8 December 2022

On the Beach Group plc

("On the Beach", "OTB", the "Company" or the "Group")

 

PRELIMINARY RESULTS FOR YEAR ENDED 30 SEPTEMBER 2022 ('FY22')

 

Financial Overview

	2022		2021		2019
	Adjusted 1	GAAP	Adjusted 1	GAAP	Adjusted 1	GAAP
Group TTV2	£856.1m	-	£238.3 m	-	£741.4m	-
Group revenue	£144.3m	£144.1m	£30.5m	£21.2m	£147.5m	£140.4m
Revenue as Agent3	£93.8m	£93.6m	£24.0m	£14.7m	£92.5m	£85.4m
Revenue as Principal4	£50.5m	£50.5m	£6.5m	£6.5m	£55.0m	£55.0m
Group gross profit	£96.1m	£95.6m	£23.3m	£14.4m	£99.1m	£92.0m
Gross profit as Agent	£90.0m	£89.8m	£22.7m	£13.8m	£92.0m	£84.9m
Gross profit as Principal	£6.1m	£5.8m	£0.6m	£0.6m	£7.1m	£7.1m
Group profit/(loss) before tax5	£14.1m	£2.1m	(£18.4m)	(£36.7m)	£34.5m	£19.3m
Basic earnings/(loss) per share6	6.3p	0.9p	(9.7p)	(19.0p)	21.3p	11.9p

¹       Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary.

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 2021 and 30 September 2022. Adjusted revenue is revenue before exceptional items of £1.0m and fair value gains on forward currency contracts of £0.8m (2021: £9.3m, 2019: £7.1m).

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 2021 and 30 September 2022.

⁵       Group adjusted profit / loss before tax is profit / loss before tax, amortisation of acquired intangibles of £5.5m (2021: £5.5m, 2019: £5.5m), share-based payments cost of £4.7m (2021: £2.7m, 2019: £0.7m) fair value gains on forward currency contracts of £0.8m and exceptional items of £2.6m (2021: £10.0m, 2019: £9.0m). A full explanation of the adjustments is included in the glossary.

⁶       Adjusted earnings per share is Group adjusted profit after tax divided by the average number of shares in issue during the period. Earnings per share is Group profit after tax divided by the average number of shares in issue during the period.

Summary of financial performance

•     Revenue of £144.1m was £122.9m higher than FY21:

−      Demand for booking holidays in FY21 was severely impacted by a series of lockdowns and complex rules and requirements for travel.

−      Whilst the first four months of FY22 were similarly disrupted by the outbreak of the Omicron variant of Covid-19, travel restrictions were removed and travel was simplified for most of the year.

•    Notwithstanding the emergence of Omicron and the disrupted airline schedules this summer, revenue was up 3% vs FY19:

−    Average booking values were 31% higher than FY19 supported by a greater mix of long haul, B2B and more premium beach holidays.

−    As a result, the TTV of holidays booked in the year increased by 15% vs FY19.

−    As well as adding more quality hotel product, during the year, the Group invested £4.8m in holiday perks including airport lounge access, security fast track and free Covid-19 tests. Revenue is presented net of these investments.

−   The TTV of holidays that departed in summer 2022 was 19% ahead of FY19.

•    The Group has made adjustments for exceptional cancellations, both directly and indirectly related to the pandemic. After making an adjustment to add back the impact of cancellations of £1.0m (2021: £9.3m) and deduct exceptional FX gains of £0.8m, adjusted revenue was £144.3m (FY21: £30.5m).

Cash and liquidity

•    Thanks to significant shareholder support, the flexible business model and the disciplined way in which customer money is handled, the Group has continued to invest in the brand and technology throughout the pandemic and ahead of a full recovery of the travel industry.

•    The Group is in a very strong financial position with combined cash balances of £133.9m:

−    Group cash, excluding amounts held in trust, of £64.5m (30 September 2021: £56m).

−    Customer prepayments held in a ring-fenced trust account of £69.4m (30 September 2021: £39m).

•    In December 2022, the Group refinanced its credit facilities with Lloyds Bank and NatWest. This included cancelling all current facilities and entering into a new facility for £60m expiring in December 2025.

•    Unlike many other businesses in the sector, due to the disciplined way in which cash is managed, recent increases in interest rates will not materially increase the cost of financing the Group's activities

•    Through the disrupted summer of flight cancellations, OTB has continued to provide prompt cash refunds for cancelled holidays. Certain airlines continue to frustrate the refund process and owe the Group a significant amount of money for cancelled flights. Legal proceedings to recover these monies are ongoing.

Current trading and outlook

•    The first quarter of our financial year (calendar Q4) has historically been the quietest trading period for the Group.

•    Over the last 6 weeks, there has been a continuation of key trends, including growth across premium, long-haul and B2B expansion areas, set against more subdued trading in sales of 3* holidays for FY23.

•    Notwithstanding the widely reported macroeconomic headwinds, the Group has begun FY23 with a healthier overall forward order book than the equivalent period in FY20 (before the onset of the Covid-19 pandemic).

•    Whilst it is unclear how the cost of living crisis will impact consumer behaviour in 2023, the Board is confident that the foundations laid over the past 12 months, including investment in brand, technology and customer proposition, position the Group favourably for another year of growth in FY23.

CEO Succession Planning

As per a separate announcement today, Simon Cooper, the Group's Founder and Chief Executive Officer will step down from his role within the next 12 months and the Board is pleased to announce that Shaun Morton, currently the Group's Chief Financial Officer has been selected by the Board to replace Simon as Group CEO. Upon stepping down as CEO, Simon will remain on the Board as non-executive Founder Director.

Other Board changes

David Kelly is the longest-serving Non-Executive Director on the Board, he will have served nine years by September 2024 and as such, the Committee has been considering succession arrangements for David's roles on the Board. With effect from 27 January 2023, Elaine O'Donnell will become the Senior Independent Director and Justine Greening will become the Chair of the Remuneration Committee. David will continue his role as a Non-Executive Director as well as supporting Elaine and Justine in their new roles. This disclosure is made pursuant to Listing Rule 9.6.11(3).

Simon Cooper, Chief Executive of On the Beach Group plc, commented:

"2022 has been a year of strategic progress for the Group. Despite a number of well-documented headwinds faced by the entire industry, including the disruption caused by Omicron in the key booking period of January, the Group reported double digit growth in Group Sales, returned to profitability and exited the year in a strong cash position. This success is largely as a result of the investments we have made in the last 12 months across our brand, technology and customer proposition.

During the year we developed a truly differentiated customer proposition, successfully positioning the brand to appeal to customers looking at 5* bookings across both short and long haul which led to the Group capturing a greater share in the premium segment of the market. Our industry-first, customer-focused initiatives, including our free lounge and fast-track security offers have enhanced our customer experience and set us apart from our peers. We are looking forward to expanding this premium offer alongside growing our long haul and B2B offerings which significantly expands our total addressable market.

Looking ahead, the visibility of the UK outbound travel industry remains unclear given the tough macroeconomic environment. Whilst winter and specifically January remains a key trading period for us, we have started the new financial year with a healthy forward order book for Summer 2023. Pleasingly, 2023 will also be the first year our industry is free from refund credit notes and vouchers which will significantly enhance our captive audience and I am confident that the investments we have made this year leave us ideally placed for the year ahead.

I would like to take this opportunity to thank the team for their continuous hard work throughout this year, responding with speed, professionalism, and resilience. As we announced today, we have commenced a leadership succession plan where I am confident that after working closely with Shaun on the strategic direction and initiatives of the group over the last few years, he is the right person to lead the business through its next phase of growth."

 

Analyst Webinar

A webinar for sell-side equity analysts will be held today at 9.30am, the details of which can be obtained through FTI Consulting.

 

For further information: 

 

On the Beach Group plc                                                                   via FTI Consulting

Simon Cooper, Chef Executive Officer

Shaun Morton, Chief Financial Officer

 

FTI Consulting                                                                                     Tel: +44 (0)20 3727 1000

Alex Beagley                                                                                        [email protected]

Fiona Walker

Sam Macpherson

Rafaella de Freitas

 

 

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 beach holiday retailer via a single platform multi-brand strategy. By using our innovative technology, low-cost base and strong customer-value proposition to provide a structural challenge to legacy tour operators and online 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.

 

This statement together with the interim financial statements and investor presentation is available on www.onthebeachgroupplc.com.

 

Chief Executive's review

The Group continues to be a dynamic, entrepreneurial and ambitious business. We deliver value-for-money, personalised beach  holidays to our customers and maintain a daily focus to improve the quality of our customer proposition and the value that we provide to our growing customer base.

Our low-cost operating model, in a primarily digital sector, where consumers are seeking increased convenience, choice, and a personalised experience with financial protection, positions us to emerge from the pandemic favourably.

This has been another challenging 12 months for the travel industry, disrupted in the first half of the year by the Omicron variant, and in the second half by staff shortages across the supply chain. Despite these exceptional circumstances, FY22 Group TTV* was 15% ahead of FY19.

Since the onset of Covid-19, the Group has consistently outlined its strategic intention to capture market share as trading normalises and demand for beach holidays recovers.

I am confident that the activities we have undertaken over the last 12 months have laid strong foundations for the Group for the year ahead and am incredibly proud of my colleagues who have delivered so much in often challenging situations.

*        Total transaction value of holidays booked in the year before cancellations and amendments.

People

Our people have continued to rise to the widespread challenges that the financial year has presented. All staff across all business departments have continued to work productively from the office or remotely.

This year we have set out a hybrid working framework. Key objectives include supporting our colleagues by promoting a healthy work life balance, enabling flexible working, staying connected both within teams and cross department, and ultimately to create an appealing environment where our staff can deliver to the best of their abilities. Hybrid working is enabling us to recruit from a wider talent pool and is an important tool to attract and retain talent in a tight labour market where colleagues are seeking a greater degree of flexibility.

We have added further strength to our senior management team in FY22, with the appointment of a Director of People in June 2022 who is helping drive and deliver these objectives.

We have continued to support colleagues with a diverse range of initiatives to promote mental health and wellbeing, helping to retain a connection to our people across departments and the Company as a whole.

Our staff continue to respond with speed, professionalism and resilience to the challenges faced by the sector. We raised the entry salary across the business to £20,000 p.a. with effect from 1 October 2021, thereby elevating the skill set of the new talent we attract and improving the overall quality of service to our customers. This also ensured that our lowest paid staff are paid in excess of the Real Living Wage, and will help to narrow our gender pay gap.

In October 22, against a backdrop of an escalating cost of living crisis, we awarded a payrise of £1,500 to all colleagues with annual salaries at or below £30,000 p.a., three months earlier than our usual pay review. This is to support our staff through difficult winter months with higher energy and living costs. It also aligns with the suggested voluntary increase by the Living Wage Foundation of the Real Living Wage, which rose by 10% in September 2022 (also earlier than scheduled). The Group is proud that it continues to voluntarily pay its lowest-paid colleagues a salary in excess of the Real Living Wage, despite another challenging year of disrupted trading.

Market conditions

Whilst FY21 was a particularly difficult year for travel, the industry and the UK population did not foresee the level of disruption experienced throughout FY22. Three months of H1FY22 were severely affected by Covid-19 and the summer season in H2FY22 was beset by acute staff shortages across the sector.

The Omicron variant heavily impacted Group trading in November and December 2021, and into the key booking period of early January 2022. Consumer demand remained materially below H1FY19 levels until restrictions were eased in mid-January.

In H2FY22, Group TTV was 25% ahead of H2FY19, despite the indirect consequences of the war in Ukraine and ongoing disruption across the travel supply chain as the sector continued to recover from the pandemic. Over the full year, FY22 Group TTV was 15% ahead of FY19 and Group revenue was 3% ahead of FY19.

Group TTV relates to new bookings. The sales of many other operators over the same period will be flattered by a proportion of their bookings rolled over from previous periods or booked using vouchers or refund credit notes ('RCNs').

The Group has never issued vouchers or RCNs in lieu of refunds. Where customers have been refunded using vouchers or RCNs from other operators, they are then captive to that operator, narrowing our addressable audience this year. The Group believes that our enhanced proposition and reputation will allow us to target these customers in FY23 when the playing field is levelled.

The Group has materially invested in its brand, technology, and customer proposition throughout the year. This includes offering a differentiated customer experience with premium lounges and fast track security, increasing headcount in technology and customer service areas, and investing in offline marketing to drive awareness of the brand. These investments, combined with improved access to a broader hotel portfolio have resulted in FY22 growth in 5* holiday sales of 82% vs FY19, and contributing to total FY22 Average Booking Value ('ABV') growth of 31% vs FY19.

On the Beach also continues to make good progress in B2B and long haul. B2B TTV1 was 45% ahead of FY19. Long- haul TTV2 was 255% up vs FY19.

