortisation and the impact of exceptional items. Exceptional items consists of exceptional cancellations as result of Covid-19 and supplier disruption in 2022. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment and allow comparability to prior years. | | Adjusted CPH EBITDA (£'m) | 2023 | 2022 |
| | CPH operating loss | 0.1 | (0.7) | ||
| | Depreciation and amortisation | - | 0.2 | ||
| | Exceptional items | - | 0.4 | ||
| | Adjusted CPH EBITDA | 0.1 | (0.1) | ||
| | | | | ||
| | | | | | |
| CPH EBITDA | CPH EBITDA is based on CPH | | CPH EBITDA (£'m) | 2023 | 2022 |
| | CPH operating profit/(loss) | 0.1 | (0.7) | ||
| | Depreciation and amortisation | - | 0.2 | ||
| | CPH EBITDA | 0.1 | (0.5) | ||
| | | | | ||
| | | | | | |
| CPH adjusted operating profit/(loss) | CPH adjusted operating profit/(loss) is based on CPH operating loss before the impact of exceptional items. Exceptional items consists of exceptional cancellations as a result of Covid-19 and supplier disruption in 2022. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment and allow comparability to prior years. | | CPH adjusted gross profit (£'m) | 2023 | 2022 |
| | CPH operating profit/(loss) | 0.1 | (0.7) | ||
| | Exceptional items | - | 0.4 | ||
| | CPH adjusted operating profit/(loss) | 0.1 | (0.3) | ||
| | | | | ||
| | | | | | |
| CPH TTV | CPH TTV is a non-GAAP measure representing the cumulative total transaction value of sales booked * Costs relate to the gross costs for bookings made on an agent basis. | | CPH TTV (£'m) | 2023 | 2022 |
| | Revenue | 6.0 | 5.8 | ||
| | Costs* and amendments | 22.0 | 25.3 | ||
| | CPH TTV | 28.0 | 31.1 | ||
| | | | | ||
| APM | Definition | | Reconciliation to closest GAAP measure | ||
| | | | | | |
| Exceptional items | Exceptional items are certain | | Exceptional items (£'m) | 2023 | 2022 |
| | Exceptional cancellations | - | 1.3 | ||
| | Exceptional operating costs | 3.5 | 1.3 | ||
| | Exceptional items | 3.5 | 2.6 | ||
| | | | | ||
| | | | | | |
| Group TTV | Group TTV is a non-GAAP measure representing the cumulative total transaction value of sales booked each month before cancellations and adjustments. * Costs relate to the gross costs for bookings made on an agent basis. ** Bookings where revenue has been recognised on a travelled basis as a principal.
| | Group TTV (£'m) | 2023 | Restated |
| | Group revenue | 170.2 | 143.4 | ||
| | Costs* and amendments | 901.1 | 711.1 | ||
| | Booked in previous year and travelled in year** | (20.9) | (13.7) | ||
| | Booked but not yet travelled** | 20.0 | 8.6 | ||
| | Group TTV | 1,070.4 | 849.4 | ||
| | | | | ||
| | | | | | |
| Group adjusted revenue
| Group adjusted revenue as an agent is revenue adjusted for the impact of fair value FX losses in 2023, for 2022, gross profit is adjusted for Covid-19 and supplier disruption offset by fair value FX gains. | | Group adjusted revenue (£'m) | 2023 | 2022 |
| | Group revenue | 170.2 | 143.4 | ||
| | Exceptional cancellations | - | 1.0 | ||
| | Fair value FX losses/(gains) | 0.8 | (0.8) | ||
| | Group adjusted revenue | 171.0 | 143.6 | ||
| | | | | ||
| | | | | | |
| Group adjusted gross profit | Group adjusted gross profit is gross profit adjusted for the impact of fair value FX losses in 2023, for 2022, gross profit is adjusted for Covid-19 and supplier disruption offset by fair value FX gains. | | Group adjusted gross profit (£'m) | 2023 | Restated |
| | Gross profit as an agent | 106.4 | 89.1 | ||
| | Gross profit as a principal | 7.6 | 5.8 | ||
| | Group gross profit | 114.0 | 94.9 | ||
| | Exceptional cancellations | - | 1.3 | ||
| | Fair value FX loss/(gain) | 0.8 | (0.8) | ||
| | Group adjusted gross profit | 114.8 | 95.4 | ||
| | | | | ||
| APM | Definition | | Reconciliation to closest GAAP measure | ||
| | | | | | |
| Long haul TTV | Long haul TTV is a non-GAAP measure representing the cumulative total transaction value of sales booked each month before cancellations and adjustments. * Costs relate to the gross costs for bookings made on an agent basis. ** Bookings where revenue has been recognised on a travelled basis as a principal.
