On the Beach Group plc ( On the Beach, the Company or the Group ) INTERIM RESULTS FOR SIX MONTHS ENDED 31 MARCH 2018

Transcription

1 10 May 2018 On the Beach Group plc ( On the Beach, the Company or the Group ) INTERIM RESULTS FOR SIX MONTHS ENDED 31 MARCH % GROWTH IN GROUP REVENUE AND 15% GROWTH IN ADJUSTED GROUP PBT Financial & Operational Highlights Group to to 31 Change Group revenue 45.3m 38.1m +19% Adjusted Group profit before tax (1) 14.0m 12.2m +15% Group profit before tax 10.8m 9.9m +9% Basic and diluted earnings per share 6.5p 6.1p +7% Adjusted earnings per share (2) 8.5p 7.4p +15% Interim dividend declared 1.1p 0.9p +22% Group revenue increased 19% to 45.3m (H1 : 38.1m) Adjusted Group profit before tax (1) up 15% to 14.0m (H1 : 12.2m) including the estimated impact of 1.1m for lost bookings due to winter seat availability and seat pricing following the Monarch failure Net debt at of 11.6m (H1 : 2.3m debt) reflecting normal seasonal working capital requirements and 12m for the funding of Sunshine acquisition. Monarch reimbursement asset of 5m recovered in full. FY17 provision of 7m has been fully utilised. Interim dividend declared of 1.1p per share (H1 : 0.9p) (1) Adjusted Group profit before tax is profit before tax before amortisation of acquired intangibles of 2.1m (H1 : 2.1m), share based payments 0.7m (H1 : 0.2m) and litigation costs of 0.3m (H1 : nil) (2) Adjusted earnings per share is Group adjusted profit after tax (1) divided by the average number of shares in issue during the period UK UK revenue up 19% to 44.4m (H1 : 37.5m) UK revenue after marketing costs up 19% to 23.0m (H1 : 19.4m) Estimated impact of 1.1m for lost bookings due to winter seat availability and seat pricing following the Monarch failure Adjusted UK EBITDA (3) up 17% to 17.0m (H1 : 14.5m) Strong booking and share growth supported by some modest and tactical discounting Daily unique visitors (4) increased by 23.9% to 34.1m (H1 : 27.5m) Branded and free traffic increased to 62% of overall traffic (H1 : 56.7%) 1

2 Percentage of revenue spent on online marketing increased to 40.6% (H1 : 40.4%), with an accelerated investment in the Sunshine.co.uk brand to drive traffic growth and to offset Sunshine's historic under-investment in paid search (3) Adjusted EBITDA excludes litigation costs and share based payments. See note 2 for the reconciliation to the nearest GAAP measure. (4) Daily UVs: Number of individuals, as defined by an IP address, visiting pages from the onthebeach.co.uk or sunshine.co.uk websites during a 24 hours period International International revenue increased by 51% (H1 : 20%), with Sweden enjoying its strongest period of trading since launch, supported by an increased investment in Sweden and Norway to accelerate growth Launch of third international market in Denmark planned for May 2018 International EBITDA loss of (1.6)m (H1 (1.0)m) Simon Cooper, Chief Executive of On the Beach Group plc, commented: On the Beach has delivered a solid performance in H1, with strong booking and share growth supported by some modest and tactical discounting. Booking growth strengthened towards the end of the period and has continued into H2. As referenced in our AGM update on 8 February 2018, the flight capacity constriction following Monarch s collapse has driven an increase in seat prices and a corresponding reduction in bookings. The position regarding flight capacity continues to recover as incremental capacity has been scheduled which alleviates this constriction. Given the resilient and flexible nature of our business model, the Board remains confident in delivering a full year result in line with management s expectations, taking into account the one-off impact of flight capacity constraints as a result of the Monarch failure and the accelerated investment to support International growth. To support our continued desire to attract and retain the best digital talent, we have signed a lease on a new digital HQ in Manchester which has the capacity to support our growth ambitions. Fit out work will begin shortly and we are scheduled to occupy this exciting new space by the end of Analyst Meeting A meeting for analysts will be held today at the offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD commencing at 09:30am. For further information: On the Beach Group plc Simon Cooper, Chief Executive Officer Paul Meehan, Chief Financial Officer FTI Consulting Jonathon Brill Alex Beagley Fiona Walker Charlotte Cobb via FTI Consulting Tel: +44 (0)