Partly due to continued rising costs of living, the lates market for value holidays has remained subdued in H2FY22 and as a result, sales of 3* holidays for FY22 was 18% below FY19. The Group is committed to maintaining its focus on this important segment and growing its share of value holidays.

¹    B2B TTV is a non-GAAP measure representing the cumulative total transaction value of sales booked each month before cancellations and adjustments for the CCH and CPH segments

²    Long haul TTV is a non-GAAP measure representing the cumulative total transaction value of sales booked each month before cancellations and adjustments for long haul holidays across the Group

 

Strategy

As I set out in more detail below, throughout the year, we have continued to focus on investment into areas of strategic value including technology, brand and supply as well as a continued focus on expanding our portfolio of beach holidays and our addressable audience, specifically through our expansion areas of premium, B2B and long haul.

Investment in our brand

Throughout the pandemic, we have continued to pursue our strategy of materially investing in both customer proposition and brand. By investing strategically in both areas, the Group aims to continue to capture share in its core value segment and increase penetration of the premium, long- haul, and B2B segments.

We invested circa £5m in FY22 across a range of promotions designed to evolve the customer offer from seamless booking service to differentiated holiday experience. By differentiating our holidays and offering a more memorable experience from the point of booking to arriving home from travel, we expect to increase loyalty, repeat rates and customer lifetime value. The promotions have contributed to the success we have had this year in growing Group sales relative to FY19. We expect the investment to also payback in FY23 and future periods in terms of continued growth in market share.

During the beginning of FY22, as we looked to restore consumer confidence and help get people back on holiday again, we ran our free Covid-19 test offer which meant we could reduce the holiday hassle administration as well as saving our customers money.

The Group subsequently took the early decision in FY22 to invest in airport fast track for all customers. This has provided a key point of differentiation relative to peers and airlines, particularly across a summer where airports have been severely disrupted by staff shortages and typical queue times have been significantly longer than normal.

In conjunction with the fast track offer, we significantly invested in free lounge access for customers booking premium holidays in summer 2022. This is a promotion that, despite the operational complexity, we were uniquely placed to offer given our scale, depth and breadth of the Group's offering across UK departure airports.

By positioning the brand to appeal to customers seeking these perks with their holiday, together with improved access to a broader hotel portfolio, the Group has achieved significant growth in premium 5* bookings.

The success of the free Covid-19 tests, fast track and lounge promotions in differentiating the proposition and capturing share of the premium segment, is testament to the efforts of many of our colleagues across the business, particularly in marketing, technology and supply, but also in our support and back-office functions. In an era of hybrid working, successfully rolling out these promotions at pace, demonstrates the strength of cross departmental team collaboration across the Group.

Alongside enhancements to the proposition, the Group doubled investment in FY22 offline media spend (vs FY19). Branded traffic has much higher conversion than traffic from paid search and other channels.

We aim to continue to pursue our strategy of differentiating the customer experience and building the brand in future periods. Our recent progress on both fronts also provides a strong platform to capture share growth as the value segment recovers.

In early FY22 we took decisive action to increase headcount across our customer service teams, to protect the Group from an increase in volume of enquiries as international travel restrictions were eased.

However, like all operators across the sector, we were subject to an exceptionally high level of disruption in the second half of the year. Certain airlines and airports fared better than others in anticipating the release of pent-up demand, however many have been caught out, either by not staffing up sufficiently or indirectly as the entire supply chain has been impacted.

This has led to operational challenges for the industry and, we believe, has contributed to a softening of demand in the lates market.

I would like to take this opportunity to thank colleagues in customer service and across the business for working tirelessly in seeking to address backlogs and serving customers in these exceptional circumstances.

The supply imbalance is easing once again as volumes travelling decrease in the autumn and winter months. We believe that the improvements made to our processes and the enhancements in our overall package to attract and retain customer service staff, will enable us to continue to put our customers at the heart of everything we do and lay the optimal foundations to cope if any such issues recur in summer FY23.

Investment in technology

We have continued to add to our technology talent, in particular to software engineering, design, product, infrastructure and security.

Across the year, the team have facilitated the successful roll out of enhancements to the proposition, including free lounge and fast track, as well as evolving our platform which will allow us to take advantage of opportunities both in our core market and identified expansion areas.

We have continued to invest in hybrid working and greater use of cloud, to empower colleagues to self-serve, work securely from anywhere at any time and drive speed to market.

Our technology teams have continued to focus on enhancing the core capabilities of our platform (flights, beds, packaging, front end, payments and back-office).

We have re-developed the front end of the site to enhance conversion and re-architected our core booking paths, enabling quicker future development and the addition of diverse sites from all geographies.

We have built new capabilities to support low-cost carriers, long haul and scheduled airlines, allowing new suppliers to be added to serve existing and new destinations.

As part of our overall strategy, there remains a focus on optimising our data platform with a view to driving increasingly sophisticated user level personalisation and maximising customer lifetime value.

Investment in supply

We continue to believe that by having our own relationships with our hotel partners, we can guarantee our customers both a good hotel experience and the best prices. Covid-19 presented the opportunity to secure direct relationships with quality inventory in key destinations that were previously on exclusive contracts with competitors.

Throughout the financial year, we have been leveraging our existing capabilities to further optimise our hotel supply. Direct bookings with hotel partners now represent over 89% of all volumes. By disintermediating bedbanks and increasing our share of direct contracting, we can drive lower prices for our customers and higher margins for the Group, relative to peers more reliant on third-party product.

In addition to the economic benefits, direct contracting enables the Group to build and develop closer relationships with hotel and customers. This is critical in periods of disruption, where our customers want us to solve their problems quickly. It has been clear without direct contracting capability, we could not possibly have delivered the same level of service.

The Group has been one of the few operators in the market with a prompt payment model. Certain other operators across the sector have been stretched by unprecedented liquidity challenges over the last two plus years, which means in many cases they were not able to pay in accordance with their own payment terms.

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.

The Group maintains access to a diversified group of low-cost carriers that fly to short haul East and West

Mediterranean locations and has taken the opportunity to develop relationships with destination specific carriers that serve Turkey, which itself has experienced a significant uplift in traffic this year.

The Group has made strong progress over the last two years in developing its scheduled flight supply with airlines that serve a core group of east and west bound long-haul destinations.

There is significant runway for growth and margin enhancement in many of these long-haul destinations we now offer by replicating our success in core short-haul markets and building out our portfolio of directly contracted product.

We continue to believe that our ability to pay promptly, distribute opaquely and access B2C and B2B channels are fundamental to growing levels of direct and differentiated supply.

Expansion areas

 

Premium

In FY21 and FY22, alongside successful efforts to access previously exclusive hotel product, the Group took strategic actions to enhance its proposition, both of which have enabled us to penetrate the premium segment of the market.

The Group's core addressable market is short-haul value holidays sold online. In the value segment of the market, which is typically 1-4* holidays sold for less than £700pp, the Group competes against other online travel agents and to some extent, tour operators. The tour operator product, however, is more skewed towards higher price point 4 and 5* holidays with higher average booking values than the Group's.

If the market is split into 'value' short-haul beach holidays less than £700 per person and 'premium' holidays greater than £700 per person, we estimate the latter segment is a similar size in terms of passengers, but approximately two and a half times larger in terms of absolute value. Capturing 1% of the premium market will therefore contribute two and a half times as an incremental 1% share of the value market.

Given the higher average booking value of premium, the revenue margin opportunity on each individual booking is also greater. The Group now has access to a large addressable segment of the market which was previously unavailable, and each incremental booking has a higher revenue per booking opportunity than the value segment. Revenue per booking is higher in the premium segment even after being offset by investment into perks, which will continue to payback as the Group's sales mix shifts to more premium product.

For these reasons, there remains a huge opportunity to continue to penetrate the premium market as demonstrated by the recent progress this financial year.

B2B overview

In 2018, we expanded into a new B2B channel via the acquisition of Classic Collection. This increased the size of the Group's addressable market by a further circa eight million holidaymakers, who book beach packages each year through an intermediary.

Since the acquisition, the Group has continued to invest behind the strategic development of both the existing Classic Collection Holidays (CCH) brand and our new Classic Package Holidays (CPH) brand. CCH sells luxury and tailor- made premium product primarily to travel agents and has a small proportion of direct sales to consumer. CPH provides an online B2B platform that enables high street travel agents to sell dynamically packaged holidays to their customers.

2022 was a record year for the Classic businesses. As travel re-emerged from almost two years of restrictions in February, Classic Collection and Classic Package were both well-positioned to deliver growth. Despite the slow restart post Omicron and the number of captive customers of competitors who had rolled cancelled holidays from Covid-19 disrupted periods, the combined Classic businesses delivered 45% growth in TTV vs 2019.

In October 2022, Andy Freeth was appointed as the new CEO of Classic Collection Holidays and Classic Package Holidays. Andy has a huge amount experience in tour operating and leading B2B businesses through fast paced growth. Andy is an experienced CEO who is excited to be coming on board and is keen to support Classic's ambitious future growth plans. I would like to also take this opportunity to thank Oliver Garner, Classic's previous CEO for his contribution to the Group. Oliver has been a fantastic member of the leadership team at OTB for eight years and an inspirational leader of Classic since its acquisition in 2018.

Classic Package Holidays (CPH)

Partly as a result of the pandemic, a number of barriers exist for new entrants and smaller independent operators looking to dynamically package holidays for their customers, including increased regulation, liability insurance and technological complexity.

With Thomas Cook exiting the market in 2019 and other tour operators focusing on direct sales, there is an opportunity to drive both number and usage of high street and independent travel agents that sell CPH holidays.

Whilst the year was heavily disrupted, the Group has continued to make progress in developing the offering and growing sales after its initial launch in 2019/20 was hampered by Covid-19. The business was able to carry more than 40,000 passengers in the year and is well set to increase this in 2023.

Classic Collection Holidays (CCH)

Pre-pandemic, the Group invested in the product portfolio of CCH to include longer-haul beach and tailor-made itineraries via travel agents for its end customers. Over the last 18 months, CCH has continued to extend and tailor the offering.

The Classic brands have now launched a long-haul offering and have a dedicated Group long-haul function.

Most recently, the leadership team at Classic have undertaken an extensive rebranding exercise launching a new look and feel for both CCH and CPH.

Long haul

There are four million holidaymakers in the UK who book long-haul packages each year. Pre-pandemic, the OTB site handled millions of searches per annum for long-haul destinations.

Historically, Group long-haul sales were dominated by tour operator capacity. However, the long-haul market has always been dominated by scheduled airlines, which we had no or very limited access to. During the pandemic, we focused on developing our flight connectivity with British Airways and Virgin Atlantic westbound, and Emirates eastbound.

We have sought to combine access to relevant airfares with new expertise to contract hotels directly, and then use our brand and buying power to break into the market.

Our long-haul offering has benefitted from the improvements we have made to the customer proposition this financial year, with the introduction of free lounge for premium bookings and fast track for all bookings. Our growing B2B distribution also supports further growth in long-haul share. Certain long-haul hotels are now in the Group's top sellers list.

There is a significant opportunity post pandemic to drive a growing share of bookings to longer-haul destinations in Classic and the core OTB brand. Alongside developing our hotel contracting in our other key destinations, we continue to optimise our flight sourcing, which will help us break into new destinations. We are also enhancing the website and specialist expertise in the team, to increase conversion, margin and grow our overall long-haul proposition.

International

The Board has and will continue to evaluate UK and international opportunities that both increase the Group's scale and deliver further value for shareholders.

Regulatory landscape

What On the Beach is calling for

We believe that holistic and comprehensive reform is required in the regulation of the travel industry 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 and which reduces or eliminates exposure for taxpayers against the risk of business failure.

Why this change is necessary

The failures of Monarch and Thomas Cook in 2017 and 2019 respectively highlighted the exposure of consumers and taxpayers to the considerable cost of airline failures and highlighted the need for reform in financial protection for airlines. The Airline Insolvency Review that followed Monarch's failure identified a number of reforms required and whilst this was included in the 2019 Queen's Speech, progress was derailed by the pandemic and Brexit, and it is not clear when this is likely to be addressed.

During the pandemic, as travel operators scrambled to preserve cash, consumer laws were broken and consumers were mistreated by having refunds refused or significantly delayed, and many were forced to accept vouchers or refund credit notes when they were entitled to a cash refund in a timely manner, creating customer detriment and reduced competition.

Although consumer sentiment has recently improved, consumer confidence for international leisure travel remains fragile and there continues to be some uncertainty regarding the shape and timing of the recovery. The recovery of the travel sector is dependent on the industry regaining the trust of customers that they will be treated fairly.

For most customers in the UK who are booking their annual beach package holiday, this will likely be the biggest investment they will make that year, unless they are moving house or changing their car. It is therefore critical that competition in the market is healthy to ensure they get the best value, choice, flexibility and consumer protection. However, a number of market dynamics, most notably 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, pose a serious threat to fair competition for consumers.