| | Long haul TTV (£'m) | 2023 | 2022 |
| | Group revenue | 170.2 | 143.4 | ||
| | Costs* and amendments | 901.1 | 711.1 | ||
| | Booked in previous year and travelled in year** | (20.9) | (13.7) | ||
| | Booked but not yet travelled** | 20.0 | 8.6 | ||
| | Short haul TTV | (988.3) | (795.9) | ||
| | Long haul TTV | 82.1 | 53.5 | ||
| | | | | ||
| | | | | | |
| OTB adjusted EBITDA | OTB adjusted 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 restructuring and legal and professional costs. Exceptional items for 2022 consists of exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 and legal and professional services. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment and allow comparability to prior years by virtue of their size and in order to reflect management's view of the performance of the Segment. | | OTB adjusted EBITDA (£'m) | 2023 | 2022 |
| | OTB operating profit | 12.8 | 5.2 | ||
| | Exceptional items | 3.3 | 1.9 | ||
| | Fair value FX losses/(gains) | 0.8 | (0.8) | ||
| | Share-based payments | 1.1 | 4.7 | ||
| | Depreciation and amortisation | 9.9 | 6.7 | ||
| | Amortisation of acquired intangibles | 4.2 | 4.4 | ||
| | OTB adjusted EBITDA | 32.1 | 22.1 | ||
| | | | | ||
| | | | | | |
| OTB adjusted revenue | OTB adjusted revenue is revenue adjusted for the impact of fair value FX losses in 2023, for 2022, gross profit is adjusted for Covid-19 and supplier disruption offset by fair value FX gains. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment and allow comparability to prior years by virtue of their size and in order to reflect management's view of the performance of the Segment. | | OTB adjusted revenue (£'m) | 2023 | 2022 |
| | OTB revenue | 106.1 | 87.1 | ||
| | Exceptional cancellations | - | 0.6 | ||
| | Fair value FX losses/gains | 0.8 | (0.8) | ||
| | OTB adjusted revenue | 106.9 | 86.9 | ||
| | | | | ||
| APM | Definition | | Reconciliation to closest GAAP measure | ||
| | | | | | |
| OTB adjusted operating profit | OTB adjusted operating profit is based on OTB operating profit/(loss) before the impact of exceptional items, amortisation of acquired intangibles and the non-cash cost of the share-based payment schemes. Amortisation of acquired intangibles are linked to the historical acquisitions of businesses. Share-based payments represents the non-cash costs, which fluctuates year on year. Exceptional items consists of restructuring and legal and professional costs. Exceptional items for 2022 consists of exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 and legal and professional services. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment and allow comparability to prior years by virtue of their size and in order to reflect management's view of the performance of the Segment. | | OTB adjusted operating profit (£'m) | 2023 |
|
| | OTB operating profit | 12.8 | 5.2 | ||
| | Exceptional items | 3.3 | 1.9 | ||
| | Fair value FX losses/gains | 0.8 | (0.8) | ||
| | Share-based payments | 1.1 | 4.7 | ||
| | Amortisation of acquired intangibles | 4.2 | 4.4 | ||
| | OTB adjusted operating profit | 22.2 | 15.4 | ||
| | | | | ||
| | | | | | |