3 About On the Beach With over 20% share of online sales in the short haul beach holiday market, we are one of the UK s largest online beach holiday retailers. We have significant opportunities for growth and a long-term mission to become Europe s leading online retailer of beach holidays. By using our innovative technology, low-cost base and strong customer-value proposition to provide a structural challenge to legacy tour operators and travel agents, we continue our journey to disrupt the online retail of beach holidays. Our model is customer-centric, asset light, profitable and cash generative. Cautionary statement This announcement may contain certain forward-looking statements with respect to the financial condition, results, operations and businesses of the Company. Forward looking statements are sometimes, but not always, identified by their use of a date in the future or such words as anticipates, aims, due, will, could, may, should, expects, believes, intends, plans, targets, goal or estimates. These forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements, including factors outside the Company's control. The forward-looking statements reflect the knowledge and information available at the date of preparation of this announcement and will not be updated during the year. Nothing in this announcement should be construed as a profit forecast 3

4 Chief Executive s Review Summary of Operating Performance On the Beach continues to be a dynamic, entrepreneurial and ambitious business delivering value for money beach holidays that are personalised to our customers individual needs. The Group maintains a daily focus to improve the quality of its customer proposition and the value that it provides to its growing customer base. We have continued to grow market share in H1, with daily unique visitors to site (4) in the UK increasing 23.9% to 34.1m (H1 : 27.5m). In light of our expectation of a strong recovery in demand we have continued to invest in both online and offline marketing activity to build trading momentum into the start of H2. The phasing of our offline marketing investment has been significantly different YOY with a heavier weight of investment at the end of the period. This has driven online marketing expenditure as a percentage of revenue to 40.6% (H1 : 40.4%), delivering a revenue after marketing costs increase of 18.6% to 23.0m (H1 : 19.4m). Our continued growth has been delivered by executing a focused strategy to optimise our customer proposition to increase conversion rates and improve margin while driving an efficient increase in our market traffic share, further enhancing our ability to gain market share from traditional tour operators. (4) Daily UVs: Number of individuals, as defined by an IP address, visiting pages from the onthebeach.co.uk or sunshine.co.uk websites during a 24 hour period Strategy and growth The Group has a mission to make it simple for customers to plan, find and book their perfect beach holiday and a vision to be Europe s leading online retailer of beach holidays. On the Beach has delivered significant growth within a growing market over the last three years by evolving a strategy based around the following drivers: 1. Out-innovating through agility and investment in talent and technology Improvements to agile working methodologies continue to increase throughput of benefits-delivering features and functionality Continued evolution of core platform to support future innovations 2. Driving an efficient increase in market traffic share Daily unique visitor growth of 23.9% in H1 and significant market share growth Branded and free traffic increased to 62.0% of overall traffic to site (H1 : 56.7%) Percentage of revenue spent on online marketing (H1 2018: 40.5% vs H1 : 40.5%) Third year of full national TV advertising campaign and second year of Benidorm TV programme sponsorship 3. Optimising and personalising our multi device customer proposition 5.8m logged sessions in H1 2018, a 16% increase (H1 : 5.0m) Responsive site now serves 60.7% of UK traffic on smartphone (H1 : 52.7%) Repeat purchase rate increased to 42.9% (H1 : 40.3%) 4. Leveraging increased revenue through direct and differentiated supply 68% of all hotel buying through direct contracting (H1 : 66%) Further progress made to increase percentage of rate and access of exclusive hotel supply throughout FY18 and beyond whilst maintaining risk-free model 4

5 5. Expanding our model into new source markets and products and driving operational leverage Fixed and variable cost as a percentage of revenue 12.9% (H1 2016: 12.5%) reflecting completion of integration of the Sunshine brand Branded and free visits to ebeach.se and ebeach.no continue to increase and repeat purchase rate continues to improve to 23% (H1 : 18%) Denmark website (ebeach.dk) launches during May 2018 We have continued to invest in our people and our platform which allows us to innovate at an increasing pace and, in doing so, stay ahead of the competition. To support our continued desire to attract the best digital talent, we have recently signed a lease on a new digital HQ in Manchester which has the capacity to support our growth ambitions. Fit out work will begin shortly and we are scheduled to occupy this exciting new space by the end of Recent market trends As referenced in our AGM update on 8 February 2018, the flight capacity constriction post Monarch s collapse drove an increase in seat prices and corresponding reduction in bookings. This short term flight supply constriction had a detrimental impact on trading in H1 whilst airlines rescheduled capacity to fill the demand left by Monarch. Supply is now returning to a more normal pattern, together with a return in demand for peak departures and since the period end we have seen a notable improvement in trading. Marketing In light of our expectation of a strong recovery in demand we have continued to invest in both online and offline marketing activity to build trading momentum into the start of H2. The phasing of our offline investment is significantly different YOY with a heavier weight of the investment in the end of the half. This investment has delivered strong momentum into the start of H2. Sunshine.co.uk Following the integration of Sunshine onto the OTB platform we have driven strong revenue growth through H1. We have continued to invest the majority of this incremental revenue to drive traffic growth and to offset Sunshine's historic underinvestment in paid search marketing. Sunshine volumes are also helping to support volume growth with key hotelier partners. Board changes As announced separately today, Richard Segal has informed the Board of his intention to step down as Non-Executive Chairman, a position he has held since October Richard has led the Group through a period of strong change and growth, as both a private and listed business, and the Board expresses its deep gratitude for his contribution and guidance during that time. After a period of transition Richard will be succeeded by Lee Ginsberg, currently Senior Independent Non-Executive Director, at a date yet to be confirmed. At that time, David Kelly will become Senior Independent Director. Lee and David have both been on the Board of the Company throughout its life as a listed entity. The Nomination Committee has commenced the process for recruiting a new nonexecutive director. Current Trading & Outlook We are efficiently executing our strategy of investing in our people, brand, supply and technology and we continue to realise the benefits of operational leverage from our low fixed cost base. A number of the technological developments that we have been working on throughout H1 will be fully rolled out in H2 and we expect will deliver significant benefits. 5