ATOL reform

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 and we expect to hear further feedback from the CAA in December 2022 or early 2023. Proposals include mandatory ring-fencing of customer funds, which would mean a fundamental change for the travel industry for those not already operating trust accounts. On the Beach is supportive of trust accounts, to protect the interests of customers and taxpayers, and if this is the direction the CAA decides to pursue, On the Beach is well-placed for the relevant reforms.

What's next?

On the Beach will continue to engage with Government, parliament and regulators on the changes it believes are required to secure a healthy and competitive market that protects consumers. Regulatory focus thus far has been focused on package organisers and not on airlines. Given the failures and significant delays by airlines to refund cancelled flights, and given the misuse of market power in the market, On the Beach will be championing the need for this to be reviewed and addressed.

Current trading and outlook

The first quarter of our financial year (calendar Q4) has historically been the quietest trading period for the Group.

Over the last 6 weeks, there has been a continuation of key trends, including growth across premium, long-haul and B2B expansion areas, set against more subdued trading in sales of 3* holidays for FY23.

Notwithstanding the widely reported macroeconomic headwinds, the Group has begun FY23 with a healthier overall forward order book than the equivalent period in FY20 (before the onset of the Covid-19 pandemic).

Whilst it is unclear how the cost of living crisis will impact consumer behaviour in 2023, the Board is confident that the foundations laid over the past 12 months, including investment in brand, technology and customer proposition, position the Group favourably for another year of growth in FY23.

Simon Cooper
Chief Executive Officer

7 December 2022

Financial review

The Group organises its operations 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).

Group overview

	2022		2021		2019
	Adjusted¹	GAAP	Adjusted ¹	GAAP	Adjusted ¹	GAAP
Group TTV2	£856.1m	-	£238.3m	-	£741.4m	-
Group revenue	£144.3m	£144.1m	£30.5m	£21.2m	£147.5m	£140.4m
Revenue as Agent3	£93.8m	£93.6m	£24.0m	£14.7m	£92.5m	£85.4m
Revenue as Principal4	£50.5m	£50.5m	£6.5m	£6.5m	£55.0m	£55.0m
Group gross profit	£96.1m	£95.6m	£23.3m	£14.4m	£99.1m	£92.0m
Gross profit as Agent	£90.0m	£89.8m	£22.7m	£13.8m	£92.0m	£84.9m
Gross profit as Principal	£6.1m	£5.8m	£0.6m	£0.6m	£7.1m	£7.1m
Group profit/(loss) before tax5	£14.1m	£2.1m	(£18.4m)	(£36.7m)	£34.5m	£19.3m
Basic earnings/(loss) per share6	6.3p	0.9p	(9.7p)	(19.0p)	21.3p	11.9p

¹      Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary.

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 2021 and 30 September 2022. Adjusted revenue is revenue before exceptional items of £1.0m and fair value gains on forward currency contracts of £0.8m (2021: £9.3m, 2019: £7.1m).

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 2021 and 30 September 2022.

⁵      Group adjusted profit / loss before tax is profit / loss before tax, amortisation of acquired intangibles of £5.5m (2021: £5.5m, 2019: £5.5m), share-based payments cost of £4.7m (2021: £2.7m, 2019: £0.7m) fair value gains on forward currency contracts of £0.8m and exceptional items of £2.6m (2021: £10.0m, 2019: £9.0m). A full explanation of the adjustments is included in the glossary.

⁶      Adjusted earnings per share is Group adjusted profit after tax divided by the average number of shares in issue during the period. Earnings per share is Group profit after tax divided by the average number of shares in issue during the period.

Impact of the pandemic and associated disruption

Certain costs have been excluded from performance measures in this statement as the Board considers this necessary to provide a fair, balanced and understandable view of the performance of the Group. A full reconciliation of all non-GAAP measures to the closest equivalent GAAP measure is included in the glossary.

The Board believes that adjusting for these items provide a clearer reflection of the Group's performance in the current and prior periods. The Group has organised package holidays for customers which were cancelled either as a direct result of the pandemic and more recently due to capacity constraints and operational challenges with airlines and at airports.

The Group has not estimated the financial impact of, or made an adjustment for, the significant reduction in booking volumes as a result of the Covid-19 pandemic or resulting disruption.

Overview of the year

•     Revenue of £144.1m was £122.9m higher than FY21:

−      Demand for booking holidays in FY21 was severely impacted by a series of lockdowns and complex rules and requirements for travel.

−      Whilst the first four months of FY22 were similarly disrupted by the outbreak of the Omicron variant of Covid-19, travel restrictions were removed and travel was simplified for most of the year.

•    Notwithstanding the emergence of Omicron and the disrupted airline schedules this summer, revenue was up 3% vs FY19:

−    Average booking values were 31% higher than FY19 supported by a greater mix of long haul, B2B and more premium beach holidays.

−    As a result, the TTV of holidays booked in the year increased by 15% vs FY19.

−    As well as adding more quality hotel product, during the year, the Group invested £4.8m in holiday perks including airport lounge access, security fast track and free Covid-19 tests. Revenue is presented net of these investments.

−    The TTV of holidays that departed in summer 2022 was 19% ahead of FY19.

•    The Group has made adjustments for exceptional cancellations, both directly and indirectly related to the pandemic. After making an adjustment to add back the impact of cancellations of £1.0m (2021: £9.3m) and deduct fair value FX gains of £0.8m, adjusted revenue was £144.3m (FY21: £30.5m).

 

Cash and liquidity

•    Thanks to significant shareholder support, the flexible business model and the disciplined way in which customer money is handled, the Group has continued to invest in the brand and technology throughout the pandemic and ahead of a full recovery of the travel industry.

•     The Group is in a very strong financial position with combined cash balances of £133.9m:

−    Group cash, excluding amounts held in trust, of £64.5m (30 September 2021: £56m).

−    Customer prepayments held in a ring-fenced trust account of £69.4m (30 September 2021: £39m).

•     In December 2022, the Group refinanced its credit facilities with Lloyds Bank and NatWest. This included cancelling all current facilities and entering into a new facility for £60m expiring in December 2025.

•     Unlike many other businesses in the sector, due to the disciplined way in which cash is managed, recent increases in interest rates will not materially increase the cost of financing the Group's activities.

•     Through the disrupted summer of flight cancellations, OTB has continued to provide prompt cash refunds for cancelled holidays. Certain airlines continue to frustrate the refund process and owe the Group a significant amount of money for cancelled flights. Legal proceedings to recover these sums are ongoing.

.

OTB performance

	2022 Adjusted £m	2022 GAAP £m	2021 Adjusted £m	2021 GAAP £m	2019 Adjusted £m	2019 GAAP £m
TTV	762.7	-	204.2	-	671.5	-
Revenue	86.9	87.1	22.1	13.0	90.3	83.3
Online marketing costs	(27.0)	(27.0)	(5.5)	(5.5)	(29.8)	(29.8)
Offline marketing costs	(11.9)	(11.9)	(6.1)	(6.1)	(5.4)	(5.4)
Revenue after marketing costs	48.0	48.2	10.5	1.4	55.1	48.1
Overheads	(25.9)	(25.9)	(16.6)	(16.6)	(16.2)	(16.2)
Depreciation and amortisation	(6.7)	(6.7)	(5.9)	(5.9)	(4.6)	(4.6)
Exceptional operating costs	-	(1.3)	-	(0.7)	-	(1.2)
Share-based payments	-	(4.7)	-	(2.8)	-	(0.7)
Amortisation of acquired intangibles	-	(4.4)	-	(4.4)	-	(4.4)
Operating (loss)/profit	15.4	5.2	(12.0)	(29.0)	34.3	21.0
EBITDA	22.1	16.3	(6.1)	(18.7)	38.9	30.0

Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary.

Revenue has increased to £87.1m (FY21: £13.0m, FY19: £83.3m). This is significantly ahead of FY21 and 5% higher than FY19. This performance is despite the early part of the financial year, which includes the traditional peak booking month of January being impacted by the emergence of the Omicron variant of Covid-19. In addition, there has been a significant reduction in the addressable market due to vouchers issued or alternative arrangements made for cancelled holidays. Also note that, unlike tour operators, all revenue recognised represents new bookings made during the financial year and paid for in cash rather than vouchers.

Average booking values have increased by 31% vs FY19 due to an increase in the mix of bookings where customers are spending more than £700pp on their holidays. This includes an increase in bookings into more premium product in both short and long-haul destinations. This has resulted in an increase in TTV to £762.7m (FY21: £204.2m, FY19: £671.5m).

Revenue of £87.1m is stated net of a £4.8m investment in 'holiday perks' for customers travelling with On the Beach. This included providing free Covid-19 tests, access to premium airport lounges and airport security fast track. These perks, many of which are a first for the industry, enhance customer experience and enable the business to clearly communicate value and differentiation through brand media channels.

Following the success of free Covid tests in September 2021, a new brand campaign was launched to support the introduction of our holiday perks. This campaign, combined with sponsorship of Magic Breakfast with Ronan and Harriet, are the main components of the £11.9m investment in offline marketing during the year.

Online marketing spend represented 31% of adjusted revenue compared to 33% in FY19. It is our expectation that as we continue to invest in the brand, online marketing costs will become more efficient as more traffic is attracted through brand and direct channels, reducing reliance on non-brand PPC.

 

 

Overheads as % of revenue

	2022 Adjusted	2022 GAAP	2021 Adjusted	2021 GAAP	2019 Adjusted	2019 GAAP
Overheads % TTV	3.5%	-	8.1%	-	2.4%	-
Overheads % revenue	30%	30%	75%	127%	18%	19%

See glossary for reconciliation to nearest GAAP measure.

Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary.

Overheads as a % of revenue have reduced to 30% (FY21: 75%, FY19: 18%). This increase compared to FY19 is due to a reduction in margins and an increase in fixed costs.

The reduction in margin is due to investments made in the proposition. This includes investments in price to ensure we remain competitive and investments in the proposition such as premium airport lounge access.

Fixed costs have increased due to ongoing investments in people and technology as well as continued regulatory cost pressures such as insurance.

Adjusted EBITDA has increased to £22.1m (FY21: loss £6.1m).

Classic Collection Holidays segment performance

	2022 Adjusted £m	2022 GAAP £m	2021 Adjusted £m	2021 GAAP £m	2019 Adjusted £m	2019 GAAP £m
TTV (booked)	55.6	-	23.2	-	55.0	-
Revenue (travelled)	50.5	50.5	6.5	6.5	55.0	55.0
Gross profit	6.1	5.8	0.6	0.6	7.2	7.2
Gross profit after marketing costs	5.1	4.8	0.2	0.2	6.3	6.3
Overheads	(5.2)	(5.2)	(3.3)	(3.3)	(4.1)	(4.1)
Depreciation and amortisation	(0.3)	(0.3)	(0.2)	(0.2)	(0.2)	(0.2)
Amortisation of acquired intangibles	-	(1.1)	-	(1.1)	-	(1.1)
Exceptional operating costs	-	-	-	(0.4)	-	0.7
Operating profit/(loss)	(0.4)	(1.8)	(3.3)	(4.8)	2.0	0.2
EBITDA	(0.1)	(0.4)	(3.1)	(3.5)	2.2	1.5

Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary..

As a principal (rather than an agent) Classic accounts for revenue on a 'travelled' basis and reports revenue on a gross basis. Both TTV and Revenue increased significantly this year as there was greater opportunity for people to travel.

Revenue increased to £50.5m (FY21: £6.5m, FY19: £55.0m) and operating losses reduced to £1.8m (FY21: loss (£4.8m), FY19: profit £0.2m).

Bookings from high street travel agents have recovered more slowly than online, due to a gradual return to normal high street footfall and staff shortages in higher touch retail stores. Despite these headwinds, Sales on a booked, rather than travelled basis, were £55.6m which is ahead of pre-pandemic levels. Revenue, reported in the period customers travel, recovered to £50.5m which was significantly ahead of FY21 and only 8% behind FY19.

Particularly encouraging was the performance of the new long haul proposition launched during the pandemic. Long haul product represented 23% of total sales in the year and expect this to be a high growth area for the business in FY23. Due to increased revenue, adjusted EBITDA losses reduced to £0.1m compared to £3.1m in FY21.

Classic Package Holidays segment performance

	2022 Adjusted £m	2022 GAAP £m	2021 Adjusted £m	2021 GAAP £m	2019 Adjusted £m	2019 GAAP £m
TTV	31.1	-	10.2	-	4.8	-
Revenue	6.2	5.8	1.8	1.7	0.8	0.7
Cost of sales	(3.8)	(3.8)	(1.3)	(0.9)	(0.5)	(0.5)
Gross profit	2.4	2.0	0.5	0.8	0.3	0.2
Gross profit after marketing costs	1.4	1.0	0.1	0.4	0.1	-
Overheads	(1.5)	(1.5)	(1.8)	(1.8)	(1.2)	(1.2)
Depreciation and amortisation	(0.2)	(0.2)	(0.2)	(0.2)	-	-
Operating (loss)	(0.3)	(0.7)	(1.9)	(1.6)	(1.1)	(1.2)
EBITDA	(0.1)	(0.5)	(1.7)	(1.4)	(1.1)	(1.2)

Adjusted measures are non-GAAP measures, a full explanation of the adjustments is included in the glossary..

