Consumers ‘protecting their holidays’, says On The Beach

Russ Mould, investment director at AJ Bell, said: “It has been a choppy period for On The Beach.

“The market had previously reacted with some disquiet to the company moving away from its core focus, as well as mounting competition and a trend of holidaymakers booking their trips later.

“In that context, today’s results are a ray of sunshine as the company announces a third consecutive record year of growth, improved margins and positive signs on key customer metrics.

“This may help restore some credibility to the company’s medium-term targets of achieving earnings of £100 million and pre-tax profit of £85 million, although these still look a big ask as they require profit to more than double from current levels.

“There was an appealing simplicity to On The Beach’s previous emphasis purely on a cohort who just wanted some sun, sea and sand.

“Moving into city breaks may offer diversification but at the expense of diluting this strategy.

“The rapid expansion of EasyJet Holidays and the continued growth ambitions of the likes of Jet2 remain a threat to On The Beach.

“While the lack of a fleet of planes means On The Beach has more flexibility and a significantly lower cost base, it does mean it has less control on prices and other factors – although the recently agreed partnership with Ryanair mitigates some of this.”