6 Given the resilient and flexible nature of our business model and the expectation that demand for peak summer departures will continue to improve, the Board remains confident in delivering a full year result in line with management s expectations, taking into account the one-off impact of flight capacity constraints as a result of the Monarch failure and the accelerated investment to support International growth. The current market dynamics are presenting the Group with many opportunities to leverage its scale and technological capability to strengthen its market leading position, such as the recently completed acquisition of Sunshine.co.uk, and the Board continues to evaluate opportunities to enhance the Group s profitability and market share position. Financial Review The Group organises its operations into two principal financial reporting segments, being UK (the "UK Segment"), the Group's established market and International (the "International Segment"), the Group's developing market. In each of the UK Segment and the International Segment, the Group realises 93% of revenue from dynamically packaged holidays with the remainder single element products such as flights or hotels. UK Segment performance m H H1 Change % Revenue % Revenue after marketing costs % Variable costs (2.4) (2.0) Overhead costs (3.6) (2.9) Adjusted UK EBITDA* % Adjusted UK EBITDA* % revenue 38.3% 38.7% * Adjusted EBITDA excludes litigation costs and share based payments. See note 2 for the reconciliation to the nearest GAAP measure. UK segment revenue and marketing costs Revenue increased by 18.5% to 44.4m (H1 : 37.5m) with On the Beach s agile business model allowing the Group to react to rapid changes in consumer demand. The acts of terrorism in recent years, have continued to impact Egypt but we have seen a return of demand to the Eastern Mediterranean in H1 2018, together with continuing strong demand for holidays in the Western Mediterranean. Marketing expenses (excluding offline) for the first half as a percentage of revenue were 40.6% (H1 : 40.5%) with total expenditure of 18.0m (H1 : 15.2m) reflecting both the accelerated investment in the Sunshine brand to offset the historic underinvestment in paid search marketing and a continued investment overall to drive traffic to build trading momentum for H2. We have increased expenditure in H1 on the Group s offline TV advertising to 3.4m (H1 : 2.9m) with a fully national campaign and a continuation of the Benidorm television programme sponsorship on ITV. UK segment Adjusted EBITDA* Whilst we continue to benefit from scale and improve operational leverage, the combination of Sunshine.co.uk (historically a lower margin, lower Adjusted EBITDA* % business) into On the Beach impacts overall blended cost ratios and Adjusted EBITDA* %, whilst we grow and invest in the business as part of the enlarged Group: H H1 Variable costs % revenue 5.3% 5.3% Overhead costs % revenue 8.1% 7.7% Total 13.4% 13.0% 6

