Shares of Stockport-based beach holiday retailer On the Beach Group plc rose 14% on Thursday after it said its profit for the financial year “will be broadly in line with management expectations” and it announced the acquisition of Classic Collection Holidays Limited for about £20 million.
In a trading update for the 19 weeks to August 15, 2018, On The Beach said: “As has been widely publicised, the exceptionally hot UK weather that has been prevalent over recent months, combined with the football World Cup, has supressed holiday demand.
“This has impacted our headline revenue growth during the period, but the weaker demand has driven a significant reduction in the group’s marketing spend, ensuring growth in revenue after marketing costs has remained strong.
“This is further testament to On the Beach’s resilient and flexible business model as we have previously demonstrated in similar circumstances.
“Whilst August and September are important trading months for the group, the board continues to expect that adjusted PBT for the financial year will be broadly in line with management expectations.”
On the Beach Group said Classic Collection reported EBITDA of £2.6 million and gross assets of £18 million in its latest statutory audited accounts for the 12 months to October 31, 2017.
“The board believes the acquisition will be earnings enhancing in the first full year of ownership, including some initial investment from On the Beach,” said the Stockport firm.
“Classic Collection dynamically packages luxury beach holidays and sells its packages through a network of third party offline travel agencies (including independent high street agents and homeworkers).
“Classic Collection employs 124 staff in its Worthing headquarters, who will continue to manage the relationships with travel agents, ensuring an excellent level of service to those travel agents and the agents’ customers.
“The acquisition represents a continuation of On the Beach’s strategy, whilst leveraging the group’s capabilities to access the circa five million short haul beach holidays that each year are booked offline.
“The group will invest to grow Classic Collection’s portfolio of luxury holidays.
“Separately, the group will support Classic to invest in, build and launch an online booking portal to provide travel agents with access to a portfolio of mainstream beach holiday product under a new brand ‘Classic Online’, using OTB’s technology capability, product sourcing and scale in the short haul beach market.
“Classic Online will be available exclusively through travel agents and will not be a consumer site …
“The total consideration will be £20.0m made up of £14.6m cash consideration on completion, £2.7m cash which will be deferred for 12 months post completion, and £2.7m in shares.”
Nick Munday, managing director of Classic Collection, said: “I am thrilled to be joining forces with Simon and the team at On the Beach.
“Partnering with such an innovative market leader will give our loyal network of agents access to an even wider portfolio of mainstream beach holiday product through the launch of Classic Online together with further investment to broaden the luxury offering of Classic Collection.”
On the Beach Group CEO Simon Cooper said: “We are pleased to welcome Nick and the Classic Collection team into the On the Beach family.
“We are excited about the opportunity to access the circa five million short haul beach customers that book holidays offline each year.
“Classic Collection has an excellent reputation in the industry and we look forward to working with Nick and the team to expand both of our product offerings.
“With regards recent trading, the resilient, flexible and asset-light nature of On the Beach’s business model, combined with our advanced technology, has allowed the business to swiftly adapt to the unprecedented three month heatwave and deliver an impressive performance.”