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 £5.8m (FY21: £1.7m), and the operating loss was £0.7m (FY21: (£1.6m)). As with CCH the CPH trading result has been impacted by the high street recovering more slowly than online. However, there has been some mitigation to this as the platform is being increasingly used by online agents and home workers.

Marketing costs increased by £0.6m to £1.0m to support the relaunch of the brand and platform as the industry emerges from two years of disruption. We continue to develop both the platform and the proposition to ensure that we are serving the trade and holidaymakers with market leading product at competitive prices.

Financing

During the period the Group had in place a revolving credit facility of £75m with Lloyds Bank. The drawdown at 30 September 2022 was nil (FY21: nil). On 7 December 2022, the Group refinanced its credit facilities with Lloyds Bank and NatWest. This included cancelling all current facilities and entering into a new facility for £60m expiring in December 2025.

Details of the current facility limits and maturity dates are as follows:

Cancelled facilities	£	Issued	Expiry	Drawn at 30 September 2022
RCF	£50m	Apr 2020	Dec 2023	£nil
CLBILS	£25m	May 2020	May 2023	£nil
Total cancelled facilities	£75m			£nil
New facilities
RCF - Lloyds Bank	£30m	Dec 2022	Dec 2025	n/a
RCF - NatWest	£30m	Dec 2022	Dec 2025	n/a
Total new facilities	£60m

Share-based payments

The Group has an LTIP scheme in place which vests based on performance criteria. In accordance with IFRS 2, the Group has recognised a non-cash charge of £4.7m (FY21: £2.8m).

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. On 21 December 2021 the Remuneration Committee approved the introduction of an underpin/minimum award for the nil cost awards originally granted 9 July 2019. This removal of a non-market -based condition has resulted in a charge to the income statement of £1.9m that reflects the scheme progress to date. These charges are added back to provide comparability to prior periods due to fluctuations in the charges.

Taxation

The Group tax charge of £0.5m represents an effective rate of 25% (FY21: 18%) which is greater than the standard UK rate of 19% (FY21: 19%).

During the period a corporation tax rebate of £0.5m was received and no payments on account have been made.

Cash flow

	FY22 £m	FY21 £m
Profit / (loss) before tax	2.1	(36.7)
Depreciation and amortisation	12.8	11.9
Net finance costs / (income)	0.5	0.9
Share-based payments including tax	4.7	2.8
Net loss / (gain) on disposal of property, plant and equipment	-	0.1
Movement in working capital	1.3	18.0
Corporation tax	0.5	4.2
Cash generated from operating activities	21.9	1.2
Other cash flows
Capitalised development expenditure	(10.6)	(4.6)
Capitalised intangible assets	(0.5)	-
Capital expenditure	(1.3)	(0.5)
Net finance (costs) / income	(0.3)	(0.9)
Payment of lease liabilities	(0.7)	(0.6)
Cash flows excl share proceeds and dividends paid	8.5	(5.4)
Proceeds from issue of share capital	-	24.9
Total net cash flows	8.5	19.5
Opening cash balance	56.0	36.5
Closing cash at bank	64.5	56.0
Closing trust balance	69.4	39.0

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.

Net cash inflows excluding share proceeds and dividends were £8.5m which is £13.9m higher than last year (outflow of £5.4m). This is due to increased profitability in the period.

Not included in the Group's cash position is £69.4m (FY21: £39m) of customer prepayments held in a trust account to be released once the customer has travelled.

As a result of the share placings in FY20 and FY21, and the extension of banking facilities to December 2025 the Group has sufficient cash reserves to continue to invest in the brand, people and proposition.

Dividend

The Board is not recommending a final dividend in respect of FY22.

 

Shaun Morton
Chief Financial Officer

7 December 2022

 

 

 

Consolidated Income Statement and Statement of Comprehensive Income
Year ended 30 September 2022

	Note		2022 £'m	2021 £'m
Revenue	4,5		144.1	21.2
Cost of sales			(48.5)	(6.8)
Gross profit			95.6	14.4
Administrative expenses	6		(93.0)	(50.2)
Group operating profit/(loss)			2.6	(35.8)
Finance costs	8		(0.8)	(1.0)
Finance income	8		0.3	0.1
Net finance costs			(0.5)	(0.9)
Profit/(loss) before taxation			2.1	(36.7)
Taxation (charge)/credit	9		(0.5)	6.5
Profit/(loss) for the year			1.6	(30.2)
Other comprehensive income/(loss):
Net gain/(loss) on cash flow hedges			0.6	(0.1)
Total comprehensive income/(loss) for the year			2.2	(30.3)
Attributable to:
Equity holders of the parent			2.2	(30.3)
Basic and diluted earnings/(loss) per share attributable to the equity Shareholders of the Company:
Basic earnings/(loss) per share	10		0.9p	(19.0p)
Diluted earnings/(loss) per share	10		0.9p	(19.0p)
Adjusted earnings/(loss) per share*	10		6.3p	(9.7p)
Adjusted profit measure*
Adjusted PBT/(LBT) (before amortisation of acquired intangibles, exceptional items and share-based payments)*	6		14.1	(18.4)

 

*       This is a non-GAAP measure, refer to notes listed above. The adjusted earnings/(loss) per share presented is both basic and diluted.

The notes form part of the financial statements.

Consolidated Balance Sheet
At 30 September 2022

				Restated note 2(d)
	Note		2022 £'m	2021 £'m
Assets
Non-current assets
Intangible assets	11		74.3	74.1
Property, plant and equipment	12		9.1	8.3
Deferred tax	19		3.4	3.6
Other assets	14		0.6	-
Total non-current assets			87.4	86.0
Current assets
Trade and other receivables	14		122.4	94.9
Derivative financial instruments	22		3.2	-
Corporation tax receivable			-	0.8
Trust account	15		69.4	39.0
Cash at bank			64.5	56.0
Total current assets			259.5	190.7
Total assets			346.9	276.7
Equity
Share capital	20		1.7	1.7
Share premium	21		89.6	89.6
Retained earnings	21		194.5	187.6
Capital contribution reserve	21		0.5	0.5
Merger reserve	21		(129.5)	(129.5)
Total equity			156.8	149.9
Non-current liabilities
Trade and other payables	16		3.0	2.5
Total non-current liabilities			3.0	2.5
Current liabilities
Corporation tax payable			0.2	-
Trade and other payables	16		186.6	119.4
Provisions	16		0.3	4.6
Derivative financial instruments	22		-	0.3
Total current liabilities			187.1	124.3
Total liabilities			190.1	126.8
Total equity and liabilities			346.9	276.7

 

The financial statements were approved by the Board of Directors and authorised for issue.

Shaun Morton
Chief Financial Officer

7 December 2022

On the Beach Group plc. Reg no 09736592

Consolidated Statement of Cash Flows
Year ended 30 September 2022

	Note		2022 £'m	2021 £'m
Profit/(loss) before taxation			2.1	(36.7)
Adjustments for:
Depreciation	6		2.0	1.8
Amortisation of intangible assets	6		10.8	10.1
Finance costs	8		0.8	1.0
Finance income	8		(0.3)	(0.1)
Share-based payments	23		4.7	2.8
Gain on termination of lease	12		-	(0.1)
Loss on disposal of property, plant and equipment	12		-	0.2
			20.1	(21.0)
Changes in working capital:
(Increase)/decrease in trade and other receivables	14		(29.6)	9.9
Increase in trade and other payables	16		61.3	21.3
(Increase) in trust account			(30.4)	(13.2)
			1.3	18.0
Cash flows from operating activities
Cash used in operating activities			21.4	(3.0)
Tax received			0.5	4.2
Net cash inflow/(outflow) from operating activities			21.9	(3.0)
Cash flows from investing activities
Purchase of property, plant and equipment	12		(1.3)	(0.5)
Purchase of intangible assets	11		(0.5)	-
Development expenditure	11		(10.6)	(4.6)
Interest received	8		0.3	0.1
Net cash outflow from investing activities			(12.1)	(5.0)
Cash flows from financing activities
Proceeds from issue of share capital			-	26.0
Costs related to shares issued paid			-	(1.1)
Interest paid on borrowings	8		(0.6)	(0.9)
Interest paid on lease liabilities	8		-	(0.1)
Payment of lease liabilities	17		(0.7)	(0.6)
Net cash (outflow)/inflow from financing activities			(1.3)	23.3
Net increase in cash at bank and in hand			8.5	19.5
Cash at bank and in hand at beginning of year			56.0	36.5
Cash at bank and in hand at end of year			64.5	56.0

The notes form part of the financial statements.

Consolidated Statement of Changes in Equity
Year ended 30 September 2022

	Share capital £'m	Share premium £'m	Merger reserve £'m	Capital contribution reserve £'m	Retained earnings £'m	Total £'m
Balance at 30 September 2020	1.6	64.8	(129.5)	0.5	215.0	152.4
Share-based charge including tax	-	-	-	-	2.9	2.9
Shares issued during the year	0.1	25.9	-	-	-	26.0
Costs related to shares issued	-	(1.1)	-	-	-	(1.1)
Total comprehensive loss for the year	-	-	-	-	(30.3)	(30.3)
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

 

The notes form part of these financial statements.

Notes to the Consolidated Financial Statements

Year ended 30 September 2022

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 located at Aeroworks, 5 Adair Street, Manchester, M1 2NQ.

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 2022 or 2021 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 2022. Statutory accounts for 2021 have been delivered to the Registrar of Companies, and those for 2022 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 a Revolving Credit Facility ('RCF'). On 7 December 2022, the Group refinanced its credit facilities with Lloyds and NatWest Banks. This included cancelling its current facility of £50m and CLBILS facility of £25m and entering into a new facility of £60m expiring in December 2025.

As at 30 September 2022 cash (excluding cash held in trust which is ringfenced and not factored into the going concern assessment) was £64.5m (30 September 2021 cash of £56.0m).

Where holidays are cancelled the Group is committed to refunding customers in cash rather than vouchers. Cash refunds are fully funded from the trust account (where refunds are for hotel and transfer payments) or are a pass-through from airlines.

Cash received from customers for bookings that have not yet travelled is held in a ring fenced trust account and is not withdrawn until the customer returns from their holiday. Cash held in trust at 30 September 2022 was £69.4m.

The Directors have assessed a going concern period through to March 2024 and have modelled a number of scenarios considering factors such as airline and hotelier 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 20% lower than historic levels, although profitability would be affected, the Group would be able to continue operating.

The Directors modelled what they consider to be a remote downside scenario of no travel or bookings until March 2024. In this scenario the Directors have assumed that variable marketing spend, which is within their control, is significantly reduced. Even in this scenario, the Group would have positive cash and no requirement to draw down on its current facilities during the going concern review period.

The Directors have considered possible levels of customer default in light of the cost of living crisis. At the date of signing default levels remain low. The Directors remain confident that the business has adequate controls and processes in place to recover outstanding balances from customers.

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 2021; the following amended standards have been implemented; however, they have not had a significant impact on the Group's consolidated financial statements:

Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free rate (RFR). These amendments had no impact on the consolidated financial statements of the Group.

Covid-19 Related Rent Concessions beyond 30 June 2021: Amends to IFRS 16

On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16 Leases. The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification. The amendment was intended to apply until 30 June 2021, but as the impact of Covid-19 continued, the IASB extended the period of application to 30 June 2022. The Group has not received Covid-19 related rent concessions during the period of application.

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 2022 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:

•     Reference to the Conceptual Framework - Amendments to IFRS 3

•     Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16

•     Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37

•     IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities

d) Reclassification of deferred tax assets

In April 2022, the Group received a letter from the Financial Reporting Council (FRC) as part of its regular review and assessment of the quality of corporate reporting in the UK. The letter included a request for further information on the Group's Annual Report and Accounts for the year ended 30 September 2021. The review conducted by the FRC was performed solely on the Group's published Annual Report and Accounts and does not provide any assurance that the Annual Report and Accounts are correct in all material respects. The review did not benefit from a detailed knowledge of the business or an understanding of the underlying transactions entered into. FRC letters are written on the basis that the FRC accepts no liability for reliance on them by the Company or any third party.

Following completion of the correspondence with the FRC, the Directors have concluded that the deferred tax asset of £3.6m reported in the balance sheet as at 30 September 2021 should have been presented as a non-current asset in line with the requirements of IAS 1.56, rather than as a current asset. Therefore, the comparatives for the balance sheet as at 30 September 2021 have been restated to correct the error identified. As a result, total current assets reduced by £3.6m to £190.7m and total non-current assets increased by £3.6m to £86.0m. There was no impact on net assets, earnings or cash flows.

e) 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.

f) 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 is reversed only if the reasons for the impairment have ceased to apply.

g) 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.  

h) 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.

iii.      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 asset 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.