7 Adjusted EBITDA* increased 17.2% to 17.0m (H1 : 14.5m). Adjusted EBITDA* as a percentage of revenue was 38.3% (H1 38.7%). *Adjusted EBITDA excludes litigation costs and share based payments. See note 2 for the reconciliation to the nearest GAAP measure. International Segment performance m H H1 Change % Revenue % Revenue after marketing costs (1.2) (0.9) Variable costs (0.2) (0.1) Overhead costs (0.2) - International EBITDA (1.6) (1.0) The Group has focused on growing international share both online and offline supported by a TV campaign in December. We also launched a site in Denmark in May Losses in the first half were 1.6m (H1 : 1.0m) and are derived almost entirely from the marketing investment required to drive branded awareness and share of traffic which will in turn improve efficiency. Adjusted group profit before tax and retained earnings The Group reports adjusted group profit before tax and amortisation of acquired intangibles to allow better interpretation of the underlying trend in profit before tax. m H H1 Change % Adjusted Group operating profit before % amortisation (6) Finance costs (0.1) (0.1) Finance income Adjusted Group Profit before tax % Litigation costs (0.3) - Share based payments (0.7) (0.2) Amortisation of acquired intangibles (2.2) (2.1) Profit before taxation % Taxation (2.3) (2.0) Profit for the half year % (6) Includes amortisation of development costs of 1m but excludes amortisation of acquired brand and website technology intangible assets of 2.2m (H1 : 2.1m) and share based payments of 0.7m (H1 : 0.2m). Finance costs The Group has in place a revolving credit facility of up to 35.0m with Lloyds. The drawdown at was 23.5m (H1 : 9.0m) and the peak drawdown for the period was 23.5m. Borrowing limits vary under the RCF to reflect the seasonal requirements of the Group and as a result of the flexible payment options given to customers. 7

8 Share based payments The Group has an LTIP scheme in place and there have now been four sets of awards granted, which vest based on performance criteria between September 2018 and September In accordance with IFRS 2, the group has recognised a non-cash charge of 0.7m (H1 : 0.2m). Taxation The Group tax charge of 2.3m represents an effective rate of 21.3% (H1 : 19.6%) which was higher than the average standard UK rate of 19% (H1 : 20%). The current tax charge is affected by a deferred tax credit of 0.4m ( H1: 0.4m) which is released in line with the amortisation of 2.1m on the valuation of acquired intangibles on the investment by Inflexion in October Cash flow and net debt m H H1 FY17 Adjusted EBITDA* Capitalised development expenditure (1.7) (1.3) (2.7) Movement in working capital (48.5) (34.8) (3.4) Capital expenditure (0.8) (0.4) (0.5) Adjusted operating cash flow (7) (35.6) (23.0) 24.6 (7) Adjusted operating cash flow is stated as net cash (outflow)/inflow from operating activities before tax paid and after deducting capital expenditure on PPE and intangible assets. * Adjusted EBITDA excludes litigation costs and share based payments. See note 2 for the reconciliation to the nearest GAAP measure. On an annual basis the Group operates a highly cash generative business model and makes no stock commitment. The cash flow profile of the Group is seasonal with approximately 50% of customers travelling in the period June to August and hence the cash flows (excluding any cash held in the trust) experience a trough prior to June through to August and a peak following this. The movement in the trust account balance for the half year is 19.9m (H1 : 23.0m). At 30 September the Group recognised a 5.0m reimbursement asset as well as a 7.0m provision in respect of the failure of the Monarch Airlines Group. The 5.0m receivable was recovered in full by the end of H1 FY18. The 7.0m provision which represented the cost the Group incurred to fulfil its obligations to customers under the ATOL regulations to arrange refunds or alternative flights relating to the failure has been fully utilised. No further provision is required. Dividend The Board has declared an interim dividend of 1.1p per share (H1 0.9p). The interim dividend will be paid on 29 June 2018 to members on the register at the close of business on 1 June Simon Cooper CEO 10 May 2018 Paul Meehan CFO 10 May

9 On the Beach Group Plc INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 MARCH 2018 CONDENSED CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME For the 2018 Note 2018 Year ended 30 September '000 '000 '000 unaudited unaudited audited Revenue 2 45,314 38,066 83,555 Administrative expenses before (31,182) (25,026) (53,298) amortisation and exceptional costs 3 Group operating profit before amortisation of intangible and exceptional costs 14,132 13,040 30,257 Exceptional costs - - (2,667) Amortisation of intangible assets (3,430) (3,124) (6,442) Group operating profit 10,702 9,916 21,148 Finance costs (145) (78) (177) Finance income Net finance costs/(income) 56 (47) (80) Profit before taxation 10,758 9,869 21,068 Taxation 4 (2,272) (1,986) (3,068) Profit for the year 8,486 7,883 18,000 Total comprehensive income for the period 8,486 7,883 18,000 Attributable to: Equity holders of the parent 8,486 7,883 18,000 Basic and diluted earnings per share attributable to the equity Shareholders of the Company: Basic and diluted earnings per share 5 6.5p 6.1p 13.8p Adjusted basic earnings per share * 5 8.5p 7.4p 17.6p Adjusted profit measure Adjusted group PBT (before amortisation of acquired intangibles, exceptional costs, share based payments and litigation costs) * 3 14,016 12,150 28,515 * This is a non GAAP measure, refer to note 3 & 5 The company has no other comprehensive income in the current or prior year 9