| OTB marketing as % revenue | OTB revenue after marketing cost is revenue after 'OTB' online and offline marketing costs. | | OTB revenue after marketing cost (£'m) | 2023 | 2022 |
| | OTB revenue | 106.1 | 87.1 | ||
| | OTB online marketing costs | (26.0) | (27.0) | ||
| | OTB offline marketing costs | (14.6) | (11.9) | ||
| | OTB adjusted revenue after marketing costs | 65.4 | 48.2 | ||
| | OTB marketing as % revenue | 38% | 45% | ||
| | | | | ||
| | | | | | |
| OTB EBITDA | OTB EBITDA is based on OTB operating profit before depreciation and amortisation. | | OTB EBITDA (£'m) | 2023 | 2022 |
| | OTB operating profit | 12.8 | 5.2 | ||
| | Depreciation and amortisation | 14.1 | 11.1 | ||
| | OTB EBITDA | 26.9 | 16.3 | ||
| | | | | ||
| APM | Definition | | Reconciliation to closest GAAP measure | ||
| | | | | | |
| OTB adjusted EBITDA as a percentage of adjusted revenue | OTB adjusted EBITDA as a percentage of adjusted revenue is based on the OTB adjusted EBITDA divided by the revenue generated in the OTB business before the impact of exceptional cancellations. Exceptional items consists of restructuring and legal and professional costs. Exceptional items for 2022 consists of exceptional cancellations as a result of Covid-19 and supplier disruption in 2022. These costs/income are excluded by virtue of their size and in order to reflect management's view of the performance of the Segment and allow comparability to prior years by virtue of their size and in order to reflect management's view of the performance of the Segment. | | OTB adjusted EBITDA as a percentage of adjusted revenue | 2023 | 2022 |
| | Revenue (£'m) | 106.1 | 87.1 | ||
| | Exceptional cancellations (£'m) | - | 0.6 | ||
| | Fair value FX losses/gains (£'m) | 0.8 | (0.8) | ||
| | OTB adjusted revenue (£'m) | 106.9 | 86.9 | ||
| | OTB adjusted EBITDA (£'m) | 32.1 | 22.1 | ||
| | OTB adjusted EBITDA as a percentage of adjusted revenue | 30% | 25% | ||
| | | | | ||
| | | | | | |
| OTB TTV | OTB TTV is a non-GAAP measure representing the cumulative total transaction value of sales booked * Costs relate to the gross costs for bookings made on an agent basis. | | OTB TTV (£'m) | 2023 | 2022 |
| | OTB revenue | 106.1 | 87.1 | ||
| | Costs* and amendments | 877.6 | 675.6 | ||
| | OTB TTV | 983.7 | 762.7 | ||
| | | | | ||
| | | | | | |
| Overheads % revenue | Overheads as a percentage of revenue is based on the OTB revenue divided by the overheads for OTB. OTB overheads is the administrative expenses excluding the depreciation and amortisation. | | Overheads % revenue | 2023 | 2022 |
| | OTB revenue (£'m) | 106.1 | 86.9 | ||
| | Overheads (£'m) | (32.3) | (25.9) | ||
| | Overheads % revenue | 31% | 30% | ||
| | | | | ||
| | | | | | |
| Overheads % TTV | Overheads as a percentage of TTV is based on the OTB TTV divided by the overheads for OTB. OTB overheads is the administrative expenses excluding marketing costs, depreciation and amortisation. | | Overheads % TTV | 2023 | 2022 |
| | OTB TTV (£'m) | 983.7 | 762.7 | ||
| | Overheads (£'m) | (32.3) | (25.9) | ||
| | Overheads % TTV | 3.3% | 3.4% | ||
| | | | | ||
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