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.

iv.      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

All financial liabilities are recognised initially at fair value and net of directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

v.       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 22 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.

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. This includes identification of the hedging instrument, 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 a hedging instrument is recognised in the statement of profit or loss as part of the Group's net revenue. 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 part of the Group's net revenue.

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.

i) 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 four reportable segments:

vi.  'OTB' - activity via UK websites (www.onthebeach.co.uk, www.sunshine.co.uk and www.onthebeachtransfers.co.uk)

vii. 'International' - activity via Swedish, Norwegian and Danish websites (www.eBeach.se, www.eBeach.no and www.eBeach.dk)

viii. 'CCH' - activity via the Tour Operator, Classic Collection Holidays Limited and subsidiaries

ix.  'CPH' - activity via the Classic Package Holidays online business to business portal

j) 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 describes 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 from the customer through purchases 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.

Revenue earned from sales through the OTB and International segments are presented on an agent basis, and therefore are stated net. Revenue earned from sales through CPH are stated net, with the commission payable to agents recognised in 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.

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.

Revenue earned from sales through the CCH are presented on an principal basis, and therefore are stated gross.

k) 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 reduction in cost of sales (corresponding increase in commission received), and as such is considered part of the Group's net revenue. 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 which 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.

l) Dividend distribution

Final dividend distribution to the Group's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Group's shareholders.

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 meet 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 & 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 assets. 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 23.

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 10).

s) Financing income and expenses

Financing expenses comprises interest payable and 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). Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use are capitalised as part of the cost of that asset. Financing income comprises interest receivable on funds invested and dividend income.

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity's right to receive payments is established. 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'. The amount subscribed for the preference shares in excess of the nominal value of these new preference shares is recorded in 'other reserves'.

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 (see note 2j).

aa) Non statutory measures

One of the Groups KPIs 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 expected infrequency of events giving rise to them, merit separate presentation to allow shareholders a better understanding of the financial performance in the period.

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 which 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 to 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 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 2022, the proportion of development costs that have been capitalised is higher than the years ending 30 September 2020 and 2021 as the development team are focusing on key developments rather than operational tasks to respond to Covid-19.

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 sufficient level of future taxable profits to support the deferred tax asset of £8.2m (2021: £9.5m) recognised (note 19).

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 19.

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. On this basis, the Group has determined that it cannot recognise deferred tax assets on these tax losses carried forward.

Critical accounting estimates

Covid-19 and supplier disruption

Covid-19 has continued to impact the current financial year, with the outbreak of the Omicron variant of Covid-19 causing disruption between October 2021 and January 2022. Following the removal of travel restrictions in February 2022, travel was further affected by the disrupted airline schedules. The recognition of costs and provisions relating to the travel disruption has been an area of significant estimation. These adjustments relate primarily to lost revenue resulting from the cancellation of bookings in the financial year. The estimation includes the loss of revenues caused by the cancellation and refund of bookings, offset by the extent to which related holiday costs can be recovered.

For the year ending 30 September 2021, the Group recognised a cancellation provision to estimate the extent to which forward bookings would be cancelled in FY22. During the current year this provision has been utilised and any unused amounts reversed, see note 16 for details. The Group has not included a provision for forward bookings affected by Covid-19 as at 30 September 2022.

i.        Recoverability of airline debtor

In relation to flights cancelled during the financial year, the Group has considered the impact of the pandemic and supplier disruption on the recoverability of amounts paid to airlines in lieu of flights which have been cancelled which as at 30 September 2022 is a receivable balance of £2.8m - see note 14.

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 are 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:

−    the merchant (airline) was unable or unwilling to provide the purchased services; or

−    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 were to increase its provision by 5 percentage points ('ppts'), this would have resulted in a decrease of £0.2m in the receivable balance of £2.8m.

ii.       Impact of Covid-19 and supplier disruption

The estimation required for determining the impact of Covid-19 and supplier disruption includes calculating the loss of revenues caused by the cancellation and refund of bookings, offset by extent to which related holiday costs can be recovered. A summary of the adjustments between Adjusted and GAAP measures, split between the Covid-19 impact and other costs, is shown below:

	Impact of travel disruption £'m
Group revenue
Revenue as Agent	(1.0)
Revenue as Principal	-
Group cost of sales	(0.3)
Group overheads	(1.3)
Group profit before tax	(2.6)

 

The total exceptional items in the year ended 30 September 2022 of £2.6m represents the £4.7m cost of Covid-19 and supplier disruption to trading in the period which has been offset by the release of £4.6m of provisions from the previous year, and legal and professional fees of £2.5m incurred in the year.

 

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 2i of these financial statements.

For the year ended 30 September 2022

	OTB £'m	Int'l £'m	CCH £'m	CPH £'m	Total £'m
Revenue before exceptional items
Sales as agent	86.9	0.7	-	6.2	93.8
Sales as principal	-	-	50.5	-	50.5
Total revenue before exceptional items	86.9	0.7	50.5	6.3	144.3
Exceptional cancellations*	(0.6)	-	-	(0.4)	(1.0)
Fair value FX gains	0.8	-	-	-	0.8
Total revenue	87.1	0.7	50.5	5.8	144.1

 

For the year ended 30 September 2021

	OTB £'m	Int'l £'m	CCH £'m	CPH £'m	Total £'m
Revenue before exceptional cancellations
Sales as agent	22.1	0.1	-	1.8	24.0
Sales as principal	-	-	6.5	-	6.5
Total Revenue before exceptional cancellations	22.1	0.1	6.5	1.8	30.5
Exceptional cancellations*	(9.1)	(0.1)	-	(0.1)	(9.3)
Total revenue	13.0	-	6.5	1.7	21.2

 

*      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. Exceptional cancellations in the year ended 30 September 2021 relate to the impact of COVID-19 (see note 3).

 

Details of receivables arising from contracts with customers are set out in note 14.

5. Segmental report

As explained in note 2i, the management team considers the reportable segments to be ''OTB'', "International", ''CCH'' and "CPH". All segment revenue, operating profit assets and liabilities are attributable to the Group from its principal activities.

OTB, International and CPH recognise revenue as agent on a net basis. CCH recognises revenue as a principal on a gross basis.

	2022						2021
	OTB £'m	Int'l £'m	CCH £'m	CPH £'m	Total £'m		OTB £'m	Int'l £'m	CCH £'m	CPH £'m	Total £'m
Income
Revenue before exceptional cancellations	86.9	0.7	50.5	6.2	144.3		22.1	0.1	6.5	1.8	30.5
Exceptional cancellations*	(0.6)	-	-	(0.4)	(1.0)		(9.1)	(0.1)	-	(0.1)	(9.3)
Fair value FX gains	0.8	-	-	-	0.8		-	-	-	-	-
Total Revenue	87.1	0.7	50.5	5.8	144.1		13.0	-	6.5	1.7	21.2
Adjusted EBITDA	22.1	-	(0.1)	(0.1)	21.9		(6.1)	(0.2)	(3.1)	(1.7)	(11.1)
Share-based charge	(4.7)	-	-	-	(4.7)		(2.8)	-	-	-	(2.8)
Exceptional items	(1.9)	-	(0.3)	(0.4)	(2.6)		(9.8)	(0.1)	(0.4)	0.3	(10.0)
Fair value FX gains	0.8	-	-	-	0.8		-	-	-	-	-
EBITDA	16.3	-	(0.4)	(0.5)	15.4		(18.7)	(0.3)	(3.5)	(1.4)	(23.9)
Depreciation and amortisation	(11.1)	(0.1)	(1.4)	(0.2)	(12.8)		(10.3)	(0.1)	(1.3)	(0.2)	(11.9)
Group operating profit/(loss)	5.2	(0.1)	(1.8)	(0.7)	2.6		(29.0)	(0.4)	(4.8)	(1.6)	(35.8)
Finance costs					(0.8)						(1.0)
Finance income					0.3						0.1
Profit/(loss) before taxation					2.1						(36.7)
Non-current assets
Goodwill	31.6	-	4.6	4.0	40.2		31.6	-	4.6	4.0	40.2
Other intangible assets	27.4	-	6.6	0.1	34.1		26.0	0.1	7.7	0.1	33.9
Property, plant and equipment	6.3	-	2.8	-	9.1		5.8	-	2.5	-	8.3

 

*      Exceptional cancellations in the year ended 30 September 2022 relate to the impact of COVID-19 and supplier disruption. Exceptional cancellations for 30 September 2021 relate to the impact of COVID-19.

6. Operating profit

a) Operating expenses

Expenses by nature including exceptional items and impairment charges:

	2022 £'m	2021 £'m
Marketing	38.7	10.9
Depreciation	2.0	1.8
Staff costs (including share-based payments)	28.0	18.5
IT hosting, licences & support	4.5	2.5
Office expenses	0.7	0.8
Credit / debit card charges	3.2	0.5
Insurance	1.6	1.6
Professional services	1.0	0.7
Other	1.2	1.8
Administrative expenses before exceptional items & amortisation of intangible assets	80.9	39.0
Exceptional items	1.3	11.1
Amortisation of intangible assets	10.8	10.1
Exceptional items and amortisation of intangible assets	12.1	11.2
Administrative expenses	93.0	50.2

 

b) Exceptional items

	2022					2021
	Adjusted £'m	Impact of travel disruption £'m	Fair value FX gains £'m	GAAP £'m		Adjusted £'m	Impact of COVID-19 £'m	GAAP £'m
Group revenue
Revenue as Agent	93.8	(1.0)	0.8	93.6		24.0	(9.3)	14.7
Revenue as Principal	50.5	-	-	50.5		6.5	-	6.5
						-	-	-
Group cost of sales	(48.2)	(0.3)	-	(48.5)		(7.2)	0.4	(6.8)
						-	-	-
Group overheads						-	-	-
Administrative expenses	(91.8)	(1.3)	-	(93.0)		(49.1)	(1.1)	(50.2)
Net finance costs	(0.5)	-	-	(0.5)		(0.9)	-	(0.9)
Group profit/(loss) before tax	3.9	(2.6)	0.8	2.1		(26.7)	(10.0)	(36.7)

 

The total exceptional items in the year ended 30 September 2022 of £1.8m includes £2.6m due to the impact of travel disruption offset by £0.8m of fair value FX gains. The impact of travel disruption represents £4.7m cost of Covid-19 and supplier disruption to trading in the period which has been offset by the release of £4.6m of provisions from the previous year, and legal and professional fees of £2.5m incurred in the year.

The exceptional items in the year ended 30 September 2021 of £10.0m represents the estimated cost of COVID-19 to trading in the period. This is primarily the cost of COVID-19 related cancellations or expected cancellations of £8.9m. Exceptional operating costs of £1.1m includes legal and professional fees and supplier provisions.

c) Services provided by the company auditor

During the year, the Group obtained the following services from the operating company's auditor.

	2022 £'m	2021 £'m
Audit of the parent company financial statements	0.1	0.1
Amounts receivable by the Company's auditor and its associates in respect of:
- Audit of financial statements of subsidiaries pursuant to legislation	0.3	0.3
- Review of interim financial statements	-	-
- Other assurance services	-	-
	0.4	0.4

 

d) Adjusted profit/(loss) before tax

Management measures the overall performance of the Group by reference to adjusted profit/(loss) before tax, a non-GAAP measure as it gives a meaningful year-on-year comparison of the Group's performance:

	2022 £'m	2021 £'m
Profit/(loss) before taxation	2.1	(36.7)
Exceptional items	1.8	10.0
Amortisation of acquired intangibles*	5.5	5.5
Share-based payments charge**	4.6	2.8
Adjusted profit/(loss) before tax	14.1	(18.4)

 

*       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 increased to £4.7m (2021: £2.8m) as a result of a significant increase in the number of awards in the year and the change in the expectations for non-market based performance conditions. In addition, on 21 December 2021 the remuneration committee approved the introduction of an underpin/minimum award for the nil cost awards originally granted 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 (2021: £2.0m) that reflects the scheme progress to date. 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:

	2022 £'m	2021 £'m
Wages and salaries	27.2	18.0
Defined contribution pension cost	0.7	0.4
Social security costs	2.9	1.9
Share-based payment charge	4.7	2.8
	35.5	23.1

 

Staff costs above include £7.5m (2021: £4.6m) employee costs capitalised as part of software development. During the year £nil was claimed in relation to the Coronavirus Job Retention Scheme (2021: £0.2m).