10 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at At At 31 At 30 September '000 '000 '000 unaudited unaudited audited Assets Note Non-current assets Intangible assets 6 70,820 62,828 72,512 Property, plant and equipment 1, ,396 Total non-current assets 72,780 63,712 73,908 Current assets Trade and other receivables 156, ,752 56,508 Cash and cash equivalents 7 70,210 55,260 71,569 Total current assets 227, , ,077 Total assets 299, , ,985 Equity Share capital 1,304 1,304 1,304 Retained earnings 233, , ,849 Capital contribution reserve Merger reserve (132,093) (132,093) (132,093) Total equity 103,290 87,309 96,560 Non-current liabilities Deferred tax 6,118 6,607 6,441 Total non-current liabilities 6,118 6,607 6,441 Current liabilities Corporation tax payable 1,705 3,609 2,406 Trade and other payables 164, ,201 89,453 Loans and overdrafts 8 23,500 9,000 - Provisions ,000 Derivative financial instruments Total current liabilities 190, ,808 98,984 Total liabilities 196, , ,425 Total equity and liabilities 299, , ,985 10

11 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the 2018 Share capital Share premium Merger reserve Capital contribution reserve Retained earnings Total For the year ended 30 September '000 '000 '000 '000 '000 '000 Balance at 30 September 1,304 - (132,093) ,427 82, Share based payment charges Dividends paid during the year (4,043) (4,043) Total comprehensive income for ,000 18,000 the period Balance at 30 September 1,304 - (132,093) ,849 96,560 Share capital Share premium Merger reserve Capital contribution reserve Retained earnings Total For the '000 '000 '000 '000 '000 '000 Balance at 30 September 1,304 - (132,093) ,427 82, Share based payment charges Dividends paid during the year (2,870) (2,870) Total comprehensive income for ,883 7,883 the period Balance at 31 (unaudited) 1,304 - (132,093) ,598 87,309 Share capital Share premium Merger reserve Capital contribution reserve Retained earnings Total For the '000 '000 '000 '000 '000 ' Balance at 30 September 1,304 - (132,093) ,849 96,560 Share based payment charges Dividends paid during the year (2,479) (2,479) Total comprehensive income for ,486 8,486 the period Balance at (unaudited) 1,304 - (132,093) , ,290 11

12 CONSOLIDATED STATEMENT OF CASHFLOWS For the Year ended 30 September unaudited unaudited audited '000 '000 '000 Profit before taxation 10,758 9,869 21,068 Adjustments for: Depreciation Amortisation of intangible assets 3,430 3,124 6,442 Finance costs Finance income (201) (31) (97) Share based payments ,138 13,418 28,497 Changes in working capital: Increase in trade and other receivables (100,371) (81,819) (9,589) Increase in trade and other payables 71,679 69,988 10,950 Increase in trust account (19,884) (22,996) (4,729) (48,576) (34,827) (3,368) Cash flows from operating activities Cash (consumed)/generated from operating activities (33,438) (21,409) 25,129 Tax paid (3,293) (2,424) (5,110) Net cash (outflow)/inflow from operating activities (36,731) (23,833) 20,019 Cash flows from investing activities Purchase of property, plant and equipment (847) (357) (475) Purchase of intangible assets (1,739) (1,290) (2,651) Interest received Acquisition of subsidiary, net of cash acquired (3,000) - (5,795) Net cash inflow/(outflow) from investing activities (5,385) (1,616) (8,824) Cash flows from financing activities Proceeds from borrowings 23,500 9,000 - Equity dividends paid (2,479) (2,870) (4,043) Interest paid (145) (49) (177) Net cash inflow/(outflow) from financing activities 20,876 6,081 (4,220) Net (decrease)/increase in cash at bank and in hand (21,240) (19,368) 6,975 Cash at bank and in hand at beginning of year 33,027 26,052 26,052 Cash at bank and in hand at end of year 11,787 6,684 33,027 12

13 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of preparation This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The annual financial statements of the Group are prepared in accordance with International Reporting Standards (IFRSs) as adopted by the EU. As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company s published consolidated financial statements for the year ended 30 September. The Group's last annual consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union. The comparative figures for the year ended 30 September are an abridged version of the Group s last annual financial statements and, together with other financial information contained in these interim results, do not constitute statutory financial statements of the Group as defined in section 434 of the Companies Act A copy of the statutory accounts for the year ended 30 September has been delivered to the Registrar of Companies. The auditor has reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or (3) of the Companies Act These interim financial statements were authorised for issue by the Group s Board of Directors on 8 May 2018 The financial information for the six months 2018 has been reviewed by KPMG, the Company s external auditor. Their report is included within this announcement. Going concern The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The Groups current revolving credit facility expires in December The Group expects to renew this facility within the next few months. The lending profile of the facility will be consistent with the current facility. Accounting estimates and judgements In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 September. 13

14 Standards issued but not yet effective As of the date of authorisation of these interim financial statements, the following standards were in issue but not yet effective: IFRS 9 Financial Instruments was endorsed for adoption by the EU in November 2016 and is effective for accounting periods beginning on or after 1 January IFRS 15 Revenues from Contracts with Customers is effective for periods beginning on or after 1 January IFRS 16 Leases is effective for periods beginning on or after 1 January 2019 subject to EU endorsement There has been no changes to management s opinion since the Annual report. We will continue to work towards quantifying the expected impact of the changes and will provide you with an update in the 2018 annual report. 2 Segmental report The management team consider the reportable segments to be UK and International. All segment revenue, operating profit, assets and liabilities are attributable to the group from its principal activities as on online travel agent. Sunshine.co.uk Limited is disclosed within the "UK" segment (unaudited) UK International Total Income Revenue 44, ,314 Marketing expenditure excluding offline (18,009) (1,563) (19,573) Incremental offline expenditure (430) - (430) Other offline expenditure (2,919) (570) (3,489) Revenue after marketing costs 23,027 (1,206) 21,822 Adjusted EBITDA 17,035 (1,557) 15,478 Litigation costs & share based payments (1,063) - (1,063) EBITDA 15,972 (1,557) 14,415 Depreciation & amortisation (3,972) (81) (3,713) Segment operating profit/(loss) 12,340 (1,638) 10,702 Group operating profit/(loss) 12,340 (1,638) 10,702 Finance costs (145) Finance income 201 Profit before taxation 10,758 Non-current assets Goodwill 31,624-31,624 Other intangible assets 38, ,196 Property, plant and equipment 1,960-1,960 14

15 UK International Total Income Revenue 37, ,066 Marketing expenditure excluding offline (15,113) (1,140) (16,253) Incremental offline expenditure (678) - (678) Other offline expenditure (2,242) (365) (2,607) Revenue after marketing costs 19,417 (889) 18,528 Adjusted EBITDA 14,464 (1,046) 13,418 Share based payments (158) - (158) EBITDA 14,306 (1,046) 13,260 Depreciation and amortisation (3,268) (76) (3,344) Segment operating profit/(loss) 11,038 (1,122) 9,916 Group operating profit - - 9,916 Finance costs (78) Finance income 31 Profit before taxation 9,869 Non-current assets Goodwill 21,544-21,544 Other intangible assets 41, ,284 Property, plant and equipment Year ended 30 September UK International Total Income Revenue 81,595 1,960 83,555 Marketing expenditure excluding offline - - (36,109) Offline expenditure (2,920) (365) (3,284) Revenue after marketing costs 44,858 (1,573) 43,285 Adjusted EBITDA 33,160 (1,996) 31,164 Share based payments (465) - (465) EBITDA 32,695 (1,996) 30,699 Depreciation and amortisation (6,729) (155) (6,884) Segment operating profit/(loss) 25,966 (2,151) 23,815 Exceptionals (2,667) Group operating profit 21,148 Finance costs (177) Finance income 97 Profit before taxation 21,068 Non-current assets Goodwill 31,624-31,624 Other intangible assets 40, ,888 Property, plant and equipment 1,396-1,396 15

16 3 Operating profit a) Operating expenses Expenses by nature including exceptional items: 2018 Year ended 30 September unaudited unaudited audited '000 '000 '000 Marketing 23,492 19,537 40,270 Depreciation Staff costs 3,644 3,066 6,916 IT hosting, licences & support ,054 Credit / debit card charges ,168 Other 2, ,448 Total administrative expenses 31,182 25,026 53,298 Exceptional costs - - 2,667 Amortisation of intangible assets 3,430 3,124 6,442 Total exceptional and cost amortisation 3,430 3,124 9,109 Total expenses 34,612 28,150 62,407 b) Adjusted group PBT Management measures the overall performance of the Group by reference to Adjusted Group PBT, a non-gaap measure: 2018 Year ended 30 September unaudited unaudited audited '000 '000 '000 Profit before taxation 10,758 9,869 21,068 Exceptional acquisition costs Litigation costs Monarch charge (net) - - 2,000 Amortisation of acquired intangibles 2,195 2,123 4,315 Share based payments charge Adjusted group PBT 14,016 12,150 28,515 16