Share-based payments includes a catch-up charge of £1.9m (2021: £2.0m) following the Remuneration Committee approving the introduction of an underpin/minimum award on 21 December 2021 for the nil cost awards originally granted 9 July 2019. This removal of a non-market based condition has resulted in the catch-up charge to the income statement that reflects the scheme progress to date.

b) Employee numbers

Average monthly number of people (including Executive Directors) employed:

By reportable segment:	2022 No.	2021 No.
UK	463	365
Int'l	4	6
CCH	134	115
CPH	22	8
	623	494

 

c) Directors' emoluments

The remuneration of Directors was as follows:

	2022 £'m	2021 £'m
Aggregate emoluments	1.0	0.5
Defined contribution pension	-	-
Share-based payment charges	0.8	0.1
Directors' emoluments	1.8	0.6

 

Remuneration was paid by On the Beach Limited, a subsidiary company of the Group.

The remuneration of the highest paid Director was as follows:

	2022 £'m	2021 £'m
Aggregate emoluments	0.6	0.3
Share-based payment charges	0.8	0.1
	1.4	0.4

 

d) Key management compensation

Key management comprised the eight members of the Executive Team.

Remuneration of all key management (including Directors) was as follows:

	2022 £'m	2021 £'m
Wages and salaries	5.1	1.7
Short-term non-monetary benefits	-	-
Share-based payment charges	3.4	2.1
Key management compensation	8.5	3.8

 

e) Retirement benefits

Included in pension contributions payable by the Group of £0.7m (2021: £0.4m) is £10,700 (2021: £1,300) of contributions that the Group made to a personal pension scheme in relation to one member of the Executive Team.

8. Finance income and finance costs

a) Finance costs

	2022 £'m	2021 £'m
Rolling credit facility interest / non-utilisation fees	0.6	0.9
Interest on lease liabilities	0.2	0.1
Finance costs	0.8	1.0

 

b) Finance income

	2022 £'m	2021 £'m
Bank interest receivable	0.3	0.1
Finance income	0.3	0.1

 

9. Taxation

	2022 £'m	2021 £'m
Current tax on profit/(loss) for the year	0.4	(0.4)
Total current tax	0.4	(0.4)
Deferred tax on profits for the year
Origination and reversal of temporary differences	0.3	(6.1)
Adjustments in respect of prior years	(0.2)	-
Total deferred tax	0.1	(6.1)
Total tax charge/(credit)	0.5	(6.5)

 

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 operating are as follows:

	2022 £'m	2021 £'m
Profit/(loss) on ordinary activities before tax	2.1	(36.7)
Profit/(loss) on ordinary activities multiplied by the statutory rate of corporation tax in the UK of 19% (2021: 19%)	0.4	(7.0)
Effects of:
Impact of difference in current and deferred tax rates	(0.5)	0.2
Adjustments in respect of prior years	(0.2)	-
Expenses not deductible	0.8	0.3
Total taxation charge/(credit)	0.5	(6.5)

 

The effective rate tax rate for the period is 25% (2021: 18%). 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 2022 have been calculated based on these rates.

10. 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.

	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	1.0p
Diluted EPS	166.7	1.6	1.0p
Adjusted basic EPS	165.9	10.5	6.3p
Adjusted diluted EPS	166.7	10.5	6.3p

 

	Basic weighted average number of Ordinary Shares (m)	Total earnings £'m	Pence per share
Year ended 30 September 2021
Basic EPS	159.3	(30.2)	(19.0p)
Diluted EPS*	159.3	(30.2)	(19.0p)
Adjusted EPS*	159.3	(15.4)	(9.7p)

 

*There was no difference in the weighted average number of shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.

Adjusted earnings/(loss) after tax is calculated using the tax rate of 25% on the basis that this is the Group's effective tax rate:

	2022 £'m	2021 £'m
Profit/(loss) for the year after taxation	1.6	(30.2)
Adjustments (net of tax at 25%)
Exceptional items	1.3	8.1
Amortisation of acquired intangibles	4.1	4.5
Share-based payment charges*	3.5	2.2
Adjusted earnings/(loss) after tax	10.5	(15.4)

 

* The share-based payment charges are in relation to options which are not yet exercisable.

11. Intangible assets

	Brand £'m	Goodwill £'m	Website & development Costs £'m	Website technology £'m	Customer relationships £'m	Agent relationships £'m	Total £'m
Cost
At 1 October 2020	35.9	40.2	15.6	22.8	2.1	4.4	121.0
Additions	-	-	4.6	-	-	-	4.6
At 30 September 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
Accumulated amortisation
At 1 October 2020	15.1	-	8.7	16.0	0.9	0.7	41.4
Charge for the year	2.4	-	4.6	2.4	0.4	0.3	10.1
At 30 September 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
Net book amount
At 30 September 2022	16.0	40.2	12.6	2.0	0.4	3.1	74.3
At 30 September 2021	18.4	40.2	6.9	4.4	0.7	3.5	74.1

 

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 amortisation period	Acquisition	At 30 September 2022 £'m	At 30 September 2021 £'m
On the Beach	4 years	On the Beach Travel Limited	12.1	14.1
Sunshine.co.uk	5 years	Sunshine.co.uk Limited	0.7	0.8
Classic Collection	6 years	Classic Collection Limited	3.2	3.5
			16.0	18.4

Goodwill

Goodwill acquired in a business combination is allocated on acquisition to the CGUs that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:

Reportable segment	CGU	Acquisitions	At 30 September 2022 £'m	At 30 September 2021 £'m
OTB	OTB	On the Beach Travel Limited	21.5	21.5
OTB	Sunshine	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, as they are internally reported and managed as one entity, but for impairment review purposes they are treated as separate CGUs as they have independent cash inflows. Goodwill acquired through Sunshine.co.uk has been allocated to the 'Sunshine' cash generating unit. Goodwill acquired through the Classic collection acquisition has been allocated to the 'CCH' and 'CPH' cash-generating units. The Group has not recognised an impairment to the goodwill for the year ending 30 September 2022 (2021: £nil).

'OTB' CGU

The Group performed its annual impairment test as at 30 September 2022 on the 'OTB' cash-generating unit ('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 four-year period. The forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2 per cent (2021: 2 per cent), 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 13.5 per cent (2021: 11 per cent).

'Sunshine' CGU

The Group performed its annual impairment test as at 30 September 2022 on the 'Sunshine' cash-generating unit ('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 four-year period. The forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2 per cent (2021: 2 per cent), 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 13.5 per cent (2021: 11 per cent)

'CCH' CGU

The Group performed its annual impairment test as at 30 September 2022 on the 'CCH' cash-generating unit ('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 four-year period. The forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2 per cent (2021: 2 per cent). 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 13.5 per cent (2021: 11 per cent).

'CPH' CGU

The Group performed its annual impairment test as at 30 September 2022 on the 'CPH' cash-generating unit ('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 four-year period. The forecasts are then extrapolated in perpetuity based on an estimated growth rate of 2 per cent (2021: 2 per cent). 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 13.5 per cent (2021: 11 per cent).

The 'international' CGU has been internally developed and, as such, has no goodwill.

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 both pre-pandemic (year ending 30 September 2019) and during the pandemic (years ending 30 September 2020 and 2021) 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 demand 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 14% 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 cost of living crisis

The Group does not consider that any CGU has been automatically impaired as a result of the rising cost of living. All CGUs remain viable trading long-term 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 the rising costs of living. The Group is satisfied that sufficient headroom exists to support the asset value.

Climate-related risks

The Group is in the process of conducting a materiality assessment of climate-related risks and will adjust the key assumptions used in value-in-use calculations and sensitivity to changes in assumptions should a change be required.

Website and development costs

The Group capitalises development projects where they satisfy the requirements for capitalisation in accordance with 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 software licences and 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 2022 this was £1.3m (2021: £1.4m).

 

12. Tangible assets

	Freehold property £'m	Right-of-use asset (note 17) £'m	Fixtures, fittings and equipment £'m	Total £'m
Cost
At 1 October 2020	1.7	5.3	7.1	14.1
Additions	-	-	0.5	0.5
Transfer from investment property	0.6	-	-	0.6
Disposals	-	(1.7)	(0.5)	(2.2)
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 30 September 2022	2.3	5.1	7.4	14.8
Accumulated amortisation
At 1 October 2020	-	1.6	2.6	4.2
Charge for the year	0.1	0.5	1.2	1.8
Disposals	-	(1.0)	(0.3)	(1.3)
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 30 September 2022	0.2	1.7	3.8	5.7
Net book amount
At 30 September 2022	2.1	3.4	3.6	9.1
At 30 September 2021	2.2	2.5	3.6	8.3

 

The depreciation expense of £2.0m for the year ended 30 September 2022 and the depreciation expense of £1.8m for the year ended 30 September 2021 have been recognised within administrative expenses.

13. 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%

 

*During the year, the Group has undertaken 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 simply 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.

14. Trade and other receivables

Amounts falling due within one year:	2022 £'m	2021 £'m
Trade receivables - net	100.8	79.5
Other receivables and prepayments	21.6	15.4
Total trade and other receivables	122.4	94.9

For the year ended 30 September 2022 , other receivables includes £2.8m receivable in respect of amounts due from airlines as a result of exceptional Covid-19 cancellations. Other receivables and prepayments 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. The expected credit losses in respect to these balances is not material.

Prepayments greater than one year are £0.6m (2021: Nil).

For the year ended 30 September 2021, other receivables includes £3.3m receivable in respect of amounts due from airlines as a result of exceptional COVID-19 cancellations. Other receivables and prepayments includes £5.3m of advanced payments to suppliers.

15. 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.

16. Trade, other payables and provisions

	2022 £'m	2021 £'m
Non-current
Lease liabilities (note 17)	3.0	2.5
Current
Trade payables	158.3	104.3
Accruals and other payables	27.4	14.8
Lease liabilities (note 17)	0.9	0.4
Provision	0.3	4.6
Total trade, other payables and provisions	189.9	126.6

 

Trade payables includes £0.4m (2021: £0.9m) in respect of refunds owed to customers, with the related receivable from the airlines recognised in trade receivables. Where the refunds are not received from the airline the Group has a legally enforceable right to offset the recognised amounts. The Group has opted to show the figures gross due to no option to settle on a net basis or realise the asset and settle the liability simultaneously.

Accruals and other payables includes £14.9m (2021: £14.2m) for products or services received but not yet invoiced at the year-end date.

	COVID-19 cancellations £'m	Other COVID-19 related provisions £'m	Cancellations £'m	Total £'m
At 1 October 2021	4.1	0.5	-	4.6
Arising during the year	-	-	0.3	0.3
Utilised	(2.0)	(0.1)	-	(2.1)
Unused amounts reversed	(2.1)	(0.4)	-	(2.5)
Unwinding of discount and changes in the discount rate	-	-	-	-
At 30 September 2022	-	-	0.3	0.3
Current	-	-	0.3	0.3
Non-current	-	-	-	-

 

COVID-19

The COVID-19 cancellations and other COVID-19 related provisions have been utilised against the costs associated with COVID-19 and supplier disruption in the year.

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 further supplier disruption.

17. Leases

The Group as a lessee

For the year ending 30 September 2022, the Group entered into leases for IT equipment, the lease terms for IT equipment are between three and five years. The Group has a lease for its head office which has a term of ten years. 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 12).

Amounts recognised in profit or loss

The following lease-related expenses were recognised under IFRS 16 in the profit or loss:

	2022 £'m	2021 £'m
Depreciation expense of right-of-use assets	0.6	0.5
Interest expense on lease liabilities	0.2	0.1
Gain on termination of lease	-	(0.1)
Total amount recognised in profit or loss	0.8	0.5

 

Set out below are the carrying amounts of lease liabilities (included trade and other payables) and the movements during the period:

	2022 £'m	2021 £'m
As at 1 October	2.9	4.2
Additions	1.5	-
Accretion of interest	0.2	0.1
Payments	(0.7)	(0.6)
Reassessment of lease term	-	(0.8)
As at 30 September	3.9	2.9
Current (note 16)	0.9	0.4
Non-current (note 16)	3.0	2.5

 

The Group had total cash outflows for leases of £0.7m in 2022 (£0.6m in 2021). The above table satisfies the requirements of IAS 7.44A to present a net debt reconciliation.

18. Borrowings

Bank Facility

The Group has a revolving credit facility with Lloyds Bank plc. The purpose of the facility is to meet the day-to-day working capital requirements of the Group.

During the year the Group had a total facility of £75m comprising two elements, as follows:

−   Core facility of £50m expiring December 2023; and

−   CLBILS facility of £25m expiring May 2023.

The interest rate payable on the core facility 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 4.25% for the facility or any unpaid sum. The interest rate payable on the CLBILS facility is equal to the Bank of England base rate plus a margin. The margin contained within the facility is 2.30% per annum for the facility or any unpaid sum.