17 4 Taxation 2018 Year ended 30 September unaudited unaudited audited Analysis of charge in year '000 '000 '000 Current tax on profit for the year 2,597 2,387 4,956 Adjustments in respect of prior years * - - (1,063) Total current tax 2,597 2,387 3,893 Deferred tax on profits for the year Origination and reversal of temporary differences (325) (401) (825) Impact of change in tax rate Total deferred tax (325) (1,030) (825) Total tax charge 2,272 1,986 3,068 The differences between the total taxation shown above the amount calculated by applying the standard UK corporation taxation rate to the profit before taxation on continuing operating are as follows. The Group earns its profits primarily in the UK therefore the rate used for taxation is the standard rate for UK corporation tax. * The adjustment in respect of prior years is in relation to an agreed Advanced Thin Capitalisation Agreement (ATCA) for financial years ended 30 September 2014 and Year ended 30 September unaudited unaudited audited '000 '000 '000 Profit on ordinary activities before tax 10,758 9,869 21,068 Profit on ordinary activities multiplied by the effective rate of corporation tax in the UK of 19% ( : 19.5%) 2,044 1,974 4,109 Effects of: Other expenses not deductible Adjustments in respect of prior years - - (1,063) Effect of rate changes on current tax Effect of rate changes on deferred tax Total taxation charge 2,272 1,986 3,068 The tax charge for the year is based on the effective rate of UK Corporation tax for the period of 19.5% (2016: 20%). A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantially enacted on 2 July Further reductions to 19% (effective from 1 April ) on to 18% (effective 1 April 2020) were substantially enacted on 26 October 2015 and an additional reduction to 17% (effective 1 April 2020) was substantially enacted on 6 September This will reduce the Company's future current tax charge accordingly. The deferred tax liability at has been calculated based on these rates. 17

18 5 Earnings per share Basic and diluted 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. Adjusted earnings per share figures are calculated by dividing adjusted earnings after tax for the year by the weighted average number of shares. Basic and diluted earnings per share are the same as there is no difference between the basic and diluted number of shares Year ended 30 September unaudited unaudited audited '000 '000 '000 Profit after tax for the year/period 8,486 7,883 18,000 Basic weighted average number of Ordinary Shares (m) Basic earnings per share (in pence per share) 6.5p 6.1p 13.8p Adjusted basic earnings per share Adjusted basic earnings per share are calculated by dividing earnings after tax of On the Beach Group plc by the weighted average number of shares: 2018 Year ended 30 September Adjusted earnings after tax 11,138 9,717 22,946 Basic weighted average number of Ordinary Shares (m) Basic earnings per share (in pence per share)

19 Adjusted earnings after tax is calculated as follows: 2018 Year ended 30 Septemb er unaudited unaudited audited '000 '000 '000 Profit for the year after taxation 8,486 7,883 18,000 Exceptional acquisition costs (net of tax at 19%) Monarch net charge (net of tax at 19%) - - 1,620 Amortisation of acquired intangibles 2,196 2,123 4,315 Share based payment charges (net of tax at 19%) * Litigation costs (net of tax at 19%) 275 Adjustments in respect of prior years - - (1,063) Deferred tax movements relating to amortisation of acquired intangibles (404) (415) (841) Adjusted earnings after tax 11,138 9,717 22,946 * The share based payment charges are in relation to options which are not yet exercisable. 6 Intangible fixed assets Brand Goodwill Website & development Costs Website technology Total Cost At 1 October 31,535 31,624 6,558 22,513 92,230 Additions - - 1,739-1,739 Disposals - - (2) - (2) At ,535 31,624 8,295 22,513 93,967 Accumulated amortisation At 1 October 8,077-2,631 9,010 19,718 Charge for the year 1,073-1,235 1,123 3,431 Disposals - - (2) - (2) At ,150-3,864 10,133 23,147 Net book amount At ,385 31,624 4,431 12,380 70,820 19

20 Brand Goodwill Website & development Costs Website technology Total Cost At 1 October ,079 21,544 3,802 22,513 77,938 Additions - - 1,290-1,290 At 31 30,079 21,544 5,092 22,513 79,228 Accumulated amortisation At 1 October , ,757 13,276 Charge for the year 1, ,127 3,124 At 31 7,018-1,498 7,884 16,400 Net book amount At 31 23,061 21,544 3,594 14,629 62,828 Brand Goodwill Website & development Costs Website technology Total Cost At 1 October ,079 21,544 3,802 22,513 77,938 Assets acquired on acquisition 1,456 10, ,641 Additions - - 2,651-2,651 At 30 September 31,535 31,624 6,558 22,513 92,230 Accumulated amortisation At 1 October , ,757 13,276 Charge for the year 2,062-2,127 2,253 6,442 At 30 September 8,077-2,631 9,010 19,718 Net book amount At 30 September 23,458 31,624 3,927 13,503 72,512 7 Cash and cash equivalents Trust accounts are restricted cash held separately and only accessible at the point the customer has travelled Year ended 30 September unaudited unaudited audited Cash at bank and in hand 11,787 6,684 33,027 Trust account 58,423 48,576 38,542 70,210 55,260 71,569 20

21 8 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 2018 Unaudited '000 Unaudited '000 Year ended 30 September Audited 000 Loans & Receivables Cash and cash equivalents 70,213 55,260 71,569 Trade and other receivables 156, ,752 55,671 Total financial assets 227,093 70, ,240 Financial liabilities Trade and other payables (164,355) (123,201) (79,602) Contingent consideration - - (3,000) Rolling credit facility 2 (23,500) (9,000) - Forward exchange contracts used for hedging 2 (902) (998) (125) Total financial liabilities (188,757) (133,199) (82,727) Derivative financial instruments The Group operates internationally and is therefore exposed to foreign currency transaction risk, primarily on purchases denominated in Euros and US Dollars. The Group s policy is to mitigate foreign currency transaction exposures where possible and the Group uses financial instruments in the form of forward foreign exchange contracts to hedge future highly probable foreign currency cash flows. Revolving credit facility The Group entered into a revolving credit facility on 18 September 2015 with Lloyds and was renewed in November 2016 to expire in September A revolving credit facility is available under the terms of the facility in an aggregate amount of up to 30,000,000. As a result of the acquisition of Sunshine.co.uk Limited, on 9 May, the facility was increased to 35,000,000 and extended to December The borrowing limits under the facility will vary monthly throughout the period of the facility to reflect the seasonal borrowing requirements of the Group, ranging from 2,000,000 in one month to the full 35,000,000 in another month. It is to be repaid in monthly instalments which vary in accordance with the Group s seasonal requirements. No early repayment fees are payable. The margin contained in the facility is dependent on gross leverage ratio and the rate per annum ranges from 1.10% to 1.90% for the utilised facility and 0.39% to 0.67% for the non-utilised facility. The terms of the facility include the following financial covenants: (i) that the ratio of total debt to EBITDA in respect of any relevant period shall not exceed 2:1 (with a one-off increase to a ratio of 2.5:1) and (ii) that the ratio of EBITDA to finance 21

22 charges in respect of any relevant period shall not be less than 5:1. There have been no changes to the fair value methodology and categorisation for financial assets and liabilities since the yearend. Fair value estimation When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows. (I) (II) (III) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities 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) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The fair values noted above are approximates of the carrying amounts of the instruments 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. 9. Provision On 2 October, Monarch announced that it had ceased trading and entered administration. At the year ended 30 September, the Group recognised a provision of 7,000,000. The amount recognised represented the cost the Group incurred to fulfil its obligations to customers under the ATOL regulations to arrange refunds or alternative flights. At the interim reporting date the full provision has been utilised. No further costs are expected. Further, through chargebacks and holding Scheduled Airline Failure Insurance ( SAFI ), the Directors considered part of the provision could be mitigated and accordingly a 5,000,000 receivable relating to the amounts expected to be reclaimed from either chargebacks or insurance was recognised. The 5,000,000 receivable was recovered via chargebacks in Principal risks and uncertainties There are a number of potential risks and uncertainties which could have a material impact on the Company s performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report for the year ended 30 September. These risks and how the Company seeks to mitigate these risks are set out on pages 17 to 25 of the Annual Report and Accounts which can be found at 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 but remains at an early stage. The position remains as disclosed in our Prospectus, save that (with regard to paragraph 13.6 on page 185), OTB issued a motion to compel delivery of full and proper particulars in May and in response to this motion, Ryanair is proposing to make amendments to its original statement of claim. This has resulted in a further delay to the anticipated timescales set out in the Prospectus. Litigation is unpredictable and if Ryanair were to prevail, this could have a material impact on the Group s business. 22

23 RESPONSIBILITY STATEMENT We confirm that to the best of our knowledge: The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first of the current financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so. This responsibility statement was approved by the Board on 9 May 2018 and is signed on its behalf by: Paul Meehan CFO 10 May

24 INDEPENDENT REVIEW REPORT TO ON THE BEACH GROUP PLC Conclusion We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months 2018 which comprises the condensed consolidated statement of comprehensive income, statement of changes in equity and statement of cash flows and the statement of financial position and the related explanatory notes. Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ( the DTR ) of the UK s Financial Conduct Authority ( the UK FCA ). Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Directors responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 24

25 The purpose of our review work and to whom we owe our responsibilities This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. Will Baker for and on behalf of KPMG LLP Chartered Accountants 8 Princes Parade Liverpool L3 1QH 10 May