The facility included the following 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;

ii.   that the ratio of total net debt to adjusted EBITDA shall not exceed 2:1

The terms of the facility prior to 1 October 2022 include the following key financial covenants:

i.    LTM minimum EBITDA: December 21 £20.4m loss; March 22 £1.2m loss

ii.   EBITDA/Net debt ratio; June 22 2.5:1 ; September 22 2.25:1

The RCF is available for other credit uses including currency hedging liabilities and corporate credit cards. At 30 September 2022, the liabilities for these other credit uses was £7.4m, leaving £68m of the Lloyds facility available for use. Card facilities with other providers remain available for use.

The amount drawn down in cash at 30 September 2022 was £nil and there has been nothing drawn down post balance sheet date.

On 7 December 2022, the Group refinanced its credit facilities with Lloyds and NatWest Banks. This included cancelling its current facilities and entering into a new facility for £60m expiring in December 2025.

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 new facility 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.

19. Deferred tax

	Intangible assets £'m	Property, plant and equipment £'m	Share-based payments £'m	Losses and unused tax relief £'m	Tax assets/ (liabilities) £'m
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
2021
Assets	-	-	0.7	9.5	10.2
Liabilities	(6.3)	(0.3)	-	-	(6.6)
Total	(6.3)	(0.3)	0.7	9.5	3.6
	Intangible assets £'m	Property, plant and equipment £'m	Share-based payments £'m	Losses and unused tax relief £'m	Total £'m
30 September 2020	(6.2)	(0.1)	0.2	3.5	(2.6)
Accelerated depreciation for tax purposes	(0.1)	(0.2)	-	-	6.2
Losses available for offsetting against future income	-	-	-	6.0	6.0
Share-based payments recognised in income	-	-	0.4	-	0.4
Share-based payments recognised in equity	-	-	0.1	-	0.1
30 September 2021	(6.3)	(0.3)	0.7	9.5	3.6
Losses utilised against taxable income	-	-	-	(1.3)	(1.3)
Accelerated depreciation for tax purposes	1.1	-	-	-	1.1
Share-based payments recognised in income			0.1		0.1
Share-based payments recognised in equity	-	-	(0.1)	-	(0.1)
30 September 2022	(5.2)	(0.3)	0.7	8.2	3.4

The deferred tax asset includes an amount of £8.2m (2021: £9.5m) 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 probability that sufficient taxable profit will be available to allow all or part of 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 13.

The Group has considered the approved budgeted information covering a four-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 11. 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 determined that the unused tax losses will be utilised across the years ending 30 September 2023 and 2024. There is no expiry in respect of the deferred tax assets.

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.

20. Share capital

Allotted, called up and fully paid	2022 £'m	2021 £'m
166,258,172 ordinary shares @ £0.01 each (2021: 165,399,366 @ £0.01 each)	1.7	1.7

The Group issued 858,806 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.

21. 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 redemption reserve arose as a result of the redemption of preference shares in the year ended 30 September 2015.

22. 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	2022 £'m	2021 £'m
Derivative financial assets designated as hedging instruments
Forward exchange contracts	2	3.2	-
Financial assets at amortised cost
Trust account		69.4	39.0
Cash at bank		64.5	56.0
Trade and other receivables (note 14)		116.9	89.5
Total financial assets		254.0	184.5
Financial liabilities
Derivatives designated as hedging instruments
Forward exchange contracts	2	-	(0.3)
Financial liabilities at amortised cost
Trade and other payables (note 16)		(189.6)	(122.0)
Provisions		(0.3)	(4.6)
Total financial liabilities		(189.9)	(126.9)

 

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 Bank plc. The borrowing limits under the facility is £75m per month, subject to covenant compliance; at year end the facility was nil (2021: nil). On 7 December 2022, the Group refinanced its credit facilities with Lloyds and Natwest Banks. This included cancelling its current facilities and entering into a new facility for £60m expiring in December 2025. For details of the revolving credit facility, see note 18. The following table provides the fair values of the Group's financial assets and liabilities:

	FV Level	2022 £'m	2021 £'m
Forward exchange contracts	2	3.2	(0.3)

 

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 2022	-	3.2	-
As at 30 September 2021	-	(0.3)	-

 

The forward contracts have been fair valued at 30 September 2022 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 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 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	2022 €'m	2021 €'m
Cash	12.0	33.2
Trade payables	(137.0)	(87.2)
Trade receivables	3.0	5.2
Forward exchange contracts	129.5	39.6
Balance sheet exposure	7.5	(9.2)

 

US dollar	2022 $'m	2021 $'m
Cash	4.0	2.7
Trade payables	(8.1)	(4.7)
Trade receivables	0.3	0.2
Forward exchange contracts	12.7	(2.0)
Balance sheet exposure	8.9	(3.8)

 

Swedish krona	2022 Kr 'm	2021 Kr 'm
Cash	25.0	17.6
Trade receivables	1.5	1.0
Forward exchange contracts	-	-
Balance sheet exposure	26.5	18.6

 

Norwegian Krone	2022 Kr 'm	2021 Kr 'm
Cash	2.4	0.7
Trade payables	-	(0.1)
Forward exchange contracts	-	-
Balance sheet exposure	2.4	0.6

 

Danish krone	2022 Kr 'm	2021 Kr 'm
Cash	0.1	0.1
Trade receivables	-	-
Balance sheet exposure	0.1	0.1

 

Moroccan dirham	2022 MAD 'm	2021 MAD 'm
Cash	0.2	0.6
Forward exchange contracts	(0.9)	(0.5)
Balance sheet exposure	(0.7)	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 per cent change taking place at the beginning of the financial period and held constant throughout the reporting period:

	2022 £'m	2021 £'m
Euro
Weakening - 10%	(1.7)	(0.5)
Strengthening - 10%	1.7	0.5
US dollar
Weakening -10%	(0.2)	-
Strengthening - 10%	0.2	-
Swedish krona
Weakening -10%	0.2	0.1
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 one year 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:

	2022				2021
EUR	Foreign currency €'m	Notional value £'m	Carrying amount £'m		Foreign currency €'m	Notional value £'m	Carrying amount £'m
30 September
Less than 3 months	56.2	48.1	1.3		8.6	7.6	(0.1)
3 to 6 months	11.6	10.0	0.3		3.9	3.4	(0.1)
6 to 12 months	53.1	46.3	1.2		49.4	42.6	(0.1)
12+ months	2.3	2.1	-		-	-	-
Total	123.2	106.5	2.8		61.9	53.6	(0.3)

 

	2022				2021
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	3.9	3.1	0.4		1.8	1.3	-
3 to 6 months	1.8	1.5	0.1		2.3	1.7	-
6 to 12 months	1.8	1.6	-		1.5	1.1	-
Total	7.5	6.2	0.5		5.6	4.1	-

 

	2022				2021
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	0.2	-	-		-	-	-
Total	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 2022
Foreign exchange forward contracts	112.6	3.2	Derivative financial instruments	1.3
As at 30 September 2021
Foreign exchange forward contracts	57.7	(0.3)	Derivative financial instruments	(0.2)

 

Credit risk

Credit risk refers to the risk that 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 0-30 days £'m	Past due >30 days £'m	Total £'m
As at 30 September 2022	100.1	0.7	-	100.8
As at 30 September 2021	79.4	0.1	0.3	79.8

 

The ageing of other receivables at the balance sheet date was:

	Not past due £'m	Past due 0-180 days £'m	Past due >180 days £'m	Total £'m
As at 30 September 2022	16.1	-	-	16.1
As at 30 September 2021	6.9	-	3.2	10.1

 

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 £4.4m has been recognised for airline receivables past due greater than 180 days. The Group has recognised a net receivable for the expected recoverable amount in note 14.

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 30 September 2022	Carrying amount £'m	Contractual cash flows £'m	Within 1 year £'m	1 to 5 years £'m	> 5 years £'m
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
30 September 2021
Trade payables	104.3	104.3	104.3	-	-
Lease liabilities	2.9	3.4	0.5	2.1	0.8
Other payables	14.8	14.8	14.8	-	-
	122.0	122.5	119.6	2.1	0.8

 

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 18) and equity of the Group as disclosed in note 20.

The Group is not subject to any externally imposed capital requirements.

23. 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	3,357	664	4,021
Granted during the year	1,188	1,205	2,393
Lapsed during the year	-	-	-
Exercised during the year	(791)	(69)	(860)
Forfeited during the year	(790)	(183)	(973)
Outstanding at the year end	2,964	1,617	4,581
Exercisable	653	112	765

 

LTIP

The LTIP scheme started on 26 May 2016 and the Group has awarded nil-cost options under the scheme each year since then. The vesting of 30% of the award will be dependent on a relative Total Shareholder Return ('TSR') performance condition measure over the performance period and the vesting of 70% of the award will be dependent on the satisfaction of an Earnings per Share ('EPS') target. For the 2017-2019 schemes the EPS target is measured at the end of the three-year performance period commencing on the first day of the financial period in which they are awarded in. 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 Remuneration Committee approved the introduction of an underpin/minimum award for the nil cost awards originally granted 9 July 2019 to key management. This removal of a non-market based condition resulted in a catch-up charge to the income statement of £2.0m that reflects the scheme progress to date. The performance conditions for the shares to vest was achieved on 30 September 2020, all of the shares vested in FY21. The Group also awarded nil-cost options to certain key employees within the business. The vesting of these awards will be dependent on set departmental targets.

During the current 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 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.

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 (£)
5 February 2021 (TSR dependent)	300,401	3.550	Nil	59%	3.0	0.03%	0.00%	0.0	2.050
5 February 2021 (EPS dependent)	700,935	3.550	Nil	0%	3.0	0.03%	0.00%	0.0	3.540
22 December 2021 (no conditions)	435,500	4.630	Nil	0%	3.0	0.73%	0.74%	0.0	4.520
22 December 2021 (no conditions)	44,000	2.450	Nil	0%	0.0	0.73%	0.74%	0.0	2.395
22 December 2021 (EBITDA dependent)	22,000	2.450	Nil	43%	0.0	0.73%	0.74%	0.0	2.395
25 February 2022 (Relative TSR dependent)	275,591	2.750	Nil	46%	3.0	1.20%	0.00%	0.0	1.710
25 February 2022 (Absolute TSR dependent)	275,591	2.750	Nil	46%	3.0	1.20%	0.00%	0.0	1.470
25 February 2022 (TTV condition dependent)	551,183	2.750	Nil	0%	3.0	1.20%	0.00%	0.0	2.749
27 July 2022 (Relative TSR dependent)	4,883	2.750	Nil	46%	3.0	1.20%	0.00%	0.0	0.717
27 July 2022 (Absolute TSR dependent)	4,883	2.750	Nil	46%	3.0	1.20%	0.00%	0.0	0.613
27 July 2022 (TTV condition dependent)	9,766	2.750	Nil	0%	3.0	1.20%	0.00%	0.0	1.156

 

Expected volatility is estimated by considering historic average share price volatility at the grant date.

Restricted Share Award (nil-cost option) and CSOP

The RSA scheme started on 27 October 2017, the Group awarded nil-cost options to key employees excluding Executive Directors. The awards will vest after three years, on 27 October 2020, subject to continued employment, but with no other performance conditions. The prior year awards will vest on 3 December 2022 subject to continued employment, employee personal performance and company performance.

The number of shares subject to the CSOP Awards has been determined by reference to the mid-market price of a share on date of award. In order to optimise the post-tax value of the LTIP for participants, the Company has granted market-value options as defined under UK tax legislation ('CSOP Options') to the participants.

Type	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 (£)
2021 RSA	20,000	3.680	Nil	N/A	1.0	0.03%	0.00%	Nil	3.680
2021 RSA	314,695	3.680	Nil	N/A	3.0	0.03%	0.00%	Nil	3.680
2022 RSA	793,135	2.450	Nil	N/A	2.0	1.20%	0.00%	Nil	2.450
2022 RSA	290,398	2.450	Nil	N/A	1.0	1.20%	0.00%	Nil	2.450
2022 RSA	33,164	2.750	Nil	N/A	2.0	1.20%	0.00%	Nil	2.750
2022 RSA	87,887	1.156	Nil	N/A	1.5	1.20%	0.00%	Nil	1.156

 

The following has been recognised in the income statement during the year:

	2022 £'m	2021 £'m
LTIP	3.2	2.1
RSA	1.5	0.7
Total share scheme charge	4.7	2.8

 

24. Commitments and contingencies

a) Capital commitments

No new capital commitments.

b) Contingencies

In September 2010, proceedings were initiated against On the Beach Limited by Ryanair alleging infringement of, inter alia, its intellectual property rights. The case lay dormant for over three 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. Therefore, whilst the legal process is ongoing, 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.

25 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).

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 2022.

•     Major airline failure: 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/CAA (which protects consumers, not package organisers). 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 impacts the Group's ability to fulfil consumer demand for holidays. Where the Group does not have an agreement in place with an airline, such airline may not wish to accept bookings from the Group's customers and might seek to impede the Group's access to flight data and bookability. Certain airlines use technological and other means to prevent the Group's bookings or to apply a price difference to make the Group's bookings more expensive, which could make the Group's offering less extensive or more expensive which could have a material adverse effect on the Group. The Group is one of several online travel agents ('OTAs') against which Ryanair has brought litigation in Ireland 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. 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. On the Beach has commenced legal action against Ryanair to prevent it from blocking the Group's bookings and degrading the experience for its customers. The proceedings are ongoing and there are no material updates to report in relation to that litigation. In order to mitigate flight supply risk, the Group may take allocations of seats on certain key routes, which may involve some limited risk. If the Group cannot sell the seats profitably or the programme is cancelled, this could lead to material costs for the Group.

•     Recoverability of airline refunds: The pandemic brought about a new risk in relation to the recoverability of refunds with some airlines not refunding flight costs in a timely manner or not refunding the flight costs at all because the flight still went ahead,(e.g. during a national lockdown). This often meant the Group had to refund customers in advance of getting the monies from the airlines. In the second half of year, we saw ongoing disruption resulting in a large number of cancelled flights. Whilst there has been a delay in recovering refunds for some of those flights, overall, most airlines have got quicker at making refunds.

•     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: To meet our strategic operations in the fast-moving marketplace that the Group operates in, our IT platforms must be agile and scalable. If we cannot keep up with growing demand, and fail to adapt our technologies to changing customer attitudes, 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 recession or reduced economic growth can lead to reduced job security and a reduction in consumer leisure spending. A weak pound makes holidays and consumer spending abroad more expensive. High-profile corporate failures reduce consumer confidence to make 'big ticket' purchases. Climate change could impact demand e.g. if customers choose 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.

•     Acquisition risk: Failing to achieve our strategic growth target for acquisitions due to insufficient opportunities being identified, poor due diligence or poor integration, or insufficient cash resources for acquisition, could result in erosion of shareholder value.

 

Statement of Director's Responsibilities

The responsibility statement below has been prepared in connection with the Group's Annual Report & Accounts for the year ended 30 September 2022. Certain parts thereof are not included within this announcement. The Directors confirm that 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.

Shaun Morton
Chief Financial Officer

7 December 2022

Glossary of Alternative Performance Measures

APM	Definition		Reconciliation to closest GAAP measure
Adjusted basic earnings/(loss) per share ('EPS')	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/(loss) 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 exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 offset by fair value gains from FX forward contracts. Exceptional items for 2021 consists of exceptional cancellations as a result of Covid-19. 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 EPS 2022 2021 Profit/(loss) for the year 1.6 (30.2) Share-based payments (net of tax) 3.5 2.2 Impact of exceptional items (net of tax) 1.3 8.1 Amortisation of acquired intangibles (net of tax) 4.1 4.5 Adjusted profit/(loss) after tax (£'m) 10.5 (15.4) Basic weighted average number of Ordinary Shares (m) 165.9 159.3 Adjusted basic EPS (p) 6.3 (9.7)
Adjusted profit/(loss) before tax	Adjusted profit/(loss) before tax is based on profit/(loss) 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 exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 offset by fair value gains from FX forward contracts. Exceptional items for 2021 consists of exceptional cancellations as a result of Covid-19. 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/(loss) before tax (£'m) 2022 2021 Profit/(loss) before tax 2.1 (36.7) Amortisation of acquired intangibles 5.5 5.5 Share-based payments 4.7 2.8 Exceptional items 1.8 10.0 Adjusted profit/(loss) before tax 14.1 (18.5)
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.       * Bookings where revenue has been recognised on a travelled basis as a principal. ** Costs relate to the gross costs for bookings made on an agent basis.		B2B TTV (£'m) 2022 2021 CCH revenue 50.5 6.5 CPH revenue 5.8 1.7 B2B revenue 56.3 8.2 Costs** and amendments 35.5 21.5 Booked in previous year and travelled in year* (13.7) (5.4) Booked in year but not yet travelled* 8.6 9.1 B2B TTV 86.7 33.4
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 exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 and exceptional cancellations as a result of Covid-19 in 2021. 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) 2022 2021 CCH operating loss (1.8) (4.8) Exceptional items 0.3 0.4 Depreciation and amortisation 0.3 0.2 Amortisation of acquired intangibles 1.1 1.1 CCH Adjusted EBITDA (0.1) (3.1)
CCH adjusted gross profit	CCH Adjusted gross profit is based on CCH gross profit 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.		CCH adjusted gross profit (£'m) 2022 2021 CCH gross profit 5.8 0.6 Exceptional items 0.3 - CCH adjusted gross profit 6.1 0.6 Marketing costs (1.0) (0.4) CCH adjusted gross profit after marketing costs 5.1 0.2
CCH EBITDA	CCH EBITDA is based on CCH operating profit before depreciation and amortisation.		CCH EBITDA (£'m) 2022 2021 CCH operating loss (1.8) (4.8) Depreciation and amortisation 1.4 1.3 CCH EBITDA (0.4) (3.5)
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 (£'m) 2022 2021 CCH revenue 50.5 6.5 Amendments 10.2 13.0 Booked in previous year and travelled in year (13.7) (5.4) Bookings made but not travelled* 8.6 9.1 CCH TTV 55.6 23.2
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 and exceptional cancellations as a result of Covid-19 in 2021. 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 EBITDA (£'m) 2022 2021 CPH operating loss (0.6) (1.6) Depreciation and amortisation 0.2 0.2 Exceptional items 0.4 (0.3) CPH adjusted EBITDA (0.1) (1.7)
CPH EBITDA	CPH EBITDA is based on CPH operating profit before depreciation and amortisation.		CPH EBITDA (£'m) 2022 2021 CPH operating loss (0.7) (1.6) Depreciation and amortisation 0.2 0.2 CPH EBITDA (0.5) (1.4)
CPH adjusted gross profit	CPH Adjusted gross profit is based on CPH gross profit before 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.		CPH adjusted gross profit (£'m) 2022 2021 CPH gross profit 2.0 0.8 Exceptional items 0.4 (0.3) CPH adjusted gross profit 2.4 0.5 Marketing costs (1.0) (0.4) CPH adjusted gross profit after marketing costs 1.4 0.1
CPH TTV	CPH 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.		CPH TTV (£'m) 2022 2021 CPH revenue 5.8 1.7 Costs* and amendments 25.3 8.5 CPH TTV 31.1 10.2
Exceptional items	Exceptional items are certain costs / income that derive from events or transactions that fall outside of the normal activities of the Group. For 2022 this consists of exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 offset by fair value gains from FX forward contracts. For 2021, this consists of exceptional cancellations as a result of Covid-19. 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.		Exceptional items (£'m) 2022 2021 Impact of Covid-19 and supplier disruption 2.6 10.0 Fair value FX gains (0.8) - Exceptional items 1.8 10.0
Group TTV	Group TTV is a non-GAAP measure representing the cumulative total transaction value of sales booked each month before cancellations and adjustments.   * Bookings where revenue has been recognised on a travelled basis as a principal. ** Costs relate to the gross costs for bookings made on an agent basis.		Group TTV (£'m) 2022 2021 2019 Group revenue 144.1 21.2 140.3 Costs** and amendments 717.1 208.4 592.3 Booked in previous year and travelled in year* (13.7) (5.4) (5.2) Bookings made but not yet travelled 8.6 14.1 14.0 Group TTV 856.1 238.3 741.4
Group adjusted revenue	Group adjusted revenue is revenue adjusted for the impact of lost revenue as a result of Covid-19 and supplier disruption in 2022 offset by fair value FX gains. For 2021 revenue is adjusted for the impact of lost revenue as a result of Covid-19. 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.		Group adjusted revenue (£'m) 2022 2021 2019 Group revenue 144.1 21.2 140.4 Exceptional items 0.2 9.3 7.1 Group adjusted revenue 144.3 30.5 147.5
Group adjusted revenue as an agent	Group adjusted revenue as an agent is revenue adjusted for the impact of lost revenue as a result of Covid-19 and supplier disruption in 2022 offset by fair value FX gains. For 2021 revenue is adjusted for the impact of lost revenue as a result of Covid-19. For 2019 revenue is adjusted for the impact of the failure of Thomas Cook Group. 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.		Group adjusted revenue as an agent (£'m) 2022 2021 2019 Group revenue 144.1 21.2 140.4 Revenue as a principal (50.5) (6.5) (55.0) Revenue as an agent 93.6 14.7 85.4 Exceptional items 0.2 9.3 7.1 Group adjusted revenue 93.8 24.0 92.5
Group adjusted gross profit	Group adjusted gross profit is gross profit adjusted for the impact of Covid-19 and supplier disruption in 2022 offset by fair value FX gains. For 2021 gross profit is adjusted for the impact of Covid-19. For 2019 gross profit is adjusted for the impact of the failure of Thomas Cook Group. 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.		Group adjusted gross profit (£'m) 2022 2021 2019 Gross profit as an agent 89.8 13.8 84.9 Gross profit as a principal 5.8 0.6 7.1 Group gross profit 95.6 14.4 92.0 Exceptional items 0.5 8.8 7.1 Group adjusted gross profit 96.1 23.2 99.1
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.   * Bookings where revenue has been recognised on a travelled basis as a principal. ** Costs relate to the gross costs for bookings made on an agent basis.		Long haul TTV (£'m) 2022 2021 Group revenue 144.1 21.2 Costs** and amendments 717.1 213.3 Booked in previous year and travelled in year* (13.7) (5.4) Booked made but not yet travelled* 8.6 9.1 Short haul TTV (802.6) (220.1) Long haul TTV 53.5 18.2
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 exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 and exceptional cancellations as a result of Covid-19 in 2021. 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) 2022 2021 OTB operating profit/(loss) 5.2 (29.0) Exceptional items 1.1 9.8 Share-based payments 4.7 2.8 Depreciation and amortisation 6.7 5.9 Amortisation of acquired intangibles 4.4 4.4 OTB adjusted EBITDA 22.1 (6.1)
OTB adjusted revenue	OTB adjusted revenue is revenue adjusted for the impact of lost revenue as a result of Covid-19 and supplier disruption in 2022 and the result of Covid-19 in 2021. 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) 2022 2021 OTB revenue 87.1 13.0 Exceptional cancellations 0.6 9.1 Fair value FX gains (0.8) - OTB adjusted revenue 86.6 22.1
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 exceptional cancellations as a result of Covid-19 and supplier disruption in 2022 and exceptional cancellations as a result of Covid-19 in 2021. 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) 2022 2021 OTB operating profit/(loss) 4.9 (29.0) Exceptional items 1.1 9.8 Share-based payments 4.7 2.8 Amortisation of acquired intangibles 4.4 4.4 OTB adjusted operating profit/(loss) 15.1 (12.0)
OTB online marketing as % revenue	OTB adjusted revenue after marketing cost is revenue after 'OTB' online and offline marketing costs.		OTB revenue after marketing cost (£'m) 2022 2021 OTB adjusted revenue 87.1 22.1 OTB online marketing costs (27.0) (5.5) OTB adjusted revenue after online marketing 60.1 16.6 OTB online marketing as % revenue 31% 25%
OTB EBITDA	OTB EBITDA is based on OTB operating profit before depreciation and amortisation.		OTB EBITDA (£'m) 2022 2021 OTB operating profit/(loss) 5.2 (29.0) Depreciation and amortisation 11.1 10.3 OTB EBITDA 16.3 (18.7)
OTB EBITDA as a percentage of adjusted revenue	OTB EBITDA as a percentage of adjusted revenue is based on the adjusted OTB EBITDA divided by the revenue generated in the OTB business before the impact of exceptional cancellations. Exceptional items consists of exceptional cancellations as result of Covid-19 and supplier disruption in 2022 and exceptional cancellations as a result of Covid-19 in 2021. 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 EBITDA as a percentage of adjusted revenue 2022 2021 Revenue 87.1 13.0 Exceptional cancellations 0.6 9.1 Fair value FX gains (0.8) Adjusted revenue 86.9 22.1 Adjusted OTB EBITDA 22.1 (6.1) OTB EBITDA as a percentage of adjusted revenue 25% (28%)
OTB TTV	OTB 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.		OTB TTV (£'m) 2022 2021 OTB revenue 86.1 13.0 Costs* and amendments 675.6 191.1 OTB TTV 762.7 204.2
Overheads % revenue	Overheads as a percentage of revenue is based on the OTB adjusted revenue divided by the overheads for OTB. OTB overheads is the administrative expenses excluding the depreciation and amortisation.		Overheads % revenue (£'m) 2022 2021 OTB adjusted revenue 86.9 22.1 Overheads (25.9) (16.5) Overheads % revenue 30% 75%
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 the depreciation and amortisation.		Overheads % revenue (£'m) 2022 2021 OTB TTV 762.7 204.2 Overheads (25.9) (16.5) Overheads % TTV 3.4% 8.1%